2.

0 TENDERING OR BIDDING PROCESS

Contract documentation –refers to the:
Pre-qualification, Tender and contract Documents collectively.
The term includes all documents prepared by the Design
Team.

There will be a number of communications to and from

various parties prior to construction.
A typical but not exhaustive list of communications is as
follows under the following stages:
• Prequalification stage
• Tender stage
• Acceptance and Agreement
• Post Acceptance procedures
Prequalification stage
• Invitation from Employer/Consultant to potential
tenderers.

• Replies from potential tenderers.

• Prequalification documents from

Employer/Consultant to potential tenderers.

• Reply to prequalification documents from potential

tenderers.

• Acceptance of list of tenderers by employer.

Prequalification stage
The prequalification stage is principally procedural with no prices
submitted. The Employer/Consultant and potential tenderers
inform each other about themselves and the project. If there is no
prequalification stage, some of this communication will occur in the
tender stage
They are documents exchanged between the Employer/Designer
and the potential tenderers prior to selection of list of tenderers.

The purpose of the prequalification stage is to ensure that the

tenderers will have the necessary constructional and financial
ability to execute the Works.

The Prequalification Documents both give information to potential

tenderers and request information from them.
Tender stage

Tendering Requirements state the procedures that all Tenderers

have to follow in preparing and submitting their tenders.

Good Tendering Requirements should be written in order to

minimize the possibility of tenderers being disqualified because
of technicalities.

Even though they are not Contract Documents, the Tendering

Requirements are often bound with the Contract Documents to
make up the Tender Documents.
Tender stage
The Tendering Requirements typically include
the following:
• Introduction to tender documents
• Description of the Works
• Funding requirements including eligibility and
qualifications
• Instructions to tenderer
• Instructions covering Preparation and
Submission of Bids
• Tender security form, if required
• Form of tender
• Advance Mobilisation form
• Performance Guarantee/bond
Tender stage
• Procedure for the Opening and Evaluation of
Bids;
• Criteria for the Award of Contract

NB (Equal Information to be supplied by the Employer )

Tender stage
• Addenda to Tender documents to tenderers
• Addenda are changes made to the Tender Documents during
the tender period.
• They are used to add, delete or change any of the Tender
Documents.

• Tenders from tenderers to

Employer/Consultant

• Opening of Tenders/Bids

• Evaluation of Tenders/Bids
 • Evaluation of Tenders/Bids

The objective of Bid Evaluation and

Negotiations for Award of Contract is to
arrive at an “Evaluated Bid Price”.
• Evaluation of Tenders/Bids

This Evaluated Bid Price as opposed to

Bid Price is arrived at by identifying
where possible, all those factors with
hidden Monetary values which when
properly quantified may add to or
subtract from the Bid Prices quoted by
Bidders. Some of these factors are:
 • Evaluation of Tenders/Bids

• The Bid Price

• Time Value of Advance Loan for
Mobilization
• Local Preference Factor, if applicable;
• Reasonableness of Bid Proposals; and
• Any other factors which may influence
the performance of the Contract.
 • Evaluation of Tenders/Bids

• Examination, Evaluation and Comparison of Bids

– Determination of Responsiveness;
– Correction of Errors;
– Conversion to Single Currency;
– Evaluation and Computation of Hidden Monetary Costs;
– Computation of Evaluated Bid Prices and Comparison
thereof;
– Ranking of Evaluated Bid Prices;
Evaluation and
Computation of Hidden
Monetary Costs
 PARTICULARS OF BIDS SUBMITTED
Bidder Bid Price Time for Advance loan
completion for Mobilization
(% of Bid Price)
A GH¢616,201.40 20 months 10%

B GH¢605,940.65 22 months 15%

C GH¢653,250.19 18 months 15%

Total of PC sums and Provisional sums
included =¢100,000.00

BIDDER STATUS

A 50% D 50% F
B 75% D 25% F
C 25% D 75% F
DESCRIPTION A B C
OR ITEM

Bid Price 616,201.40 605,940.65 653,250.19

Corrected Bid 611,200.40 605,940.65 650,250.00

Price

Remarks Arithmetic No Error Arithmetic

Error Error
 EVALUATION AND COMPARISON OF
BIDS
Annual Discount Rate = 26%
Monthly Discount Rate r is given by
(1.0 + r)12 = (1.0 + 0.26)
= 1.26
1+r = (1.26)1/12
r = 1.0194 - 1
= 0.0194
= 1.94%
 Benefits foregone by Employer Due to
Mobilization Loans
Since the Mobilization Loans are to be
paid without interest in equal
installments at the end of 4th, 5th, 6th,
7th and 8th months, the values of these
payments to present value should be
determined.
 Pr = Pv (1 + r)n
Where Pr = The repaid monthly amount
Pv = Present Value
n = No of months
r = Monthly Discount Rate
Thus Pv = Pr
(1 + r)n
 Thus the present value of payments made at the end of the
various months are:
• Month 4 Pr/ (1.0194) 4 Pr/ 1.0799 0.9260 Pr
• Month 5 Pr/ (1.0194) 5 Pr/ 1.1008 0.9084 Pr
• Month 6 Pr/ (1.0194) 6 Pr/ 1.1222 0.8911 Pr
• Month 7 Pr/ (1.0194) 7 Pr/ 1.1440 0.8741 Pr
• Month 8 Pr/ (1.0194) 8 Pr/ 1.1662 0.8575 Pr
Total 4.4571 Pr
CONTRACTOR A
• Corrected Bid Price = 611,200.40
• Less Contingency = 55,563.67
555,636.72
• Less Provisional sums / PC Sums
= 100,000.00
= 455,636.72
• Mobilization Loan requested 10%
= 45,563.67
• Since Mobilization is to be repaid in 5 equal
installments
Pr = 45,563.67
5
= 9,112.73
• Present Value of all monthly Payments
is given by
PvT= 9,112.73 x 4.4571
= 40,616.37
• Monetary loss to Employer due to
Mobilization Loan to Contractor A is given by
• Mobilization Loan - Present Value of
Repayments

= 45,563.67 - 40,616.37
= ¢4,947.30
 Benefits foregone by Employer for longer
time of Completion
• The shortest time of completion offered by a
Responsive Bidder is 18 months by contractor
C.

• A offered 20 months and B 22 months

 Lets denote
• Time for completion in months by Bidders
other than C by T.
• Extra period over the shortest time of
completion offered by a responsive bidder =
(T - 18) months
Corrected Bid Price, less Pc,Ps,Contingency
= CBP
Foregone Benefit (BF) for each month longer
than Completion time @ 3%
= 0.03 x CBP
• The foregone Benefits occur in the 19th,
20th, 21st & 22nd months
Present Value of the forgone benefits using the discount rate of
1.94% already established are:
19th month BF / (1.0194)19 BF/ 1.4406 0.6942 BF
20th month BF / (1.0194)20 BF/ 1.4686 0.6809 BF
21st month BF / (1.0194)21 BF/ 1.4971 0.6680 BF
22nd month BF / (1.0194)22 BF/ 1.5261 0.6553 BF
2.6984 BF
 Computation of Local Preference Factor
• All the bidders are joint ventures of Domestic
and foreign Bidders but ranging degrees of
Domestic participation. Their Evaluated Bid
price will therefore be loaded by the
appropriate percentage for the compensation
only.
• Corrected Bid Price= CBP
• Add Benefits foregone for Advance Loan
= BFA
• Add Benefits foregone for Longer Completion
= BFT
• Total = CBP +BFA+ BFT
• Loading Factor Applicable
= Applicable % (CBP +BFA+ BFT)
 Benefits foregone by Employer for Advance
Mobilization
DESCRIPTION BIDDER
A B C
A Corrected Bid Price (CBP) 611,200.40 605,940.65 650,250.00
B Less Pcs, Ps, Contingency 155,563.67 155,085.51 159,113.64
C Net Price for Computing 455,636.73 450,855.14 491,136.36
Advance Loan (a-b)
D Mobilization Percentage 10% 15% 15%
E Mobilization Amount 45,563.67 67,628.27 73,670.45
F Monthly Repayment 9,112.73 13,525.65 14,734.09
G Total Repaid Amount 40,616.37 60,285.19 65,671.31
(Present Value)
Benefits foregone by 4,947.30 7,343.08 7,999.11
H Employer (e-g)
 Benefits foregone by Employer due to longer
times of Completion
DESCRIPTION BIDDER
A B C
A Corrected Bid Price (CBP) less Pc, 455,636.73 450,855.14 491,136.36
Ps contingency etc.
B Time of Completion 20 22 18
C Extra over Shortest Time of 2 4 0
Completion (T – 18)
Benefits foregone for each longer 13,669.10 13,525.65 14,734.09
D Time of completion @ 3% of CBP
E Total of Present Values of Benefits 18,796.38 36,497.61 0.0
foregone by Employer
NOTE
(e) is obtained by multiplying (d) by 2.6984 for
4 months longer times of completion but
1.3751 for 2 months longer times of
completion.
 Computation of Loadings in Favour of Domestic
Bidders
DESCRIPTION BIDDER & STATUS

A B C
50% D 50%F 75%D 25%F 25% D 75%F
A Corrected Bid Price less Pcs, Ps 455,636.73 450,855.14 491,136.36
contingency etc
B Benefits foregone for Advance 4,947.30 7,343.08 7,999.11
Mobilization
Benefits foregone for longer 18,796.38 36,497.61 0.0
C
times of Completion
D
Total 479,380.41 494,695.83 499,135.47

E Percentage loading in favour of 7.5% 0.00 7.50%

Domestic / Foreign Bidder

F Amount of loading in Favour of 35,953.53 0.00 37,345.16

Domestic / Foreign Bidder
 Summary of Evaluated Bid Prices and Ranking
of Bidders
DESCRIPTION BIDDERS

A B C

A Bid Price as submitted 611,201.40 605,940.65 653,250.19

B Corrected Bid Price 611,200.40 605,940.65 650,250.00
C Pc, Ps & Contingency 155,563.67 155,085.51 159,113.64
D Corrected Bid Price less Pcs, Ps & 455,636.73 450,855.14 491,136.36
Contingency
E Benefits foregone for Advance 4,947.30 7,343.08 7,999.11
Mobilization
F Benefits foregone for longer time of 18,796.38 36,497.61 0.00
Completion
G Loading in favour of Domestic Bidders 35,953.53 0.00 37,435.16
H Final Evaluated Bid Price (d+e+f+g) 515,333.94 494,695.83 536,570.63

Rank 2 1 3
 NEGOTATIONS LEADING TO THE
AWARD OF CONTRACT
• Basic Prices of Labour, Materials and Plant
• Rates
• Possible adjustments in Performance Security
• Personnel
• Programme and Commencement Date
• Special Requirements
• Employer’s Obligations
Acceptance and Agreement
Acceptance Letter: written acceptance of a Tender by
the employer. It may be superseded by a formal
Agreement.

Agreement Form: the written document signed by the

Employer and the Contractor which is the legal
instrument binding the parties to the work. The
Agreement defines the relationships and obligations
existing between the Employer and Contractor. By
reference it incorporates the other Contract
Documents listed above.
Post Acceptance procedures

Submission by contractor of further

documents required under the contract.
• Performance security
• Valid Clearance Certificate
• SSNIT Certificate
• Insurance Bond
Contract Documents
The Contract Documents define the materials and
products and how they are installed together with all the
management procedures.

They contain all the documents necessary to define the

Works for construction, the conditions as well as
financially, pertaining to the contract and are binding on
both the Employer and Contractor.
Contract Documents listed as such in the Conditions of Contract, Form of
Agreement or Schedule of Contract Data provided by the Employer
These include:
• Form of Tender completed by the contractor
• Supplements to completed Form of Tender
• Bill of Quantities (with JCT, NEC, ICE6 and FIDIC conditions)
• Schedule of Activities (NEC, and BPF conditions)
• Appendix to Form of Tender completed by contractor
• Letter of Acceptance
• Form of Agreement (if required)
• Conditions of Contract
• Standard Conditions: published Conditions of Contract.
• General Conditions: core clauses of a Standard Conditions of Contract
• Supplementary Conditions: optional clauses in a Standard Condition of Contract
selected but not written by the Employer/Design Team.
• Special Conditions to project: conditions amended or added by the Employer/Design
Team to the Standard Condition of Contract.
• Appendix to Agreement or Conditions: a list of conditions required by the Employer
for a particular project.
• Specification
• Drawings
• Addenda to Tender Documents for documents above
Documents not in the above list but referred to in the Conditions of
Contract but not in existence at the time of Acceptance are binding
documents but are not Contract Documents. These include:
• Bonds
• Insurances
• Certificates of Completion
• List of subcontractors
• Programme (if not in schedule of contract data)
• Construction sequence
• Schedule of resources
• Schedule of rates
• Contract modifications
• Variation orders
• Site instructions
• Method statements (if not given at tender)
Form of Tender

There are two schools of thought as to whether or not the Form of Tender is
part of the Tendering Requirements or is a Contract Document.

For the ICE6 and FIDIC Conditions, the Form of Tender is a Contract
Document and the Form of Agreement does not state the Contract Sum as it
is assumed to be the Tender.

For the JCT and BPF Conditions, the Form of Tender is not a Contract
Document as it is superseded by the Form of Agreement which states the
Contract Sum.
Supplements to Form of Tender

UK and FIDIC Conditions usually specifically name one or more of the Bill of
Quantities, Schedule of Activities or Schedule of Rates as a Contract
Document.

Non-financial Contractor’s statements accompanying the completed Form of

Tender are often attached to the Form of Agreement because otherwise they
would have little point.
Letter of Acceptance and Form of Agreement

Letter of Acceptance: written acceptance of a Tender by the employer. It may be

superseded by a formal Agreement.

Form of Agreement: the written document signed by the Employer and the
Contractor which is the legal instrument binding the parties to the work. The
Agreement defines the relationships and obligations existing between the
Employer and Contractor. By reference it incorporates the other Contract
Documents listed above.
Conditions of Contract

Conditions of Contract define the basic rights, responsibilities and

relationships of the parties involved in the construction. Conditions of
Contract can be classified as follows:
• Standard Conditions. Such Conditions are issued by a body recognised
by the industry. They consist of General and Supplementary Conditions:
• General Conditions: These are core clauses that are generally
applicable to most projects.
• Supplementary Conditions: These are optional clauses required for
a particular project.
• Special Conditions are written specially for the project.
Documents completed after Acceptance of Tender
Some Contracts require the Employer and Contractor to both sign an
Agreement that refers to the other Contract Documents.
Some Standard Conditions include forms for bonds and certificates as
Contract Documents.
They are different from other forms required by the Tendering
Requirements or the Conditions of Contract in that they are not
completed by the Contractor until after Acceptance.
The blank forms are sometimes bound with the Agreement and
Conditions of Contract. For example, the Performance Bond form
follows the form of Agreement with the ICE6 Conditions. Example of
bonds and certificates are as follows:
• Performance Bond. This provides financial protection for the
Employer should the Contractor not complete the work in
accordance with the Contract Documents.
• Certificates. The most common certificate is a certificate of
Insurance. Other certificates tend to be those for compliance with a
specific standard.
Specification

The Specification describes the required materials and products including

their quality and workmanship.
Drawings

Drawings describe the Works graphically, including the materials, sizes, shapes,
positions and connections.
The degree of detail depends chiefly on whether or not the Contractor has
design responsibilities.
Drawings may also include schedules when they are not included in the
Specification.
Variation Orders

After Acceptance any additions, deletions or modifications to the Contract

Documents should be accomplished by Variation Order.
Conditions of Contract often specifically include modifications to the Contract
Documents.