Title: TENDERS
1TENDERS
- Legal Principles for Engineers
- ELE 4EMT
Lecture 4 7 May, 2007
2Business Marketing
- A sale to an industrial user, wholesaler,
retailer, or organisation other than the consumer
is sold in the Business Market. - Marketing activity necessary to bring about an
exchange among organisations is often called - Business-to-Business Marketing
3Partnering
Partnering is a business relationship for the
benefit of all parties - built on trust, openness
and respect. http//www.construction-partneri
ng.co.uk/
A mutually beneficial business-to-business
relationship based on trust and commitment and
that enhances the capabilities of both parties.
http//www.investordictionary.com/ Strategic
partnering gt long term relationship
Note Partnering should not to be confused with
Partnership
4Out Supplier
- Actively search for leads,
- Isolate specific needs,
- If possible, participate actively in early
purchases or buying process by supplying
information and technical advice, - Define and respond to organisations problem with
existing supplier, - Encourage organisation to sample alternative
offerings
5Out Supplier - cont.
- Convince organisation that the potential benefits
of re-examining requirements and suppliers exceed
the cost of analysis, - Attempt to gain a position on the organisations
preferred list of suppliers even as a second or
third choice.
6INTRODUCTION
- 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.
7PURCHASING 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
8SOME COMMON TERMS
- RFQ - Request For Quotation
- RFP - Request For Proposal
- RFT - Request For Tender
- EOI - Expression Of Interest
- RFI - Request For Information
9SCOPE 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.
10TENDER 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.
11THE 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
12CALLING 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.
13TENDER 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?
14REGISTRATION 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.
15PUBLIC 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.
16THE 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.)
17TENDERING 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
18EXAMPLE 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)
19SOURCES OF INFORMATION
- Generic specification
- Brochures
- Trade shows
- Equipment manuals
- Existing equipment specification
- Request for information (RFI)
20BIDDING 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
21TENDER 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
22EXCEEDING 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?
23LETTERS 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.
24AWARD 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
25Case Study Multiplex/Wembley
- Original estimate under GBP500M
- Final cost will be close to GBP1billion
- Originally scheduled to be ready for 2005 Cup
Final - Will in fact be ready for Cup Final on 19/5/07
- Fixed price contract
- Losses incurred by Multiplex due to steel price
increases and penalty payments - Impact of changes to plans?
- No established lines of supply
- http//sport.independent.co.uk/football/news/artic
le355558.ece - http//news.uk.msn.com/the_curse_of_the_new_wemble
y_stadium.aspx
26References
- Blanchard, Benjamin S., System Engineering
Management, Jon Wiley Sons, Inc. - Cook, John R, Architects, Engineers, and the
Law, 3rd edition, The Federation Press
27Thanks for your attention