Tendering

Stages of a Project

Stage 1: Inception & Feasibility – identifying project objectives /

set up project brief
Stage 2: Design – develop further project brief / develop concept
& schematic design / Undertake detailed design & detailing /
prepare cost plan & budget
Stage 3: Tendering – issue tender documents / prepare & submit
tender / evaluation of tender / award tenders / prepare contract
documents
Stage 4: Construction – site possession & mobilization / undertake
procurement fabrication, installation, construction / carry out
contract admin
Stage 5: Handover & Maintenance – undertake all testing,
commissioning & training / obtain CF / handover project to owner
/carry out necessary maintenance / Defect rectification / etc
TENDER

It is an invitation from the owner to the contractor to execute

some work at specified cost in specified time. It is published in
the form of tender notice in news papers, notice boards,
gussets, etc. according to the cost of works.

Tendering is the means of obtaining the most competitive offer

and thereby obtaining the best return for invested money
•Incorporates time and other conditions required
•A means to carry out the contract requirements
•The tender which is submitted by the contractor is generally
based on a bill of quantities & specifications of the statement
of work
Classification of tenders:-

1. Open tender– An oral talk or written document between

the Engineer and the Contractor for certain small jobs to be
performed. Sometimes it is advertised.

2. Sealed tender—Invited for important or huge projects; wide

publicity is given; always written documents are made.

3. Limited tender—Only a selected no. of contractors are

invited to quote their rates
4. Single tender—Invitation is given to only one firm to render
a service by quoting their rates. If the quoted rates are high,
it will be negotiated prior to the agreement of the contract.

5. Rate contract—usually adopted for supply of materials,

machine, tools & plant, etc. (items to the store). It specifies
the supply at a fixed rate during the period of contract. The
quantities are not mentioned in type of contract and the
contractor is bound to accept any order which would be
placed before him.
Procedure for inviting tender:-

1. Preparation of tender documents

2. Issue of notice inviting tender or tender call notice
3. Submission and opening of tenders and their scrutiny
4. Acceptance of tender and award of contract
 Preparation of tender documentation –
typical contents
• Letter of invitation
• Checklist for submission of tender
• Articles of agreement
• Conditions of contract
• Form of tender
• Tender specifications
• Bills of quantities
• Tender drawings
• Sample copy of letter of acceptance
• Sample copy of bang guarantee for performance bond
• Schedule of day work rates
• Sample copy bank guarantee for advance payment
Information to be given in a tender document:-

1. The notice inviting tender in specified form like PWD 2.

Layout plan, location of work
3. Division in which location is situated
4. Schedule of quantities of work
5. Nearest road/railway link
6. Set of drawings including working drawings
7. Availability of materials in the vicinity
8. Detailed specifications or reference to standard
specifications for each item of work
9. Complete architectural and structural drawings
10. Schedule of stores to be issued by the owner of the
project indicating the rates and their place of supply
11. Schedule of tools & plant and other facilities to be made
available by the owner, indicating the conditions, hire
charges and place of delivery
12. Rate of supply of power and the point of supply
13. Location of water supply point
14. Time for completion and the progress to be made at
intervals of time
15. Conditions regarding employment of technical personnel
16. Weather conditions in the area
17. Amount of EMD and the form in which it is to be paid
18. Insistence on Income tax and sales tax clearance certificate
19. Amount of Security deposit to be paid/ deducted from
running bills of contractors should be notified in the tender call
notice
20. Mode of payment for work done
21. Power to reject tenders without assigning reasons
22. Penalty conditions for slow progress and delay in the
completion of work
23. Designation of arbitration authority in case of disputes
Tender Notice

The Tender Notice is a brief description of the job

being tendered.
To be published in Newspapers and on the Internet.
The Internet is a very cost effective way of
publishing the tenders.
Information to be given in a tender notice :-

1. Name of the department inviting tender

2. Name of work and location
3. Designation of officer inviting tender
4. Last date and time of receipt of tender
5. Period of availability of tender document
6. Cost of tender document
7. Time of completion and type of contract
8. Earnest Money Deposit to be paid
9. Date, time and place of opening the tender
10. Designation of the officer opening the tender
 Processing

• Received tender submitted by contractor

• Tender assessment / evaluation
– Completed tenders are received
– Arithmetical check
– Reasonable tender sum
– Reasonable completion time
– Capabilities of tenderers under
considerations
• Tender recommendation / report – tender
board

LOC1/AC2 14
Earnest Money Deposit (EMD)
•It is the initial deposit paid with the tender in order to show the
earnest desire of the contractor to take up the work if awarded.
•An amount equal to 1.5 to 2% of the estimated cost of work is
taken as EMD.
•This amount remains in the safe custody of the client/govt.
body for the work. This amount carries no interest.
•After opening the tender, EMD of all unsuccessful contractors is
refunded to them on applying to the authority.
•The EMD of successful contractor forms a part & parcel of
security deposit of 10% required to be paid while signing the
contract.
•The main purpose of EMD is to maintain healthy competition
between the bidders.
•EMD is accepted in cash, DD or in the form of government
securities like postal order, bank guarantee .
Security Deposit

•Once the tender is accepted the selected /successful contractor

has to deposit a certain amount with the client/government body.
•The amount varies from 5% to 10% of estimated cost of work with
a highest limit of 5 lakh for any amount of work.
•This amount is known as security deposit which includes the
amount of EMD paid with the tender.
•This amount is helpful as a check on the contractor for fulfilling all
terms and conditions of the contract including the quality & time
limit.
•This amount remains with the client/govt. body till the final
completion of the project.
•It is refunded in two stages.
1.50% after virtual completion of the project
2.Remaining 50% after the defect liability period
Arbitration
 Arbitration
Arbitration is a process in which a dispute is submitted to an
impartial outsider who makes a decision which is usually
binding on both the parties.
Arbitration is a means of securing an award on a conflict issue
by reference to a third party. It is a process in which a dispute
is submitted to an impartial outsider who makes a decision
which is usually binding on both the parties.
Arbitral Disputes

Property
Insurance
Contract (including employment contracts)
Business / partnership disputes
Family disputes (except divorce matters)
Construction
Commercial recoveries
Non Arbitral Disputes

Matters of criminal nature

Disputes relating to matrimonial relations
Testamentary matters relating to the validity of a will
Relating to trusts for public purposes of charitable
or religious nature
Insolvency matters
Matters relating to the guardianship of a minor or lunatic.
Any execution proceedings .
DUTIES OF ARBITRATOR

To administer oath to the parties and witness

appearing
To act judicially and impartially
To put necessary interrogatories to any party to the
dispute
To determine by and to whom the costs of reference
and the award shall be paid
To award interest
To fix amount, mode and time of payment
 Main Types of Arbitration

1) VOLUNTARY ARBITRATION
2) COMPULSORY ARBITRATION

VOLUNTARY ARBITRATION

Voluntary arbitration implies that the two contending

parties, unable to compose their differences by themselves
agree to submit the conflict/dispute to an impartial
authority, whose decision they are ready to accept.
Essentials of voluntary arbitration

The voluntary submission of dispute to an arbitrator

The subsequent attendance of witnesses and investigations

The enforcement of an award may not be necessary and

binding

Voluntary arbitration may be specially needed for disputes

arising under agreements /contracts
COMPULSORY ARBITRATION

Compulsory arbitration, is one where the parties are

required to accept arbitration without any willingness on
their part.
When one of the parties to an industrial dispute feels
aggrieved by an act of the other, it may apply to the
appropriate government to refer the dispute to an
adjudication machinery.
Essentials of Compulsory Arbitration

• the country is passing through grave economic crisis

• industries of strategic importance are involved parties
are ill balanced
• Compulsory arbitration leaves no scope for strikes and
lockouts; it deprives both the parties of their very
important and fundamental rights.
Other Types of Arbitration

1. Ad-hoc Arbitration
2. Institutional Arbitration
3. Statutory Arbitration
4. Domestic or International Arbitration
5. Foreign Arbitration
(1) Ad-hoc Arbitration:- When a dispute or difference arises
between the parties in course of commercial
transactions. This arbitration is agreed to get justice for
the balance of the un-settled part of the dispute only.

(2) Institutional Arbitration: There is prior agreement

between the parties that in case of future differences or
disputes arising between the parties during their commercial
transactions, such differences or disputes will be settled by
arbitration as per clause provide in the agreement.

(3) Statutory Arbitration: It is mandatory arbitration which is

imposed on the parties by operation of law. In such a case
the parties have no option as such but to abide by the law of
land.
 (4) Domestic or International Arbitration: Arbitration which
occurs in India and have all the parties within India is termed as
Domestic Arbitration. An Arbitration in which any party belongs
to other than India and the dispute is to be settled in India is
termed as International Arbitration.

(5) Foreign Arbitration: When arbitration proceedings are

conducted in a place outside India and the Award is required to
be enforced in India, it is termed as Foreign Arbitration.
Arbitration in India

Indian council of arbitration (1965)

Abide Arbitration and Conciliation Act, 1996
Comprehensive legal framework
95% arbitration is of type ad-hoc
India No. 2 in arbitration cases reaching Singapore
centre
Mumbai to have India's first International Arbitration
Centre soon
 Advantages
The parties to the dispute usually agree on the arbitrator, so the
arbitrator will be someone that both sides have confidence will be
impartial and fair.
The dispute will normally be resolved much sooner, as a date for the
arbitration can usually be obtained a lot faster than a court date.
Arbitration is usually a lot less expensive. Partly that is because the fee
paid the arbitrator is a lot less than the expense of paying expert
witnesses to come and testify at trial. There are also lower costs in
preparing for the arbitration than there are in for preparing for a trial.
Unlike a trial, arbitration is essentially a private procedure, so that if the
parties desire privacy then the dispute and the resolution can be kept
confidential.
If arbitration is binding, there are very limited opportunities for either
side to appeal, so the arbitration will be the end of the dispute.
 Disadvantages
If arbitration is binding, both sides give up their right to an
appeal. That means there is no real opportunity to correct what one
party may feel is an erroneous arbitration decision.
If the matter is complicated but the amount of money involved is
modest, then the arbitrator’s fee may make arbitration uneconomical.
Rules of evidence may prevent some evidence from being considered
by a judge or a jury, but an arbitrator may consider that
evidence. Thus, an arbitrator’s decision may be based on information
that a judge or jury would not consider at trial.
If certain information from a witness is presented by documents, then
there is no opportunity to cross-examine the testimony of that
witness.
Discovery may be more limited with arbitration.
If arbitration is mandatory or required by a contract, then the parties
do not have the flexibility to choose arbitration only when both
parties agree.
The standards used by an arbitrator are not clear, although generally
the arbitrator is required to follow the law.
International Projects
 PPP in infrastructure
Physical infrastructure
– roads
– transportation systems
– water and sanitation networks

They involve large investments that can put a strain on the public purse.
This strain is especially great for countries, such as India, whose
economies are undergoing rapid development and urbanisation and have
a great need for expanded infrastructure.

Public-private partnerships (PPPs) are increasingly being used by

governments and public sector authorities throughout the world as a way
of increasing access to infrastructure services for their citizenry and
economies at a reduced cost.
Public Private Partnership (PPP)
Benefits of PPP Model
Types of PPP

BOOT – Build Own Operate Transfer

BOT – Build Operate Transfer
BOO – Build Own Operate
DBF – Design Build Finance
DBFO – Design Build Finance Operate
DBO – Design Build Operate
BLT – Build Lease Transfer
BTO - Build Transfer Operate
DBFOM – Design Build Finance Operate Manage
LROT – Lease Renovate Operate Transfer
DCMF – Design Construct Manage Finance
BOOR - Build Own Operate Remove
BOOT (Build-Own-Operate-and-Transfer)

•Here the private partner undertakes to build, operate,

maintain and then transfer the asset to the government.
•The assets are transferred at the end of the contract period.
•In a BOOT project, the private partner is given a concession
to build and operate a facility that would otherwise be built
by the public sector.
•The facility might be a power station, toll road, airport,
bridge, tunnel, water supply and sewerage system, railway,
communication or manufacturing plant.
BOT (BUILD-OPERATE-AND-TRANSFER)

•In BOT model, the private partner builds, operates &

delivers the service for a specified time period under an
agreement.
•Under a build-operate-transfer (BOT) contract, the
government grants a concession to a private company to
finance, build and operate a project.
•The company operates the project for a period of time –
perhaps 20 or 30 years – with the goal of recouping its
investment, then transfers control of the project to the
government.
•BOT projects are normally large-scale, greenfield
infrastructure projects that would otherwise be financed,
built and operated solely by the government.
BOOT versus BOT
– The definition of BOOT and BOT is very close together and the
only difference is the ownership of facilities in BOOT and because
of this, quality of the work is vital to private
– BOOT is more efficient
– The BOOT contracts have the tendency to work well when the
purpose of the project is to offer a service, but if the aim is to
improve a service this modality is not recommended.
BOO (BUILD-OWN-AND-OPERATE)

•In this model, the selected partner designs, develops and

implements the project, most often, entirely at its cost and
operates the system for a specified period.
•Here transferring of ownership is not included.
•In the Build-Own-Operate (BOO) type, the private sector
builds, owns and operates a facility, and sells the
product/service to its users or beneficiaries.
•This is the most common form of private participation in the
power sector in many countries.