STRATEGIC CONSTRUCTION PROJECT 1

STRATEGIC CONSTRUCTION PROCUREMENT

By (Name)

Course:

Professor’s Name

Institution

Location of Institution

Date
 STRATEGIC CONSTRUCTION PROJECT 2

Strategic Construction Procurement.

Introduction

Procurement is defined as the acquisition of the materials, supplies or the services

required to effectively run the business or complete a project. Construction process needs to be
approached is a strategic way. Therefore, this has called for the concept of strategic construction
procurement which aims at utilizing the services or the provided materials to maximize the
efficiency and effectiveness of each project. It is essential for a construction company to
implement a prudently planned strategy to procurement process by acquiring the supplies and
materials needed in the most cost effective way (Watermeyer, 2012, p.222).The procurement
approach need to take into account various factors such as timescale, budget and the quality of
the project.

When making a choice on the route to use during the construction process it is vital to
choose a route that provide the long term goals of the customer’s business plan. Some of the
frequently used routes in the construction include, traditional procurement route and a design and
build route. A design and build project follows a two tendering process single-stage tender and
two stage tender (Watermeyer, 2012, p.222). Therefore, this tender evaluation report will base on
the single tendering route by use of competitive bidding based on the two submitted bid by
tenderers. The process of competitive bidding allows the dealers to submit their bids for
consideration within a given period. The proposals are disclosed to increase privacy of each
vendor’s bids. After the end of the bid submission period, the firm (recipient) choose the bidder
with the best conditions for the RFP.

Therefore, based on the competitive bidding procedure, the tendering evaluation process
pass through various stages. Bergman, and Lundberg (2013, p.73) asserts that work planning is
very essential for effective and timely conduct of the evaluation process. Usually it is
recommendable that the panel carry on meeting to plan for the process before the tenders are
received. The two primary stages of tender evaluation are receipt and opening of tenders and
evaluation of tenders which results in the recommendations of the contract award made by the
board.
 STRATEGIC CONSTRUCTION PROJECT 3

Therefore, looking at the two tenders submitted to the ProBuld to set High-quality
shopping complex in Melbourne city, there is need to set off project it has to develop external
buildings related to the work. In this case the two bids submitted their tendering applications
forms denoted as tender A and B. The tendering process is opened and carried out in stages such
as Responsiveness determination, comprehensive technical examination, financial evaluation
combination of technical, tender sums comparisons and financial score. The last stage process is
the due diligence determination (Lambropoulos, 2007, p.452). This process is conducted with
transparency, confidentiality, scrutiny of the provided documents and considering all aspects that
allow the effectiveness of the procurement process. The process is executed in the following
stages;

Stage 1- determination of responsiveness

Preliminary examination of tender forms.

This is the initial stage that examine the pre-qualification conditions that are classified in the
letter of invitation and any other requirement stated on the bid document. This conditions
include;

(i) Tenderers to provide Certificate of Incorporation.

(ii) Tax Responsiveness Certificate from tax authority.
(iii) Limited companies to provide Certificate of Confirmation of Directors and
Shareholding.
(iv)Certificate of enrollment with National Construction Authority.
(v) Authorization from relevant legislative bodies such as Energy Regulatory Commission,
Local Authorities, Water Management Boards and national environmental management
authority
(vi)Payment details for tender document.
(vii) Provision of Bid Security.
(viii) Completely signed and stamped Confidential Business Survey (S33).
(ix)Complete form of the tender.
(x) Dully filled, signed and stamped Form of Tender.

Stage 2: Mandatory evaluation

 STRATEGIC CONSTRUCTION PROJECT 4

This stage is carried out to examine the completeness of the tender documents. The related body
such as the procurement panel and the evaluation committee conducts introductory assessment of
the submitted tender forms to determine the compliance of the tenders to the obligatory
conditions (Watt, Kayis, and Willey, 2010, p. 51). The authors outlines multiple obligatory
conditions that enhance the completeness of tender documents which include:

(a) Dully filled tender forms.

(b) Bid security of about USD 200

(c) Firm Certificate of incorporation (Copy).

(d) Active enrollment certificate required specialization category (NCA).

(e) Tax Compliance Certificate (Copy).

(f) Receipt of Tender purchase proof.

(g) Proposal for the maintaining of the installations after the end of the warranty period or
defects liability period.

NOTE: the cost in g above IS not be included in the tender price.

(h) Confirmation of ability to complete the assignment within the needed time of contract.

Results

Table 1.

NO Item Description Remark (yes/no) Tenderer Tenderer

A B
1 Dully filled tender forms yes yes
2 Bid security of us dollars 200 yes yes
3 Company certificate registration or yes yes
incorporation (Copy).
4 Active registration certificate required yes yes
specialization Category (NCA) (copy of
registration and renewal certificate).
5 Tax Compliance Certificate (Copy). yes yes
 STRATEGIC CONSTRUCTION PROJECT 5

6 Tender purchase proof (Copy of receipt). yes yes

7 Confirmation of ability to complete the yes yes
assignment within the needed time of
contract

Observations

(i) All the two (2) firms were declared to be have adhered to the mandatory
requirements, thus both qualified to proceed to the next stage of technical evaluation.

Stage 3: Technical proposal evaluation

The evaluation process of awarding the actual points starts when the submitted bids have been
declared valid. The tenders are evaluated in relation to the assessment approach being used in
contradiction of non-price method, which is, based on the technical advantages. The assessment
committee should not have access to the tender price at this step. The evaluation of the non-price
selection criteria is documented before proceeding to the next stage of tender evaluation (Reich,
2009, p. 989). The technical evaluation parameters and award points are as shown below:

Detailed scoring tables.

Table 1: Tenderer B scores

Item Description Tenderer B maximum

points scored points
1 Statement of Compliance 3 3
a)Signed and stamped
-------------------------------------------------- 3
b)Signed but not stamped or vice versa
------------------------------ 2
c)Not signed nor stamped
---------------------------------------------- 0
2 Tender Questionnaire 5 5
a)Completely well filled
 STRATEGIC CONSTRUCTION PROJECT 6

-------------------------------------------------- 5
b)Partially filled
-------------------------------------------------------
--3
c) Not filled
-------------------------------------------------------
-------- 0
3 Schedules of on-going projects 5 10
a)Project similar to tendered one, in terms of
magnitude----- 10
b)Project of similar nature but of lower value
than the one in consideration
--------------------------------------------------
----------5
c)No ongoing project of similar nature -
---------------------------0
4 Contractor’s equipment schedule and means 10 10
of transport the evidence of ownership of
means must be provided.
a)Transport means (Vehicle)
---------------------------------------4
b) No means of transport
---------------------------------------------- 0
c) Every specific equipment required in the
installation of the tendered work. (Max No. of
equipment for considered – 3.) ----------------
2
5 Audited financial report (for at least last 10 10
three(3) years)
a)Firm turn over equal to or greater than 2
times the cost of the project tendered --- 10
b)Firm Turn over greater equal or greater than
 STRATEGIC CONSTRUCTION PROJECT 7

the cost of the project ---- 6

c)Firm turn over below the tendered project
cost --------------------------- 2
RECOMM The total score will be combined sums of The total score The total
ENDATIO Technical, Tender Sums Comparison and will be score will
N The total Financial marks as below: combined sums be
score will of Technical, combined
be Tender Sums sums of
combined Comparison and Technical,
sums of Financial marks Tender
Technical, as below: Sums
Tender Comparison
Sums and
Comparison Financial
and marks as
Financial below:
marks as
below:
7 Name, Address and Telephone of Banks 5 5
(Contractor to provide)
a) Name provided ------------------------ 5
b) Not provided -------------------------- 0
8 Litigation History 3 3
a)Filled ------------------------------------------ 2
b)Not filled ------------------------------------- -0
9 Contract completed Contracts in the last five 4 4
(5) years (Max of 5 Projects)
a) Projects similar in terms complexity,
nature or magnitude --------------4
b) Project with similar nature but have
lower value than the one under
consideration- --------------------------2
 STRATEGIC CONSTRUCTION PROJECT 8

c) No any completed project of similar

nature ------------------------------ 0
10 Sanctity of tender document. 10 10
a) the document is well intact (not tempered
with in any way) ------------------------------10
b)Have been mutilated or modified the tender
document----------------0
total score 62 70

Table 2: Tenderer A scores

item Description Tenderer A maximum

points scored points
1 Statement of Compliance 3 3
a)Signed and stamped
--------------------------------------- 3
b)Signed but not stamped or vice versa
------------------ 2
c)Not signed nor stamped
---------------------------------- 0
2 Tender Questionnaire 5 5
a)Completely well filled
----------------------------------- 5
b)Partially filled
----------------------------------------------3
c) Not filled
--------------------------------------------------- 0
3 Schedules of on-going projects 5 10
a)Project similar to tendered one, in terms of
magnitude----- 10
b)Project of similar nature but of lower value
than the one in consideration
------------------------------------------------5
 STRATEGIC CONSTRUCTION PROJECT 9

c)No ongoing project of similar nature -

------------------0
4 Contractor’s equipment schedule and means of 8 10
transport the evidence of ownership of means
must be provided.
a)transport means (Vehicle)
--------------------------------4
b)No means of transport
----------------------------------- 0
c) Every specific equipment required in the
installation of the tendered work. (Max No. of
equipment for considered – 3.) ---------------- 2
5 Audited financial report (for at least last three(3) 8 10
years)
a)Firm turn over equal to or greater than 2
times the cost of the project tendered --- 10
b)Firm Turn over greater equal or greater than
the cost of the project ---- 6
c)Firm turn over below the tendered project cost
--------------------------- 2
6 Financial Resources evidence provided. 10 10
a)firm financial resources equal to over 20% of
the cost of the project tendered-- 10
b)Firm’s financial resources below 20% of the
cost of the project -----5
c) No any indicated source of financial resources
-------------------0

7 Name, Address and Telephone of Banks 5 5

(Contractor to provide)
c) Name provided
--------------------------------------------------
 STRATEGIC CONSTRUCTION PROJECT 10

---------------- 5
d) Not provided
--------------------------------------------------
----------- 0
8 Litigation History 3 3
a)Filled
-----------------------------------------------------------
----------- 2 b)Not filled
-----------------------------------------------------------
----- -0
9 Contract completed Contracts in the last five (5) 2 4
years (Max of 5 Projects)
d) Projects similar in terms complexity,
nature or magnitude --------------4
e) Project with similar nature but have
lower value than the one under
consideration-
--------------------------------------------------
----------2
f) No any completed project of similar
nature ------------------------------ 0
10 Sanctity of tender document. 10 10
a) the document is well intact (not tempered
with in any way)
---------------------------------------10
b)Have been mutilated or modified the tender
document----------------0
total score 59 70

Recommendation
 STRATEGIC CONSTRUCTION PROJECT 11

The minimum score from this section was set at 50 points thus making all biders to be
considered for further evaluation that is financial evaluation.

Table 4: Summary of evaluation of table 2 and 3 for the firms that complied with the mandatory
conditions.

N Item Description Marks Tenderer B Tenderer A

O
1 Statement of Compliance 3 3 3
2 Schedules of on-going projects 10 5 5
3 questionnaire tender 5 5 5
4 Schedules of contractors 10 10 8
equipment
5 Audited Financial Report for 10 10 8
the last 3 years
6 Evidence of Financial 10 10 10
Resources
7 Name, Address and Telephone 5 5 5
of Banks
8 Litigation History 3 3 3
9 Contract completed Contracts 10 4 2
in the last five (5) years
10 Sanctity of tender document. 10 110 10

totals 70 62 59

Stage 4: Financial Assessment

The financial evaluation is assumed once the tender has been assessed alongside the technical
criteria. The outcomes of the financial assessment are to be recorded before proceeding to the
next stage of evaluation. According to World Bank Procurement Regulations, evaluation criteria
of certain standards utilized during assessment of bids to select the most advantageous proposal
that meets the requirement and provide best value for money invested in project (World Bank,
2016). The organization body provides various specification that govern the financial assessment
process. The following are guidelines of the financial evaluation as per standard procurement
document (SPDs).
 STRATEGIC CONSTRUCTION PROJECT 12

a. Proper evaluation method that suits the type, nature complexity and the prevailing market
conditions objectives as well as the value of what is being constructed.
b. The criteria needs to be quantifiable for instance, able to be measured in monetary units
to ease the process of quotation.
c. Document completeness and specification on how the assessment will be carried out
should be included on the SPDs to assist bidders to maximize the chances of winning the
tender.
d. After the provision of the SPD only evaluation criteria outlined on the document will be
used by the committee. Any of the criteria of evaluation will be made only through
agenda.
e. There will be need to refer to the SPD and other documents issued to bidders to enhance
consistency, transparency and to minimize variations.

According to the SPDs guidance it means that evaluation criteria has been established in the
early stages of the procurement need to exhibit transparency, integrity and value for money in the
whole procurement process. After designing of the contract requirement and selection procedure
the evaluation criteria has to be set so that the borrower can appropriately and easy prepare the
bid that best delivers the requirements and maximum value for money (SPDs, 2016). To attain
the values for money the process should take into consideration the following factors:

a) Evaluation cost the methodology which is appropriate to the nature of the procurement
process including: adjusted proposal, which is computed by taking the bid price add the
recurrent cost over the useful time of an asset minus the life-cycle costs.
b) The evaluation approach need to involve quality that is checking the degree at which
goods, service and work meet or exceed the minimum required.
c) The appropriate criteria should be the one that puts into account environmental, economic
and social factors in support of the project aims. This calls for the selection criteria to be
flexible enough to incorporate changes that might emanate during the life cycle of the
project.
d) The selected criteria should be the one that allow the panel to undertake any assessment
of innovation in delivery of goods and services to give bidders opportunity to include
 STRATEGIC CONSTRUCTION PROJECT 13

appropriate innovation if it calls for solutions which exceed the requirements or

alternative solutions that could lead to a better (VfM)

With all firms having scored over 50 points in previous stage, Financial tender evaluations
was done by the selected committee that involved preparatory examination of financial tender
forms and tender sum comparison.

Preliminary examination.

The evaluation procedure should start immediately after the proposal have been opened with a
preparatory examination to verify the overall completeness of the submitted tender figures and to
check availability of any supportive documents. This procedure enables the committee to rule out
the proposals that contain errors, those with ambiguous figures and those that have omitted the
financial cost per unit procured item (Cholopray, 2019). The outcome of the preliminary stage
has to be recorded on the evaluation form in case of occurrence of disqualification. This stage
puts off an application from further consideration and evaluation it therefore calls for the
committee to ensure that the reason provided for disqualification is justifiable. At this stage to,
much attention is directed towards deficiencies that when accepted will end up giving unfair
advantage to either of the proposer.

This therefore, calls for sound decisions such as simple omission error should not set
ground for rejection unless the error is significantly massive. This allowance is given because it
is often difficult to find perfectly completed forms as a result of limited nature of person. Hence,
as stated in the SPD, the bidders quoted figures are assessed against the monetary quantifiable
method through evaluation and comparison of each bidder cost (UNDP, 2016). The standard
procurement document specify relevant dynamics in addition to the price that need to be
considered when setting monetary evaluation criteria in any given proposal cost evaluation.
Thus, for the purpose of determining the evaluated cost of each bid, we consider various types of
costs as discussed below;

Life-cycle cost.

The evaluation of the bid cost may incorporate assessing the life cycle cost the application of the
principle of VFM does not necessarily mean picking on the lowest price quoted by the bidders
but rather the total cost of ownership over a period usually the life span of a particular asset.
 STRATEGIC CONSTRUCTION PROJECT 14

Therefore VFM has to represent the optimum combination of total cost of ownership and quality
of provided service so as to meet the buyer’s requirements. This measurement allows the relative
benefits that accrue from different Bids to be measured by taking into account all cost involved
in the construction work over a defined period of time.

Proposal price.

Proposal price forms a part of each proposal. Extensions of this price include all
arithmetic corrections, discounts if given, and other adjustments that are stated in the SPD for the
purpose of evaluation. Those proposal prices that are used in long term contracts instead of fixed
prices are not considered in the evaluation similarly any discount that is conditional on the award
involving more than one lot is not also considered for evaluation purposes. The Bid prices should
be adjustable due to need for comparing evaluated cost of each Proposal the said adjustments
should only apply to those minor deviations that are fairly monetary values. Any other elements
that are not stated in the procurement document are not used during the proposal evaluation. The
evaluation committee in accordance with the Government act of tenderers settled on arithmetic
errors and comparison of rates as parameters of interest.

Arithmetic Errors

The bids are checked for any errors based on the provided rates and the total sums indicated
quantities. This process aims at ruling out in writing the tenderers whose tender sum have a
significant arithmetic error to their disadvantage, and to confirm whether tenderers stand by their
tender sums. Any discount is treated as an error in pursuant with Tenderers instructions. Non-
compliance with the above leads to automatic disqualification from any further evaluation.
Arithmetic sum of tender bids submitted at ProBuid are as shown in the following tables.

Tenderer A

Item description Quality Rates Totals

primary work
site cleaning 1 8,200 8,200
Demolition and removal of existing buildings 1 3,500 3,500
earth work
excavation of base slab including ground beams 1 7,750 7,750
removal of excess excavated material 1 2,250 2,250
concrete work
 STRATEGIC CONSTRUCTION PROJECT 15

supply for concrete for building 1 312,450 312,450

metal work
supply of steel structures for support as per specified 1 127,440 127,440
building work
supply and installation of precast panel wall 1 95,940 95,940
supply and installation of prestressed wall 1 66,540 66,540
supply and installation of floor and ceiling finishing 1 92,000 92,000
supply and install door and windows inclusive of all 1 11,750 11,750
hardware
727,820

Summ of unite rates of tenders A conforms to the total sum given thus no any arrithmetic error.
Tenderer will be further evaluated in the next stage.

Tenderer B

Item description Quality Rates Totals

primary work
site cleaning 1 6.500 6,500
Demolition and removal of existing buildings 1 5.800 5,800
earth work
excavation of base slab including ground beams 1 13.500 13,500
removal of excess excavated material 1 3.750 3,750
concrete work
supply for concrete for building 1 277.860 277,860
metal work
supply of steel structures for support as per specified 1 132,0000 132.000
building work
supply and installation of precast panel wall 1 110,350 110,350
supply and installation of prestressed wall 1 78,900 78,900
supply and installation of floor and ceiling finishing 1 60,050 60,050
supply and install door and windows inclusive of all 1 9,870 9,870
hardware
698,580

Similarly tender B sum of unit rate is equivalent to the total sum provided threrefoer B qualiffy
for the next evaluation stage.

Stage 5: Comparison of Rates

 STRATEGIC CONSTRUCTION PROJECT 16

The evaluation committee compared rates from the two bidders in order to check how consistent
the rates are the committee aimed at nullifying those bids whose deviation exceeds 20% above or
below of the preliminary average since this deviations are considered unreasonably high.
Preliminary average is computed by omitting provisional sum and contingence sums from the
respectful bidder’s amounts.

Stage 6: Finance score

The financial score (Fs) is therefore determined by comparing tender sums from the two
responsive bidders using the stated formulae below.

We shall allocate financial score a maximum of 20%.

Fs = 20 x Fm/F

Fs is the financial score, FM represents the lowest priced responsive financial bid and F is the
price of the bid under the tender price.

The final score will therefore comprise of sums of Technical the higher one Tender Sums
Comparison lower bidder who demonstrates value for money for proposed project and Financial
marks:

Technical (Ts) + Tender Sums Comparison (TSC) +Financial (Fs) = Ts+TSC+Fs

Advantages and disadvantages of competitive bidding

The competitive bidding process is advantageous to both the vendor and the buyer. For
instance, it allows the firm to choose the bidder with the requirements that provide the best terms
for their proposals. This allows the company to get most qualified personnel to provide the
services and goods while maintaining the prices cost on the low. On the side of the vendors the
biding process allows them to implement proposal that they are familiar with. This is
advantageous as it permit them to save on cost they would have incurred to find the potential
customers for their goods and services (CFI, 2020).

However. The bidding procedure can be very tedious as it involves many stages before
awarding the contract. The process usually results to barriers in communication between the
customers and the vendors as the process is bound to confidentiality. This discourages inner
 STRATEGIC CONSTRUCTION PROJECT 17

communication thus, bidder may avoid asking some relevant questions that reveals bidder’s
strategies, features and the like. Another significant drawback of this process is that the best
vendor may not tender (Rooyen, 2020). For example, in Australia the government regulations on
the process may only permit vendors whose tender to be reflected for a procurement judgment. If
the leading seller are not considered, the buyer can only contemplate the bid from the seller who
do the tender thus if the leading seller are not considered the customer or the firm may end up
choosing the less valuable goods and services.

Conclusion

Based on the literature, it is evident that conducting a tendering process is vital to attain
the specification of the construction services. For instance, the tendering process through
competitive bidding helps to build a competitive environment that is beneficial to the firm. The
process regulates the market prices and provide the best value for undertaking the price is
achieved. The tendering process involves s

Recommendation

Based on the analysis of this report, the two bidders showed almost equal potentiality to be
awarded the contract but bidder B is recommended for this tender due to the following.

1) Has the highest technical score of 62 out of maximum score of 70 as stated on table 4 of
the summery of the technical scores of tables 2 and 3.
2) Bidder B also has lower quotation value of 698,580 as compared to As 727,820 dollars
event though also has low deviation in terms of quotation per unit item with low
deviations.
 STRATEGIC CONSTRUCTION PROJECT 18

References

Watermeyer, R.B., 2012. A framework for developing construction procurement strategy.

Proceedings of the Institution of Civil Engineers-Management, Procurement and Law, 165(4),
pp.223-237.

Bergman, M.A. and Lundberg, S., 2013. Tender evaluation and supplier selection methods in
public procurement. Journal of Purchasing and Supply Management, 19(2), pp.73-83.

Lambropoulos, S., 2007. The use of time and cost utility for construction contract award under
European Union Legislation. Building and environment, 42(1), pp.452-463.

Watt, D.J., Kayis, B. and Willey, K., 2010. The relative importance of tender evaluation and
contractor selection criteria. International journal of project management, 28(1), pp.51-60.

Reich, A., 2009. The new text of the agreement on Government Procurement: An Analysis and
assessment. Journal of International Economic Law, 12(4), pp.989-1022.

The World Bank, (July, 2016). Procurement Regulations for IPF Borrowers. Retrieved from
http://pubdocs.worldbank.org/en/178331533065871195/Procurement-Regulations.pdf

SPDs, (.November, 2016). Standard Procurement Guidance: Overview for practitioners.

Retrieved from: http://pubdocs.worldbank.org/en/572311488224076481/SPDs-Guidance-
FINAL.pdf

Cholopray, K.D., 2019. The Bid Evaluation Process. Retrieved from

https://procurementclassroom.com/the-bid-evaluation-process/

United Nations Development Program (2016). Advanced Certificate in Public Procurement

Level 3. Available at https://www.undp.org/content/undp/en/home/procurement/procurement-
training.html
 STRATEGIC CONSTRUCTION PROJECT 19

Corporate Finance Institute CFI, (2020). The process of competitive bidding. Retrieved from
https://corporatefinanceinstitute.com/resources/knowledge/other/competitive-bidding/

Rooyen V.W., 2020. Disadvantages of Competitive bidding. Retrieved from https://www.sa-

tenders.co.za/content/hints-tips-and-news/7-disadvantages-competitive-bidding
STRATEGIC CONSTRUCTION PROJECT 20