TENDERING PROCESS

PUBLIC WORKS DEPARTMENT

Steps in Procurement 1. Preparation of Bid Documents

2. Approval of Bid Documents by Competent Authority

3. Public Invitation for Pre-qualification (where relevant) Issue of Instructions and Pre-qualification criteria Pre-Application Meeting and Issue of Clarifications to Applicants Receipt of PQ applications and scrutiny Approval to PQ

4. Invitation for Bids

5. Issue of Bid documents to prospective bidders

6. Pre Bid Meeting and Issue of Minutes, Clarifications and Common Set of Deviations

7. Receipt of Bids

8. Scrutiny/Evaluation

9. Negotiations, where warranted

10. Acceptance of Bids

Preparation and Approval to Draft Bid Documents Draft Bid Documents prepared before the invitation of the bids is

commenced. Bid Documents to be approved by the authority empowered While approving the Bid documents it should be inter alia

ensured that:

(a) there is no ambiguity, contradiction, or duplication in the nomenclature of items, conditions of contract, specifications and drawings;

(b) the specifications & drawings are capable of implementation at site; &

(c) the time stipulated to complete the job is adequate. The official approving the bid documents to affix his signature on

every page of the bid document as a token of approval and a certificate of approval.

Bid Advertisements in Newspapers in Web sites

Wide publicity must be given to the Bid Invitation Notice. Tenders must be invited in the most open and public

manner possible, by advertisement in the Press and by notice in English/Hindi and regional language newspapers of the concerned District/ State or National Levels as may be applicable.

Many departments/ organizations/ ULBs have well-managed web sites with the practice of hosting the notices on the web site in addition to the invitation in the press.

Invitation in the newspaper in a window format - important or core information is provided while leading the intending bidders to the detailed tender notice on the web site of the organization.

CVC Guidelines on Tender Publicity

The Central Vigilance Commission’s (CVC) communication no. OFF/CTE/ dated 4.2.2002 stipulates :

a) In order to have wider, fair and adequate competition, it is important that sufficient time, say 4-6 weeks in case of Advertised/Global tenders is allowed.

b) The tenders should preferably be kept open for sale till the date of tender opening or just one day prior to the date of tender opening.

c) With the widespread use of Information Technology, the tender notices should also be put on the website and e-mail address of the organization should be indicated in the tender notice.

Time Period for Bids Period given for submission of Bids should be adequate to enable the

bidder make his investigations, visit the site, carry out his costing, and quote realistically.

For domestic Bids this period may be 30 to 60 days. For smaller works the period could be less than 30 days. For very short works the period could be about 15-20 days. For large and complex works, this period will depend on the demands

of the work/ stipulation imposed by the funding institution (e.g. World Bank).

Usually the period is reckoned from the publication to the last date of sale of bid documents.

Some organizations prescribe a time gap of four to seven days between the last date of sale and the receipt of bids so as to allow some time for the bidders to study the bid documents and prepare their bids.

The time period for bids is reduced for the second or subsequent calls, in case re-bidding is resorted to.

Sale of Tenders Tender documents must be kept ready for sale

before the issue of Invitation for Bids. The intending bidders desiring to tender should

generally make a written application and pay the price of the bid documents in the specified format.

An official is designated to see that tender documents with complete set of drawings are made available to the bidders as soon as their applications are received.

Bidders need to acknowledge receipt of the bid documents for purposes of record.

Pre-Bid Meeting A Pre Bid Meeting is held at a specified place and time to enable prospective

bidders to seek clarifications about the provisions of the bid and make suggestions to the organization about the work and the bidding conditions.

It is to be noted that non-attendance at the Pre Bid Meeting does not constitute a disqualification of the bidder.

A senior official connected with the bid process usually chairs the meeting. Minutes of this meeting are prepared along with clarifications to the bidders

to respond to their queries. In case there are amendments to the bid conditions proposed at this stage

ensuing from the suggestions made by the bidders or otherwise, the same are issued in the form of Common Set of Deviations (CSD) to the bidders.

The minutes of the Pre Bid Meeting, Clarifications and the CSD as above need to be supplied to the bidders without delay.

A minimum gap of about ten to fifteen days is usually allowed between the Issue of these minutes and the clarifications/CSD and the last date of sale of the bid documents primarily with a view to enable bidders who are attracted to the bid process on account of these deviations, to purchase the bid documents and participate in the bid.

Bid Validity Bids to be valid for a stipulated period after the

submission, usually 120 days. The process of scrutiny and evaluation of the bids

has therefore to be completed and acceptance communicated well within the validity period.

If for some reason, the process of scrutiny and evaluation is delayed, either the successful bidder or all the bidders could be requested to extend their validity for a suitable period.

It must be noted that extension to the bid validity is entirely discretion of the bidder and such a request may not be responded favourably.

Bid Security A bid security (Normally 1% of the estimated

cost of the work put to tender) is to accompany the bids.

This is also called Earnest Money Deposit (EMD)

The format of the bid security as well as the time frame and manner of its refund in case of unsuccessful bids is stipulated in the bid documents.

The successful bidders are allowed usually to convert the bid security into their performance security.

Submission of Bids Fixed place, specific date and time as the deadline for the

submission of tenders. Prior to the deadline for the submission of tenders; extend

the deadline, if necessary Notice of any extension of the deadline needs to be given

promptly to each bidder. The tender to be submitted in writing, signed and in a sealed

envelope as per stipulations contained in the Bid documents. The employer may provide to the bidders a receipt showing

the date and time when its tender was received, especially when asked for.

The tender received after the deadline for the submission of tender, shall be returned unopened to the bidders who submitted the same.

Opening of Bids On the due date and appointed time, bids are opened in the

presence of the intending bidders or their representative. The bidder’s name, the bid prices and discount, if any will be

announced by the procuring entity during opening of bids. A record of opening of bids is to be maintained. Where the bidding follows a two envelope bid submission, the

first envelope of the bidders containing the documents to ascertain eligibility/qualification of the bidders and/ or technical proposals is opened on the bid submission date.

The documents in the first envelope are scrutinized in due course.

The financial bids of those technically qualified bidders are opened.

Qualifying bidders intimated date of opening of financial bids Bid documents should clearly spell out the procedure of

opening and scrutiny of the bid documents.

Responsive Bids Scrutiny of the 'Financial Bids‘ to determine whether properly signed and

is substantially responsive. A substantively responsive bid is one that conforms to all the terms,

conditions and specifications of the tender documents without material deviation and reservation.

A material deviation or reservation is one: a) which affects in any substantial way the scope, quality, or performance

of the works; or b) which limits in any substantial way the Employer's rights or the

bidder's obligations; or c) whose rectification would affect unfairly the competitive position of

other bidders which are substantially responsive. If a bid is not substantially responsive to the requirements of the bid

documents, it shall be rejected with the approval of the authority empowered to accept the bid in the first instance, and may not subsequently be made responsive by correction or withdrawal of the non-conforming stipulation.

In this context, conditional bids may be considered as non-responsive. The provisions regarding determination of responsiveness of bid

documents generally form part of the Instructions to Bidders (ITB) incorporated in the bid documents.

Correction of Errors Substantially responsive financial bids are checked for

any arithmetic errors. Arithmetic errors are to be rectified on the basis of the

standard procedure stipulated in the ITB which is as follows:

a) If there is a difference between the amount of rate in figure and in words of an item, and the total amount is worked out, then the rate which corresponds to the amount worked by the bidder shall be taken as correct.

b) If the bidder has not worked out the amount of an item, or the same does not correspond with the rates written either in figures or in words, then the rate quoted by him in words shall be taken as correct.

c) If the rate quoted by the bidder in figures and in words tallies, but the amount is not worked out correctly, the rate quoted by the contractor shall be taken as correct and not the amount.

Clarification from Bidders To assist the process of examination, evaluation and

comparison of bids a procedure is stipulated in the bid documents - the Employer may ask the bidder individually for clarification, if any, of their bids, including breakdown of unit rates and price.

The request for clarification and the response must be in writing, but no change in the price or substance of the bid will be sought, offered or permitted, except as required to confirm the correction of arithmetical errors discovered by the Employer in the course of scrutiny.

Evaluation and Comparison of Bids

The evaluated bid Prices will be adjusted after taking into account (i) correction for errors; (ii) adjustments for any acceptable variations, deviations and, (iii) adjustments to reflect any discounts or other modifications offered. Variations, deviations, or alterative offers and other factors which are in

excess of the bidding documents or otherwise result in unsolicited benefits for the Contractor should not be taken into account in bid evaluation.

Duties, taxes and other levies will not be considered in evaluation of bids.

If the bid of the successful bidder is seriously unbalanced in relation to the estimate of the cost of the work, the Employer may ask the bidder to produce detailed price analysis for any or all the items of Bill of Quantities, to demonstrate the internal consistency of those prices with the construction methods and schedule proposed.

After evaluation of this analysis, the Employer may require that the amount of performance security be increased to a level sufficient to protect the Employer against financial loss in the event of default of the successful bidder under the Contract.

Confidentiality Considerations The ITB shall usually provide for the confidentiality of

the process by stipulating that information relating to the examination, clarification, evaluation and comparison of bids, and recommendations for the award of a contract shall not be disclosed to bidders or any other person not officially concerned with such process, until the award to the successful bidder is announced.

Additionally, Bidders are not to contract the Employer or his officials from the time of bid opening to the time contract award on any matter related to the bid, except on request and prior written permission and that any effort by the Bidder to influence the Employer in bid evaluation, bid comparison or contract award decisions will result in the rejection of the Bidder's bid.

Acceptance of Bids At the end of its scrutiny and evaluation of the bids a comparative

statement of tenders is prepared to compare the tenders and in order to ascertain the successful tender in accordance with the procedures and criteria set forth in the bid documents.

No criteria shall be used that has not been set forth in the tender document.

Based on the acceptance criteria stipulated in the Bid documents, the competent authority shall accept the tender that meets the requirements of the bid documents and the acceptance criteria stipulated.

The usual criterion stipulated in bid documents, is to regard a bidder successful if his bid quotes the lowest price subject to any margin of preference applied pursuant to Government policy.

The Bid documents should incorporate the stipulation that the Employer shall reserve the right to accept or reject any bid or all bids, recall the tender and to annul the bidding process, at any time before the award of its work, without thereby incurring any liability to the affected bidder(s) or any obligation to inform the affected bidder(s) of the grounds for this action.

However, while exercising this right the competent official of the Employer must base his action of rejection on clear, logical reasons and keep these reasons for rejection/recall of tenders on record.

Negotiations – CVC Guidelines CVC guidelines in this regard stipulate as under: a) There should not be any negotiations. Negotiations, if at all, shall be

an exception and only in the case of proprietary items or in the case of items with limited source of supply. Negotiations shall be held with L-1 only. Counter offers are tantamount to negotiations and should be treated at par with negotiation.

b) Negotiations can be recommended in exceptional circumstances only after due application of mind and recording valid, logical reasons justifying negotiations. In case of inability to obtain the desired results by way of reduction in rates and negotiations prove in fructuous. Satisfactory explanations are required to be recorded by the Officials/Committee who recommended the negotiations. The Officials/Committee shall be responsible for lack of application of mind in case its negotiations have only unnecessarily delayed the award of work/contract.

c) In case of L-1 backing out there should be re-tendering as per extant instructions.

d) The original terms and conditions of the bid should not be varied while negotiating. A record of the negotiations will be kept, which will form part of the agreement along with undertakings given by the contractor.

Guidelines for Acceptance of Single Tenders The acceptance of single tender poses difficulty and is not encouraged.

Acceptance of a single tender is to be an exception and not a general rule. The following guidelines adopted by NHAI for its works, may be used for guidance.

In case only a single bid is received by the due date of receipt, normally the bid process may be cancelled and re-bidding done by giving a shorter notice (say of four weeks) except in cases where due to other reasons like difficult conditions, law and order etc., the tender response is expected to be poor.

In case of re-bidding, change from pre-qualification to post-qualification may also be considered and resorted to, if that would help increase response of tender.

In case re-bidding/change to post-qualification also results in receipt of single bid then it should be opened and the bid amount should be compared with the estimated project cost. In case the bid amount is within 15% of the estimated cost, then acceptance of the bid may be considered with proper justification and reasons.

For EPC contracts such single tenders can be considered for acceptance provided if bid is reasonable and sufficient justifications exist for acceptance.

In cases where due to reasons like difficult conditions, law and order, likelihood of poor response etc., it is decided to open the single bid without going for re-bidding, then for acceptance, the above guidelines shall be applicable as are prescribed for acceptance of tenders where re-bidding is resorted to.

Communication of Acceptance

Acceptance of the bid is communicated to the successful bidder well before the expiry of the bid validity period, in a standard format of acceptance letter.

The bidder is requested to submit a performance security (Usually 5 % to 10% of the contract price) within the stipulated period so as to issue a notice to proceed with the work (Work Order)

Performance Security The successful bidder is required to furnish to the Employer a

performance security after the receipt of Letter of Acceptance, within the time stipulated,

usually of an amount equivalent to 5% to 10% of the contract price plus additional security for unbalanced bids.

The Performance Security to be provided by the successful bidder is in the form of a bank guarantee as per prescribed format issued from any nationalized Indian bank/IDBI/ICICI/Export Import bank/Foreign bank with counter guarantee from any nationalized Indian Bank or other bank as may be acceptable to Employer

The Bank Guarantee for performance security shall remain valid for a sufficient period (as specified in the Contract) after expiry of Defects Liability Period.

After the successful bidder furnishes the performance security towards the work as stipulated in the bid documents, the notice to proceed with the work (Work Order) is issued and the agreement is signed.

Eligibility & Qualification of Bidders Pre-qualification: The successful execution of contracts for

large buildings, civil engineering, supply and installation, turnkey, and design and build projects requires that contracts be awarded only to firms, or combinations of firms, that are suitably experienced in the type of work and construction technology involved, that are financially and managerially sound, and that can provide all the equipment required in a timely manner. The assessment by an implementing agency of the suitability of firms to carry out a particular contract prior to being invited to submit a bid is a process called pre-qualification.

Post-qualification: Where the assessment by the implementing agency of the suitability of the firm to carry out the contract is carried out after the submission of bids, the process is called post-qualification. The post-qualification process comprises scrutiny of the credentials of the firm from the first envelope of the two envelopes bidding process and considering the financial bids in the second envelope only of those bidders who conform to the stipulated qualification criteria.

Eligibility Criteria Eligibility criteria generally stipulated in the bid

documents comprises the following: Conflict of Interests: A firm that has provided

consultancy services to the Employer in the preparation of the project or bid documents etc. or affiliates of such a firm are not eligible to provide services or goods and thus not eligible for bidding.

Government owned enterprises are not eligible for bidding unless they are legally and financially autonomous and operate under the commercial law.

A firm declared ineligible for having indulged in corrupt or fraudulent practices by the Employer shall not bid. Firms that have been debarred from participating in the bid processes of the Employer for non- performance shall be ineligible for bidding in the period so applicable.

Qualification Criteria Registration of Contractors in Appropriate

Class General Construction Experience Particular Construction Experience Turnover Bid Capacity Financial Capability Equipment Capability Personnel Capability Litigation History and Past Performance

Qualification Criteria Generally, the following qualification criteria are specified in the pre-

qualification document for qualification of bidders. The criteria may also be used to carry out post-qualification of bidders. The criteria could be modified and expanded to include other conditions to meet the requirements of individual works.

Registration of Contractors in Appropriate Class: The Qualification criteria usually stipulates that the bidders must be registered in appropriate class with the Employer or the CPWD or State PWDs or Railways etc, The registered contractors would be eligible to tender for the class (es) of work(s) for which they are registered and up to the limits of their registration and area of operation.

General Construction Experience: The qualification criteria stipulates that bidders should have been actively engaged in civil works construction business for similar work at least for 5/ 10 years immediately prior to the date of submission of application.

Particular Construction Experience: The qualification criteria stipulation may provide that the bidder should have successfully completed or substantially completed, within the last 5/10 financial years, at least one contract of the specified percentage (e.g. 75 %) of the contract value in question and which is similar to the one now being proposed and (ii) The bidder should also have achieved the minimum annual production rates of the key construction activities stipulated.

Qualification Criteria Turnover: The minimum average turnover of the bidder during

the preceding 5 to 7 years should be more than the specified value. This is usually two times the estimated cost of the work put to tender divided by the time in years allowed for the work. While working out the turnover of the preceding years, a compounding factor (e.g. 10% per year) may be specified.

Bid Capacity: The qualification criteria invariably provide that the bidder should possess the bidding capacity as calculated by the specified formula. The formula generally adopted is: Bid Capacity = A x N x F -B, where : A = Maximum value of works executed in any one year during the last 5 years (updated at the current price level by a compounding factor e.g. 10% per annum), taking into account the completed as well as works in progress. N = Number of years prescribed for completion of the work in question. B = Value (updated at the current price level) of the existing commitments and ongoing works to be completed in the next 'N' years. F = A multiplier factor (Usually 1.5 to 2)

Qualification Criteria Financial Capability: With a view to ensure that the bidder has

access to or possesses adequate liquid assets and other financial assets to meet the cash flow requirements for the contract in question, the qualification criteria provides that (i) The bidder must possess a specified minimum value of liquid assets (Generally 10% of the annual turnover) (ii) The bidder should have adequate sources of finance to meet the cash flow requirements of works currently in progress and for future contract commitments and (iii) The bidder should possess financial soundness as established by audited balance sheets and/or financial statements. Towards this the bidder may be required to produce these details such as Profit and Loss Statements and Balance Sheets for the preceding five or seven years. The bid documents may also provide that the Employer may seek reference from the bidder’s bankers to establish his financial soundness.

Equipment Capability: The qualification criteria may provide that the bidders should demonstrate the availability of key equipment necessary for the contract work. This may be through ownership of the equipment of through hire or lease. The prime consideration in this regard would be to assure the availability of the equipment at the time when it is required to be deployed in the contract work.

Qualification Criteria Personnel Capability: The qualification criteria may

require the bidder must demonstrate the availability of key personnel of the requisite qualification and experience for deployment in the contract work.

Litigation History and Past Performance: With a view to weed out bidders with a history of unsuccessful or bad litigation or poor performance in past contracts, e.g. unsuccessful completion, or excessive delays the criteria may require the bidders to provide details of previous works and litigations. The Employer may, in this regard insist on certificates/ independent verification from the previous Employers to ensue that the past history of the bidder does not create a doubt about his performance in the present contract. A decision to disqualify has to be based on solid evidence (references) from the previous Employers to substantiate that non-performance resulted from a default by the bidder.

Joint Venture Intending bidders forge joint ventures to bring together their

technical, financial, personnel and equipment capabilities to meet the requirements of a contract work.

For large and complex works (say costing more than Rs. 100 Cr.), joint ventures are, therefore, permitted.

While qualifying joint ventures, the memorandum of understanding forming the joint venture agreement should be carefully scrutinized.

The MOU between the joint venture partners should contain details such as Management structure of the J/V, share of individual partners in the J/V, Lead Partner and his empowerment to incur liabilities and enter negotiations, responsibilities of individual partners in furnishing bid security, performance security etc., their joint and several liability and remedy in case of abdication of responsibility by one or more parties etc.

While considering qualification of a Joint Venture, some of the criteria specified above could be met collectively and some by the Lead Partner.

Some of the criteria could be applied to the individual partners to the extent of their share in the J/V.

For smaller contracts it may be desirable to disallow joint ventures.