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LECTURE 2: TENDER PROCESS

AND DOCUMENTATION

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WHAT IS TENDER?

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Tender is an offer which incorporatesthe sum of money, time and otherconditions required to carry out thecontract obligations in order to completea project or a part of it consisting ofspecified works.

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WHAT IS TENDERING ?

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Stages of a project Stage 1: inception & feasibility – identifying

project objectives / set up project brief

Stage 2: design – develop further project brief / develop concept & schematic design / Undertake detailed design & detailing / prepare cost plan & budget

Stage 3: tendering – issue tender documents / prepare & submit tender / evaluation of tender / award tenders / prepare contract documents

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Stages of a project

Stage 4: construction – site possession & mobilization / undertake procurement fabrication, installation, construction / carry out contract admin

Stage 5: handover & maintenance – undertake all testing, commissioning & training / obtain CF / handover project to owner /carry out necessary maintenance / Defect rectification / etc

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Tendering

Will be started after the design complete and project budget must be approvedThe process that is used to obtain offers

leading to a contract between:

client contractor

client consultantmain contractor sub-contractor

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Purpose of tendering process

To select a suitable contractor at a time appropriate to the situation of the project.

To obtain from the contractor selected at the proper time, an acceptable tender or offer upon which a contract can be let.

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A tender formally means an invitation to trade under the terms of offer.

A contract is the term used for when the parties have reached agreement.

Difference between a contract and a tender

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General TENDERING PROCESS

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Tendering process – PRINCIPAL ACTIVITIES

1. Selection of the most preferable or appropriate contract procurement method.

2. Development of tender list3. Preparation of tender documentation4. Invitation / calling off tender5. Preparation and submission of

tenders

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Tendering process – PRINCIPAL ACTIVITIES (cont’d)

6. Receipt and opening of tenders7. Evaluation of tenders8. Acceptance of tender award or award

of contract

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Stage 1: Selection of the most preferable or appropriate contract procurement method.

Traditional contract procurement route Longer time – lead to critical work

scheduling Less errors – more precise

Fast-track contract procurement route Shorter time Consequences – may be lead to critical

error, variation.

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Stage 2: Development of tender list

Potential tenderers can directly apply to the employer for future works.

Employer generate list based on previous dealings

The professional team generate their own list and recommend to the employer.

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Stage 3: Preparation of tender documentation – typical contents

Letter of invitation Checklist for submission of tender Articles of agreement Conditions of contract Form of tender Tender specifications Bills of quantities Tender drawings Sample copy of letter of acceptance Sample copy of bang guarantee for performance

bond Schedule of day work rates Sample copy bank guarantee for advance payment

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Tendering process

Stage 2:

APPROVAL TO TENDER

Stage 1:

PREPARATION

Stage 3:

DOCUMENTATION

Stage 4:

INVITATION

Stage 5:

PROCESSING

Stage 6:

AWARD CONTRACT

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Stage 1: Preparation

Final completion of drawings, specification, measurement / take-off process.

Choose conditions of contract. Parties involved: architect, engineers,

QS, client, project manager

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Stage 2: Approval to tender

Discussion and decision on type of tender to be used.

Selection of tender: Open Selective Negotiate

Parties involved: CLIENT, CONSULTANT, PROJECT MANAGER

Shortlist the selected contractor

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Stage 3: Documentation Contract based on quantities Compilation of:

Letter of invitation to tenderers Articles of agreement /

conditions of contract Form of tender Form of tenderer’s details. i.e:

contractor’s registration, organization background, track record (past and present projects)

Letter of acceptance Bank and insurance guarantee

forms (performance bond) Bank and insurance guarantee

forms (advance payments) Specifications Bills of quantities Relevant drawings

Contract based on tender & specs Compilation of:

Letter of invitation to tenderers Articles of agreement / conditions

of contract Form of tender Form of tenderer’s details. i.e:

contractor’s registration, organization background, track record (past and present projects)

Letter of acceptance Bank and insurance guarantee

forms (performance bond) Bank and insurance guarantee

forms (advance payments) Specifications Summary of tender Schedule of rates Relevant drawings

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Stage 4: Invitation

Based on selection of tendering methods Open / competitive / bid tender –

produce tender notice Selective – shot listed contractors will

be invited to tender if they wish Negotiated – only one contractor is

approached- direct entry to project

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TENDER NOTICE OR NOTICE

INVITING TENDER

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The Tender Notice is a brief description of the job being tendered which is to be published in Newspapers and on the Internet.

The Internet is a very cost effective way of publishing the tenders.

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Format of an ideal Tender Notice

a. Name of the Project.b. Name & Address of the

Company floating the tender.

c. Name of work, materials or services.

d. Place of work location. e. Approximate estimated

cost of work. f. Earnest Money. g. Period of completion. h. Date on which the Tender

Document sale commences.

i. Date on which the Tender Document sale commences.

j. Date and time up to which tender documents can be obtained.

k. The cost of tender documents.

l. The date and time up to which the tenders to be submitted and are to be opened.

m. Specification. n. Eligibility Criterion.

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Stage 5: Processing Received tender submitted by contractor Tender assessment / evaluation

Completed tenders are received Arithmetical check Reasonable tender sum Reasonable completion time Capabilities of tenderers under considerations

Tender recommendation / report – tender board

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Guidelines to fulfill in the Tender System

The capacity, past credentials and financial status of the tendered is thoroughly investigated before awarding the contract. These aspects should be commented in detail along with the tender documents.

The rates should be quoted in the numbers and words without any corrections. To take advantage of any possible increase in statutory taxes & duties, the tax component such as excise duty, Sales Tax, Works Contract Tax, etc. should be clearly indicated.

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Tenderers should not quote many special conditions as some of them may have financial implications, did this can be added to your quoted cost. Also it creates confusion and creates room for manipulative forces.

The rates quoted for individual items should be realistic and should not be abnormal and unworkable.  

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Stage 6: Award contract

Pre-award meeting with contractors – validation of lowest complying bid

Validate lowest bid - Pre-contract meeting with contractor for contract signing

Approval by tender board / treasury (tender exceeds RM10 mill.) – an acceptance of tender form is issued to tenderer , signed by the authorised officer

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TENDER PROCESS FOR CONTRACTOR

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Tendering process

Stage 2:

Determine basis of tender

Stage 1:

Decision to tender

Stage 3:

Preparation of cost estimates

Stage 4:

Commercial appreciation

Stage 5:

Conversion of estimate to tender

Stage 6:

Submission of tender

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Stage 1: Decision to tender Receipt of tender documents Pre-tender data sheet Decision to tender Consider implications of:

Bonds Warranties Parent company Guarantees

Funding

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Stage 2: Determine basis of tender Abstract materials and subcons Sent out enquiries Consider construction methods / prepare method

statement Design temporary works / consider alternatives Prepare outline programme Check major quantities Identify restrictions Visit site and compile site report Campaigning meeting (designating areas

responsibilities)

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Stage 3: Preparation of cost estimate Calculate recurrent rates using:

Operational Unit rates Man-hours estimating

Analyse and check subcontractors’ quotations Price prelims / general items (in association

with members of the team Prepare summary sheets

LOC1/AC2 33

Stage 4: Commercial appreciation Tender committee meeting part 1- Review:

Method Programme Technical and commercial risks Cash flow and finance Use of own plant Competition Commercial opportunities Economic climate Check prelims against historical cost data

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Stage 5: Conversion of tender estimate to tender bid

Tender committee meeting – part 2 Calculate ‘spread’ and add to estimate

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Stage 6: Submission of tender

Submit in format required Organize delivery