7/9/2016

Sr Dr. Mohd Saidin Misnan

UNIVERSITI TEKNOLOGI MALAYSIA
81310 UTM Johor Bahru, Johor, Malaysia
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Client’s Requirement
• Client’s brief
• Pre-qualification of contractor
• Preliminary estimate of projects

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Project Procurement

• The employer, when selecting a

contractor, shall obtain and evaluate
information regarding the contractors
performance, contract employer's safety
performance and programs.
• The employer shall inform contract
employers of the known potential risk,
fire, explosion, or toxic release hazards
related to the contractor's work and the
process.

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PROCESS OF CONSTRUCTION

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BIDDING SYSTEM

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GOVERNMENT TENDER PROCEDURE

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Contractor Pre-Qualification & Authorization

• The Standard Requires You to:

– Explain contractor qualification requirements
– List what is required for contractor pre-bid awareness -
pre-qualification
– List what is required for contractor post-bid awareness -
training & orientation
– Specify contractor responsibilities
– Describe contractor 300 Log Requirements
– Evaluate Contractor Performance
– List documentation requirements for contractors to
complete
– Explain the use of a work authorization system

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Contractor Pre-Qualification & Authorization

• Typical Pre-Qualification Elements:

– Years Experience in Work Process
– Experience Modification Rate (EMR)
– OSHA Total Recordable Incident Rate and Lost Work day
Case Rate Information
– Safety Programs
– Training Documentation

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Pre-Qualification
• Definition: capability assessment of firms to carry out a
particular contract prior to being invited to submit a bid is
a process called prequalification.

• Specially suitable for:

– Large or complex civil work
– Custom designed equipment
– Industrial plant
– Specialized services
– Complex information technology
– Turnkey, design and build, management contracting
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PQ – Why do it?
ADVANTAGES
• Enhances participation of serious contractors (since unqualified
bidders are excluded)
• Reduces high cost of bidding
• Gives early warning of competition potential
• Reduces complaints of disqualified bidders
• Gives “Peace of Mind” to Employers

MORE ADVANTAGES
• Borrower able to assess interest of qualified firms
• Identifies potential conflict of interest (contractors with
business association with consultants)
• Reduces time in evaluating bids from unqualified bidders
• Reduces potential for controversy
• Early Detection of Employer’s capacity to manage procurement
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Prequalification
• DISADVANTAGES
– Increases procurement lead time (minimized by
undertaking prequalification while preparing bidding
document)
– Review of all application is mandatory whereas post-
qualification requires review of only winning bid (BUT
VERIFICATION OF INFORMATION SUBMITTED IS NOT
REQUIRED FOR THE PQ EXERCISE)
– Possibility of collusion
• ADVANTAGES OUTWEIGH DISADVANTAGES

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PQ – If you meet the Criteria

you may enter in contest!

• Every firm or JV that meets the PQ criteria, which is always

Pass or Fail, does become pre-qualified. Employer can not
modify the criteria to increase or decrease the number of
pre-qualified firms during evaluation.
• The worst problems in civil works usually arise from
contractors lacking knowledge, means, funds, equipment
or personnel.

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PQ CRITERIA (Slide 1 of 3)
• History of Non-Performing Contracts. The Employer must
ensure that the prospective Contractor doesn’t have a history
of litigation an non-performance.
• Failure to Sign Contract Not being under execution of a Bid
Securing Declaration.
• Pending Litigation All pending litigation shall in total not
represent more than [insert number ] %, [insert percentage in
words] of the Applicant's net worth and shall be treated as
resolved against the Applicant.

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PQ Criteria (Slide 2 of 3)
Financial Requirements
 Sound position; long term profitability.
 Cash Flow (on hand) of about 4 months (to finance work
unpaid) Straight line calc.
 Annual turn-over for a number of years of no less than 2 times
annual disbursement of contract. (used to be 10 and then 5,
3, and now 2) This reduces chance of contractor going broke
on your job! Borrowers may use 3 which is more conservative.

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PQ criteria (Slide 3 of 3)
Construction Experience
 Completed one or 2 “Contracts” of similar type and value
(80%) during last 5 years.
 Executed similar work of same key items of BOQ in similar
periods, at a 80% of the rate required. Including peak periods
if needed.

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Prequalification (& the new PQ document)

• REVISED PREQUALIFICATION DOCUMENT DESIGNED TO
– Simplify Employer’s preparation time.
– Reduce Applicant’s preparation time.
– Simplify evaluation of applications by Employer.
– Minimize Bank’s review time.

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Prequalification – PQ Document

• PART I -APPLICATION PROCEDURES

– Section I: Instructions to Applicants (ITA)
• Specifies procedures to be followed by the Applicants
• No modifications permitted in Section I
– Section II: Application Data Sheet (ADS) Provisions
specific to given package
– Section III: Qualification Criteria
– Section IV: Application Forms

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Prequalification
• PART 2: WORKS REQUIREMENT
– Section V
• Briefly describes scope of works, time for delivery and
completion, technical specification ,etc.
– EMPLOYER REQUIRED TO FILL ONLY
• SECTION II - Application Data Sheet
• SECTION III- Qualification criteria
• SECTION V - Scope of work
– USER’S GUIDE – Not a part of prequalification document

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Prequalification

• IMPORTANT CLAUSES OF INFORMATION TO APPLICANT

(ITA)
– Source of Fund
– Corrupt Practices
– Eligible Applicant
– What comprises PQ Document
– Procedure for preparation of application

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Prequalification – Important Clauses in ITA

(Information to Applicants)

– Submission of application( deadline, late application,

etc.)- Late applications to be returned unopened.
– Procedure for evaluation of application (clarifications,
domestic preference, specialist subcontractor, etc..).
– Evaluation and notification.

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Prequalification

• QUALIFICATION CRITERIA
– ELIGIBILITY CRITERIA
• No conflict of interest, government owned entity
restrictions, Nationality, Bank ineligibility, UN
Resolution, etc. (each partner of Joint Venture to
meet each eligibility criteria)

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Prequalification
– EXPERIENCE CRITERIA
• (a) General Construction Experience-normally 5 years or
more; 3 years under special circumstances to allow new
entities (Each partner of JV must also meet this criteria)
• (b) Specific construction experience: similar contracts
based on physical size,complexity, methods/technology,
etc. (1 to 3.. normally 2); Applicant to have completed or
substantially completed one or more contracts of a
value(not less than 80%) of the proposed contract over
the stated period say five years
– key construction activity( earthwork, concrete etc);
Applicant to demonstrate experience ;example
pouring or placement of rock or concrete of 80% of
peak monthly or annual rates expected under
proposed contract over stated period say 5 years
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Prequalification
– FINANCIAL CRITERIA
• (a) Applicant to establish financial soundness and long
term profitability for last 5 years (exceptionally 3 years) –
each Joint Venture partner must meet this requirement
• (b) Minimum cash-flow for specified amount
• (c) Average Annual Construction Turnover within last five
years or more (three years exceptionally) for not less than
twice the estimated annual turnover of proposed contract
(may be reduced to 1.5 for contracts over RM200 million);
for JV each partner must meet a percent (say 25%) and
one partner must meet a percent (say 40%) of
requirement

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Prequalification
– Criteria for historical contract non-performance and pending
litigation.
– Pending litigation not to exceed 50% of Applicant’s net worth
(each partner of JV to meet this requirement)

• OTHER IMPORTANT ASPECTS

– Employer to set pass/fail criteria.
– Joint Venture must satisfy collectively specified qualification
requirement in full, in addition to each partner meeting specified
minimum.

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Prequalification
– Verification of liquid asset/line of credit, key personnel and
equipment at time of award.
– Multiple Contracts: Qualification criteria to be indicated for each
contract and applicants to be qualified for one or more contracts.
– Basis for multiple contract awards: consider combination of bids
offering lowest evaluated cost to Employer for all contracts.

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Prequalification

– Will need to Address the Slice and Package: size of

package , preferably to be similar and number of slices
not to exceed 4 – complexity of evaluation increases
with more numbers.
– Conditional Prequalification ( examples, provision of
additional critical information, revision of preliminary
JV Agreement, proposal for subcontracting specialized
elements, questionable ability to undertake subject
contract along with pending contracts).

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Prequalification
– No upper limit on numbers: all firms that meet criteria
must be prequalified
– Notify each disqualified Applicant giving an indication
for reasons for disqualification
– Invite all qualified Applicants to bid
– Changes in structure or formation of Applicant after
prequalification : requires prior written approval of
Employer/Bank
– Re-verify critical qualification information at time of
award

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vs. Postqualification !

• Only for selected bidder

• Criteria (Goods)
– Eligibility
– Experience of supply of similar items over a specified
period
– Manufacturer’s authorization to supply
– Production capacity

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Postqualification

– Production capacity
– Technical capability
– Financial resources
– Spare parts and service
– Past performance

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Postqualification
• Criteria (works)
– Eligibility
– Past experience (size/complexity)
– Personnel resources
– Equipment resources
– Financial capacity
– Litigation/arbitration history
• If there was prequalification, confirm that bidder’s status
is substantially the same as at prequalification

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SELECTION PROCEDURES AND

QUALIFICATIONS
• The owner, typically assisted by the designer, formulates a
procedure to attract and evaluate interested contractors.
• This procedure may be informal or highly structured,
depending on the size and complexity of the project and
owner’s organization.
• Private sector owners may award contracts on the basis of
prices offered informally (even orally).
• Most public agencies are required by law to use competitive
bidding.

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SELECTION PROCEDURES AND

QUALIFICATIONS (cont.)
• The first step in the selection procedure is to invite
contractors to submit information about their qualifications in
the form of a statement of qualifications (SOQ). Invitation can
be public notice or private invitation.
• In general, competitive bidding for public projects requires
the following qualifications of contractors submitting bids:
– Valid state and local license(s) to perform the work.
– Proof of financial capability to enter into contract, as
evidenced by the ability to supply bid and performance
bonds.

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SELECTION PROCEDURES AND

QUALIFICATIONS (cont.)
• The following is a general checklist of pre-qualification
information that may be requested by the owner:
– Constructor name, location, license, and corporate
structure
– Business data: financial information, bonding capacity,
bank references
– Construction experience: projects constructed or under
construction, size, type, performance on schedule, and
budget
– Work force on contractor payroll vs. subcontracting

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• Pre-qualification information checklist (cont.)

– Equipment owned vs. rentals
– Safety records: written program, actual experience
– Quality control: written program
– Resumes of key executive and supervisory staff
– Current work load: remaining bonding capacity
– Personnel to be assigned to key positions of
management and field supervision
– Performance of completed project references
– Record of litigation

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SELECTION PROCEDURES AND

QUALIFICATIONS (cont.)
• AGC has prepared a preprinted form, “Construction
Contractor’s Qualification Statement for Engineered
Construction” (AGC Doc. 220), for use as a suggested generic
pre-qualification statement or a contract-specific qualification
statement.
• In examining and evaluating the information submitted, the
owner may make independent checks on the contractor’s
credit standing, visit projects completed, interview owners
and operators, investigate safety records, and review other
indicators of performance capability.

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CONTRACTOR QUALIFICATIONS
• Private owners may choose the contractor that they
consider the best qualified. The owner may use the
qualification information to develop a “short list” of pre-
qualified contractors who are asked to:
– Bid competitively for the work on a unit-price or lump sum basis.
– Present priced proposals for negotiation of a contract on mutually
acceptable terms.
• Public owners may use the qualification information to
select a short list bidders.

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SELECTION BY COMPETITIVE
BIDDING
• Two ingredients for true price competition bidding are:
– Clear, concise set of construction plans, specifications, other proposed
contract documents (Specify the product to be delivered)
– Defined procedure for the bidding award process (Provide a systematic
approach)
• The bidding procedure protects both the owner and the
bidders by providing a systematic approach to bidding and
awarding the contract.

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Role of Designer
• Designer’s degree of involvement in the bidding process
depends on the agreement for professional services with the
owner. In a typical arrangement, the designer:
– Prepares drawings, specifications, bidding documents, and estimates
of probable costs for the review and approval of the owner.
– Assists the owner in obtaining bids or priced proposals for each
contract to be awarded.
– Assists the owner in evaluating bids or proposals and in awarding
contracts.

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Competitive Bidding for Public Works

• Competitive bidding is usually mandated by law or
agency regulations for federal, state and local
government projects.
• Beyond the general mandate, there are numerous
specific rules and criteria that are defined by the set
of documents issued to prospective bidders. These
documents generally include:
– Bidding documents that apply to the bidding process (e.g.
invitation to bid, instruction to bidders, information for
bidders, and bid forms).
– Contract documents specify contractor’s performance (e.g.
owner/contractor agreement, performance and payment
bonds, the bid or proposal, general conditions, drawings,
specifications, supplementary conditions, addenda and
change or extra work orders)
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Owner’s Bidding Procedures for

Public Works
• The procedures required to solicit and inform bidders, to
receive and analyze bids, and to award contracts under a
competitive bidding system include specific actions
– prior to the bid opening,
– during the bid opening process,
– And after bid opening.
• These activities are conducted by the owner, assisted by
designer, legal counsel and other advisers.

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Competitive Bidding for Private

Work
• The private sector owner may elect to follow essentially the
same procedures in securing competitive bids as has been
outlined for the public sector.
• The owner may invite a broad spectrum of the construction
industry to participate, or may limit participation to select
bidders list chosen by pre-qualification.
• In either case, the owner and bidders rely on defined bidding
and contract documents. (generally prepared by the designer)

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SELECTION PROCEDURES FOR

COMPETITIVE NEGOTIATED CONTRACTS
• Where structured price bidding may not be appropriate,
the owner first compares the qualifications submitted by
interested contractors then selects the contractor best
qualified for the project, according to established criteria,
and finally negotiates a contract for project construction
with that firm or person.
• This approach generally results in some form of
reimbursable cost-plus-fee contract, although negotiated
lump sum or unit-price arrangements are not precluded.

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SELECTION PROCEDURES FOR

COMPETITIVE NEGOTIATED CONTRACTS
(cont.)
• If competition more directly related to construction or
design-build services is desired, the owner selects a list of
contractors on the basis of qualification analysis.
• The owner then solicits proposals from contractors on the
list to address certain topics defined by the owner. (similar
to the previously covered contractor qualifications)
• With this information available, the owner makes an
evaluation of the organizational and cost elements of the
work and negotiates a contract with the contractor judged
to have the best overall proposal.

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SELECTION PROCEDURES FOR

NONCOMPETITIVE NEGOTIATED
CONTRACTS
• Situations where the owner may select a specific contractor
and negotiate the contract include the following:
– The owner may choose the contractor based on his/her
performance on work previously done for the owner.
– The contractor may have unique qualifications for the work
to be accomplished
– The contractor is already working at the site
– The urgency of the situation requires immediate action
• In the case of sole source award of a contract by a public
agency, the contractor may have unique characteristics. (e.g.
successful relationship with the owner, specialized expertise,
immediate availability for handling emergency)
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Contractors:
Who is a good one and Who is NOT
• When hiring a contractor to work in your facility there
are many things to consider
– Cost
– Knowledge or certification
– Insurance
– Liability
– Efficiency
– Reputation
– Safety

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How do you know for sure who

you are hiring?
• We use a Pre Qualification Process to
ensure we know who we are hiring
and if they are capable of working
safety within our facilities

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Who has to Pre-Qualify?

• All contractors and sub-contractors meeting the
requirements below:
– Construction - mechanical, electrical, civil
contractors doing project work to include new
installation and major retrofits, over hauls and
modifications.
– Supplemental maintenance – mechanical, electrical
and civil contractors doing equipment and facility
maintenance and repairs inside the plant facility.
– Specialty contractors doing HVAC, roofing, high-
pressure water cleaning (greater than 3000 psi) and
other High Hazard work (work at heights) as
determined by the requisitioner.
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Benefits
include a contractor selection process that provides for the selection
of contractors that have:
• A proven history of low injury frequency and severity rates as validated by
OSHA TIR (total incident rate) 3 year TIR Must be 4.0 or under. Must provide
3 previous years OSHA 300 logs.
• WC EMR. (experience modification rate) Must be 1.0 or under and be
verified by a letter with the insurance carriers letter head. Along with
Insurance Certificate
• Any specialty license or certificates Must be valid and current.
• Written EHS programs and policies meeting regulatory requirements that
allow for sustaining and improving injury performance.
• Written policies that provide for management commitment and employee
involvement in meeting established company goals and objectives.
• EHS Training programs to ensure employees are adequately trained to
perform their work in a manner that protects themselves and their co-
workers.
• Job skills and qualifications to perform the assigned work.
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Benefits = The use of safe contractors provides for

the opportunity to:

• Better protect LP employees, facilities and assets from contract

work in our facilities.
• Lesson the opportunity for civil actions and liability claims from
contractor injuries, property damage and business
interruptions.
• Reduced costs through lower contractor WC and GL insurance
coverage's.
• Lesson opportunities for regulatory citations and penalties as it
relates to OSHA's "Multi-Employer Worksite Policy" and OSHA's
ability to address contractor safety through owner
accountability of contractor activities.

It's the right thing to do.

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Benefits
• Helps ensure safe contractors are used.
• Takes the responsibility off LP and places it on the contractor.
• Little effort required by the plants to implement. TVTC is the
resource to the contractors. Any calls from contractors should be
referred to TVTC.
• Less follow-up required by LP personnel to ensure information is
complete and current.
• No more reviews and interpretation of completed contractor
information required by LP personnel (simply check database to see
if contractor is registered).
• The opportunity to share contractors among plants.
• Second party administration of the program through TVTC
– To conduct audits of the information submitted by the
contractors.
– To place all registered contractors in our database.
– To house the database on the TVTC website.

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Benefits to the Contractor

• Eliminates paperwork burden and duplicate reporting for
the same companies/different plants.
• Contractors can provide access to other owners instead of
filling out multiple forms.
• Exposure to additional businesses utilizing PQF. (pre
qualification form)
• Serves as cost effective advertisement.
• Allows owners to search for contractors by specialty, EMR,
TIR, Specialty, etc.

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Variance Procedures
• A variance is required for contractors who do not meet the safety
criteria.
• Variances are discouraged and should be used only when there is a well
defined business need such as specialization of the contractor and no
other contractors with this specialty are available, location of the site and
availability of contractors with the required skills and qualifications.
• The variance request shall be completely filled out by the requisitioner
and approved by the Plant Manager, Plant Safety Manager, Project
Engineer, and the Operations Manager.
• The variance form must be accompanied by a Commitment Letter from
the contractor stating what they are going to do (with no additional cost
to LP) to ensure their employees safety on our site.
• All variances will be reviewed by the Functional Area Safety Manager and
forwarded to TVTC so that they can be maintained in the PQF database.

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Request for Contractor Safety Variance

Variance Form
1. Contractor safety variance is requested for:

Contractor Name:

Address;

City, State, Zip

Phone:

Fax:

E-mail:

Contact Name:

2. Why is this variance being requested? What criteria did the contractor not meet?

3. What specialized service or expertise does this contractor have?

4. Were other “qualified” contractors available?

If so, why were they not selected? If there were no “qualified” contractors, why?

5. What is being done differently, BY THE CONTRACTOR AT NO ADDITIONAL COST TO LP,

to insure that LP safety expectations (Goal of ZERO) are met?
(Contractor commitment letter attached)

Approved By: Date

1 Mill Manager: ______________________________ _____________

2 Area/Mill Safety Manager: _______________________________ _____________

3 Project Manager/Engineer: _______________________________ _____________

4 Operations Director/Manager: _______________________________ _____________

5 Reviewed By: _______________________________ _____________

Functional Area Safety Manager
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Once a contractor is Qualified

• The On site safety orientation is started. As each facility does things
just a little bit different
• We review the job function / task that is being completed and facility
area
• Delegate an LP point of contact for the contractors
• Evaluate what PPE will be required to complete the task
• What Permitting will be required (Confined Space / hot work /etc)
• MSDS needs and locations
• Emergency evacuation meeting area and alarms
• Safe Work Expectations
• Daily tool box forms that will be required – depending on the length
of on site work
• Safety inspections that will be completed while the work is in
progress
• Field any questions the contractors may have
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Contractors

• The Greatest challenge is making sure Your

contractors Understand YOUR safety Rules and
Expectations

• There are differences between General industry

Safety and Construction safety – however while on
OUR site they will follow OUR Rules.

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QUESTIONS?

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Who does not have to Pre-

Qualify?
• Vendors making deliveries or servicing their own
equipment at the plant (UPS, vending machine personnel,
copy machine repair, truck drivers, warranty repairs, etc.).
• Work outside the process areas (lawn care, landscaping,
cafeteria contractors, security, janitorial, etc.).
• Consultants/technical experts who will not do any “hands-
on” work in the process area.
• Temporary employees working under direct LP Supervision
(temp agencies, temporary mechanical employees for
down days, etc.).
• Contractors providing off site fabrication in their own
facilities or other off site work.
• Single owned operations (owner / worker / rep)
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Where did we come from?

 Hastings District Council
Contractor A
Prequalified
Contractors
Award
Contract to
Contractor B Lowest Price
Conforming
Bid &
Contractor C methodology

Contractor D Prequalification
Provides all non-price attributes: meets threshold
prequalification threshold

Contractor E
Does not meets prequalification threshold:
Excluded from consideration

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Where did we come from?

 Capacity Infrastructure Services

Non-Price Attributes Performance Evaluations

Performance adjusted Non-Price Attributes

Contract Award based on Price and Performance-adjusted non-price Attributes

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Costs of tendering
 Cost of tendering survey

$
Client & Consultants evaluation
costs
0.5% of contract value

Contractors Bid costs

1.5% of contract value

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Performance Evaluation

 Must mean something

 Must feed back into the prequalification
scores

Performance Adjusted
Non-Price Non-Price
Attributes Evaluations Attributes

Time
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The Path to Superlative

 Use existing prequalification systems for MOST contracts to
reduce costs
 Review
 Work categories
 Classifications
 Use prequalification scores
 Meaningful performance evaluations
 Feed back to non-price attribute scores

Design & implement collaboratively

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Fig: Project management

process

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THANK YOU
b-saidin@utm.my

SBEQ3513-b-saidin@utm.my
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