TENDERS

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TENDERS

• Legal Principles for Engineers
• ELE 41EMT / ELE 31MEL

Lecture 4 10 May, 2004
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INTRODUCTION

• Tendering is the traditional method for obtaining
  a competitive price for the supply of goods or
  services.
• Tendering process is also used in many instances
  to sell goods and services
• In general, governments and public companies must
  use the process of tendering when buying or
  selling.
• The tender document contains
• commercial terms and conditions, and
• technical specification.

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PURCHASING A READY-MADE ITEM
Needs (garden shed)

• Sources of information
• Other users
• Brochures
• Displays, etc.

Search the market
Compare Prices/Design
are needs met ?
No
Review the needs
Yes
Purchase the shed
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SOME COMMON TERMS

• RFQ - Request For Quotation
• RFP - Request For Proposal
• RFT - Request For Tender
• EOI - Expression Of Interest
• RFI - Request For Information
• FOB - Free On Board (basis of price)
• CIF - Customs, Insurance, and Freight (basis of
  price)
• The use of Shall and Should in tender
  specification

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SCOPE OF TENDER

• Some examples of tender requirements
• Supply only of equipment and/or materials
• Supply, installation, and commissioning of a
  system
• Design, supply, installation, and commissioning
  of a system (Turnkey)
• Build, Own, Operate, and Transfer (BOOT)
• It should be noted here that the scope of tender
  divides the responsibility of the implementation
  of the system between the principal and the
  supplier.

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TENDER PRICE

• Lump Sum Contract
• Firm (may not be fixed, exchange rate) price
• Tenderer will have to take some risks
• Allowance for price variations (additional work)
• Cost Plus Contract
• Cost (not price) of equipment and material
• An agreed system of mark-up (10, 15, etc.)
• Hourly rates for project management, design, etc.

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THE PRINCIPAL

• The title of Principal is usually given to the
  person representing the organisation or the
  public authority issuing or requesting the
  tender.
• Depending on the nature of the project, the
  Principal can be the Project Manager, Architect,
  or Engineer.
• The title Superintendent is also used for the
  Principal

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CALLING FOR TENDERS

• Depending on the nature of the project and
  situation on hand, there are three methods for
  calling for tenders
• By invitation
• By invitation after registration of interest
• Public tenders
• It should be noted here that a subsequent
  contract will be based on the outcome of the
  tendering process.

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TENDER BY INVITATION

• A list of potentially suitable tenderers is drawn
  up on the basis of previous knowledge or
  research.
• This method is suitable for small projects if
  contractors or suppliers are well known to the
  principal.
• Can cause problems at times, why wasnt our
  company invited?

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REGISTRATION OF INTEREST

• A variation on the method of tender by invitation
• Potential tenderers are invited by an
  advertisement to register their interest in the
  project
• After an initial check on the applicants, a short
  list is drawn up and a more detailed assessment
  is made.
• Applicants on the final short list are then
  invited to submit a bid.

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PUBLIC TENDERS

• Often used by public authorities to satisfy
  statutory obligations.
• Any contractor/supplier is entitled to submit a
  tender response to the advertised tender request.
• The obvious disadvantage of this method is that
  the process of checking the credentials of the
  tenderers will be deferred until the receive of
  tender responses.

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THE TENDER DOCUMENT

• Instructions to Tenderers
• Commercial Terms Conditions
• Price basis (e.g. Tax, FOB, materials/service,
  etc.)
• Terms of payment
• Legal clauses
• Basis for contract
• Technical Specifications
• Functional requirements
• Performance requirements
• Operational and maintenance requirements, etc.
• Appendices (Drawing, Data, etc.)

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TENDERING COSTS MONEY

• Preparation of the tender document
• Identification of needs
• Requirements formulation
• Technical specification writing
• Commercial terms and conditions
• Responding to a tender (bidding)
• Analysing the document
• Systems design and costing
• Evaluation of responses and follow up

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EXAMPLE OF A SYSTEM TECHNICAL SPECIFICATION

• Scope
• Requirements
• System Definition
• System Characteristics
• Design and Construction
• Documentation / Data
• Logistics
• Producibility
• Test and Evaluation
• Quality Assurance Provisions
• Preparation for Delivery (please refer to handout)

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SOURCES OF INFORMATION

• Generic specification
• Brochures
• Trade shows
• Equipment manuals
• Existing equipment specification
• Request for information (RFI)

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BIDDING PROCESS

• Bidding Team
• Sales and Marketing (Commercial)
• Engineering/Project Management
• Tender Analysis (clause by clause response)
• Bid/No Bid Decision (SWOT analysis)
• System Planning and Design
• Costing and Price Formulation
• Tender Response Submission
• Follow up

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TENDER ASSESSMENT

• Commercial Compliance
• Price too low (buying the job, inexperience,
  etc.)
• New information about the tenderer
• Unacceptable conditions included with tender
• Construction time
• Unbalanced bid (lump sum/rate for additional
  work)
• Technical Compliance
• Full compliance / Partial compliance
• Meets and exceeds requirements

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EXCEEDING THE BUDGET

• Extremely high tender price, what are the
  reasons?
• If all the tenders are above the budget estimate,
  the principal has five options
• Proceed on revised budget, or
• Abandon the project, or
• Call for tenders from different tenderers, or
• Make savings (reduce requirements), or
• Negotiate with tenderers (must be fair to all)
• Price variations can happen during the project,
  why?

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LETTERS OF INTENT

• Before a contract is made, negotiations with a
  tenderer may lead to a request for the tenderer
  to do work in anticipation that a contract will
  ensue.
• A letter of intent records the principals
  intention to enter into a contract subject to
  agreement on precise terms.
• Normally a successful claimant for remuneration
  for work done on the basis of a letter of intent
  will be entitled to be paid a reasonable sum.

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AWARD OF CONTRACT

• The principal and the successful tenderer
  (bidder) enter into a contract.
• The tender document, along with any amendments
  during the bidding process, will be the basis of
  the contract.
• A project manager on each side (principal
  tenderer) will be assigned to the project.
• Project review meetings and progress monitoring

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References

• Blanchard, Benjamin S., System Engineering
  Management, Jon Wiley Sons, Inc.
• Cook, John R, Architects, Engineers, and the
  Law, 3rd edition, The Federation Press

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Thank you for your attention