Construction Planning and Management: Adama Science and Technology University Department of Civil Engineering

ADAMA SCIENCE AND TECHNOLOGY UNIVERSITY
DEPARTMENT OF CIVIL ENGINEERING
Course Title: Construction Planning and Management

Course No : CEN 5316/4207
Credit: 3
Lecture : 2 hrs/wk
Tut: 3 hrs/wk
Instructors: Kokebe Y. and Surafel L.
CHAPTER THREE …
CONSTRUCTION PROJECT DEVELOPMENT…
Procurement Management
Procurement Management
Procurement Management (PM)
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.
PM is a process of selecting individuals or organizations to
carry out the intended services and/or works.
PM is carried out based on the provisions made during the
contract planning phase of the Procurement and Contract
Process.
PM involves the preparation of procurement documents,
their invitation and submission of tender proposals, and
Opening and Evaluation of tenders.
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Types of Procurement
Procurement can be classified based on the things to

be procured and the way they are procured.
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5
Classification of Procurement…
B. Bidders' Coverage:
Purpose of tendering procedure is to select a suitable bidder
at time appropriate to circumstance
B-1: Competitive Tendering
– Open Tendering
– Selective Tendering
B-2: Negotiated Tendering
– Direct order
– Serial Tendering
.
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B. Bidders’ Coverage: Competitive Vs Negotiated
Tendering
 B –1.Competitive 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 tending and bid –
evaluation
 Might result in incompetent bidder
 Results in better cost

 B –1.2 -Limited 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
 Results in higher costs –professional negotiation
 B –2. Negotiated Tendering - Direct appointment of an

eligible firm
 Exceptionally exercise
 Applicable when the project requires special skill and is
very urgent
 The offer might be higher than the norm
B–2. Negotiated Tendering
Serial Tendering
• Used for very large engineering projects.

• The project is divided into several stages.
• First project stage is awarded to a contractor using
competitive or negotiated tendering.
• Next stages are awarded to the same contractor if
succeeded in achieving owner requirement in earlier
stages.
• Owner benefits form repetition of the work to
achieve better quality with minimal cost.
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C. Geographical Coverage:
 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 trade policy
 In Practice - Preference Margins –Up to 10% margins
might be used to encourage local firms.
D. Procurement Awareness: General and Specific
Tendering
 It is advisable to include bidders at initiation of
projects
 Then General Procurement Notice (GPN) is made
during projects planning phase
 It only arouse the interests of the bidders.
 GPN is used when
 The Project Owners: to save time; identify bidders relevant
for the procurement required; and protect loss of cost in
preparing lots of tender documents
 The Bidders to: to give sufficient time to assess the cost of

the project; protect loss of cost only to participate; and
encourage competent bidders who wary about law-balling
to participate.
 GPN–is of two types based on purpose & time of notice.

 Type I –posted to create awareness of up coming projects
(Announced -Design implementation stage is started)
 Type II –to determine interested bidders to invite them in
the form of limited competitive tendering.
 Specific Procurement Notice (SPN)–is an Invitation to

tender or request for proposal (Project ready for
Implementation)
 Might be used to invite pre-selected bidders through
GPN.
E. Procurement Steps:
 Single Vs Two Staged; and
 Pre-Vs Post -Qualification Tendering.
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.
Pre or Post Qualification Tendering:
 Prequalification–an internationally accepted practice &
Common in civil works -nature & cost is large & complex.
 Bidders are invited to provide evidence of their ability.
 Pre -qualification can be of two types
1. Those considered qualified during licensing requirements
which entitled them for a single stage tendering process.
Tender evaluation criteria become the low priced bid.
2. When two staged tendering is used to pre-qualify

tenderers for their technical competency. Then either the
lowest priced bidder or the lowest evaluated bidder based
on the weighted average of the technical and financial
scores will be recommended for award.
• Pre -qualification criteria:
 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.
The advantages of pre -qualification in procurement
are:
 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.
 Advantage -the lowest bidder will not loose and

allows 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.
Procurement Management Process
 Procurement Management involves three major processes as
shown in the figure:
Procurement Management Process…
A. Procurement Preparation phase: includes
1. Formation of a Procurement Team
 Minimum of five members shall be established
 Necessary Experts shall be included(since tender
evaluation involves joint technical & commercial
exercise)
2. Preparation of 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.
Tender documents include:
1. Form of Invitation to Tender or Request for Proposals
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 2);
5. Forms of Contract Agreement -Refer Contract Documents
(Chapter 2);
6. General and Particular Conditions of Contract –
Refer Contract Documents (Chapter 2);
7. Bill of Quantities and Drawings -Refer (Chapter 4);
8. Technical Specifications & Methods of
Measurement –Refer (Chapter 3 &
4); and
9. Other Forms, Formats and Schedules –Refer Contract
Document Parts (Chapter 2).
Instruction to Tenderers
 A.3.Approval of Tender Documents: includes the

checking, renewal and approval of tender documents.
 Check list is best practice for Tender Documents
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
B. 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 to15 days.
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.
B.2.Clarifications: -can either be requested by interested

bidder or carried out using a pre-tender clarification
meeting.
 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 including the issues clarified.
 Late bids are automatically rejected.

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11/24/2021 30
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

MWUD, Project Owner, Consultant (if available), and
Contractors (Who wish to attend) by themselves or by their
legal 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,
3. Check the tender is the right one,
B.3. Tender Opening…
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
• The following is bid recording format for basic data during opening
C. Tender Evaluation Phase: meant to determine the winner

based on:
 Technical qualification,
 Completion time,
 Commercial terms of the offer, etc
 Note: -Least bidder may not necessarily be the winner.
C.1. Preliminary Evaluation: includes Eligibility and Arithmetic

Review requirements.
• Eligibility Requirements: Tenders are subjected to eligibility

qualifications before they enter to bid and their respective
evaluations.
 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.
• 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.
Arithmetic Review
 Most tenders are often submitted hastily and it is
common to have arithmetic error.
 Evaluation without arithmetic check will
ultimately result in despites.
 Therefore, it is a formal evaluation process to
review arithmetic before carrying out detail
evaluations.
 Note: -Arithmetic review can be done if and only

when financial proposals are opened.
C. 2. Detail Evaluations: include Technical, Commercial and

Financial Qualification requirements.
 Critical evaluation of Technical and Commercial offers will
be carried out to ensure common bases for evaluation.
 Finally, the Financial offer will be updated using Absolute
Results from Commercial comparisons.
 Technical Requirements: Will be carried out according to
the criteria set. E.g. Pre –Qualification Criteria.
C. 2. Detail Evaluations:-
 Commercial Evaluation
 This includes Benefit Forgone due to Completion Time;

Additional Costs due: to differences in Foreign Currency
Exchange and Advance Payment requirements; and
Provisions of Domestic or Regional Preference Margins.
C. 2. Detail Evaluations:-
 Commercial Evaluation…
1. Benefit Forgone due to Completion Time

 The Benefit Forgone (BF) due to additional completion
time can be computed using the following expressions:
 BF = (FV –TO) / (1 + i)n; FV = TO (1 + i)n
Where; TO = Tender Offer after Arithmetic Check;

n = Completion time in days
i = Discount Rate = 0.05% per day
=1.5% per month;
FV = Future Value
Commercial Evaluation…
2. Additional cost due to:
1. Foreign Currency Exchange requirements
 Used when the tenders have provisions to quote different currencies
 Comparison will be made based on the effects due to the additional
cost incurred from variations in currency exchange requirements.
 Then every currency is converted to a Common Currency.
 For currency conversion, selling rates of Bank published by an official
source and applicable for transactions shall be used.
 Additional cost due to Foreign Currency Exchange requirements can

then be determined using selling rates at:
 15 days prior to tender submission date
 Tender Opening Date
 Decision for Award or Expiry of Tender Validity date
2.2. Additional Cost due to Advance Payment

 Occurs when different amounts of advance payment are requested
as part of the tender offer.
 The Additional Cost due to differences in mobilization advance
requirements can be computed from the following expressions:
APAC= {(AP x TO) / 100} –PV;
PV = A x PWF;
A = {(AL%) x TO} /n;
PWF = {(1 + i)n–1} / {i(1 + n)n}
Where; AP = Advance Payment Requirement in %;

TO = Tender Offer after Arithmetic Check;
i = Discount Rate = 0.04 % per day;
n=Completion time in days
PWF = Present Worth Factor;
PV = Present Value
A=Advance payment
Domestic and /or Regional Preference

 Domestic or regional preference margin is a provision to give
preference to local companies even if their bid offer is not
over by a percentage often equals 7.5 -10 % for construction
works.
 Eligibility criteria for performance margin are usually set.

Financial Offer Comparison
 Financial Offer Comparison: After all commercial
comparisons are considered on the same bases; the Tender
offer will be adjusted based on the Cost -Benefit principle
which involves adding costs and benefits foregone. That is:
 TO evaluated = (TO + BFCT + ACAP + ACFE + ACPM)

TO= Tender offer
BFCT = Benefit forgone due to completion time
ACAP= Additional cost due to advance payment
ACFE= Additional cost due to foreign exchange
ACPM= Additional cost due to preference margin
 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.
Tender Evaluation
• Preliminary Evaluation: -Eligibility Responsiveness and
Arithmetic Review.
• Detail Evaluation: -Commercial and Equivalent Financial

Offer Comparisons.
• Commercial: Benefit Forgone due to Completion Time;

Additional Costs due to differences in Foreign Currency
Exchange and Advance Payment requirements; and
Provisions of Domestic Preference Margins.
• Finally the equivalent financial offer is computed.

• Checks on front loading shall also be carried out.
Example –Tender Evaluation
Eligibility Requirement
Commercial Evaluation
APAC= Advance
Additional cost
AL
(%)
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.
 Lowest responsive offer is found unreasonably high.

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ADAMA SCIENCE AND TECHNOLOGY UNIVERSITY

DEPARTMENT OF CIVIL ENGINEERING

Course Title: Construction Planning and Management

Procurement can be classified based on the things to

 Results in better cost

 B –1.2 -Limited Tendering - only those passing a certain

 B –2. Negotiated Tendering - Direct appointment of an

• Used for very large engineering projects.

 The Bidders to: to give sufficient time to assess the cost of

 GPN–is of two types based on purpose & time of notice.

 Specific Procurement Notice (SPN)–is an Invitation to

Single or Two Staged Tendering:

• Two Staged: When the bidders submit separate

2. When two staged tendering is used to pre-qualify

 Advantage -the lowest bidder will not loose and

 However, Post qualification approaches often cause

 A.3.Approval of Tender Documents: includes the

B. Tendering Phase: includes Invitation, Clarification,

B.2.Clarifications: -can either be requested by interested

 Issues clarified shall be sent (written) to all bidders

 The bidders shall submit their offer on or before the

 Late bids are automatically rejected.

B.3. Tender Opening: Bids shall be opened in public on the

 Ethiopian practice (public):Two representatives from

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

C. Tender Evaluation Phase: meant to determine the winner

C.1. Preliminary Evaluation: includes Eligibility and Arithmetic

• Eligibility Requirements: Tenders are subjected to eligibility

 Most often sited issues considered in eligibility

• Responsive to Tender is based on the deviation from the

 Note: -Arithmetic review can be done if and only

C. 2. Detail Evaluations: include Technical, Commercial and

 This includes Benefit Forgone due to Completion Time;

1. Benefit Forgone due to Completion Time

 BF = (FV –TO) / (1 + i)n; FV = TO (1 + i)n

Where; TO = Tender Offer after Arithmetic Check;

 Additional cost due to Foreign Currency Exchange requirements can

2.2. Additional Cost due to Advance Payment

Where; AP = Advance Payment Requirement in %;

Domestic and /or Regional Preference

 Eligibility criteria for performance margin are usually set.

 TO evaluated = (TO + BFCT + ACAP + ACFE + ACPM)

• Detail Evaluation: -Commercial and Equivalent Financial

• Commercial: Benefit Forgone due to Completion Time;

• Finally the equivalent financial offer is computed.

Rejection of All Tenders:

 All Tenders are found non –responsive during the

 Evidences of lack of competitions such as collusion among

 Lowest responsive offer is found unreasonably high.

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