ADVANCED CONTRACT DRAFTING

BIDDING, TENDERING ……

Atul Juvle
atulgjuvle@gmail.com
+91-99208 24036
27.07.2018
 Disclaimer

▪ Information/ opinions shared in this PPT

▪ is Privileged and meant only for the
▪ permitted recipients. The information
▪ shared/views expressed are in
▪ personal capacity and
▪ should never be considered as views of
▪ SCHINDLER INDIA.
1. TENDERING
 PROCESS..
 EOI – Expression of Interest
 RFP/RFQ – Request for Proposal / Quotation
 PBC – Pre Bid Conference
 NIT – Notice Inviting Tender----- eTendering
 EMD – Earnest Money Deposit-
 BIDDING- or Accepting Bids
 Evaluation
 APPROVAL
 Single Tender
If only a particular firm is the manufacturer
Emergent need to procure from a particular
source
Technical reason to be recorded-

N.B. - Single response to an open bid can’t

be termed as Single Tender
 Two Bids System
1. Technical Bid (Tech. + Comm. Terms )
2. Financial Bid (Item wise price )
(1) + (2) = (3) Main Envelope- all sealed
*Firstly Tech. Bid shall be opened and evaluated
*Secondly Fin. Bid of Technically acceptable
offer should be opened & evaluated
 CVC Guidelines: Pre-Award Stage

 Short listed firms/consultants are fulfilling the eligibility criteria.

There is no deviation from notified criteria during evaluation.
 Tenders/bids are opened in the presence of bidders/their
authorised representative.
 Conditions having financial implications are not altered after
opening of the price bids.

 Avoid risk of – Whistle blower’s allegations…

2. MANUAL BIDDING………… E-BIDDING
 Limitation of Manual System
• Delay in issue of tender schedules to Vendors

• Disadvantage for geographically spread bidders to

participate

• Physical request / threats to bidders

• Delays in finalization of tenders

• Human interface at every stage leading to loss of

objectivity

• Lack of Transparency
 Advantages of the e-Bidding

• Reduces the time and cost of doing business for both

• Realize better value for money spent through increased

competition

• Standardizes the procurement processes across

departments

• NO NEED of Physical Presence of signatory

• Brings transparency
3. NIT- NOTICE INVITING TENDERS
 Standard Bid Document
▪ Instructions to Bidder
▪ Conditions of Contract- Technical, General
▪ Schedules of Requirement
▪ Specifications & allied Tech. details
▪ Price Schedule
▪ Contract Form
▪ Other Standard Forms/ drafts
 Earnest Money Deposit
▪ To safeguard the interest (withdrawal / alter the bid by
bidder)
▪ EMD - 2 % to 5% of estimated value
▪ Can be DD / Banker Cheque / BG- Be careful about
Payee & Period & Bank
▪ Unsuccessful bidders EMD should be returned /refunded
at the earliest.
 Performance Security
▪ From the successful bidders
▪ Amount – 5% to 10%
▪ DD /BG/ PCG/PCU-
▪ Should be valid for 60/180/365… days beyond the
date of completion of all the contractual
obligations of the supplier including warranty
▪ EMD can be refunded or converted in to
Performance Security
4. SOME OF THE CRITICAL CONDITIONS OF TENDER
 (1) Parent Company Guarantee/ Undertaking

▪In case of
▪ long term high value contracts
▪ Where Imports forms major value
▪ Where contract performance is spread over 5 to 20 years –
example- Airports , Metros
▪ Foreign co/ SPV

▪Performance – Guarantee & Undertaking from

Foreign Parent company is Tender condition.
 Parent Company Guarantee- PCG

▪Performance Guarantee
▪Cover defect liability obligation
▪Value covering contract
▪(Many times value is not mentioned and linked
to contract.)
 Parent Company undertaking- PCU

▪Not to sell shares of Indian Company

▪Not to sell or liquidate shareholding
▪Not to transfer shares of subsidiary
company within group/associate

Without prior written permission……..

 (2) INTEGRITY PACT- ETHICS CONFIRMATION

▪Which laws will be applicable :

▪INDIAN laws
▪FCPA- Foreign Corrupt Practices Act, 1977
▪UK-BRIBERY Act, 2010

▪MUST be informed in writing to Sales,

Operations, Project Manager- copy Senior
Management.
 (3) RISK PURCHASE

* Triggering only after sufficient prior legal Notice in

writing to CURE the default
* Value should be capped & not Vague

Operations to confirm in writing- they have read

Tender and are confident on specifications of product
supply, mile stones of the contract & Identified Project
Manager to be appointed to take care or escalate
triggering in time.
 (4) EVER GREEN WARRANTEE

* Restart of warrantee in case of failure of any spare

part.

* Limited to that spare part

* Back to back warrantee from supplier
* Identified Project- Mgr to manage / mitigate risk
 (4) DISPUTE RESOLUTION MECHANISM

* Escalation to Dept. head level

* Post 60 days- Conciliation as per Act

* Post 90 days- Arbitration

* Seat of Arbitration & Number of Arbitrators

 (5) INDEMNITY FOR DAMAGES

* Avoid
* CAP / Limit -it
* Unlimited only for Property damage/ Accident due to
gross or wilful negligence.

* Exclusion of Indirect damages / 3rd party claims..

* Take proper comprehensive Insurance Cover
 (6) TRANSFER OF IP RIGHTS

* AVOID

* ONLY for SELF USE

* NEVER for COMMERCIAL USE

 7. CONFIDENTIALITY / PRIVACY

▪ AVOID accepting unlimited period.

▪Limit it to 2 to 5 years

▪MUST be informed in writing to Sales,

Operations, Project Manager,
Communications…
 8. SEVERABILTY & ASSIGNABILITY

▪ To be discussed
 HOW TO DEAL WITH RISKY CLAUSES?

▪ Understand line by line- to get to root of the

RISK
*Three ways :
# AVOID
# ACCEPT- Mitigate
# TRANSFER
5. DIGITAL SIGNATURE CERTIFICATE (DSC)
 DSC

1. DSC can be presented electronically to prove

your identity or your right to access information
or services on the Internet.

2. You can do operations from anywhere in the

world.

3. Use of Legally Valid Class III Digital Signature

and USB Token to store the Signature is
compulsory as per Indian IT Act 2000 -
Amendment 2004
 Why DSC needed for e-Tendering?

To enable Trust & Security :

• Authentication : How do you verify whether the vendors are really

sending the information or some others?

• Confidentiality : How do you make sure that the information sent is

read only by intended users and nobody else?

• Integrity : How do you make sure that the information sent is not
altered dishonestly or falsely?
 Types of DSCs
There are 3 different classes of certificates for different
applications

• Class 1 is for email.

• Class 2 is for IT filing, etc.,

• Class 3 are high assurance certificates, primarily intended for e-

commerce applications and are issued to individuals only on their
personal (physical) appearance before the Certifying Authorities.
6. EVALUATION PROCESS
 EVALUATION PROCESS - micro

▪The factors for initial examination:

▪Whether the tenderer meets the eligibility
criteria ?
▪Whether the crucial documents have been
submitted & duly signed / attested ?
▪Whether the requisite EMD (Earnest Money
Deposit) has been furnished ?
 EVALUATION PROCESS - micro
 Satisfaction of Conditions specific to the contract
 Capacity Evaluation.
 Statutory documentation / Licenses
 Arrival at Outcome Price of the bid
 Determination of L-1, L-2, L-3……
 Determining Reasonableness of the L-1 Rates
 Recommendation for Negotiation (if require)
 CVC Guidelines: Negotiations
 Circular No. 4/3/07, 3rd March, 2007
As post tender negotiations could often be a
source of corruption, it is directed that there
should be no post-tender negotiations with L-1,
except in certain exceptional situations. Such
exceptional situations would include,
procurement of proprietary items, items with
limited sources of supply and items where there
is suspicion of a cartel formation. The
justification and details of such negotiations
should be duly recorded and documented
without any loss of time.
7. WHEN NEGOTIATION IS JUSTIFIED
 NEGOTIATIONS…….
 Private organizations…
 When difference between L-1 & L-2 is marginal
 Policy change proposed / expected
 Change in the prices level drastically…
 Some push is possible and will not be too much
disadvantageous to the bidder
8. TYPES OF FRAUDS- TENDERING
 PRE- SOLICITATION PHASE…….
 NEED RECOGNITION

 BID TAILORING

 BID SPLITTING

 UNJUSTIFIED METHOD OF PROCURING

 THE SOLICITATION PHASE…….
 BID MANIPULATION
 LEAKING BID DATE
 COLLUSSION AMONG CONTRACTORS
BID ROTATION
BID SUPPRESSION
MARKET DIVISION

 DEFECTIVE PRICING SCHEME

 BID EVALUATION & AWARD…….

BID MANIPULATION

LEAKING BID DATE

 POST AWARD & ADMINISTRATION

NON-CONFIRMING GOODS/ SERVICES

CHANGE ORDER ABUSE

COSTS MISCHARGING
Questions ?

THANK YOU