Lec 5 CM898

CE-898
Contract Management
TITELMASTERFORMAT DURCH KLICKEN BEARBEITEN
Lecture No. 05
Dr.-Ing Abdur Rehman Nasir

Assistant Professor
Department of CE&M
Assistant Professor of Construction Engineering and Management
1
NIT (SCEE), NUST H-12, Islamabad 03.10.2018
NIT (SCEE), NUST H-12, Islamabad
CE-898
Contract Management
 Tender
 Prerequisites for Invitation to Tender
 Preparation of Tender Documents
 PEC Bidding Documents
Annexures provided with this lecture

 PEC STANDARD FORM OF BIDDING DOCUMENTS (Civil Works)

Assistant Professor of Construction Engineering and Management 03.10.2018
NIT (SCEE), NUST H-12, Islamabad 2
CE-898
Contract Management
What is a Tender?
What is a Bid?

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Contract Management
Tender
 A Tender/Bid is written offer in response to invitation to do a work or to

provide a material at a given price within a prescribed period and under
certain specific conditions.
 A Tender Notice is an open Request for Proposal (RFP) when an organization

wants to buy something and is soliciting bids from suppliers.

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Contract Management
Tender
 "Tender" means the Contractor's priced offer to the Employer for the
execution and completion of the Works and the remedying of any defects
therein in accordance with the provisions of the Contract, as accepted by the
Letter of Acceptance. – FIDIC
 “Bid” means a tender, or an offer, in response to an invitation, by a person,

consultant, firm, company or an organization expressing his or its willingness
to undertake a specified task at a price. – PPRA Rules

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Contract Management
 Tendering is adopted for purchasing the materials or getting the work

executed at the most competitive rates, and to eliminate chances of undue
favor to any particular supplier. The aim of this is to give equal opportunity to
all vendors or contractors.
 Bidding is the process of submitting a proposal to undertake, or manage the

undertaking of a project.

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Contract Management
Types of Tender
 Open Tender
 Limited / Restricted / Selective Tender
 Single Tender
 Negotiated Tender
 Item Rate Tender
 Percentage Rate Tender

CE-898
Contract Management
Prerequisites for Invitation to Tender

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Contract Management

A. Completion of Feasibility Studies
− Technical Feasibility
− Economic Viability
− Environmental Impact Assessment (EIA)

CE-898
Contract Management

B. Detailed Engineering Design
− Design of Project Components
− Finalization of Technical Reports
− Specifications
− Computation of Quantities
− Formulation of Engineer’s Estimate

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Contract Management

C. Administrative Approval
− Preparation of PC-1 Proforma
− Approval by The Government
D. ARRANGEMENT OF FINANCES
− Local & Foreign Exchange Components
E. Land Acquisition
F. Prequalification of Contractors
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Contract Management
Preparation of Tender Documents

CE-898
Contract Management

Notice Inviting Tender (N.I.T.) Notice of Tender
Invitation to Tenders Tender Notice
Invitation for Bids Bidding Notice
 This is the general notice issued by the client inviting tenders from the
prospective construction firms. This signifies the intention of the client to get
work executed by contract.
 The purpose of this is to get competitive offer. A condensed text of N.I.T.
covering key features is advertised in newspaper. This condensed text is known
as “Tender Notice” or “Press Tender Notice”.
CE-898
Contract Management

The tender notice generally covers the following:
 Name and details of type of work, its estimated value, timeline

 Source of funds for the works
 Earnest money and the manner of its payment
 Price of tender document, and date and place upto which it can be purchased
 Place, and last date and time of submission of tender documents, and date
and time of its opening
 Category of contractors eligible to tender
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Contract Management

N.I.T. usually contains following information in addition to that available in the
tender notice:
 Guidelines to bidders for proper submission of tenders
 Amount of security deposit etc. and its method of deposition
 Validity period of tenders
 Mention about right to rejecting of all tenders or accept any part or whole of
the tender, acceptance of lowest rates is not binding
 Mention of situations which may render a tender liable for rejection
 Mention that sales tax or any other taxes to be borne by the contractor
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Contract Management

The client is generally required to prepare the following for completion of the
Tender Documents:
(i) General Conditions of Contract

(ii) Particular Conditions of Contract / Conditions of Particular Application
(iii) Specifications - Special Provisions.
(iv) Specifications - Technical Provisions.
(v) Bill of Quantities.
(vi) Drawings

CE-898
Contract Management

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Contract Management

CE-898
Contract Management

CE-898
Contract Management

CE-898
Contract Management

CE-898
Contract Management

CE-898
Contract Management

CE-898
Contract Management
PEC Bidding Documents

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Contract Management
PEC Bidding Documents

The following documents have already been Notified by the Federal Government
(ECNEC):
1. Standard Form of Bidding Documents (Civil Work)

2. Standard Form of Bidding Docs for Procurement of Works (E & M)
3. Standard Form of Bidding Documents for Procurement of Works for Smaller Contracts
4. Standard Form of Contract for Engineering Consultancy Services (Time Based Assignments)
5. Standard Form of Contract for Engineering Consultancy Services (Lump Sum Assignment)
6. Standard Form of Contract for Engineering Consultancy Services for Smaller Projects.

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Contract Management
Standard Form of Bidding Documents (Civil Work)

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Contract Management

 This document is to be used for all works with estimated value of more than
Rs.25 Million.
 While preparing this document, the following publications/documents have

been referred to:-
(i) Pakistan Standard Conditions of Contract (Civil) 1st Edition reprinted in July 1993.
(ii) Standard Bidding Documents finalized by WAPDA in 1987 for use on medium sized contracts.
(iii) National Highway Authority Contract No. 1, Indus Highway Project (N-55).
(iv) Asian Development Bank-Sample Bidding Documents.
(v) World Bank Standard Bidding Documents - Procurement of Works May 2005 (based on FIDIC 99 Second
Edition).
(vi) Public Procurement Rules, 2004.
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Contract Management

 This document has been approved by ECNEC in its meeting on 12th November,
2007.
 The document has been notified by Planning Commission, Government of

Pakistan vide Notification No. 8(60)WR/PC/2008 dated 12th February, 2008.
 It is, therefore, mandatory for all engineering organizations and departments

at Federal and Provincial level and district governments to use this document
for procurement of civil works funded locally and/or through donor agencies.

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Contract Management

 The complete Bidding Documents shall comprise twelve items listed therein
and any Addenda issued in accordance with thereof.
 The Standard Bidding Documents, in addition to Invitation for Bids, includes
the following:
1. Instructions to Bidders 7. Form of Bid & Appendices to Bid
2. Bidding Data 8. Sample Bill of Quantities
3. General Conditions of Contract, Part-I (GCC). 9. Form of Bid Security
4. Particular Conditions of Contract, Part-II (PCC). 10. Form of Agreement
5. Specifications - Special Provisions. 11. Form of Performance Security/Bond &
Mobilization Advance Guarantee/Bond
6. Specifications - Technical Provisions. 12. Drawings.
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Contract Management

Invitation for Bids
 The “Invitation for Bids” is meant for publication in the national/ international
newspapers, as well as on PEC Website & PPRA Website in case of Federal
Govt. procuring agencies and for other additional distribution to be decided by
the Employer as notice for calling of Bids.
 The notice should be published so as to give the prospective bidders sufficient

time for preparation and submission of bids which may be 42 to 154 days
depending on the size of the Works.

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Contract Management

Invitation for Bids
 The non-refundable fee for the sale of Bidding Documents should be nominal
so as to cover reproduction and mailing costs and to ensure that only bona-
fide bidders will apply.
 The amount of Bid Security should be a lump sum figure ranging from 1% to
3% of the likely cost of the Works or a percentage ranging from 1 % to 3 % of
the Bid Price.

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Contract Management

 The Bid Security shall be, at the option of the bidder, in the form of Deposit at
Call or a Bank Guarantee issued by a Scheduled Bank in Pakistan or from a
foreign bank duly counter guaranteed by a Scheduled Bank in Pakistan or an
insurance company having at least AA rating from PACRA/JCR in favor of the
Employer valid for a period 28 days beyond the Bid Validity date.

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Contract Management

 The bid securities of unsuccessful bidders will be returned as promptly as
possible, but not later than 28 days after the expiration of the period of Bid
Validity.
 The Bid Security of the successful bidder will be returned when

the bidder has signed the Contract Agreement and furnished the required
Performance Security.

CE-898
Contract Management
Bid Preparation
Bidders’ Responses to the Invitation to Tender
 Whatever time is allowed for bidders to prepare quotations to meet the
closing date, it never seems quite enough.
 In the frenzied activity of estimating, the bidder sometimes overlooks the
inconsistencies and pitfalls introduced by the client, not by design, but as a
result of haste or carelessness in the composition of the bid package.
 Most bidders are confident that they have read the bid package from cover to
cover before submitting their tenders but in reviewing the contract proper, it is
important not only to understand what is written therein but also to be aware
of what is left unwritten.
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Contract Management
Articles of Agreement or General Terms and Conditions

 The Articles of Agreement are preprinted as a permanent part of each contract
and some clients consider that the articles are set in concrete and not to be
challenged.
 Unfortunately, some contractors are willing to accept this view and skip over
the articles in review as something to be accepted without question.
 Indeed, most of the articles are reasonable, practical, and inserted for
purposes that few bidders would contest. On occasions, however, clients’
lawyers will slip in some clause that could be unfair to the contractor or, at
best, biased in favor of the owner.
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Contract Management

Few examples:
i. Contractor shall comply with all applicable laws and regulations of all
governmental and other authorities having jurisdiction, including but not
limited to, laws and regulations regarding labor, taxes, and safety.
The bidder might inquire who pays extra taxes, and so forth, if these laws are revised during
the life of the contract. Probably the “other” authorities having jurisdiction should be listed.

CE-898
Contract Management

Few examples:
ii. Without prejudice to Company’s other rights under Contract, Company shall
have the right to terminate the Contract for any reason and at any time by
giving notice in writing to Contractor. (The clause goes on to explain to what
compensation the contractor will be entitled if the termination is not for default.)
Most articles are silent on any suggestion regarding the contractor’s right to terminate, but if
the bidder accepts this it may be worthwhile looking closely at the compensation to determine
if, when the contract is halted through no fault of the contractor, the amounts offered are
sufficient. The same applies to the suspension clause that may be actuated solely at the
convenience of the client.
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Contract Management

 There are other clauses in various articles that may be questioned. The general
message to the bidder is:
Don’t be afraid to challenge the Articles of Agreement if you think they may be
weighted against you.
 Finally, it should be mentioned that, because the articles are frequently taken
from a “model” contract, one or two clauses might creep in to the bid package
and be completely irrelevant to the work. On discovery, the client will usually
be quite willing to alter or delete them.

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Focus should be upon conditions related (but not limited) to:
 Scope of Work
 Changes in Scope of Work
 Materials
 Specifications and Drawings
 Alternate Proposals

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Contract Management
Tendering Process
The tendering process, which leads towards the award of a main or prime
contract to the main contractor, is complex and generally follows four distinct
stages.
Stage 1
 Subcontractors and suppliers of materials prepare bid prices and quotations to
be used by main (general) contractors.
 Subcontractors and suppliers will be invited by bidding main contractors to
supply bid prices for specific project activities and materials.

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Contract Management
Tendering Process
Stage 1
 A structure of the bill of quantities facilitates a relatively easy break-up of the
bill into specific trade sections for use by bidding subcontractors. The bill of
quantities is also highly suitable for use by suppliers of materials.

CE-898
Contract Management
Tendering Process
Stage 2
 A main contractor compiles a tender either from the real subcontractors’ bids
or from target costs allowed for different trade items, or from both. Material
costs, preliminaries and the markup costs are then added. Some contractors
prefer to develop their own estimates of subcontract work.
 A main contractor combines the best subcontract and supply bid prices with
an estimate of preliminaries and mark-up to form a competitive bid price.

CE-898
Contract Management
Tendering Process
Stage 2
 It is interesting to note that on building projects, the bids of subcontractors
and suppliers generally amount to at least two-thirds of a contractor’s tender
price (assuming that preliminaries range between 10 and 15 per cent, and the
mark-up between 15 and 20 per cent).
 Values of subcontract bid prices clearly affect the competitiveness of a

contractor’s tender.

CE-898
Contract Management
Tendering Process
Stage 2
 The total tender price is then a function of the main contractor’s preliminaries,
subcontractors’ and suppliers’ bid prices, the main contractor’s mark-up, and
the magnitude of the risk allowance. It can be expressed by the following
equation:
TTP = f((GCP + SUM SCB + SUM SB) + GCMP + RA)
where:
- TTP = total tender price - GCP = main contractor’s preliminaries
- SCB = subcontractors’ bid prices - SB = suppliers’ bid prices
- GCMP = main contractor’s mark-up - RA = risk allowance
CE-898
Contract Management
Tendering Process
Stage 2
 It would be too simple when analyzing a tender price to consider the main
contractor’s risks only. Subcontractors and suppliers are also exposed to risks
and will make appropriate allowances for such risks in their bid prices.
 The magnitude of such risk allowances was assessed by Uher (1990) to be

approximately 12 per cent (measured as an average maximum value for a
sample of subcontractors surveyed).

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Contract Management
Tendering Process
Stage 3
 In the evaluation of submitted tenders, the ‘best tender’ is selected and the
contract is awarded to the respective main contractor.
 General contracts and subcontracts are usually awarded to the best tenderer.
 How the term ‘best tender’ is interpreted undoubtedly, depends on the
perception of risk.
 Where the project risks are seen as insignificant, the ‘best tender’ will most
likely be the lowest priced tender, provided it is within an acceptable margin
from the principal’s/engineer’s estimate.

CE-898
Contract Management
Tendering Process
Stage 3
 In the presence of a moderate to high risk, however, the term ‘best tender’ will
commonly be a bid in the range between the lowest and the mean tender
prices. The selection of the lowest tender on high-risk projects would normally
be regarded as a risky decision.
 Tendering is similar to auctions and requires knowledge of the construction
industry, application of common sense, and a feel for the market. It is a
complex process that brings together a number of bidders, each with only one
objective in mind i.e. to win a job.

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Contract Management
Tendering Process
Stage 3
 Despite its complexity, competitive tendering ultimately leads to the selection
of a successful bidder.
 But until the winning tenderer is announced, the tendering process is riddled
with uncertainty.
 Tenderers do not know how accurate, complete and competitive their bids are,
whether they are free of mistakes, how good or bad various assumptions will
be, or whether the tendering process will be conducted ethically.

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Contract Management
Tendering Process
Stage 3
 The evaluator(s) may also not be sure how accurate tender prices are and to
what extent they cover the project risk. Nevertheless, the outcome of this
stage should be the selection of the best tender.

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Contract Management
Tendering Process
Stage 4
 After the award of the contract, the successful main contractor will select
subcontractors and suppliers on the basis of meeting or bettering the real or
target cost provisions for different trades made in the tender.
 Although post-tender negotiations between the main contractor and

subcontractors have no immediate bearing on the main contract price, they
may set in motion a series of events that may ultimately inflate the main
contract price.

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Contract Management
Tendering Process
Stage 4
 Such events are almost always linked to unrealistically low subcontract prices
and the presence of difficult subcontract conditions. Problems in executing just
one subcontract may cause overruns in project cost and time.

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Industry Practices

52 03.10.2018
CE-898
Contract Management
Procedures of Open competitive Bidding under PPRA Rules
 Single Stage – Single Envelope

 Single Stage – Two Envelope
 Two Stage – Two Envelope
 Two Stage Bidding Procedure

53 03.10.2018
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Contract Management
I) Single Stage – Single Envelope
Each bid shall comprise one single envelope containing,

separately, financial proposal and technical proposal (if
any). All bids received shall be opened and evaluated in the
manner prescribed in the bidding document.

54 03.10.2018
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II) Single Stage – Two Envelope

 The bid shall comprise a single package containing two separate
envelopes. Each envelope shall contain separately the financial
proposal and the technical proposal.
 Initially, only the envelope marked “TECHNICAL PROPOSAL” shall be
opened. After the evaluation and approval of the technical proposal the
procuring agency, shall at a time within the bid validity period, publicly
open the financial proposals of the technically accepted bids only.
 The financial proposal of bids found technically nonresponsive shall be
returned unopened to the respective bidders. The bid found to be the
lowest evaluated bid shall be accepted.
55 03.10.2018
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Contract Management
III) Two Stage – Two Envelope

First Stage:
 The bid shall comprise a single package containing two separate
envelopes. Each envelope shall contain separately the financial proposal
and the technical proposal. Initially, only the envelope marked
“TECHNICAL PROPOSAL” shall be opened.
 The envelope marked as “FINANCIAL PROPOSAL” shall be retained in
the custody of the procuring agency without being opened. The
technical proposal shall be discussed with the bidders with reference to
the procuring agency’s technical requirements.
 Those bidders willing to meet the requirements of the procuring agency
shall be allowed to revise their technical proposals following these
discussions.
56 03.10.2018
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Contract Management
III) Two Stage – Two Envelope
Second Stage:
 After agreement between the procuring agency and the bidders on the
technical requirements, bidders who are willing to conform to the
revised technical specifications and whose bids have not already been
rejected shall submit a revised technical proposal and supplementary
financial proposal, according to the technical requirement.
 The revised technical proposal along with the original financial proposal
and supplementary financial proposal shall be opened at a date, time
and venue announced in advance by the procuring agency.

57 03.10.2018
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Contract Management
IV) Two Stage Bidding Procedure

First Stage:
 The bidders shall first submit, according to the required
specifications, a technical proposal without price.
 The technical proposal shall be evaluated in accordance with the
specified evaluation criteria and may be discussed with the bidders
regarding any deficiencies and unsatisfactory technical features.
 After such discussions, all the bidders shall be permitted to
revise their respective technical proposals to meet the
requirements of the procuring agency.

58 03.10.2018
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Contract Management
IV) Two Stage Bidding Procedure

Second Stage:
 The bidders, whose technical proposals or bids have not been
rejected and who are willing to conform their bids to the
revised technical requirements of the procuring agency, shall be
invited to submit a revised technical proposal along with the financial
proposal.
 The revised technical proposal and the financial proposal shall be
opened at a time, date and venue announced and communicated
to the bidders in advance; and the revised technical proposal
and the financial proposal shall be evaluated in the manner
prescribed above.

59 03.10.2018
CE-898
Contract Management
your relevant experiences are welcomed for sharing!

CE-898
Contract Management
Thank You!
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CE-898

TITELMASTERFORMAT DURCH KLICKEN BEARBEITEN

Dr.-Ing Abdur Rehman Nasir

Annexures provided with this lecture

Dr.-Ing Abdur Rehman Nasir

Dr.-Ing Abdur Rehman Nasir

 A Tender/Bid is written offer in response to invitation to do a work or to

 A Tender Notice is an open Request for Proposal (RFP) when an organization

Dr.-Ing Abdur Rehman Nasir

 “Bid” means a tender, or an offer, in response to an invitation, by a person,

Dr.-Ing Abdur Rehman Nasir

 Tendering is adopted for purchasing the materials or getting the work

 Bidding is the process of submitting a proposal to undertake, or manage the

Dr.-Ing Abdur Rehman Nasir

Dr.-Ing Abdur Rehman Nasir

Prerequisites for Invitation to Tender

Dr.-Ing Abdur Rehman Nasir

Prerequisites for Invitation to Tender

Dr.-Ing Abdur Rehman Nasir

Prerequisites for Invitation to Tender

Dr.-Ing Abdur Rehman Nasir

Prerequisites for Invitation to Tender

Preparation of Tender Documents

Dr.-Ing Abdur Rehman Nasir

Preparation of Tender Documents

Preparation of Tender Documents

 Name and details of type of work, its estimated value, timeline

Preparation of Tender Documents

Preparation of Tender Documents

(i) General Conditions of Contract

Dr.-Ing Abdur Rehman Nasir

Dr.-Ing Abdur Rehman Nasir

Dr.-Ing Abdur Rehman Nasir

Dr.-Ing Abdur Rehman Nasir

Dr.-Ing Abdur Rehman Nasir

Dr.-Ing Abdur Rehman Nasir

Dr.-Ing Abdur Rehman Nasir

Dr.-Ing Abdur Rehman Nasir

PEC Bidding Documents

Dr.-Ing Abdur Rehman Nasir

PEC Bidding Documents

1. Standard Form of Bidding Documents (Civil Work)

Dr.-Ing Abdur Rehman Nasir

Standard Form of Bidding Documents (Civil Work)

Dr.-Ing Abdur Rehman Nasir

Standard Form of Bidding Documents (Civil Work)

 While preparing this document, the following publications/documents have

Standard Form of Bidding Documents (Civil Work)

 The document has been notified by Planning Commission, Government of

 It is, therefore, mandatory for all engineering organizations and departments

Dr.-Ing Abdur Rehman Nasir

Standard Form of Bidding Documents (Civil Work)

Standard Form of Bidding Documents (Civil Work)

 The notice should be published so as to give the prospective bidders sufficient

Dr.-Ing Abdur Rehman Nasir

Standard Form of Bidding Documents (Civil Work)

Dr.-Ing Abdur Rehman Nasir

Standard Form of Bidding Documents (Civil Work)

Dr.-Ing Abdur Rehman Nasir

Standard Form of Bidding Documents (Civil Work)

 The Bid Security of the successful bidder will be returned when

Dr.-Ing Abdur Rehman Nasir