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Open tender type of tenders based on selection and procedure

Open tendering is the main tendering procedures employed by both the government and private sector. The client advertises the
tender offer in the local newspaper giving detail and key information of the proposed works and inviting interested contractor to
tender. In the legal sense such tender notices constitute invitation to treat, a mere request by the employer for suitable contractor
to submit their bids or offers.
If the pre-requisite to tendering on the form of possession of the necessary registration has been identified in the tender notice,
then the advertisement is directed to only that particular class of the public having the said qualifications. In order to reduce
number of enquiries, earnest money is deposited (for private project). Until the receipt of a bone fide tender selected then it will be
returned. Although price is very important in the decision on which tender or bid to accept, it is not the only factor taken into
account. Client does not bind to accept the lowest or any offer. The advantages and disadvantages of open tender are stated below:
.
Advantages Disadvantages

• It allows any interested contractor to tender. Therefore it
gives opportunity for an unknown contractor to compete
for the work.
• Allowing the tender list to be made without bias. Client
will obtain the bargain possible. No favoritism in selecting
contractors
• Ensuring good competition not obliged to accept any
offers.
• Traditional method of tendering, familiar to all sector of
the engineering and construction industry.
• The tender list can be long as too many contractors
tendering for one job.
• Uneconomic use of source.
• Public accountability may be questioned if the lowest offer
is not accepted.
• Does not attract reputable and established contractor unless
they are forced to, due to lack of work.
Selective tender

Selective tendering is the one alternatives developed to address the limitations of the open tendering procedure. In this method, a short
list of contractor is drawn up and they are invited to submit tenders. The purpose of the elective tendering are to improve the quality of
the bids received, to ensure that contractors with the necessary experience and competence are given the opportunity to submit the
necessary bids, due to urgency work involved, for specific reasons of the employer, eg security reasons in government projects. etc. and
to make the tendering procedure more manageable and less a burden on the parties involved. Such list may be prepared through
recommendation from the Client’s professional adviser whom have knowledge of the Contractors undertaking the work in the past or
advertisement through the newspaper (prequalification). The advantages and disadvantages of the selective tendering are stated below.

Advantages Disadvantages

• Only the competent contactors were invited to tender, • Reduces the availability of work for other contractors
then the lowest can be accepted. especially new contractors.

• It reduced the cost of tendering (economic use of
resources, reduced tender documentation, shorter tender
periods, better management of the tender process, etc.)
• Tender Price may invariably higher than would have been in
open tendering.
• Tendering period longer because it involved two distinct
stages.

• Favoritisms may occur in the short listing.

Two Stage Selective Tender
Two stage selective tendering combined elements of competition and negotiation into a formula where the employer could utilize the
contractor’s expertise at an early stage of the project cycle so as to maximize innovation, ingenuity and quality and simultaneously
optimize cost, time and resource input. A contractor is selected competitively early in the design process. The tender documents contain
approximately quantities of the major value items. As design and planning proceed, the final tender is developed from cost and priced
data supplied with the initial tender. Two stage selective tendering was very popular in developed countries. It was different from
selective tendering because has two (2) distinct stages namely:
• Selection of suitable contractor
• This involves the selection of a suitable contractor and the establishment of a level of pricing for subsequent negotiations.
• The objective is to select suitable contractor as early as possible is to work together with the professional team and to establish a
level of pricing for subsequent negotiation.
• The criteria for short listing is normally confined to items such as technical and financial capability, experience in similar works and
extent of resources (manpower, plant and equipment).
• The pricing document should be flexible enough to cater for adjustment of price fluctuation for the period between two stages and
the pricing of the second stage.
• In selecting a suitable candidate, a basis for pricing the subsequent second stage should be established accordingly.
• Determination of Contract Price
Once a suitable contractor is selected, he will work together with the project team start contributing to the pre contract process in his
capacity as unbiased but independent construction expert. This contractor will contribute the following:
• Contribution as a Technical Advisor to the Design Process
• Practical Skills and Buildability
• Minimization of Project Delay
During this stage, a negotiation to reach an agreement on the final contract price is undertaken and the pre contract process is perfected.
If no agreement being reached, the employer has an option to abandon the tendering exercise and re-tender the works using any other
tendering procedure.
.
Two Stage Selective Tender
The application of two stage selective tendering might be appropriate where the works are a very complicated nature, where at the time
of selection of the contractor, the magnitude of the work may not be known with sufficient certainty and where it is an essential pre-
requisite for works to be finished by an early completion date. Table below are some advantages and disadvantage of two stages selective
tendering

Advantages
• Benefit of the contractor’s expertise in buildability, specialist
knowledge in proprietry systems, project scheduling, etc
resulting in value for money.
• Savings of time due to the overlap of the design and
tendering stage.
Disadvantages
• Its application requires a high level of familiarity and
commitment on the part of employers and contractors.
• owing to a relatively smaller element of competition, but on
the other hand higher negotiations content, the tender
process is relatively more expensive and longer than other
common procedures.

• The procedure utilizes the best aspects of both competition
and negotiation to arrive at the most favourable
arrangement at an optimum firm price before work
commences.
• Since the contractor is part of the project team at a very
stage of the project, this results in better communication
and information flow
• Should the second stage be deadlocked or result in no
acceptable agreement being reached, the tender process
has to be initiated all over again, albeit, through a different
route. This incurs a time and cost penalty to the project as a
whole.
• This procedures requires a high level of commitment,
integrity and good faith on the part of both sides which
sadly is usually lacking, hence the apparent failures
encountered to date.
Negotiation Tender Advantages
Negotiation tendering is extensively used in the engineering and construction industry
commencing from tendering till dispute resolutions, i.e. under the styles of pre-contract • Only reputable contractor are invited for negotiation..
negotiations and post contract negotiations. Usually with single contractor but may be up to
three contractors. Negotiation process involves are as follows: • The Contractor can contribute his expertise during design
stage..
• Identification by the employer of a suitable contractor to negotiate with.
The contractor can be selected either from the employer’s own list of preferences or on • Early Commencement of work on site. It shortens the
the advice of the professional team. period involved in appointing the contractor..
• The contractor being apprised of the work scope.
• The selected contractor is issued with details such as the scope of work involved, relevant • Reduce risk of failure
drawings, design and /or information to enable him to appreciate the extents of obligations
and the employer’s actual needs. Some employers prepare and issue to the contractor • Best alternatives for the employer to adopt is special
proper tender documents inclusive of a nominated bills of quantities to assist contractor in circumstances such as emergencies, security reasons and
pricing the works for the forthcoming negotiations. Negotiations can be applied to the etc.
following type of contract: • Experience has shows that contracts let out this basis
• In Partnering type of contracts under the so called win-win formula. result in fewer disputes and claims during the construction
• Where the employer has a long term business relationship with the contractor. stage.
Disadvantages
• In situations where the parties are in a relationships of holding and subsidiary companies.
• Where the contractor is involved in the financing of the project.
• The cost work is likely higher than competitive
• In situations where the employer finds it advantages to employ the same contractor to
tender.
continue an initial or existing contract for the new works
• Reduces the availability of work for other
• Where there is a pressing need to have a very early start of work on the site and to
contractors.
complete the works on a fast tract basis.
• Tendering period longer because it involved two
• In special circumstances e.g. Security reasons, emergencies etc where it is expedient to
distinct stages.
secure the services of a particular contractor only.
• Should the negotiations be deadlock or prove
• Where there is only a single contractor who is the only one available or with ether the
eventually unsuccessful, this causes wastage of
special skill or resources to carry out the particular works.
valuable resources on both sides and loss of time
• The employer’s resources are either limited or constrained thereby making the use of the
for the employer, thereby delaying the overall
other tendering impractical.
selection of suitable contractor.
Term Tender

• Term tendering normally used on major maintenance projects. It may be awarded to a contractor to cover a range of
different buildings in different locations.

• It is often limited to a fixed time scale, although the needs of the client may often require this to be extended.

• It is like a standing offer to undertake a loosely defined extends of work usually within a fixed time period.

• The type of work is usually specified and priced in a schedule of rates.

• The contractor will initially be offered the work to cover a number of different trades usually on the basis of prices
contained in a schedule prepared by the client.

• Where the client supplies the rates for the work, the contractors are given the option of quoting a percentage addition or
deduction from these rates depending upon their desire to win the project.

• The contractor offering the most advantageous percentage to the client will then be awarded the contract.

• An indication of the amount of work expected over the specified period of time will assist the contractors in the
consideration of the percentage to be quoted.
Conventional Tendering Process

As the researcher mentioned before, this chapter will focus on conventional tender while the next chapter will focus on electronic
tendering. Therefore readers will see clearly background on conventional tendering and electronic tendering. Conventional tendering
process will involve pre-tender stage, tender advertisement stage, closing of tender, tender opening process, tender evaluation process
and finally tender award.

Pre-tender Stage
At pre-tender stage, when the clients have an idea, client will appoint consultant to discuss further about the project. Consultant will do
their job, advising, managing the tender and contract, and also transfer the idea into the drawing. At this stage client and consultants
will brainstorming about the scope, time to complete and budget that client willing to allocate. Researcher believes that pre-tender
stage is most crucial matter because it will initiate the next step of a project. If the pre-tender stage is failed, the project will not
successfully complete.

Tender Advertisement
Tender advertisement also called tender notice. The conventional tender notice will advertise in local newspaper. In tender notice, basic
requirement should be appearing are:
Title of the project.
Class of contractor, head and subhead needed.
Location, date, and time to obtain the tender document.
Fees for tender document.
Location, date and time for submission of tender doc.
Closing of Tender

In tender notice will mention the time and date of tender closing process. If the contractors fail to submit their bids within specific time and
date, it considers the contractors refuse to bid for the tender. At that time also tender validity period is started. At this period, contractors can
withdraw back their bids if they are no more interested to fight for the tender. Consultant use this period to make assessment and evaluation
each of the offers.

Tender Opening and Evaluation Process

Quantity surveyors usually will handle tender opening process. In order to preserve the integrity of the competitive process, it is imperative
that the evaluation of proposals is undertaken objectively, consistently and without bias towards particular suppliers. Tenders are usually
evaluated against a pre-determined set of criteria. The evaluation of the tenders shall be prepared the soonest possible after the tender
opening. A report prepared by the Quantity Surveyor will describe the findings of the said evaluation and it will be supported by tables and
graphs. In the end, the Quantity Surveyor will recommend which tenderer, who in his opinion, is the most suitable to undertake to execute
the project.

Tender Award
An evaluation team will examine each tender received and make recommendations as to which tender represents best value for
money. Once the contract has been awarded, both the successful and unsuccessful tenderers will be notified. Once the final decision has
been made on the tender award, the tender administrator creates the tender results notification which is in letter form, and then sent to all
participating contractors