Tender :

Tender is an offer which incorporates the sum of money, time and other conditions required to carry
out the contract obligations in order to complete a project or a part of it consisting of specified works.
OR
The Tender is an offer in writing to execute some specified work or to supply the materials rates within
fixed time under certain conditions of agreement between the contractor and the department or owner
or any party
Necessity of Tender
• Lower bids that may be obtained due to competition among the contractors.
• Selection of contractors can be made based upon their experience in their line.
• Personal interests, prejudices, preferences, Partiality can be avoided by calling for tenders.

Processing of works
• Following are the stages in planning, sanctioning and execution of work.
(a) Inclusion in Procurement Plans
(b) Preparation of Preliminary Project Report (PPR)
(c) Administrative Approval
(d) Preparation of Detailed Project Report (DPR) & Detailed Estimates
(e) Technical Sanction
(f) Appropriation of funds
(g) Preparation of Tender documents
(h) Call of Tenders and Award of Work
(i) Execution of works
(j) Monitoring of works and Quality Assurance

Inclusion in Procurement Plans :

• Each Ministry/Department shall prepare a perspective plan for 5 years for undertaking
different types of works. There shall also be a provision for annual review of the plan for
making modifications, if any.
• For execution of any work, whether departmentally or through a Public Works
Organisation, the Ministry / Department shall constitute a “Works Committee”, comprising
of representatives of administrative wing and Finance wing and an officer possessing
technical skills and experience for framing estimates and execution of works
• The Works Committee shall ensure observance of due process in the planning and
execution of works, check the reasonability of the estimates and other technical details and
monitor the execution of the works.
Preparation of Preliminary Project Report (PPR) :
• On requisition from Ministry/Department for procurement of works, a preliminary project
report shall be prepared by Public Works Organization to whom work is entrusted for
execution and shall be submitted to the requiring Department/ Ministry for obtaining
sanctions of the project.
The PPR consists of

• Background of the work/ project justifying the need for the work
• Details of scope of the project
• Availability of auxiliary services like roads, power, water, solid & liquid waste disposal
system, street lighting and other civic services shall be ensured.
• Preliminary estimated cost
• Time of the completion
• Environmental impact assessment (EIA)
• Cash flow : This will show year-wise requirement.

Administrative Approval
• For every work, it is necessary to obtain, in the first instances the concurrence of the
competent authority of the administrative department requiring the work. The formal
acceptance of the proposals by the authority is termed as Administrative Approval of the
work.

• It is duty of the engineering department requiring the work by the administration to obtain
the requisite approval to it.

• An approximate estimate and such preliminary plans are necessary to explain the proposals
are submitted by an engineering department to the administration to obtain administrative
approval to take up the work within the sanctioned amount.

• After receiving the administrative approval, detailed drawings, design and the estimated
cost etc. are prepared by the engineering department and submitted to the administrative
department for sanction.

Preparation of Detailed Project Report (DPR) & Detailed Estimates

• On receipt of sanction of the project, based on submission of PPR and assurance of funds,
the procuring entity shall finalize the Detailed Project Report giving reference to the
following documents:
o Site Plan, Architectural Drawings etc. as required.
o Detailed soil investigation.
o Detailed architectural drawings.
o Detailed structural drawings.
o Detailed Cost Estimates based on specifications and schedule of rates prepared by
CPWD or any other Public Works Organization.
o Annual plan and five-year plan allocation and cash flow.
o Works accounting system
 o Quality assurance system/mechanism.

Technical Sanction
Technical sanction to detailed cost estimates shall be accorded by the Works Committee so as to ensure
that proposals are structurally sound and that the estimates are accurately calculated based on
adequatedata.

Appropriation of funds
Before taking up the execution of work it shall be ensured that proper funds are available to meet out
the expenditure on the work.

Preparation of Revised Project Report

During preparation of DPR or at tender processing stage or during execution of work or after the
completion of work if it is felt that the project cost has or is likely to vary more than 10% of sanctioned
cost, then a Revised Project Report taking into account various possible reasons for variation like
change in scope, design of work, material/labour cost, time over run etc. shall be prepared and sanction
of competent authority shall be obtained.

Preparation of tender documents

Before Inviting the tenders the tender documents have prepared and issued to interested tenderers,
this document consists of

• Detailed Specification of the Work and materials should be used.

• A complete set of drawings with details of various parts.
• General Conditions of contract and any Special Conditions.
• Schedule of quantities of the various items of the work and approximate quantity of work
under each item of work.
• The location of the work.
• The Name of the division in which the work is situated.
• The period of completion of work and the time and completion of each stages of work.
• The Amount of EMD.
• The name of authority that is accepting and rejecting tender.
• Conditions of penalty of slow progress and non fulfilment of the conditions of the contract.

Earnest Money Deposit

 Earnest Money Deposit: When the contractor submits the tender for work, he has to deposit
usually at about 2% of the estimated cost to the departments guarantee or assurance of the
tender.
 If the contractor refuses to take up the work when his tender accepted, his earnest money is
forfeited.
 The earnest money of all other contractors whose tender have not been accepted will be return
to the respective contactors.
 Earnest money given by all the contractors except the lowest tenderers should be return within
week from the date of receipt of tenders.
  Earnest money of second and third lowest tenderers should be returned within 15 days of the
acceptance of tender.
 The Earnest money of the lowest tenderer whose tender is normally accepted is retained by the
department as a part of SD for due performance of the contract.
 The earnest money may be in form of DD,Cash or Cheque or FD or Bank guarantee like saving
Certificate.
 To ensure that a Bidder does not submit a Dummy Bid or back out at time of tender opening,
Department collects a small refundable fee from each bidder, which is called EMD.

Security Deposit (SD)

▪ Once the tender is accepted ,the selected contractors should deposit 10% of the total cost of
work as SD with the department.
▪ This amount is includes EMD of already deposited.
▪ The contractor may deposit the Entire amount at the beginning of work or it my be deducted
from the running bill of contractor.
▪ The Contractor should fulfill all the conditions of contract and carry out the work satisfactory
according to specification and complete the work in time, If the contractor fail to satisfy the
terms of agreement, then the part or complete amount forfeited.
▪ If he completes the work the as per the conditions of the contractor with in the specified time,
the SD will be refunded to the contractor.
▪ This amount Will be refunded six month after the completion of work or rainy season.
▪ Any defects noticed during this observation period is to be rectified by the contractor at his
cost.
▪ For e.g. If a Bidders gets Rs.10 Cr contract to construct a Bridge with in 12 months , than he
has to deposit a Security deposit of 10% i.e. 1 Cr with Buyers. Now if he does not complete the
bridge on time or leaves it incomplete, the Department can forfeit his 1 Cr as penalty

CALL OF TENDERS AND AWARD OF WORK

Registration of contractors :
• Defined by competent authority based on technical capability, financial status.
✓ Class I : No limits ( Proper labour, workforce, experienced workers)
✓ Class II : Up to 3 Cr.
✓ Class III : Up to 1 Cr.
✓ Class IV : Up to 50 Lakhs
✓ Class V : 15 Lakhs
✓ Class VI : 5 Lakhs
✓ Class VII : 2 Lakhs( municipal works)
Open tendering :
✓ Open tendering allows anyone to submit a tender to supply the goods or services that are
required. Generally, an advert will be placed giving notice that the contract is being tendered,
offering an equal opportunity to any organisation to submit a tender.
✓ On larger projects, there may then be a pre-qualification process that produces a short-list of
suitable suppliers who will be invited to prepare tenders
Selective tendering :
✓ Selective tendering only allows suppliers to submit tenders by invitation.
✓ A pre-selected list of possible suppliers is prepared that are known by their track record to be
suitable for a contract of the size, nature and complexity required.
✓ They might then be asked if they would be interested in tendering for the contract, and then
based on the responses received, a number of them invited to tender (generally no more than
6).
✓ From the tenders received, a preferred tenderer is selected based on criteria such as price and
quality and negotiations entered into.
Negotiated tendering
✓ Negotiated tendering occurs when the client approaches a single supplier based on their track-
record or a previous relationship and the terms of the contract are then negotiated.

Prequalification of Contractors :
 Registration of contractors:- The contractor must get himself registered in the departments (
Government - govt. Contractor) for which he is interested to take up works.
 Government contractors are entitled to do govt. jobs if awarded.
 Contractors are classified according to the registration and registration fees and depending on
this they can undertake works up to certain amount.
 Sometimes works are awarded on the basis of quotations invited from a group of ‘selected
tenderer’ (a group of known reputed contractors) who are considered suitable for that job. This
method is known as ‘pre-qualification’ and saves a lot of time.
 In the advertisement itself it must be mentioned that only contractors having experience in the
particular work should submit the tender.
 To get a contractor to be registered under certain class, he has to apply to the competent
authority.
 The application should contain the following documents:
1. Current income tax certificate
2. Work certificates for all the works performed during the
last three years and those in progress
3. Solvency certificate for an appropriate amount
4. Attested copy of deed of partnership and power of attorney on stamp paper if needed
5. Application in duplicate with all documents
6. Attested photos of all the partners if any
 ▪ In relation to the public works, following catogories of contractors are generally enlisted or
building and roads
o For sanitary installations and water supply
o For electrical and air conditioning
o For furniture.
▪ Contractors at B and C must process valid plumbing and electrical licence
▪ Each of them is expected to have machinery and equipment required for the job
▪ Their qualifications are further adjudged from
o Professional ability to understand and implement the contractual obligations and
subsidiary instructions given by the engineer in charge of the department.
o Their financial resources
o Capacity to control labour, especially by a way of regular payment of fair wages and
observance of labour regulations
o Their zeal for maintaining reputation and integrity

Publicity of Tenders :
▪ Wide publicity shall be given to the Notice Inviting Tender.
▪ Tenders must be invited in the most open and public manner possible, by advertisement in the
Press and by notice in English/Hindi and regional language of the concerned District.
▪ The Notice Inviting Tender shall also be placed on the website of the Ministry/Department
Format of an ideal Tender Notice :
▪ Name of the Project.
▪ Name & Address of the Company floating the tender.
▪ Name of work, materials or services.
▪ Place of work location.
▪ Approximate estimated cost of work.
▪ Earnest Money.
▪ Period of completion.
▪ Date on which the Tender Document sale commences
▪ Date and time up to which tender documents can be obtained.
▪ The cost of tender documents.
▪ The date and time up to which the tenders to be submitted and are to be opened.
▪ Specification.
▪ Eligibility Criterion.
▪ The designation of the officer who accept the tender
 Sample Copy of Tender Notice(PWD) :

Issue of Tender Document

• Before Inviting the tenders the tender documents have prepared and issued to interested
tenderers, this document consists of
✓ Detailed Specification of the Work and materials should be used.
✓ A complete set of drawings with details of various parts.
✓ General Conditions of contract and any Special Conditions.
✓ Schedule of quantities of the various items of the work and approximate quantity of
work under each item of work.
✓ The location of the work.
✓ The Name of the division in which the work is situated.
 ✓ The period of completion of work and the time and completion of each stages of work.
✓ The Amount of EMD.
✓ The name of authority that is accepting and rejecting tender.
✓ Condtions of penalty of slow progress and non fulfilment of the conditions of the
contract.

Pre-bid conference
• A supplier or contractor may request a clarification of the tender documents from the procuring
entity within a reasonable time prior to the deadline for the submission of tender. The procuring
entity shall respond within a reasonable time, so as to enable the supplier or contractor to make
a timely submission of its tender.
• At any time prior to the deadline for submission of tenders, the procuring entity may for any
reason, whether on its own initiative or as a result of a request for clarification by a supplier or
contractor, modify the tender documents by issuing addendum

Submission and opening of bids

• The procuring entity shall fix a place and a specific date and time as the deadline for the
submission of tenders.
• If the procuring entity issues a clarification/modification of the tender documents or if a meeting
of suppliers or contractors is held; it shall, prior to the deadline for the submission of tenders;
• extend the deadline, if necessary to afford suppliers or contractors reasonable time to take the
clarification or modification of the minutes of meeting into account in their tender; after
adequately publicising such modifications.
• The procuring entity may, in its absolute discretion, prior to the deadline for the submission of
tenders extend the deadline, if it is not possible for one or more suppliers or contractors to
submit their tenders by deadline owing to any circumstance beyond their control.
• Notice of any extension of the deadline shall be given promptly to each supplier or contractor
to which the procuring entity provided the tender documents
• The tender shall be submitted in writing, signed and in a sealed envelope.
• The procuring entity shall, on request, provide to the suppliers or contractors a receipt showing
the date and time when its tender was received.
• The tender received by the procuring entity after the deadline for the submission of tender, shall
not be opened and shall be returned to the suppliers or contractors that submitted it.
• On the due date and appointed time, as mentioned in the bid document, the procuring entity
will open the bids in the presence of the intending bidders or their representative. The bidder’s
name, the bid prices and discount, if any will be announced by the procuring entity during
opening of bids. A record of opening of bids will be maintained.

Evaluation of bids
• The procuring entity may ask suppliers or contractors for clarifications of their tenders in order
to assist in the examination, evaluation and comparison of tenders.
 • No change in a matter of substance in the tender, including changes in price and changes aimed
at making an unresponsive tender as responsive shall be sought, offered or permitted.
• The procuring entity shall correct purely arithmetical errors that are discovered during the
scrutiny of tender. The errors will be corrected by the procuring entity as follows.
(a) If rates in words does not tally with rates in figure then the rate which correspond to the
amount in words shall be taken as correct.
(b) If the amount of an item is not worked out by the contractor or it does not correspond with
the rates written either in figure or in words then the rate quoted by the contractor in words
shall be taken as correct.
▪ After the correction of the error as above, the procuring entity shall give prompt notice of any
such correction to the supplier or contractor that submitted the tender.
▪ If the bidder does not accept the corrected amount, the bid will be rejected and the earnest
money may be forfeited
▪ The procuring entity may regard a tender as responsive only if it conforms to all requirements
set forth in the tender documents.
▪ The procuring entity shall not accept a tender if the supplier or contractor that submitted the
tender, is not qualified and if the tender is not responsive.
▪ The procuring entity shall evaluate, prepare comparative statement of tenders and compare the
tenders that have been accepted in order to ascertain the successful tender in accordance with
the procedures and criteria set forth in the tender documents. No criteria shall be used that has
not been set forth in the tender document. The successful tender shall be the tender with the
lowest price
▪ Information relating to the examination, clarification, evaluation and comparison of tenders
shall not be disclosed to suppliers or contractors or to any other person not officially involved
in the examination, evaluation or comparison of tenders except to the extent required under law.
Letter of intent
▪ Client identifies the agency to whom the work is to be awarded and issues a letter of intent
asking the bidder
o To deposit the performance guarantee say ( 5% of award value)
o Mobilise and commence work. ( date of commencement is mentioned in LOI)
▪ Performance guarantee is released after the issue of completion certificate by the client ( if the
performance , time etc during the execution is found satisfactory.

Acceptance of Bids and Award of Work

▪ The tender rates should be reasonable considering the justified amount of the work which shall
be worked out based on market conditions and other factors pertaining to particular works.
▪ The tender that has been ascertained to be successful tender, shall be accepted. Notice of award
of work shall be given promptly to the supplier or contractor submitting the tender.
▪ The tender document may require the supplier or contractor whose tender has been accepted,
to sign the written procurement contract conforming to tender. In such cases, procuring entity
or the supplier or contractor shall sign the procurement contract within a reasonable period of
time after the letter of award is dispatched to the supplier or contractor.
 ▪ Where the tender documents stipulate that the procurement contract is subject to approval by
higher authority, the procurement contract shall not enter into force before the approval is given.
▪ A procurement contract in accordance with the terms & conditions of the accepted tender comes
into force when the notice of acceptance of tender is dispatched to the supplier or contractor
that submitted the tender.
Types of contracts
1. Lumpsum contract :
▪ In this contract, the contractor agrees to execute complete work in all respects for a specified
amount within a specified time
▪ The plan, specification and drawings are provided to the contractor but details of quantities and
schedule of items will not be given and the contractor will have to complete the work as per
plan and specification within contract period
▪ On completion of work, no measurements will be taken by the dept.
▪ The contractor is paid for the fixed amount as agreed by checking the whole work in comparing
the plan, drawing and specification
Merits :
1. Reduction in cost of construction due to competition of contractors
2. The amount to be spent is accurately known in advance
3. Contractor tries to complete the work early as it is advantageous for him
Demerits :
Difficult to make changes in plan and drawings during construction
2. Target contract :
▪ This type of contract where the contractor is paid on a cost plus percentage basis for work
performed under this contract, and in addition he receives a percentage plus or minus on savings
or excess effected against either a prior agreed estimate of total cost or target value arrived at
by measuring the work on completion and valuing at prior agreed rates
Advantage : the contractor is encouraged to use his skill and experience in keeping the cost as low as
possible. This type of contract is profitable to both contractor as well as owner.
Disadvantage : The contractor may show higher cost of construction and thus he gains more amount
even covering the penalty for excess expenditure.
3. Item rate or unit price contract :
▪ Contractor undertakes execution of work at the unit rates agreed at the time of tender.
▪ The payment is made by the detailed measurement of the work actually executed by the
contractor
Merits :
▪ Since the work is distributed as an item wise, no disputes between owner and contractor
▪ Drawings and specifications can be changes at any instant of time
▪ Finalization of bill is made by taking measurement of work done by the contractor. Hence it is
economical
Demerits :
▪ Final cost cannot be determined before completion of work
 ▪ Comprehensive and intelligent scrutiny is required
4. Cost plus percentage contract :
▪ In this contract, the contractor is paid the actual cost of building plus the fixed percentage as
his overhead expenses, service and profit
▪ The contractor procures the materials and arranges labours at his own cost keeping the proper
account and he is paid be the department or the owner the whole cost together with certain %.
Normally 10 % as his profit
Merits :
▪ No chance of dispute for carrying out any extra item required
▪ No major difference of opinion with contractor and the owner
Demerits :
▪ Final cost cannot be determined before completion of work
▪ Quality of work may be poor
▪ It is difficult to calculate actual cost incurred by the contractor. The owner has to keep a check
over labour, material cost and quality of work.
5. Labour contract
▪ Contractor undertakes only the labour portion of the work
▪ All the necessary materials are supplied to the site by department or owner and contractor
arranges his own labours and get the work dine as per the specifications
▪ The contractors is only paid for the labours only on the actual quantities of work done measured
under item rate basis
Merits :
▪ Since the materials are supplied by the department, better progress and standard quality can be
maintained
Demerits :
▪ Sometimes there may be delay in obtaining materials by the departments.
▪ Large storage area is required to store different kinds of materisla a constant guarding etc are
essential
▪ Theft from the store, shortage of materials, accounting all the materials are constant worries for
a department.
6. Negotiated contract :
• When work is awarded on contract by manual negotiation between parties without call of
tenders, it is said to be negotiated contract. In PWD, the contractors are negotiated only in
special circumstances such as
✓ To obtain reasonable rates
✓ To meet the situation arising out of emergency viz. construction of shelterss for disabled
persons, strengthening of runways for national defence in short notice etc.
7. subcontracting
▪ Subcontracting is the practice of assigning part of the obligations and tasks under a contract
to another party known as a subcontractor.
 ▪ Subcontracting is especially prevalent in areas where complex projects are the norm
▪ Subcontractors are hired by the project's general contractor, who continues to have overall
responsibility for project completion and execution within its stipulated parameters and
deadlines
▪ A subcontractor is a type of contractor who works in a specialized area and could be a
freelancer, independent contractor.
▪ While the contractor maintains relationships with clients (e.g., corporation or government),
the subcontractor works with a contractor, providing his or her specialized skill set in
exchange for a contractual fee.
▪ The subcontracting individual or company reports to the primary contractor, who is
responsible for managing the contracted work from initiation to completion.
Why subcontract?
▪ There are several reasons why subcontracting is carried out. Subcontracting is very useful
in situations where the range of required capabilities for a project is too diverse to be carried
out by a single general contractor.
▪ In such cases, subcontracting parts of the project that do not form the general contractor's
core competencies may assist in keeping costs under control and mitigate overall project
risk.
▪ self-employed individual or company who wants to run a subcontracting business must be
properly licensed in his or her home state as a limited liability company or corporation.