Professional

Practice
Module 3

TENDER
What is a tender?
Tender is a written offer to execute specified work or to supply
materials required for construction within a stipulated time
under specified conditions of tender or quotation.
Objectives:
• To give wide publicity
• To obtain competitive bids
• To provide equal opportunity to all contractors.
For government and public sector undertakings, it is
mandatory to invite tenders. Article 299 of the constitution
of India prescribes a definite procedure for execution of
government contracts:
 It must be in writing
 It must follow standard format
 It must be signed by a person duly authorized by President
of India for central works and Governor of state for state
works.

For private sector works, it will be signed by board of directors/

managing director.
Method of inviting Tender:
1. Public tender
Invited from registered contractors of appropriate
class. Work experience, financial solvency, annual
turnover is considered.
2. E – tendering
Its an end to end e-procurement portal system.
Negotiations may take place before the award of the
work.
3. Limited tender
Tender notice is sent to selected contractors of repute.
Lowest tenderer may be called for negotiations.
Method of inviting Tender:
4. Single tender
Only one tender is received even after liberalizing
tender conditions. Single tender is accepted with
approval from higher authority.
5. Nomination
Works with special skills in construction which are
normally not available. Reputed contractor is selected.
Adopted for small magnitude of works.
TENDERS CAN BE ISSUED THROUGH:
Expressions of interest (EOI) - used to shortlist potential
suppliers before seeking detailed offers.
Request for information (RFI) - used in the planning stage to
assist in defining the project, however, not used to select
suppliers.
Request for proposal (RFP) - used where the project
requirements have been defined, but an innovative or flexible
solution is needed.
Request for quotation (RFQ) - invites businesses to provide a
quote for the provision of specific goods or services.
Request for tender (RFT) - an invitation to tender by public
advertisement open to all contractors or material suppliers.
“Call for Tender” is the process by which a company
(Private or government) invites potential contractors or
suppliers to submit offers for the execution of a contract.
 Characteristics of a Tender notice:
Should be clear, brief and contain following particulars:
1. Brief description of the work
2. Estimated cost put to tender
3. Period of completion of work
4. Earnest money deposit
5. Cost of tender
6. Eligibility criteria for tendering
7. Documents required for obtaining blank tender document
8. Last date for issue of blank tender documents
9. Place and period for issue of tender documents
10. Last date and place of submission of tenders
11. Date, place and time of opening tenders
Pre-requisites for tendering:
For Client:
1. Availability of clear site.
2. Adequate funds
3. Procurement of materials for issue to the contractor
4. Finalized designs and working drawing including
structural drawings
5. Sanctioned drawings to commence the work
6. Essential infrastructure at site.
7. Accessibility to the site for inspection
8. Particular guidelines or statutory rules applicable to the
site to be mentioned in the tender document.
Pre-requisites for tendering:
For Contractor:
1. Site visit for familiarization
2. Market survey for materials, labor, machinery
3. Resource mobilization
4. Identify sub-contractors, vendors
5. Seed capital to commence the work
Constituents of Tender
document:
 Notice inviting Tenders (in
detail)
 General Conditions of
Contract
 Bill of Quantities
 Tender drawings
 Specifications
 Form of Agreement
 Formats and Statements
 Detailed architectural and
structural drawings
 Network Chart
Duty of an Architect is to see:
• All drawings, specifications and details are verified
without any ambiguity
• Bill of quantities should be accurate
• Special condition if any has to be mentioned without
any item overlooked
Essential qualities of a Tender :

• Tender should be based on definite and detailed

information.
• Drawings should be given where ever details are involved
like doors, windows railing etc. where ever descriptions
are difficult, drawing should be given.
• All factory made products- trade names should be
specified.
• Certain material rates cannot be specified, in such cases
basic price of material shall be specified(like natural
stone, tiles etc…)
• All the tenderers should be given same information.
 Types of Tenders
1. Item rate tender
2. Lump sum tender
3. Cost plus fee tender
4. BOOT (Build-own-operate-transfer) tender
5. Turnkey tenders
6. Labor tender
7. Tender for demolition work
1. Item rate tender:
It is an offer to execute the work based on the rates
of different items of work. It contains bill of quantities
wherein all the items of work are fully described with
their quantities. The contractor is required to fill in the
rates of the items.
In percentage rate tender, the contractor quotes %
above or below the estimated cost.
It is suitable for all kinds of works like buildings, bridges,
culverts, sewer lines, roads, etc.…
2. Lump sum tender:
In this tender the contractor agrees to carry out the
work as shown in the drawings and described in the
specifications by providing materials, labor and
machinery as required for a fixed amount.

He gets paid only after the completion of work. If he

leaves in between, then he is not entitled for payment for
even the works already executed. This contract is
indivisible where the consideration is one and entire.
Essential characteristics:
 Work to be executed should be clear with relevant details
 Detailed specifications with special conditions if any has to
be mentioned.
 Time for completion of work to be specified
 Conditions of payment, like part payment has to be
mentioned.
 No major variations are accommodated.
 Amount to be paid is not decided on the measurements
except for additions and omissions.
Advantages :
 Total cost of construction is known in advance
 Contractor will try to complete the work at the earliest.
 Work load of engineer and architect are reduced as
detailed measurements of the work executed are not
required.

Disadvantages:
 Design may get affected unless heavy variations are
made
 Quality of work not guaranteed
 Has more elements of speculation and a risky form of
tender
Suitable for
 All building works
 Laying of main sewers
 Drainage and plumbing works
 Electric installation works
 Road works
Lump sum contract is not suitable
 For works where nature of soil and type of foundation
cannot be ascertained beforehand.
 For alterations and additions work of existing building
 Repair works
 Underwater works like foundations for bridges, culverts
etc.…
3. Cost plus fee tender
In this tender, the contractor is paid his expenditure and
above that, he is paid certain percentage as his fee towards
his professional service. Fees is usually fixed at a certain
percentage of the cost of work.

Cost plus fixed fee tender in this tender the contractor is

given a fixed fee irrespective of the cost of the project.

Cost plus fixed fee with bonus and penalty

This form of tender is useful when there a need to keep a
check on the cost of the project. If the cost of the project
remains the same as estimated, then there is no penalty or
bonus applied. If the cost of the work turns out to be less than
estimated then the contractor is rewarded with certain
percentage of the savings, plus his agreed fees. When the cost
goes up than estimated, certain % of the increased cost will be
deducted from his agreed fees.
Characteristics
 Work can commence immediately without all the
formalities
 Contractor should be trust worthy and he acts as a
manager of the owner.
 Suitable for public and private works
 All details need not be worked out before commencing
the work, Necessary variations can be made
 Ultimate cost of the project is not known in advance
 Contractor might try to increase the project cost to
increase his profits.
 No time limit to complete the work
 Owner is entitled to discounts and rebates
4. Build- own-operate and transfer tender

It is adopted for infrastructure projects, where private

sector is involved. The private organization is granted
the right to own, maintain and operate
the project for a set period of time, during which they
can draw fees from users of the asset.

Once the time period has elapsed, the control of

the project transfers to the public sector partner,
either freely or for a fee that is stipulated in the
original contact. It is common for the time period to
be several decades in the case of
big infrastructure projects that carry a lot
of construction and operational risk.
5. Turnkey tenders

Turnkey means complete responsibility: through an

agreement, the contractor is responsible for both the
design and the implementation of the entire project. In
other words, the product will be ready for immediate
use: all the client has to do is turn the key.
Costs can be reduced without compromising quality
when the contractor participates in the planning and
design of the project from the very beginning.
The scope of the facility is described in detail and a fixed
price is paid to the contractor.
Turnkey projects are not the solution to all problems in
the construction industry. They are not a natural fit for
projects that involve a large number of uncertainty
factors and where the lack of a detailed plan makes it
difficult to determine the system costs.
6. Labor Tender
In this tender, the contractor supplies only the labor
component, i.e.; all the labor, tools, plants, scaffolding,
centering materials, etc... The owner supplies only the
required materials.

This method of execution of work is very popular as

the materials used and the workmanship is of standard
quality. The points of dispute are minimized, and the
payments for extra works are restricted to labor charges
only.

The owner has to keep a close watch over the

materials used by the contractor as the contractor will
be least concerned with the wastage.
 These tenders are invited on the basis of rate per
cubic meter of the construction work. This tender is
suitable for works like buildings, bridges, culverts,
addition, alteration & repair works.

Advantages:
 Saving in the cost of the work
 Disputes are reduced
 Workmanship is good and design is not affected
7. Tender for demolition work
These tenders are called for demolition of existing
building to ground level. The tenderer takes all the
materials and in turn pays a specified amount to the
owner.
The highest bidder gets the tender. Total amount will be
paid to the client before the demolition work starts on
site.
The contractor will have to make arrangements for
cutting off the existing water supply, drainage
connection, electric supply etc…
Earnest Money Deposit (EMD):
Money deposited by each tenderer to enable the owner
to ensure that a tenderer does not refuse to execute the
work after it has been awarded to him.

Forfeiture of Earnest Money Deposit:

• Tenderer fails to commence work
• Withdrawal of tender before the expiry of validity period
• Makes modifications in the terms and conditions
• Fails to deposit Security deposit.

Refund of Earnest Money Deposit:

Returned after the expiry of the validity period or after the
award of the contract.
Security Deposit:
• It is a check for the owner to ensure that the contractor
fulfills all terms and conditions of the contract.
• Rate of security deposit is not uniform, varies from 10% of
the tendered amount to max of Rs.5 lakhs. Recovered from
running bills at 10% per bill.
• Contractor deposits 5% of tendered value as Performance
Guarantee and balance 5% of Security Deposit is
recovered from running bills.
• Refund of Security deposit is on Completion of work after
expiry of defect liability period, Finalization of final bill and
works account

Retention Amount:
In cases where the contractor is unable to deposit the security
deposit, alternatively a deduction is made from the running
bills towards the security deposit. It is also a security deposit
recovered from running bills.
Mobilization amount:
Amount provided to the contractor to assist in
meeting start-up costs incurred to promptly perform
under the contract.

Bonus and penalty Clause

Provision in the contract that offers a bonus for timely
completion without cost overruns and prescribes an
equal amount as penalty foe any violation. Its an
approach to keeping the project within budget and
schedule.
Pre-bid Conference:
Conference held before the bidding for both the parties to
understand what is required and what is offered. Clarifications
regarding scope, stipulations, constraints, time frame and
assistance required from owner are discussed.
This conference facilitates projection of realistic bids.

Bid Rates:
Bidding rates are finalized upon site visit, study of tender
documents and market survey. Consists of material costs, labor
cost, hire charges of machinery, profits and overheads and
contingencies.
Contractor’s profit:
It reflects rate of return on his investment.

Overheads :
Administrative or executive costs incident to management.
Opening a Tender:
 Date, time and place shall be informed
 Opened in presence of the owner’s representative,
financial representative and tenderers.
 All tenderers with their EMD are entered in the tender
register. Tender opening authority signs in the tender
register.
 The practice of opening and closing of tender by the client
is discouraged.

Scrutiny of Tender:
1. Checking of E.M.D
2. Covering letter read carefully- should not have any
conditions mentioned.
3. Arithmetical check to be made in the rates quoted.
4. Sometimes a rebate mentioned may be accepted but
without any conditions.
5. Comparative statement- item wise comparison has to be
made.
Acceptance of Tender:
Before accepting the tender following aspects are
considered
a) Contractor’s financial ability with respect to the
estimated cost of proposed work.
b) Intelligence and capacity to organizing the work.
c) Previous works and certificate by the Architects.
d) Works at present in hand.
e) General behavior and temperament
Scrutiny report of tenders
After a careful scrutiny, next job of an Architect is to
recommend the contractor giving a scrutiny report with reasons

Aspects to be considered:
1. Quality of workmanship of a contractor shall be given more
weightage along with the item-rates
2. Previous experience of the contractor
3. Sometimes two contractors are selected by Architect and
left for the owner for decision making.
4. For any clarifications from the contractor, can be clarified in
writing.

Letter of Intent is given to the contractor mentioning the

acceptance from the owner side.

Work Order given by Architect on behalf of the owner

expecting the “ Letter Of Acceptance” from the contractor.
Problems faced by an Architect after tender is opened:
• Client prefers known contractors to take up work, it might
lead to poor quality of work
• Client decides to totally abandon the work for personal
reasons.
• Contractor refuses to take up the work where he has to
recover the balance amount quoted by the next lowest
quote.

Commencement of work:
i. Handing over the site free from encumbrances
ii. Release mobilization advance
iii. Issue stipulated materials
iv. Mobilization of resources
v. Study of drawings for discrepancies
Issues and Guidelines - Tendering
i. Contractor does not produce required documents for issue
of tender forms – Refuse issue of tender forms
ii. Late receipt of tenders – Return the tender
iii. Tender not signed by contractor – Not valid for evaluation.
iv. Discrepancy in rates and amount – To be dealt with
respect to the guidelines stipulated in tender documents.
v. EMD not deposited – Reject the tender
vi. Withdrawal of tender before opening – Legally valid
vii. Withdrawal before the expiry of validity period – Forfeit the
EMD
viii. Cartel formed – Reinvite tenders
ix. Response is poor – Reinvite tenders and revise eligibility
criteria
x. Bids are unbalanced – Rationalize w.r.t tendered amount
xi. Some tenders submit alternative bids – Evaluate them