 ThisTopic examines the activities done in the

bidding process when undertaking procurement of

Works; clearly defining the requirements, the
selection of the type of procurement, the bidding
approach, the contract type and the preparation
of the bidding documents.

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 Bidding Tendering Contracting

Closing Administering
Procurement Procurement

 Clearlydefine your requirements

 Decide on the type of procurement
 Decide on the Bidding Approach
 Decide on the contract type
 Prepare the bidding documents

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 Many contracts include a statement of work (SOW).
A statement of work is a description of the work
required.
 The SOW describes the work in sufficient detail to allow
prospective sellers to determine if they are capable of
providing the works, goods and/or services required.
 Note: in construction contracts, usually the description of
work is provided in the Drawings, Specifications and Bill
of Quantities.

I. Scope of Work: Describe the work to be done in details.

(including any drawings, specifications, …etc)
II. Work Included and Work Excluded
III. Exact Location of Work: Describe exactly where the
work must be performed.
IV. Deliverables: List specific deliverables. Describe them in
detail, and specify when they are due.
V. Applicable Standards: Describe any industry specific
standards that need to be adhered to in fulfilling the
contract.
VI. Acceptance Criteria: Describe how it will be determined if
the work is acceptable.
VII. Special Requirements: Specify any special requirements
such as minimum degree or experience level of personnel,
travel requirements, and so on.

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 Establishan estimated budget for the package.
 Obtain the required approvals according to your
company’s policies.

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 Clearlydefine your requirements

 Decide on the type of procurement
 Decide on the Bidding Approach
 Decide on the contract type
 Prepare the bidding documents

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  Open Bidding
 Selective Bidding
 Negotiated Bidding
 Single Source Procurement

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 The process begins by placing an advertisement in local

newspapers or trade journals.
 The advertisement gives interested Contractors (sellers)
details on how to obtain further information.
 The invitation is open to all Contractors that choose to
participate in the bidding.
 Non-refundable Tender fees could be applicable, to
ensure only serious offers are made.
 Employer (buyer) could explicitly state that he is not
bound to accept the lowest tender, or any tender

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 Advantage: transparency and better price
 Disadvantage: may take long time to evaluate all
tenders

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 Also called Limited Bidding or Restricted Bidding

 A pre-selection or pre-qualification process is made to
pre-select a limited number of contractors, who are
asked to tender for the work.
 It allows price to be the deciding criterion. All other
selection factors will have been dealt with at the pre-
qualification stage.

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 Contractors are asked to bid for a certain project on the
basis that offers may be negotiated.
 After the contractors submit their offers, the employer
has the right to negotiate offers (after being technically
accepted).
 Such negotiation is entered into with a number of the
most suited tenders.

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 It is the process of procurement of goods, services and

works from only one source, without competition.

 in emergency situations
 when only one firm is qualified or available to fulfill the
requirement e.g. high technology services
 for the continuation of previous work

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 Your company may already have developed a list of
qualified firms, if you build regularly.
 Based on the advice of your consultant, certain
contractors are selected.
 An advertisement may produce several interested
contractors and suitable firms are selected to tender.
 You may invite all interested firms to submit an expression
of interest, including information required. Or make a Pre-
Qualification questionnaire to collect the information.

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 Previous experience with similar projects

 References
 Resource capabilities
 Qualifications of key staff
 Financial standing
 Time, cost and quality management plans
 Health and Safety plans

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 Determine the number of tenderers to invite for
a bidding according to your company’s
procurement policy.
 Only invite those who would be capable to
execute the project.
 Confidentiality should be respected.
 Sufficient time and information should be
provided to allow the tenderers to prepare the
tenders.

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 Clearlydefine your requirements

 Decide on the type of procurement
 Decide on the Bidding Approach
 Decide on the contract type
 Prepare the bidding documents

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A One Envelope Approach:
 The Employer requires the tenderer to include both
the technical and financial proposal in a single
envelope.
A Two Envelope Approach:
 The Employer requires the tenderer to include the
technical proposal and financial proposal in separate
and sealed envelopes.
 The technical proposal is opened and evaluated first.
 The financial proposal is then evaluated.
 Usually a mix of the above distinct approaches is
used.

 To ensure a fair evaluation of the proposals.

The technical proposal would be evaluated
purely on its technical merits without being
influenced by the financial proposal.

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 Clearlydefine your requirements
 Decide on the type of procurement
 Decide on the Bidding Approach
 Decide on the contract type
 Prepare the bidding documents

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 Lump-sum contracts
 Re-measurement (Unit Price) contracts
 Reimbursable (Cost Plus) contracts

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A price is set at the time of entering into the
contract.
 If there are no variations, the lump sum amount
agreed upon at the beginning will remain
unchanged.
 Based upon a well defined scope at the time of
contracting. Technical specifications and drawings
should be complete.
 The use of Lump-sum contracts would not be
appropriate if the scope of the work is not
defined at the tender stage.
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 Lump sum contracts apply to both design and

build and traditional contracts.
 The price is fixed in advance but is subject to
change under the terms of the contract.
 This could include:
 Variations
a fluctuations clause to pay for the increases
caused by inflation.

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 Sometimes called ‘fixed price’ contract.
 This definition leads to much confusion in the
construction industry where ‘fixed price’ is the
term for a price, which will not be subject to
fluctuations.
 An arrangement which is not subject to
fluctuations is better described as ‘firm price’.

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 Risk of quantities is allocated to the Contractor.

 Contractor prices high to allow a margin to cover
for any missed items.
 Sometimes, no bill of quantities will be provided.
Tenderers have to prepare their own quantities.
 In such case, it is preferred to include a Schedule
of Rates or Prices for use in valuation of variations
and payment. A Schedule of Rates is the same as
the bill of quantities, except that it does not
include quantities.

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Item Unit Rate Total Price
Description Unit Quantitiy
No. EGP EGP

1 Excavate as per the drawings m3 10,000.00 15.00 150,000.00

Supply & install MDF according to the

2 m2 63.00 650.00 40,950.00
Specifications

Supply & install Cables X1 according to the

3 m 320.00 550.00 176,000.00
Specifications
Supply & install ceramic tiles 30X30cm, grey or
4 off white semi matt (depending on adjacent m2 39.00 85.00 3,315.00
floor cover)
Supply & install dark grey porcelain tiles
5 m2 83.00 220.00 18,260.00
60X60cm, R.A.K

Item Unit Rate

Description Unit
No. EGP

1 Excavate as per the drawings m3 15.00

2 Supply & install MDF according to the Specifications m2 650.00

Supply & install Cables X1 according to the

3 m 550.00
Specifications
Supply & install ceramic tiles 30X30cm, grey or off
4 m2 85.00
white semi matt (depending on adjacent floor cover)
Supply & install dark grey porcelain tiles 60X60cm,
5 m2 220.00
R.A.K

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 Projects where substantially complete definition is
available

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 More cost certainty for the employer

 Contractor bears major portion of risk
 Maximum construction efficiency (since scope is
well defined)
 Detailed project definition requires minimum
change
 Requires minimum administrative monitoring

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 Contract price includes the contractor's
contingency for risks which may not materialize
 Contractors may be reluctant to accept this form
during periods of inflation, since they will have to
add excessive contingency to prices and thus
increasing the price.
 Longer bidding process is required to prepare a
detailed scope

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 Used where quantities cannot be accurately

determined before signing the contract.
 A bill of approximate quantities will be used as
the basis of calculating the contract price.
 The sum which the Employer pays the
Contractor is determined by measuring the work
actually done and applying them to the rates in
the bill of approximate quantities.
 Risk of quantities is allocated to the Employer.

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  Traditional buildings
 Civil work (earth moving, drilling, etc.)

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 Since the Contractor carries less risk, a lower

contingency price is placed by the contractor and thus a
lower tender price than in lump sum contracts.
 Shorter bidding process than in lump sum contracts.
 Unit prices are established for certain well-defined
elements of work, such as: pipes, excavation, insulation.
If changes in quantities occur during construction,
pricing can be based on predetermined fixed unit prices
 Flexibility is increased since modifications to the work
can be made as details of the work become available

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 Less cost certainty, because the final contract price
will depend on the actual quantities executed.
 Careful measurement and determination of
quantities requires additional administration
 Contractors could claim that units added by
variations are different than the units in the BOQ,
thus the unit prices in the BOQ would not apply
 The employer carries more risk than in lump sum
contracts

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 The sum which the Employer pays the Contractor is a

sum calculated by reference to the actual cost of the
works done and a fee, which may be a percentage of
the direct cost or a lump sum (to cover his overheads
and profit)
 This type of contract is used when work cannot be
defined sufficiently accurately at the outset and it would
not be possible to prepare a bill of approximate
quantities.
 In addition, design work can continue after
commencement of construction, thereby saving time
and allowing an earlier start on site.

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 Contract with uncertain work scope
 Contract work subject to many design changes
(e.g. HVAC)
 Maintenance of existing facilities
 Projects of an emergency nature (e.g. remedial
works)

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 Flexible in that it allows changes in scope, effort

and schedule without adverse effect on the
contractor
 Significant control over all aspects of work
execution can be retained by the engineer
 Specifies access to contractor's cost records
 Scope of work need not be fully defined, which
allows for fast-track construction based on
minimum design available during progress of the
work

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 Littleincentive for the contractor to control costs.
Contractor actually has an incentive to over spend
on cost plus percentage of cost contracts. Employer
should attempt to put a limitation on the
contractor's fee
 Requires detailed auditing and heavy administration
costs
 Most of the risk falls on the employer
Such contracts are to be avoided, if possible

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 Clearlydefine your requirements

 Decide on the type of procurement
 Decide on the Bidding Approach
 Decide on the contract type
 Prepare the bidding documents

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What constitutes the Bidding Documents?

• Invitation For Bid;

• Instructions to tenderers;
• Form of Tender;
• Special Conditions of Contract;
• General Conditions of Contract;
• Specification;
• Drawings;
• Bill of Quantities; and
• Form of Agreement
Note: In short contracts, we do not need all these documents

 This is a letter prepared by the employer,

addressed to contractors, inviting them to the bid,
so, interested ones submit their offers.

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 Advertisement in newspaper or technical
magazine
 A letter addressed to interested tenderers

This Invitation for Bid is being made by XX. XX

wishes to receive tenders for the construction of
their head office located in the Fifth Settlement.
Tenderers are invited to collect the bidding
documents from XX headquarters at YY. The due
date for submitting tenders is 10th of December
2012.

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 Itgives necessary directions regarding preparation
and submission of tenders such as:
 place of submission
 due date for submission
 validity of tenders
 tender security
 evaluation of tenders
 the type of contract (lump sum, re-measured, …)
 how queries will be handled
 details of site visits, if any
 how the tender should be packaged

 Aka (also known as) Bid bond

 What is the purpose of the tender security?
 It provides some security to the employer:
 Against tenderers withdrawing their tenders before
the end of the tender validity period
 If the successful tenderer fails to enter into a
contract with the employer after being selected
 If the successful tenderer fails to provide a
performance security, if required

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 What is the amount of tender security?
 This is usually 2-5% of the estimated tender
sum or of the tenderer’s tender sum.
 When should the employer release the
remaining tender securities to the unsuccessful
tenderers?
 Usually after signing the contract with the
successful tenderer or after the expiry of the
tender validity period.

 Tender assessment criteria (selection criteria), if any

 If weighting system is used, the basis of the system
should be stated

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 Experience in similar projects with similar size
 Similar experience in Egypt
 Previous positive experience with the company
 Quality of work and Performance record
 Resource capabilities
 Health and safety record and competence
 Financial stability
 History of delays

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 Operation costs
 Maintenance costs and spare parts
 In-house management and staff
 Consumables
 Licenses
 Taxes
 Energy/water consumption
 Depreciation

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We, the undersigned, declare that:
 The information contained in this proposal is true, accurate, and
complete.
 The total price of our tender is: -----------------
 We offer to complete the whole of the Works in conformity with the
Bidding Documents, except for the following reservations:
------------------------
 We agree to abide by this proposal for a period of Ninety (90) days from
the due date of its submission. We accept that you are entitled to cash
the Tender security if we withdraw the proposal before the expiry of the
validity period.
 If our tender is accepted, we commit to obtain a performance security in
accordance with the Bidding Documents.

 The general conditions of contract are the

framework for the entire contract, setting out the
usual contract terms, that should not vary from
one contract to the other. They set out the rights
and obligation of the parties who shall enter into
the contract and allocate risks between them.

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 Intended to deal with matters that are specific to
the contract at hand
 Sometimes named “Particular Conditions” or
“Conditions of Particular Application”

 Itis often impossible to fully describe the work

on drawings and in bills of quantities.
 Specifications are used to describe in greater
detail that which is shown on the drawings or
mentioned in the bills of quantities.
 Written requirements for materials, equipment
and workmanship. For example:
 characteristics of cement and steel used in
reinforced concrete
 tests to be performed on fresh and hardened
concrete

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 These are essential to facilitate construction
 Regardless of their place in the order of
precedence, they are perhaps the most
important documents when it comes to
planning and programming the works.

 “Bill of Quantities"
 means the bill of quantities which includes the
items to be priced and completed by the
tenderer
 If bills of quantities are not provided as part of
the contract, a schedule of rates is often used
as a basis of valuing variations

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Item Unit Rate Total Price
Description Unit Quantitiy
No. EGP EGP

1 Excavate as per the drawings m3 10,000.00

Supply & install MDF according to the

2 m2 63.00
Specifications

Supply & install Cables X1 according to the

3 m 320.00
Specifications
Supply & install ceramic tiles 30X30cm, grey or
4 off white semi matt (depending on adjacent m2 39.00
floor cover)
Supply & install dark grey porcelain tiles
5 m2 83.00
60X60cm, R.A.K

Item Unit Rate

Description Unit
No. EGP

1 Excavate as per the drawings m3

2 Supply & install MDF according to the Specifications m2

Supply & install Cables X1 according to the

3 m
Specifications
Supply & install ceramic tiles 30X30cm, grey or off
4 m2
white semi matt (depending on adjacent floor cover)
Supply & install dark grey porcelain tiles 60X60cm,
5 m2
R.A.K

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 It is the document to be signed by the parties
after the contractor receives the Letter of
Acceptance

FIDIC Form of Agreement

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 Request for Proposal
 Tender Enquiry Documents

Bid Documents

Input by Tenderer

Tender Documents

Input by Parties

Contract Documents

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 Write a list that a short contract has to include.

 Recitals

 Preamble

 Main Body

 Boilerplate

 Signatures

+ Statement of Work (SOW)

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 Recitals The Parties,
 Preamble
addresses,
commercial registry,
 Main Body ...etc
 Boilerplate

 Signatures

+ Statement of Work (SOW)

87

 Recitals

 Preamble reasons for entering into

the Contract. e.g.
 Main Body
“Whereas the Employer
 Boilerplate desires to perform the
Works known as …”
 Signatures

+ Statement of Work (SOW)

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 Recitals
Definitions, Interpretation
Contract Documents
 Preamble
The Role of the PM
Employer’s General Obligations
 Main Body
Contractor's General Obligations
 Boilerplate
Commencement
Contract Duration
 Signatures Contract Price
Payment Terms
Liquidated Damages

+ Statement of Work (SOW)

89

 Recitals
Durations for Approvals
Inspection and Testing
 Preamble
Guarantees/Insurances
Health and Safety
 Main Body
Subcontractors
 Boilerplate
Variations/Changes
Completion
 Signatures Defects Liability Period
Termination by Employer
Termination by Contractor
Claims (Time and Cost)

+ Statement of Work (SOW)

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 Recitals

 Preamble
Force Majeure
 Main Body Entire Agreement
 Boilerplate
Severability
Dispute Resolution & Arbitration
 Signatures Applicable Law
Non-waiver
Copyrights & Confidentiality

+ Statement of Work (SOW)

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 Recitals

 Preamble

 Main Body

 Boilerplate

 Signatures

+ Statement of Work (SOW)

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 Alternate bidding is a tool which enables the
Employer to prepare a scope of work which fits
its budget.
 The Employer lists bid alternates with an amount
stated in the bid to be added to or deducted
from the amount of the base bid if the alternate
materials and/or methods of construction is
chosen.
 The Employer, having seen the bid prices, can
select the most advantageous scope of work,
given the estimated budget.
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 Keep a record of the tenderers who picked up

the bidding documents.
 If you need to make any changes to the Bidding
Documents, you can issue an addendum before
the due date of the tender.
 Example: an addendum issued to cover changes in:
 Scope in the Introduction and Project Overview
 Due date of submission of tenders

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 Large tender lists
Usually caused by Open Bidding. However, it continues to be
used, mainly by local authorities for transparency reasons.
 Short tender periods
The time for tendering should be determined by the size of the
project, the complexity of the project and the standard of the
documents. In tenders with short periods, tenderers produce a
rough estimate, usually including contingency sums for errors.
 Insufficient Bidding documentation
Clients should produce enough drawings for the tenderers to
understand the nature and scope of the works.
 Asking for tenders when the work is unlikely to proceed

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 You are the Head of the Procurement Team in a
famous university. You are required to construct
a cafeteria during the summer holiday. You just
got the approvals for the project in May and you
need to start the project. Assess all types of
contracts and select which one would be most
appropriate for the project.

101

 Sort the three main types of contracts according

to the risk to the employer (higher risk, less risk,
least risk).

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 Brook, Martin, Estimating and Tendering for Construction
Work, (3rd Edition, Elsevier Ltd., Great Britain, 2004)
 Fisk, Edward, Construction Project Administration, (5th
Edition, Prentice-Hall, United States of America, 1997)
 MacRoberts, Solicitors, MacRoberts on Scottish Building
Contracts, (2nd Edition, Blackwell Publishing Limited,
2008)
 Murdoch John and Hughes Will, Construction Contracts
Law and management, (4th Edition, Taylor & Francis,
London and New York, 2008)

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