TENDER/CONTRACT

DOCUMENT
zulkfli sapeciay / fspu / uitm shah alam
 Contents
1. Introduction
2. Tender Documentation
3. Type of Tendering
4. Tender Process
5. Example
1. Introduction
5
1. Introduction

What is Tender Document?

“ A project is a temporary endeavour undertaken to create
a product or service”
(PMI, US)
“Achievement of a specific objective, which involves a
series of activities and tasks, which consume resources,
has to be completed within prescribed specifications and
having a definite start and end dates”
(Building Property Review, 1996)
6
1. Introduction

▸ Tender can be summarized as a system to select a

contractor to carry out the construction work. According
to Marsh (2003), the specific procedures adapted for a
tender process will depend on the following:
• Type of tender
• No of tenderer
• Type of contract
7
1. Introduction

• Estimate tender price/cost/value

• Location of tenderer (Local or International)
• Project location,
• Selection mechanism (time/cost/quality)
8
1. Introduction

The tender documents form the basis of the contractor’s

offer to construct the works

▸ The tender documents are the means by which the

employer’s design and/or works requirements are
communicated to the tendering contractors. These
inform the contractor of the scope and detail of the
project, the conditions under which the work will be
executed, and they identify the rights and obligations of
the various participants under the proposed contract.
9
1. Introduction

▸ The tender documents enable contractors to price the

works requirements and submit an offer (bid) which, if
accepted by the employer becomes a binding contract.
Some of the tender documents will, in turn, become
contract documents. Many, if not most, of the financial
problems in building originate in inadequate or unclear
tender documents, culminating in disputes between
employers and builders over what is included in the
price for the work.
10
1. Introduction

▸ It is important therefore, that quantity surveyors have a

clear understanding of the nature and purpose of the
various documents used for tendering purposes. This
study examines these documents in the context of
‘mainstream’ Irish procurement approaches.
2. Tender Document
12
2. Tender Document

▸ A tender can be said as an offer to do work or supply

goods at a fixed price. Initiating step of a tendering
process in which qualified contractors are invited to
submit sealed bids for construction or for supply of
specific and clearly defined goods or services during a
specified timeframe.
13
2. Tender Document

▸ The tender process is designed to ensure that the work

to be done for client/government is given out in a fair
way. For example in Malaysia, there are a number of
policies known as procurement policies which guide
government of Malaysia on how to make decisions on
which tender to accept.
14
2. Tender Document

▸ Although price is very important in the decision on

which tender or bid to accept, it is not the only factor
taken into account.
15
2. Tender Document

▸ Once client/government accepts a tender, it is binding

on both parties. This means that the person or
company that won the tender has to provide the goods
or services in the manner agreed to and at the price
offered, and client/government must pay the agreed
price at the agreed time. In other words, once accepted,
a tender is a binding contract.
16

2. Tender Document

▸ The items contained in the Tender Document need to

be addressed and understood by the
contractor/tenderer.

▸ Although the content and requirements set out in

most of the project Tender Documents are quite
standard, there are often special provisions and
conditions entered by the client in the Tender
Documents for their projects.
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2. Tender Document

▸ Special provisions and conditions in the Tender

Documents:

• Types of contracts used and additional clauses

• Tender period
• Tender validity period
• Special provisions, such as commencement date and
completion date, specific work method, limitation to
access to the site, storage material or plant /
machinery, use of certain materials and tools, etc.)
18

2. Tender Document

• Provision and appointment of the Nominated

Sub-Contractor
• Terms and conditions of claim and payment
• Local Authority requirements, Permits and other
approvals.
• The work methods will be carried out taking into account
the environment and the site's location/condition.
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2. Tender Document

Table Tender Document

▸ Special provisions and conditions in the Tender
Documents
▸ TTD works as an example of a Tender Document
▸ Can be used by contractors who are interested in identify
the scope of the work specified in the tender
20

2. Tender Document

Contents of Tender Document

▸ The actual content of Tender Documents depends on
the type of contract used.

▸ However, the basis for making estimates for any type

of contract will lead to the elements in the following
Tender Documents:
21

2. Tender Document

Contents of Tender Document

✔ Letter of Invitation to Tenderers
✔ Articles of Agreement
✔ Form of Tender
✔ Bills of Quantities
✔ Summary of Tender
22

2. Tender Document

Contents of Tender Document

✔ Checklist for Submission of Tenders
✔ Conditions of Contract and Appendices
✔ Specifications
✔ Tender Drawings
✔ Sample Copy of Letter of Acceptance
23

2. Tender Document

Contents of Tender Document

✔ Schedule of Daywork Rates
✔ Schedule of Rates
✔ Appendices
✔ Supplementary Information
✔ Sample Copy of Letter of Acceptance
24

2. Tender Document

Contents of Tender Document

✔ Schedule of Technical Data of Equipment/Plant/Tools
✔ Contractor’s Technical Staff Data
✔ Appendices and Supplementary Information
25

2. Tender Document

Contents of Tender Document

✔ Sample Copy of Bank Guarantee for Performance
Bond
✔ Sample Copy of Bank Guarantee for Advance Payment
✔ Conditions of Contract and Appendices
 Project Industry Standard Owner Reference
Agreement Document Document

General
Condition
Format
Special
Condition
Invitation to
Technical Proposed Bid
TENDER Bid
Specification Contract
DOCUMENTATION Documents
Documents Proposal
Drawings

Insurance Others
Requirement

Job Rules Ancillary

Insurance Bonds
Contracts
Safety
Program Language Document
requirement
Considerations Modifications

Special
Instructions

Tender Document
3. Type of Tendering
30
3. Type of Tendering

▸ When talk about tendering, it is involved some kind of

complicated process and procedure. Before any
tendering process can be done, professional team and
employer must make sure all necessary tender
documents have been prepared, checked and approved.
31
3. Type of Tendering

▸ The source of the funding also must have been

identified and the project financing put in place. The
procedures for subsequent stages should have been
established with the express consent of the employer to
ensure the tendering process will go smoothly.
32
3. Type of Tendering

▸ What types of tendering that employer want to choose

is depends on nature of contract, complexity of the
construction, expertise needed and several reasons.
33
3. Type of Tendering

▸ But usually for the government project all over the

world, is tend to make open tender to ensure the
procurement and works to be done in fairly manner
without prejudice. As the researcher mention before,
open tender is one of the types of tendering that
commonly used in this world.
34
3. Type of Tendering

▸ Actually there are several types of tender including

open tender, selective tender, negotiated tender, serial
tender and term tendering.
35

3. Type of Tendering

3.1 Open Tender

▸ Open tendering is the main tendering procedures
employed by both the government and private sector.
The client advertises the tender offer in the local
newspaper giving detail and key information of the
proposed works and inviting interested contractor to
tender.
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3. Type of Tendering

3.1 Open Tender

▸ In the legal sense such tender notices constitute
invitation to treat, a mere request by the employer for
suitable contractor to submit their bids or offers.
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3. Type of Tendering

3.1 Open Tender

▸ If the pre-requisite to tendering on the form of
possession of the necessary registration has been
identified in the tender notice, then the advertisement is
directed to only that particular class of the public
having the said qualifications.
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3. Type of Tendering

3.1 Open Tender

▸ In order to reduce number of enquiries, earnest money
is deposited (for private project). Until the receipt of a
bone fide tender selected then it will be returned.
Although price is very important in the decision on
which tender or bid to accept, it is not the only factor
taken into account.
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3. Type of Tendering

3.1 Open Tender

▸ Client does not bind to accept the lowest or any offer.
The advantages and disadvantages of open tender are
stated below:

• It allows any interested contractor to tender.

Therefore it gives opportunity for an unknown
contractor to compete for the work.
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3. Type of Tendering

3.1 Open Tender

• The tender list can be long as too many contractors
tendering for one job.
• Allowing the tender list to be made without bias. Client
will obtain the bargain possible. No favoritism in
selecting contractors.
• Uneconomic use of source.
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3. Type of Tendering

3.1 Open Tender

• Ensuring good competition not obliged to accept any
offers.
• Public accountability may be questioned if the lowest
offer is not accepted.
• Traditional method of tendering, familiar to all sector of
the engineering and construction industry.
• Does not attract reputable and established contractor
unless they are forced to, due to lack of work.
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3. Type of Tendering

3.2 Selective Tender

▸ Selective tendering is the one alternatives developed to
address the limitations of the open tendering
procedure. In this method, a short list of contractor is
drawn up and they are invited to submit tenders.
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3. Type of Tendering

3.2 Selective Tender

▸ The purpose of the elective tendering are to improve the
quality of the bids received, to ensure that contractors
with the necessary experience and competence are
given the opportunity to submit the necessary bids, due
to urgency work involved, for specific reasons of the
employer, e.g.. security reasons in government projects.
etc. and to make the tendering procedure more
manageable and less a burden on the parties involved.
44

3. Type of Tendering

3.2 Selective Tender

▸ Such list may be prepared through recommendation
from the Client's professional adviser whom have
knowledge of the Contractors undertaking the work in
the past or advertisement through the newspaper
(prequalification) or Pre-Q.
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3. Type of Tendering

3.2 Selective Tender

▸ The advantages and disadvantages of the selective
tendering are stated below:
• Only the competent contactors were invited to
tender, then the lowest can be accepted.
• Reduces the availability of work for other contractors
especially new contractors.
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3. Type of Tendering

3.2 Selective Tender

• It reduced the cost of tendering (economic use of
resources, reduced tender documentation, shorter
tender periods, better management of the tender
process, etc.)
• Tender Price may invariably higher than would have
been in open tendering.
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3. Type of Tendering

3.2 Selective Tender

• Greater chance of collusion.
• Tendering period longer because it involved two distinct
stages.
• Favoritisms may occur in the short listing.
48

3. Type of Tendering

3.3 Two-Stage Selective Tender

▸ Two stage selective tendering combined elements of
competition and negotiation into a formula where the
employer could utilize the contractor's expertise at an
early stage of the project cycle so as to maximize
innovation, ingenuity and quality and simultaneously
optimize cost, time and resource input.
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3. Type of Tendering

3.3 Two-Stage Selective Tender

▸ A contractor is selected competitively early in the
design process. The tender documents contain
approximately quantities of the major value items. As
design and planning proceed, the final tender is
developed from cost and priced data supplied with the
initial tender.
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3. Type of Tendering

3.3 Two-Stage Selective Tender

▸ Two stage selective tendering was very popular in
developed countries. It was different from selective
tendering because has two (2) distinct stages namely:
i. Selection of suitable contractor
▪ This involves the selection of a suitable
contractor and the establishment of a level of
pricing for subsequent negotiations.
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3. Type of Tendering

3.3 Two-Stage Selective Tender

i. Selection of suitable contractor (cont’d)
▪ The objective is to select suitable contractor as
early as possible is to work together with the
professional team and to establish a level of
pricing for subsequent negotiation.
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3. Type of Tendering

3.3 Two-Stage Selective Tender

i. Selection of suitable contractor (cont’d)
▪ The criteria for short listing is normally confined
to items such as technical and financial
capability, experience in similar works and
extent of resources (manpower, plant and
equipment).
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3. Type of Tendering

3.3 Two-Stage Selective Tender

i. Selection of suitable contractor (cont’d)
▪ The pricing document should be flexible enough
to cater for adjustment of price fluctuation for
the period between two stages and the pricing
of the second stage.
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3. Type of Tendering

3.3 Two-Stage Selective Tender

i. Selection of suitable contractor (cont’d)
▪ In selecting a suitable candidate, a basis for
pricing the subsequent second stage should be
established accordingly.
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3. Type of Tendering

3.3 Two-Stage Selective Tender

ii. Determination of Contract Price
▪ Once a suitable contractor is selected, he will
work together with the project team start
contributing to the pre contract process in his
capacity as unbiased but independent
construction expert.
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3. Type of Tendering

3.3 Two-Stage Selective Tender

ii. Determination of Contract Price (Cont’d)
▪ This contractor will contribute on the following:
• Contribution as a Technical Advisor to the
Design Process
• Practical Skills and Buildability
• Minimization of Project Delay
57

3. Type of Tendering

3.3 Two-Stage Selective Tender

ii. Determination of Contract Price (Cont’d)
▪ During this stage, a negotiation to reach an
agreement on the final contract price is
undertaken and the pre contract process is
perfected.
▪ If no agreement being reached, the employer
has an option to abandon the tendering exercise
and re-tender the works using any other
tendering procedure.
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3. Type of Tendering

3.3 Two-Stage Selective Tender

▸ The application of two stage selective tendering might
be appropriate where the works are a very complicated
nature, where at the time of selection of the contractor,
the magnitude of the work may not be known with
sufficient certainty and where it is an essential
pre-requisite for works to be finished by an early
completion date.
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3. Type of Tendering

3.3 Two-Stage Selective Tender

▸ There are some advantages and disadvantages of the
two-stage selective tendering:
• Benefit of the contractor's expertise in buildability,
specialist knowledge in proprietary systems, project
scheduling, etc. resulting in value for money.
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3. Type of Tendering

3.3 Two-Stage Selective Tender

▸ There are some advantages and disadvantages of the
two-stage selective tendering:
• Its application requires a high level of familiarity and
commitment on the part of employers and
contractors.
• Early commencement of work at site even when the
magnitude of the works is not known with sufficient
certainty at the time of site possession.
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3. Type of Tendering

3.3 Two-Stage Selective Tender

• Owing to a relatively smaller element of competition,
but on the other hand higher negotiations content,
the tender process is relatively more expensive and
longer than other common procedures.
• Savings of time due to the overlap of the design and
tendering stage.
62

3. Type of Tendering

3.3 Two-Stage Selective Tender

• Should the second stage be deadlocked or result in
no acceptable agreement being reached, the tender
process has to be initiated all over again, albeit,
through a different route. This incurs a time and cost
penalty to the project as a whole.
63

3. Type of Tendering

3.3 Two-Stage Selective Tender

• The procedure utilizes the best aspects of both
competition and negotiation to arrive at the most
favorable arrangement at an optimum firm price
before work commences.
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3. Type of Tendering

3.3 Two-Stage Selective Tender

• This procedures requires a high level of
commitment, integrity and good faith on the part of
both sides which sadly is usually lacking, hence the
apparent failures encountered to date.
65

3. Type of Tendering

3.3 Two-Stage Selective Tender

• Since the contractor is part of the project team at a
very stage of the project, this results in better
communication and information flow.
66

3. Type of Tendering

3.3 Two-Stage Selective Tender

• Generally there will be fewer claims and disputes in
the post contract award stage due to the
contractor's involvement at the design / pre contract
stage. Experience has shows that the contractor has
a clearer understanding of the requirements and a
better appreciation of the intricacies of the design
and contract documentations.
67

3. Type of Tendering

3.4 Negotiation Tender

▸ Negotiation tendering is extensively used in the
engineering and construction industry commencing
from tendering till dispute resolutions, i.e. under the
styles of pre-contract negotiations and post contract
negotiations. Usually with single contractor but may be
up to three contractors.
68

3. Type of Tendering

3.4 Negotiation Tender

▸ Negotiation process involves are as follows:
i. Identification by the employer of a suitable
contractor to negotiate with. The contractor can
be selected either from the employer's own list of
preferences or on the advice of the professional
team.
ii. The contractor being apprised of the workscope.
69

3. Type of Tendering

3.4 Negotiation Tender

▸ Negotiation process involves are as follows:
i. The contractor being apprised of the workscope
(cont’d)
The selected contractor is issued with details
such as the scope of work involved, relevant
drawings, design and /or information to enable
him to appreciate the extents of obligations and
the employer's actual needs.
70

3. Type of Tendering

3.4 Negotiation Tender

▸ Negotiation process involves are as follows:
i. The contractor being apprised of the workscope
(cont’d)
Some employers prepare and issue to the
contractor proper tender documents inclusive of a
nominated bills of quantities to assist contractor
in pricing the works for the forthcoming
negotiations.
71

3. Type of Tendering

3.4 Negotiation Tender

▸ Negotiations can be applied to the following type of
contract:
• In Partnering type of contracts under the so called
win-win formula.
• Where the employer has a long term business
relationship with the contractor.
• In situations where the parties are in a relationships of
holding and subsidiary companies.
72

3. Type of Tendering

3.4 Negotiation Tender

▸ Negotiations can be applied to the following type of
contract:
• Where the contractor is involved in the financing of the
project.
• In situations where the employer finds it advantages to
employ the same contractor to continue an initial or
existing contract for the new works
73

3. Type of Tendering

3.4 Negotiation Tender

▸ Negotiations can be applied to the following type of
contract:
• Where there is a pressing need to have a very early start
of work on the site and to complete the works on a fast
tract basis.
• In special circumstances e.g. Security reasons,
emergencies etc. where it is expedient to secure the
services of a particular contractor only.
74

3. Type of Tendering

3.4 Negotiation Tender

▸ Negotiations can be applied to the following type of
contract:
• Where there is only a single contractor who is the only
one available or with ether the special skill or resources
to carry out the particular works.
• The employer's resources are either limited or
constrained thereby making the use of the other
tendering impractical.
75

3. Type of Tendering

3.4 Negotiation Tender

▸ Advantages & disadvantages:
• Early Commencement of work on site. It shortens the
period involved in appointing the contractor.
• Should the negotiations be deadlock or prove eventually
unsuccessful, this causes wastage of valuable
resources on both sides and loss of time for the
employer, thereby delaying the overall selection of
suitable contractor.
76

3. Type of Tendering

3.4 Negotiation Tender

▸ Advantages & disadvantages:
• Reduce risk of failure
• Best alternatives for the employer to adopt is special
circumstances such as emergencies, security reasons
and etc.
• Experience has shows that contracts let out this basis
result in fewer disputes and claims during the
construction stage.
77

3. Type of Tendering

3.5 Term Tender

▸ Term tendering 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.
78

3. Type of Tendering

3.5 Term Tender

▸ It is like a standing offer to undertake a loosely defined
extends of work usually within a fixed time period. The
type of work is usually specified and priced in a
schedule of rates. The contractor will initially be offered
the work to cover a number of different trades usually
on the basis of prices contained in a schedule prepared
by the client.
79

3. Type of Tendering

3.5 Term Tender

▸ Where 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.
80

3. Type of Tendering

3.5 Term Tender

▸ An indication of the amount of work expected over the
specified period of time will assist the contractors in
the consideration of the percentage to be quoted.
4. Tender Process
82

4. Tender Process

4.1 Conventional Tendering Process

▸ Conventional tendering process will involve pre-tender
stage, tender advertisement stage, closing of tender,
tender opening process, tender evaluation process and
finally tender award.
83

4. Tender Process

4.1.1 Pre-Tender Stage

▸ At pre-tender stage, when the clients have an idea,
client will appoint consultant to discuss further about
the project. Consultant will do their job, advising,
managing the tender and contract, and also transfer the
idea into the drawing.
▸ At this stage client and consultants will brainstorming
about the scope, time to complete and budget that
client willing to allocate.
84

4. Tender Process

4.1.1 Pre-Tender Stage

▸ Pre-tender stage is most crucial matter because it will
initiate the next step of a project. If the pre-tender stage
is failed, the project will not successfully complete.
85

4. Tender Process

4.1.2 Tender Advertisement

▸ Tender advertisement also called tender notice. The
conventional tender notice will advertise in local
newspaper. In tender notice, basic requirement should
be appearing are:
• Title of the project.
• Class of contractor, head and subhead needed.
86

4. Tender Process

4.1.2 Tender Advertisement

• Location, date, and time to obtain the tender document.
• Fees for tender document.
• Location, date and time for submission of tender doc.
87

4. Tender Process
 Advertisement/ Selection of
Invitation Qualification Financial
Invitation Qualified Bidder
(Instruction to
bidders) Technical

Proposals Soliciting Bids Performan

Form ce

Agreement Request for Prebid

TENDERING Clarification
Proposals Conferences of RFP
General
(RFP) EXERCISE & Site visits
Conditions
Special On-site
Conditions
Others Identification

Technical
Specifications Issuing Question of Extension of
Addenda Propriety Bid Period
Drawings
Controlling Request for
communication Additional
Risks Documents

Tender Process
89

4. Tender Process

4.1.3 Closing of Tender

▸ In tender notice will mention the time and date of tender
closing process. If the contractors fail to submit their
bids within specific time and date, it considers the
contractors refuse to bid for the tender. At that time
also tender validity period is started. At this period,
contractors can withdraw back their bids if they are no
more interested to fight for the tender. Consultant use
this period to make assessment and evaluation each of
the offers.
90

4. Tender Process

4.1.4 Tender Opening & Evaluation Process

▸ Quantity surveyors usually will handle tender opening
process. In order to preserve the integrity of the
competitive process, it is imperative that the evaluation
of proposals is undertaken objectively, consistently and
without bias towards particular suppliers.
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4. Tender Process

4.1.4 Tender Opening & Evaluation Process

▸ Tenders are usually evaluated against a pre-determined
set of criteria. The evaluation of the tenders shall be
prepared the soonest possible after the tender opening.
A report prepared by the Quantity Surveyor will describe
the findings of the said evaluation and it will be
supported by tables and graphs. In the end, the Quantity
Surveyor will recommend which tenderer, who in his
opinion, is the most suitable to undertake to execute
the project.
 Helps to surface
Guard against bidder
bidder error &
collusion or bid rigging
misunderstanding
Isolate variances or Pre-award Identify unbalancing
exceptions negotiation bids

Fair Price Estimate

Post-bid
Bid Security
Discussions
TENDER RECEIPT &
EVALUATION
Selection and
Errors & Rebid
notification
Bid evaluations
considerations

First Cost Intangibles Lifecycle cost

Commercial Technical
Considerations Considerations

Tender Evaluation
93

4. Tender Process

4.1.5 Tender Award

▸ An evaluation team will examine each tender received
and make recommendations as to which tender
represents best value for money. Once the contract has
been awarded, both the successful and unsuccessful
tenderers will be notified. Once the final decision has
been made on the tender award, the tender
administrator creates the tender results notification
which is in letter form, and then sent to all participating
contractors.
 Negotiation Bidding Competition

Method

Letter of Intent

Pre-award Meeting TENDER AWARD

Agreement
Conforming the
contract

Conformed Contractor Client

Contract Signature Signature

Contract
Drawings
Document

Tender Award
5. Example Tender Process
(Government Project)
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Tender Process (Government Project)

JKR/PWD
97

Tender Process (Government Project)

JKR / PWD
98

Tender Process (Government Project)

JKR / PWD
99

Tender Process (Government Project)

Tender Advertisement / Notice

Newspaper Web Site Email

Thank you