Contract, Specification & Quantity Survey: Lecturer: Ayansa Kebede

Contract,
Specification &
Quantity Survey
Lecturer: Ayansa Kebede
(MSc. In Construction Engineering & Management)
Procurement and
Contract Management
MeU, FoET, Dep't: CoTM, Lecturer: Ayansa K. (MSc. In Construction Engineering & Management) 2
Outline
1.4. Procurement and Contract
Management
1.4.1. Procurement Management
1.4.2. Contract Management
1.4.1. Procurement
Management
The purposes of a Procurement Management System:
1. To satisfy the need for economy and efficiency, and
2. To provide equal opportunity to competitive bidders.
Procurement Management process:
i. Preparation,
ii. Tendering, and
iii. Evaluation (including Award Recommendation)
Procurement Management Ctd…
Procurement Preparation phase:

- is meant for the formation of a Procurement Team; the
preparation of Tender Documents and their approval.
 Procurement Team: needs a minimum of 5 members

and necessary experts shall be composed in the team.
 Tender Documents are prepared to:
 Instruct bidders on the procedures for the preparation and
submissions of bids,
 Inform bidders about the nature of things to be procured,
 Inform bidders about the criteria for evaluation and selection
of the successful bidder, and
 lay down the contract conditions, delivery system,
procurement methods and contract types of the project.
 Tender documents include:  General and Particular Conditions of

Contract
 Form of Invitation to Tender or
Request for Proposals;  Bill of Quantities and Drawings
 Instruction to Tenderers (Standard  Technical Specifications & Methods of
and / or Particular information) or Measurement and
Terms of References;  Other Forms, Formats and Schedules
 Prequalification Documents if
necessary
 Forms of Tender;
 Forms of Contract Agreement
 Approval of Tender Documents :
Regulatory requirements enforced for:

 Budgeting, Credit, Assistance and Grant Policies;
 Health, Safety and Environmental Requirements; and
 Professional, Ethical and Legal Requirements
 Tendering Phase: includes

 Invitation,
 Clarification,
 Submission and
 Opening of tenders.
 Open tenders are floated for a period between 30 to 45 days.

 Limited and Negotiated tenders can be invited between 7 to 15 days.
 The invitation to tender shall clearly state:
 the owner and his desirous service or works
 eligibility requirements,
 place to get further information,
 where to purchase & submit tender documents,
 how long the tender will be floated,
 how should the tender offer be packed, and
 when and where submission and opening of tender will take place.
 Clarifications can either be requested by interested bidder or carried

out using a pre - tender clarification meeting.
In both cases, issues clarified shall be sent (written) to all bidders
participating for the intended services or works.
 Tender Opening: Bids shall be opened in public on the date, at the
time and place mentioned in the invitation to tender and stipulated in
the tender documents.
 The following will be carried out during tender opening:-

 Tender Attendee members shall take their place and be registered,
 Tender box opened and checked for faulty things,
 Check the tender is the right one,
 Bids will be opened one after the other,
 All necessary data which deem useful such as Project Name, Name of bidder,
Bid Bond Amount, Tender Price, etc. will be read aloud and recorded at the
opening of bids.
 Bidders representative shall sign a register to attest their presence during
opening, and
 Tender committee members shall sign on the Tender documents.
 Tender Evaluation Phase:

 is made to determine and make award recommendation for the least
evaluated bidder using preliminary and detail evaluations.
 The recommended winner may or may not necessarily be the lowest
bidder.
 It is recommended to complete a Basic Data Sheet for each tender

to record key information and enable coding.
1. PRELIMINARY EVALUATION
 Is made for eligibility requirements and arithmetic review
requirements.
i. Eligibility Requirements: Tenders are subjected to eligibility
qualifications before they enter to bid and evaluations.
o Most often sited issues considered in eligibility requirements are:

 Valid & Up to date Trade and Professional License,
 Valid & Up to date Membership to Financier Organizations,
 Valid provision of Bid Security or Bond,
 Completeness and submittals of all required documents,
 These eligibility requirements together with basic alterations of the

conditions of the tender will be considered for responsiveness or not.
 If the bidder offer provided weighs a major deviation from the

tender condition, the tender will be considered non - responsive
and could not be further considered .
 For minor deviation, either the procurement team use their
discretionary power to request clarification or the case will be
recorded and taken up during negotiation if the respective winner
become the least evaluated tender.
ii. Arithmetic Review: Most tenders are often submitted hastily.

 Tenders are not arithmetic error free.
 Arithmetic review can be done if and only when financial proposals are opened.
2. DETAIL EVALUATIONS
 Include Technical, Commercial and Financial Qualification requirements.
i. Technical Requiements: The following criteria are often used in determining
this ability of the bidder;
 Experience and past performance,
 Health, Safety and Environment Records, if any,
 Capability in respect of personnel and equipment,
 Organizational arrangement and facilities,
 Financial Status, and
 Schedule of Commitments.
ii. Commercial Evaluation: includes:

 Benefit Forgone due to Completion Time;
 Additional Costs due to differences in Foreign Currency

Exchange and Advance Payment requirements; and
 Provisions of Domestic or Regional Preference Margins.
 Benefit Forgone due to Completion Time
BF = (FV – TO) / (1 + i)n; FV = TO (1 + i)n

TO = Tender Offer after Arithmetic Check;
n = Completion time in days
i = Discount Rate = example: i= 0.05 % per day = 1.5 % per month;
FV = Future Value
 Additional cost due to Foreign Currency Exchange requirements
 Convert all tender prices into one currency
 Can be determined using selling rates at:

• 15 days prior to tender submission date
• Tender Opening Date

• Decision for Award or Expiry of Tender Validity date
 Additional cost due to Advance Payment

APAC= {(AP x TO) / 100} – PV;
PV = A x PWF; AP = Advance Payment Requirement in %;
TO = Tender Offer after Arithmetic
A = {(AL%) x TO} / n; Check;
PWF = {(1 + i)n – 1} / {i(1 + i)n} i = Discount Rate = 0.04 % per day;
n = Completion time in days;
A= amount of advance per month or day
PWF = Present Worth Factor;
PV = Present Value
AL=Advance loan
 Provisions of Domestic and / or Regional Preference
 Domestic or regional preference margin is a provision to give

preference to local companies even if their bid offer is not
over by a percentage often equals 7.5 - 10 % for construction
works.
 A contractor can be eligible for such preference margin if and only if;
 Its legal constitution is in accordance with the Employers’ Country / Region
 It is registered according to rules and regulations of the Employers’ Country /
Region
 It has proof that its majority of works are undertaken in the Employers’ Country
/ Region
 Its majority of capital shares are held by the Employers’ Country / Region
nationals
 Its majority of the board of directors members are the Employers’

Country / Region nationals
 Its 50 % key personnel are nationals of the Employers’ Country /
Region
 Its arrangement to execute the work should not involve major part of
its work or net profit other than the Employers’ Country / Region
Nationals or Co - Companies
iii. Financial Offer Comparison:

TO evaluated = (TO + BFCT + ACAP + ACFE -PM)
TO = Tender offer after arithmetic check
= Benefit Forgone due to Completion Time
= Additional Cost due to Advance Payment
= Additional Cost due to Foreign currency Exchange
= Preference Margin
 Financial offers per groups of trades of works are compared

in order to evaluate whether tenders are front loaded or not.
 Front loading often cause disruption of projects or

overzealous contractual negotiations.
 Rejection of All Tenders: it is recommended in the following cases:

 All Tenders are found non – responsive during the Preliminary evaluations
 Evidences of lack of competitions such as collusion among bidders,

monopoly, etc
 Lowest responsive offer is found unreasonably high.
EXAMPLE:TENDER EVALUATION
Given the following Bid Opening Data, Evaluate their offer; that is, determine the Least Evaluated
Tender for Award Recommendations and Write the Tender Evaluation Report.
Project: Mettu University Campus Tender No.: 001 / 88
Engineer’s Estimate: Birr 20,877,188.00 Date of Invitation: Sept.30,2018 Procurement
Method: ICB No. of Bid Sold: 8 No. of Bids Submitted: 6
Bid Submission Date: Nov. 15, 2018 Bid Validity Period: 45 Cal Days
Selling Ex. Rate 15 days before: 1 USD = Birr 28.25
Selling Ex. Rate 15 days before: 1 USD = Birr 28.25
Selling Ex. Rate on bid closing date: 1 USD = Birr 28.31
i = 0.05 % per day =1.5 % per month for Completion Time;
i = 0.04 % per day for Advance Payment computations
Domestic Preference Margin = 7.5 %
EXAMPE Ctd…
Tender Offer Tender Security (TS) Perf. Adv Comp Foreign Ex.
No Bidders Cat. TO Amount Type Security Req’d Time Req’d Rebate
1 DCM 1F 17,630,915.11 31,746 USD CPO 20 % 20 % 645 55 % USD
2 CGTS 1L 22,145,153.10 260,000 USD UIC 10 % 705
3 CGCS 1L 18,146,822.49 250,000 USD AIC 10 % 705 3%
4 CECC 1F 21,236,399.00 40,000 USD CPO 20 % 705 50 % USD

S
5 CGCA 1L 24,110,160.00 300,000 USD Cert. 10 % 20 % 705 15 % USD
Cheq
6 CBAS 1L 22,766,237.75 250,000 USD EIC 10 % 20 % 705
Required Minimum Tender Security = 1 % of TO; F = Foreign Company and L = Local Company
EXAMPE Ctd…
 Tender offer after Arithmetic Check was found as:
Tenderers DCM CGTS CGCS CECCS CGCA CBAS
Tender Offer 17,695,206.70 21,200,883.60 18,163,888.91 21,229,904.11 23,885.300.33 20,953,625.22
 Turnover of Companies for the last Five Years:

Tenderers DCM CGTS CGCS CECCS CGCA CBAS
1991 361,275,260.40 --- --- 2,259,278,000.00 --- 4,571,118.00
1992 338,197,052.30 --- --- 1,663,141,000.00 --- 9,377,632.00
1993 432,790,201.30 343,796.00 --- 2,187,401,000.00 --- 12,680,696.00
1994 550,511,109.90 6,659,457.00 --- 2,416,035,000.00 --- 18,377,772.00
1995 --- 22,068,798.00 63,160,062.88 --- 54,145,000.00 18,099,520.00
Currency Egyptian Pound Birr Birr USD Birr Birr
Ex. Rate** 1 USD = 2.21 28.25 28.25 1.00 28.25 28.25
Required Turnover = 5 Mill. USD taking their maximum turnover over the five years.
** Exchange rate used is selling price at their maximum turnover within the last five years.
EXAMPE Ctd…
 For the Preliminary purpose, assume all bidders are Responsive to:
 Valid and Up to date Trade and Professional License
 Valid and Up to date Membership to Financier Organizations
 Completeness and submittals of all required documents
 Power of Attorney, Signature and Sealing Requirements
 Appropriate Invitation, Packaging and Submission Requirements
1.4.2 Contract Management
 Contract Management is the management of its Processes, Stakeholders and their

Performances along the Planning , Implementation and Monitoring + Evaluation
Cycle of the functions of Management.
 Contract Management process can be idealized into three major processes:
 Contract Formulation,
 Contract Administration, and
 Closing of Contract Processes.
Contract Management Ctd…
 Contract Formulation: involves Negotiation and Signing of

Contract Agreement.
 Contract Administration: is a process that ensures the successful
completion of the project under consideration with substantial
compliance of the Terms of the Contract.
 The following activities are included in Contract Administration services:

 Identifying contractual responsibilities of Stakeholders.
 Reviewing the Terms of Contract Documents
 Extract Monitoring Responsibilities
 Preparing Monitoring Responsibility Summary Sheets
 Determining and understanding the construction components of the project.

 Reviewing the Contract Drawings and Technical Specifications
 Extract the Construction Methods and Sequences
 Prepare Construction Methods and Over all Sequences Sheets
 Review submitted (Integrated) Schedules and Breakdowns for operations such as
Organizational Breakdowns, Resources Breakdowns & Schedules and Time
Schedules.
 Record, Monitor and Evaluate Progress of Mobilizations , Works and
Completions.
 Report Project Status daily and / or periodically and Completions.
 Certify qualities of materials , shop drawings, samples, workmanships and works.
 Measure Works , Record Site Potentials and Certify Payments and Completions
 Take off sheet and Bending Schedules are used for

Measurement of Works
 Method of Measurement is according to standard practices
 Site Potentials such as material, equipment and Manpower on

site together with appropriate site organization is recorded
 Advance, Interim and Final Payments are certified

 Administer contract changes.
 Issue Change Orders including Clarifications
 Evaluate and Certify Additions and Omissions
 Evaluate and Certify Provisional Quantity and Provisional Sums
 Evaluate and Certify Remedial Rights
 Evaluate and Certify Claims
 Prepare Contract Changes Status Sheet
 Mediate Disputes.
 Closing of Contract: Closing of Contract looks into issues related to:
 Maintenance Period and
 Remedial works,
 Dealing with Left Over Claims and
 Disputes, if any,
 Closing of Accounts and
 Completion Certificates.
1.5 Settlement of Claims and Disputes
in Contract Administration
 Claim is mostly concerned with entitlements and liabilities arising

under, or as a result of, a legally valid contract (Hughes & Barber,
1992).
 Claims can be associated with three major categories that can be
understood as the different types of claims. These are:
Time Related Claims, Cost Related Claims and Default by Contracting
Parties
1.5.1 Causes of Claims and Disputes
 According to Levy, 2000, the causes are related to:

 poor or unclear tender and/or contract documents,
 poor or inadequate administration of responsibilities by stakeholders, and
 Unforeseen or uncertain situations during execution
causing changes due to variations in requirements.
 Wideman, 2001 has also identified claim causes into three main
categories:
 Changed conditions
 Additional works, and
 Delay for cost overruns and time extension.
1.5.2 Claim and Dispute Resolution
Techniques and Procedures
 Basically, three types of dispute resolution systems are well

recognized. These included:
1. Preventive Dispute Resolution System including Partnering, Use of

dispute resolution advisors and Use of Facilitators for early neutral
evaluation and advise to prevent the happening of claims or their
consequential disputes.
Claim and Dispute Resolution Ctd…
2. Amicable Dispute Resolution System including Negotiation,

Mediation, Conciliation and use of Mini-Trials to administer the
claim in a less formal, simple procedure, more flexible, less
adversarial and strictly confidential mode so as to avoid the time and
cost implication of claim processing.
Claim and Dispute Resolution Ctd…
2. Judgmental Dispute Resolution System including Adjudication or

use of Dispute review board, Arbitration and Litigation where the
formal adjucatory or common law system is applicable to bring the
closure of claim processing.
Thank You!

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Contract,

Procurement Preparation phase:

 Procurement Team: needs a minimum of 5 members

 Tender documents include:  General and Particular Conditions of

 Approval of Tender Documents :

Regulatory requirements enforced for:

 Health, Safety and Environmental Requirements; and

 Professional, Ethical and Legal Requirements

 Tendering Phase: includes

 Open tenders are floated for a period between 30 to 45 days.

 Clarifications can either be requested by interested bidder or carried

 The following will be carried out during tender opening:-

 Tender Evaluation Phase:

 It is recommended to complete a Basic Data Sheet for each tender

o Most often sited issues considered in eligibility requirements are:

 These eligibility requirements together with basic alterations of the

 If the bidder offer provided weighs a major deviation from the

ii. Arithmetic Review: Most tenders are often submitted hastily.

ii. Commercial Evaluation: includes:

 Additional Costs due to differences in Foreign Currency

 Benefit Forgone due to Completion Time

BF = (FV – TO) / (1 + i)n; FV = TO (1 + i)n

 Additional cost due to Foreign Currency Exchange requirements

 Convert all tender prices into one currency

 Can be determined using selling rates at:

• Tender Opening Date

 Additional cost due to Advance Payment

 Provisions of Domestic and / or Regional Preference

 Domestic or regional preference margin is a provision to give

 Its majority of the board of directors members are the Employers’

iii. Financial Offer Comparison:

 Financial offers per groups of trades of works are compared

 Front loading often cause disruption of projects or

 Rejection of All Tenders: it is recommended in the following cases:

 Evidences of lack of competitions such as collusion among bidders,

 Lowest responsive offer is found unreasonably high.

2 CGTS 1L 22,145,153.10 260,000 USD UIC 10 % 705

3 CGCS 1L 18,146,822.49 250,000 USD AIC 10 % 705 3%

4 CECC 1F 21,236,399.00 40,000 USD CPO 20 % 705 50 % USD

6 CBAS 1L 22,766,237.75 250,000 USD EIC 10 % 20 % 705

Tender Offer 17,695,206.70 21,200,883.60 18,163,888.91 21,229,904.11 23,885.300.33 20,953,625.22

 Turnover of Companies for the last Five Years:

 Valid and Up to date Membership to Financier Organizations

 Completeness and submittals of all required documents

 Power of Attorney, Signature and Sealing Requirements

 Appropriate Invitation, Packaging and Submission Requirements

 Contract Management is the management of its Processes, Stakeholders and their

 Contract Administration, and

 Closing of Contract Processes.

 Contract Formulation: involves Negotiation and Signing of

 The following activities are included in Contract Administration services:

 Determining and understanding the construction components of the project.

 Take off sheet and Bending Schedules are used for

 Method of Measurement is according to standard practices

 Site Potentials such as material, equipment and Manpower on

 Advance, Interim and Final Payments are certified

 Dealing with Left Over Claims and

 Closing of Accounts and

 Claim is mostly concerned with entitlements and liabilities arising

 According to Levy, 2000, the causes are related to:

 Basically, three types of dispute resolution systems are well

1. Preventive Dispute Resolution System including Partnering, Use of