TENDERING COSTING AND APPRAISAL OF MATERIALS

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. In construction, the main tender process
is generally the selection, by the client, of a contractor to construct the works. However, as
procurement routes have become more complex, so tenders may be sought for a wide range
of goods and services. This helps reduce inefficiency and wasted effort in the tender process.

An invitation to tender include:

1. A letter of invitation to tender.

2. The form of tender.
3. Preliminaries (which includes pre-construction information and site waste
management plan).
4. The form of contract, contract conditions and amendments. This might include a
model enabling amendment if building information modelling is being used, to make
a BIM protocol part of the contract documentation.
5. Employer's information requirements if BIM is being used.
6. A tender pricing document (or contract sum analysis on design and build projects).
7. A drawing schedule.
8. Design drawings, and an existing building information model.
9. Specifications.

Tender Schedules Purposes:

1. The tender schedules are needed to allow tenderers to describe their offers in

terms of the evaluation criteria.

2. Establishing the conformity of the Technical Proposal offered by the tenderer

with the Tender Document.

3. Establishing the tenderer's qualifications in accordance with the requirements

of Evaluation and Qualification Criteria.

Tender Schedules Types:

The tender schedules have many types of forms,

1- Letter of Tender

2- Schedules of Prices / Bill of Quantities

3- Form of Tender Security

4- Schedule of Supplementary Information

Tender documents should be broken down into a series of packages (even if there will only be
one main contract) each with its own design drawings and specifications suitable to be issued
by the main contractor to potential sub-contractors. This makes the tender easier to price for
the contractor and easier to compare with other tenderers for the client. It is important when
this is done to ensure that the interfaces between packages are properly identified and clearly
allocated to one package or another. Having too many packages increases the number of
interfaces and so the potential problems. The cost plan (pre-tender estimate) should also be
re-assembled package by package to allow easy appraisal of tenders received.

Clarification

Mid-tender interviews may be arranged to allow clarification of matters that might otherwise
lead to an inaccurate tender being submitted, they can also give the client insights into
potential drawbacks or opportunities in the project as it is described by the tender
documentation.

Responses to queries raised during the tender process can lead to clarification or amendment
of the tender documentation which may also result in an extension of the tender period. It is
better to allow sufficient time during the tender process to investigate opportunities and
clarify problems, as the resulting tenders will then be better prepared and will be likely to
save time and money later.

It is important that any clarification, additional information or changes to the tender

documents are circulated to all of the tenderers to ensure a level playing field. However, this
should not give away a particular supplier's proposed methodology, commercial proposals or
programming advantages, which may have been divulged to the client consultants in
interviews. Such information must be treated as confidential.

Submission

In response to an invitation to tender, invited tenderers will submit their tender, which
will include their price for supplying the goods or services along with proposals for how
the clients requirements will be satisfied if these have been requested.
The precise content of tenders will vary considerably depending on procurement route,
however they might include:
1) A tender return slip, with details of the contract, return address, tender checklist etc.
2) A completed tender pricing document (or contract sum analysis on design and build
projects).
3) Schedules of rates.
4) An initial construction phase plan.
5) Any design proposals or method statements that have been requested.
6) Program.
7) Procedures to be adopted are procurement procedures, cost management procedures.
8) Demonstration of capability, for example design capability and systems used.
9) A BIM execution plan if building information modelling is being used.
10) Key project personnel.
11) Management organization.
12) Plant and labor resources and availability.
13) Prior experience.
14) References.

Variant Bids

Alternative or non-compliant proposals, also referred to as 'variant bids' may be submitted if

the tenderer believes that what they are proposing offers better value for money. However,
non-compliant proposals should only be submitted if they have been requested and should be
accompanied by a compliant proposal.

Qualified Tenders
Qualified tenders are tenders which include reservations or statements made to limit liabilities
if that tenderer is given the contract.

Settlement

In response to an invitation to tender, invited tenderers will submit their tender, which
will include their price for supplying the goods or services along with proposals for how
the clients requirements will be satisfied if these have been requested.Once the client has
identified the preferred tenderer (which may lead further interviews) they may hold a
tender settlement meeting to enter into negotiations. This may result in further adjustment
of the tender documents and the submission of a revised tender
Once tenders have been received, tender negotiations might proceed with two preferred
tenderers prior to selection of the successful bid. They are an opportunity to agree or
clarifying any matters regarding the pricing and quality of the proposed works, conditions
of contract and program. This is the last chance the client and consultant team will have to
negotiate with tenderers while they are still subject to the pressures of competition.
Tender negotiations may involve:
1. Tender qualifications to the proposed contract conditions.
2. Anomalies or clarification in the tender pricing document.
3. Alternative offers to the design or specification.
4. Resolution of provisional sums.
5. The record of the agreements reached needs to be carefully drafted and signed off by
both parties as it will form part of the contract documents.

Contract engrossment and execution

This is the process of preparing the final agreed form of contract its schedules and appendices
so that it can be executed. Contract execution is the process of signing an agreed contract,
after which its terms become binding on the parties to the contract.

TYPES OF TENDERS

1. Open Tendering:

This is an invitation to tender by public advertisement. There are no restrictions placed on

who can submit a tender, however, suppliers are required to submit all required information
and are evaluated against the stated selection criteria. It has been criticised for being a slow
and costly process, attracting tenders or expressions of interest from large numbers of
suppliers, some of whom may be entirely unsuitable for the contract and as a result it can
waste a lot of time, effort and money.

However, open tendering offers the greatest competition and has the advantage of allowing
new or emerging suppliers to try to secure work and so can facilitates greater innovation. The
number of firms tendering can be reduced (a maximum of 6) by a pre-qualification process,
and if this uses a standard pre-qualification questionnaire, then the time wasted by
unsuccessful applicants can be minimised.While often seen to be more efficient, selective
tendering can exclude potential suppliers, it can be seen to introduce bias into the process,
and it can result in prospective suppliers continually contacting clients and consultants to
check that they are on the appropriate lists.Open tendering can be either single stage or two
stage.

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 allowing them to begin work and in the second stage a fixed
price is negotiated for the contract.

2. Select Tendering:

A select tender is only open to a select number of suppliers. The suppliers may be a short
list sourced from an open tender or be a compilation of businesses that the organization
has worked with previously.Selective tendering will tend to be faster than open tendering,
and can be seen as less wasteful, as there is no pre-qualification process as part of the
tender procedure itself, and only suppliers that are known to be appropriate for the
proposed contract are invited to prepare tenders. It can also give clients greater
confidence that their requirements will be satisfied.

However, it can exclude smaller suppliers or those trying to establish themselves in a new
market, it can reduce the potential for innovation, and it can be seen to introduce bias into
tendering as firms may be excluded from approved lists for unknown reasons, because of
a lack of awareness, or because of personal preferences. It can also result in prospective
suppliers continually contacting clients and consultants to check that they are on the
appropriate lists.Selective tendering can be either single stage or two stage.
 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 allowing them to begin work and in the second
stage a fixed price is negotiated for the contract.

3. Serial tendering:

Involves the preparation of tenders based on a typical or notional bill of quantities or

schedule of works. The rates submitted can then be used to value works over a series of
similar projects, often for a fixed period of time following which the tender procedure
may be repeated.

Serial tendering maybe used where the client has a regular programme of works that they
would like to be undertaken by a single contractor, often minor works, repetitive works
(such as housing) or maintenance work. The tender documents will generally define the
buildings that will be covered by the works, the term over which works may be required
(often between one and five years), an estimate of the likely total value of the works that
will be required over the term and an estimate of the likely size of individual orders.

Appointment is based on an agreed schedule of rates related to the categories of work that
are likely to form part of the programme.

When individual works are required, the client issues an instruction to the contractor
which may include a written description of the works, drawings if appropriate and a
valuation agreed by the client and contractor. Payments are then calculated based on the
agreed schedule of rates.

Serial tendering can reduce tender costs, and may encourage suppliers to submit low rates
to secure an ongoing programme of work. However, it may be seen as anti-competitive
and exclusive. It can be argued that it both encourages innovation (by giving contractors
the confidence to invest in continuous improvement) and discourages investment (by
preventing other contractors from submitting alternative proposals).
Continuity tendering is a variation on serial tendering, where subsequent work is
negotiated following successful completion of a preliminary contract.

4.Framework Tendering:

Clients that are continuously commissioning construction work might want to reduce
procurement timescales, learning curves and other risks by using framework agreements.
This allows the client to invite tenders from suppliers of goods and services to be carried
out over a period of time on a call-off basis as and when required.
The framework contract documents should define the scope and possible locations for the
works or services likely to be required during the defined time period. They should
describe the contract conditions that will be used for pre-construction services (such as
design) and/or the contract conditions that will be used to execute the works.
Depending on the size and complexity of the anticipated projects, the supplier might
provide a pricing mechanism or risk adjustment mechanism for different types of contract
that might be used, for example a minor works contract, a cost reimbursable contract, a
design and build contract and so on. A suitable option would then be selected by the client
depending on the nature of the projects that emerged.
Framework tender documents are likely to include:
1. The starting and completion dates of the agreement.
2. Requirements and obligations regarding insurance, bonds and warranties.
3. A description of the contract conditions to be used and assumptions regarding
preliminaries.
4. A description of how the project will be managed in its various stages and the
basis of remuneration.
5. A description of the tender selection procedure and assessment procedure to be
employed by the client.
6. A description of inflation, interest and retention percentages to be applied.
7. A description of incentive mechanisms to be applied.
8. A description of dispute resolution procedures.
9. Rates for travel and subsistence expenses.
10. A request for schedules of rates and time charges to be submitted and a breakdown
of resources and overheads to be applied to design, or manufacture and
installation (including any proposed subcontractor or sub-consultant details).
11. Any other criteria required from tenderers in order that the client can properly
assess their suitability.
One or more suppliers are then selected and appointed. When specific projects arise the
client is then able to simply select a suitable framework supplier and instruct them to start
work.
 Where there is more than one suitable supplier available, the client may introduce a
secondary selection process to assess which supplier is likely to offer best value for a
specific project. The advantage to the client of this process is that they are able instigate a
selection procedure for individual projects without having to undertake a time-consuming
pre-qualification process This should also reduce tender costs.
The advantage to the supplier is that the likelihood of them being awarded a project when
they are already on a framework contract should be higher than it would be under an open
procurement process. Some suppliers however complain that having already been
appointed on a framework agreement, they may then have to bid for individual projects
anyway, and after a great deal of time and effort may not be awarded any projects.

TENDERING COSTING

Tendering; is the process of making an offer, bid or proposal, to an invitation or request for
tender.

Many bidders that respond to tenders struggle when it comes to calculating a price for a
specific tender. One of the reasons for this is that a large number of small business owners are
usually new to the tender process and therefore they lack enough experience to price their
bids correctly.

Without getting into the fundamentals of accounting there are two basic items that determine
your tender price. These two basic items should always be the guide when determining the
price on the goods or services that one is dealing with.

The two items that determine pricing are:

1. Direct Costs; and

2. Indirect Costs.

1. Direct Costs

Direct Costs are the costs that one pays to either:

Produce goods or services

 The cost price you pay to procure goods or products that you will resell to your
customers.

In other words, if you manufacture wooden chairs your direct costs will be the money you
spend on purchasing the wood for the chairs. Other direct costs in manufacturing wooden
chairs would be wood glue, nails and labor costs.

Thus, when responding to a tender you must take the utmost care that you include all your
direct costs in your tender price.

2.Indirect Costs

Indirect Costs are the expenses that you incur to run your business; these costs do not
necessarily generate any income. Some of the most common indirect costs that your business
incurs are:

Rent

Utility expenses such as electricity and water

Telephone

Stationary

Salaries and wages

Accounting fees

It is very important to include indirect costs in tender price. The tender will form part of the
normal day-to-day business and therefore it must contribute to your indirect costs.

The question is how to calculate how much of the indirect costs are contributable to the
tender. There isnt one specific rule but one of the more common rules is to estimate the time
spend on servicing the tender and then use that to factor in the indirect costs into the tender
price. In other words, if you have to spend 50% of your time servicing the tender then 50% of
your indirect costs should be part of your tender price.
APPRAISAL ESTIMATE

Much of the private, corporate and public wealth of the world consists of real estate. The
magnitude of this fundamental resource creates a need for informed appraisals to support
decisions pertaining to the use and disposition of real estate and the rights inherent in
ownership. An appraisal answers one or more specific questions about a real estate parcels
value, marketability, usefulness or suitability.

The Appraisal Defined

Professional real estate appraisers perform a useful function in society and offer a variety of
services to their clients. They develop opinions of several types of property value and assist
in various decisions about real estate. Standards for the appraisal profession are set forth in
the Uniform Standards of Professional Appraisal Practice (USPAP) developed by the
Appraisal Standards Board of the Appraisal Foundation. USPAP specifies the procedures to
be followed in developing and communicating an appraisal and the ethical rules for appraisal
practice. As defined in USPAP, an appraisal is the act or process of developing an opinion
ofvalue. The valuation process is a systematic procedure the appraiser follows to answer a
clients question about real property value.

The most common type of appraisal assignment is the development of an opinion of market
value. However, because of their specialized training and experience, appraisers can provide
a wide range of additional appraisal services from investment consultation to advice on
various business as well as personal financial decisions.

The Intended Use of an Appraisal.

An appraisal may be requested or required for many reasons:

1 To facilitate the transfer of ownership of real property

2 To help prospective sellers determine acceptable selling prices or prospective buyers
decide on offering prices.
 3 To establish a basis for the exchange or reorganization of real property or for merging
the ownership of multiple properties. Many appraisal assignments relate to financing
and credit.
4 To assist the underwriter in establishing a value of security for a mortgage loan.
5 To provide an investor with a sound basis for the purchase of real estate mortgages,
bonds or other types of securities. Other appraisals are requested to help resolve legal
or tax issues.
6 To estimate the market value of a property in eminent domain proceedings
7 To estimate the market value of a property in contract disputes or as part of a
portfolio.
8 To estimate the market value of partnership interests.
9 To estimate damages created by environmental contamination.
10 To estimate assessed value
11 To determine gift or inheritance taxes
12 To estimate the value of the real property component of an estate 4 Appraisals are also
used in investment counseling and decision-making.
13 To set rent schedules and lease provisions
14 To determine the feasibility of a construction or renovation program
15 To aid in corporate mergers, issuance of stock or revision of book value
16 To estimate liquidation value for forced-sale or auction proceedings
17 To counsel a client on investment matters, including goals, alternatives, resources,
constraints and timing
18 To advise zoning boards, courts and planners, among others, regarding the probable
effects of proposed actions
19 To arbitrate between adversaries Appraisals for the Lending Industry Many appraisals
are performed for lending purposes.

Property owners should be aware that current federal lending regulations require the lender
to initiate the appraisal. The lender must have the first contact with the appraiser and
oversee the appraisal process. According to these regulations, the lender must be the client
and the appraiser must be engaged by the lending institution.

Any property owner who wants to use the appraisal for lending purposes should
communicate this need to the lender and have the lender engage the appraiser. This avoids the
possibility of the lender rejecting the appraisal or requiring a new appraisal because the
appraisal was not initiated by the bank. According to federal lending laws, any bank can use
an appraisal prepared for another bank, as long as the initiating bank reviews the appraisal
and finds it to be acceptable.
Value Influences the analysis of social, economic, governmental and environmental forces
provides an understanding of the dynamics of change and helps identify value trends. Against
this background, the appraiser investigates the characteristics of the subject property that
might impact the propertys value. The appraiser also investigates the nature of the market for
that property, competitive properties, and the buyers and sellers who constitute the market for
that property type. The principles of supply and demand, substitution, balance and
externalities help explain shifts in value.

Four independent economic factorsutility, scarcity, desire, and effective purchasing power
must be present to create value in a particular item or collection of items. Professional
appraisal standards specifically require the study of all value influences. Change and
anticipation are fundamental, and appraisers apply these principles and related concepts that
influence value in their analyses. Approaches to Value Participants in the real estate market
commonly think of value in three ways:

The current cost of reproducing or replacing a building, minus an estimate for depreciation,
plus the value of the land (and entrepreneurial incentive, if applicable).

The value indicated by recent sales of comparable properties in the market.

The value that the propertys net earning power will support 6 these different viewpoints
form the basis of the three approaches that appraisers use to value propertythe cost, sales
comparison and income capitalization approaches.

One or more of these approaches may not be applicable to a given assignment or may be less
significant because of the nature of the property, the appraisal problem or the data available.
The approaches to value are applied within the context of the valuation process. The
valuation process although characteristics of properties differ widely, all appraisal problems
can be solved through the systematic application of the valuation process. In the valuation
process the problem is identified, the work necessary to solve the problem is planned and
relevant data is collected, verified and analyzed to form an opinion of value. The valuation
process is accomplished by following specific steps, the number of which depends on the
nature of the appraisal assignment and the data available to complete it. In all cases, however,
the valuation process provides the model to be followed in performing market research and
data analysis, in applying appraisal techniques and in integrating the results of these analytic
activities into an opinion of value.