Chapter Two

Bidding Procedures and Contract Types

Learning Objectives:
At the end of this Chapter , students should be able to:
Explain the bidding procedures for engineering works and service contract
Mention the different types of tendering
List the different types of service and works contract.
Understand the major components of contract document

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 Standard Bidding Document
The significance of having standard bidding procedure, specially for public
funded projects is:
To simplify the drafting of a specific bidding document for Procurement of
Works by procurement staff;
To minimise the time required by the Tender Committee to approve Bidding
Documents prior to release;
To reduce Bidders time and effort in the preparation of Bids;
To facilitate and simplify the evaluation and comparison of bids and Contract
award by the Procuring Entity
To ensure this, for instance, the Ethiopian government
established an agency (PPA) that supervises procuring
entities and sets procedures of public procurement
[proclamation no. 430/2005]

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 Scope and Value of Contract
This SBD is suitable for a standard contract, where the works have been fully
designed by or for the Procuring Entity (Employer), prior to bidding, and the
Contractor will be responsible for construction only.
It is suitable for works valued at up to US$10 million.
This SBD for the Procurement of Works is not suitable for the following
situations:
Complex works under US$10 million, such as large water treatment plants;
Works over US$10 million;
Works designed by the Contractor, including turnkey contracts.

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Types of tender
Things Bidders Geographical Procurement Procurement
Bases Procured Coverage Coverage Awareness Steps

Types Goods Competitive International General PN Single

Services Negotiated Regional Specific PN Two Staged
Works National Pre Qualification
Local Post - Qualification

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 Bid Qualification Procedure

Competitive Bid Negotiative Bid

Financial Proposal

Short-Listed Bid Open Bid

Financial Pr.

One-Stage Procedure Two-Stage Procedure

Financial Proposal

Pre-Qualification Post Qualification

Technical Proposal
Financial Proposal
Financial Proposal 5

Technical Proposal
Types of Tender
Based of things to be procured tenders can be classified as:
Consultancy/ Service
oServices means the consultancy services to be performed by the Supplier as
described in the contract. E.g. Design, Supervision, Contract administration
Works
oThe Works are what the Contract requires the Contractor to construct,
install, and turn over to the Employer, as defined in the Special Conditions of
Contract.
Goods
oGoods means all of the commodities, raw materials, machinery and
equipment, and/or other materials that the Supplier is required to supply to
the Procuring Entity under the Contract.

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 Bidding procedure for Service Contract

Selection of Bidders;
Preparation and Issue of RFP Documents;
Bidding Period and Receipt of proposal;
Proposal Opening;
Proposal Evaluation; and
Bid Acceptance, Contract Award and Signing.

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 Selection of Bidder
Under the Request for Proposals method, the Procuring Entity will normally
publish a notice seeking expressions of interest, so that all potential bidders have
the opportunity to participate.
The notice must be published in a newspaper of wide international circulation
or in a relevant trade publication or technical or professional journal of wide
international circulation.
The Procuring Entity will then evaluate the expressions of interest received and
develop a shortlist of between three and seven bidders.
The RFP document should be accompanied by a letter of invitation

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Preparation and Issuing of RFP Documents
The Procuring Entity is responsible for the preparation and issue of the RFP
The Procuring Entity must use the standard RFP or other appropriate standard
document issued by the Public Procurement Agency, as this is a mandatory
requirement for contracts to be funded by the Government of the Federal
Democratic Republic of Ethiopia.
In deciding the deadline for proposal submission the PE should allow Bidders
sufficient time for obtaining and studying the RFP, preparing complete and
responsive proposals and submitting the proposals.

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Bidding Period and Receipt of Proposals
The Bidder is responsible for proposal preparation and the submission of its
proposal. During the bidding period, the Procuring Entity shall:
Hold any pre bid meeting, if one is required, and issue minutes promptly;
Promptly respond to requests for clarifications from Bidders;
Issue amendments to the RFP if necessary;
Receive and record sealed proposals from Bidders or make a Bid Box available up to the
deadline for proposal submission;
Close bidding at the precise date and time of the deadline and ensure that no late
proposals are received;
Keep all proposals received secure until the time for proposal opening.

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 Proposal Opening
The Tender Committee is responsible for the Proposal Opening, which is a
critical event in the procurement process.
Conduct the Proposal Opening strictly following the procedures specified in the ITB Sub-
Clause 20 for all proposals received on or prior to the date and time of the proposal
submission deadline.
Ensure that all proposals that were received on time are accounted for, before starting the
Proposal Opening, as proposals that are not opened and read out at Proposal Opening
shall not be further considered.
Ensure that only technical proposals are opened and that financial proposals are kept
sealed and removed to a secure place after the opening.

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 Continued
Agree before the Proposal Opening on the details to be read out
Not reject any proposal at Proposal Opening, except for late proposals received
after the date and time of proposal submission deadline.
Examine the proposals at Proposal Opening in accordance with the provisions of
ITB Sub-Clause 17

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 Proposal Evaluation
For Consultancy services, proposal evaluation will be conducted in two stages
and Tender Committee approval of the technical evaluation report must be
obtained before opening financial proposals and conducting the financial
evaluation.
The Tender Committee shall:
Maintain the evaluation process strictly confidential
Reject any attempts or pressures to distort the outcome of the evaluation, including fraud
and corruption

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 Continued
Strictly apply only and all of the evaluation criteria specified in the
RFP to determine the proposals which proceed to the financial
evaluation and subsequently to make a recommendation for award
of contract to the Tender Committee.
For consultancy services, negotiations are often held with
the recommended Bidder, to finalise all technical details,
prior to placing the contract.

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 Bid Acceptance and Contract Award
The following procedure is required for bid acceptance and award of the
contract
The head of the Procuring Entity makes a contract award decision.
The Procuring Entity notifies all Bidders of the results of the evaluation.
After a period of five working days, if no complaint has been received by the
Procuring Entity, the PE awards the contract by either issuing a Letter of
Acceptance to the successful bidder or signing a contract (which is often done
following the successful conclusion of any negotiations).
Where a Letter of Acceptance is issued, the contract will be confirmed by issue of
a full conformed Contract Document.

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 Summary of BP for Service Contract
Preparation of Terms of Reference (TOR)
Preparation of Cost Estimate
Advertize for expression of interest
Prepare short list
Prepare and issue Request for Proposal (RFP)
Evaluate Technical proposal
Notify Unsuccessful Bidder
Notify bidders (passing technical Requirements) about the date of financial
opening
Open financial opening in public
Evaluate financial proposal
Negotiate price and sign contract

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 continued
The TOR normally consist of
Background of the project;
Objectives of the Assignment;
Scope of work;
Transfer of knowledge;
List of reports, schedule of deliveries, period of
performance;
Data, local services, personnel, and facilities to be provided
by the borrower; and
Institutional arrangements.

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 Types of Service Contracts based on method of
evaluation of proposal
1. Competitive Selection Process Quality v Cost based (QCBS):
Financial proposal and Technical proposal is evaluated(Sf = 100 x Fm/F
Two envelope system used (S = (St x T%) + (Sf x P%)
2. Competition on quality (QBS)
Technical Evaluation Only
Negotiations on Price
3. Selection under fixed budget (SFB)
Technical and financial proposals in two separate envelopes
Financial proposals to be within specified fixed budget
Technical evaluation (quality) first
Public opening of financial proposals
Rejection of proposals exceeding fixed budget
Highest rated technical proposal (within fixed budget) selected
4. Least Cost Selection (LCS)
Proposal will be ranked
The lowest Financial priced proposal will be recommended for contract
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award, subject to satisfactory negotiations.
Types of Service Contracts based on mode of payment

I. lump-sum
planning and feasibility studies, environmental studies, Design etc.
Contents, duration, and output clearly defined. payments linked to outputs only.

II. Time-based
Quality Control, supervision, Contract administration, technical assistance.
payments linked to inputs, agreed staff rates and reimbursable items. Example: AAHDPO

III. Percentage contracts

The consultant will paid based on a percentage of the works being executed (Cost plus %) or % of
the project cost

V. Indefinite delivery contracts

specialized services on call

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 Bidding procedure for works
The relevant parts of the bidding process are summarised here as follows:
Selection of Bidders;
Preparation and Issue of Bidding Documents;
Bidding Period and Bid Receipt;
Bid Opening;
Bid Evaluation; and
Bid Acceptance, Contract Award and Signing.

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 Selection of Bidders
a. Open tendering without pre-Qualification
The PE must publish an Invitation to Bid notice, so that bidding is open to all interested
bidders
The notice must be published in at least one national newspaper of general circulation
Where tendering is international, the notice must also be published, in a newspaper
using the same language as the notice and of sufficient circulation to attract foreign
competition
Notices should also be published on the internet, wherever possible.
PEs should also ensure that bidding documents are finalised and approved before
publishing the Invitation to Bid notice, to avoid any delays in the process.

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 .Continued
b. Restricted Tendering
the bidders invited will be those included on the shortlist, who
should be selected from among contractors registered in the
contractors list.
There is no need to publish an Invitation to Bid notice, but the
bidding document should be accompanied by an invitation to bid
letter
the Procuring Entity may advertise the opportunity, to invite
companies to express interest in being invited to bid.

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Preparation and Issue of Bidding Documents
The Procuring Entity is responsible for the preparation and issue of the Bidding
Document and must use the appropriate SBD, as this is a mandatory requirement
for contracts to be funded by the Government.
A record must be kept of the Bidders to whom Bidding Documents have been
issued. Receipts must be issued for all fees paid

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 Bidding Period and Bid Receipt
During the bidding period, the Procuring Entity shall:
Hold any pre bid meeting or site visit and issue minutes promptly;
Promptly respond to requests for clarifications from Bidders;
Issue amendments to the Bidding Documents if necessary;
Receive and record sealed bids from Bidders or make a Bid Box available up to the
deadline for bid submission;
Close bidding at the precise date and time of the deadline and ensure that no late bids are
received; and
Keep all bids received secure until the time for bid opening.

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 Bid Opening
Best Bid-Opening Practices to Observe
Conduct the Bid Opening strictly following the procedures specified in the ITB Sub-Clause
23 for all bids received on or prior to the date and time of the bid submission deadline.
Ensure that all bids that were received on time are accounted for, before starting the Bid
Opening,
Examine the bids at Bid Opening in accordance with the provisions of ITB Sub-Clause 19.

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 Bid Evaluation
The Tender Committee shall:
Maintain the bid evaluation process strictly confidential
Reject any attempts or pressures to distort the outcome
of the evaluation, including fraud and corruption
Strictly apply only and all of the evaluation and
qualification criteria specified in the Bidding Documents
to determine the lowest evaluated bid and to make a
recommendation for award of contract to the Tender
Committee.

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 Types of Works Contract
Type of contracts:
1. lump sum contract
Such a contract might be used for the supply of a particular
unit of process plant or material, or for a package deal in
which the Contractor is responsible for both
o Detailed design and
o Construction.

2. Cost - reimbursable contract

Cost- reimbursable contracts are used when the requirements of the promoter
are vague or
when it is desirable for design to proceed concurrently with construction.
Such contracts are also used when the promoter wishes to be directly involved
in the management of the contract or to reduce the financial risk to the
contractor

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 Types of Works Contract
3. Cost - plus contract
A cost-plus contract is the extreme form of the cost
reimbursable type and is so called because
The contractor is reimbursed for all costs incurred during the
fulfillment of the contract,
Plus an agreed fee to cover overheads and profit.
The fee may be defined as a percentage of the agreed actual cost
or as a fixed amount
4. Admeasurements Contracts
The most common types of construction contract which facilitate competitive
tendering but
Which incorporate some mechanism for the introduction and evaluation of
changes in the work content of the contract.

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 Types of Works Contract
a) Bill of quantities :Bidders are required to enter unit prices against the estimated
quantities of many items of completed work
b) Activity Schedule :
This types of contract is similar to the bill of quantities, but the estimated
quantities of work items which are expected to be less accurate than those given
in the bill of quantities.

5. Target Contracts:
A promoter may introduce additional incentives into a contract by offering the contractor a bonus
payment for the achievement of some previously defined target in terms of
Time,
Cost, or
Performance

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 Provisions of Contract/Contract Document
For works contract include:
a. Invitation to Bid;
b. Construction Agreement and its Appendices;
c. Letter of Acceptance;
d. Signed form of Bid of the Contractor, Appendices and Annexes ;
e. Particular Conditions of Contract
f. General Condition of Contract;
g. Priced Bill of Quantities;
h. Drawings;
i. Technical Specifications and Methods of Measurement;
j. The Standard Instructions and Information to Bidders for Building
k. Construction Works and the Particular Project Information and
Instruction thereto;
l. Any other documents required to form part of the Contract.

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 Commencement of site Supervision
As per sub clause 41.1 of the GCC of FIDIC 1987 edition, the Contractor shall
commence the Works as soon as is reasonably possible after the receipt by him
of a notice to this effect from the Engineer, which notice shall be issued within
the time stated in the Appendix to tender after the date of the Letter of
Acceptance

Hence, the supervision service of the Engineer will commence in parallel

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