Unit 4 Tender and Contracts PDF

L J UNIVERSITY L J Institute of Engineering & Technology, Ahmedabad Subject : Real Estate Practices Subject Code : 017095701 Unit 4 Tender and Contract Faculty In-charge...

L J UNIVERSITY L J Institute of Engineering & Technology, Ahmedabad Subject : Real Estate Practices Subject Code : 017095701 Unit 4 Tender and Contract Faculty In-charge Mr. Ishan Trivedi Department of Civil Engineering LJIET Email-id: [email protected] L J UNIVERSITY WHAT IS A CONTRACT? 2 L J UNIVERSITY 3 L J UNIVERSITY 4  L J UNIVERSITY What is a contract? It is an undertaking by a person or firm to do any work under certain terms and conditions. The work may be for construction or maintenance and repairs, for the supply of labour, for the transport of materials, etc. A contract is an agreement which can be enforced by law. 5  L J UNIVERSITY Offer or Proposal When one person signifies to another his willingness to do or to abstain (hold back) from doing anything, with a view to obtaining the assent of that other to such act, he is said to make a proposal or offer. Thus a simple advertisement or circular stating that certain goods are for sale by tender, is an offer. Similarly, a tender notice inviting tenders is called an offer. 6  L J UNIVERSITY Acceptance When the person to whom the proposal is made signifies his assent there to, the proposal is said to be accepted. A proposal when accepted, become a promise. To be binding and effective, the acceptance must be unconditional and absolute. A conditional acceptance amounts to a counter offer. 7  L J UNIVERSITY Essential Requirements of Valid Contracts 01 02 03 04 05 The contract shall The contract shall There shall be a The subject matter be made by parties be made by free There must be a definite proposal of the agreement competent to consent of the lawful and its acceptance. must be legal and contract. parties. consideration definite. 8  L J UNIVERSITY The contract shall be made by parties competent to contract. 01 02 03 04 He must be major He must have Sound He must not be Minor, Idiots and according to law, if not Mind. disqualified from lunatics and drunken he can break contracting by any persons are considered agreement at any time. Law. as incompetent. 9  L J UNIVERSITY The contract shall be made by free consent of the parties. 2 Not under any Not caused by influence fraud WHEN TWO PARTIES 1 AGREES ON THE SAME THING IN 3 SAME SENSE THEN IT Not caused by IS SAID CONSENT threatening to Not caused by commit any act mistake of IPC 5 Not caused by misinterpretation 4 10  L J UNIVERSITY There must be a lawful consideration. Lack of Lawful Consideration by B. A B C C gives the barer cheque of 10 Lakh rupees Wants to accept the offer and initiate the Wants to sell his home made by A but requires purchase of for 55Lakhs. Time of 7 Days. Home. 11  L J UNIVERSITY Types of Contracts Item Rate Contract Percentage Rate Contract Lump – Sum Contract All in contract OR Entire contract Labour Contract Material Supply Contract Piece work Agreement Cost Plus Percentage Rate Contract Cost Plus Fixed Fee contract Cost Plus Sliding Fee OR Fluctuating Fee Contract Target Contract BOT Contract 12  L J UNIVERSITY Item Rate Contract In this type of contract, the contractor has to quote the rate per unit of item of work. For example, if the work is for only excavation, contractor has to quote the rate for per m3. BOQ is prepared. Thus, it is based on rate per unit item of work. In this type of contract reasonable variations in the quantities are being accepted by both the parties. The rates which are quoted by the contractor are inclusive of material, labour, overhead charges and profit, etc. It is useful when quality of work, but not exact quantity of items to be executed, is previously known. Most of the public work projects are based on item rate contract. It is also known as unit price contract. 13  L J UNIVERSITY Advantages of Item Rate Contract Disadvantages of Item Rate Contract Elasticity Leads to financial difficulty for Economical client Absence of uncertainty Chances of having unbalanced tender No delay of work Both parties required to have book No chance of ring formation keeping and appoint staff Extra items are source of trouble Comparative statement is more elaborative 14  L J UNIVERSITY Percentage Rate Contract The contractor is required to offer to carry out the work at par with the rates shown in bill of quantities or percentage above or below the rates indicated in the bill of quantities of the tender. The percentage above or below or at par, tendered by the contractor is applicable to all the items. 15  L J UNIVERSITY Advantages of Percentage Rate Contract 01 02 03 04 Lowest position is No possibility of Comparative No over writing or readily knowing by unbalanced tender. statement can be erasing is possible so just opening of tender. prepared quickly as no no rejection of tender. tampering can be done with rates to become lowest. 16  L J UNIVERSITY Disadvantages of Percentage Rate Contract 01 02 03 Just to become lowest Chances of Ring By negotiation among they do not carry out formation. the contractors two or detail rate analysis more of them may they just fill their rates quote the same rate in based on their guess of order to get a part of what their competitors work at a higher rate. can fill. 17  L J UNIVERSITY Lump-sum Contract It is the oldest form of contract. In this form of contract contractors are required to quote a fixed sum for execution of a work in all aspect, i.e. according to the drawing – specification and within specified time period. S.O.R is provided to the contractor, to work out the cost of extra items or omissions. A lump-sum contract is usually an entire contract and, as such, no payment can be recovered by the contractor until the whole work is completed. 18  L J UNIVERSITY Advantages of Lump- Sum Contract 01 02 03 04 The owner knows the Detail measurements of Excellent planning and Contractor tries to total project cost. the work done are not efficient management complete the work as required. for execution of work early as possible. is more convenient. 19  L J UNIVERSITY Disadvantages of Lump- Sum Contract 01 02 03 04 Chances of dispute Contractor quotes high Difficulty arises in This contract is not between contractor & rates to protect making any suitable where client. themselves from the intermediate payment. considerable additions uncertainties. and alterations are expected. 20  L J UNIVERSITY Labour Contract Sometimes the owner is in the position to purchase the required materials himself. In such cases, he invites tenders only for the labour work. The contractors put up their rates for the labour per unit execution of each item. That rates must include – Equipment cost, Temporary works, supervision charges & profit. The overall responsibility of the work is of contractor. 21  L J UNIVERSITY Advantages of Labour Contract 01 02 03 Difficulty in The materials The increase in the obtaining certain stored by the cost of the work is materials in the Government are checked inspite of open market can thus utilized. any rise prices of be avoided and such materials in thus better the market. progress of work with standard quality of materials can be maintained. 22  L J UNIVERSITY Disadvantages of Labour Contract 01 02 03 delay in obtaining A large storage Theft from store, the materials by area is required to shortage of the department store the different materials, consequently the kinds of materials difficulty during contractor is and constant handling, required to keep guarding, etc. are accounting all himself in touch also essential. materials are with the day to day constant worries position regarding for a department. the supply of materials from the department. 23  L J UNIVERSITY All In Contract or Entire contract This is a rare form of a contract but considered first because in it the owner ceases to be the promoter and delegates a large firm or consortium to perform both design and construction. The owner specifics his requirements and also the broad and general outline of the proposed work and the contractor has to submit full particulars of detailed investigations, designs and construction cost including maintaining the work for a limited period. The two parties agree to the terms and conditions of executing the project through all the above phases. This form of contract is suitable to some exceptional types of works. The works most suited to this from are industrial facilities where firms are in market with say patented processing plants. 24  L J UNIVERSITY Material Supply Contract the contractor has to offer their rates for supply of required quantity of the materials, inclusive of all taxes, carriage and delivery charges to the specified stores within the time fixed in tender. 25  L J UNIVERSITY Advantages and Disadvantages of Material Supply Contract A’s D’s 01 02 01 02 Payment is promptly Contractor has no Assurance of same Chances of Ring so chances of getting worry about loss of quality every lot or formation. material at low price. materials, breakage, batch. demurrage charges during transit. 26  L J UNIVERSITY Piecework Agreement Piece work agreement is that where only rates are agreed upon without reference to the total quantity of work or time, and that involves payment of work done at the stipulated rate. In case of petty work valued up to Rs.10,000 each inclusive of cost of materials may be carried out through contractors by piece work agreement. The P.W. Agreement contains only the descriptions of different items of works to be done and the rate to be paid for but does not provide the quantities of different items of works to be done and the rate to be paid for but does not provide the quantities of different items to be executed nor the time within which the works to be completed. P.W. Agreements are not contracts in the true sense, there is no penalty clause tad no security money, and the department may terminate the work at any time like but a notice specifying the date of termination should be served to the worker. Separate agencies may also be engaged chargeable to the contractor to complete the work if the contractor does not carry out the work satisfactorily, to the specifications or delays the work or leaves the work incomplete or uses bad materials. 27  L J UNIVERSITY Advantages and Disadvantages of Piecework Agreement A’s D’s 01 02 01 02 If a contractor delays For this type of small Urgent small work to execute the work or No penalty clause and work, approved may be taken up for uses inferior quality no security money Is contractors find little execution without materials or leaves the kept in the P.W. interest as such work is inviting tender and work partially Agreement. entrusted to petty considerable time is complete, another contractors having saved. contractor may be little experience. engaged at any time. 28  L J UNIVERSITY Work Order Small work up to Rs. 2000=00 may be carried out by work order. This is a contract and specifies the approximate quantities of different items of works, specifications of each item of work, time for completion of whole work, penalty that will be imposed for not fulfilling terms and conditions etc. Payment is made on the measurement of the work done and 10% of the bill amount is deducted from the running bill of the contractor as security money which amount is refunded in the final payment on the satisfactory completion of the work. Debitable agency can be engaged for bad work or for unsatisfactory progress. Contractors are usually selected by taking quotations. 29  L J UNIVERSITY Cost Plus Percentage Rate Contract In this system contractor is paid the actual cost of the work, plus an agreed % in addition, to allow for profit. Contractor arranges materials and labour at his cost and keeps proper account and he is paid by the department or owner the whole cost together with certain percentage, say 10% as his profit as agreed upon beforehand. This type of contract is generally adopted when conditions are such that labour and materials rates are liable to fluctuate. In adopting this system of tendering no "bill of quantities" or "schedule of rates" has to be framed but the owner or the department should carefully define the actual cost and record exactly what permissible in the cost of work. 30  L J UNIVERSITY Advantages and Disadvantages of Cost Plus Percentage Rate Contract A’s D’s Contracts can quickly be drawn up and Close supervision and checking of also work of an urgent nature put in hand delivery notes and invoices which it completed without delay. involves, makes it unsuitable for works, where the necessary staff is This type of contract system is most not available. suitable during war period when urgency prevails. It is to the contractor's advantage to make the cost as high as possible by Suitable when work can not be executed wasting material and employing by other type of contractor at a inefficient workmen, as the contractor competitive rate due to uncertainty and takes little risk and his profit is fluctuation in the market rates of labour assured. and materials. 31  L J UNIVERSITY Cost Plus Fixed Fee Contract In this type of contract, the contractor is paid by the owner, an agreed fixed lump sum amount over and above the actual cost of the work. This fixed fee shall cover overheads and profit to the contractor. The fee does not vary with the actual cost of the work as in the case of cost plus percentage rate contract. 32  L J UNIVERSITY Advantages and Disadvantages of Cost Plus Fixed Fee Contract A’s Since the fixed fee cover the contractor's profit and overhead charges, the contractor shall naturally try to complete the work speedily in order to earn his fee as soon as possible. D’s The contractor shall try to complete the work as early as possible even by purchasing materials at higher rate and engaging labour at high charges and thus the owner may lose a reasonable amount. 33  L J UNIVERSITY Cost Plus Sliding Fee Contract In this type of contract the contractor is paid by the owner the actual cost of construction plus an amount of fee inversely variable according to the increase or decrease of the estimated cost agreed first by both the parties. Thus, higher the actual cost, lower will be the value of fee and vice versa. A’s The contractor shall not try to increase the actual cost, as in the case of "cost plus percentage rate" or shall not be indifferent to in the case of "cost plus fixed fee contract" because interest of a contractor is totally involved with the variation of the actual cost is thus lower and lower so both the owner and contractor will be benefited, this is the best of the cost plus contract. D’s The estimated cost must be very accurately determined. In case the estimate is much higher than the actual cost due to inefficient estimator a contractor will get more amount on the basis of savings and vice-versa. 34  L J UNIVERSITY Target Contract In this type of contract the contractor is paid on a cost plus percentage basis of work performed under this contract. In addition he receives a percentage plus or minus on savings or excess effected against either a prior agreed estimate of total cost or a target value arrived at by measuring the work on completion and valuing at prior agreed rates. 35  L J UNIVERSITY Advantages of Target Contract 01 02 The contractor is encouraged to use his The contractor may skill and experience in show higher cost of keeping the cost as low construction and thus as possible. This type he gains more amount of contract is profitable even covering the to both the contractor penalty for excess as well as to the owner. expenditure. 36  L J UNIVERSITY BOT Contract In this type of contract, the contractor undertakes to design, finance, construct, operate and maintain the works for a concession period in consideration of exercise and/or to enjoy the rights, powers, benefits, privileges, authorities & entitlements including the amount receivable from the collection of charges levied on the beneficiaries who use the work and in some cases annuity payment each year. For example, in the case of a road or bridges, the contractor construct the structure and is entitled to collect toll from the road users for the construction period. The cost of construction of the project is ascertained in the same manner as for the lump sum or item rate contract. The tenderer then works out the total cost of financing the project and its recovery from the collection of toll till the cost of construction together with the cost of finance is fully recovered. 37  L J UNIVERSITY Advantages and Disadvantages of BOT Contract A’s The main advantage is that the state or public authority is not required to finance the project immediately, and the project is made to generate the funds and be self financing to the extent required. The developmental works which otherwise would get delayed can be undertaken forthwith. This type of contract is most suitable for roads and bridges. D’s The main drawback of this form of contract is that it is not suitable for each and every type of work. In particular, works which are not likely to generate capital or be self financing, are not suitable for this contract. For example, rural water supply, Village roads, City roads, etc. 38  L J UNIVERSITY Classification of Contracts in Other Way 01 02 03 04 05 Measured Turn-Key Negotiated Rate Contract Sub Contract Contract or Contract Contract Schedule Contract 39  L J UNIVERSITY Measured Contract or Schedule Contract Except lump-sum contract all other types of contracts are measured contracts. In this form of contract, the total cost of a work is worked out by detailed measurement of different items of work after its completion. A bill is then prepared multiplying the measured quantities by their respective rates. 40  L J UNIVERSITY Turn – Key Contract Owners desires to deal with one party for all the works such as Design, Engineering, Construction & Procurement etc. Offers are invited from specialized contractors for all planning, design, specifications, preparation of estimates, construction and supervision under one contract on competitive basis. The contract may be drawn either on a firm price or cost - plus basis. 41  L J UNIVERSITY Negotiated Contract When work is awarded on contract by mutual negotiation between the parties without call of tenders, it is said to be a 'negotiated contract’. Advantages Negotiated contract It may be in any of the forms given below : It brings some economy in 1. Item rate contract expenditure. 2. Percentage rate contract 3. Lump-sum contract 4. Materials supply contract, etc. The parties selected being always reliable and financially sound, it ensures uninterrupted work with less chances of dispute. 42  L J UNIVERSITY Rate Contract In order to supply some manufactured articles like pipes, A.C. sheets, C.I. Pipes- Office furniture, computers, etc. the Director General of Supplies and Disposal of Central Government invites tender and fixes rates of such articles and makes rate contract with the manufacturer or supplier to supply the articles or materials for a certain period which is known as "rate contract." System of Payment in Rate Contract 98% Payment is made by the Controller of accounts department of Supply, Govt. of India on proof of inspection and dispatch. Balance 2% payment is made after receipt of the goods in good condition, by department or by the Controller of Accounts after receiving the endorsement for the department concerned. 43  L J UNIVERSITY Sub Contract A subcontract may be defined as an agreement between two contractors - sub contractor and the main contractor - in which the sub contractor undertakes to carry out for the main contractor a particular portion of the work which main contractor has under taken from the owner. In the case of construction projects, usually, the successful contractor enters into agreements with specialist subcontractors to carry out that portion of work which each subcontractor has specialized himself. Ex. Water proofing, electrification, Water supply and Sanitary work, MEP services, Fixing lifts etc 44  L J UNIVERSITY Contract Formation In order for a legally binding agreement to be formed, there are four basic requirements to be met: 1. Offer 2. Acceptance 3. Certainty & Intention to Create Legal Relations 4. Consideration & Promissory Estoppel 45  L J UNIVERSITY Offer The offer is the first core requirement of the formation of a contract. The first requirement of a legally binding agreement is that there is an offer. One party is the offeror, who presents the offer, and one party is the offeree, who is the potential acceptor of the offer. An offer can be revoked at any point prior to acceptance. In order to be effective, the revocation must be communicated. An offer may also be revoked if there is a fixed time for acceptance; once this period is over, there is an automatic revocation of the offer. Offer can be explain 1. An expression of willingness to contract on specified terms 2. With the intention that it is to be binding once accepted 46  L J UNIVERSITY Offer Vs Invitation To Treat An important distinction to make in contract law is that between an offer and an invitation to treat. An invitation to treat is an indication that a party is open to negotiation, but is not an offer. OFFER INVITATION TO TREAT Certain promise to be bound There is room for negotiation Clear and specified terms There is an invitation for offers The conduct or words of the There is a request for party show certainty information There is no room for negotiation Lack of certainty 47  L J UNIVERSITY Acceptance The acceptance is the accepting the offer of a contract. Acceptance proceeds an offer as the second requirement for a legally binding contract. A contract is deemed to be accepted when an offeree has made unequivocal communication as to their intent to contract. 48  L J UNIVERSITY Certainty & Intention to Create Legal Relations Certainty in this context refers to whether the terms of a contract are sufficiently certain to bind the parties. Without certainty a contract cannot be legally enforced. Lack of certainty can normally be categorized as belonging in one of two areas. Either issues with 1. Vagueness 2. Incomplete agreements 49  L J UNIVERSITY Consideration Consideration is essential in contract formation and is the final step in ensuring a contract is legally binding. Types of Consideration: Executory consideration: Found in bilateral contracts, this form of consideration occurs when promises are exchanged by the parties i.e. is yet to be executed. Executed consideration: Found in unilateral contracts. When the party that is required to perform under the contract does so, the consideration is considered executed. Promissory Estoppel Promissory estoppel is an equitable concept that prevents a person or “estops” them from going back on a promise 50  L J UNIVERSITY Tender A tender is an offer in writing for executing certain specified work or for supplying specified material subject to certain terms and conditions like rates, time limit, etc. While inviting tenders the bill of quantities (BOQ), detailed specifications, conditions of contract, and plans and drawings are supplied to the contractors who wish to quote their rates, on payment of the requisite tender cost. Depending upon the type of contract, the tender may be 1. lump - sum tender 2. item rate tender 3. cost plus tender 4. Percentage rate tender 5. labour tender 6. demolition tender, etc. 51  L J UNIVERSITY Tender The tenders may be invited either by private owners or by public notice or by negotiations. The tender may either be open tender or selective tender. The open tender is given to all reputed contractors and thus, the tenders for the project are received on competitive basis. In case of selective tender, the architect after consultation with his client, invites a limited number of contractors for filling up the tender of the project. 52  L J UNIVERSITY Tender Process Preparation To select mode of tender TENDER PROCESS process Documentation Invitation Processing Award Contract 53  L J UNIVERSITY Preparation of Tender Final completion of drawings, specification, measurement / take-off process. Choose conditions of contract. Parties involved: architect, engineers, QS, client, project manager To Select Mode of Tender Process Discussion and decision on type of tender to be used. Selection of tender: Open Tender or Public Tender Selected Tender or Limited Tender Negotiated Tender Shortlist the selected contractor Parties involved: Client, consultant, project manager 54  L J UNIVERSITY Documentation Compilation of: Letter of invitation to tenderers Articles of agreement / conditions of contract Form of tender, Form of tenderer’s details. i.e: contractor’s registration, organization background, track record (past and present projects), Letter of acceptance Bank and insurance guarantee , forms (performance bond), Bank and insurance guarantee, forms (advance payments), Specifications ,Bills of quantities, Relevant drawings Invitation Based on selection of tendering methods Open / competitive / bid tender – produce tender notice Selective – short listed contractors will be invited to tender if they wish Negotiated – only one contractor is approached- direct entry to project 55  L J UNIVERSITY Processing Opening of tender Scrutiny of tender Acceptance of tender Rejecting the lowest tender Selecting tender 56  L J UNIVERSITY Award Contract Pre-award meeting with contractors – validation of lowest complying bid Validate lowest bid - Pre-contract meeting with contractor for contract signing Approval by tender board / treasury an acceptance of tender form is issued to tenderer , signed by the authorized officer 57 L J UNIVERSITY NOTICE INVITING TENDER OR NIT 58  L J UNIVERSITY Tender Form General Description 01 of work Estimated Cost of work 02 Detail of Earnest 03 Money Deposit Detail of Security Deposit 04 Time of completion 05 of work Signature of contractor before Signature of witness submission 06 to contractor’s 07 signature Signature of officer by whom it is accepted 08 59  L J UNIVERSITY Tender Document or Contract Document Title Page Index Tender Notice Tender Form Conditions of contractor Schedule of quantities Special terms and conditions General specification and detailed specification Approved Drawings 60  L J UNIVERSITY Name of the authorities 1 inviting tender Particulars of contractors eligible to 2 submit tenders Name of work, and its Points to be 3 location consider while writing Tender Notice Estimated cost of 4 work Cost of complete set of 5 tender form 6 EMD & SD 61  L J UNIVERSITY 7 Time of Completion Last date of sale of 8 tender paper Last date, time limit Points to be 9 and place of receipt of sealed tender consider while writing Tender Notice Date, time and place 10 of opening of tenders 11 Accepting authority Va l i d i t y o f t e n d e r 12 62  L J UNIVERSITY Tender Notice The notice inviting tender paper is a very important document on which tender and subsequent agreements with the contractors are based. All the tender notices should be in the standard form of department. It is the displayed in the notice board of the division and also circulated to the related subdivisions and other divisions of the department. For wide publicity of major work the tender notice is required to be published in to daily local news papers. 63  L J UNIVERSITY Sample Tender Notice Tender notice No - ____________ Sealed tenders in the prescribed form for the following works are invited from registered contractors (in the appropriate class with the ______ Govt.) to reach this office up to or before ______ a.m./ p.m. on ______ (date). The tenders will be opened on the same day at ______ p.m., if possible in the presence of the intending tenderers. Blank tender forms will be available on payment of Rs ________ which is not refundable, on any working day from _______ (date) to ___________ (date) during office hours, i.e. ____ a.m. to _____ p.m. on weekdays and up to ______ p.m. on Saturdays. Contractors desirous of obtaining tender forms by post should remit by money order in advance the amount of regular tender fee plus Rs ___ to cover postage. 64  L J UNIVERSITY Sample Tender Notice The earnest money by way of treasury receipted challan should accompany the tender, without which the tender will not be considered. EMD will not be accepted in cash or by cheque under any circumstances. Further particulars in connection with the work can be had from the same office. The authority competent to accept the tenders reserves the right to reject the lowest or all tenders without assigning any reason. 1. Estimated Cost 1. Date and time of issuing blank tenders 2. Earnest money Sr. no Name of work 2. Date and time of accepting sealed tenders 3. Tender fee 3. Date and time of opening of tenders 4. Time limit Date Name of Officer Designation Department 65  L J UNIVERSITY Pre-Qualification of Contractor It is a process/method developed by a client or government to select the contractors who can participate in tender / bidding process by submitting certain documents asked by client or government. This documents can be either Technical Details of firm or Financial Details of firm or both. Instead of inviting tenders publicly, the contractors can be invited to apply for selection and registration as qualified tenderer. For this purpose, the client / government publishes an advertisement in leading newspapers. The intending bidders are supplied with pre-qualification documents; generally in prescribed forms or specific formats finalized by client. 66  L J UNIVERSITY Pre-Qualification of Contractor Past Experience Major Works in Hand Technical Personnel Engaged Financial Capacity Equipment Owned Any other relevant information 67  L J UNIVERSITY Pre-Qualification of Contractor The blank tender forms are then issued only to those contractors who, in the judgment of the employer are adequate in asked information. In such a case, the above information may be asked to submitted in a separate cover. Sometimes when the cost of work is huge, there will be very few contractors who can qualify. So contractors to strengthen their hands by forming joint ventures of two or maximum three firms. 68  L J UNIVERSITY Criteria for Pre-Qualification Generally, states that a parties failure to enforce certain rights under a contract on an occasion, whether intentionally or unintentionally, does 01 02 03 04 not act as waiver to prevent that party from exercising those same rights 05 under the contract, at a later date Financial Strength Past five years Technical Construction plant Other experience personnel engaged and Equipments considerations such as quality control standards, ISO certifications etc. The first four points carry nearly 90% and the last generally 10%. To pre-qualify the applicant must score generally, at least 60% on each of the first four categories mentioned above and 70% of the total points. 69  L J UNIVERSITY Mode of Submission of Tender Think : If you are a contractor and you want to submit a tender, How will you do it? Well generally a 4 Envelop method is used in this! Envelop 1 Envelop 2 This envelope shall Covering letter for the offer. contain the earnest Special features that the contractor feels are worth mentioning money deposit (EMD) about his offer. in the form indicated in The solvency certificate from bank authorities. the notice inviting tender. The latest income tax clearance certificate. A list of works of similar nature and magnitude carried out by the tenderer. Details of plants and machinery available which the tenderer proposes to use in this construction work. Details of technical personnel engaged by the tenderer. Complete detail of works in hand at the time of submission of 70 the tender.  L J UNIVERSITY Envelop 3 This envelope shall contain the priced tender form with the signature of tenderer. Envelop 4 This envelope shall be large in size and shall contain the above mentioned envelope No. 1 ,2 and 3. It should be properly sealed and shall be endorsed on the out side face “Tender for name of project”. This should be mailed or deposited at given registered address of client or government office to concern department. 71  L J UNIVERSITY Opening of Tenders Think : If you are a client or his engineer or you are government officer and you have to do opening process submitted tenders by different contractors. How will you do it? Check of ENVELOPE 4 WITHDRAWAL ENVELOPE 2 ENVELOPE 1 ENVELOPE 3 72  L J UNIVERSITY Evolution of Tender The Evaluation of the bid has following parts: 1. Technical Evaluation 2. Commercial Evaluation 3. Capacity Evaluation 73  L J UNIVERSITY Technical Evaluation The equipment/system & manufacturer being offered by the bidder is to be evaluated for its conformance with the tender technical specification The feedback of working of the equipment supplied by the bidders in other projects to be evaluated The Guaranteed Technical particulars are to meet the minimum Tender requirement. Any alternative technology or material grade offered by the bidder needs to be verified. Any price implication on the project w.r.t. technical parameters to be verified and respective loading on the price to be proposed. 74  L J UNIVERSITY Commercial Evaluation The Bid Forms are duly filled and signed. The declared Deviations on the Commercial part are to be evaluated. All costs are properly covered in the offered prices. Bid price is in specified currency or the listed conversion rate at the time of price bid opening are to be considered. Details of any extra costs (such as Delivery cost , shipping cost, custom charges, insurance, documentation, testing & inspection) are identified. Cost of Spares if mentioned extra is identified. 75  L J UNIVERSITY Capacity Evaluation The Bidder has sound financial condition. The Bidder has sufficient funds to procure raw material and process so that positive cash flow is maintained up to delivery of equipment. The Bidder is not under litigation or any act resulting in bank corruptly. The Bidder’s financial has sufficient immunity from market economy trend. In case of Foreign Bidder, geo-Political scenario to be evaluated. 76  L J UNIVERSITY Scrutiny of Tenders List of tenders received, with a comparative statement as tabulated below Sr. No. Name of Firm Amount of Tender Position Remarks 1 A RS. 40,32,860.00 II 2 B RS. 38,90,700.00 Lowest 3 C RS. 41,12,630.00 III 4 D RS. 41,65,800.00 IV 5 Original Estimate RS. 38,20,500.00 77  L J UNIVERSITY Scrutiny of Tenders It should be checked and verified that each tender is duly signed and contains the address of the contractor. It should be seen that whether the contractor has claimed any extra percentage of rate over and above the quoted rate or has offered any rebate. Accordingly, the tender amount should be modified. In case of Lump-sum contract, not likely to involve any extras, it is of little or no importance to the owner to know how different contractors has carried out their calculation. In case of measurement contract the total cost is based on the estimated quantities mentioned in the schedule. As quantities are approximate the cost may very, hence total amount tendered is not taken as only criteria for the award of the contract. 78  L J UNIVERSITY Scrutiny of Tenders In case any serious mistake is committed by contractor while working the cost and if the work is awarded to him, the contractor here is obliged to carry out the work, in spite of great financial loss. If contractor refuses to do so, his EMD will be forfeit and suitable legal action would be taken for breach of contract. In such case client may grant the contractor an opportunity to revoke the offer or to correct and re-submit the same. In other case, if the owner is satisfied with the fact that the mistake is genuine and has committed unintentionally, he may award the work to the next lowest bidder and save that contractor from embarrassment. 79  L J UNIVERSITY Rejecting the lowest tender When the tender is informal, i.e. not submitted in the form sold by the department or not supported by EMD, etc. If there is any condition of unusual character and any uncertainty. If contractor has quoted abnormally low rates. If any provision infringes any standard rule or order of higher authority. If any of the pages of the tender are removed/replaced. If all corrections and additions or pasted slips are not signed by the tenderer. If the tenderer has inadequate finance. If the tenderer has inadequate staff. If the tenderer has inadequate equipment. 80  L J UNIVERSITY Termination of Contract Termination by performance Termination by agreement Termination by breech Termination by impossibility of the performance Termination by the provisions of the law 81  L J UNIVERSITY Termination of Contract Termination by performance - when a contract is carried out as per the terms and conditions and completed satisfactorily in all aspects, it will be treated as terminated. Termination by agreement – The parties concerned, the owner and the contractor can make an agreement at any stage of work, for the termination of contracts. Termination by breech – If the contractor does not fulfil the terms and condition of the contract, such as if he leaves incomplete work, if he does not maintain progress or if he does not observe rules, instructions etc. the contract can be terminated by such breach. Termination by impossibility of the performance – Due to the unexpected or abnormal conditions, it is practically impossible for the contractor to complete the work, the contract can be terminated. Termination by the provisions of the law – A contract can be terminated by the operation of various provisions of prevailing laws, such as the laws pertaining to inheritance or bankruptcy or limitation of time. 82  L J UNIVERSITY Important Terminology Earnest money Deposit (EMD) Security Deposit (SD) Retention Money Liquidated Damages Unliquidated Damages Revocation of Tenders Vouchers Abstract Agreement Inventory Tender Fee 83  L J UNIVERSITY Earnest Money Deposit (EMD) Earnest money deposit is an assurance or guarantee in the form of cash on the part of the contractor to keep open the offer and to confirm his intention to take up the work accepted in his favour for execution as per terms and conditions in the tender. This amount is for a check so that the contractor many not refuse to accept the work or run away when his tender is accepted. In case of the contractor refuses to take up the work, his earnest money is forfeited. EMD of the tenderer whose tender is not accepted are generally refundable. In case of The EMD is converted into a part of 10% security deposit to be deducted from his running bills. The amount of EMD is about 1 to 2% of the totals estimated cost. 84  L J UNIVERSITY Retention Money Whenever any claims for payment of a sum of money arises out of or under the contract against the contractor, the engineer-in-charge is entitled to withhold sum or sums in whole or in part from security deposit till finalization or adjustment of any such claim. 85  L J UNIVERSITY Security Deposit (SD) On the acceptance of tender, the contractor has to deposit 10% of the tendered amount as security money which is inclusive of the earnest money already deposited. This amount is kept as a check so that the contractor fulfils all the terms and conditions of the contract and carries out the work satisfactorily according to the specification and maintain progress of work, completes the work within the time. If the contractor fails to fulfil the terms and conditions of the contract, his whole or part of the security deposit is forfeited by the department. The SD is refunded to the contractor after satisfactorily completion of the work after specified time, usually after one rainy season or six months of the completion of the work. 86  L J UNIVERSITY Liquidated Damages It is an amount of compensation payable to contractor to the owner or government due to delay in construction. It has no relation with the real damage. If the contractor fails to complete the work within the time limit specified in the tender then the contractor shall pay to the owner or government the sum stated in the tender as liquidated damages. The payment of such damages shall not relieve the contractor from his obligations and liabilities under the contract. If before completion of work, any part of the work is occupied or used by owner, liquidated damages for the delay shall be reduced in proportion in which the value of the part is used. 87  L J UNIVERSITY Unliquidated Damages This is known as ordinary damage having relation with the actual damage done. Revocation of Tender If after filling up the tender and before its acceptance by the owner, the contractor comes to know his mistake or intends to withdraw from the work, the contractor is free to do so. This is known as revocation of tender. Section 4 & 5 of the Indian contract act deal with the revocation of the tender. 88  L J UNIVERSITY Vouchers The term voucher is used to mean a legal receipt with details, for proof against the payment made and is kept in record. Abstract Work abstract is a monthly account of all transactions relating to work in respect to cash, stock and other charges. Agreement An arrangement (usually informal) between two or more parties that is not enforceable by law. It is Mutual acceptance by both (or all) parties involved. It is not always in written form. 89  L J UNIVERSITY Inventory A complete list of items such as property, goods in stock, or the contents of a building. Tender Fee The main importance of tender fee is to reduce the competition of contractors. Tender fee is also collected as part of service charge which client provides in the form of drawings, specification and other printed documents for filling the tender. 90