13. Contract Planning and Contractor Selection Flashcards
Describe the three stages in contractor selection?
The Invitation to Tender. The first stage is begun by the Promoter inviting one or more parties to submit offers to undertake the work.
The Submission and Receipt of an Offer. The second stage involves each tenderer submitting the results of their tender activities. The contents of this submission will depend on the rules set out within the invitation to tenderers but in effect it represents the Contractor’s offer - one part, of course, of the formation of a simple contract.
The Consideration and Acceptance of the Offer. The third stage will involve the Promoter and its project management team evaluating each offer. It may be that one tenderer is selected but is not accepted unconditionally. As we saw earlier this forms a counter offer and thus the process of negotiation has begun. When both parties are satisfied and an unconditional acceptance of an offer has taken place, the formation of a formal contract, if required, can begin.
List the three distinct stages of documents in the contractor selection process.
- Tender Enquiry Documents
- Tender Documents
- Contract Documents
Describe tender enquiry documents.
Sometimes abbreviated to Enquiry Documents, these comprise the documents involved in the first stage of selection - the Invitation to Tender. They include all the documents which are issued to tenderers and which prescribe the principal’s requirements for the preparation and submission of bids and the performance of the work under the Contract. Clear and unambiguous documentation is vital.
Important information includes:
• The source of the Conditions of Contract, e.g. a model form, an in-house form, a specially prepared form or a contractor proposed form. Forms of Conditions of Contracts will be discussed later.
• The type of pricing schedule, e.g. Bill of Quantities, Schedule of Rates, Activity Schedule.
• The freedom given to the Contractor in preparing the pricing schedule.
• The nature of information required in the contractors tender and the use of pro-forma for such information, e.g. programme, proposed subcontractors.
• Method of construction / fabrication, proposed resources.
Describe tender documents.
Documents involved in the second stage - the Submission and Receipt of an Offer. They are all those documents that comprise tenderers offer; they form the actual tender to be submitted.
Describe contract documents.
Those involved in the third stage - the Consideration and Acceptance of an Offer, and are also the formal documents that are used during the management of the contract. They comprise all the documents referred to in the contract agreement and must incorporate all amendments made to the Enquiry Documents and Tender Documents arising from negotiations before the signing of the Contract.
Describe the tender invitation ‘open competition’.
On face value, open competition between all contractors who express an interest may appear to offer the principal the greatest value. This is not always the case, apart from the smallest of projects, as those contractors who are not particularly suited for the work can apply.
Describe the tender invitation ‘pre-qualification: select competition’.
This is to ensure that those contractors who eventually tender for the work have appropriate experience, expertise and capacity and are financially sound. A full prequalification procedure may include:
• Either press announcement requiring response from interested firms or direct approach to known acceptable firms.
• Issue by the promoter of brief contract descriptions including value, duration and special requirements.
• Provision of information by the contractor including affirmation of willingness to tender, details of similar work undertaken, financial data on number and value of current contracts, turnover, financial security, banking institutions, and the management structure to be provided with names and experience of key personnel.
• Discussions with contractors key personnel.
• Discussions with other promoters who have experience of the contractor.
Pre-qualification can be done specifically for the contract, and periodically to update standing lists of contractors acceptable for various types of work and contract values.
Describe the tender invitation ‘two stage’.
stage A contractor is selected competitively, but early in the design process. The tender documents contain approximate quantities of the major value items. As design and planning proceeds the final tender is developed from cost and price data supplied with the initial tender. There is a separate technical and commercial assessment; eliminating bidders at each stage as more information is tendered, e.g. for a design competition.
Describe the tender invitation ‘negotiated’.
In some cases the principal may know exactly which contractor is required for the work. This may be simply because there is only one available or because that contractor has worked very successfully for the principal in the past. Negotiation is also not restricted to one contractor but may simply be a very informal tendering process.
Describe the issues to consider when applying tendering rules.
- Dealing with Queries. Tender queries should be in writing and question and answer given to all tenderers. Any meetings with tenderers should be minuted.
- Presentation and Submission of Tenders. Clear instructions must be given about the timing of submission and the form and format of the information requested.
- Special Features of Tender Evaluation. Tenderers should be advised of the main points that will be considered in the evaluation.
- Tender Opening Procedure. Tender opening for major contracts should be by panel including at least one independent. A formal minute of the process should be prepared and signed. The original of all pricing schedules should be evidenced.
- Site Inspection Arrangements. Site inspections must be planned, controlled and minuted. Only issues relating to site facilities should be discussed.
- Late Tenders and Extension of Tendering Period. Generally late tenders should not be accepted and be returned unopened.
- Qualified Tenders and Alternative Tenders. Qualified tenders may endanger possibility of award. Where possible the tender should be priced unqualified with an alternative being offered for the condition which the tenderer would prefer not to accept.
- Treatment of Errors. Any errors or changes advised before the tenders are opened should be treated as if they were the original tender. Any changes or errors advised after tenders are opened should be treated with caution and only be accepted in exceptional circumstances where the tenderer can fully justify the change as the result of clarification of workscope
- Publication of Tender Results. All tenderers must be advised of the outcome. However the successful tender should be formally accepted before the award is made public.
- Commencement Date. Contract documents should be signed upon award and before work commences. In some cases it may be necessary to issue a or Letter of Intent. This should always be for a limited duration and price and is discussed in more detail later.
Describe the factors to consider when carrying out a tender submission evaluation.
- Responsiveness to the Tender Documents. The response to the requirements and the quality of the tender documents can be a good indicator of the suitability of any particular tenderer.
- Acceptability of Alternative or Qualified Tenders. All qualifications must be assessed for their commercial impact and bids normalised to take account of this. Evaluation should be based on both base and alternatives if they are acceptable.
- Arithmetical Errors. Arithmetical errors should be corrected before evaluation. Tenderers should be advised of any errors.
- Adequacy of Resources. The contractor’s current and planned workload must be taken into account in evaluating the adequacy of resources. The quality of the resources must also be evaluated.
- Differences in Timing of Payments. The differences in timing of payments must be included in the commercial evaluation. Discounted Cash Flow techniques should be used.
- Reasonableness of Advance Payments. Advance payments should be avoided where possible. If they are to be made a Repayment Bond should be obtained to protect the promoter against non-performance.
- Different Contract Duration. This must be evaluated both in terms of cost impact and project schedule.
- Whether to give a “Margin of Preference” Price Comparison. This should only be considered where there is an incumbent contractor and should be limited to the additional costs associated with changing out the contractor.
