Tendering Process in Construction Explained

Tendering Process in Construction Explained

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A tender is a submission made by a prospective supplier in response to an invitation to tender. It makes an offer for the supply of goods or services.

Invitation to Tender

The inviting of tenders for civil engineering works is usually performed by one of the following three choices.

i) By advertising for competitive tenders.  A typical tender notice is shown on next page.
ii) By inviting tenders from selected contractors. (approved or Prequalified) Enlistment of approved contractors is mainly on the basis of financial status and employment of some highly qualified engineers.

Depending upon financial status and cost of projects, approved contractors are divided into various categories. Enlistment is not for a particular work but it is general. Prequalification is for a particular large project depending upon factors as given in any example of prequalification Notice including reputation of contractor, financial stability, technical staff, machinery available, works already in hand and experience of similar works

iii) By negotiating a contract with a select contractor.  This procedure is adopted for well-reputed and previously experienced contractor.

Opening of Tenders

Tenders submitted by different parties should be under sealed covers and generally these are opened in the presence of tenderers or their representatives. Following procedure is adopted after opening of tenders.

i) List of tenders is prepared making sure that earnest money is also accompanied by each tender.
ii) Tenders without any earnest money shall not be considered in the competition.
iii) A comparative statement of the tenders is prepared. Rates are given by the tenderes for non-scheduled items and premium for scheduled items.
iv) Careful scrutiny (thorough checking) of all the tenders is a must to make sure that the tenders are properly signed and any corrections are erasures must be initialed by the tender.
v) As far as possible, the minimum tender must be accepted. But, in certain cases, if the minimum tender is very low as compared with the estimated cost of the work, it is liable to be rejected because in such cases the contractor is liable to use sub-standard materials and violate the specifications/conditions of the contract, and thereby cause un-necessary litigation (court affairs).
However, if the lowest tender/bid is very high as compared with the estimated cost of the work, again it is liable to be rejected because of the financial complications. Client must revise the estimate and must again invite the tenders after checking availability of funds and after obtaining fresh approval.

Final Award of Contract

After the tender is accepted, the contractor is asked to enter into a legal agreement with the client and to provide a further sum of 5 to 10% of the total cost of the work (normally 10%) inclusive of earnest which is known as security Deposit.
Before issuing any work order (order to start with the work), the contractor must deposit the security in the form of a bank guarantee or in cash. Otherwise, he must submit a performance bong and the security deposit is deducted from bills of completed works.
The following points must be considered before the final award of the contract.
a) Prequalification of the contractor processing the requisite experience.
b) Make sure that his present position on other works allows the staff and machinery to be available for this project. In other words, works already in hand of contractor with the time of their completion must be considered.
c) Reputation of the contractor in the market should be known.
d) General behavior and temperament (nature etc.) of the contractor should be observed.

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Tendering Process in Construction Explained

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