A tender is a formal offer normally in written form which incorporates the sum of money or equivalent, time and otherconditions required to carry out the contract obligations in order to complete a project or a part of it consisting ofspecified works. A contract is the term used for when the parties have reached agreement.
Tender is one of the most important element in the overall five (5) stages of the project. The successful of a project is depending on the decision of the selection to recommend the suitable contractor during the tender evaluation process. The overall stages of a project is shown below:
|Inception & feasibility
|Identifying project objectives / set up project brief
|Develop further project brief / develop concept & schematic design / Undertake detailed design & detailing / prepare cost plan & budget
|Issue tender documents / prepare & submit tender / evaluation of tender / award tenders / prepare contract documents
|Site possession & mobilization / undertake procurement fabrication, installation, construction / carry out contract admin
|Handover & maintenance
|Undertake all testing, commissioning & training / obtain CF / handover project to owner /carry out necessary maintenance / Defect rectification / etc
Tender process will start after the design was completed as per client need statement, requirement and project allocated budget. The procurement and the contract model will determine the parties involved in the Stage 1, Stage 2 and Stage 3 of the project. This process will be used to obtain offers leading to a contract between: the client, contractor, consultant, sub-contractor and etc.
2.0 Purpose of tendering process
The main objectives of the tender are as follows:
• shows transparency and will provide an environment that encourages interest and competitive offers from suitably qualified and experienced construction contractors
• obtain the best fair price and value for undertaking construction works that will benefit the client
• to select the most suitable contractor with work and technical experience, financial capability an etc
• to obtain a clear understanding of the rights and obligations of all parties
• allow resolution of general issues requiring clarification to all tenderers
• allow resolution of specific matters only relevant to a particular tenderer’s bid
• reduce the likelihood of misunderstandings and disputes during the construction phase
• secure a construction contractor to undertake and meet the required project scope, time, cost and quality parameters.
3.0 Type of Tender
There are 6 main type of tender that normally used in modern construction work.
3.1 Open tendering
Open tender allows anyone that suit the tender requirement as advertised in local newspaper, official government agencies website and etc. to submit and participate in the particular tender.
The intention is to offering an equal opportunity to any organization to submit a tender and show agencies transparency. A larger projects scale, there may then be a pre-qualification process that produces a short-list of suitable suppliers who will be invited to prepare tenders. Open tendering has been criticized for attracting tenders intrest from large numbers of contractor, some of whom may be entirely unsuitable for the contract and as a result it can waste a great deal of time, effort and money. However, open tendering offers the greatest competition and has the advantage of allowing new or emerging suppliers to try to secure work.
3.2 Selective tendering
Selective tendering only allows contractor to submit their tender by invitation that are known by their track record to be suitable for a contract of the size, nature and complexity required. Selective tendering give client greater confidence that their requirements will be satisfied and should reduce the wasted effort and time that can be involved in open tendering. It may be particularly appropriate for specialist or complex contract, or contract where there are only a few suitable firms. However, it can exclude smaller contractor or supplier or those trying to establish themselves in a new market.
3.3 Negotiated tendering
Negotiating with a single contractor or supplier may be appropriate for highly specialist contract, or for extending the scope of an existing contract. It can reduce the cost of tendering and allow early contractor involvement, but the competitive element is reduced, and unless the structure of the negotiation is clearly set out there is the potential for an adversarial atmosphere to develop, even before the contract has been awarded.
3.4 Serial tendering
Serial tendering involves the preparation of tenders based on a typical or notional bill of quantities or schedule of works. The rates submitted can then be used to value works over a series of similar projects, often for a fixed period of time following which the tendering procedure may be repeated. It can reduce tender cost, and may encourage suppliers to submit low rates to secure an ongoing programme of work. Serial tendering may used where the client has a regular programme of works that they would like to be undertaken by a single contractor, often minorwork, repetitive work (such as housing) or maintenance work.
3.5 Single-stage and two-stage tendering
Single-stage tendering is used when all the information necessary to calculate a realistic price is available when tendering commences. An invitation to tender is issued to prospective suppliers, tenders are prepared and returned, a preferred tenderer is selected and following negotiations they may be appointed. Two-stage tendering is used to allow early appointment of a supplier, prior to the completion of all the information required to enable them to offer a fixed price. In the first stage, a limited appointment is agreed to allow work to begin and in the second stage a fixed price is negotiated for the contract. It can be used to appoint the main contractor early, or more commonly as a mechanism for early appointment of a specialist contractor such as a cladding contractor. It may also be adopted on a design and build project where the employer’s requirements are not sufficiently well developed for the contractor to be able to calculate a realistic price.
3.6 Term Tender
Term tender normally used on major maintenance projects. It may be awarded to a contractor to cover a range of different buildings in different locations. It is often limited to a fixed time scale, although the needs of the client may often require this to be extended. The type of work is usually specified and priced in a schedule of rates. The client supplies the rates for the work, the contractors are given the option of quoting a percentage addition or deduction from these rates depending upon their desire to win the project. The contractor offering the most advantageous percentage to the client will then be awarded the contract.
4.0 Tender Process for Client
Every agencies has their own procurement and tender processes procedure. The tender process depend on the size of project, budget and difficulties of the project itself. For smaller project, agencies that has technical capability will prepare their own tendering process. For bigger and difficult project, agencies will seek for assistance from Public Work Department(JKR) or appoint independent consultant. However, there are 6 main stages of tender process for Client commonly practice in Malaysia.
|Project definition, Selection of the most preferable or appropriate contract procurement method, Specification Preparation (Need Statement)
|Selection Process for type of tender and determination of Preliminaries Detail Abstract (PDA)
|Tender Documentation(Drawing, specification, Tender Document etc) Selection Process
|Call for tender (Notice, sale of tender document, deposit, closing etc.), Responding to tender invitation and developing commercial offer, Amendments to tender (addendum), Submission and closing of tender
|Tender meetings and enquiries Tender analysis, Analysis on Compliance to Tender, Analysis on Completeness of Tender, Analysis on Adequacy of Minimum Capital, Analysis on performance of current work, Other evaluationTender clarification / Selection (letter of intent if required)
|Tender selection and award (Letter of award), Approval by tender board / treasury (tender exceeds RM10 mill.) – an acceptance of tender form is issued to tenderer , signed by the authorised officer, Pre-award meeting
5.0 Tender Process for Contractor
For contractor, the tender process started once they had make a decision to participate in the particular tender. The process might be different depending on the nature of the tender itself. For instance, for open tender the process is quite similar to the process describe below. However for Design and Build tender the process is quite different. The typical Tender Process for Contractor (conventional) can be summarise an divided into 6 stages as shown below.
|Decision to tender
|Receipt of tender documents, Pre-tender data sheet, Decision to tender, Consider implications of: Bonds, Warranties, Parent company Guarantees, Funding
|Determine basis of tender
|Abstract materials and subcons, Sent out enquiries if anyConsider construction methods / prepare method statement, Design temporary works / consider alternatives, Prepare outline programme, Check major quantities, Identify restrictions, Visit site and compile site report, Campaigning meeting (designating areas responsibilities)
|Preparation of cost estimate
|Build up rate, Quantity take off and Calculate recurrent rates using:OperationalUnit rates, Man-hours estimating, Analyse and check subcontractors’ quotations, Price prelims / general items (in association with members of the team), Prepare summary sheets
|Contractor Tender committee meeting part 1- Review : Method Statement, Work ProgrammeTechnical and commercial risks, Cash flow and finance, Use of own plant, Competition, Commercial opportunities, Economic climate, Check prelims against historical cost data
|Conversion of tender estimate to tender bid
|Contractor Tender committee meeting – part 2 Calculate ‘spread’ and add to total project estimation
|Submission of tender
|Submit in format required Organize delivery and tender submission.
Knowing the procedure and stages of tender for both Client and Contractor will help us to determine and understand the clear process of the agencies procurement system. Winning the tender project is the objective of every contractor. Thus knowledge in tender processes, mandatory procedure and documents submission, element of tender evaluation weightage and etc will definitely contribute to the success of the tender.
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