1.

INTRODUCTION
Clients or promoters of the construction
rely on competitive tendering to justify the
Awarding of contracts. Most construction
contracts are awarded after a number of
contractors have submitted a tender.
Construction contractors base these
tenders on an estimate of the cost to the
contractor, of executing the work
described in the contract documents. The
estimating department is therefore of
central importance to the commercial
success of the contracting organization.

2. PARTIES INVOLVED IN ESTIMATING AND

TENDERING
The parties involved in estimating and
tendering can be divided into three
classes:
a) The client's staff or their professional
representative

|
 b) The construction contractor's
personnel including senior
management, estimators, planners,
buyers, plant managers, temporary
works designers and site management
staff.
c) The external organizations such as
material suppliers, plant hire
companies and sub-contractors?

The contribution of each of these is

described below;
a) The Client's Staff or Professional
Representative:
The contract documents prepared by
the professional representatives of clients
include drawings, bill of quantities,
specifications and other documents.
These are the main sources of
information to the estimators who
prepare the cost estimates and tenders.

|
b) The Construction Contractor's
Personnel
i) Senior Management is usually
involved in the decision whether or not
to tender for a particular contract and
in the decision on what tender to
submit. Here he considers the estimate
of cost and resources involved as
produced by estimators.
ii) Estimators are employed in the
estimating department. He is
responsible of producing estimates.
iii) Planners are employed to produce
construction plans or programmes. The
estimators are usually concerned, with
a pre-tender plan which may not be as
detailed as one produced for site use.
However, it will provide the overall -
duration of the project, the duration
and sequence of the key activities, and
approximate resource totals for labour
and plant.

|
iv) Buyers are usually responsible for
purchasing materials and placing
orders with plant hire companies and
sub-contractors. They provide
quotations for materials, plant hire and
sub-contractors. v) Plant Managers are
responsible for the company's plant
department and supply estimators with
current internal hire rates and advice
availability of company owned-plant.
vi) Temporary works designers are
responsible for designs of major
temporary works such as bridge, false
work etc. Estimators would take advice
on the nature of the temporary works.
vii) Site Management is the personnel
who are employed to take
responsibility for the execution of
projects on site. This expression covers
agents works managers, engineers and
surveyors. The contribution of site
management to estimating is to

|
 provide advice to the estimators on
methods of construction.

c) External Organizations:
Material suppliers, plant hire
companies and sub-contractors all get
involved in the estimating process. They
receive and respond to enquiries for
quotations from contractors.

3. THE ESTIMATING PROCESS

The basic steps of estimates are:
a) Decision to tender
b) Programming the estimate
c) Collection and calculation of cost
information
d) Project study
e) Preparing the estimate
f) Site overheads
g) Estimator's reports

|
a) Decision to Tender:
The decision to tender for a particular
contract is mainly the responsibility of
senior-management. The decision to
tender is based on such factors as:
i) the company's current workload,
turnover and recovery of
overheads
ii) the company's financial resources
iii) the availability of resources to
undertake the work
iv) the type of work
v) the location of the contract
vi) the identity of the client or
promoters and his representatives
vii) a detailed examination of the
contract documents

b) Programming the Estimate:

The two tasks that can take place in
this stage are:

|
 i) collection and calculation of the
cost information
ii) a study of the project to gain the
required appreciation

c) Collection of Cost Information:

The cost information required by the
estimator for, labour, plant, materials
and subcontractor.

d) Project Study:
To gain an appreciation of the
project the estimator will undertake
the following tasks:
i) a study of the drawings
ii) a site visits and meeting with the
clients or promoter's
representative.
iii) the preparation of a method
statement determining how the
project will be constructed.

|
e) Preparing the Estimate:
The estimator is required to establish
the direct cost rates for each item in
the bill of quantities. A direct cost rate
is a rate for the labour, plant,
materials and sub-contractors but
exclusive of additions for site
overhead, head office overhead
and profit. This will be assessed and
included later.

f) Site Overheads:
The estimator assesses the site
overheads based on requirements
such as:
i) Site staff
ii) Clearing site
iii) Site transport facilities
iv) Mechanical plant not previously
included in the item rates
v) Scaffolding and gantries
vi) Site accommodation
vii) Small plant
viii) Temporary services
|
 ix) Welfare, first aid and safety
provisions
x) Final clearance -and handover
xi) Defects liability
xii) Transport of men to site
xiii) Abnormal overtime
xiv)Risk

g) Estimator's Reports;
On completion of the estimate the
estimators prepare a set of reports for
consideration by the senior
management. These reports contain,
i. a brief description of the project
ii. a description of the method of
construction
iii. notes of any unusual risks which
are not covered by the condition
of contract or bills of quantities.
iv. any unresolved or contractual
problem
v. an assessment of the state of the
design proves and the possible
financial consequences thereof
|
 vi. notes of any major assumptions
made in the preparation of the
estimate
vii. assessment of the profitability of
the project
viii. any pertinent information
concerning market and industrial
conditions

4. TENDERING ADJUSTMENTS:

A tender adjudicating panel is formed

by the staff involved in estimating and
representatives of senior management.
It is the responsibility of this panel to
satisfy themselves that the estimate-is
adequate.

Additions for “mark-up” includes the

allowances for:

|
 i. "risk" if the chance or profitability of
making a loss is assessed
ii. "Company overheads" to cover the
central head office costs which are
involved in administrating at the
contract.
iii. the "profit" considered to be
possible in the existing market
conditions.

5. THE TENDERING PROCESS

5.1 TYPES OF TENDERS IN

CONSTRUCTION
A tender refers to a written
document that describes the
details of the project and the work
that it will involve. It is shared with
the public to attract bids from
qualified contractors and suppliers.
Clients may also directly send
invitations to tender to contractors

|
 and suppliers who are eligible and
willing to participate in the project.

A tender document is crucial in the

tendering process because it
provides the buyer’s criteria to
select suitable contractors and
suppliers. A client must consider
pricing and quality when choosing
contractors and suppliers for a
project.

5.2 WHAT IS THE TENDER PROCESS?

A tender process is when the client
invites bids from qualified and
interested contractors to carry out
specific construction work packages. A
tender process begins with an invitation
to tender.

Tenders are typically advertised

through local media to give all
interested contractors equal
|
opportunity to submit their bids, clearly
indicating the materials to be used and
the project’s estimated cost.
The contractors must submit the bids
within the client’s deadline. The client
then evaluates all the proposals based
on criteria such as quality and price.
After a public evaluation process, the
tender process is concluded once the
winning contractors and suppliers are
determined.

5.3 IMPORTANCE OF THE TENDER

PROCESS
The tender process is critical in
construction because of the following:
i. Preventing bias: The bids in a tender
process are evaluated based on
predetermined criteria such as
quality and price, giving all
interested parties a fair chance of
selection.
|
ii. Value for money: The client can
choose contractors and suppliers to
produce the highest quality of work
at the lowest price point.

iii. Healthy competition: The tender

process encourages potential
contractors and suppliers to be
more efficient and deliver the
highest possible quality of work
while reducing operational costs
and inefficiencies. This helps create
a competitive market as all the
potential contractors and suppliers
aim to be more creative and
innovative.

iv. Ease of entry for new firms: The

tender process is objective and fair,
making it easier for new firms to
enter the market as long as they
meet the predetermined criteria.

|
5.4 TYPES OF TENDERS
A client can choose different types
of tendering based on the expertise
needed, the nature of the contract,
and the complexity of the
construction. There are three main
types of tendering: open tendering,
selective tendering, and
negotiated tendering.

i. OPEN TENDERING
In the open tendering, the client
advertises the proposed project
publicly and is available to all
interested contractors. The client
may require a refundable deposit
from all applicants. Open tendering
is common in both government and
public sectors, and is widely used in
the construction industry.
Below are the pros and cons of
open tendering.

|
PROS
 All interested contractors are allowed
to apply, thereby increasing the ease
of entry for new players in the market.

 The client obtains the best bargain

possible.

 The selection of contractors is without

bias or favoritism.

 Open tendering encourages

competition among potential
contractors without obligating the
client to accept bids.

 It is suitable for the construction

industry.
CONS
 The tender list may be too long
because the tendering applications
are open to all interested contractors.

|
 Contractors’ resources go to waste
when they spend time preparing
tender documents but are not
selected.

 The contractors may offer a price

without fully considering the details of
the contract. Therefore, the client
may get seemingly reasonable prices
that do not reflect the actual price
point of their project.

 The client runs the risk of choosing a

contractor offering the lowest price
and not getting the highest quality of
work.

ii. SELECTIVE TENDERING

In selective tendering, the client only
invites a shortlist of contractors to
submit their bids for the tender.
Selective tendering is designed to
|
mitigate the limitations of the open
tendering method. Since a shortlist of
qualified contractors is drawn in
advance, participation is restricted to
only competent and skilled
contractors.
Below are the pros and cons of
selective tendering.
PROS
 It promotes the economical use of
contractors’ resources.
 Reduces tendering costs because
the client invites fewer contractors to
submit their bids.
 It helps to save time because the
tender process is shorter.
 The client can select the lowest offer
because only qualified contractors
are considered.
 The tender process is easier to
manage.

|
  Reduced tender documentation
because only a shortlist of contractors
is invited.
CONS
 It presents a barrier or entry for other
contractors, especially new
contractors.
 It increases favouritism.
 The tendering period may be longer.
 There is a risk that contractors may
overprice their services.
 There is a risk that contractors may
collude.

iii. NEGOTIATED TENDERING

Negotiated tendering is commonly
used in the construction industry, as
negotiation starts from the tendering
process to the dispute resolution stage.
Negotiated tendering involves two
phases: the pre-contract negotiations
and the post-contract negotiations.

|
This tendering process typically involves
a single contractor but has an
allowance for a maximum of three
contractors.
The negotiated tendering process
begins when the employer identifies a
suitable contractor to deal with. The
employer can select the contractor
from their list of preferences or through
the guidance of the professional team.
Once the client identifies a contractor,
they give them the project details.
Negotiation tendering is suitable for
types of contracts where:
 The contractor is involved in funding
the construction project.
 The employer and the contractor
have a long-term business
relationship.
 The construction project is urgent,
and the work must be fast-tracked.

|
Below are the pros and cons of
negotiated tendering.
PROS
 Negotiated tendering minimizes the
risk of failure in the construction
industry.
 The tendering process is significantly
shortened as the most suitable
contractor can be selected much
faster.
 The contractor is brought into the
project early and can contribute their
expertise to thedesign.
 It is the best tendering method for
particular circumstances, such as
during emergencies.
CONS
 This method increases the barrier of
entry for new contractors and
reduces the availability of work for
non-selected contractors.

|
 Contractors are likely to quote higher
prices than in more competitive
tendering processes.
5.5 Calling for Tenders:
An employer may publicly advertise
(by press) that he is open to receive
tenders. It is usual for the engineer to
draft this notice so that it contains a
brief but adequate description of the
proposed works and their location, so
that contractor can judge whether
they are interested in tendering. It is
also usual to state that no expenses
incurred in tendering will be reimbursed
and that the employer does not bind
himself to accept the lowest, or any
tender. Contractors are normally
required to pay a deposit, before they
get a set of tender file.
An alternative procedure to public
advertisement of tender is to invite
certain contractors only to submit
tenders. Probably the best way to do
|
this is to advertise that contractors may
if they send in their qualifications and
experience, apply to be placed on a
list of "selected tenders". This is called
pre-qualification, and it saves time for
both contractors and the engineer and
employer. Thus, for the construction of
a bridge, a public advertisement might
be issued inviting contractors,
experienced in bridge building to
apply to be placed on the list of
selected tenderers. Applications would
be asked to provide details of their past
experience, present labour force,
plant, and equipment, and to give the
names of previous employers they
have-worked for.
However, sometimes the engineer may
himself draw up a list of selected
tenders in consultation with the
employer, without resorting a public
advertisement. But this may not be fair
to certain contractors.

|
5.6 Comparing Tenders:
It is the engineer's job to recommend to
the employer which contractor's offer
should be accepted. It should be
noticed that, the engineer does not
accept the offer, nor does he make the
final decision. The engineer
recommends, the employer decides
and acts.
The first criterion is of course, the sum
total offer made by each contractor. It
is important to see whether each
contractor is, in fact offering the same
thing. Some tenders may be submitted
with certain reservations which are
contrary or additional to the conditions
in the tender documents. Some tenders
may have misspellings or mistakes of
interpretation of the documents. All
these matters are listed side by side and
where necessary, adjustments made to
the total sums offered. After this
|
comparison, 3 or 4, offer are selected
and examined in detail.
If the tenders are based on bills of
quantities, the detailed prices
submitted by different contractors for
the same portions of the work are
compared. This will reveal relatively
high or low unit prices for certain types
of work, so that the engineer can
decide what trouble could be in
certain parts of the work. The engineer
will not like a contractor making high
profit from some part of the work and
high loss from the other part of the
work.

5.7 Choosing a Tender:

With the completion of the close
check, and comparison, the engineer
may invite one or two of the lowest
tenderers to his office, to discuss certain
points of their offer: Principally he may

|
wish to be provided with further
evidence from a tenderer, such as,
proposed methods of construction,
and his proposed program. The
engineer will not of course reveal to
any contractor the prices offered by
others. Meantime, the engineer may
have made private contact with the
referees named by the contractors.
Then the decision is made as to which
tender should be recommended for
acceptance.

5.8 Those who can't take part in Bidding

Committee
1- Member of the bidding
commission
2- Employees linked to the bidding
or bidding commission (secretary,
etc.)

|
 3- Highest ranking of civil and
military official
4- Fathers, mothers, brothers,
children, wives, husbands, sons in
law, father in law of items 1,2 and 3
above.
5- These not allowed to take part in
biddings, (as penalty)

5.9 Documents that a bidder should

submit:
1- Registration
2- Bonds
3- Contractor ship license
4- Permission to take part in
biddings
5- Documents show that the
company is active
6- List of signatures

|
5.10 Bonds: (for defaults or damages of
contractor as security of owner)
a) Bid bond
b) Performance bond

a) Bid Bond:
Amount of bid bond is normally about
5% of the tender. At the end of the
bidding if a company doesn't win, the
bid bond is paid back to him. But if a
company wins the bidding and then
gives up, the bid bond is not given
back to him.

These are accepted as Bid Bonds:

1- Money
2- Bank guarantee letter
3- National bonds
4- Shares of companies
5- First rate of mortgage

|
b) Performance Bonds:
The amount of performance bond is
normally about 10% of estimate cost.
But when a company signs a
contract, the bid bond is transferred
as performance bond, which is 5% of
tender where it is half of the
performance bond. The rest of the
performance bond is cut from the
payments. At each payment, %10 of
the payment is cut and transferred to
performance bond.

Example:
Tender: E 10,000,000.-
Bid Bond: E 10,000,000 x 5% = E
500,000.-
Performance bond: E 10,000,000 x
10% = E 1,000,000. -

Although bid bond is transferred to

performance bond, to complete
performance bond another E
500,000.- is necessary. And that
|
amount will be cut from payments as
10% of the payment.

Suppose:
1st payment E 1,750,000.
As performance bond
E 1,750,000.- x 0,1 =E 175,000.- is
deducted
2nd payment = E 2,500,000.
E 2,500,000.- x 0,1 = E 250,000.- is
deducted.
Total amount cut: E 425,000.

To complete the performance bond

further E 75,000.- (500,000 - 425,000 =
75,000.-) must be deducted from the
3rd payment.
1st payment: E 1,750,000 - 175,000 = E
1,575,000.-
2nd payment: E 2,500,000 - 250,000 =
E 2,250,000.-

|
3rd payment: E 3,000,000 - 75,000 =
E 2,925,000.-
From the rest of the payments no
money will be cut as performance
bond. The contractor can take back
his performance bond if:
- The permanent acceptance of the
work is done
- The contractor brings a certificate
from social Insurance office to prove
that all the insurances of the labours
are paid.