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Module 3 :
CONSTRUCTION PROJECT PROCUREMENT
AND CONTRACT MANAGEMENT

PROJECT PREPARATION
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 Procurement/Tendering as Client/Owner
 make sure that....
 your requirements are well-defined

 your designer’s outputs are in order

 you have a reliable cost estimate

 you have enough money ready (or at least you know

where to get it)

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 PROJECT PREPARATION
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 Bidding as a Contractor
 make sure that....
 you are aware of the rules for bidding

 you have a complete set of issued documents

 you understand the project requirements

 you have an experienced estimator who can make

good judgments on unclear designs
 you are aware of financing requirements (from the
client or from your pocket)

WHAT IS PROCUREMENT?
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 process of contracting the services of a ________

contractor, consultant or supplier

 RA9184 definition : the acquisition of goods,

consulting services, and the contracting of
infrastructure projects

 a critical first step in ensuring successful project

implementation

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 WHY UNDERGO THE PROCESS?
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 options possible which will

in order to have as many _______as
improve the chance that we will contract with the most
qualified company

 to systematize our firm’s approach, thereby putting order in

the way we do things

 For ____________ and accountability

 can also be the avenue which will provide opportunities for

good start-up companies

WHY UNDERGO THE PROCESS?

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 it is often said that if we select the most qualified

contractor for the project - the job is half-done....

 and yet many firms fall into the trap of not setting
aside time and resources for good selection

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 PROCUREMENT PREREQUISITES
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 identified scope or project requirements

 a system of ______________

 a set of evaluation criteria

 qualified evaluators

 a predetermined budget (esp. for contracting)

WHY RA9184 AS FRAMEWORK?

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 because it provides concrete objectives

 because it employs a system which encourages accountability

& transparency in procurement

 because it is systematic & procedure-driven

 IT IS A VERY GOOD REFERENCE ! IF YOU ARE A PRIVATE

FIRM, IT PROVIDES EXCELLENT INSIGHTS IN ACTIVITIES
RELATED TO PROCUREMENT. IF YOU ARE A GOVT AGENCY,
YOU HAVE NO CHOICE. 

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 CONTRACTOR PROCUREMENT
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 main objective  determine the ______ calculated

responsive bid who meets the pre and post-
qualification criteria

 usual criteria w/c determine pre-qualification:

 see succeeding slides

 main basis of proposal :

BID DOCUMENTS (issued by Client)

CONTRACTOR PROCUREMENT
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 Contractor Pre-qualification

 A procedure that provides a measure of assistance in

controlling the quality of bidders who will be
allowed to bid for a certain project

 Means of Pre-Qualifying Contractors

 By Public Invitation (Newspapers)
 By Private Invitation (letters)

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 CONTRACTOR PROCUREMENT
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 Contractor Pre-qualification
 Submittal Requirements
1. Legal Documents
 PCAB License
 Valid JV Agreements
 Authorization to Verify Submitted Documents
2. Technical Documents
 Statement of all completed projects (last 3 years)
 Statement of ongoing projects
3. Financial Documents
 Audited Financial Statements
 Contractor’s NFCC Statement

CONTRACTOR PROCUREMENT
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 usual criteria w/c determine responsiveness (criteria

which are mainly evaluated):
 see detailed list in RA9184 Section 25

 how contractor evaluation is undertaken...

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 CONTRACTOR PROCUREMENT
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 Bidding & Award Procedure

 IB 10.2 – Submission, Opening & Abstracting

 Two - envelope System

 1st envelope – “legal & technical” component
 2nd envelope – “financial” component
 Process….

CONTRACTOR PROCUREMENT
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 Bidding & Award Procedure

 Post-Qualification
 validation of responsiveness of contractor’s bid to the
stated project requirements
 verification of correctness, relevance and adequacy of pre-
qualification/ eligibility statement of the lowest calculated
bidder
 components to be evaluated
 Legal
 Technical
 Financial

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 CONTRACTOR PROCUREMENT
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BIDDING AND AWARD PROCEDURE

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 Awarding of Contract

 By Bid Contract

 By __________ Contract

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 BONDS AND SECURITIES
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 Refers to an issuance by the Contractor (to the Client) of

a specified monetary sum intended to guarantee the
Contractor’s faithful & complete participation in the
bidding process or execution of the work

 Types
 Bid Bond – during bidding
 Performance Bond – during construction

 Warranty – one year from completion or as

prescribed/determined by the Agency

BONDS AND SECURITIES

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 Forms of Bonds allowed

 Bid Bond
 Cash, Manager’s Check, Cashier’s Check, Irrevocable Letter of Credit
or Bank Draft  1% of Approved Budget
 Bank Guarantee  1.5% of Approved Budget
 Surety Bond  2.5% of Approved Budget
 Performance Bond
 Cash, Manager’s Check, Cashier’s Check, Irrevocable Letter of Credit
or Bank Draft  10% of Total Contract Price (UPDATED)
 Bank Guarantee  10% of Total Contract Price
 Surety Bond  30% of Total Contract Price

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 BONDS AND SECURITIES
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 Forms of Bonds allowed

 _________
 Primary purpose – to cover uncorrected discovered defects
and third party liabilities
 Retention Money
 10% deduction per progress billing until 50% completion
 At 50% completion, may be stopped if the project is
satisfactorily done & on schedule
 May be replaced with Surety Bonds equivalent to the
amount due for retention

VARIATION ORDERS
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 Issued for any of the following reasons:

 increase/decrease in quantity, including:
 new work items not included in original contract
 reclassified work items

 Three Main Forms

 Change Order – for existing pay items
 Extra Work Order – for new pay items

 Supplemental Agreement

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 CHANGE ORDERS
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 Conditions for Change Orders

1. Decrease or increase in _______ work items due to
necessary deletion or addition of work items or
sections

EXTRA WORK ORDERS

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 Conditions for Extra Work Orders

1. Additional works needed which were not included in
the original contract
2. Physical conditions differing materially from those
indicated in the original contract
3. Unusual and Unknown physical conditions and
recognized as inherent in the work called for in the
contract

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 SUPPLEMENTAL AGREEMENT
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 Condition for Supplemental Agreement

1. Amount of Change Order/ Extra Work Orders go

beyond 25% but less than 100% of escalated
original contract price

2. Beyond 100%  public bidding is required….

 Note that RA 9184 (Annex E) is silent regarding

Supplemental Agreements

OTHER TERMS
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 _________ Damages
 amount due the Client for Contractor’s refusal or failure to
complete the work within the specified time (including time
extensions)
 TLD = VUUP x [(1 + OCC) n – 1)] x K

 Substantial Completion
 refers to Contractor’s satisfactory completion of 95%
(quantity and value) of the works
 This is not in RA9184 but is an industry-accepted
performance parameter

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 OTHER TERMS
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 Punch-list
 document which specifies the remaining works, deficiencies
to be corrected and time of completion (considering
approved contract time)

 Incentive Bonus
 amount due the Contractor upon early completion (without
suspension orders/extension) of contract (works which saves
the Government expenses for engineering and allows early
use of the completed facility) – applicable only for major
and urgent projects
 TIB = VCUP x [(1 + OCC) t – 1)] x K’

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