W4 - Tendering

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PAT 304 – CONTRACT

AND SITE
ADMINISTRATION

Sr. Dr. Norsyakilah


Romeli
(Professional QS, MRISM, BQSM)
PhD in Built Environment (UiTM)
Msc in Integrated Construction Project Management (UiTM)
Degree in Quantity Survey (UiTM)
Diploma in Quantity Survey (UiTM)
In the end of this subject, students will
gain :
CO1:
Ability to ANALYZE the major types of contracts commonly adopted
in the construction industry.
CO2:
Ability to ANALYZE the use of various construction documents and
the administrative process.
CO3:
Ability to ORGANIZE the construction documents provided by a
construction manager including the practice of value engineering &
constructability.
CO4:
Ability to RECOMMEND the principles of quality and safety
management systems based on OSH Act.
PAT 304 : Contract and Site Administration

W1 Introduction of Contract
W2 Contract Management in Construction
W3 Elements of Document Contract,
Standard Form of Contracts
W4 Procurement, Tendering, and
Contractual Procedure
W5 Post Contract Conducts
W6 Financial and Costing in Contracts
W7 Handover of Projects Practices
W4- PROCUREMENT,
TENDERING AND
CONTRACTUAL PROCEDURE
Procurement Method
How to obtain the construction project ?
To procure, to obtain
Who fund the project ? Which contract
used ?
What project ?
Procurement Selection Criteria
Client’s Requirement – capital cost,
maintenance cost, pre qualification and
tendering cost, financial risk, price
comparison, completion within budget
Time related factors – planning and
designing time, construction time, the early
start of the project, speed of construction,
time overruns, quick response to client’s new
requirement, minimizing of activities
interfacing, stage completion
Selection Criteria (cont’d)
 Quality related factors – design reliability,
aesthetic appearance of building, workmanship,
function ability and design innovation
 General needs – allocation of responsibility,
professional team performance, parties
involvements, accountability, transparency, safety
requirement, cooperation and motivation, existing
building operation, familiarity, tender evaluation
criteria, flexibility, clearly express end user’s
requirement, types of client, consultant’s attitude
towards clients
Selection Criteria (cont’d)
Project characteristics – project type,
project size, project cost, degree of
flexibility, degree of complexity, time
constraints, payment methods, integration
of design and construction, project
funding method, project site location, site
risk factors, construction method, degree
of innovative technology involvement
Selection Criteria (cont’d)
 External environment – market’s competitiveness,
government as a policy maker, government as a
major client, regulatory feasibility, technology
feasibility, source of finance for the project,
experienced contractor availability, education of
builder, economic condition of the country,
availability of material, information technology,
influence of the institutional bodies, natural disaster,
industrial action, socio- cultural differences,
goodwill of the contractors, environmental issues,
civil war condition, objection from neighbourhood
Common project selection criteria
Employer involvements in construction
Separation between design and management
Employer right to alter specification
Clarity of employer contractual remedies
Complexity of the project
Speed from inception to completion
Certainty of price / value for money
Miscellaneous criteria
Identifying the procurement methods
Performance
Start Does the based contract
ownership of
Does the client pay facility transfer
for contractors' to purchaser BOT/PFI
work ?

Does the contractor


have overall Design and
responsibility for Built
design

Is the contractor Construction


responsible for Management
managing assembly
General
Is all of contractor Contracting
work subcontracted
Management
to others
Contracting
Types of project procurement
• Design and Build
• Traditional Method
• Engineering Procurement & Management Contract
• Turnkey
• Partnering and Joint Venture
• Privatization ( PFI/ BOT)
• Construction Management Contract
Design and build

One organization is responsible to the client for


both design and construction of project
It is a single – point responsibility concept
In the events of defects, there are no disputed
responsibilities, the D&B firm is solely liable.
The organization can be one company or a
partnership of firms.
The organization with the capacity to design and
built with full house expertise
Usually used in STP projects, complex hospital
design and infrastructure
Traditional method
Consultant manage design, cost and tendering
Risk at client, and contractor
Payment done by employer that has been
supervised by consultant
Contractor will be selected using the
conventional tendering system
Usually housing, school, hospital, renovation,
renovation works, private used building
Engineering Procurement & Management Contract

The term of design and manage is used


where the organization responsible for
design and construction employ consultant to
do the design and independent contractors to
the construction, while preserving a largely
material role for itself.
An engineer- procure- construct (EPC)
contract is form of D&B contract in that the
owner contracts with a single entity for the
entire project.
Engineering Procurement & Management
Contract (cont’d)
A design engineer or firm or design
consultant heads a team which includes an
experienced contractor and perhaps a plant
supplier
The client/ promoter specified his project
requirement in outline which the team
design in detail and continued liase with him
EPC used in manufacturing / utilizes/
marine/ oil and gas
Turnkey
 The client usually the government provides the financing for
the project but engaged an organization to design, construct,
and operate the facility for a specified period of time
 Turnkey system may provide for the company supplying
D&B services to also finance the project
 Client makes periodic payment towards the works
completed
 Usually, the payment will be made upon the testing and
commissioning phase
 While this share some of the similarities with BOT but the
contractor doesn’t covers on the operation phase
 Sport Centre, Velodrome
Collaboration Approach ( Joint Venture
or Partnering)
Two parties or more
Can be used to form a PDP (project delivery partner)
eg Gamuda – MMC in constructing the SBK line MRT
Manage payment to the nominated subcontractor in
each of the packages
Act as the main contractor and selected the rest of the
contractor for each of the package
Usually involved large infrastructure project
Involves risk sharing, human resource sharing,
technical expertise sharing and technology and
knowledge transfer
Privatization
 Usually, these arrangement based on the concession contracts.
Built Operate and Transfer types.
 One organization act as the consortium of contractor and funders
that perform the design, construction and long term financing
and temporary operation of the project
 At the end of operation period, the operation of the project is
transferred to the owner
 During the operation stages, the concessionaire receive income
from users of the facility which may be subsidized by the client
until the project has reached its forecast user capacity and thus
become commercially viable
 Private – Public Funding Initiative also bound to this type of
project.
 Highway construction, LRT, telecommunication projects, carpark
Construction Management Contract
The client is in contract the contract management +
consultant for design
The client has no privity of contract with the work
contractors and the MC is contractually liable for the
works of the contractor
If the MC fails to pay, contractors can’t claim direct to
client for the subcontractor claim and works
The design consultant no longer manage the construction
contract for the client
The MC manage the construction
Apartment, high rise building
Commencement and Design
Development
ProjectInception and Feasibility
Introduction to the Project
Land issues
Appointment of the Professionals
Submission and Approvals
Preliminary Cost Estimates and Cost
Planning
The Design Process
Contract Formation Process

Contract : A clear offer or proposal,


acceptance and presence of consideration
The preferred types of contract to be used
The particular condition of contract to be
employed
The relevant tender documentation
involved
Tendering Procedure

Purpose of tendering : to select a suitable


contractors at time appropriate to the
circumstances of the project
Selection of the contractors : optimum
resources, financial, manpower, material,
contractors input on the design, cost saving
alternative through value engineering,
allocation of risk
Mode : Open tender, direct negotiation,
selective tendering
Open tender

 Any contractors who meets the specified requirement to carry


out a proposed construction project may submit a tender for the
work
 Tenders can be invited through advertisement in the technical,
trade and or general press. For public work, an invitation to bid
is placed in the classified advertising section of one or more
national newspaper over specified period
 Advertising will give outline details of the works, its scale,
programme, the form of contract and other relevant matters
 Commonly used bt government agencies to ensure accountability
of public funds
 Complete design documentation is necessary to enable accurate
bidding
Open tender (cont’d)
Attract large number of tenders and the bids are expected to be more
competitive. However, it is inefficient used of the industry used.
Lowest possible price will be obtained, although the experience and the
financial standing of such contractor are suspected. Highly risk of choice
Low tenders from contractor as a consequences of making the most
errors or who cut price at the initial stage with a view of recouping the
losess by means of corner- cutting and claims
Tendering can be expensive and cost of unsuccessful tenders tend to
inflate prices for future work
The method allows for new firm the chances of tendering for works
 The method allows for new firm the chance of tendering for work
Tenderers have no assurances about the quality of their competitors
A higher cost of administration of tenders, duplicating document
Problem of selecting best tender from a wide range of tenders
Direct negotiation
The tendering method is without a call or
competition. The clients selects a contractor
directly and then negotiates with the terms of
agreement and form of payment
This approach maybe appropriate when the client
believed that the contractor possesses skills or
experience relevant to the project based on the
latter’s reputation and recommendation
Negotiation may based on schedule of prices, or
approximate bills of actual costs plus agreed
profit margin.
Direct negotiation (cont’d)
Contractor must prepared a budget quotation for the
work based on limited information
Client and contractor’s representative work on the and
negotiate on the rates and prices and finally agree to a
tender price
In negotiation with the chosen contractor, main item
can be roughly quantified and price as basis of
agreement, with additional less costly items agreed later
in a consensual rather than adversarial negotiation
Competitive – client negotiates the term with selected
bidders (include a formal tender stage prior to
negotiation
Direct negotiation (cont’d)
Negotiation may be considered under these circumstances
1. established business relationship between client and
contractor
II. Quality and not economy is major determinant
III. A continuation contract based on the first contract
IV. Additional contract where contractor is already on site
V. the contractor have special expertise relevant to the
project
VI. Contractor’s contribution is required in relation to
design or programming
Direct negotiation (cont’d)
Cut down time and money on tendering
Completed design documentation is not
necessary for work to start, and the
contractor’s skill may be brought into the
design process
Absence of competition, so the tender sum
may be higher
But client may get think it worth paying more
in return for a quicker job, or better quality
than he may otherwise obtain.
Selective tendering
Only a limited numbers of contractors who
fulfill certain criteria are invited to tender
The selection is done prior to tender invitation
The criteria are often the general experience of
the types of project contemplated, financial
ability and managerial and technical capabilities
Suitable firms are invited from clients/
consultant approved list singled out by
reputation, recommendation, previous contact
with client or consultants.
Selective tendering (cont’d)
Select tendering can be approached in two
stages
In the first stage – advertisement can be
published inviting suitable firms to pre qualify
for tendering. The tenderer will have to supply
information about their previous experience,
physical resources and financial standing
After which the client will only invited small
numbers of the pre-qualified contractors to
submit their tenders
Selective tendering (cont’d)
Can mean higher quotations because of
less competition but also because of the
higher caliber of the tenderer
This method ensure the lowest prices
from contractors who are capable of doing
the work
Cost of tendering reduced
Tender Documentation

Requirement :
Define nature and extent of work
Provision to contract form basis,
Reflect the employers procurement policies
Minimize ambiguities and discrepancies
Reflect employer’s requirement,
Design and work specification to latest
standard practice
Invitation to tender
Details of the project
Registrations requirement
Details for the procurement
Details of site visit
Detail of tender documentation fee
Detail of tender table documents
Detail of submission of tender
Miscellaneous details
Submission and Receipt of Tender

Clear and complete in any sense


Comply with The Tender Response
Requirement or Instruction to The
Tenderer documents issued by Employer
Contain no arithmetical mistakes
Submitted in accordance with the
stipulated condition
Evaluation / Assessment of Tender

Evaluation criteria :
Completeness of the offer
Accuracy of the offer
Reasonable of the commercial offer
Reasonable of the work program
Technical conformance
Capability of tenderer
Others
Acceptance of Tenders

Issue of letter of intent


Pre contract award meeting
Confirmation and fundings
Preparation of the Letter of Acceptance
Tender Report
Miscellaneous Matters

Withdrawal of tender
Withdrawal of acceptance
Legal Mistake
Factor Influence the Tender Preparation
Process
Revised scope and drawings
Types of Procurement Path
Tools to prepare
Types of Projects
Delay of submitting documents
Unclear specification
Legal Language Barrier
Accuracy of tender documents
Number of tender preparation team

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