tenders contract -arti

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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 etc. according to the cost of works. OR It is an offer in writing to execute some specified works or to supply some specified works or to supply some specified articles subject to certain terms and conditions like rates, time limit etc. between the contractor and the department or owner party. TENDER

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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 etc. according to the cost of works.

OR It is an offer in writing to execute some specified works or

to supply some specified works or to supply some specified articles subject to certain terms and conditions like rates, time limit etc. between the contractor and the department or owner party.

TENDER

1. Open tender–It is invitation of tenders by open advertisement through the Indian Trade Journal or through the principal newspapers in India or Abroad up to 10000/- or over.

2. Limited tender—This is direct invitation only to a selected no. of contractors to quote rates for supply of articles. This is ordinarily adopted in the case of all orders the estimated value of which is less than Rs.10,000.

Classification of tenders:-

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 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.

Classification of tenders

It is part of tender document. Tender form is printed standard form of contract giving standard conditions of contract, general rules and directions for guidance of contract.

There is also a memorandum for giving 1)General description of work 2)Estimated cost 3)Earnest money 4)Security deposit 5)Time limit in months /years6)Column for signature of contract before submission of tender, signature of witness to contractor’s signature and signature of the officer by whom accepted. The price of the tender form is given on the form. This printed form and other

documents are to be purchased on cash payment from the office inviting tender during office hrs on all working days.

Tender Form

Various condition & terms of contract which are to be formulated while inviting tender for a civil engineering work are: The Notice Inviting Tenders (N.I.T) is a standard approved form

of a department Tender form with standard conditions of contract (printed form) Schedule of quantities of work to be done and materials, tools

and plants to be supplied by the department if any Special terms and conditions Complete specification of work to be executed

Tender Documents

One set of approved drawings where necessary All the documents are signed by the contractor page by page,

forwarding letter head of a contractor with bank draft (or other form of earnest money) are put in closed cover.

Then the cover is closed and dropped in the tender box within the time limit for tender.

The name of the work and the name of the contractor are mentioned on the cover.

Tender Documents

Tender for work or supply are invited by issuing tender notice in prescribed form. Following particulars are given in the tender notice1. Name of the authorities(deptt.) inviting tender Exa: Govt. of Tamil Nadu Water Resources Organisation Public Works Department (PWD),2. Name of work and its location3. Estimated cost4. Last date and time of receipt of tender 5. Period of availability of tender document or validity of tender6. Cost of tender document7. Time of completion and type of contract8. Earnest Money Deposit to be paid & security deposit9. Date, time and place of opening the tender10. Designation of the officer opening the tender

Tender notice :-

1. The notice inviting tender in specified form like PWD 6

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

Information to be given in a tender document:-

10. Complete architectural and structural drawings11. 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 supply13. Location of water supply point14. Time for completion and the progress to be made at intervals

of time15. Conditions regarding employment of technical personnel16. Weather conditions in the area17. Amount of EMD and the form in which it is to be paid

Information to be given in a tender document

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 done21. Penalty conditions for slow progress and delay in the

completion of work22. Designation of arbitration (technique for the resolution of

disputes outside the courts)authority in case of disputes

Information to be given in a tender document:-

It is a assurance or guarantee in the form of cash on the part of the contractor to keep open the offer for consideration and to confirm his intention to take up the work accepted in his favour for execution as per terms and conditions in the tender

It is the amount of money to be deposited along with the tender document to the department by the contractors quoting a 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 (EMD).

EARNEST MONEY DEPOSIT

Restriction on unnecessary competition: contractor with low sound financial position may also submit tender with low price which may late lead to great difficulties in completion of work. Thus provision of EMD will restrict competition among sound financial contractors who are capable of completing work.

Punishment: Contractors with no intension of work may quote low rates. They may be punished by forfeiting EMD.

Compensation: In case if lowest contractor refuses to do work it may be allotted to second lowest contractor and EMD will be forfeited from first lowest contractor

Objectives of collecting EMD

Security deposit is the amount of money which is deposited by the contractor to the owner before awarding a work, whose tender has been accepted in order to render himself liable to the department to pay compensation amounting to the part or whole of his security deposit if the work is not carried according to specifications.

This amounts is 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 after the completion of the project. No interest is paid on SD.

SECURITY DEPOSIT

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 construction and the contractor refuses to demolish and reconstruct then the department will carry out that work using the SD.

SECURITY DEPOSIT

Deposit for loans: It serves as security against the materials or the plants and machinery supplied by the department to the contractor as a loan.

Punishment: on incomplete work in time, use of inferior quality of material, leaving work incomplete SD if forfeited as punishment.

SD is refunded after successful completion of work with in specified time. It is refunded after the first maintenance is done which is six months.

Following are the main reasons for security deposit:

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.

QUALIFICATIONS OF THE CONTRACTORS

1. Current income tax certificate2. Work certificates for all the works performed during

the last three years and those in progress3. Solvency certificate (proof that the person's assets are

more than his liabilities) for an appropriate amount4. Attested copy of deed of partnership and power of

attorney on stamp paper if needed5. Undertaking for employment of the Class I & II staff6. Application in duplicate with all documents7. Attested photos of all the partners if any

The application should contain the following documents:

All the tenders should be sealed and submitted to the respective officer, before the time and date as mentioned in the tender note.

At the described date, time and place all the received tenders will be opened in the presence of intending tenderers or their authorised agents.

The rates quoted by the various tenders shall be read out by the officer.

Opening of tender

Following points should be observed while opening the tenders:

1.The tender should be opened in public at ….on …..in the office of the …..and rates will read out in presence of the owner or committee members and tenderers or their respective representative as are present.2. If the owner is not present, the architect along with one assistant should open the tender. The architect shall scrutinize the same, prepare the comparative statements and forward them to his client, with his recommendation as to whom the work should be awarded and why.3. A record must be kept for the list of tenderers and the money deposited by them. The earnest money should preferably be accepted in the form of bank draft.

4. The lowest tender should be accepted after close investigating the reputation and standing of that contractor.

6. It is essential to ensure that they have been thoroughly checked and are without any mistakes.

List of all tenders received along with the details of EM received should be prepared.

It should be checked that every tender should be duly signed by the contractor.

The address of contractor should be clear and complete.

Verification of contractor conditions should be done.

Rates should be mentioned in both figures and words, both should be same, if there is any difference lowest should be accepted.

Scrutiny of tender

Calculations done by contractor and the total cost of the work should be carefully checked.

After tender have been opened, a comparative statement is prepared in presence of the tender opening authority and got signed by them.

Then compare the rates of various tenders in respect of each item rate against the estimated rate.

Scrutiny of tender cont.…

Based on the comparative statement, usually the lowest tender is accepted, while accepting the tender, the tender accepting authority shall satisfy the following regarding the tenderers.

1) the financial status of each tenderer.2) capacity to do the work 3) past record as contractor such as experience,

procurement of labourer etc.

Acceptance of tender

For valid reason, a tender other than the lowest can be accepted . The fact is to be recorded with full reasons. A report on this to be submitted to the next higher authority. A suitable reason is also mentioned in the comparative statement. The tender accepting authority himself has to sign the comparative statement and record his remarks.

Two tenders have quoted the same lowest rates When all the tenderers have quoted abnormally high rates Sometimes only one tenderer may respond to the tender call Chief engineer(FP),Superintending engineering(FP),

Executive engineer up up to 5,00,000/-, District engineer up to 50,000/-, Assistant engineer up to 20,000/-

Acceptance of tender

A. General conditions:1. Regarding drawings2. Reg IS specifications3. Reg Bill of quantities and schedule of prices4. Reg notice and arbitration(form of alternative dispute resolution)B. Labour and personnel conditions1. Regarding accidents to workmen at sight.2. Reg presence of contractor representative at the sight supervision

of work3. Reg removal of employees from the contract4. Reg rate of wages of the labour5. Reg labour amenities

Terms and Conditions of contract: The main objective is to avoid the disputes and keep parties away from court. They are

C. Execution of work conditions1. Reg defects in work and its removal2. Reg quality of materials and workmanship3. Reg additions, alterations, omissions during progress of

work4. Reg damages to the work, to the dept, to the contractor5. Reg precautions during blasting, showing , undepinning etc.6. Reg doing of work on holidays and night etcD. Measurement and payment conditions1. Reg measurement of completion of work2. Reg mode of payment3. Reg extension of time limit of the contract

4. Reg non-completion of work in time5. Reg bankruptcy ( is a legal status of a person or other entity that cannot

repay the debts it owes to creditors)of the contractor.6. Reg right of owner to suspend work7. Reg getting the work done by another contractor in case of

failure of the contractor etc.F. General Obligations of contractor, conditions1. Reg Act, Bye-Laws and regulations2. Reg fencing, watching and lighting the sight3. Reg insurance of workers, works etc4. Reg access to work

G. Special Conditions1. Reg use of special tools and plant2. Reg use of intoxicants3. Reg pollution of natural water courses4. Reg names of approved suppliers of materials5. Reg royalties(sum paid by one party to the

owner for on use of as asset), taxes etc

Contract may be terminated in the following conditions Completion of work: When work is completed according to

contract agreement and the owner is satisfied By Agreement: During unavoidable conditions like expiry of

contractor or owner if there is nobody to further complete the contract, payment is made till that day to the legal successor and the remaining work will carried by another contractor or a fresh agreement is made

By breach (an act of breaking or failing to observe a law, agreement, ) of conditions: If any of the party do not follow the conditions of contract then the other party has the rights to terminate the contract. And the sufferer can claim for damage in court of law or arbitration.

Termination of Contract

Impossibility to complete the work: In case of land not belonging to so called owner, land acquired by government for other purpose, flooded in water. Damage done to the contractor shall be paid by owner himself.

By bankrupt (declared in law as unable to pay their debts): If either party becomes bankrupt and cannot complete the contract.

"An agreement enforceable by law is a contract.”OR

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.

CONTRACT

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.

CONTRACT DOCUMENTS

1. Title page – name of work, name of owner, name of contractor, contract agreement no., estimated amount put to tender, etc.

2. Index page – contents of the agreement with page references

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. Letter acceptance of tender & written order to commence work: In order to avoid complication, it is imp.to mention date of acceptance of tender & date of written order to commence work but date on which the agreement is finalized shall not be considered at all.

The contract document must contain

5. Any letter given by contractor with the tender 6. Tender form – general description of work, the bill of

quantities, estimated cost, contractor's rate, time of completion, amount of security deposit, columns for signature of contractor and witness to contractor's signature and officer by whom accepted, etc.

7. 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.

8. Drawings – complete set of drawings including plan, elevation, sections, detailed drawings, etc. 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.

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 depositc) Mode of payment to contractor including running payment, final

payment and refund of security money, etc.d) Time of completion of worke) Extension of time for completion of workf) Engagement of sub contractor and other agencies at contractor’s cost

and riskg) Penalty for poor quality and unsatisfactory work progressh) Termination of contracti) Arbitration for settlement of disputesj) Work on Sundayk) Supervision by higher authorityl) Alteration of designs and specifications etc.

9.Conditions of contract

10. 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.

11. Labour regulations and safety code must be followed .

1. Lump-sum contract2. Cost plus percentage contract3. Cost plus a fixed fee contract4. Percentage rate contract 5. Item rate contract 6. Turn-key contract7. Cost plus sliding scale of fees8. Negotiated contracts

Classification of Contracts

Contractor undertakes work on item rate basis

Payment is done on the basis of quantities of items done and their respective rates

Quantities are calculated by detailed measurements and shown in tender form. Also called as unit price contract

Total cost is arrived by summing up of each items rate.

5. Item rate or unit price or schedule contract

As the contractor gets payment against the actual quantities of item done by him the methods economical because no excess payment can be made

As rates are item wise, contractor is not worried about the uncertainty in the plan and specification

Work can be started after accepting the tender without waiting for the detailed drawings and specifications

Advantages

Owner shall be interested in getting the works of such items whose rates are lower but contractor will be interested in works with higher prices.

There may be difficulty in classifying the work such as ordinary sol, soil mixed with kankar or loose rock because contractor will charge according to the classification whose price is higher.

It becomes difficult to calculate to exactly the final cost of construction resulting in difficulty for arrangement of funds.

Work is started before getting the final drawings and specifications which result in demolishing of some work which increases the construction cost.

Disadvantages

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 is the most commonly adopted system of contract in the different departments of our state.

4.Percentage rate contract

Owner knows the cost before hand. Detailed measurement of work is not

recorded unless there is some addition and alteration.

Complete picture of work from detailed drawings and total cost is known before hand, excellent planning efficient management of work can be done.

Contractor tries to complete work quickly for the sake of payment.

Advantages

In this it is essential that the work should be checked accurately and completely shown on the drawings in the specifications and the full information about the site condition should be available other wise it will leads to disputes.

Contractor is free to use the lowest cost of material equipment, methods.

Difficulty arises in making any intermediate payment. There is uncertainty about the quality ,smooth

progress, and completion of work

Disadvantages

In this type actual cost plus an agreed percentage in addition is added to allow profit

This type is adopted when conditions like rates of labor and materials are liable to fluctuate

Bill of quantities has to be framed but owner should carefully define the cost and record exactly what is permissible in the cost of work

2. Cost plus percentage rate contract

Advantages Suitable for urgent works It is suitable when work can not be executed by other type of contract

& if rates of labour and materials are fluctuating.Disadvantages Close supervision and checking of delivery notes and invoice are

required . This is unsuitable where the necessary staff is not available. It is contractors advantage to make cost high by wasting material,

employing inefficient workmen, as he takes little risk and his profit is assured.

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 as in Cost plus % rate.

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.

This system is not generally used.

3. Cost plus a fixed fee contract

Advantage Since fixed fee covers all the overhead charges and

profit. contractor tries to complete the work speedily to earn fee.

Disadvantage• Contractor shall try to complete work quickly by

purchasing material with high rate and engage labor at high cost due to which owner will be in loss.

In this type of contract the contractor is paid by the owner the actual cost of construction plus an amount of fee inversely variable according to the increase or decrease of the estimated cost agreed first by both parties. thus the higher the actual cost, lower will be the value of fee and vice versa.

Advantages: In this case the contractor shall not try to increase the actual cost. The actual cost is lower and lower, so both the owner and the contractor will be benefited.

Disadvantages: estimated cost should be accurate. Other wise the contractor get more profit if the actual cost is much higher than the estimated cost.

7.Cost plus sliding scale of fees contract

When the work is awarded on contract by mutual negotiation between the parties with out call of tenders, it is said to be negotiated contract.

In PWD, the contract are negotiated on special conditions like to obtain reasonable rates and also helpful in case of emergency.

Basic advantage by this system is that it brings economy in expenditure, parties will be reliable and less chance of disputes

8. Negotiated contract

It sometimes happens that the owner contemplating a construction project desires to deal with only one party for all services, both engineering and constructions, in connection with the work. This is so called “turn-key or package job”

A turnkey contract is a business arrangement in which a project is delivered in a completed state. Rather than contracting with an owner to develop a project in stages, the developer is hired to finish the entire project without owner input.

In effect, the developer is finishing the project and “turning the key” over to the new owner. 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.

6.Turn-key contract or combined Engineering and construction contracts

In a turnkey contract, the owner is generally left out of the building process entirely,as the developer handles all decisions and problems related to construction.

A contract of this kind may also be used in the residential home building industry

With a turnkey agreement, a builder or developer completes both the construction and the finishes in the home before turning it over to the homeowner.

The homeowner is often offered a chance to select finishes, including curtains, paint colours and carpeting.

A turnkey contract also provides more time for an owner to seek financing and investors before he is required to pay for a completed project

builder will construct a retail establishment for an owner, and the builder will receive a percentage of the gross receipts for a specific period of time.

construction decisions are based on the long-term needs of the project, rather than just the short-term decisions needed to get the job done.

Competitive bidding

Defination:• Transparent' procurement method in which bids

from competing contractors, suppliers, or vendors are invited by openly advertising the scope, specifications, and terms and conditions of the proposed contract as well as the criteria by which the bids will be evaluated.

• Competitive bidding aims at obtaining goods and services at the lowest prices by stimulating competition, and by preventing favouritism.

Advantages of Competitive Bidding• ensures transparency in the selection and award of

project • results in competitive costs/pricing (setting the price

of a product or service based on what the competition is charging)

• provides a market mechanism for selecting the best proposal

• stimulates interest among a broader range of investors

Suitability• The project is fairly standard• The technical parameters can be defined with

reasonable certainty in the bidding documents • limited scope for innovation and creativity on the part

of an operator

Local Competitive Bidding is one of several forms of procurement made with World Bank financing. LCB is generally used for contracts involving:(a) labour intensive activities; (b) small value; (c) locally procurable services or goods priced below

the world market; (d) intermittent work; or (e) activities to be performed at numerous sites

Global bidding has one of the largest database of international and national tenders / competitive bids, procurement news, project information from all over the world.

A specialized system for global recruitment, bidding, and assignments, to build a pool of qualified staff, ready to serve in long-term positions overseas.

Global Tenders is a premier opportunity platform that provides Global Tender Notices/International Competitive Bids/Trade Leads, procurement news, project information from all over the world. An international marketplace designed to help small to large-sized companies do business both domestically and globally. 

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