Competitive bidding

procedures
ICB: International competitive bidding
NCB: National competitive bidding
LCB: Local competitive bidding
Invitation to bid
Scope of work
Language of the bid.
Bid currencies.
Bid security.
Bid validity period.
Price preference
Signing of Agreement
Commencement of work
Liquidated damages
Variation
Retention money
Advance payments
Escalation
Day works
Provisional sum
Tender notices are published in at least three national
newspapers in case of NCB, local newspapers incase of LCB and
three international publications in case of ICB.

LCB process gives preference to the local contractors and

established in the area where the project is located. Here the
bids are labour intensive.

NCB process gives preference is given to the contractors of

national repute. (Having registration with PWD, CPWD and
MES of appropriate class).

ICB process gives preference to the internationally reputed

contractors where details of foreign currency, employment of
foreign personnel, procurement of foreign machinery are
mentioned.
ICB is generally open to all. In some circumstances, it may be restricted to
a few suppliers, when there are only a few known sources of supply.

The ADB insists on ICB for contracts valued in excess of US $500,000 for
goods and us S 1.000,000 for civil works.

For the WB, the limits are US $200,000 for goods and US $10 million for
works. In suitable cases, which are not frequent, a relaxation may be
allowed.

ICB is useful when the volume of goods is large, or the equipment is

complex and not available locally. It has the disadvantage of making
arrangements of foreign currency, opening letters of credit, long process
of selecting competent suppliers, and complicated methods of resolving
disputes.
National Competitive Bidding

Open Unrestricted Bidding

The GOI rules suggest an open tender system whenever the purchase value
is Rs. 50,000.00 or more. Purchases through approved suppliers with whom
Government of India has entered into long-term supply contracts known as
rate contracts also fall in the category of open bids. The rate contracts
come into force through open unrestricted competitive bidding.
The WB and the ADB allow domestic competitive bidding if the likely value
of the purchase transaction is below the monetary limit for ICB.

Limited Tenders
The GOI has laid down that limited tenders should generally be invited only
where the purchase value is up to Rs. 50,000.
Language of the bid.

In private trade, and for domestic bids, language may,

perhaps, not be a very important clause.

However, in international trade, it is important to specify the

language of bids as the bids may be from several countries
with different languages.

If bids are received in many languages, the buyer may find it

difficult to get them translated properly.

Moreover, as the contract will be governed by the language of

the offer, the buyer's unfamiliarity with it may give use to
difficulties and disputes.
Bid currencies.

In international competitive bidding, instructions to bidders have a clause

on bid currencies.
It states how bids in different currencies will be converted into the
domestic currency.
A bidder may choose to ask for bids in its own currency; in such a case, the
prices may be higher as the supplier will have to accept the risk of
exchange rate variations.

For example, if a bid is accepted for, say, US dollars 1000, and the rate of
exchange on the date of opening bids is Rs. 45 to one US dollar, the
purchase transaction is valued at Rs. 45,000. However, when the buyer
pays for the goods, it may have to buy US dollars for a higher amount of,
say, Rs. 46,000 if the US dollar is quoted at Rs. 46 to a dollar.

The buyer has accepted the exchange risk in this case. If a bidder is to
quote in rupees, it may either not agree to this, or may quote a rate based
on a likely future rate of exchange when the payment would fall due.
Price Preference

The ADB allows a price preference up to 15 per cent for

domestic goods

The price preference is 7.5 per cent for domestic works for
both the World Bank and the ADB.
Performance Security.

In the form of Unconditional bank guarantee of the amount of

10% of contract price
To be submitted within 28 days receipt of LOA
The validity of BG upto 28 days from the date of issue of
taking over certificate( completion of work)
To be returned within 14 days of the expiration of validity
period.

NCB
In the form of BG of the amount of 5% of contract price , to
be submitted within 21 days of receipt of the LOA.
To be returned within 28 days from the expiry of defect
liability period
Signing of Agreement.

Within 28 days of receipt of LOA, along with the agreement.

Failure to sign constitutes breach of contract and bid security
is forfeited.

NCB and FIDIC may be same as above.

Commencement of Work.
The engineers notice to commence the work to be issued
within 35 days after the LOA or 7 days after signing of the
contract agreement, whichever is earlier.

Commencement date of work is taken as the date of receipt of

this notice by the contractor.

In NCB commencement date of work is specified as certain no.

days from the issue of notice to proceed by the engineer.
Liquidated damages for delay
Rate of ld per day of default being taken 1/2000 of contract price for the
whole of work or of the price of the relevant contract section (milestones/
section wise ) as the case may be.
Limit of liquidated damages is 10% of final contract price
The rate of LD can be reduced in proportion to the cost of balance work if
the taking over certificate for part work is issued before completion of
the whole work or section of work.
NCB is same as ICB
Variations

The engineer can issue instructions to the contractor for variations as

specified.

No instructions are required for any increase or decrease in quantities

provided in the BOQ.

The effect of the variations , if , any s to be evaluated in accordance with

clause as specified.

At the rates and prices set out in the BOQ of contract, if applicable

The rates and price of the BOQ items shall be the basis if found
reasonable/ applicable from similar items.

The agreed rate between engineer and the contractor after due
consultation if above are not applicable.
If, in the opinion of the Engineer, any BOQ tem rate becomes
inappropriate or inapplicable owing to the quantum of variation due to
reason of the nature and amount of any varied work in relation to the
nature or amount of the whole of the work or any part thereof… then a new
suitable rate shall be agreed between the engineer and the contractor
after due consultation with the client.
But change in the quoted rate of the BOQ item shall be considered only if
(i)The BOQ item amount is more than 2% of the contract price
(ii)The quantities exceed or fall by 25% or more
If overall variation due to the varied work and all payments on BOQ
( except provisional sums, day work and escalation exceeds by more than
15% of the contract price , a sum either agreed or determined by the
engineer shall be added to compensate for the increase in O/H , equipment
etc. The addition will be based only on an amount in excess of the above
15%.
In NCB for changing the quoted rate of the effected item, its quantity
must change by 25% or more, and the cost of the change should exceed 1%
of the contract price.
Retention Money
6% of IPC( interim payment certificate) starting from the 1st IPC till its
totals to 5% of the contract price (Limit)
The full amount once realised can be replaced by the unconditional BG.
One half (50%) of the total money so retained shall be certified for
payment by the engineer after the issue of the taking over certificate.
The other half (50%) shall be certified after expiration of the defect
liability period.
Part of the retention money can be withheld depending upon the
requirement at the different stages of repayment to cover any eventuality
in the defects liability etc.

NCB is same as LCB.

Advance Payments
Mobilisation and equipment advance normally 10% of the contract price fro
each, interest free, payable on the certification of the engineer after
i)Signing of agreement
ii)Submission pf performance security( unconditional BG)
iii) and submission of unconditional BG of the amounts equal to these
advances.

Recovery of these advance payment will commence normally when

i) 15% of the contract price has been certified for payment( or as
provided in the specific contract ) by the engineer
ii) After 6 months ( or as provided in the specific contract) after payment
of 1st Installment of advance ( if payment of advance made in
installments) whichever is earlier.
The recovery of these advances shall be made at the rate of 30% ( or as
provided in the specific contract ) of the amount of IPC until full
advance is recovered.
It is also to be ensured that theses advance payments shall be completely
recovered prior to the time when 80% of the contract price has been
certified.
In NCB same as ICB in general except that maximum limit equipment
advance of the is 5% of the contract price.

Escalation
Price adjustment for Escalation shall apply only for work out within the
stipulated time and within the extension period.
Price adjustment after the period stated above and the delay being
attributable to the contractor but extension, still granted , shall made
either using the indices at the completion time or those current at the
time he should have theoretically completed the work, whichever is
favorable to employer.
In applying price adjustment formulae percentage of various components
have top be fixed by the client.
Currency conversion has to be taken into account.
Dayworks
The contractors unit rates for different categories of labour and for
material and equipment inputs are provided by him in the relevant part of
BOQ to cover the eventualities of any ( other than BOQ) works to be got
done by him on daywork basis.
The theoretical amount for virtual quantities specified for this purpose in
the tender, are worked out and accounted for in the variations of tenders/
bids at bid evaluation time
Escalation on days work not payable if costs paid against actual vouchers
and costs each time such work called for and executed.

In NCB no such conditions exists however if mentioned in the contract.

Provisional sum
For the elements of contract work which are unforeseen at the time of
bidding( ie unknown item) a provisional sum is provided and is operated at
the instructions of the engineer as required.
These items can be deleted from execution
These sums are not accounted for in the valuation f tenders.

No escalation payable on such woks as these are paid against actual costs
and vouchers.

In NCB no such provision exists.