TENDERS & TYPES OF TENDERS

Introduction, The proceedures, tendering for a

project,Awarding of tender ,work order arbitration ,
professional bodies and arbitration
6th SEMESTER
UNIT 5
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, gazzettes , etc.

according to the cost of works.

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.
For a CONTRACT to be valid, there must be an offer from the
owner in the form of tender notice to get some specified work to
be executed and there must be an acceptance from the contractor
to execute the work, both the offer and the acceptance must be
definite and legal.

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

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

Information to be given in a tender document:-
1. General conditions of tender
2. Schedule of items of work with clear specifications
3. Special conditions
I. The notice inviting tender in specified form like PWD 6
II. Layout plan, location of work
III. Division in which location is situated
IV. Schedule of quantities of work
V. Nearest road/railway link
VI. Set of drawings including working drawings
VII. Availability of materials in the vicinity
VIII. Detailed specifications or reference to standard specifications for each item of work
IX. Complete architectural and structural drawings
X. Schedule of stores to be issued by the owner of the project indicating the rates and their
place of supply
XI. Schedule of tools & plant and other facilities to be made available by the owner, indicating
the conditions, hire charges and place of delivery
XII. Rate of supply of power and the point of supply
XIII. Location of water supply point
XIV. Time for completion and the progress to be made at intervals of time
XV. Conditions regarding employment of technical personnel
XVI. Weather conditions in the area
XVII.Amount of EMD and the form in which it is to be paid
XVIII. Insistence on Income tax and sales tax clearance certificate
XIX Amount of Security deposit to be paid/ deducted from running
bills of contractors should be notified in the tender call notice
XX Mode of payment for work done
XXI Power to reject tenders without assigning reasons
XXII Penalty conditions for slow progress and delay in the completion
of work
XXIII Designation of arbitration authority in case of disputes
SHORT TENDER NOTICE
When work is to be completed very quickly or no contractor prefers to accept the
work (THE TENDER IS FLOATED), then a notice with short duration is again published
by the client.
Such a tender notice is called “SHORT TENDER NOTICE”. The terms and conditions
remain the same as that for ordinary tender notice.
QUOTATION For small jobs, the owner/engineer gives an offer to the contractor for
quoting rates for works and supplies required. No EMD is required with a quotation
EARNEST MONEY DEPOSIT It is the amount of money to be deposited along with the

tender document to the department by the contractors quoting a tender. This money
is a guarantee against the refusal of any contractor to take up the work after the
acceptance of his tender. In case of refusal, this amount is forfeited. EMD of
contractors whose tenders are not accepted will be refunded. 1% - 2% of the
estimated cost of work is the Earnest Money Deposit normally .
LIQUIDATED DAMAGES

 It is an amount of compensation payable by a contractor to the owner due to

delayed construction.

 This amount of compensation is not related with real damage.

 This does not relieve the contractor from his obligations and liabilities under the

contract. In case if a part of the project or premise is used by the owner before its

completion, the amount to be paid is reduced in proportion to the value of the part

that has been utilised, after issuing the certificate of occupancy.

UNLIQUIDATED DAMAGES

 It is an amount of compensation payable when a contract is broken. The party who

suffers such a breach is entitled to receive this amount from the party who has
FIRM PRICE & FIRM PERIOD

 Sometimes owner award the work at a firm price or fixed rate.

 As the labour wages and materials cost increases, it is advisable to provide

escalation and over run compensation.

 Firm period is the duration of time over which the firm price is valid
CONTRACT DOCUMENTS

 When the tender of a contractor is accepted, an agreement between the

contractor and the owner takes place and the documents defining the rights and

obligations of he owner and the contractor are attached to the agreement bond

and this is called a contract document.

 Each page of the contract document bears the signature of the contractor and the

accepting authority and any correction in it is initialed.

The contract document must contain
1. TITLE PAGE – name of work, name of owner, name of contractor, contract agreement no.,
contents, etc.
2. INDEX PAGE – contents of the agreement with reference pages
3. TENDER NOTICE – brief description of work, estimated cost of work, date and time of
receiving tender, amount of EMD and security deposit, time of completion, etc
4. TENDER FORM – the bill of quantities, contractor’s rate, total cost of work, time of
completion, amount of security deposit, etc.
5.SCHEDULE OF ISSUE OF MATERIALS – list of materials to be issued by the owner/department
to the contractor with the rates and place of issue.
6.DRAWINGS – complete set of drawings including plan, elevation, sections, detailed drawings,
etc. all fully dimensioned.
7.SPECIFICATIONS –
(a) General Specifications which specify the class and type of work, quality of materials, etc.
(b) Detailed specifications – detailed description of each item of work including material and
method to be used along with the quality of workmanship required.
8. CONDITIONS OF CONTRACT
a) Rates of each item of work inclusive of materials, labour, transport,
plant/equipment and other arrangements required for completion of work
b) Amount and form of earnest money and security deposit .
c) Mode of payment to contractor including running payment, final payment and
refund of security money, etc.
d) Time of completion of work
e) Extension of time for completion of work
f) Engagement of sub contractor and other agencies at contractor’s cost and risk
g) Penalty for poor quality and unsatisfactory work progress
h) Termination of contract
i) Arbitration for settlement of disputes
9. SPECIAL CONDITIONS –
Depending upon the nature of work taxes and royalties included in the rates, labour
camp, labour amenities, compensation to labour in case of accidents, etc.
CLASSIFICATION OF CONTRACTS
1. Lump-sum contract
2. Cost plus a fixed percentage contract
3. Cost plus a fixed fee contract
4. Target contract
5. Percentage rate contract (B1 system)
6. Item rate contract (B2 system)
7. Labour contract
8. Joint venture contract
9. Turn-key contract
10.Indirect lump-sum contract for flats or bungalows
11.BOT system
LUMP-SUM CONTRACT
 In this system, the contractor undertakes the execution of a specific work for a
definite lumpsum amount within a specified time period.
 On completion of the work, it is checked as per drawings and specifications and if
approved the amount is paid to the contractor.
 The quantities of various items is not measured.
 For the construction of sculptures and decorative works this system is adopted.
COST PLUS A FIXED PERCENTAGE CONTRACT
 Under this system, the contractor furnishes labour and materials and completes the
work for the actual total cost plus an agreed percentage of it as the profit of the
contractor.
 The speed and quality of work is maintained in this
system but there is always tremendous wastage of materials as the contractor’s aim is
to increase the total cost of the work.
 This system is adopted only in the case of emergency works.
3. COST PLUS A FIXED FEE CONTRACT
 In this system a fixed fee is given as contractor’s profit irrespective of the total cost
of work.
 This is to control the tendency of the contractor to increase the cost of the project
unnecessarily.
 Smaller the completion time more is the profit and hence the contractors hurry to
complete the work and the quality of workmanship is not maintained.
4. TARGET CONTRACT
 The contractor is paid a fixed fee on a prime cost basis for the work performed
under the contract and in addition he receives a percentage on the savings effected
against either a prior agreed estimated total cost or a target value arrived without
changing the specification.
 It is presumed that by proper management of the work, the contractor can reduce
the cost of work.
5. PERCENTAGE RATE CONTRACT (B1 system)
 In this system the contractors are required to quote single percentage either higher
or lower at which he wants to execute the job.
 Here scrutiny of the tenders become easier and as cement and steel is usually
supplied by the department chances of manipulation is less.
 This the most commonly adopted system of contract in the different departments
of our state.
6. ITEM RATE CONTRACT (B2 system)
 Here the contractor gets the payment depending on the rate at which he has
quoted every item of the work.
 It was rather difficult to scrutinise the tenders submitted by various bidders and
the system was hence modified and now the department quotes the items of work
along with their quantities and the bidders are required to quote the percentages
at which he can execute the various items
7. LABOUR CONTRACT
 This is the most commonly adopted system for the construction of private individual
buildings in small cities.
 The contractor arranges all necessary labour, tools & plant and equipments required.
 The materials are supplied by the owner and he appoints an Engineer to supervise the
work to maintain the quality and economy in construction.
 This system is suitable in the works of Govt. departments as they are in a privileged
position to buy large quantities of materials at cheap rates.
8. JOINT VENTURE CONTRACT
 In case of huge important projects the construction works can be categorised into different
parts and each part can be given to a specialised contractor in that field.
 This method improves the quality of work and the project can be completed within a short
period of time.
 Thus the project works can be divided among different contractors and hence joint
venture system of contract developed.
9.TURN-KEY CONTRACT
In this system all the works related to a project including designing, planning,
execution etc. are to be done by the contractor. Once the project is completed it is
handed over to the owner. The owner has to complete the transaction works and
occupy the structure by simply turning the key, ie. opening the door.
10.INDIRECT LUMP-SUM CONTRACT
For interior works in flats or bungalows.In this system the rate of construction per
sq.m. of plinth area is jointly fixed by the contractor and owner which includes
contractor’s profit also. Once this agreement is made the contractor starts
the work and receives payment at regular intervals during the different stages of
work. Sometimes the specifications, drawings are prepared by the builder
SECURITY DEPOSIT

Security deposit is the amount the contractor has to deposit

with the owner before awarding a work, after his tender is accepted.
This amounts to generally 5% to 10% of estimated cost of the project
and is inclusive of the EMD already deposited by the contractor along
with the tender. This will be refunded to the after the completion of the
project. No interest is paid on SD.
The contractor has to fulfill all the terms and conditions laid
down in the contract and maintain quality and speed satisfactorily. If he
fails to do so, a part or whole of the SD is forfeited by the department.
If there is any fault in the interior works and the contractor refuses to
re-do and rectify then the department will carry out that work using the
SD.
If the cost of the interior project is a huge amount, the contractor is

made to deposit only 50% of the amount in the initial stage and then

the rest of the SD is deducted in installments from the running bills of

the contractor.

SD is not collected in the case of a contract for supply of materials, as

the supplied materials become the security.

QUALIFICATIONS OF THE INTERIOR CONTRACTORS
Registration of contractors:-
The contractor must get himself registered in the departments ( or Government - govt.
Contractor) for which he is interested to take up works.
Government contractors are entitled to do govt. jobs if awarded.
Contractors are classified according to the registration and registration fees and
depending on this they can undertake works up to certain amount. To get a contractor
to be registered under certain class, he has to apply to the competent authority.
The application should contain the following documents:
1. Current income tax certificate

2. Work certificates for all the works performed during the

last three years and those in progress
3. Solvency certificate for an appropriate amount
4. Attested copy of deed of partnership and power of
attorney on stamp paper if needed
5. Undertaking for employment of the Class I & II staff
6. Application in duplicate with all documents
7. Attested photos of all the partners if any
PRE-QUALIFICATION OF CONTRACTORS

Sometimes works are awarded on the basis of quotations invited from a

group of ‘selected tenderer’ (a group of known reputed contractors)
who are considered suitable for that job. This method is known as ‘pre-
qualification’ and saves a lot of time.
In the advertisement itself it must be mentioned that only interior
contractors having experience in the particular work should submit the
tender.
1. Quality characteristics
This include the characteristics and properties
of the materials, finishing quality of interior works etc. used for the work.
For example if the material used is gypsum for partitions and ceilings , aluminium
framework , spacing , guage of aluminium sections , fixing clamps etc quality is
checked
2. Quality control in interior works
The basic elements of quality are:
1.Quality characteristics
2.Quality of design
3.Quality of conformance
2. Quality of design
No design can produce perfect results. Hence the desired standards that define a
material such as dimension, strength, etc. and the tolerances, the acceptable
variations from the standards are also specified. For example if the material used is
gypsum , in addition to specifying the required thickness , the range of variation
permitted in design viz.
Undulation of the fixing of the gypsum board on the partition, Grooves in the
partition to be checked for uniformity, Skirting fixing along with partition and check
for undulations, Joints between the Gypsum and wood work cracks to be checked
Nail heads and screw heads to be covered properly with putty and polish etc etc
If very high standards of quality and stiff tolerance limits are set, then this will increase
the cost of the project
ARBITRATION
Resolving Disputes under Contractual Obligations: Disputes are part of
any relationship. Minor disputes can be resolved by discussion. However, when the
differences are very acute, a mediator may be invited. A mediator impartially guides
the parties to achieve a solution on their own, but cannot impose a settlement. The
result of the mediation should be an acceptable agreement for the parties.
Occasionally, disagreements over commercial transactions are complex, involving
matters of technical nature. A court can only interpret a law in a given context. Court
of law procedures can be extremely slow, complicated, and expensive, and when more
so when conflicting technical issues are involved. Disputes that cannot be resolved
through Mediation are offered for Arbitration. A contract must mention and accept
the mediation and arbitration as methods of resolving disputes before going into
litigation. These clauses in the contracts allow establishment of a Domestic Tribunal by
the parties under contractual obligation, to settle disputes and differences. The
Arbitration Act, 1940, helps the parties to enforce that decision.
Definition of Arbitration: ‘Arbitration is a reference of a dispute orNdifferences between two or
more parties, for determination, after hearing all sides in a judicial manner, by a person or
persons other than a court of competent jurisdiction’. The arbitrator may be appointed by the
involved parties themselves, by the Government, or by any judicial head.
OR
The parties get together to appoint one or more persons to adjudicate upon the disputes and
differences, which have arisen, or are likely to arise. The parties have already agreed to abide by
the decision of the said one or more persons nominated for the settlement.
Advantages of Arbitration:
1 Persons, who are EXPERTS, are appointed as arbitrators, and their decisions are fair and
refined and do not involve any element of guesswork. In case of a dispute concerning
building construction jobs, the persons chosen as arbitrators are usually architects, or
engineers who possess expert knowledge of the subject and are fully qualified to act as
arbitrators
2 LEGAL FORMALITIES are cut short, and decision is reached in much shorter time compared
with a court case.
3 SAVINGS in the cost, as there are no court fees, lawyers’ fees, or long hearings.
4 Time, date and place of meetings can be arranged to suit the convenience of all concerned.
The arbitrators are comparatively free, attending only one or few such disputes, so are able to
handle the matter continuously.
5 PRIVACY OF VIEWS, OPINIONS, EXPRESSIONS etc., as hearing is not public.
6 The arbitrator may take HELP OF OTHER EXPERTS to understand the dispute.
7 Finality of the award.
Appointment of Arbitrators:
• Nominally a Single Person is appointed as an arbitrator unless the nature and
complexity of the situation requires the appointment of more than one arbitrator.
• If there is more than one arbitrator, then they are known as Joint Arbitrators. In
case of sole arbitrator, the appointment is by mutual agreement of parties.
• In case of two arbitrators, each party will appoint one arbitrator. Arbitrators are
generally appointed by the disputing parties on their own or through the help of
their professional organizations.
• A court of law also can appoint arbitrators to resolve disputes of technical nature
An Arbitrator must be
1 An expert in the particular branch of a profession to which the dispute relates.
2 Honest, disinterested and independent of the parties, but be acceptable to the appointing
parties.
3 Impartial , not having any ill feeling against any of the parties.