Design Management

Subject Code- BDI- 341

Types of Contracts

Ar. Upendra Joshi

Tender
Tender is a written offer/proposal by the tenderer
(the person who offer the tender) to
perform the work or to supply some specified
goods at a certain rate/amount within a fixed
time frame under certain agreement.

It is the first step in the formulation of Contract.

Tender Notice
Tender notice is the information inviting bids
from competent contractors.
It is published in the form of tender notice in news
papers, notice boards, online etc. according to the
cost of works.

Preparation before Tendering

Desk study
Survey
Design, Drawing , and Specification
Rate analysis and cost estimation
Approval of budget
Tender document/Bid document preparation
Tender notice publication
Tender notice is the information inviting bids from
competent contractors.

• Essentials of Tender notice

• Implementing Agency
• Project Name
• Notice No
• First date of publication
• Contract No
• Description of work and location of work
• Bid security/Earnest money deposit
• Fee for Bid document
• Office for buying bidding document and submit tender
• Last date of submission of bid
• Bid opening date
• Cost estimate of the project
• Maximum no of partner in joint venture(JV)
• Pre bid meeting
• Date place and time for opening of the tender
Tender Document

Tender document/Bidding document is a

document prepared by the owner for submission
by bidders by filling up the price or rate. tender
document includes instruction to bidders,
specifications, drawing, design, terms of reference,
schedule of works, evaluation criteria, bill of
quantities, condition of contract and similar other
document.

Matters to be stated in bidding documents:

Instruction to bidders(ITB)
• Tender notice
• Bid data sheet
• Plan, Drawing of the proposed work
• Bill of quantities(BOQ)
• Quantity of goods
• Work to be done by the bidder
• Time of supplying goods, completing
construction work
• Provision regarding warrantee and repair and
Maintenance
• Type and quantity of necessary Training and
supervision to be provided by the bidder
Principles Of Tendering

The purpose of these principles for Tendering is to provide a framework for the effective, consistent and
efficient management of tendering practices throughout any construction project. The principles set out in
this document can be equally applied to any industry involving the delivery of a new product or service.

These are the basic principles of tendering process:

• All aspects of the tendering process must be conducted with honestly at all levels of the industry.
• A clear understanding of the rights and obligations of both parties.
• Parties must confirm to all legal obligations.
• Parties must clearly identify ownership.
• Parties must not submit tenders without a firm goal.
• Parties must not engage in any practice which gives improper advantage.
• Condition of tendering must be the same for tender on any particular project.
• Clients must clearly specify their requirements in the tender document and indicate criteria for evaluation.
• All the information provided in the course of tendering must be protect.
Classification of tenders
• Open Tender
• Selective Tender
• Negotiation Tender
• Limited Tender
• Single Tender
• Rate contract

Advantages of Open Tender

Open to all qualified bidders
Having a project available to all contractors has a higher tendency to find new promising contractors which can
satisfy the cost to quality to time ratio of the employer. Open tenders also provide a larger variety of options to
choose from which doesn’t limit the composition of the project.

No favouritism
Every participant has an equal chance of getting the project and is not bias to any single tenderer. This not only
allows new firms to enter the market but also promotes professional etiquette.

Highly competitive
Forces the contractors to submit competitive prices to obtain the project. This can prove to be advantageous for
the employer in getting value for money.

Disadvantages of Open Tender

High cost of tendering
The number of copies of tender will have to depend on the number of participants tendering. Open tendering
being the method with usually the most tenderers, cost of tendering is generally higher.
• Sealed tender- Invited for important or huge projects; wide publicity is given; always written documents are
made.

• Limited tender- Only a selected no. of contractors are invited to quote their rates

• 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 prior to the agreement of the contract.

• 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.
Tender Process
Project Definition and Scoping
Selection Process For Tenderers
Tender Documentation
Criteria for Selection
Call For Tenderer
Tender Meeting
Amendments To Tender
Document
Submission And Closing Of Tender
Tender Analysis Reasons for Tender Rejection
Non-compliance with tender
Tender Clarification conditions
details not completed
Tender price too high
Tender Selection & Award tender price is too low
lot of work in progress
insufficient financial capability
unsatisfactory work records
Selection Criteria
Conformity
Capability
Innovation
Price
Construction
Period
Types of Contracts Advantages

• Lump-sum Contract • Owner is aware of the cost of the project before the
• Cost Plus Fixed Fee Contract project construction starts.
• Cost Plus Bid Bid Fee Contract • Project scope and limits are defined prior to the start
• Guaranteed Maximum Contract of construction.
• Negotiated Contract • Contractual relation between all parties, owner and
• Unit-price Contract Engineer are clearly defined.
• Design Build • Best price for work obtained through competitive
• Turn Key Contracts process with cost of work established and agreed
upon.

Lump-Sump Contract Disadvantages

• Traditional method of Contract. • The lack of time flexibility in this method may
• The contractor offers to do the whole work for a result in delayed project implementation.
total stipulated sum of money as shown in • Highly skilled Architect or Engineer is needed.
drawings and described by specification. • Difficult to implement revisions or change in the
• It is more suitable for works which contractor work on the later stage of the work.
have
prior construction experience.
• This is considered when tender process will tend
to be slower and preparing a tender may be more
expensive for the contractor.
Cost Plus Fixed Fee Contract
•All Cost for the work according to the specification is
reimbursed by the owner to the contractor.
•Contractor is paid a fixed sum which represents the
profit.
•The variation on the lump-sum fee is percentage fee
wherein fees is established by percentage of total
cost incurred by the contractor.
•Usually it is fixed as a sum.
Guaranteed Maximum Contract
•The contractor agrees to perform work within a
price ceiling. This is the maximum guaranteed price.
•If the ceiling is exceeded, without change in scope
then the excess cost is borne by the contractor.
•If the work is accomplished under the ceiling then
the owner pays no more than the actual cost and
the profit is shared between the contractor and
the owner.
•This method gives greater flexibility for the owner.
Cost Plus Bid fee Contract
• Owner invites proposal from qualified contractor in
terms of past experience, performance , etc.
• All Cost for the work according to the
specification is reimbursed by the owner to the
contractor.
• The bid fee is calculated on the basis of project
scope.
Negotiated Contract
The preselected contractors are invited upon on
the basis of
• Capability of the past experience in the specific area
• Availability of the personnel to accomplish the
work in the specified time frame Bid (Estimate)
Price
• Proposed method for compensation including
amount of fee.
• The owner is then negotiating with the contract
including method of payment for the work, Bid, etc.
• On the basis of circumstances it can be competitive
or non-competitive.
Assignment – Group Work Content of a Presentation:

Every group is supposed to make a

presentation on one of the following
contracts .
For Interior Students
• Lump Sum Contract
• Item Rate Contract
• Turn Key Contract
• Cost Plus Reimbursement Contract
Name & Type of Contract
Definition
Main Aspects & Working methodology of the
Contract (How it works, When it is used, Payment
procedures, In what kind of projects used)
Advantages

For Architecture Students Disadvantages

• Lump Sum Contract Actual sample of a Contract

• Item Rate Contract
• Turn Key Contract
• Cost Plus Reimbursement Contract
• Percentage Rate Contract
• BOOT Contract
• Design + Build Contract
• Supply & Labor Contract
Unit Price Contract

• Based on the estimated quantities of the items involved in the work.

• The cost per unit item is given by the contractor and the estimated quantities of items are given by the
owner.
• The total cost of work can only be calculated only after the completion of the work because measurement is
made on the basis of work actually done.
• The contractor is obliged to perform the work actually required in the field at his quoted price only.
• If the estimated quantity is exceeds, then there should be increase in unit price , therefore it is difficult to
forecast the project cost.

Design Build

•It is a method to deliver a project in which the design and construction services are contracted by a single
entity known as the design–builder or design–build contractor.
• Design–build relies on a single point of responsibility contract and is used to minimize risks for the project
owner and to reduce the delivery schedule by overlapping the design phase and construction phase of a
project.
• Contractor will be responsible for all of the work on the project, regardless of the nature of the fault.

Turn-key contracts

• A type of project that is constructed so that it could be sold to any buyer as a completed product.
• This is contrasted with build to order, where the constructor builds an item to the buyer's exact
specifications, or when an incomplete product is sold with the assumption that the buyer would complete it.