IN THE NAME OF ALLAH, THE

BENEFICENT, THE MERCIFUL

 INTRODUCTION
TENDER A formal statement of price
some one would charge for doing a job
or providing goods or services.
TENDERING To make a formal offer to
do a job or provide goods and services at
a particular price.

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Terminology
Agreement : Consent of various parties to join hands to
do something for the benefit of one or more parties.
Contract : A legally enforceable agreement.
Client : The beneficiary (Individual or party (ies)) who
may be investor for self or others.
Contractor : The party to execute the requisite work(s).
Consultants: A third party, not a legal partner but
authorized to check the works on behalf of the client.

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 PC I
Project Documentation
PC II
Feasibility Study
PC III
Quarterly Progress Report
PC IV
Project Completion Report
PC V
Evaluation Report after Completion
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 INTRODUCTION

CONTRACT.
A contract is a formalized means of communication
between parties.

Is used very commonly by owner and the contractor

to control the delivery of their projects.

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INTRODUCTION
CONTRACT
In law a contract can be defined:
A valid contract is an agreement made between two
or more parties whereby legal rights and obligations
are created which the law will enforce.

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INTRODUCTION

CONTRACT
A simple contract consists of an agreement
between two or more parties under certain
terms and conditions whereby one party
undertakes to execute works or to supply
materials at specified rates and the other
party undertakes to make necessary payments
for the work completed by the first party.

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Types of Contracts

Some of the commonly used types are ;

Bill of quantities contract.
Scheduled contract.
Lump Sum contract.
Labour contract.
Cost plus percentage contract.
Cost plus fixed profit contract.
Package deal contract.
Serial contract.
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Contracts. (cntd)

1- Bill of Quantities Contract.

This type of contract which includes a BOQ (bill
of quantities) priced by the contractor is most
commonly used form of contract for civil engineering
works.

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Contracts. (cntd)

2-Scheduled Contract
In this type of contract the client may refer to a
schedule of unit rates covering each item of work
and ask the contractors, when tendering, to quote a
percentage above or below the given scheduled rates
for which the contractor would be willing to execute
the work.

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Contracts. (cntd)

3-Lump Sum Contract

In a Lump Sum Contract, the contractor
undertakes to execute certain specified works for a
fixed amount of money. The nature and extent of the
work are normally indicated on drawings and the
nature of materials and workmanship are described
in specifications but no BOQ is provided.

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Contracts. (cntd)

4-Labour Contract
This is a contract where labour and
workmanship is provided by the contractor but all
the materials are supplied by the client.

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Contracts. (cntd)

5-Cost Plus Percentage Contract

Cost plus percentage and cost plus fixed profit

contracts are together called Reimbursement
contracts.
In the cost plus percentage contract, the accounts
are properly maintained by the contractors showing
the actual expenditure on the work

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Contracts. (cntd)

6-Cost Plus Fixed Profit Contract

This is similar to the previous type of contract with

the difference that the amount of profit is fixed and
will not vary with increase or decrease of actual cost
of the work

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Contracts. (cntd)

7-Package Deal Contract

If a contracting firm is well-reputed and provides

both design and construction facilities, the project as
a whole may be awarded to this firm; the agreement
become a package deal contract

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Contracts. (cntd)

8-Serial Contract

If a contractor is already working on certain contracts

at a constructions site and later on more works are
planned on the same site, these works may be
awarded to the same contractor, generally at the
same rates, depending upon his previous
performance. This becomes a serial contract.

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Procurement & Tendering
Project Procurement includes the processes to purchase or
acquire the products, services, or results needed from outside
the project team to perform the work.

Procurement can be defined as the acquisition of goods or

services. Procurement (and contracting) is a process that
involves two parties with different objectives who interact on a
given market segment.

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 Procurement & Tendering
Good procurement practices can increase corporate
profitability, minimizing cash flow problems, and seeking out
quality suppliers.

All procurement strategies are frameworks by which an

organization attains its objectives.

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General Types of Procurement &
Tendering
Civil Works for example, bridges and buildings,
harbors and highways;
Goods typically equipment, material and supplies,
commodities, textbooks, medical supplies; and
Services Consultancy Services, Expert advice and
training conventionally labeled as Technical
Assistance as well as such things as building
maintenance, computer programming, etc.

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 Procurement & Tendering
Procurement can be done through:

Open Competitive tendering

Prequalified Tendering
Negotiation
Selection (Specially for patent products)
Single Source (SS).

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Normal set of tender documents

1. Instructions to tenders
2. Information to tenders
3. Conditions of contract (general part-i & particular part-
ii)
4. Forms of tender & appendices
5. Specifications ( special & technical provisions
6. Bill of quantities or schedules of prices
7. Form of bid security, contract agreement, performance
Security
8. Drawings

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Tendering Process

A. Pre-requisition of Invitation to Tender

B. Formulation of Tender Documents
C. Tendering/Evaluation/Award
D. Contract Administration

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A - Pre-requisition for Invitation to
Tender

A-1. COMPLETION OF FEASIBILITY STUDIES

TECHNICAL FEASIBILITY
ECONOMIC VIABILITY
ENVIRONMENTAL IMPACT ASSESSMENT(EIA)

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Benefit Cost Raito (B/C Ratio)
The ratio between the present value of
benefits and the present value of costs of a
project during its entire design life.

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 Cost
Cost is define measure of expenditure incurred
for hiring/use of resources to implement the
project.

Cost can be tangible and intangible

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Tangible Cost
The costs which can be quantified and to which a monetary
value can be assigned
e.g.
Capital cost.
Annual recurring cost .

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Intangible Cost

The costs which cannot be quantified in monetary terms and

are described qualitatively
e.g.
Impact on environment like Air Pollution , Noise etc.
Loss of Aesthetics

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Benefits

Benefits occurred from Highway projects

comprise of the following.

1.) Vehicle operating cost Savings (VOC).

2.) Values of travel time Savings.

3.) Distance Savings.

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Benefit Cost Raito (B/C Ratio)

The ratio between the present value of

benefits and the present value of costs of a
project during its entire design life.

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B/C RATIO
Three situations may be visualized in case of B.C Ratio.

a) B.C Ratio greater than Unity:

It is a viable project.

b) B.C Ratio less than Unity:

Not a sound project.

c) B.C Ratio equal to Unity:

In this case one is just indifferent to the acceptance
or rejection of the project. 30
A - Pre-requisition for Invitation to
.
Tender. (contd..)
A-2. Detailed Engineering Design.

DESIGN OF PROJECT COMPONENTS

FINALIZATION OF TECHNICAL REPORTS
SPECIFICATIONS
COMPUTATION OF QUANTITIES
FORMULATION OF ENGINEERS ESTIMATE

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A - Pre-requisition for Invitation to
Tender. ..(contd.)
A-3. ADMINISTRATIVE APPROVAL
PREPARATION OF PC-1 PROFORMA
APPROVAL BY THE GOVERNMENT

A-4. ARRANGEMENT OF FINANCES

LOCAL & FOREIGN EXCHANGE
COMPONENTS

A-5. LAND ACQUISTION

A-6. PREQUALIFICATION OF CONTRACTORS

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B. Formulation of Tender Documents

a. Specifications
b. Design Calculation and Analysis (Design)
c. Tender Drawings
d. Estimation of Quantities
e. Decision about Specific Provisions
f. Decision About funding-e.g. ADB/IDA
(International Donor Agency)
g. Conditions of Contract - Part 1 & II.

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Tender Documents
General Conditions of Contract
These define the legal rights and obligations of the parties
and may be described as the regulations under which the
contract will be performed.
Nominates an independent third person called the
Engineer who is responsible for administering the
contract
General conditions vary from country to country and
organization to organization
Conditions of Contract internationally
Federation Internationale des Ingenieurs Counseils
(FIDIC), Switzerland, 1992.
Pakistan Engineering Council
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Tender Documents (Contd.)
Special Conditions of Contract
These are additions to, deletions from or amendments to
the General Conditions to make them project or party
specific.
Specifications
Give full description of work to be carried out
Detail the materials and workmanship that the Contractor
is to utilize in the project
Define the quality and standards of workmanship required
Act as a legal evidence in the event of litigation

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Tender Documents (Contd.)

Drawings
Bill of Quantities
Quantities are estimates only and should have limits of
accuracy
Tender/Bid
Formal offer to undertake the project. Price, conditions and
method statements are detailed. It should be noted that all
documents submitted with a tender form part of the tender
Letter of Acceptance
Relevant Correspondence
This often include points of clarification of either the
Tender Documents or about the project.

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Instructions to Tenderers

This contains information's and instructions which contractor

is required to know or abide by for participation in
Tendering:-

Name of work to be constructed

Source of funds for the works
Eligibility & qualification requirement
Firms and persons authorized to submit tender
Cost on tendering not reimbursable
What makes a tender non-responsive
Holding of pre-tender conference, if required
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C Tendering/Evaluation

C-1. Tendering
Tendering Process
LCB (Local Competitive Bidding)/ICB
Tendering
Procedure for Tendering

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C-2. Evaluation

Tender Opening
Preliminary Evaluation
Detailed Evaluation
Procedure for Preference

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 Tendering gives
Straight forward purchasing or hiring procedure
Objectives of works clear at the time of beginning
Needs are established and clear
Time and cost saving may be taken
Every one offering his optimum price
Healthy competition
Quality assurance

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Tendering Process
Type of tender (Public Tender/Public Tender
with Pre-qualification/Tender by Invitation)
Advertisement
Pre-qualification documents
Invitation to tender
Purchase of Tender Documents
Pre-tender meetings and joint site visits
Amendments to Tender Documents through
Tender questions.
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Tendering Process (Contd.)

Bid Bond/Tender Security

Tender Opening
Tender Evaluation and Report
Tender award and invitation to contract
negotiations
Performance Bond
Signing of Contract

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 Tender Security

Amount of security shall be in form of Cash

Deposit, Certified Cheque, Bank Draft, Letter of
Credit, Guarantee from a Scheduled Bank in
Pakistan or Foreign Bank Acceptable to the Client.

If Tender is not accompanied by an acceptable Bid

bond (1-3% of Estimated Cost, whereas 3% for
smaller Contracts). It will be rejected being non-
responsive and having major deviation.

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C-2 Tender Evaluation

C-2.1 At tender opening

is tender security accompanied with tender?
is tender signed, stamped & accompanied by?
Power of Attorney
Joint Venture agreement

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 Tender Evaluation (contd.)

C-2.2 Preliminary Examination of

all Tenders

Eligibility & Qualification

Arithmetic check
Currency proportion
Adjustment on account of foreign component?

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Tender Evaluation (contd.)

GENERAL CONFORMITY OF:

Legal & Contractual Evaluation
Cost & Financial Evaluation
Technical Evaluation
Deviations: Major/Minor

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Tender Evaluation (contd.)

C-3. Detailed Evaluation of Substantially

Responsive Tenders only
Detailed Scrutiny of Minor Deviations:
LEGAL & CONTRACTUAL ASPECTS
TECHNICAL ASPECTS
COST & FINANCIAL EVALUATION
Clarifications (If Required)

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Legal & Contractual Evaluation

Evaluation for Responsiveness

Evaluation of legal & Contractual
Aspects
Comparison with Pre-qualification
Status

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Cost & Financial Evaluation

Correction of Errors
Adjustment of Foreign Currency Components
Interest Rate for Delayed Payments
Price Adjustments
Evaluated Tender Price
Balanced Tender

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Technical Evaluation

Program of Work
Key Personnel
Mobilization
Method of Construction
Equipment
Dewatering
Sub-Contractors
Materials

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Tender Evaluation (contd.)

CONFORMING TO ALL TENDER CONDITIONS

& NO MAJOR DEVIATION OF:

PRICE, SCOPE, QUALITY & PERFORMANCE

DO NOT LIMITS CLIENTS RIGHT OR
TENDERERS OBLIGATIONS
ISSUANCE OF LETTER OF ACCEPTANCE (LOA)
PERFORMANCE SECURITY

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 D. Contract Administration

Award of Contract
Signing of Contract
Mobilization
Contractual Provisions Enforcement
Important Contract Clauses

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Notification of Award and Signing of
Agreement

The Tenderer whose Tender has been accepted

shall be notified of the award by the Employer
prior to expiration of the Tender validity period in
writing.
This letter called the Letter of Acceptance
shall state the sum that the Employer shall pay the
Contractor in consideration of the execution,
completion, and maintenance of the Works by the
Contractor as prescribed by the Contract (called
the Contract Price).

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Notification of Award and Signing of
Agreement (contd.)

Letter of Acceptance shall constitute the

formation of the Contract, subject to
furnishing the Performance Security and
signing of the Agreement by the Tenderer.

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Contractual Provisions Enforcement

Work Schedule to be Submitted

(Clause 14)
Within 15 Days
Revised after every Three Months
Performance Security (Clause 10)
Within 15 Days after the Receipt of LOA
10 % of Contract Price

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Contractual Provisions Enforcement (contd.)
Priority of Contract Documents
1. The Contract Agreement
2. The Letter of Acceptance
3. The completed Form of Bid
4. Special Stipulations (Appendix A to Bid)
5. The Conditions of Contract Part II
6. The Conditions of Contract Part I
7. The Bill of Quantities (Appendix D to Bid)
8. The Appendices to Bid (B-Foreign Currency, C-Price
Adjustment, E-Schedule, F, G, H, I, J, K, L)
9. The Drawings
10. The Specifications

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Important Contract Clauses

1. Extensions in time
2. Variation Order
3. Escalation
4. Force Majeure.
5. Remedies & Powers.
6. Dispute Resolution
7. Arbitration
8. Termination of Contract
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 TYPES OF PROCUREMENT

1. FOR CIVIL ENGINEERING WORKS

A SMALL SIZED CONTRACTS
TENDERING ON PERCENTAGE
RATE BASIS UPTO Rs. 25 M
(LCB)
(OPEN TO REGISTERED
CONTRACTORS)

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 TYPES OF PROCUREMENT(Contd.)

B LARGE SIZED CONTRACTS

TENDERING ON ITEM RATE BASIS Rs. 25-400 M
(ICB)
(OPEN TO PRE-QUALIFIED CONTRACTORS)
C EXTRA LARGE/COMPLEX CONTRACTS

MORE THAN Rs. 400 M (ICB)

SPECIFICALLY DRAFTED ON WORK TO WORK
BASIS OPEN TO PRE-QUALIFIED CONTRACTORS

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 TYPES OF PROCUREMENT(Contd.)
2 FOR ELECTRICAL & MECHANICAL WORKS
A GOODS/EQUIPMENT SUPPLY CONTRACTS
OPEN TO REGISTERED, ENLISTED &
PRE-QUALFIED MANUFACTURES/
SUPPLIERS(LCB/ICB)
B EQUIPMENT ERECTION CONTRACTS
ON PRE-QUALIFICATION BASIS
(LCB/ICB)

C EQUIPMENT SUPPLY & ERECTION

CONTRACTS
ON PRE-QUALIFICATION BASIS
(LCB/ICB)

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TYPES OF PROCUREMENT(Contd.)

3. TURN-KEY CONTRACTS (LCB/ICB)

Engineering, Procurement and Construction (EPC);
SURVEY, DESIGN, MANUFACTURE,
SUPPLY, ERECTION, TESTING &
COMMISSIONING CONTRACTS
(ON PRE-QUALIFICATION BASIS)

4. CONSULTANCY SERVICES

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 Use of PECs Bidding Documents
Standard Form of Bidding Documents has been
approved by ECNEC in its meeting on 12
November 2007. The document has been notified
by Planning Commission, Government of Pakistan
vide Notification No. 8(60)WR/PC/2008 dated 12th
February 2008.
It is mandatory for all engineering organizations
and departments at Federal and Provincial level
and district government to use the document for
procurement of civil works funded locally and/or
through donor agencies.

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Thank You