Project Procurement Management

Tendering Process
Procurement: Typical Flow of Activities

Topographical
Understanding of Conceptualization Rough cost
Site data collection survey of site &
the Client’s needs of scheme. Estimate.
contouring,

Administrative
Preparation of Preparation of
Geotechnical Approval & Approval of Plans
preliminary preliminary
investigation Expenditure by Local Body
drawings Estimate
Sanction

Detailed drawings, Selection of Type Eligibility criterion

Preparation of
Structural of Contract: Item of Contractors, Notice Inviting
Detailed Estimate,
drawings and Rate, % Rate, Lump Enlistment & Tender (NIT)
Technical Sanction
Design of Services Sum, Cost plus Prequalification

Receipt &
Publicity & Sale of
Processing of Negotiations,
tenders, Prebid
Tenders and their Award of work
conference
evaluation
 What is Tendering?

Process in which an offer is submitted by an individual contractor or a construction firm in writing to

Tendering execute the work or supply to be made for a specified project, against the proposal/notice issued
by the owner of the project.

A tender document helps in a tendering process that helps a buyer select qualified and interested suppliers based on certain
contract criteria.
Broadly this is pricing documentation and quality criteria

Characteristics of Tender
• All potential contractors and suppliers must submit their bids within the deadline decided on by the client.
• The bid (tender papers) must include all the required and relevant details about the materials to be used, the expected cost of the
project, etc.
• After the deadline has passed, all bids are evaluated by the client based on a set of predetermined criteria such as price and quality.
• The process of tendering starts with an invitation of tender or a request for tender (RTF).
• It ends with the public evaluation process and following by which one of the firms that submitted a tender wins the project or
contract.
• Before they are floated by the client, tenders are generally advertised in a different local of media and newspapers, to allow all
interested contractors an opportunity to bid for the project.
Tendering Process

Tendering Pre-Tendering • Preparation tender documents: all relevant items of contracts,

specifications, and terms and conditions
Cycle Activities

• Sealed tenders published – Notice Inviting Tender (NIT)

Tendering Process
Tendering • Through advertisement/Papers/Websites/Letters/E-Tender
Tendering

• Opening of Bids- In presence /Without Presence

Opening Bids • Check for Rejection Criteria
Contract
Signing
• Prepare Comparative Statements
Evaluation • Evaluate Lowest/Most Preferred Bidder

Construction • Allocate Purchase Order

Award • Seek Acceptance
 Types of Tenders

•Type of Tender is usually governed or identified by how a tender is

processed
•Generally Following types of Tenders are usually encountered in
Construction
•Open Tender
•Limited or Selective Tender Single Bid / Two Bid

•Global Tender
•Single Tender
 Open Tenders

• Process of inviting tender which is open to all eligible contractors,

• Some defined pre-qualification for the contractors

• Credential
• Financial capabilities
• Any contractors fulfilling the criteria of PQ (pre-qualification) can participate in the tender and
can bid their suitable price.

• This process of tendering is a common practice by government departments or agencies,

• A huge number, a qualified contractor can participate where awarding the job to a contractor
becomes very difficult, generally the lowest bidder is awarded the contract.

• Mode of Tender: All except direct letters

 Open Tenders

Advantages Highly Competitive - Provides greatest Competition among Suppliers.

Or
Advantage of creating opportunities for new and emerging suppliers
Drawbacks
Under evaluated Bids – Some novice contractor bids with erroneous
understanding
High Cost of tendering – Reduce through e-tendering

Underpriced Bids – Result of competitive bidding

Time consuming to evaluate bids

Grater Transparency - No favoritism

 Selective Tenders

• This process is also called limited tender.

• Addressed to a limited number of suppliers - Qualified contractors with the right credentials
and capabilities.

• Only invited contractors are eligible to bid their prices.

• Approved list of contractors

• The best alternatives for the employer to adopt - special circumstances such as emergencies,
 Open Tenders

Advantages / Fewer Suppliers - Easy to choose the right contractor to award

Drawbacks the job.
PQ Ready - Only those contractors are invited to participate who
have adequate credentials and financial capabilities
Simplified tendering process and low cost

Not very Competitive – Chances of cartelization.

Better Quality of Workmanship

Higher price of project

 Single Tender

• This is also called Award on Nomination Basis in public sector parlance

• It is the process of tendering where only one contractor is invited for the tender to participate.

• The invitation for a single tender is given to the contractor who has the previous satisfactory
record of completion with the employer.

• Or, In the case of highly specialized jobs, where limited reputed contractors are available, or
some special equipment or engineers are required to execute the job.

• Rarely followed by the government or the Public sector- under exceptional circumstances
only.
 Single Tenders

Advantages / Simplest form of procurement

Drawbacks

Saves a lot of time and manpower of the employers - omits all long processes
involved in open tendering.

Might result in higher contract price

Low risk of time variation – Dependable, tested and expert suppliers work


It is also beneficial for the contractor to rely on his client as there is a past
relationship is made.

Needs high control, Prone to corruption – Resources for audit

 Global Tender

• It is an open Tender

• It is the process of tendering where suppliers located globally can participate.

• Is open to anybody from any part of the world to supply the required quantity and quality of
materials

• Where: Large scale of project and Special expertise is required

• Price is not the main concern – Scale and complexity of technology

 Global Tenders

Advantages / Complex in its execution

Drawbacks

Requires lot of time and expertise even to form contract document

Makes available global technology and expertise

Might need a third party help in framing tender documentation.

Difficult to choose a supplier – Valuation is critical

Contract Documents
Construction Contract Documents

• All documents prepared for tender process will be a part of the Contract
• These documents are called Contract Documents

• General conditions
Types of • Special conditions
Documents in • Drawings and specifications
Construction • B.O.Q (bill of quantity)
Contract • Letter of acceptance
• Contractor bid
Construction Contract Documents

Conditions of Contract
• terms that rule the relationships between the owner and the contractor.
• define each party's rights and obligations,
• specify the method of payment and
• determine actions required when existing any disputes between the
owner and the contractor.

General Conditions of Special Conditions of

Contract (GCC) Contract (GCC)
Construction Contract Documents

Terms & Conditions of Contract

General Conditions of Contract (GCC) Special Conditions of Contract (SCC)

1. General Standard format 1. Amendments/Additions/Deletions to GCC

2. Scope and Performance of Contract 2. Material provided by Owner
3. Contract components 3. Site Visits
4. Rights and responsibilities for the owner 4. Mobilization Advance
and the contractor 5. Start Date of Construction
5. Valuation and Payment method 6. Requirement of various reports
6. Warranty and delay penalty 7. Any other specific requirement
7. Arbitration & Laws
Classification : Engineering Contracts

Categories of Contract

Separated Management Integrated Discretionary

• Lumpsum • Management Contract • Design Build • Partnering

• Measurement • Const. Management • Turnkey • Joint Venture
• Item Rate Contract • Build Operate &
• Percentage Rate • Design Management & Transfer
• Cost Plus Percentage Construction contract

Source: CPM pg 114

 Classification : Engineering Contracts

Separated

• Lumpsum • Drawings & Other detail provided by Client

• Measurement • Contractor quotes a single lumpsum figure – contract value
• Item Rate • LS amount refers to total sum of money contractor agrees to
• Percentage Rate carry out the job.
• Cost Plus Percentage • Contractor responsible for all factors – supply of materials,
uncertainty, hazards etc
• Design and specifications must be fully developable.
• No detailed measurement of actual work needed
 Classification : Engineering Contracts

Separated

• Lumpsum • Tender document contains a detailed BOQ. Estimated quantity of

• Measurement items given
• Item Rate • More than total amount of contract, rate quoted by contractor
• Percentage Rate sacrosanct.
• Contractor to carryout detailed analysis to work out item rates
• Cost Plus Percentage
• Contract value = Sum of estimated qty of items x rate of items
• Actual account of items executed necessary to be kept
• Difference between actual quantities of items executed against
those estimated possible
 Classification : Engineering Contracts

Separated

• Lumpsum • Tender document contains detailed analysis of rates; Rates of items

• Measurement given in addition to estimated quantities.
• Item Rate • Estimate of total work available to contractor
• Percentage Rate • Contractor as usual to carryout detailed analysis to work out item
rates and arrives at his total price.
• Cost Plus Percentage
• Contract value = Sum of estimated qty of items x rate of items
• Contract price quoted as a percentage of estimated price.
• Overall modification in the rates of the contractor with % factor
• Actual account of items executed necessary to be kept
 Classification : Engineering Contracts

Separated

• Lumpsum • Client agrees to pay certain percentage of cost in addition to actual

• Measurement cost incurred
• Item Rate • Tenderer only quotes this percentage.
• Percentage Rate • Often Client make available a part of the material to contractor
• Contractor required to keep a detailed account of expenses
• Cost Plus Percentage
incurred.
• Depending on terms of contract, only final measurements are
taken and cost of inputs worked out based on established and
agreed guidelines.
• Sometimes material brought directly to site is paid by the client
Request For Proposal (RFP)
An Overview
Overview

• Definition of Request for Proposal (RFP)

– An RFP is a formal document used to
solicit detailed proposals from
potential suppliers or service providers
for complex projects, services, or
products.
• Purpose of RFP
– Comprehensive Project Evaluation and
Supplier Selection
– RFPs play a pivotal role in evaluating
solutions that are tailored to meet
specific project requirements.
 How RFPs Work?

Detailed Customized Flexibility in Comprehensive Informed Encouragement Alignment with Reduced Risk of
Information Solutions: Approaches: Evaluation Decision- of Innovation: Stakeholder Miscommunicati
Gathering: Criteria: Making: Needs: on:
RFPs require suppliers RFPs allow RFPs encourage The evaluation RFPs empower RFPs encourage As RFPs involve By clearly articulating
to provide in-depth organizations to suppliers to present a criteria for RFPs are organizations to make suppliers to think collaboration among project requirements,
information about outline their unique range of approaches, designed to assess well-informed innovatively and various departments expectations, and
their proposed needs, challenges, methodologies, and multiple dimensions decisions by providing creatively. Since the and stakeholders, the evaluation criteria,
solutions. This and goals in detail. solutions to address of the proposed a wealth of focus is on proposing resulting proposals RFPs minimize the
includes technical Suppliers are then the project's solutions. This information from comprehensive are more likely to risk of
details, prompted to create challenges. This includes technical potential suppliers. solutions, suppliers align with the broader miscommunication
methodologies, proposals that flexibility enables feasibility, alignment The submitted are motivated to organizational goals. between the
implementation directly address these organizations to with project goals, proposals offer come up with This alignment organization and
plans, and strategies. specific requirements. explore various innovative thinking, insights into different inventive ideas that ensures that the potential suppliers.
By collecting detailed As a result, the options and choose scalability, and more. perspectives, can potentially lead chosen solution not This clarity helps
information, RFPs proposals submitted the one that aligns The comprehensive methodologies, and to improved project only meets project prevent
ensure that suppliers through RFPs are best with their evaluation criteria strategies. This outcomes. requirements but also misunderstandings
thoroughly often highly objectives and ensure that solutions information equips contributes to the and increases the
understand the customized and constraints. are evaluated decision-makers with overall strategic likelihood of accurate
project's scope and tailored to the holistically rather the knowledge direction of the solutions being
objectives before organization's exact than solely based on needed to select the organization. proposed.
submitting their needs. price. solution that offers
proposals. the best fit for the
project's unique
requirements.
 Importance of RFP

• In-Depth Project Understanding

– RFPs require suppliers to provide detailed
solutions, encouraging them to thoroughly
understand the project's scope and
objectives.
• Customized Solutions
– RFPs enable organizations to receive
proposals that are tailored to their unique
needs, leading to higher-quality solutions.
• Comparative Evaluation
– By receiving multiple detailed proposals,
organizations can compare and select the
proposal that best aligns with their goals.
 RFP Process - Step 1:
Identifying Needs
• Defining Project Scope and Objectives
– Clearly outline the project's scope,
objectives, and expected outcomes
to guide potential suppliers.
• Identifying Key Requirements and
Constraints
– Specify essential requirements,
constraints, and any critical
parameters that must be addressed
in proposals.
 RFP Process - Step 2: Preparing the RFP Document

• Components of an RFP Document

– Introduction: Provide an overview of the
project and its context.
– Project Requirements: Detail the technical,
functional, and performance criteria.
– Evaluation Criteria: Outline how proposals will
be assessed.
– Terms and Conditions: Specify legal and
contractual terms.
– Submission Instructions: Explain how suppliers
should structure and submit their proposals.
– Ensuring Clarity in Communication
– Craft a clear and comprehensive RFP document
to avoid misunderstandings and ambiguities.
 RFP Process - Step 3: Identifying Potential Suppliers

Researching and Engaging a Diverse Evaluating Supplier

Shortlisting Suppliers
Identify potential suppliers
who possess the expertise
and resources needed for the
project.
Range of Suppliers
Encourage participation from
both established suppliers
and innovative newcomers to
stimulate creativity.
Suitability
Ensure that potential
suppliers have the capability
to deliver the required
solutions.
 RFP Process - Step 4: Distributing the RFP

• Utilizing Various Distribution Channels

– Digital Platforms: Use online portals
to post RFPs and facilitate easy
access.
– Direct Communication: Email RFPs
to pre-identified suppliers.
– Ensuring Equal Access to
Information
– Guarantee that all potential
suppliers have the same access to
information and can submit their
proposals under fair conditions.
 • Addressing Supplier Queries
RFP Process - Step 5: – Respond promptly to
Supplier Queries supplier inquiries to
ensure a clear
and Clarifications understanding of the
project's requirements.
• Transparency and Fairness
– Share clarifications with
all potential suppliers to
maintain a level playing
field.
 RFP Process - Step 6: Proposal Submission and Review

Submission Deadline Comprehensive Proposal

Set a deadline for suppliers to
submit their detailed proposals.
Evaluation
Review proposals based on the
outlined evaluation criteria,
considering technical aspects,
feasibility, and innovation.
 RFP Process - Step 7: Supplier Presentation or Negotiation

Supplier Presentations Negotiation of Terms

Invite shortlisted suppliers to present Engage in negotiation if necessary,
their proposals, providing an opportunity focusing on refining details and aligning
for them to elaborate on their solutions. expectations.
RFP Process - Step 8: Finalizing the Contract

• Selecting the Winning Proposal

– Choose the proposal that best
aligns with the project's
objectives and meets the
evaluation criteria.
• Formalizing the Contract
– Draft a comprehensive
contract that encompasses the
agreed-upon terms and
conditions.
RFP Best Practices

• Detailed and Precise RFP Document

– Craft an RFP that leaves no room for
ambiguity, providing all necessary
information and requirements.
• Well-Defined Evaluation Criteria
– Clearly outline the criteria that will be
used to assess proposals, ensuring
transparency.
• Effective Communication
– Maintain open and clear
communication with suppliers
throughout the process.
 Challenges and Mitigations

Incomplete Proposals Subjective Evaluation

Strategies for managing proposals Methods for ensuring that the
that lack essential information or evaluation process remains
are incomplete. objective and unbiased.
Request For Proposal (RFP)

When is an RFP process a better approach?

• design and construction details are unknown or known only generally;

• the client requires input into design options including new or alternative
approaches;
• there may be uncertainty as to whether the project will proceed; and,
• if the project proceeds there is a need for further negotiation to reach a
contract.

A request for proposals is “process-sourcing” rather than

“price-sourcing”.
Request For Proposal - Elements
Clearly list the details of the proposed project, like goals and
Project description expectations, deadlines, location and the reason why you're
creating the project.

This section includes tasks that you'd like the bid winner to
Statement of work complete for the project.

Anticipated schedule and timeline for project completion; may

Project timeline request bidders to submit their own timeline projections as well.

How client organization intends to grade proposals and method

Evaluation criteria for selecting the best bidder.

Briefly describe your business, the products you sell and your
Background of the organization organizational goals.

Outlines what you expect to see from each proposal document. It

Proposal elements, instructions and terms may specify the information you want the bidder to include and
the format they must follow.

List any other project details you'd like to see from the company
Additional submission guidelines and deadlines and the deadlines bidders must submit their proposals by.
 Request For Proposal (RFP)

Let’s Summarize!
RFPs are non-binding invitations for proposals from interested parties.

The purpose of an RFP is to obtain offers. The request will describe the desired end-product, the
generic specifications, and set out the proposal evaluation criteria.

RFPs typically set out general information about the project, including design considerations and
budget but lack the detail that would be in a call for tenders.

There isn't a fixed set of requirements or detailed specifications that all suppliers have to adhere to,
but merely a rough idea.

Prospective contractors offer different methods, solutions, and price points for the customer to
evaluate
Request For
Quotation
(RFQ)
An Overview
Overview
Overview
• Definition of Request for Quotation (RFQ)
– An RFQ is a formal document used in
procurement to solicit bids from
potential suppliers for the provision of
goods or services. It outlines the
requirements, specifications, and terms
of the procurement, allowing suppliers
to submit competitive quotations.
• Purpose of RFQ: Procurement Process and
Supplier Selection
– The primary purpose of an RFQ is to
streamline the procurement process,
promote competition among suppliers,
and facilitate transparent and informed
decision-making in supplier selection.
Importance of RFQ
• Cost Savings Through
Importance of RFQ Bidding
Competitive
– By inviting multiple suppliers to submit
quotations, organizations can benefit from
competitive pricing. Suppliers vie to offer the
best value, resulting in cost savings for the
procuring entity.
• Supplier Evaluation and Comparison
– RFQs enable organisations to assess and
compare suppliers based on various criteria,
such as quality, price, reputation, and delivery
timelines. This comprehensive evaluation
helps in making well-informed choices.
• Transparency and Accountability in Procurement
– RFQs promote transparency by establishing a
clear process for supplier selection. This
transparency enhances accountability and
reduces the likelihood of biased decisions.
 RFQ Process - Step 1: Identifying Needs

1 2
Define the Goods or Services Specify Quantity, Quality, and
Required Other Requirements
• Begin by precisely defining the goods or • Quantify the quantity required, specify
services needed. Clarity in requirements is quality standards, and outline any special
essential for accurate quotations and requirements. These details set the
successful execution. foundation for supplier understanding.
RFQ Process - Step 2: Preparing the RFQ Document

• Components of an RFQ Document

– Introduction and Background: Briefly introduce
the project, its objectives, and the context.
– Scope of Work or Specifications: Detail the
technical and functional requirements.
– Terms and Conditions: Outline the legal,
contractual, and payment terms.
– Submission Instructions: Provide clear
instructions on how suppliers should submit
their quotations.
– Clear Communication of Requirements to
Potential Suppliers
– A well-structured RFQ document ensures that
suppliers have a comprehensive understanding
of what is expected, leading to accurate
quotations.
 RFQ Process - Step 3: Identifying Potential Suppliers

Research and compile a list of potential

Building a List of Potential Suppliers suppliers who can fulfill the requirements.
Diversify the list to encourage competition.

Involve various suppliers, including established

Engaging With a Diverse Range of
players and newer entrants, to foster
Suppliers innovation and obtain competitive offerings.

Screen potential suppliers to ensure they are

Ensuring Supplier Eligibility and
eligible to participate and have the capacity to
Capability meet the requirements.
 RFQ Process - Step 4: Distributing the RFQ

• Methods of Distribution
– Email: Directly send RFQs to selected
suppliers.
– Online Procurement Platforms: Utilize
digital platforms to post RFQs and
allow suppliers to access and respond.
– Direct Mail: Send physical copies to
suppliers who prefer traditional
communication.
– Efficient distribution ensures that all
potential suppliers receive the RFQ and
have equal access to information.
 RFQ Process - Step 5: Supplier Queries and Clarifications

Addressing Supplier Questions to Ensuring Fairness and Equal

Ensure Common Understanding
Suppliers may seek clarification on various
aspects of the RFQ. Promptly address these
queries to prevent misunderstandings.
Access to Information
Any clarifications provided should be shared
with all potential suppliers to maintain
fairness and ensure everyone has the same
level of information
 RFQ Process - Step 6: Receiving and Reviewing Quotations

Set Deadline for Specify a deadline by which suppliers must submit their quotations. This
Quotation Submission ensures a structured and timely evaluation process.

Evaluation Criteria: Price, Quality, Delivery Timeline, etc.

Cross-Functional Team
Involve representatives from different departments to ensure a
Involvement in
comprehensive evaluation that considers various perspectives.
Evaluation
 RFQ Process - Step 7: Supplier Selection

Comparing Quotations Consideration of Non- Finalizing the Selected

and Supplier Offerings
Compare the quotations received to
identify the most suitable options.
Consider both the quantitative
(price) and qualitative (quality,
reliability) aspects.
Price Factors (Quality,
Reputation, etc.)
Don't base decisions solely on price.
Take into account other factors like
supplier reputation, past
performance, and quality of goods
or services.
Supplier(s)
Once the evaluation is complete,
finalize the selection of the
supplier(s) that best align with the
organization's needs.
 RFQ Process - Step 8:
Awarding the Contract
• Notifying the Chosen Supplier
– Inform the selected supplier about their
successful bid and initiate further
communication.
• Negotiation of Terms if Necessary
– In some cases, negotiations might be
necessary to fine-tune terms, conditions,
and pricing before finalizing the contract.
• Formalizing the Agreement Through a
Contract
– Draft and sign a contract that outlines the
terms, responsibilities, and obligations of
both parties.

Clear and Concise RFQ
Documentation
Ensure the RFQ document is
clear, concise, and free from
ambiguities to prevent
confusion.
RFQ Best Practices
Objective Evaluation
Criteria
Establish objective evaluation
criteria to ensure fairness and
transparency in supplier
selection.
Ethical Considerations
in Supplier Selection
Maintain ethical standards
throughout the selection
process, avoiding favouritism or
biased decisions.
Understanding the Differences
Between RFP and RFQ

– Request for Proposal (RFP) vs.

Request for Quotation (RFQ)
– Exploring the Distinctive
Characteristics and Use Cases
Purpose and Scope

Request for Proposal (RFP)

• Purpose: To seek detailed solutions and
approaches from potential suppliers for
complex projects or services.
• Scope: Typically used for projects with
multiple variables and potential approaches.

Request for Quotation (RFQ)

• Purpose: To solicit specific pricing information
from potential suppliers for well-defined
goods or services.
• Scope: Primarily used for procurement of
standardized goods or services.
 Content Focus
• Request for Proposal (RFP)
– Emphasizes: Technical solutions,
methodologies, and strategies to address
project challenges.
– Information Required: Detailed proposals
outlining how the supplier plans to meet
project objectives.
• Request for Quotation (RFQ)
– Emphasizes: Pricing details and terms for
the required goods or services.
– Information Required: Clear and
competitive price quotations.
 Evaluation Criteria

• Request for Proposal (RFP)

– Evaluation: Focuses on both technical
and qualitative aspects, including
solution quality and innovation.
– Selection: Chooses the proposal that
offers the most comprehensive
solution.
• Request for Quotation (RFQ)
– Evaluation: Primarily based on price,
with consideration for other factors
such as delivery timelines.
– Selection: Chooses the supplier with
the most competitive price.
 Example
RFP
• Project: Designing a Corporate Website
• An organization wants to revamp its website
for improved functionality, user experience,
and branding.
• The RFP would require potential suppliers to
present design concepts, technical solutions,
and strategies for implementation.
• Evaluation criteria might include design
creativity, technical feasibility, and proposed
maintenance plans.
• The chosen supplier would be the one
offering the most comprehensive and
innovative website design solution.
RFQ
• Procurement: Office Furniture
• A company is looking to purchase
standardized office furniture items for its
new branch.
• The RFQ would ask potential suppliers for
quotations specifying prices for desks,
chairs, cabinets, etc.
• Evaluation criteria would primarily be based
on the competitiveness of the quoted prices
and adherence to specifications.
• The chosen supplier would be the one
offering the most cost-effective furniture
options.
 • RFP and RFQ - Distinct Approaches
• RFPs focus on comprehensive
solutions and approaches for
complex projects.
Conclusion • RFQs emphasize competitive pricing
for standardized goods or services.
• Understanding the differences helps
organizations choose the
appropriate approach for their
procurement needs.
Thank You