Tender Strategy Report

for ABC Sdn Bhd

(ABCSB )
 Table of Content
1.0 Introduction
2.0 Competencies for Tender strategy/contract
selection
3.0 Scope

4.0 Legal Obligation

5.0 Selective Tendering For Design and Build
6.0 Negotiation
7.0 Request For Proposal
8.0 Supplier Qualification
9.0 Decision and Contract
 Introduction
The purpose of this document is to describe the Tender strategy which will be adopted by ABC
Sdn Bhd (ABCSB) to facilitate consistency in, and provide guidance to contract departments
regarding, selection of the most appropriate tender strategies and contracts for design and
build projects. ABCSB will work collaboratively with the contractors and their representatives to
ensure that all market testing is undertaken in an ‘open book’ manner, providing full visibility
and utilizing robust procedures and systems which will demonstrate and deliver affordability
and best value for money to the Company at all times. ABCSB will use this document as a
vehicle to alleviate other stakeholders concerns over demonstrating and obtaining the best
possible value for money. This report aims to address any concerns whilst acknowledging the
challenges of the project and the need to satisfy a number of important requirements such as
the drivers of value, transparency and competition.

Competencies for Tender strategy/contract selection

The selection of appropriate procurement strategies and contracts requires knowledge of:
• the key objectives of, and constraints on, the design and build project
• the risks (both typical and specific) that might impact upon or be encountered at each
stage in the delivery of the project, and how best to deal with those risks
• the level of complexity of the project
• the key processes and activities that must be performed in delivering the project
• the available tender strategies and contracts

Scope
Tender Strategy provides an overview of the tender strategies and contracts that may be used
on design and build projects and guidance as to their application. It emphasises the need for
early selection of the tendering strategy and for flexibility after the selection has been made.
The guideline also explains why these aspects are critical to securing planned project outcomes.
The design and build arrangement is an attractive option for clients because the contractor
accepts the responsibility for designing and constructing. The benefits include single point
responsibility ,prices which reflect more closely to the final cost to the leading to the early
completion.
 Legal Obligation

The parties’ obligations

 The ABCSB request for tenders is Request For Proposal and therefore
the employer is under no legal obligation to accept any tender.
 The cost of tendering is generally borne by the contractor.
 Where the preliminary work goes beyond what is normally expected,
an employer may agree to make payment.
 A person who invites another to tender with no intention whatsoever of accepting
that tender can be liable for any expenses that the latter incurs.
 An employer who expressly promises to accept the lowest tender will be bound by
that promise, if that tender complies with any conditions.
 An employer may be under an implied obligation to give proper consideration to
any tender submitted in accordance with published conditions.
 Local authorities are required by the Local Government Act 1972 to publicise
formal contracting procedures, normally involving competitive tendering.
 Local authorities are required to give reasons for their procurement decisions and
are generally prohibited from taking into account non-
commercial considerations in reaching those decisions.

Selective Tendering For Design and Build

The terms of any consultant switch should be communicated to the tenderers in the
preliminary enquiry
In order to limit unnecessary work by tenderers, the employer should include in the
requirements all information about the site and building in their possession S
Selection of tenderers

 Preliminary list should comprise six to eight contractors

 Final list should (in additional to criteria outlined above) take into account:
Whether the firm has had recent experience of designing and constructing to type of
building envisaged by the Employer’s Requirements
Whether the firm’s customary design capability is in-house and if not, what method
will be used

 Final list should be limited to no more than three firms, due to the high costs involved in
in preparing tenders for work with contractor’s design involvement
 If two stage tendering is used, the list may be increased to no more than five firms with
either one or two going through to the second stage
ABCSB Requirements
The ABCSB Requirements should state the priority of the following items that will determine
the successful tender:

 Appearance
 Functional requirements
 Capital cost
 Expected lifespan of the building
 Flexibility of use
 Quality
 Running and maintenance costs
 Time of construction
 Any other factors
Cost Of Tendering
Where substantial high quality design work is required or excessive competition is introduced,
it may be in the employer’s interests to offer payment from the preparation of unsuccessful
competitive tenders

Single stage or two stage?

Most employers would benefit from a two stage procedure that would enable post-tender
changes and development to the design and cost.

In exceptional circumstances where the employer’s requirements are well defined, then single
stage tendering may be used

Extent of information
A full set of drawings and specification should not be expected at tender stage. Therefore the
employer must indicate the minimum require to enable him to select a contractor

Tenderers should be instructed to indicate in their tender the period they require to elapse
between the acceptance of their tender and the commencement of work on site to enable
them to complete production drawings and obtain necessary statutory approvals
Tender period
Depends on the nature of the Employer’s requirements and whether a single stage or two stage
procedure is being followed. For most projects, the period is three to four months

Assessment
The evaluation should be carried out in accordance with the criteria specified in the preliminary
enquiry The best tender, which may not be the lowest, should be accepted

Two stage tendering

The process of finalisation of the contractor’s proposals resulting in an acceptable basis for the
contract. Where the employer fails to reach an agreement with the selected contractor, it will
be necessary to either recommence the second stage procedures with another tenderer or
invite further first stage competitive tenders

Negotiation
Newer forms of procurement (eg construction management and management contracting)
demand a less adversarial approach
The inherent flexibility demanded means no standard method for negotiating a contract
Serial contracting: contractors are asked to bid for a project on the basis that if they build this
one satisfactorily, others will follow and the same bill rates will be used - partnering
Most effective way of selecting a contractor for non-traditional approaches
Familiarity between employer and contractor is important factor
 Request For Proposal
Points to consider when preparing a Request For Proposal to be sent to various contractors

 Name of firm
 Size of firm
 Turnover of firm
 Evidence of financial stability
 Location of firm
 Recent experience of this type of project
 References from previous clients/architects
 Recent experience of this type of time scale
 Health and safety records
 Availability of resources for that time period
 Information on key personnel to be working on project
 Management structure of firm
 Quality assurance procedures within the firm
 Details of liability insurance

Points to consider when preparing an agenda and objectives for a structured interview to
establish a shortlist of contractors who will be invited to tender.

 Agenda for interview

 The information in the questionnaire
 Location of project
 Nature of site/ existing buildings
 Restrictions over site
 The firm’s general approach to the site conditions
 Description of the required retail development including cost
 Experience of the firm in large retail developments
 Discussion as to the type of contract and method of procurement that will be used
 Experience of the firm with this type contract and procurement method
 Whether there will be any contractor’s design
 Health and safety records and initial plan for the project
 Resource available for the project
 Initial thoughts as to programme and phasing
 Procedure to be adopted for the examination and correction of any errors in the
tender
 Approximate date for dispatch of tender documents and tender period
  Any additional questions that the firm may have

Objectives

 To establish whether the firm has the requisite skill and experience for this type of
development
 To judge their competence
 To ascertain whether they have the adequate resources necessary to carry out the
project
 To meet the firm face to face
 To give the firm an opportunity to ask any questions about the project, client and
design team
 List of attendees

Client

 Architect and/or contract administrator and/or quantity surveyor

 Director of construction company
 Key personnel who would be involved with project
 Bonds and/or parent company guarantees are commonly used to protect the
financial interests of the employer.

What are bonds?

Bonds are financial assurances that can be purchased from finance institutions such as
banks or insurance company by contractors to back up their tenders
What are parent company guarantees?

Parent company guarantees are financial guarantees under which the contractual
performance of one company within a corporate group is underwritten by other members
of the group to back up the contractor’s tender
In what ways do they provide security?
Bonds and/or guarantees can be provided to guarantee every aspect of the contractor’s
performance
They provide security for the employer in that in the event of insolvency of the contractor
Bonds can be provided in return for early release of retention money, so that the employer
is protected against any defects that he may later discover
Advance payment bonds protect the client in the event that the contractor fails to fulfil
obligations that have already been paid for
Bonds can also be requested by contractors from subcontractors to protect their ability to
deliver the project for the tender sum in the event that their tender was based upon the
subcontractor’s tender and the subcontractor has subsequently withdrawn
How are the requirements for these included in the tender documents?

The need for a bonds and/or parent company guarantee would be stated in the preliminary
enquiry for invitation to tender
Details of the bonds and/or parent company guarantees would be outlined in the tender
package
How would you deal with errors in tender returns?

Depends on which alternative chosen on instructions to tenders:

• Alternative 1 – the QS should amend computing errors arriving at a new tender sum. They
should inform the contractor who can choose to either confirm or withdraw
Alternative 2 - QS should amend computing errors arriving at a new tender sum. They
should inform the contractor who can choose to confirm or amend.
Supplier Qualification
 Decision and Contract
Decision Interfaces understand the myriad issue that can arise under contractor or vendor
selection process.
Decision interfaces contract negotiation services include :

 A thorough review of key pricing and service terms.

 An examination of proposed contractor supplier contract.
 Close coordination to resolve document issues.
 Interfaces with the contractor or supplier.

Decision interfaces contract negotiation are client directed.

Decision interfaces conduct a comprehensive evaluation of every element of proposed contract
including :

 Price
 Term
 Business issues
 Payment term
 Service Level agreement
 Conversion Timing
 Termination penalties
 Performance Warranties
 Ownership of custom enhancement
 Escrow arrangement
 Bank and vendor responsibility