(UNIT-4)

Construction procedures

Dr. V.P SINGH

CED, MNNIT, PRAYAGRAJ
 Tender
 A tender is a written offer presented before an owner
(department) showing interest to perform the
specified work within the specified time under
agreed conditions.

 Tendering usually refers to the process whereby

governments and financial institutions invite bids
for large projects that must be submitted within a
finite deadline. 

 A tender offer is a public solicitation to all

shareholders requesting that they tender their stock
for sale at a specific price during a certain time.
Types of tenders
The four main types of tender
I. Open tender
II. Selective tender
III.Negotiated tender
IV.Single-stage and two-stage tender

Ⅰ. Open tender

 Open tendering is the main tendering procedures employed by both the

government and private sector. Open tendering allows anyone to submit a
tender to supply the goods or services required and offers an equal
opportunity to any organization to submit a tender.

 This type of tender is most common for the engineering and construction
industry. Open tendering provides the greatest competition among
suppliers and has the advantage of creating opportunities for new or
emerging suppliers to try to secure work. However, not all those who bid
may be suitable for the contract and more time is required to evaluate the
tenders.
Ⅱ. Selective tender
 Selective tendering only allows suppliers to submit tenders
by invitation.
 These suppliers are those who are known by their track
record to be suitable for a contract of that size, nature and
complexity required.
 Selective tendering gives clients greater confidence that
their requirements will be satisfied.
 It may be particularly appropriate for specialist or complex
contracts, or contracts where there are only a few suitable
firms.
Ⅲ. Negotiated tender
 Negotiated tenders are extensively used in the engineering
and construction industry commencing from tendering till
dispute resolutions.
 Negotiating with a single supplier may be appropriate for
highly specialist contracts, or for extending the scope of an
existing contract. Costs are reduced and allows early
contractor involvement.
Ⅳ. Single-stage and two-stage tender
 Single-stage tendering is used when all the
information necessary to calculate a realistic price
is available when tendering commences.
 An invitation to tender is issued to prospective
suppliers, tenders are prepared and returned, a
preferred tenderer is selected and following
negotiations they may be appointed.
 Two-stage tendering is used to allow early
appointment of a supplier, prior to the completion
of all the information required to enable them to
offer a fixed price.
 In the first stage, a limited appointment is agreed
to allow work to begin and in the second stage a
fixed price is negotiated for the contract
 Tender preparation
Steps in Tender Preparation
 Project formulation: In this step, the project's
necessity is identified, and a cost-benefit analysis is
done.

 Detail Design cost estimation :To estimate design

cost you first enter or edit these costs for each action
item within a project. The program then rolls up all of
your action costs for the entire project.

 Approval of cost estimate: approve cost estimates is

the Cost Estimate or, if lower, the revised Cost
Estimate approved by the Owner in the Construction.
 Tender document preparation: A tender is a
submission made by a prospective supplier in
response to an invitation to tender.
 It makes an offer for the supply
of goods or services, including a price and proposal
for how the requirements will be satisfied if these
have been requested.

 Tender Invitation: An invitation to tender  is a

formal invitation to make an offer for the supply
of goods or services.
 It might be issued for a range of contract,
including:
E-tendering process
Source- Google
 Tendering Process
 Tendering is the process of inviting bids for large
projects, it is usually practiced by
government institutions.
 The main objective of the Tendering Process in
Construction is to eliminate favoritism and
corruption in awarding works to
construction companies.
Tendering Process In Construction
I. Pre-tender Stage
II. Tender Advertisement Stage
III. Closing of Tender
IV. Tender Opening Process
V. Tender Evaluation Process
VI. Tender Award
Ⅰ. Pre-tender Stage
 At the pre-tender stage, when the clients have an idea,
the client will appoint a consultant to discuss further the project.
 The consultant will do their job, advising, managing the tender
and contract, and also transferring the idea into the drawing.

Ⅱ. Tender Advertisement Stage

 The tender advertisement is also called tender notice.
The conventional tender notice will advertise in the
local newspaper.
 In the tender notice, the basic requirement that should
be appearing are:

a) Title of the project.

b) Class of contractor, head, and subhead needed.
c) Location, date, and time to obtain the tender document.
d) Fees for tender documents.
e) Location, date, and time for submission of tender doc.
Tender Advertisement Stage
Source- Google
Ⅲ. Closing of Tender
 The tender notice will mention the time and date of the
tender closing process.
 If the contractors fail to submit their bids within
a specific time and date, it considers the
contractors’ refusal to bid for the tender. At that time also
the tender validity period is started.
Ⅳ. Tender Opening and Evaluation Process
 Quantity surveyors usually will handle the tender opening
process. To ensure the integrity of the
competitive process, the evaluation of proposals must
be undertaken objectively, consistently & without bias
toward particular suppliers.
 Tenders are generally evaluated against a pre-
determined set of criteria. The evaluation of the tenders
shall be prepared the soonest as possible after the tender
opening.
Ⅴ. Tender Award
 An evaluation team will examine each
tender received and make recommendations as to
which tender represents the best value for money. 
 Once the contract has been finalized and work has
been awarded, both the successful and
unsuccessful tenderers will be notified.
 Pre–qualification of contracts
 Contractor prequalification is an information
gathering and assessment process that determines a
contractor’s capability, capacity, resources,
management processes, and performance.
 Typical subject matter areas include financial
capacity and surety, work history, licensing and
qualifications, management standards and,
regulatory, quality, safety, and environmental
performance data.
 When used by local government, the potential
bidders on projects are audited to assess their
prequalification standing before bids are accepted.
Only those bidders that are prequalified will be
invited to submit a bid.
 The Requirement for Prequalification of Bidders
 This document relates specifically to the selection of
competent contractors, prior to the issue of the
invitations to bid, a procedure known as
prequalification.
 Prequalification of contractors is recommended for large
or complex works and, exceptionally, for custom
designed equipment and specialized services.
 Prequalification is also desirable in other
circumstances, for example, in sector projects with a
programmatic approach, and when a large number of
contracts are let on a “slice and package” basis.
 The qualification of a contractor is a separate process
from the bid evaluation procedure, which concentrates
on the price and merits of the bid itself.
Benefits of Prequalification
 The prequalification process is of advantage to
contractors and purchaser alike.
 The prequalification process enables contractors,
who may be insufficiently qualified on their own, to
avoid the expense of Bidding or to form a joint
venture, which may give a better chance of success.
 The assurance that competitors which lack the
necessary qualifications will be excluded from
bidding thus encourages leading contractors or
suppliers to bid.
 The well-qualified firms may also price their bids
more competitively with the knowledge that they
will only be competing with other qualified bidders
meeting realistic minimum competence criteria.
Basis for Prequalification
 Under Bank-financed projects, the purchaser is responsible
for preparing the prequalification documents and evaluating
the applicants.
 The prequalification documents should provide a clear basis
upon which prospective bidders can be evaluated, following
an objective process based on fair and transparent criteria.
 The documentation sought should always be relevant, clearly
stated and, so that prospective bidders are not deterred,
should not impose an excessive burden of preparation or
paperwork.
 Prequalification should be denied only to those prospective
bidders who do not meet the specified criteria.
 Thus, those who prepare prequalification documentation for
a project are responsible for ensuring that the criteria are
drawn in accordance with the realistic needs of the project.
Eligibility to Prequalify
 The prequalification process should not be used to
limit the number of bidders, and all prequalified
applicants must be permitted to bid.
 Some agencies maintain registers of firms that
meet pre-set qualification requirements.
 Such registers are not a substitute for the
prequalification process under open bidding.
 Prequalification in Bank-funded projects is open to
contractors, suppliers, and joint ventures from any
country or countries.
Advertisement
 The prequalification of bidders should be advertised
following the procedures for notification and advertising
specified in the Bank’s Procurement Policies and Rules.
 Adequate time for response should be allowed. (See also
the Bank’s Note on the Preparation and Publication of
Procurement Notices).
Prequalification Criteria to Be Pre-set
 A clear statement of the requirements for qualification
should be sent to all applicants who wish to be considered
for prequalification.
 The specific criteria, and the prequalification document as
a whole, must be considered with care as early as possible
in the procurement process.
 However, the prequalification documents should be
issued only when the preparation of engineering designs
and bidding documents is well-advanced, and the works
are reasonably well-defined.
tender evaluation
 The tender notices are been published by
buying/tendering authorities on their respective
websites and various other mediums like local and
national newspapers, aggregating websites.
 The ones (bidders/contractors) who are interested
submit their commercial and technical proposals
along with pre-qualified bids within the allowed
timeline.
 Once this is done the actual process of evaluation
begins.
 Stages of tender evaluation
 Pre-qualification
 A set of qualified and relevant team members
of the buying/tendering authorities form a
committee to evaluate the tenders. On the pre-
announced location, date and time the pre-
qualification bids are opened in front of the
representatives of bidders.
 During this process, a checklist is used as a
reference to select bidders whose
technical/financial bids would be opened later
as per the tender schedule/notice. As per the
checklist followed by the tender evaluation
committee, it covers details as follows along
with supporting documents:
• Audit reports of last 3 – 5 years

• Relevant license to carry out the project in a given

region/territory

• Necessary background infrastructure required to

run the project

• Necessary industry certifications

• Important mandatory documents like PAN/TIN

number, sales tax/VAT/registration certificates
etc.
 EMD – Earnest money deposit enclosed
 The committee examines pre-qualified bids to
check their completeness of it, the required
documents are signed or not, is required EMD
enclosed and does it have all the supporting
documents.
 If any of the bid doesn’t have the minimum
requirements or is non-responsive in any of the
criteria according to the bidding documents is
been rejected by the committee without any
intimation.
 Evaluation of technical bids
 For the bidders who were successful in clearing the
first step of pre-qualification, the next step is to
clear the technical aspects concerning the
requirements mentioned in the bidding document.
 Tendering authority uses a point-based system
between 0 to 10 (with 0 being the lowest and 10
being the highest), to rate each of the bidders on
lines of below mentioned criteria:

• Bidding organization’s capability in terms of

compliance checks, current licenses and relevant
certificates etc.

• Relevant experience
• Past performance in the same field

• Relevant resources/manpower availability for the

project

• Requirement understanding, and solution design

as per technical specification
 Evaluation of financial bid
 the financial bid evaluation, the lowest commercial
bid is designated as B1, second-lowest as B2 and so
on.
 Considering an example for the calculation to
understand the scoring of B1, B2 and B3 bidders.

 Say B1 gets 75 points.

 Then B2 score would be calculated as follow:

B2=75-(75/B1*(B2-B1))
 Similarly, for B3 score would be calculated below:

B3=75-(75/B1*(B3-B1))
[ the total points scored = Technical bid evaluation
point + Financial bid evaluation point ]
Shortlisted bidder & deciding award of contract
  Once the shortlisting of bidders is done, they are
called for negotiation and project-related
discussion.
 During these discussions, buying authority and
the bidder both get a chance to clarify their doubts
or discuss the project implementation details,
product design details, cost negotiation etc.
 Most of the time discussion is managed by the
administrator, they might be few people from the
finance or project team who would be to clarify the
queries related to it.
 Once both sides have finally achieved clarity a
final contract document or Letter of Award (LOA) is
issued to the bidder.
 Contract monitoring
 
 Contract monitoring is a process of ensuring that a
vendor adequately performs a contracted service.

 The level and type of monitoring conducted by

state agencies is primarily at their discretion.

 State law does not address contract monitoring.

While DOAS offers guidelines for monitoring
contracts, it imposes only minimal contract
monitoring requirements on agencies.
 Causes and Impact of Inadequate Monitoring
 Deficiencies in contract monitoring are related to
violations of good management principles.
Inadequate monitoring is often the result of the
following:
• Poorly established criteria for evaluating vendor
performance.
• Perception of oversight as a responsibility to
develop a partnership rather than enforce rules,
regulations, or contract provisions.
• Focus on rules and regulations rather than
outcomes;
• Failure to conduct follow-up reviews to ensure
that corrective action was taken.
• Failure to identify the risk and level of review
necessary for each vendor.
 Components of an Effective Contract Monitoring
System
 State agencies can mitigate the risks associated with
contracting out services by developing an effective
contract monitoring system.
 The components of an effective contract monitoring
system are detailed below.
 Training in Contract Monitoring
 Training in contract monitoring increases the
likelihood that individuals will monitor contracts
reliably by giving them the appropriate background
knowledge related to contracts.
 Many of the topics that should be included in
contract monitoring training are included in the list
of components of an effective contract monitoring
system.
 Written Policies and Procedures
 Written policies and procedures serve as a guide to
agencies and their personnel in ensuring a
consistent, high-quality contract monitoring
process.
 Contingency Plans
 Agencies without contingency plans risk
interruption of services when vendors default on
their obligations and may pay additional costs for
taking back services.
 A number of options are available for a default
contingency plan: contracting with the next lowest
bidder from the original solicitation; using another
current vendor; delivering the service in-house; and
contracting with another government entity.
 Contract Administration Plan
 A contract administration plan is a cursory view of
planned and completed activities and can be
utilized throughout the contract period as a status
report.
 It should detail the methods that the agency will
use to monitor the vendor and the individuals or
offices that will be responsible for the monitoring.
 Organized Contract Files
 Files should be organized so that someone could
reconstruct and understand the history of the
contract in the absence of the contract
administrator.
 Contract files should hold all the information
necessary to know what was expected and received
under the contract.
 Payments Linked to Satisfactory Performance
 For contracts that involve monthly or quarterly
payments, agencies should require a vendor to submit
programmatic reports in advance of or concurrent with
its invoices.
 The programmatic reports should be directly related to
the terms of the contract.
On-Site Monitoring
 Agency officials should conduct random inspections of
vendor records and the delivery of services to ensure all
terms of the contract are being fulfilled.
 On-site monitoring visits are most effective when based
on a specific methodology or a checklist of review tasks.
 On-site monitoring visits may not be necessary for all
contracts.
 Measuring Customer Satisfaction
 Utilizing methods to measure customer satisfaction
helps to improve vendor performance because the
feedback can be used to notify the vendor when
specified aspects of the contract are not being met.
 In addition, agency officials can use the
information as a source of past performance
information for subsequent contract awards.
 Dispute Resolution Procedures
 The agency should have procedures in place for
the monitoring officials to notify the agency’s
procurement office if a dispute arises.
 Agency officials should provide notification of
problems and a timetable for resolution to the
vendor in written form.
Post-Contract Review
 At the end of a contract period, agencies should
evaluate the vendor’s performance and their own
method of monitoring the vendor.
 Agencies should consider conducting a
programmatic review and a financial audit.
 Settlement of disputes
Disputes
 Disputes is a natural phenomenon when two
individuals or parties work together for a common
goal.
 A combination of environmental and behavioral
factors can lead to construction disputes.
 Projects are usually long-term transactions with
high uncertainty and complexity, and it is
impossible to resolve every detail and foresee every
contingency at the outset.
 Development of disputes give rise to the creation of
claims.
 Settlement of claims is essential for the progress of
work.
Common causes of construction disputes

Acceleration

 Commercial property owners to insist upon

acceleration of a construction project.

 The circumstances surrounding acceleration are

often not properly analyzed at the time the decision
is made, and that inevitably leads to disputes once
the contractor has carried out accelerative
measures and incurred additional costs only to
find that the developer refuses to pay.
Co-ordination
 In complex projects involving many specialist
trades, particularly electrical installations, conflict
often arises because work is not properly co-
ordinate.
 Ineffective management control may result in a
reactive defense to problems that arise, rather than
a proactive approach to resolve the problems once
they become apparent.
Culture
 The personnel required to project work may come
from different social classes or ethnic backgrounds.
Delays
 Disputes frequently arise in respect of delays and
who should bear the responsibility for them.
 Most construction contracts make provision for
extending the time for completion.
Engineer and Employer's Representative
 The personality of the Engineer or the Employer's
Representative and their approach to the proper
and fair administration of the contract on behalf of
the Employer is crucial to avoiding disputes.
Complexity.
Project complexity
 In complex construction projects the need to carry
out a proper risk assessment before a contract is
entered into is paramount: yet this is often not don.
Site conditions
 Disputes are inevitable when adverse site or
ground conditions impede the progress of work or
require more expensive engineering solutions.

Tender
 The time allowed to scrutinize the tender
documents, prepare an outline program etc.
 conclude the whole process with a commercial
review is often impossibly short.
 Mistakes in this process may have an adverse
effect on the successful commercial outcome of the
project.
Types of Disputes
Ⅰ. Contractor’s claims against the client
 claims for refund of money wrongly deducted.
 Claims for extra amount on petty grounds.
 Claims for compensation for losses suffered by
the contractor due to the delay in supply of
construction materials, delay in sanction etc.
 Claims for other accounts under the contract
such as extra payment due, balance payment
etc.
 interest on delayed payment.
 Interest on other claims amount
Ⅱ. Client’s claims against the contractor

 Claims for defective work done by the

contractor.
 Claims for over payments made to the
contractor.
 Claims for expenditure incurred in getting work
done in case of incomplete or abandoned work
through other agencies.
 Claims for liquidated damages for delays caused
by the contractor in completing the work.
 Interest on amounts claimed by the client.
 Other compensation claims for delays caused
by the contractor
Arbitration and commissioning of project
Arbitration
 Arbitration is most popular mode of settling
disputes in building and construction disputes.
 Most construction projects provide for arbitration .
 Helps in imparting justice in a
I. Speedier
II. Cost effective manner
 Determining of disputes by the decision of one or
more persons known as arbitrator.
 Every disputes which can be settled by a civil court
can be settled under arbitration.
Type of arbitration

I. Arbitration without intervention of court.

II. Arbitration with intervention of court and there is

no suit pending.

III. Arbitration in suits.

Need for arbitration

 Arbitration can provide better protection for your

assets by minimizing your risk of large losses
sometimes seen with jury verdicts.

 Arbitration can provide flexibility in scheduling,

versus court where you are told when and where
to show up without much room to negotiate.

 Arbitration can put an end to your case faster.

The time taken by an arbitrator is usually less
than that to get a case to court to resolve a
construction dispute..
Duties of arbitrator
 Duty to follow a natural justice

 Duty to act fairly to both parties – Duty not to

delegate
 Duty to decide according to law
 Duty not to exceed his authority
 Duty to decide all matters referred
 Duty to act together
 Duty not to accept hospitality
Advantages of arbitration
 Faster than litigation in court.
 Cheaper and more flexible.
 Arbitral proceedings and arbitral awards are
generally non public and can be made confidential
 Arbitration awards are generally easier to enforce
in other nations than court verdicts.
 In most legal systems there are very limited
avenues for appeal of an arbitral award, which is
sometimes an advantage because it limits the
duration of the dispute and any associated liability
Disadvantages of arbitration
 The parties waive their rights to access the courts
and to have a judge or jury decide the case.
 If the arbitrator or the arbitration forum depends
on the corporation for repeat business, there may
be an inherent incentive to rule against the
consumer.
 There are very limited avenues for appeal, which
means that an erroneous decision cannot be easily
overturned.
 Although usually thought to be speedier, when
there are multiple arbitrators on the panel, juggling
their schedules for hearing dates in long cases can
lead to delays.
 Discovery may be more limited in arbitration or
entirely nonexistent.
Thank you…