AMT 20604 : Construction

Value Estimation and

Procurement (W2-
Introduction to Contract and
Tendering II )
Sr. Dr. Norsyakilah Romeli
(Professional QS, MRISM, BQSM)
PhD in Built Environment (UiTM)
Msc in Integrated Construction Project Management (UiTM)
Degree in Quantity Survey (UiTM)
Diploma in Quantity Survey (UiTM)
 SCOPE OF WORKS &
CLIENT’S NEED STATEMENT
Project
Client
 Need of statement to own the building,
for public purpose and private purpose
 Can be the one who finance the project
and the one who gather all of the funding
to implement the projects
 The one who appoint consultant, current
practice consultant must compete as well
 Construction team in client side provide
general details of construction
Client’s Need Statement
 To own as per required building/
infrastructure, cost saving and satisfied with
the delivery of the product.
 Risk in building construction are high in
especially in design and cost
 The procurement approach tend to deal
with risk management that clients may need
to understand
 Therefore, the document tender need to be
precise and spell out everything so that
client can calculate their cost of risk.
SCOPE OF WORKS
Contractor
During tenderer process, the contractor
bid the tender with reasonable amount that
he wished to go through
The quantity surveyor in contractor side
will aware of their rate, their supplier rate,
and overhead for the company
Profit and attendance were pre determined
before getting into the tender
Contractor’s Objective
 Usually bound and ready for any risk to be taken.
 Clear scope of work so that the risk has been
calculated as well
 Contractor need to be firm on what scope of
work and area of limitation to execute the work,
especially when the work is impossible to be
implement
 Contractor is concern on the optimization of
their profit.
 Hence, contract has been formulated to ensure
the controlled payment from the client to the
contractor
Consultant
 Appointed by the client to assist with the
pre contract and post contract usually
lead by architect as the superintending
officer
 The architecture and structure design,
specification, approval were pre
determined before tender document
produced
 Quantity surveyor assist with legal
documentation on behalf of the client
Types of Contract
 Lump sum – based on specification and
drawings, bills of quantity
 Unit Price – bills of quantity, schedule of
daywork rate
 Cost reimbursement – fee percentage, fix
fee, Cost plus with guaranteed maximum
price (GMP) contract
 Time and Materials - time and materials
contracts define an hourly or daily rate
for builders
 Pre Contract Process

Feasibility
Preparation of
studies and Preliminary Detail
Project Brief preliminary
project estimates design
design
inception

Preparation Tender Tender

Preparation
to sign the evaluation and invitation and
of tender
document letter of tender
documents
contract acceptance acceptance

POST CONTRACT START

(Syed Abdul Haris & Bushral , 2007)
ELEMENTS OF DOCUMENT
CONTRACTS, STANDARD FORM
OF CONTRACTS
Evolution of tender document

Table Tender
Document (TTD) Tender Document (TD)

Preliminary Tender  Contract

Estimate (PTE)
document
Preliminary Tender Estimate
 Estimation done by quantity surveyor
with rate given and agreed by consultant
and client
 Based on clients statement of needs,
design approved by C&S, M&E consultant
 As reference for tender evaluation
 Private and confidential
Table Tender Document
 A tender document without rate
 Spell out the specification
 Material used
 Scope of work in bill of quantities
Document Tender
Document that portrayed the physical
projects into a paper
Design according to details spells out inside
the document tender
Document tender will be sell to the
contractor
Contract Document
 Tender that has winning the bidding,
agreed by the contractor through letter
of acceptance
 Signed by contractor
 Pre agreement in between contractor and
client to produce/ construct the building
within stipulated time in within the
contract sum agreed.
Purposed of tendering procedure :
• Select a competence contractor for a
particular project according to the
expertise and class
• Obtain for an offer at a reasonable price
form relevant and competence contractor
• Tendering may taken account on the
construction period bid by the tenderer
however current practice; clients
indicated the time frame to complete the
project
Purpose of converting tender
document into contract document
 Element of contract is existed
 As an evidence to ensure that during the
construction project, everyone falls in to
the responsibility written in the contract
 Defend mechanism for all parties when
construction undergo dispute
 Guideline for contractor for constructing
 Rate issues, usage for claim the work
done
 Content of Tender Document :
Specification
Written description, the quality and aspect
of the construction project.

Technical details of the standard

workmanship, quality of materials

The information which not easily shown on

a project drawing
Technical specification content :
 General – the scope of work to be performed within
the specification section or work item included in
pricing

 Material – describe the product (materials,

equipment, accessories, component, fixture) and the
development and manufacturing process to be used in
producing them

 Execution – describes the preparation, workmanship,

installation, erection and application procedures to be
employed along with quality requirements and
performance criteria that must be satisfied
Content of Tender Document : Bills
of Quantities
 The contract sum spell out
 Formed from the taking off QS produce
according to drawing/ design/
specification/ materials
 Scope of Work details in the description
 Item, Description, Quantity, Unit, Rate
 Unit can be in m2, m3, numbers, lump sum
Content of Tender Document : Bills
of Quantities
 To provide a uniform tendering basis and
determine the price.
 BQ normally covers this matters :
Preliminaries, Measured Item, Prime Cost
Sum and Provisional Sum
 Preliminaries – describing contractor’s
general obligation and management
arrangement
 Measured Item – detailed quantification of
the works which are usually group into
trades of works section
Content of Tender Document : Bills
of Quantities
 Prime Cost Sum : for works which are to
be carried out by nominated sub-
contractors or for goods to be supplied
by nominated suppliers or statutory
authority, under the direction of the main
contractors.
 Provisional Sum : for work which cannot
be entirely foreseen, defined or detailed
at the time of tendering
Content of Tender Document
:Standard Form of Contracts
 PWD 203A and PAM 2006
 FIDIC (Civil & Infrastructure Projects)
 For public and private projects
 The law enforce along the construction projects
 Claims and dispute can be refer to the standard
form of contract as the intention and need are
clearly stated
 Procedure and guideline
 Item is different from one to another standard
form of contracts, in terms of time frame and
procedure
Content of Tender Document
:Standard Form of Contracts
 PWD 203A usually preferred by
government
 MAHB, MBSA, Putrajaya Development
using their own standard form of contract
but taking the content derived from PWD
203A
 Client usually bound to construct the
public construction
Content of Tender Document
:Standard Form of Contracts
 PAM 2006 usually used by the private
client
 Sime Darby, KPJ Healthcare, Glomac
 Housing works, convention center, hotel
and amenities, shopping complex
 For private purpose, investment for the
client to gain profit after the project done.
 For individual and personal used eg ;
construction of bungalow
Differences
 Time for each of the procedure, EOT,
LAD calculation
 Terms and definition of works
 Authorized personnel as per named in
the contract
 Requirement for contract document
 As-built drawings and maintenance works
Content of Tender Document :
Instruction to Tenderer
 The general instruction for the tenderer
 Where to buy the tender?
 What should be in the tender?
 How many pages ?
 What would be the requirement?
 When will be the dateline to submit ?
 Tender box, site visit date ?
Content of Tender Document :
Letter of Acceptance
 Tender evaluation done, the client
selected the best tenderer.
 The tenderer required to sign on the
letter of acceptance (compulsory strictly)
 The contract is invalid as long as the
contractor didn’t sign the letter of
acceptance
 Indicating the both parties agree for a
contract.
Content of Tender Document
:Preliminaries
 Before contractor enter the site, the
preliminaries works has to be done
 Preliminaries divided into initial, recurring,
completion
 Example, electrical, site investigation, site
office, access road, hoarding
Content of Tender Document :
Form of Tender
 Form of tender require to be sign
 Mandatory information : contact sum,
name of the project, duration of the
project, sign / verification from the
correct personnel
 Must be the director of the company
 Not valid if the personnel not pass the
mandatory regulation to form a contract
Content of Tender Document :
Condition of Contract
 Conditions and requirement before
undergo into a contract
 Contractor must read
 Mentioned about regulation, responsibility
and legal action taken if the certain
situation happened.
Content of Tender Document
:Schedule of Daywork Rate
 The labour rate must be based on the
Schedule of Daywork Rate.
 Usually the rate based on JKR Schedule of
Daywork Rate and Siaran Khas according
to Jabatan Statistic Negara (recent years)
 The contractor must do Built Up Rates
base
Content of Tender Document :
Preamble
 Trades of the craftsman works
 Material that has been usually rarely
found in the common construction
 Required to be stated including the
methodology of construction
 Brief method statement required to be
stated in preamble.
Content of Tender Document :
Drawings
 Show graphically in details works to be
done.
 Drawings covers architectural, structural,
mechanical and electrical
 There are normally grouped in location of
the drawing ( masjid, dewan makan,
hostel)
 Assembly drawing (IBS drawing)
 Component drawings
Tender Notice and Condition of
Tendering
 Time and place for the submission of tender
 Site visit
 The form of tender – matters must be included
 Tender period and closing date
 Tender validity period – a specified period during
which a tender should remain open for
acceptance, although the tenderer may revoke it
at any time
 Necessary fees and deposit
 Requirement to be fulfill before/ execution of
contract
Formation of Contract Document
Contractor – submit
Client – offer contract,
tender document, sign LA,
needs statement to have a
perform regulatory
building. Verify consultant
responsibility as verified
judgement
by S.O on site

Consultant – lead by S.O

(architect) prepare PTE,
advise client, perform
mandatory checking, select
the best tenderer to
proceed for contract
management
TENDERING TYPES
TENDERING PROCEDURE AND
MODE OF TENDERING
 Purpose of tendering : to select a suitable
contractors at time appropriate to the
circumstances of the project
 Selection of the contractors : optimum
resources, financial, manpower, material,
contractors input on the design, cost saving
alternative through value engineering,
allocation of risk
 Mode : Open tender, direct negotiation,
selective tendering
 Open tender

 Any contractors who meets the specified requirement to carry

out a proposed construction project may submit a tender for
the work
 Tenders can be invited through advertisement in the technical,
trade and or general press. For public work, an invitation to bid
is placed in the classified advertising section of one or more
national newspaper over specified period
 Advertising will give outline details of the works, its scale,
programme, the form of contract and other relevant matters
 Commonly used bt government agencies to ensure
accountability of public funds
 Complete design documentation is necessary to enable accurate
bidding
 Open tender (cont’d)
 Attract large number of tenders and the bids are expected to be more
competitive. However, it is inefficient used of the industry used.
 Lowest possible price will be obtained, although the experience and the
financial standing of such contractor are suspected. Highly risk of choice
 Low tenders from contractor as a consequences of making the most
errors or who cut price at the initial stage with a view of recouping the
losess by means of corner- cutting and claims
 Tendering can be expensive and cost of unsuccessful tenders tend to
inflate prices for future work
 The method allows for new firm the chances of tendering for works
 The method allows for new firm the chance of tendering for work
 Tenderers have no assurances about the quality of their competitors
 A higher cost of administration of tenders, duplicating document
 Problem of selecting best tender from a wide range of tenders
Direct negotiation
 The tendering method is without a call or
competition. The clients selects a contractor
directly and then negotiates with the terms
of agreement and form of payment
 This approach maybe appropriate when the
client believed that the contractor possesses
skills or experience relevant to the project
based on the latter’s reputation and
recommendation
 Negotiation may based on schedule of
prices, or approximate bills of actual costs
plus agreed profit margin.
Direct negotiation (cont’d)
 Contractor must prepared a budget quotation for
the work based on limited information
 Client and contractor’s representative work on
the and negotiate on the rates and prices and
finally agree to a tender price
 In negotiation with the chosen contractor, main
item can be roughly quantified and price as basis
of agreement, with additional less costly items
agreed later in a consensual rather than
adversarial negotiation
 Competitive – client negotiates the term with
selected bidders (include a formal tender stage
prior to negotiation
Direct negotiation (cont’d)
 Negotiation may be considered under these
circumstances
 1. established business relationship between client
and contractor
 II. Quality and not economy is major determinant
 III. A continuation contract based on the first contract
 IV. Additional contract where contractor is already on
site
 V. the contractor have special expertise relevant to
the project
 VI. Contractor’s contribution is required in relation
to design or programming
Direct negotiation (cont’d)
 Cut down time and money on tendering
 Completed design documentation is not
necessary for work to start, and the
contractor’s skill may be brought into the
design process
 Absence of competition, so the tender sum
may be higher
 But client may get think it worth paying
more in return for a quicker job, or better
quality than he may otherwise obtain.
Selective tendering
 Only a limited numbers of contractors who
fulfill certain criteria are invited to tender
 The selection is done prior to tender
invitation
 The criteria are often the general
experience of the types of project
contemplated, financial ability and managerial
and technical capabilities
 Suitable firms are invited from clients/
consultant approved list singled out by
reputation, recommendation, previous
contact with client or consultants.
Selective tendering (cont’d)
 Select tendering can be approached in two
stages
 In the first stage – advertisement can be
published inviting suitable firms to pre qualify
for tendering. The tenderer will have to
supply information about their previous
experience, physical resources and financial
standing
 After which the client will only invited small
numbers of the pre-qualified contractors to
submit their tenders
Selective tendering (cont’d)
 Can mean higher quotations because of
less competition but also because of the
higher caliber of the tenderer
 This method ensure the lowest prices
from contractors who are capable of
doing the work
 Cost of tendering reduced