TENDERING PROCEDURES

Tender
A tender is an offer by a party to provide a service or materials to carry out a
specific building construction work under specific conditions for a fixed amount of
money and within a fixed period of time. Tenders are invited as a means of
determining which contractor or supplier will most effectively undertake the works
for the best price.

Tender documents
These refer to all important information concerning the contract in relation to rules,
conditions, quantity, quality etc supplied to the contractor so as to enable him price
the works accurately taking into account the peculiarities which every building
project possesses. The documents include:

 Bills of Quantities – Is a document giving details of estimates of

quantities of work, labour and materials to be used under the contract.
 Specifications – Deals with technical matters as they relate to the works
e.g details of construction e.g quality of materials and workmanship. It also
contains details of the conditions of contract.
 Contract drawings – depicts graphically the work as it is intended to
be erected, showing sufficient details and dimensions to enable the contractor
gather from them the quantities and the mode of construction required.
 Condition of tendering/instruction to tenderers – this is a document
containing the terms under which the contractor must submit his tender in
order that it may be considered valid. This document sets out a formal
procedure to be followed in the whole of tendering process.
 Form of surety undertaking – this is a document required to be
completed by an established bank, insurance company or a fidelity guarantee
company who is willing be bound to the employer or organization in an
amount equal to generally 10% of the contract sum (performance bond) in the
event that the contractor is awarded the contract, for the performance by the
contractor of his obligations under the contract.(i.e they promise to provide the
contractor with a performance bond if he is awarded the contract).
 Form of tender – this document refers to the main particulars about
quality and quantity, the overall program as well as fluctuation rules. On this
form the tenderers name, amount of tender, date of completion etc are listed.
  Form of availability of materials – certain jobs may require that
tenderers complete a form declaring that all or a portion of materials required
for work will be made available by him when required.
 List of approved sub- contractors – this document is included in
tenders for large jobs where extensive sub-contracting of work is required.

Methods of tendering

(a) Open tendering

This method of selection is open to any contractor who feels he is capable of
performing the work and is ready to subscribe a price. It is usually done through
advertisements placed in the press and normally comprises a brief description of
the works, anticipated starting date, funding agent etc, and the method is most
suitable to large public bodies and local authorities where accountability and
transparency is most required.
Normally there is a deposit paid by the prospective bidders depending on size
of the project and this money is used to cover costs incurred in preparing tender
documents and to ensure only serious tenderers submit bids.
Current procurement regulations require this method to be used for all tenders
of public institutions except under special circumstances.

Advantages
 Fairness – especially where the project is owned by the government or
public bodies because everybody is given a chance to try his lack.
 Provides an opportunity for a suitable contractor to submit his quotation
who could have been locked out by not being shortlisted.
 It can give maximum benefit of completion – i.e due to competition
every contractor is keen on winning which results to low tender sums.

Disadvantages
 There is danger of getting the lowest tender from an inexperienced contractor.
This contractor could have become the lowest due errors in tendering. His figures
may also become unrealistic. He may have problems with finances, industrial
relations and technical expertise. It is therefore necessary to include a clause that the
employer is not bound to accept the lowest or any other tender.
 The cost of tendering is very high because there are many contractors
tendering and the client has to somehow bear this cost, though some of it may be
offset by the deposit fee. There is a cyclic transfer of costs. We begin with the
consultants who may take long and spend more to prepare tender documents and
analyze all the tenders. The contractors spend more preparing bids and those who
lose now will want to recover in another tender and the costs are passed on and on
to the industry.
 Tender analysis take very long because there are many contractors who submit
tenders.
 In an attempt to lower costs, clients ask contractors for nonrefundable deposit.
The effect of this is to deter some contractors from tendering.

(b) Selective tendering

This is a method of selection where a certain number of contractors are shortlisted
and invited to tender. The number one considered suitable for the particular job. The
method is intended to cover the shortcomings of the open tendering system. Two
approaches are used:-

(i) Through the local press – where applications are invited from certain category
contractors to tender for a particular project (briefly described). This way, who are
not of the said category say C or B (of MORPW classification) and above are
discriminated against and therefore only those who qualify can tender.
(ii) Looking at a list of approved contractors and picking on a number that looks
desirable say six, you write to them requesting them to tender for a particular project.
Here there are good chances that favourable tenders are going to be submitted since
the few contractors chosen are reputable.

Advantages
(i) Only capable contractors submit tenders.
(ii) Tendering costs are reduced due to the small number of tenderers.
(iii) Time for tender analysis is also reduced.

Disadvantages
(i) Tender sums are generally higher than what it would be in open tendering.
Contractors behave differently when they know that it’s a specific category
tendering. Collusion is possible especially when the number of tenders is very small
and they happen to know each other.
(ii) Strictly speaking, it erodes the level of competition and instead associated
benefits.
(c) Negotiated tendering
Sometimes the client chooses or has to do without competitive tendering and
instead negotiates a price with 1 or 2 contractors.
Negotiating is preferred when:-
 a quick start of work is required.
 A certain contractor or a few contractors have a specialized plan
or technique that is required for the works.
 The building industry is overstretched by demand and
contractors are very busy.
 There is a good business relation between the contractor and
client – e,g based on past relationship.
It is important to note that negotiation should never be adopted unless the employer
is sure to get real benefit from it.
There are 2 types of negotiated tendering:-
(a) Single stage – when the employer directly nominates a
contractor and together they negotiate rates.
(b) Two stage – where tenders are invited and on the basis of the
tender sums, the employer negotiates rates with one of the tenderers.

Advantages
(i) It makes it possible to retain services of a firm(s) which have been found
satisfactory in the past.
(ii) It may produce lower tender sums than under normal tendering procedures.
This is particularly so under 2 stage tendering.
(iii) Cost of tendering is reduced – in that the consultant has to do only a single
tender analysis and that only few tender documents are produced.

Disadvantages
(i) It might take too long before construction starts.
(ii) The long term effect would be high costs – as the clients consultant has
to sit down with the contractor so as to agree on each and every rate. This may
continue up to and including construction when the problem becomes
compounded.
 (d) Serial Tendering
This is a type of tendering where the contractors tenders for a particular project
with the understanding that if s/he is awarded that tender, then there will be many
more projects that will follow. For instance a contractor tendering for phase 1 of an
estate comprising more than 1 phases will give favourable rates so as to gain benefits
of continuity should s/he win the tender. In doing succeeding phases s/he has the
advantages of using same site office, retaining most of his staff, his plant will be
occupied throughout, workers will have kind of work in which case productivity will
be higher and working relationships between the various players will be maintained.
There is a provision of upgrading/reviewing the over the time to cater for
inflation. The method may be either selective or open tendering.

(e) All in service/package deal/design and build

This method adopted from a project where both roles of design and construction
are given to the same firm. The client gives the brief on his various firms (open or
selectively chosen) will tender on the basis of price, a basic design and models. Their
tender figures covers the cost of all these. The client chooses the design that
approximates mostly to what he wants subject to its cost in terms of its design and
construction. This type of tendering is used where urgency is paramount e.g the
Mausoleum of the late Mzee Jomo Kenyatta. It is also used where highly specialized
skills in design and construction are only to be found within a particular firm – for
example a building to house nuclear facilities.

Advantages
 Price is normally fixed and hence little probability of cost escalation.
 There is a firm completion date – hence the contractor has to do the work
fast enough and reduces the probability of time overruns.
 Construction can start before design is completed – thus saving time.
 No organizational problems because the designer and contractor are the
same team – there is ease of communication and quick decision making.

Disadvantages
Ω The client has got no advantage of seeing his design evolve and if he
wants to change later, s/he pays very dearly for it as there is no rate
breakdown and cost of extra works has to be negotiated anew.
Ω Tender sums are generally very high.
 Ω The firms may compound the problems (ii) above by putting lost
tenders to the present tender in an attempt to recover them.

Tendering procedures

(a) Prequalification of Tenders

Contractors are sent and should reply promptly a letter of preliminary
invitation to tender (prequalification of tender). This way, subsequent withdrawals
and the submission of cover prices are eliminated (cover price is one that is
sufficiently high to be well above the lowest tender). The letter states that the
acceptance will imply the readiness to submit a wholly bonafide tender and that
tenderers are not to indulge the tender price to any person or body before the time
opening of tenders.
This letter invites contractors to apply for prequalification and should contain
all important project particulars, special features of the project, complications and
also the documentations that will be supplied for tendering. The letter will require
contractors to include information on nature and status of firms i.e category of
registration, details of turnover together financial status and ability, name of sureties,
details of similar works carried out within the past 5 years, name and address of any
referees, the construction equipment that is available and the remainder would be
availed, statement of technical qualification of managers and supervisory staff, and
what parts of work will be sublet.
Some of the principal matters to consider while prequalifying / short listing
the contractors are:-
(a) The firm’s standing and record – i.e checking on the financial stability
of the contractor. This may be ascertained from his bankers who should give
a written opinion as to the financial status of the contractor.
(b) Whether the firm has had recent experience of building at the required
rate of completion over a comparable contract period.
 (c) The firm’s general experience and reputation in a comparable area of
work.
(d) Whether the management structure of the firm is adequate for type of
contract envisaged (cases of industrial unrest come under this).
(e) Whether firm will have adequate capacity at the relevant time. NB:
MORPW category registration of contractors as A, B, C etc is based on labour
force, equipment, amount of work handled etc hence it’s a good criteria to
use.

Prequalification at the time of tendering is not necessary if the employer or the

organization keeps for use a list of approved contractors. The preparation of this list
is based on the above issues a-e. However, the list should be adjusted periodically to
kick out those firms that are deviating from the expectation of these considerations
and admitting new firms who qualify to be short listed in the light of the laid down
considerations.

(b) Invitation to tender

This should take into account all those matters which the employer and the
consultant wish complied with in order to obtain comparable and complete tenders.
The letter should be framed as to give all contractors fail and sufficient particulars
of the works in terms of its precise nature and extent. A good invitation to tender
should thus contain:-

1. A general description of the proposed work.

2. The place where, when, the drawings, specifications and other documents may
be seen.
3. Location and description of the site and how it may be accessed.
4. Particulars of any deposit to be charged to the contractors for copies of, access
to documents and whether such deposits are returnable.
5. Whether Bills of Quantities will be supplied and on what terms.
6. Closing date for receipt of tenders and warning of any indication mark on the
envelope.
7. Rules on how to return tenders:-

(a) This should be by stipulated date and time to a stipulated addressee.

The envelope should be plain bearing no indication of the sender.
 (b) Whether tenderers may be/may not be present during opening of the
tenders and their scrutiny.
(c) That tenders which are late should not be accepted from any contractor
(because he may take advantage of illicit information received after tenders
are due adjusting his rates accordingly and delivering it after due time).

NB: Time for Tendering

Ample time should be allowed to prepare and submit bonafide tenders. Limit of
time for submission should be chosen so as to allow as short a time as possible to
elapse before the opening of tenders. Hurrying tenders unduly risks obtaining high
prices which cover requirements which tenders have been unable to investigate or
which contain some mistakes which could cause trouble later. Not less than 4 weeks
should be given for an average project, though time allowed will depend on size and
complexity of the contract, complexity being more critical.

(c) Opening of tenders

It is important to notify tenderers the results of tenders as soon as possible. The
quickest and most efficient method is to invite the contractors to be present at tender
opening. Prompt notification of tender results to the contractors is important so that
unsuccessful ones are free to tender for other jobs while the successful one is able to
start organizing materials, sub contracting etc.
Tenders are opened in the contract office where they were submitted. They
are opened on the date and time fixed in the letter inviting tenders. The small
envelope containing the form of tender is opened and following particulars read out
which are then recorded:-
Tenderer’s name, amount of tender, time for completion. The tabulated list of tenders
starting from the lowest should be signed by at least 2 of the persons present at the
meeting.

NB:- If any tender has some qualification of a kind, it should be noted down.
Photocopies of the list and the completed forms of tender should be circulated to the
appropriate persons concerned after making photocopies.

(d) Examination of Tenders

Tenders are examined to ensure that prices are reasonable and consistent, and
that the document does not contain serious errors or omissions, which may render
a contract, if entered into, open to failure. The tenders should be examined to ensure
that they contain no mistakes, it complies with requirements and that qualification
and alterations (if any) are considered and that there are no loose pages.

Examination:
Tenders are checked so as to bring out and analyze the following points:-
(i) Effect of arithmetic errors on the contract amount for example in
extension, `summation and carrying over.
(ii) Effect of any serious error in pricing on the contract sum for example
if concrete 12:4 is costing approximately 2,800/= per cubic meter, but the
contractor prices it at say 1,500/= or 3,500/=.
(iii)Omissions or additions to the tender e.g contractor giving a 5% discount
at summary page.
(iv) Any qualification by the tenderer which might invalidate his tender.
(v) Whether prices are considered reasonable.
(vi) Amount of tender in relation to estimated cost or in case of subcontracts
in relation to PC or provisional sum.
(vii) Reasons for any differences with tender amount in relation to
estimated or prime cost amount.
(viii) Recommendation for saving to reduce the tender amount to the
value of the estimate or the PC sum.
(ix) Comment on whether all documents are filled in correctly including
surety undertakings.
(x) Any other relevant information arising out of tender analysis.
(xi) Recommendation for acceptance, giving reasons.

(e) Acceptance of the tender

This is a letter send to the contractor whose tender has been selected. It brings
a contract into being between the two parties. It should be a clear unequivocal letter
referring to a correspondence which may have passed between tender and
acceptance. The letter may include a brief reference to the work to be executed, the
amount of offer, and the time of completion. This provides a conversant summary
of the identity of objectives reached between the two parties.