Post on 26-Mar-2020
E2-E3
FinanceTender Evaluation,Negotiation,
Arbitration
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WELCOME
• This is a presentation for the E2-E3 Core Module for the Topic:
Tender Evaluation ,Negotiation ,Arbitration. .
• Eligibility: Those who have got the Upgradation from E.2 to E.3.
• This presentation is last updated on 22-3-2011.
• You can also visit the Digital library of BSNL to see this topic.
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Tender Evaluation.
• Tender Evaluation is necessary to identify the Lowest
Bidder commonly known as L1
Bidder.
Unless Tenders are evaluated we cannot know whether
the price quoted is reasonable or not.
Thus Tender Evaluation is an important stage in the
Tender Processing.
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Tender Evaluation.
• Examination of Bids before Evaluation:
• Prior to the detailed evaluation of bids, it will be
examined whether each bid:
• A) Meets the eligibility criteria.
• B) Has been properly signed.
• C) Is accompanied by the required
securities called for.
• D) Is substantively responsive to the
requirements of the bidding
documents.
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Tender Evaluation.
• The TEC does the above checks.
• What is substantively responsive Bid?
• A Bid is said to be substantively responsive when it conforms to
all the terms, conditions and specifications of the bidding
documents without any material deviation or reservation.
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Tender Evaluation.
• Transparent Tender Processing.• To have a transparent tender processing, the DOT has issued
the following guidelines vide Lr No 26-405/92 MMC (pt) dt 12-09-96.
• a) The Tender conditions should be clear and unequivocal. The technical specifications should be firm and clear.
• b) In TWO Bidding system, price Bids of only those Bidders who are qualified on technical and other prescribed conditions to participate in the tender are only to be opened. The Price Bids of those Bidders who do not qualify must be returned unopened by Registered Post.
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Tender Evaluation.
• Transparent Tender Processing -----
• e) The tender conditions should clearly indicate the share of
orders which the successful bidders are likely to get.
• f) Norms and procedure for vendor rating should be
formulated and published well in advance.
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Tender Evaluation Committee :
• Who has to Constitute the TEC?
• The Tender Accepting Authority has to constitute the
TEC.
• NOTE: The Tender Evaluation Committee is to be so
constituted that the officer holding power by virtue of
his position as a member of the Tender Committee
should not be the accepting authority also.
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Tender Evaluation Committee :
• The Constitution of Tender evaluation committees is to be
determined by the virtue of lowest acceptable Tender Value.
• The Tender evaluation Committee basically comprises of three
members representing Technical, Commercial and financial
wings of the unit so that the Bids can be evaluated technically,
commercially and financially.
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Tender Evaluation Committee :
• The Technical Member would be from the concerned user wing
of the unit who will generally be the convener and having the
prime responsibilities for preparation of the Minutes. The
commercial Member can be from MM Cell of the Unit and the
Finance Member would be from the financial cell of the Unit.
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Convener of TEC
• Immediately after opening of the Tenders, the following
documents will be handed over to the convener of the TEC.
• a) All bids accepted at the bid opening alongwith a copy of
NIT.
• b Original Bid documents along with specifications.
• c) Guide lines for TEC. (issued by Tender Accepting Authority)
d) Minutes of bid opening register.
e) Extract of Tender Opening Register.
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Tender Evaluation Process
• The following are the allocation of responsibilities among the
three wings of the TEC.
• Technical Evaluation:
• This work is to be carried out by the Technical branch
representative of the TEC. The technical comparative
assessment of the material list is required to be done alongwith
the corresponding
• Prices to be taken for evaluation. Such comparative list will be
done by the Finance representative of the TEC.
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Tender Evaluation Process
• Commercial Evaluation:
• The Commercial evaluation is to be carried
out by the MM Cell representative in TEC
and vetted by the Finance representative.
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Points of consideration by TEC.
• The prices quoted in the Tender should be compared with the
prices quoted for similar items in the last contract.
• Rates should be reasonable.
• Meaning of reasonable:
• The rates should reasonable considering the market conditions
and other factors like prevailing prices of raw materials, Taxes
etc.
• This price analysis can be got done before accepting the lowest
one, in as much as the lowest one need not be a reasonable
one.
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Points of consideration by TEC.
• In case of Single Tender;
• Sometimes in response to open Invitation only a single Tender
might be received. Even then, the TEC should examine whether
the rate quoted is reasonable or not, as the only such tender
need not necessarily be accepted merely because it is received
in response to the call of the open tenders.
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Points of consideration by TEC.
• Importance of after Sales Service…
• In modern technology, especially Computers or any
sophisticated equipments, “After Sales Service” is of
vital importance. In determining the L1, adequate
weightage may be given to the above point.
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Points of consideration by TEC.
• The points to be seen are:
• i) Does the supplier have a team of competent technicians and
engineers employed exclusively for after sales service ?
• ii) Are required Spares readily available to meet any
emergency ?
• iii) Is after sales service price reasonably priced.
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Report of TEC.
• The criteria adopted for evaluation should be clearly
indicated in its report. The TEC should clearly spell out
its recommendations in its report about technically
acceptable bids, listed in order starting lowest technical
bids L-1 upwards or as per vendor rating starting from
VI.
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Report of TEC.
• The report should contain complete Technical,
Commercial and Financial appraisal of each tenderer
with its remarks and recommendations. The Technical
bids should be ranked and then prices should be
evaluated .
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Recording of Decisions of TEC.
• Recording of decisions of TEC in other words means
preparation of Minutes. The following points should be
kept in mind in arriving at decisions and record of
minutes.
• The tender evaluation report should clearly indicate
deviations recommended vis-à-vis tender conditions
alongwith reasons for such deviations. When there are
no such deviations from tender conditions, a
declaration to that effect must be given.
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Recording of Decisions of TEC.
• The TEC will record its decision with full justification. There may
be some difference in the opinion of one or more members. The
views of the dissident member (s) if any, will also be duly
recorded on the file. The authority competent to decide the
tender however has got the final say in the matter (i.e., his
decision will prevail) in consultation with his IFA.
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Recording of Decisions of TEC.
• Again there may be difference of opinion between the
Tender accepting authority and IFA. In such cases the
matter should be referred to next higher authority for
decision.
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Recording of Decisions of TEC.
• The recommendations of the Committee for Evaluation of tender
are essentially internal document. Final decisions are taken by
the competent authority on the basis of TEC recommendations.
The confidentiality of the TEC document from outsider is
therefore, to be maintained. No information to substance,
examination, clarification or evaluation of bids would be
communicated to persons other than those officially connected
with it.
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Recording of Decisions of TEC.
• But in the light of RTI 2005 Act the above provision has
to be suitably amended to accommodate the queries
taken up by public.
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What is Price ?
• Price can be defined as cost plus reasonable profit. In
other words the difference between price and cost
would be the profit, which can be higher than
reasonable when the supplier wants to exploit in case
of high demand and less competition. Thus the lowest
price tendered need not necessarily be the
Reasonable price.
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What is Price ?
• In respect of items, which are being procured
continuously over a period of 3 years, the average
price of previous purchases made as well as market
price can be the guiding factors to certain extent.
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What is Price ?
• For those costly items which are of Proprietary nature of new
item, estimate of cost plus can be made to arrive at reasonable
price (generally allowing profit margin of 5%). This price analysis
can be done for package works inclusive of supply of materials
(I.e.,) Supplying,
• installing, Testing & Commissioning to enable negotiations for
reasonable price.
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What is Price ?
• Unbalanced Bids:
• If the L1 price is disproportionate with the price
estimated by the Purchaser, the
Latter may ask the bidder to produce detailed analysis
for the same.
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Acceptance of Tenders
• Who has to accept ?
• The Officer competent to accept the Tender as per the
delegated Financial powers should be the Tender accepting
authority.
• Which Bid is to be accepted?
• The lowest Bid in terms of cost is generally accepted if all other
conditions like substantively responsive are fulfilled.
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Acceptance of Tenders
• Purchaser’s right to accept or reject any or all the Bids.
– It shall be the prerogative of the purchaser to accept or reject
any bid, or to annul the bidding process and reject all bids at
any time prior to award of the contract, where the purchaser
does not incur any liability or obligation. It need not state any
reasons for its action.
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Acceptance of Tenders
• An Offer (Tender) when accepted, becomes “Promise”
(vide Section 2 (b) of Law of Contracts).
• Acceptance of a Tender can be by means of a letter or
memorandum communicated to the contractor and this
includes Advance acceptance of tender.
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Multiple Vendor System
• Multiple Vendor System is where it
• becomes necessary to sustain multiple
• vendors/suppliers. The intention behind
• this is to ensure speedy supplies of goods
• without any hitch.
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Multiple Vendor System.
• DOT has laid down the following guidelines for Multiple Vendor
System.
• A) The distribution of orders should normally be restricted to
the bidders who are bidding 50 to 60% of the lowest bids.
• All such bidders will be offered unit price for supply, which is of
the lowest bidder.
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Multiple Vendor System
• b) The distribution of quantities amongst the bidders who are
within the above range will be in inverse ratio to their original
price quotations. This will ensure bidders who quoted the lower
rates to get a major share of distribution.
• c) While deciding the quantities as above, the technical
feasibility of the distribution and capability of the supplier is also
to be kept in view.
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Multiple Vendor System.
»For the above, the following special
condition will be made in Tender Document.
• “The purchaser intends to limit the number of
technically and commercially responsive bidders to ( )
from the list of such bidders arranged in increasing
order of their evaluated prices starting from the lowest
for the purpose of ordering against this tender.
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Multiple Vendor System.
• The bidder with the lowest evaluated price will be
ordered on the remaining selected bidders inversely
proportional to their quoted prices. However, the
purchaser reserves the right for the placement of order
of entire tendered quantity on the bidder with the
lowest evaluated price.
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Multiple Vendor System.
Number of Bidders on whom the
order is proposed to be placed.
Proposed Quantity of
Distribution.
2 L -1 would get 70% L -2 would get 30%
3 L-1 would get 50 % Remaining Qty to other selected
bidders in inverse ratio of their
evaluated price.
4 L-1 would get 40% -do-
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Multiple Vendor System.
Number of bidders on
whom the order is proposed
to be placed.
Proposed quantity of
Distribution.
5 to 9 L-1 would get 30%
10 & above L-1 would get
20%
Remaining Qty to other
selected bidders in inverse
ratio of their evaluated
price.
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Purchase Orders
• Purchases made are to be governed by certain Terms and
Conditions of the contract both General as well as “Special
conditions”.
• In addition, they are also governed by the following:
• Indian contract Act 1872.
• Sale of Goods Act 1930.
• Insurance Law.
• Sales Tax Act.
• Central Excise Act.
• Arbitration and conciliation Act.
• Other General Laws At applicable from time to time.
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Acceptance Letter
• After the tender for the work is accepted, the same will
be communicated to the contractor in the prescribed
form:
• It is important that:
• A copy of the letter will be endorsed to the following in
addition to the related officers in charge of execution of
work and the concerned branches.
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Acceptance Letter
• 1) Assistant Labour Commissioner.
• 2) Conciliation Officer (Labour)
• 3) Income Tax Officer (of concerned circle)
• 4) Labour Officer.
• The Contractor has to obtain a valid license under Contract
Labour (R&A Act),1970 and the Contract Labour (R&A) Central
Rules 1971.
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Security Deposit/PG
• While the EMD/Bid Security is required for safeguarding the
Dept in case the selected contractor fails to take up the work by
the specified date, the Security Deposit is for the due fulfillment
of the contract entered thereafter.
• It ranges from a minimum of 5% to a maximum of 10% of the
amount of tendered value.
• It has to be submitted within 21 days of receipt of APO.
• Security Deposit is also known as Performance Guarantee.
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Security Deposit
• Security Deposit Period.
• Delivery Period Period of SD
• Upto 6 Months 2 years.
• 6 Mnths to One Year 2yrs and 6 Months.
• > One Year 3 years.
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Security Deposit.
• After the above period, the purchaser will discharge the
PG/SD.
• If any loss is incurred during the course of Contract
Period, the proceeds will be realised from the PG/SD in
f/o Purchaser.
• Time of release: Within 30 days after completion of
suppliers obligations including Warranty.
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SD Exemption
• Following are exempted subject to production of
documentary proof regarding Regn etc.
• A) Firms registered with DG S&D.
• B) SSI registered NSSIC.
• C) PSUs registered with DG S&D.
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Liquidated Damages.
• Liquidated Damages are the amount payable by the
Contractor to the Purchaser in the event of delay in
supply of goods or in completion of work. It shall be
made clear in the Tender Schedule itself and also
made a part of the agreement. This is recovered from
the amounts payable to the Contractor through his
Bills.
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Liquidated Damages
• Recovery rates.
• If the tenderer fails to supply goods within the
prescribed period of delivery, LD is levied at the
following rates.
• .5% of the value of delayed supply for each week of
delay for a period upto 10 weeks. 0.7% of the value of
the delayed supply for each week for another 10 weeks
of delay.
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Arbitration and conciliation
• During the course of execution of contract works,
sometimes disputes may arise. Though we say that the
decision of the Department is final and binding,
sometimes either of the parties may find the solution
not satisfactory or convincing. Hence there is a
recourse to 1) Arbitration or 2)Conciliation.
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Arbitration and conciliation
• 1) Arbitration: Arbitration means referring the present
or future dispute to a private tribunal for settlement by
an agreement between the parties to refer the dispute
to a third party for settlement outside the court.
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Arbitration and conciliation
• It may consist of one or more members but the figure
should be odd one.
• Arbitrator can be of any nationality.
• The arbitration proceedings are conducted in a quasi
judicial manner.
• The tribunal shall fix the cost, fee for arbitration,
administrative charges.
• It decides cost payable by each party and also decides
the cost payable by one party to another.
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Arbitration and conciliation
• Conciliation:
• This provides a legal forum to encourage voluntary
compromise/conclusion of disputes arising out of legal
relationship connected with commercial disputes.
• Conciliators may be one or more.
• He/they will assist the parties in an independent/impartial
manner to reach an amicable settlement.
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Arbitration and conciliation
• When settlement is reached, it shall be reduced to
writing and authenticated by the conciliator.
• Cost of the proceedings is borne equally by both the
parties or in any agreed ratio.
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