Haramaya University

Haramaya Institute of Technology

Department of Civil Engineering
Contract Specification and Quantity Surveying
( CEng 4231)
Lecture-6. Construction Procurement

Ayele.B (MSc. in Construction Technology

and Management
Email: [Link]@[Link]
 Chapter Objectives

At the end of this chapter, the student will be able to:
Identify and explain different types of Procurement methods.

Identify and explain different types of project delivery systems

Evaluate tenders.

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 Chapter 6. Construction Procurement
 Contents
 Introduction to procurement
 Types of Procurement
 Procurement and Contract Management
 Procurement and Contract Delivery System

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 Introduction to procurement
Stages in Construction
 The following are the common formal stages for a construction project:
i. Inception and feasibility
 At this stage the owner puts his visions and wishes and with this as the starting point, the various groups
(professionals) try to conceptualize the project and prepare a conceptual design.

 At this stage the owner will hire a consultant to formally design and develop the concept into a practicable
project.

ii. Planning and Design stage

 Planning is a function of devising the cause for future with a vision, formulated for the future state of the
organization or project.

 At this stage the consultant plans and designs the project based on the owner’s requirement and the
4 possible constraints.
 Introduction to procurement

iii. Tendering Stage

 At this stage contractors are invited to offer their best technical and financial offers as per the conditions
and specifications depicted in the contract documents.

iv. Bid Evaluation / Evaluation of Tenders

 The bids are evaluated based on:

 Compliance with the contractual terms and conditions,

 Correction of bid prices,

 Detailed analysis.

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 Introduction to procurement

v. Award of Contract

 After the negotiations have been successful, the contract will be awarded to the successful contractor.

 The formal Steps might include:

 Write a letter of acceptance

 Write the letter to proceed with the works

 Performance bond: 10% a guarantee that he will do the job as per agreed

 There are different methods & types of construction contracts. The owner generally makes the selection.

 The type selected depends on the kind of work being performed and the conditions under which it is being
performed.

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 Introduction to procurement

vi. Construction

 Here is where the actual execution of the works takes place as per scheduled.

vii. Commissioning and Acceptance

 Commissioning is a process where by the contractor makes sure that all installed mechanical or electrical
parts are operational.

 Acceptance has two stages:

 Provisional acceptance: the client accepts the completed works on provisional basis for a period of one
year(but not always). During this period all payments except the retention money are paid.

 Final acceptance: At this stage the owner completely accepts the works executed and the retention money
is released to the contractor.
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 Introduction to procurement

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 Introduction to procurement

 Construction Industry involves procurement and contract management systems in order to ensure fair
competition and distributions of obligations and rights among stakeholders.

 Competition helps:

 The Project Owners’ -acquire the five rights (Counterpart, Cost, Time, Quality and Quantity)

 The Project Financiers’ & Regulators’ - value market principles and effective utilization of finance, and

 The Project Providers’ - get impartial & neutral Opportunity for business.

 Procurement is a process used to select the lowest competitive and qualified bidder for procuring services,
works or goods from potential competitors based on reasonable & relevant criteria.

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 Introduction to procurement

 Procurement can also be expressed as a method used to employ or buy services or works or goods for the
value (in the form of money) which includes reasonable profit.
 An effective and efficient procurement method ensures the following rights called the "Five Rights".
 The Right Quality,
 The Right Quantity,
 The Right Cost / Price /,
 The Right Counterpart and
 The Right Time.

 The Right Quality

 Right Quality is always based on two major factors. These are the technical expectation and the economic
consideration, i.e.; Price &Availability.

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 Introduction to procurement

 The Right Quantity

 The quantity should be computed carefully and included in the BOQ correctly.

 If the quantity is found mistakenly small :

 Project Budgeting will be affected due to less quantities

 Construction planning will be affected and cause under stocking

 Tenderers can manipulate their offer due to it

 Overzealous contract administration is caused, and

 Contractor cash flow will be affected.

 On the other hand if the quantity is mistakenly more, it will cause high stocking, more storing places and
risk of spoilage; unhealthy practices due to over budget provisions; and manipulation in tendering.
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 Introduction to procurement

 The Right Cost/ Price

 Tendering together with negotiation and market intelligence techniques is the only way that ensures the
right cost and accomplishing the task successfully.

 Competition is the bases for determining the Right Cost or Price.

 The Right Counter Parts

 This is to guarantee that the parties agreeing to accomplish the task shall be fit to the job.

 The Right time

 The right time for the provision of resources and accomplishment of obligations of each party shall be
set and agreed.

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 Types of Procurement

 Procurement types can be classified based on the things to be procured and the way how they are
procured.
 There are five bases for classifying procurement methods. These are:

Table: types of procurement

Bases Things procured Bidder’s Geographical Procurement Procurement steps
coverage coverage awareness

Types Goods Competitive International General PN Single

Works Negotiated Regional Specific PN Two staged
Services National Pre-qualification
Local Post -qualification

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 Types of Procurement

A. Things to be Procured: Goods, Services, or Works

 A-1. Procurement of Goods: Physical resources like Materials and Equipments are made available using
Procurement of Goods.

 A-2. Procurement of Services: In the construction Industry procurement of services are often termed as
consultancy services procurement. These include services like Pre-feasibility and Feasibility studies,
Design and Contract Administration of projects, Construction Management Consultancy Services,
Research or Study based Consultancy Services, etc.

 A-3. Procurement of Works: In the CI procurement of works mean the procurement of contractors to
carryout the actual physical infrastructures.

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 Types of Procurement

B. Bidders’ Coverage: Competitive Vs. Negotiated Tendering

B – [Link] Tendering:

 Used for the selection of better and capable winning bidder among the various eligible firms.

 Competitive bidding can either be Open or Limited Competitive

 Bidding in the form for their invitations.

B – 1.1 - Open Tendering – all eligible bidders are allowed.

 Consumes time for tendering and bid –evaluation

 Might result in incompetent bidder

 Results in better cost

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 Types of Procurement

 Advantages of Open Tendering

 It allows all interested contractors to compete on equal grounds and potentially strong new contractors
may appear in the competition.

 It gives the opportunity for local authorities to demonstrate the best bargain possible for public and
government money and assures fairness in selecting contractors.

 It helps to prevent contractors from forming rings i.e. agreeing on offers to be submitted to the owner due
to the long list of contractors and may not know each other.

 The owner may obtain the least possible construction cost estimates due to the tight price competition
among long list of contractors.

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 Types of Procurement
 Disadvantages of Open Tendering

 Due to the long list of contractors, tender evaluation will take longer time incurring additional overhead
costs to the owner.

 Public accountability may be questioned, if the lowest offer is not accepted during the financial
evaluation of tenders.

 Contractors with ill-equipped management may submit the lowest offer and inevitably the contract can
drag out causing delay and incurring additional cost to the owner.

 If the submitted tender price is too low and the contractor is losing money, then the contractor may try to
reduce the quality of works.

 It is also very normal that qualified and experienced contractors may not participate in the tender

17 knowing that the competition will be very tight.

 Types of Procurement

B–1.2 - Limited Tendering / Selective Tendering

 Only those passing a certain qualification criteria are allowed.

 Applicable when the project is urgent or unique.

 Avoids the rejection of Bids which are non – responsive for technical evaluations.

 The short list of contractors is usually prepared based on different criteria such as:

 Contractor’s previous reputation in business,

 Financial standing,

 Available resources especially of machineries and manpower,

 Normal conduct of business i.e. the specialization of the contractor,

18  Attitude on contractual claims, and others.

 Types of Procurement

 The selective tendering has the following advantages to the project owner:

 Competent contractors are participating in the tender and it is fair to select the contractor with the lowest
offer.

 It reduces the time and overhead cost of tender evaluation and facilitate the early commencement and
completion of the project.

 It results in less abortive tenders and, hence, a reduction of tendering cost and waste in the construction
industry.

 Enable competing contractors to include an adequate level of profit which helps to give stability to the
construction industry

 Reduces the risk of failure.

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 Types of Procurement

 The selective tendering has also the following disadvantages to the owner

 Tender prices are inevitably higher than would have been under open tendering due to the limited number
of competing contractors.

 Contractors who are not interested in the tender may submit high prices rather than withdrawing from the
tender not to remove their names in the subsequent tender lists.

 There is a great chance of forming rings among contractors unless the composition of the list of
contractors is variable for each tender.

 Care shall be taken to ensure no favoritism in inclusion and exclusion of contractors from the short list
especially in public and governmental projects.

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 Types of Procurement

B–2. Negotiated Tendering

 Negotiated contracts are made particularly when the contactor has special skills to undertake particular
work which require a high degree of technical competence or is capable of completing the works within a
required time period.

 Direct appointment of an eligible firm

 Exceptionally exercised

 Applicable when the project requires special skill and is very urgent

 The offer might be higher than the norm

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 Types of Procurement

 The advantages of negotiation tendering are:

 The contractor can participate starting from design stage contributing his experience for a better quality
and performance of works.

 It allows early commencement and completion of projects with a better understanding of the contracting
parties.

 Client’s tendering costs are substantially reduced owing to the production of minimal tendering
information.

 All the important points of the construction project (e.g. construction programme, method and procedure)
are discussed during the negotiation and this effects the rational price.

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 Types of Procurement

 The disadvantages of negotiation tendering are:

 Contractors will offer higher tender prices.

 Client obtains an offer which is not truly competitive and does not reflect what the construction market
can bear.

 There may exist legal implications of joint design when the negotiation results in design and production
overlap.

 Contactor experiences difficulty in estimating on outline information.

 It may not satisfy the requirements of public accountability in construction projects for public sector
clients.

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 Types of Procurement

B–3. Serial Tendering

 Serial tendering is more applicable when the owner has a continuing construction program of similar
projects such as housing projects, schools, health centers and so on.

 Contractors are invited to participate in a tender with the basic understanding that successful contractors
will enter into a series of contracts with the same conditions contained in the tender.

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 Types of Procurement

 The advantages of serial tendering are:

 Lower tender prices can be obtained, if the competition is open to all contractors.

 It allows the owner and the contractor to program works in advance with more certainty.

 It generally creates a better relationship between the owner and the contractor in such a way contractors
usually contribute advice in planning of future works.

 It allows the contractor more time to plan, organize and coordinate his resources and experience for the
next projects enabling a more efficient way of performing the future contracts.

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 Types of Procurement

 The disadvantages of serial tendering are:

 It has the tendency of reducing work available, under competition, to other contractors.

 The work’s to follow may go to unfair extents as the client knows the contractors prices. This depends on
the interests of the client.

 It reduces the work available under competition to other contractors who may have wished to price.

 In this type of tendering, contractors should also consider the future economic factors such as cost of
materials, machineries and manpower in the future as series of projects will be executed with the current
cost estimates.

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 Types of Procurement

C. Geographical Coverage: International Vs Regional Vs National Vs Local Tendering

 Based on geographical coverage: i.e. International, Regional, National and Local Tendering.

 Such types of procurements are generally caused by three major factors.

 Local Capacity – lack of local capacity,

 Financial Sources – depending on financial source and,

 Globalization – free tread policy (WTO)

 In Practice - Preference Margins – Up to 10% margins might be used to encourage local firms.

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 Types of Procurement

D. Procurement Awareness: General and Specific Tendering

 To enhance proof of competition and increase accessibility, projects are recommended to create awareness
starting from its initiation.
 This approach is very helpful for:
I. The Project Owners to:
 identify interested bidders to issue Invitations by letters and save time;
 identify bidders relevant for the procurement required; and
 protect loss of cost in preparing lots of tender documents.
II. The Bidders to:
 give sufficient time to assess the cost of the project;
 protect loss of cost only to participate; and
 encourage competent bidders who are cautious about the construction law to participate.

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 Types of Procurement

D. Procurement Awareness: General and Specific Tendering

 General Procurement Notice (GPN) is of two types. These two types are based on their purpose, why and
when they are notified.

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 Types of Procurement

 Specific Procurement Notice (SPN) is an Invitation for Tender or a Request for Proposal when the
project is ready for implementation.

 SPN can be sent to those interested bidders identified following GPN directly. Otherwise, it should be
advertised on the bases of enlarging opportunities.

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 Types of Procurement

E. Procurement Steps:

 They are related with whether tender packaging for submission separately and their evaluations are staged
for a single or two steps when invitations are made.

E-1 Single or Two Staged Tendering:

 Single: Bidders submit single proposal and the evaluation is carried out on the same.

 Two Staged: When the bidders submit separate proposals and the evaluation will be carried out separately,
usually financial then technical.

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 Types of Procurement

E-2 Pre or Post-Qualification Tendering:

 Pre-Qualification

 Prequalification is an internationally accepted practice in procurement management.

 It would normally be required for civil works contract of which its nature and cost is large and complex.

 It is a procedure in which eligible bidders are invited to provide evidence of their ability to perform the
services required by the employer.

 Prequalification is desirable because it enables the Employer to establish the competence of companies
subsequently evaluated.

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 Types of Procurement

 Pre - qualification can be of two types:

1. During licensing requirements which entitled them for a single stage tendering process. Tender evaluation
criteria become the low priced bid.

2. The Second is when two staged tendering is used to pre-qualify tenderers’ for their technical competency.
Then either

 The lowest priced bidder or

 The top evaluated bidder based on the weighted average of the technical and the lowest bidder for
financial scores will be recommended for award.

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 Types of Procurement

 Pre - qualification should be based entirely on the ability of the bidder to carry out the required works
satisfactory.

 The following criteria are often used in determining this ability of the bidder;

 Experience and past performance,

 Health, Safety and Environment Records, if any,

 Capability in respect of personnel and equipment,

 Organizational arrangement and facilities,

 Financial Status, and

 Schedule of Commitments.

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 Types of Procurement

 Advantages of pre-qualification

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 Types of Procurement

Post-Qualification

 Post - qualification is a tendering type where Financial Evaluation is carried out first and rank bidders on
the basis of their offer for tender price. Then technical evaluation follows.

 Technical Evaluation is performed step by step starting from the lowest financially evaluated bidder until
technically or cumulatively qualified bidder is determined.

 The advantage of this approach is not to loose the lowest financially evaluated bidder and to save time
during technical evaluations.

 However, Post qualification approaches often cause to fix evaluators on financial results and be locked
and biased for successive technical evaluations.

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 Procurement and Contract Management

 Procurement and Contract Management involves three major processes: Contract Planning, Procurement
Management and Contract Management.

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 Procurement and Contract Management

Contract Planning

 Contract planning includes decisions on proposed Delivery Systems, Procurement Methods and Contract
Types to be followed and used together with its provisions for alterations.

 This is because such decisions are related to regulatory requirements such as:

 Ethical (Neutrality, Formality, and Impartiality);

 Economical: (Proof of Competition, Least Qualified and Evaluated Bidder);

 Accountable: (Obligations and Rights);

 HSE (Health, Safety and Environment); and

 Transparent: (Accessibility and Notice of Advertisement).

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 Procurement and Contract Management

Procurement Management
 Procurement Management is a process of selecting individuals or organizations to carry out the intended
services and / or works.

 Procurement Management is carried out based on the provisions made during the contract planning phase
of the Procurement and Contract Process.

 It involves the preparation of procurement documents, their invitation and submission of tender
proposals, and Opening and Evaluation of tenders.

 On the bases of results from tender evaluations, the procurement team will recommend the lowest
responsive bidder for Contract Management Phase.

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 Procurement and Contract Management

 The following issues are necessary for a successful Procurement Management phase:

 Knowing and ensuring the implementation of procurement related National and International laws, rules
and regulations,

 Adherence to the provisions made during the contract planning phase including their change processes
that is; with respect to: Delivery Systems, Procurement Methods and Contract Types,

 Establishment of a flexible procurement team, and

 Adhering to the principles of Proof of competition, Impartiality, Neutrality, Accessibility and Formality.

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 Procurement and Contract Management

Contract Management

 Contract Management is a process of reaching contractual agreement for implementation, its

administration and finally concluding the contract.

 Similar to the procurement management process, it shall be based on the provisions decided during the
contract planning phase. It involves:

 Negotiation based on tender evaluation recommendations,

 Signing of contractual agreement,

 Administration for contractual implementation,

 Progress tracking, and

 Changes, claim and disputes administrations.

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 Procurement and Contract Management

 The following issues are necessary for a successful Contract Management phase:

 Knowing and ensuring the implementation of contract related National and International laws, rules and
regulations,

 Adherence to the provisions made during the contract planning phase including their change processes,
that is; with respect to delivery Systems, Procurement Methods and Contract Types,

 Identifying, recognizing and involving all potential or key stakeholders to form a contract team,

 Understanding, mapping and monitoring all contract conditions agreed upon, and

 Ability to administer changes, claims and disputes.

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 Procurement and Contract Delivery system

 Procurement and Contract Delivery system is the way Project Owners together with Project Regulators
and Financiers determine the assignment of responsibilities to Project Stakeholders along the
Construction Process.
 Procurement and Contract Delivery system is often determined during the Basic Planning phase of
Construction Project.
 Generally, there are six types of Procurement and Contract Delivery systems. These are:
 Force Account,
 Design Bid Build (DBB),
 Design Build (DB) or Turnkey,
 Finance / Build Operate System (BOT),
 Construction/Facility Management Consultancy, &
 Alliances and Outsourcing.

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 Procurement and Contract Delivery system

 Such Procurement and Contract delivery systems are developed overtime and are shown in Fig. below.

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 Procurement and Contract Delivery system

Force Account

 When the Project Owners engage themselves to undertake the project, it is called a force account delivery
system.

 Often such a system is promoted if the Project Owners believe that there is a comparative advantage in
Cost, Time and Quality issues.

 When there is a lack of capacity from the private sector to undertake very large and technologically new
projects, public companies do undertake such projects using Force account delivery systems.

 When projects are unattractive to bidders.

 These days this type of delivery system is often used when projects are small and places are remote.

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 Procurement and Contract Delivery system

Design Bid Build (DBB)

 Is the most practiced type of delivery system in the Ethiopian Construction Industry – Since 1987

 Project owners → Basic Planning → Design – Consultants →Bid - Contractors→ Project Built.

 Client – coordinates the different packages.

 Consultant – Design and may supervise the project - (Provide the methods not the end result).

 Contractor - construct works with due care and diligence and complete them in accordance with the
contract, but they are not held responsible for design deficiencies

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 Procurement and Contract Delivery system
Design Bid Build (DBB)
 This traditional approach becomes less popular due to the following factors:

 Severe Adversarial relations between the design and contract administration consultant and the contractor

 Fragmented contract for the project owner

 Project owner responsibility for risks associated with the design and contract administration

 Non - Impartiality of the Design and Contract Administration services

 The inability of design and contract administration consultants to cope up with new construction
technologies and constructability issues of their designs

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 Procurement and Contract Delivery system
Design Build (DB)/ Turnkey
 Is a response to problems associated to the last two types of delivery systems.

 Design-build contracts are exactly as what the name implies. One contractor responsible for both the
design and construction.

 Reduces fragmentation, adversarial relations and Project Owners’ risk. However, there is loss of control
& Higher cost of tender & risk.

 A design-build contract provides distinct advantages to the owner who no longer needs to referee
disagreements between the designer and the contractor because they are working together under the same
contract.

 This type of contracting is growing in popularity.

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 Procurement and Contract Delivery system
Design Build (DB)/ Turnkey
 Advantages of DB are as follow:

 Minimizing Project owners’ risk transferable due to Designers’ faults;

 Accountability and entire responsibility for both design and construction which entitle the employer to
receive completed project is onto a single contractor;

 Employers’ responsibility to co-ordinate interfaces between different project elements is avoided;

 Single point responsibility minimizes the opportunity to claims by the contractor due to design related
issues;

 Coordination between design and construction processes will also be enhanced, and

 The client budget or financial requirement is defined early enough in the development process.
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 Procurement and Contract Delivery system
Design Build (DB)/ Turnkey
 Disadvantages of DB are as follow:

 Since limited supervisory role by the employer representative is practiced; which is relatively flexible and
makes the employer distanced from the whole process, the employer has little chance to understand what
is developed and entertain variations in requirements implying loss of control.

 Contractors in order to provide reasonable offer, their tender cost is higher than in the case for DBB
delivery system

 The increase in risk transferred onto the contractor will be counterbalanced by the increase in contract
prices which can be taken to include these costs of risks.

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 Procurement and Contract Delivery system
Finance Build Operate Transfer (BOT)
 Design-build-operate contracts are not as common as DB. They may be used for projects such as athletic
arenas, water treatment plants, water purification facilities, and toll highways.

 The principle is that the contractor will retain some percentage to ownership in the facility, up to 100%,
for a specified period of time, and operate the facility of a profit during that time to recoup the capital
investment (total cost plus profit).

 The period of ownership by the contractor may vary from few years to permanent. During the period of
ownership, the contractor is responsible for all costs of ownership, and all profits resulting from
ownership.

 In the case of athletic arenas, there is typically a revenue-or profit sharing agreement with the term

51 ownership or municipality.
 Procurement and Contract Delivery system
Finance Build Operate Transfer (BOT)
 This delivery system is advantageous because of three major factors:

 It minimizes owners’ scarcity of financial resources;

 It devoid of considerable risks from the project owners and lessen regulatory activities; and

 The facility is well operated and transferred with free of charge or minimum compensations to project
owners.

 The increasing popularity of the BOT project is largely due to a shortage of public funding and the
opinion that the facility will be more efficiently managed by a private entity.

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 Procurement and Contract Delivery system
Construction/ Facility Management Consultancy
 Construction Management Consultancy Delivery System is a response to problems associated with DB
and BOT where the Project Owner was not well represented for its benefit and the problem of
fragmentation between Planning and Implementation.

 Construction management consultancy firm is used to coordinate all activities from concept inception
through acceptance of the facility.

 Facility management consultancy adds operation of facility during operation to Construction

Management Consultancy.

 Construction Management Consultancy service are particularly attractive to organizations that involve in
construction physical infrastructures such as MoE, MoH, Real Estate Organizations, MoWRs, MoT&C,

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 Procurement and Contract Delivery system

Construction/ Facility Management Consultancy

 Construction Management Consultants then represents Project Owners to carry out the following
services:

 Feasibility studies of Construction related services

 Plan and Monitor the Triple Constraints of Project Performances

 Lead and Organize regulatory systems of the Construction Industry

 Valuation, Quantity Surveying and Procurement and Contract Management Services

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 Procurement and Contract Delivery system

Partnering, Alliances, Outsourcing (Running and Specialized Delivery System)

 The need for constructing quicker, cheaper and to a higher quality of physical infrastructure by clients
and at the same time with
 Very minimized or no dispute questioned fragmentation of packaging,
 Costs related to wastes and overheads,
 Single staged procurement systems,
 Involving in less competitive and comparative advantage for services and works and existing stakeholders
relationships.
 As a result,
 Running delivery system using Partnering and Alliances,
 Specialized delivery system using Outsourcing,

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 Procurement and Contract Delivery system

 Procurement Management process can be idealized into three major processes. These include
Preparation, Tendering, and Evaluation (including Award Recommendation) Processes.

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 Procurement and Contract Delivery system

A. Procurement Preparation
 Procurement Preparation phase is meant for the formation of a Procurement Team; the preparation of
Tender Documents and their approval for procurement implementations.

A.1. Procurement Team

 Ethiopian Procurement Regulation states that a Procurement team consisting of a minimum of five
members shall be established.

 As Tender Evaluation is a joint technical and commercial exercise, the project owner shall consider that
the necessary experts shall be composed in the procurement team.

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 Procurement and Contract Delivery system

A.2. Preparation of tender documents

 Tender Documents are prepared to:

 Instruct bidders on the procedures for the preparation and submissions of bids,

 Inform prospective bidders about the nature of things to be procured,

 Inform bidders about the criteria for evaluation and selection of the successful bidder, and lay down the
contract conditions, delivery system, procurement methods and contract types of the project.

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 Procurement and Contract Delivery system
A.2. Preparation of tender documents
 Tender documents include:
1. Form of Invitation to Tender or Request for Proposals (Box 1.1);
2. Instruction to Tenderers (Standard and / or Particular information – Box 1.2) or Terms of References;
3. Prequalification Documents if necessary – Refer procurement methods based on stages (Section 1.3);
4. Forms of Tender - Refer Contract Documents (Chapter 7);
5. Forms of Contract Agreement - Refer Contract Documents (Chapter 7);
6. General and Particular Conditions of Contract – Refer Contract Documents (Chapter 7);
7. Bill of Quantities and Drawings - Refer Contract Documents (Chapter 3);
8. Technical Specifications & Methods of Measurement – Refer Contract Document (Chapter 2 & 3); and
9. Other Forms, Formats and Schedules – Refer Contract Document Parts (Chapter 7).

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 Procurement and Contract Delivery system

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 Procurement and Contract Delivery system

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 Procurement and Contract Delivery system
A. Procurement Preparation
A.3. Approval of tender documents
 Includes the checking, renewal and approval of tender documents.
 Check list is usually used for tender document approval.
Prepare Checklist for
1. Request For Proposal including Proposed Program and Terms of References
2. Architectural, Structural, Electrical and Sanitary Preliminary and Final Designs
3. Feasibility Studies for Big Projects
4. Road and Bridge Designs
5. Water Works Designs
6. Contract Documents
7. General Points

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 Procurement and Contract Delivery system
B. Tendering Phase
 Tendering Phase includes Invitation, Clarification, Submission and Opening of tenders.
 Normally open tenders are floated for a period between 30 to 45 days. Limited and Negotiated tenders
can be invited between 7 to 15 days.
B.1. Invitation: The invitation to tender shall clearly state:
 The owner and his desirous service or works
 Eligibility requirements,
 Place to get further information,
 Where to purchase & submit tender documents,
 How long the tender will be floated,
 How should the tender offer be packed, and
 When and where submission and opening of tender will take place.

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B. Tendering Phase

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B. Tendering Phase

B.2. Clarification and addendum

 Clarifications can either be requested by interested bidder or carried out using a pre - tender clarification
meeting.

 In both cases, issues clarified shall be sent (written) to all bidders participating for the intended services
or works.

 The bidders shall submit their offer on or before the submission date and time.

 Late bids are automatically rejected.

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B. Tendering Phase

B.3. Tender opening

 Bids shall be opened in public on the date, at the time and place mentioned in the invitation to tender
and stipulated in the tender documents.

 Ethiopian practice (public): Two representatives from MoWUD, Project Owner, Consultant (if
available), and Contractors (Who wish to attend) by themselves or by their representatives shall attend
during the tender opening ceremony.

 The following will be carried out during tender opening:-

1. Tender Attendee members shall take their place and be registered,

2. Tender box opened and checked for faulty things,
69 3. Check the tender is the right one,
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4. Bids will be opened one after the other,

5. All necessary data which deem useful such as Project Name, Name of bidder, Bid Bond Amount, Tender
Price, etc. will be read aloud and recorded at the opening of bids.

6. Bidders representative shall sign a register to attest their presence during opening, and

7. Tender committee members shall sign on the Tender

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B.3. Tender opening

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C. Tender Evaluation

 Tender Evaluation Phase: is made to determine and make award recommendation for the least
evaluated bidder using preliminary and detail evaluations.

 The recommended winner may or may not necessarily be the lowest bidder.

 The following factors are used in determining the least evaluated bidder.

 Technical qualification,

 Completion time,

 Commercial terms of the offer, etc.

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C. Tender Evaluation

C.1. Preliminary Evaluation

 Preliminary Evaluations are made for Eligibility and Arithmetic Review requirements.

 Before commencing the actual evaluation, it is useful and recommended to complete a Basic Data Sheet
for each tenderer to record key information and enable coding.

i. Eligibility Requirements

 Eligibility Requirements: Tenders are subjected to eligibility qualifications before they enter to bid and
their respective evaluations.

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i. Eligibility Requirement

 Most often sited issues considered in eligibility requirements are:

 Valid & Up to date Trade and Professional License,

 Valid & Up to date Membership to Financier Organizations,

 Valid provision of Bid Security or Bond,

 Completeness and submittals of all required documents,

 Turnover requirements fulfilled

 Power of Attorney, Signature & Sealing Requirements, and

 Appropriate Invitation, Packaging and Submission Requirements.

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C.1. Preliminary Evaluation

 Responsive to Tender is based on the deviation from the bid conditions. The more major deviations are
witnessed the bid will be rejected based on non – responsiveness to bid conditions.

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C.1. Preliminary Evaluation

ii. Arithmetic Review

 Most tenders are often submitted hastily and it is common to have arithmetic error.

 Evaluation without arithmetic check will ultimately result in disputes.

 Therefore, it is a formal evaluation process to review arithmetic before carrying out detail evaluations.

 At this stage no adjustment on the unit prices is allowed. If the contractor has made any arithmetic errors
those are corrected.

 If unit prices are left unfilled then it is assumed that the contractor will have covered the prices in other
sections of the submission.

 Note: - Arithmetic review can be done if and only when financial proposals are opened.
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C.2. Detail Evaluation

 Detail Evaluations include Technical, Commercial and Financial Qualification requirements.

 Evaluations at this stage should first and foremost critically see the technical and commercial offers and
establish system that can ensure common bases for comparison.

 Finally, the Financial offer will be updated using Absolute Results from Commercial comparisons

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C.2. Detail Evaluation

Technical Evaluation

 Besides being required to submit a priced bill of quantity a contractor is required to submit a technical
compliance document.

 This technical compliance document will require submission of required details.

 In the evaluation process, at least the following will need to be checked.

 Completeness of bid

 General compliance to the tender requirements

 Substantial responsiveness to technical specifications and bidding documents.

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Technical Evaluation

 In the evaluation process, at least the following will need to be checked.

 Alternative proposals if any

 Acceptance for detailed examination

 Review of the proposed organization/staff organization chart

 Schedule of personnel capabilities

 Implementation schedule/ schedule of program of work/ details of work program

 Availability of equipment/ schedule of plant and equipment

 Working hours

79  Labour build up, run down and source

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Technical Evaluation

 In the evaluation process, at least the following will need to be checked.

 Interest rates/ Day work rates

 Cash flow/ program of payments

 Schedule of suppliers/ Sub contractors

 Detail regarding site establishment

 Details regarding temporary works

 Details regarding the financial stability

 The original copies to be submitted

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C. Tender Evaluation
Financial offer comparison
 Besides, Financial offers per groups of trades of works are compared in order to evaluate whether tenders
are front loaded or not.

 Front loading often cause disruption of projects or overzealous contractual negotiations.

 Rejection of All Tenders:

 Though is solely the power of the employer to decide, for the sake of fairness it is recommended that
such rights shall be exercised in the following cases:

 All Tenders are found non – responsive during the Preliminary evaluations

 Evidences of lack of competitions such as collusion among bidders, monopoly, etc.

81  Lowest responsive offer is found unreasonably high.

 Example: Tender Evaluation
You are tasked with evaluating three bids for a construction project. The bids are as follows:
Table A: Bidder’s Technical information
Bidders Experience and Equipment and staff Completion
qualification time(days)
A 5 150
B 7 175
C 6 160
Minimum experience required = 5 years; Estimated project duration = 145 cal. days
Table B: Technical evaluation criteria and maximum points
Bidders Experience and Equipment and Completion time Total A
qualification staff (10%) (days) (10%)
(30%)
A 21.43 9.5 9.66 40.59
B 30 10 7.93 47.93
C 25.71 9 8.97 43.68
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 Example Cont.…
Table C: Bidder’s financial evaluation criteria
Bidders Tender offer Tender ES-10%of ES+10%of ES Remark
( Total B) offer ES
(50%)
A 1,300,000 50 1,215,000 1,485,000 Responsive
B 1,400,000 46.15 1,215,000 1,485,000 Responsive
C 1,450,000 44.23 1,215,000 1,485,000 Responsive
Engineering Estimate = 1,350,000
Table D: Technical and Financial evaluation result
Bidders Total A (50%) Total B (50%) Total A+B (100%) Rank
A 40.59 50 90.59 2nd
B 47.93 46.15 94.08 1st
C 43.68 44.23 87.91 3rd

Based on the evaluation, Bid B has the highest overall score of 94.08 and should be selected for
the project. To justify the decision to the stakeholders, we can explain that Bid B offers the best
83 combination of price, completion time, contractor experience and qualifications.
 Thank you

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