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TENDERS

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Responding to a tender (bidding) Analysing the document. Systems design and costing ... with any amendments during the bidding process, will be the basis of ... – PowerPoint PPT presentation

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Title: TENDERS


1
TENDERS
  • Legal Principles for Engineers
  • ELE 4EMT

Lecture 4 7 May, 2007
2
Business 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

3
Partnering
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
4
Out 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

5
Out 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.

6
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.

7
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
8
SOME COMMON TERMS
  • RFQ - Request For Quotation
  • RFP - Request For Proposal
  • RFT - Request For Tender
  • EOI - Expression Of Interest
  • RFI - Request For Information

9
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.

10
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.

11
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

12
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.

13
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?

14
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.

15
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.

16
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.)

17
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

18
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)

19
SOURCES OF INFORMATION
  • Generic specification
  • Brochures
  • Trade shows
  • Equipment manuals
  • Existing equipment specification
  • Request for information (RFI)

20
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

21
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

22
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?

23
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.

24
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

25
Case 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

26
References
  • Blanchard, Benjamin S., System Engineering
    Management, Jon Wiley Sons, Inc.
  • Cook, John R, Architects, Engineers, and the
    Law, 3rd edition, The Federation Press

27
Thanks for your attention
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