Assignment on International Contracts Management

Subject Name – International Contracts Management

Faculty Name – Prof. Aslam Deshmukh Sir
Name of the Student – Saifuddin Shyamwala
Serial No. - 11

SAIFUDDIN SHYAMWALA 1
 Assignment on International Contracts Management

Q. 1) Explain in detail “Tendering Procedure” for overseas construction project for a

Lump Sum (Fixed Price) contract.
Ans
This procedure is suitable for tendering for most international construction works, but it may
be adapted to suit the particular requirements occasioned by the size and complexity of a
project and any special conditions imposed by the established procedures of the employer or
the financing institutions. Experience has shown that for projects involving international
tendering ‘prequalification’ is desirable since it enables the employer to establish the
competence of companies subsequently invited to tender.
Step 1 - Establishment of Procurement Strategy and Form of Tendering

As soon as the project strategy has been decided, the employer, assisted by his engineer,
should establish procurement methods and forms of tendering to be used in the project. The
procurement method and forms of tendering are established by determining.
1. The parts of the project for which tenders are to be sought.
2. The conditions of Contract to be adopted.
3. The award criteria.
4. The tendering procedure.
5. The criteria which shall be used to prequalify tenderers.

Step 2 - Preparation of Programmes

In any project number of activities are to be carried out in a systematic and timely manner. It
is important that these activities are planned carefully and incorporated in the form of
programmes. Normally, a preliminary overall programme covering all major activities of the
project is prepared in the initial stage of the project. Calling tenders for a given part of the
project should be carried out in compliance with the overall programme. Such tender
programme includes : -
- Preparation of Tender Documents
- Preparation of Prequalification Documents
- Prequalification of Tenderers
- Obtaining Tenders
- Evaluation of Tenders
- Award of Contract
Time should be allowed in each programme for the employer to make necessary decision and
give required approvals. When preparing the tender programme, it is important to ensure

SAIFUDDIN SHYAMWALA 2
 Assignment on International Contracts Management

that the sequence of activities is such that all necessary data and information are available
when each activity is to be carried out. This applies in particular to the order in which the
activities forming "Preparation of tender documents" and "Preparation of prequalification
documents" are carried out. Consideration should be given as to what extent the tender
documents should be prepared and agreed before the prequalification documents can be
finalised and issued. This has to be decided for each intended contract, since key information
from the tender documents will often have to be incorporated in the prequalification
documents in order to give adequate information to those seeking prequalification. Financing
institutions will generally require time for scrutiny and approval of tender documents.
Below flowchart represents standard procurement strategy followed:

Step 3 - Prequalification of Tenderers

1. Preparation of Prequalification Documents

Prequalification documents should give information about the project, the tendering
procedure and the prequalification procedure. Documents normally include the
following:
- Letter of invitation to prequalify
- Information about the prequalification procedure
- Project information

SAIFUDDIN SHYAMWALA 3
 Assignment on International Contracts Management

- Prequalification application
2. Invitation to Prequalify

The employer should publish a notice inviting interested contractors to apply for
prequalification documents, stating that tender documents will be issued only to a
limited number of companies/JVs selected by the employer as having the necessary
qualifications to perform the work satisfactorily.
The notice should be published in appropriate newspaper and journals to give sufficient
publicity according to the particular circumstances of the project. The notice should be
reasonably brief and contain:
- Name of the Employer
- Name of the Engineer
- Location of the Project
- Description of the project and scope of work
- Source of Finance
- Anticipated programme (i.e., Award of Contract, Completion, and any other Key
dates).
- Planned dates for issue of tender documents and submission of tenders.
- Instructions for applying for prequalification documents.
- Date by which applications to prequalify must be submitted.
- Minimum qualification requirements and any particular aspects which could be of
concern to prospective tenderers.
3. Issue and Submission of Prequalification Documents

On receipt of requests from contractors, the employer should issue the prequalification
document. The letter of invitation to prequalify should state how the application is to be
packaged and sent. The employer should acknowledge receipt of the completed
prequalification applications from the contractors.
4. Analysis of Prequalification Applications

The employer should evaluate the prequalification applications to identify those

companies/ JVs whom they consider to be suitably qualified and experienced to
undertake the project. The evaluation should determine the following:
- Structure and organisation

SAIFUDDIN SHYAMWALA 4
 Assignment on International Contracts Management

- Experience in both the type of work and the country or region in which it is to be
undertaken
- Available resources in terms of management capability, technical staff,
construction and fabrication facilities, maintenance and training facilities, or other
relevant factors
- Quality assurance procedures and environmental policy
- Extent to which any work would be likely to be subcontracted
- Financial stability and resources necessary to execute the project
- General suitability, taking into account any potential language difficulties
- Litigation or arbitration history
5. Selection of Tenderers

If the resulting list, after those firms who were found unsuitable have been excluded,
exceeds six potential tenderers and there are no special regulations or conditions
imposed on the employer, the selection procedure should be continued to eliminate the
less well-qualified in order to arrive at no more than six.

6. Notification of Applicants

When the list of selected tenderers has been prepared, successful applicants should be
notified and requested to confirm their intention to submit a tender. This should ensure,
as far as possible, an adequate number of competitive tenders. If a potential tenderer
wishes to drop out at this stage, the next best-placed should be invited and asked to
confirm as above. Following this, all applicants should be notified of the list of selected
tenderers without giving explanation for the decisions.

Step 3 - Obtaining Tenders

1. Preparation of Tender Documents

The tender documents prepared by the employer will normally include the following:
- Letter of invitation to tender
- Instruction to tenderers
- Tender form and appendices
- Conditions of Contract (Parts I and II) together with any requisite forms
- Specification
- Drawings
- A breakdown of each sums into constituent parts should be provided in case of
lump sum tenders

SAIFUDDIN SHYAMWALA 5
 Assignment on International Contracts Management

- Information data
- List of additional information required from tenderers
The scope of the contract and an outline of the tender documents should be prepared
before the prequalification documents in order to achieve consistency between these two
sets of documents.

2. Issue of Tender Documents

Tender documents should be issued by the employer to those firms who have been
selected to tender. If a charge for documents is to be raised, issue should only be made
against payment.

3. Visit to Site by Tenderers

Visit to the site of the works should be arranged with the employer as laid down in the
instruction to tenderers. The primary purpose of the visit is to enable each tenderer to
inspect the site and obtain all relevant information required for the preparation of his
tender. Tenderers should be advised of the probable duration of the visit, the period
during which the visit may be made and the maximum number of persons from each
tenderer allowed to participate. Tenderers should make their own travelling
arrangements and bear the cost, including fares, accommodation and subsistence and
they should be advised of this in the instructions to tenderers.

4. Tenderers Queries

Tenderers queries can be handled by correspondence or by tenderers conference or by a

combination of these methods. The intended method or methods should be described in
the instruction to tenderers.
Any tenderer requiring clarification of the tender documents should submit his queries
to the employer in writing. Tenderers should be instructed that queries will not be
accepted by the employer unless received 28 days before the date of submission of
tenders. Reply to queries should, where appropriate, be issued as addenda to the tender
documents.

5. Addenda to Tender Documents

SAIFUDDIN SHYAMWALA 6
 Assignment on International Contracts Management

Each addendum should be complete in themselves and should not rely on tenderers
having to appreciate the implications and decide whether other changes to the
documents are required as a consequence. Addenda becomes part of the tender
documents. The tender period should not be extended unless the circumstances are
exceptional.

6. Submission and Receipt of Tenders

It is the responsibility of tenderers to ensure that their tenders are delivered to the
employer by the due submission date and time, properly signed by authorised
signatories. The employer should mark all tenders with the time and date of receipt and
ensure that they are kept secure and unopened until the date and time appointed for the
official opening.

Step 4 - Opening of Tenders

At the date and time fixed for the official opening, the employer should check and display the
sealed condition of each tender prior to its being opened. As each tender envelope is opened,
the employer should announce:
- Tenderers name
- Tender price
- Price of alternative tenders, if applicable
- Tender security
The official opening of tenders may be carried out in one of two ways i.e. In Public or
Restricted.

Step 5 - Evaluation of Tenders

1. Review of Tenders

Following the opening, tenders should be checked by the employer to establish that they
are arithmetically correct, are responsive without errors and omissions and consistent
with the invitation to tender. When arithmetical errors are found, these should be
corrected in accordance with the provisions in the instructions to tenderers. Tenders that
are considered to be substantially unresponsive should be rejected and returned to the
tenderers.

SAIFUDDIN SHYAMWALA 7
 Assignment on International Contracts Management

2. Tenders containing Deviations

Where a tender contains deviations, the employer should make a detailed assessment and

may wish to seek clarification of the information contained in the proposal. The employer

should not raise queries in such a manned as to elicit supplementary information beyond

the minimum required for clarification and should state that any such further information

given will be disregarded.

The evaluation of tenders can generally be considered to have three components. The
components may include:
A. Technical Evaluation
- Conformity with specification and drawings
- Comparison of any proposed alternatives (if allowable) with the requirements of
the tender documents
- Design aspects for which the contractor is responsible
- Methods of construction and temporary works
- Environmental considerations
- Quality assurance
- Programme
B. Financial Evaluation
- Capital cost
- Discounted cash flow and net present value
- Programme of payments
- Financing arrangements
- Currencies
- Securities
- Interest rates
- Retention
- Daywork rates
- Contract price adjustment proposals
C. General contractual and administrative evaluation
- Conformity with instructions to tenderers
- Completeness of tenders

SAIFUDDIN SHYAMWALA 8
 Assignment on International Contracts Management

- Validity of tenders
- Exclusions and deviations – stated or implied
- Insurance
- Experience of proposed key staff
- Shipping, customs, transport
- Working hours
- Labour build up, run down and source

Step 6 - Award of Contract

1. Issue of Letter of Acceptance

The employer will normally seek to award the contract to the tenderer submitting the
lowest evaluated responsive tender. The award must be made during the period of tender
validity or any extension thereto accepted by the tenderers. The letter of acceptance
should identify the contract and the works to be executed by the contractor as well as the
contract price which the employer will pay to the contractor in accordance with the terms
of the contract.
2. Performance Security

It is normally a requirement of the contract that the contractor shall furnish a

performance security within the time and in the amount, currency and form, prescribed
in the contract documents. The performance security should be furnished before the
expiry of the validity period of the tenders.
Tenderers should be advised, in the tender documents of the consequence of failing to
produce a performance security according to the stated requirements. The successful
tenderers tender security must be returned to him promptly once he has furnished his
performance security.

Step 7 - Rejection of all Tenders

In the unlikely event of rejection of all tenders, the tenderers should be advised of the reason.
Tenders should not be rejected and completely new tenders invited against the original
tender documents for the express purpose of trying to obtain lower prices. Rejection of all
tenders is also justified when:
- Tenders are not substantially responsive to the tender documents.

SAIFUDDIN SHYAMWALA 9
 Assignment on International Contracts Management

- Too few tenders received to ensure competition.

Q. 2) List down and explain in brief the points to be considered in site survey of
overseas construction projects.
Ans
Site Survey For Foreign Countries
(Financial and Administrative Information)
The following points are required in addition to the details necessary for working, prime cost
as well as overheads for the tender:
1. Name of Work:

2. Clients:
i. Name:
ii. Address:
iii. Telex No.:
iv. Telephone No.:
v. Cable Address:
vi. Name of the officer to be dealt with:

3. Indian Embassy:
i. Postal Address:
ii. Cable Address:
iii. Telex No.:
iv. Telephone No.:
v. Name of Ambassador:
vi. Name of Commercial Counselor:

4. Political Situation
i. General assessment of political situation in the country

5. Economic Situation of the Country

i. General economic situation of the country, particularly with reference to:
- Rate of inflation during past one to two years

SAIFUDDIN SHYAMWALA 10
 Assignment on International Contracts Management

- Availability of food items

- Availability of construction material
- Availability of equipment
- Rise in
- Consumer price index
- Wholesale price index
- Industrial price index, if any

6. Currency:
i. Name of the currency:
ii. Its relation to India Rupee:
iii. Its exchange rate with other major:
Convertible currencies of the world
iv. Whether they have fixed parity with US $:

7. Banks:
i. Name:
ii. Addresses:
iii. Telephone/Telex No:
iv. Name of the officers in those banks:
Dealing with issue of bank guarantees
Foreign exchange matters
Overdraft limits
Raising of loans etc.

8. Banking:
Details of facilities extended by the banks, such as
- Overdrafts
a. Limits:
b. Rate of Interest:
c. Any other restriction/limitation:
- Loans
a. Rate of Interest:

SAIFUDDIN SHYAMWALA 11
 Assignment on International Contracts Management

b. Ceilings, if any:
c. Requirements of the bank about:
Formalities like credit line with any national recognized bank in India
- L/Cs
a. Requirements of the bank for opening L/Cs:
b. Margin money required:
c. Any surety/security required:
- Bank Guarantees
a. Rate of interest:
b. Limits, if any, for accepting counter:
Guarantees of Indian banks
c. Names of the banks with whom:
Credit Line available
d. Whether any stamp duty to be paid:
Locally to the tax department etc.
e. Any limit about claims period:
f. Any other matter relating to any specific:
Conditions required from the country guarantee bank

*Fixed Deposits:
a. Whether fixed deposits allowed for short period:
b. Rate of Interest allowed:
c. Any limits lay-down:

9. Repatriation / Remittance of Funds

i. Corporation:
a. Percentage of contract value allowed:
As repatriation in foreign exchange.
b. Any other requirements as prerequisite:
To repatriation of funds.
ii. Salaries/Wages:
a. Percentage of remittances allowed.
b. Whether individual accounts permitted to be opened for remittances.

SAIFUDDIN SHYAMWALA 12
 Assignment on International Contracts Management

iii. Any problems in remittance to India:

10. Taxation
i. Corporate Tax:
a. Rates of Taxation:
b. Whether accounts required to be:
Maintained separately in the local language in addition to English.
ii. Salary/Wages:
a. Rates of taxation:
b. Exemption permitted:
(NB: One copy of the Income Tax Act may be brought if possible)

iii. Other taxation like sales / purchase tax:

In that case:
a. Rate of taxes:
b. Types of items covered under that:

11. Minimum Wages

i. Rates of various categories:
ii. Whether required under law to provide free food:
iii. Any other concession under law:

12. Immigration Rules

i. Any restriction about type of workers to be imported in that country:
ii. Whether resident visa and work permit required:
iii. Approximate cost of these formalities per capita:
iv. Whether any other Indian company operating if so,
- Name:
- Address:
- Telephone/ Telex Nos.:
- Name of the Chief:

13. Whether Any Agents Are Operating, If So:

i. Name and Addresses:

SAIFUDDIN SHYAMWALA 13
 Assignment on International Contracts Management

ii. Details of services rendered by them:

iii. Normal percentage of charges:
iv. Whether willing to enter into legal contract as per local law:

14. Liaison Officer

i. Normal monthly salary charged by a local liaison:
ii. Also state whether appointment of local liaison officer is a must under the local system:

15. Translation Facilities

Whether translation facilities available, if so
i. Rates:
ii. Whether easily available:
iii. Whether working in English alone is possible:

16. Local Auditors

i. Name of the firms of accountants taking up audit:
ii. Addresses:
iii. Charges by other companies:
iv. Whether related to the work load or they have some minimum charges:

17. Legal Remedy

Whether legal remedy available, if so

i. Charges of the advocates:

ii. Whether the charges linked with the value of the dispute:

18. Import of P&M / Materials

Whether import of P&M / materials from 3rd countries is permitted
i. Directly:
ii. Through local Government Agencies only:
iii. In case allowed, the commission charged by the government agencies:
iv. Position of availability of the import license:
v. Rate of custom duties:
vi. Rates of port & freight charges etc.:

SAIFUDDIN SHYAMWALA 14
 Assignment on International Contracts Management

- Nearest city:
- Work site:

19. Insurance:
Rate of insurance premium for:
i. Works policy:
ii. Marine insurance for various materials and equipment:
iii. For plant & equipment / vehicle to be operated locally:

20. Hotel Accommodation

Whether hotel accommodation available easily:

21. Bid Bond

Amount of Bid Bond:

22. Transport
i. Means of transport available for
a. Men within the country:
b. Materials within the city and to the work site:
c. Rates from:
- City to the work site:
- Port to the work site:

23. P & M
i. Whether P & M available on hire, if so
- Rates:
- Whether any stamp duty to be payable on the payments received from the clients:
ii. Whether clauses existing for
a. Excavation:
b. Force Majeure clause:
c. Penalty:
d. Bonus for early completion:

SAIFUDDIN SHYAMWALA 15
 Assignment on International Contracts Management

SITE VISIT REPORT PROJECT NUMBER: _____________________

PROJECT PARTICULARS Contact for Site Visit:

Project Title: Name:

Project Address: Tel:

Directions to Site: Visit Details:

Person making visit:

Date: Time:

SITE POSITION Remarks

Adjacent Buildings

Fencing/hoardings

Demolitions

Potential Hazards

SITE CONDITIONS
Topography

Trees and Vegetation

Site Clearance

Ground conditions: type of soil

Stability of soil

Security Problems

Space for temporary accommodation/storage

Scaffolding

Existing Services: Live

Not in use

Site Protection

ACCESS

SAIFUDDIN SHYAMWALA 16
 Assignment on International Contracts Management

Temporary Roads

Safety

Deliveries

Traffic Restrictions

LOCAL FACILITIES
Disposal of excavate material

Site Services

Statutory Authorities

LOCAL CONTACTS

SAIFUDDIN SHYAMWALA 17