DEPARTMENT OF CONSTRUCTION
TECHNOLOGY & MANAGEMENT
CONTRACT ADMINISTRATION (COTM 4504 )
Introduction
Lecture 1
General Introduction
Construction Industry is an industry which is
involved in the planning, execution and
evaluation of all types of civil works.
The Construction Industry can be categorized into
three major sectors; namely,
Transport and Communication (Road, Railway,
Airway, and Telecommunication related physical
works);
Water and Energy Works; and
Buildings and Other Physical Infrastructures.
The main players in the construction industry are:
The Client: The client is the initiator and owner of
the project
The Consultant: The consultant transfers the wish
of the owner into realizable form and makes the
study, design and possibly the supervision.
The Contractor: The contractor is the one who
performs the work.
Insurance Companies: Insurance companies
provide bid bonds, performance and payment
bonds, and they also service the liability and
property insurance needs of contractors.
Banks: Banks provide the working capital
contractors need to build the project. Banks
also provide bonds for bid and performance.
Suppliers
Permitting Agencies: represent the interests of
public safety.
Public
Stages in Construction
1-Inception and feasibility
the owner puts his visions and wishes
owner will heirs a consultant to formally
design and develop the concept into a
practicable project.
2-Planning and Design stage
At this stage the consultant plans and designs
the project based on the owner’s requirement
and the possible constraints.
3-Tendering stage
At this stage contractors are invited to offer
their best technical and financial offers as per
the conditions and specifications depicted in
the contract documents
4-Bid Evaluation / Evaluation of Tenders
The bids are evaluated based on:
Compliance with the contractual terms and
conditions, Correction of bid prices, Detailed
analysis.
5-Award of Contract
The formal Steps might include:
Write a letter of acceptance
Write the letter to proceed with the works
Performance bond: 10% a guarantee that he
will do the job as per agreed
6-Construction Stage
Here is where the actual execution of the
works takes place as per scheduled.
7-Commissioning and Acceptance
Commissioning is a process where by the
contractor makes sure that all installed
mechanical or electrical parts are operational
Acceptance has to stages:
a. Provisional acceptance:
In this acceptance, the client accepts the
completed works on provisional basis for a period
one year.
During this period all payments except the
retention money are paid.
The other option is to release the retention
money and require for a bank or insurance
security.
b. Final acceptance:
At this stage the owner completely accepts
the works executed and the retention money
is released to the contractor.
Introduction to Procurement
The Project Owners’ to acquire the five rights
(Counterpart, Cost, Time, Quality and
Quantity) s/he is entitled to
The Project Financiers’ and Regulators’ to
value market principles and effective
utilization of finance such that lowest
qualified bids takes the project , and
The Project Providers’ to get impartial and
neutral Opportunity for business.
Procurement is a process used to select the
lowest competitive and qualified bidder for
procuring services or works or goods from
potential competitors based on reasonable
relevant criteria.
Type of Procurement
Procurement types can be classified based on
the things to be procured and the way how
they are procured.
Bases Things Bidders Geographical Procurement Procurment
procured coverage Coverage Awareness steps
Types Goods Competitive International General PN Single
Services Negotiated Regional Specific PN Two Staged
Works National Pre –
Local Qualification
Post -
Qualification
Bidders’ Coverage: Competitive Vs
Negotiated Tendering
Competitive Tendering: The objective of
competitive bidding is to acquire the goods, or
works, or services at the most economic cost
to the project owner
is commonly 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 their
invitations.
Open competitive bidding allows all eligible
bidders to participate;
Limited competitive bidding allows a number of
selected firms decided by the Project Owners in
consultation with concerned parties for
qualification
Limited Competitive Bidding is often used when
the nature and urgency of the work justifies to do
so.
In this case limited numbers of eligible firms are
invited to participate for the bid.
Commonly short listing is done based on the
firms past performance, work load at present,
presence of a firm in the vicinity of the projects,
knowledge of similar type of works before and
financial and technical capabilities of the firms.
Negotiated Tendering
Under certain circumstances, which shall be rare
in practice, direct appointment of an eligible firm
can be exercised by Project Owners.
The nomination of this direct invitation is usually
based on good performance, acquaintance with
the Project Owner, for supplementary
agreements, etc.
This kind of tendering is exceptionally exercised
when the project under consideration is very
urgent or needs special skill whereby the
required skill is rarely available.
The main disadvantage of this type of
tendering is that the price offered can usually
be higher than the competitive bidding.
Geographical Coverage: International Vs
Regional Vs National Vs Local Tendering
Such types of procurements are generally
caused by three major factors.
These are
Local Capacity,
Financial Sources and
Globalization.
Procurement Awareness
To enhance proof of competition and increase
accessibility, projects are recommended to
create awareness starting from its initiation.
GPN is made during projects planning phase
and it is only interests of the bidders are
aroused because sufficient tender documents
are not available
Specific Procurement Notice (SPN) is an
Invitation for Tender or a Request for Proposal
when the project is ready for implementation.
SPN can be sent to those interested bidders
identified following GPN directly.
Otherwise, it should be advertise on the bases
of enlarging opportunities.
This approach is used:
1. The Project Owners to
identify interested bidders to issue Invitations by
letters and save time;
identify bidders relevant for the procurement
required; and protect loss of cost in preparing
lots of tender documents.
2. The Bidders to:
give sufficient time to assess the cost of the
project; protect loss of cost only to participate
Procurement Steps: This includes Single Vs Two Staged;
and Pre - Vs Post - Qualification
Tendering.
Single or Two Staged Tendering: Procurement can be
made using a single or two staged tendering process.
They are related with whether tender packaging for
submission separately and their evaluations are staged
for a single or two steps when invitations are made.
Often two staged biddings are made for the submission
of technical and financial proposals separately and
their evaluations one after the other.
Pre or Post Qualification Tendering:
Procurement can also be based on Pre - or Post – Qualification
processes.
Prequalification is an internationally accepted practice in
procurement management.
It would normally be required for civil works contract of which its
nature and cost is large and complex.
It is a procedure in which eligible bidders are invited to provide
evidence of their ability to perform the services required by the
employer.
Prequalification is desirable because it enables the Employer to
establish the competence of companies subsequently evaluated.
It is also in the interest of contractors since, if prequalified, they
will know that they are competing against a limited number of
other firms, all of whom possess the required competence and
capability.
Pre - qualification can be of two types.
The First is when companies are already
considered qualified during their licensing
requirements which entitled them for a single
stage tendering process.
For such types of tendering, the most important
tender evaluation criteria become the low priced
bid.
The Second is when two staged tendering is used
to pre-qualify tenderers’ for their technical
competency
Once bidders qualify for the tender, 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.
The advantages of pre - qualification in
procurement are:
To the Employer To the Bidder
Protect the employer against Saves bidders from the cost of
unqualified bidders preparing bids
Quicker Evaluation for only Assure pre-qualified bidders
pre-qualified for their bid considerations
Bidders Make bidders to be better
Ensure award to least planned
evaluated not lowest bidder
Assess level of interest shown
by bidders Show competency &
methods of
implementation
Pre - qualification should be based entirely on the
ability of the bidder to carry out the required works
satisfactory.
The following criteria are often used in determining
this ability of the bidder;
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.
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.
That is, Technical Evaluation will be done after the Financial
Evaluation.
However, Technical Evaluation is performed step by step
starting from the lowest financially evaluated bidder until
technically or cumulatively qualified bidder is determined.
The advantage of this approach is not to loose the lowest
financially evaluated bidder and to save time during technical
evaluations..
Procurement Management
Procurement Management process can be
idealized into three major processes.
These include Preparation, Tendering, and
Evaluation (including AwardRecommendation)
Processes
Procurement Preparation phase is meant for
the formation of a Procurement Team;
the preparation of Tender Documents and
their approval for procurement
implementations.
Procurement Team: Ethiopian Procurement
Regulation states that a Procurement team
consisting of a minimum of five members shall
be established.
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 or Terms of References;
3. Prequalification Documents if necessary
4. Forms of Tender
5. Forms of Contract Agreement
6. General and Particular Conditions of Contract
7. Bill of Quantities and Drawings
8. Technical Specifications & Methods of Measurement
9. Other Forms, Formats and Schedules
Approval of Tender Documents: Regulatory
requirements enforced for:
Budgeting, Credit, Assistance and Grant
Policies;
Health, Safety and Environmental
Requirements; and
Professional, Ethical and Legal Requirements
And demand checking, renewal and approvals
of Tender Documents.
Tendering Phase includes Invitation,
instruction to tendererers, Clarification,
Submission and Opening of tenders.
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.
Instructions to Bidders
The Instructions to Bidders (ITB) inform Bidders
of the procedures that regulate the bidding
process.
The ITB contain standard provisions that have
been designed to remain unchanged and to be
used without modifying their text.
The ITB clearly identify the provisions that may
normally need to be specified for a particular
bidding process and require that such details be
introduced through the BDS.
Conventionally the Instructions to Bidders
contain information and data relating to the
procedure for bidding and evaluation up to
the point of contract award.
Bid Data Sheet
The Bid Data Sheet (BDS) supplements the ITB
by specifying details relevant to an individual
bidding document such as its closing date or
the value of bid security required.
The Employer must specify in the BDS only the
information that the ITB request be specified
in the BDS.
All information shall be provided; no clause
shall be left blank.
Input of Information to be completed by
Employer(BDS)
Instructions to Data relevant to the ITB
Bidders (ITB)
reference
A. General
A Bidder shall submit with its bid the documentary evidence
ITB 3.2 specified in ITB Clause 3.2. [Amend if no documentary evidence is
required e.g. if this has been verified during a pre-qualification
exercise].
The documentary evidence required shall be amended as follows:
[amend if any alternative or additional documents are required].
ITB 3.2(a) The mandated public body for the registration of contractors is: [insert public body responsible for contractor
registration for the works being purchased e.g. “Ministry of Infrastructure” or “Ministry of Water Resources”].
ITB 7.2 The Employer [insert “will” or “will not”] hold a pre-bid meeting.
If a pre-bid meeting is being held, it shall take place at:
Location: [insert full address for pre-bid meeting].
Date: [insert day, date, month and year of pre-bid meeting e.g. Monday 15th November 2004]
Time: [insert time and identify if a.m. or p.m. e.g. 11.00 a.m.]
The Employer [insert “will” or “will not”] hold a site visit.
If a site visit is being held, it shall take place at:
Location: [insert full address for site visit].
Date: [insert day, date, month and year of site visit e.g. Monday 15th March 20]
Time: [insert time and identify if a.m. or p.m. e.g. 11.00 a.m.]
[For major contracts, it is good practice for the Employer to organise a pre-bid meeting, which provides
the opportunity of providing information and a session for questions and answers. A site visit should
also be arranged where possible.]
B) Bid Document
ITB 9.1 Clarification purposes only, the Employer’s address is:
Attention: [insert full name of contact person]
Address: [insert street address and number]
Floor/Room number: [insert floor and room number, if applicable]
Town/City: [insert name of city or town]
PO Box No/Postal Code: [insert postal, or PO Box No if applicable]
Country: [insert name of country]
Telephone: [insert telephone number, including country & city
codes]
Facsimile number:[insert fax number, including country & city code]
Email address: [insert email address, if applicable]
Schedule of Requirements
The Schedule of Requirements (SOR) informs Bidders
of precisely what the Employer wishes to procure.
The Schedule of Requirements should provide
sufficient information to enable bidders to efficiently
and accurately prepare bids that are realistic and
competitive and to ensure that bids meet the
Employer’s needs.
The SOR must be prepared by suitably qualified and
experienced staff. The specifications, drawings and the
completed bill of quantities or activity schedule will
form part of the Contract.
The Statement of Requirements consists of
four parts:
1.Scope of Works
2.Technical Specifications
3.Drawings
4.Bill of Quantities or Activity Schedule
Scope of Works
The Employer should provide a description of
the works, including approximate quantities of
major items, which adequately describe the
contract scope of work.
Additional information that may be included
is:
Site location
Climate and weather information
Site investigation studies and reports
Topographical data
Access details
Details of other ongoing or future works to be
carried out by other contractors during the
Contract period
Information regarding disposal, borrow and
quarry areas including royalty payments as
applicable
Any other pertinent information regarding the
site and the works
Technical Specifications
A set of precise and clear specifications is a
prerequisite for Bidders to respond
realistically and competitively to the
requirements of the Employer without
qualifying or conditioning their bids.
present a clear statement of the required
standards of workmanship, materials, and
performance of the related goods and services
to be procured
Drawings
Any notes on the drawings should use the same
terminology as used in the rest of the bidding
documents.
A simplified map showing the location of the Site
in relation to the local geography, including major
roads, posts, airports and railroads, is helpful.
The construction drawings, even if not fully
developed, must show sufficient details to enable
bidders to understand the type and complexity of
the work involved and to price the Bill of
Quantities.
Bidding Period and Bid Receipt
The Bidder is responsible for the preparation and
submission of its Bid.
During the bidding period, the Procuring Entity
shall:
Hold any pre bid meeting or site visit and issue
minutes promptly;
Promptly respond to requests for clarifications
from Bidders;
Issue amendments to the Bidding Documents if
necessary;
Receive and record sealed bids from Bidders
or make a Bid Box available up to the deadline
for bid submission;
Close bidding at the precise date and time of
the deadline and ensure that no late bids are
received; and
Keep all bids received secure until the time for
bid opening.
Clarifications can either be requested by
interested bidder or carried out using a pre –
tender clarification meeting.
In both cases, 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. Late
bids are automatically rejected.
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 in tender opening for public
construction projects is that, two representatives
from MWUD in addition to the Project Owner,
Consultant (if available), and Contractors (Who
wish to attend) representatives shall attend
during the tender opening ceremony.
The following will be carried out during tender opening:-
Tender Attendee members shall take their place and be
registered,
Tender box opened and checked for faulty things,
Check the tender is the right one, Bids will be opened one
after the other,
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.
Bidders representative shall sign a register to attest their
presence during opening, and
Tender committee members shall sign on the Tender
documents.
Tender Evaluation Phase:
is made to determine and make award
recommendation for the least evaluated bidder
using preliminary and detail evaluations.
The recommended winner may or may not
necessarily be the lowest bidder.
Factors such as technical qualification,
completion time, commercial terms of the offer,
etc are used in determining the least evaluated
bidder.
The Tender Committee shall:
Maintain the bid evaluation process strictly
confidential
Reject any attempts or pressures to distort the
outcome of the evaluation, including fraud and
corruption
Strictly apply only and all of the evaluation and
qualification criteria specified in the Bidding
Documents to determine the lowest evaluated
bid and to make a recommendation for award of
contract to the Tender Committee.
Preliminary Evaluations are made for Eligibility
and Arithmetic Review requirements.
Before commencing the actual evaluation, it is
useful and recommended to complete a Basic
Data Sheet for each tender to record key
information and enable coding.
Eligibility Requirements:
Tenders are subjected to eligibility qualifications before
they enter to bid and their respective evaluations.
Valid & Up to date Trade and Professional License,
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.
According to PPA(Eligibility)
A bidder shall:
Have the legal capacity to enter into a contract;
Not be insolvent, in receivership, bankrupt or
being wound up,
not have had their business activities suspended
and not be the subject of legal proceedings for
any of the foregoing; and
Have fulfilled their obligations to pay taxes
according to the laws of the Federal Democratic
Republic of Ethiopia
If the bidder offer provided weighs a major
deviation from the tender condition, the tender
will be considered non - responsive and could not
be further considered.
But if it is minor deviation, either the
procurement team use their discretionary power
to request clarification or
the case will be recorded and taken up during
negotiation if the respective winner become the
least evaluated tender.
Major Deviations Minor Deviations
Affecting the validity of Do not affect the project
the bid triple constraints
Rejection or Disqualifying Do not result in change of
conditions stated Bid Price
Substantial effect on the Non conditional tenders
Bid Price
Arithmetic Review
Most tenders are often submitted hastily. As a
result, tenders are not arithmetic error free.
If tenders are processed without arithmetic
checks, on the first place tenders are not
evaluated on the bases of equal merits and
if they become binding contracts being over-
sighted, they will be the cause for potential
disputes.
Arithmetic review can be done if and only when
financial proposals are opened.
Detail Evaluations include Technical, Commercial
and Financial Qualification requirements.
Evaluations at this stage should first and foremost
critically see the technical and commercial offers
and establish system that can ensure common
bases for comparison.
Finally, the Financial offer will be updated using
Absolute Results from Commercial comparisons
Bid Acceptance and Contract Award and
Placement
Bid acceptance and award and placement of a contract
can be confusing for both parties if there is not a
precise and specified procedure for award of contracts
The procedure specified in the Proclamation and
Directives provides a sequence of events based on the
need
to recognise Bidders’ rights to appeal against the
conduct of the evaluation and
the need for a contract to be placed as soon as is
practical after a decision to award has been approved
The following procedure is required under the
Proclamation and Directives:
The head of the Procuring Entity makes a contract award
decision, based on the recommendation of the Tender
Committee.
The Procuring Entity notifies all Bidders of the result of the
evaluation.
After a period of five working days, if no complaint has
been received by the Procuring Entity, the PE awards the
contract by issuing a Letter of Acceptance to the successful
bidder.
The contract will be confirmed by issue of a full conformed
Contract Document.
PEs should note that the Letter of Acceptance
and the Contract Document should not
contain any provisions or conditions which
vary from those in the Bidding Document, or
the Bidder’s Bid, including any subsequent
clarifications.
Any such modifications should be agreed by
the Bidder in writing before a contract award
decision is made.
Thank You !
