School of Civil EngineeringDivision of Construction Engineering and Management

CE 222/CEM 201Life-Cycle Engineering and Management of

Constructed Facilities

Lecture 3

Bidding & Preparing Bid Package

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Project Development Cycle

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• It is the 1st step in any project life cycle• Differs based on the type of entity

– Individual– Companies– Institutes– Profitable organizations

• Triggered by:– Personal preference– Profit– Improvement of quality of service

• Completed by Feasibility analysis

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Establishing Need

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• 2nd step in project life cycle

Conceptual Design

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Conceptual Design (Cont’d)

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• Inputs:– Need & Conceptual design

• Outcomes:– Set of drawings and specifications

• 2 stages1. Preliminary (40% completion)

• Allows the owner to review his needs and financial status.• Outputs:

– Drawings (40% completed)– Specifications (40% completed)– Preliminary estimate

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Preliminary & Detailed Design

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2. Detailed Design• Outputs:

– Full set of integrated Drawings– Full set of Specifications– Detailed estimate ( 3% accuracy) including

» Direct Cost» Indirect Cost

• Purpose:– To ensure that the design produced is within owner’s financial

resources– To establish a reference point in evaluating bids

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Preliminary & Detailed Design (continued)

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• Design team– Includes a team leader and members from the different

disciplines

• What are the different involved disciplines?

– Extensive coordination is required• Foundations loads• Floor plans and finishing nature dictate pipes & outlets

orientation.

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Preliminary & Detailed Design (continued)

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• What?– A document announcing to prospective bidder that

design documents are available for consideration and that the owner is ready to receive bids

• Why?– To ensure that the work will be performed at the lowest

cost and in the quality required

• How?– Locally:

• Advertisements (public projects)• Letter (known contractors)• Builders exchange news letter

– Internationally:• Web based systems like Dodge report systems.

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Notice to bidders

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• What does it include?– Size of project– Availability of plans and specifications– Project duration– Place and date of bid opening

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Notice to bidders (Cont’d)

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Notice to bidders (Cont’d)

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• What?– A set of documents defining project scope and details

and on which a contractor must base his decision to bid or not to bid.

• Includes:– Proposal form– General conditions– Special conditions– Drawings– Specifications

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Bid package

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• Proposal form– When filled and submitted by a contractor illustrates

his/ her intent and commitment to perform the work as per the specifications and drawings in the desired time and budget filled out

– It is not a formal contract

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Bid package

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Bid package

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• General conditions– Certain specifications regulating how a contract is to be

administered and the relation ship between involved parties

– Generally address aspects common in all projects

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Bid package

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• Supplementary conditions– Covers aspects of the contractual relation that are

peculiar to a specific project• Duration of the project• Owner’s procured materials• Specific payment days

– Items included are of two types• Modifications of the articles of the general conditions• Additional articles that are legally binding

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Bid package

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Bid package

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• Specifications – Verbal description of the technical requirements and

aspects of the work to be performed.

• Addenda– A document illustrating any changes, additions,

omissions, corrections, and contract conditions that arise before bidding is finalized.

– It becomes part of the contract documents.– It is a binding document.

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Bid package

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• A contractor must base his decision to bid on:– Site inspection– Analysis of contract documents– Quantity takeoff (Quantity Surveying)

• Why?– Costs of bid preparation are only recoverable if bid is

won.– Approximately 0.25% of total bid value

• Bid value includes– Direct cost– Indirect cost– Markup

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Decision to bid

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• Prequalification:– A statement submitted by a contractor illustrating his

potentials for performing the current project– Includes:

• Company portfolio• Company Curriculum Vita• Satisfactory performance letters of other projects

– why:?• Provides a supporting documents to help the owner decide on

the best contractor to perform the works.

• Subcontractor’s and vendors costs:– How does a general contractor incorporate these

costs?

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Bid submission

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• Assurances provided by a third party (Surety Company)

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Bonds

# Type To whom By whom Why? Value

1 Bid Owner Cont.

Protects the owner in case the awarded contractor did not sign a contract

1. The difference between current bid and the next lowest bid

2. Specified value

2 Performance Owner Cont.Protects the owner against the contractor’s lack of performance

Varies from one contract to other

3 Payment Owner Cont.

Protects the owner against any liens or unpaid amounts by the contractor

Varies from one contract to other

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• Bonds are issued for a service fee– For contract sums of ≤ $ 200,000

• 1 % of contract value or $10 for each $ 1,000

– For contract sums of > $ 200,000• Rate varies according to contractor’s history of performance• Usually rates are between 0.5% to 3% of contract total value

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Costs & requirements for bonds

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• Establishes the level of bond for federally funded projects– Performance bond = 100% of contract total value– Payment bond

• 50% if contract value is ≤ $1,000,000• 40% if contract value is >$1,000,000 and ≤ $5,000,000• Fixed amount of $2,500,00 if contract value is >$5,000,000

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Miller’s Act