CHAPTER 2

The Tendering Process

2.1 Introduction

Tendering is a critical activity in a capital works project and is

normally the accepted means of obtaining a fair price and best value

for undertaking engineering construction works and projects.

A call for bids or call for tenders or invitation to tender

(ITT) (often called tender for short) is a special procedure for

generating competing offers from different bidders looking to obtain

an award of business activity in works, supply, or service contracts.

Best practice dictates that any tendering process should follow a

defined set of stages.

There are two main categories of tendering process;

1. Open procedure –In this procedure, an advert is placed in the

press to invite any firm that wishes to to do so to submit a tender for a

project, the advert will give a brief description of the works to be

undertaken. Interested firms can request a copy of the tender

documents and then submit a response.

Advantages of Open Procedure

I. It gives the opportunity for all firms including relatively unknown

but capable ones to tender.

II. Since there is no restriction, they can be no change of favourism

in drawing up a list of tenders

III. The prevent firms in area from forming an exclusive clique to

keep up prices.

IV. Above all, open tendering should secure maximum competition

and therefore the lowest process.

Disadvantages of Open Procedure

I. The system result in increased cost of tendering arising from a

great number of firms likely to be involved in tendering and only

one of them succeeding.

II. Also, a lot of time is taken up and lost through the placing of

notices in the press.

III. The lowest tender may not necessary be competent to handle

the project.

IV. Many good contracting firms avoid open tendering, while others

resort to this only times of dire need. The chance of selecting the

irony contractor is therefore high.

2. Restricted /Selective procedure – This procedure as its name

implies is to select a limited number of firms and invite them to submit

tenders usually by letters of invitation, sometimes through the media

informing the short listed firms. The majority of contracts in Nigeria

are awarded using this procedure. It is used when only a limited

number of suppliers will be invited to submit a full tender. The criteria

for drawing up the list of tenderers would depend on the character of

the project and size. The character of such project could include;

i. The standard of workmanship required.

ii. The equipment such as plant and workshops owned by the firm.

iii. The business records and standards of the firm e.g. whether

completion dates were met on previous jobs, the project were

brought in within budget, claims policy of the firm etc.

iv. The financial stability and length of time in business.

v. The capacity available in relation to the firms current work load.

vi. The local history in respect of labour relations.

vii. The real willingness to tender.

The short list is usually prepared from the client’s approved

list of contractors. Otherwise an adhoc list of contractors with

established schemes, integrity, responsibility and proven competence

for work of the character and size contemplated. Selective tendering

makes good many of the deficiencies of open tendering and provides

a restricted but adequate list of technical suitable firms and of

comparable standing. However, selective tendering might mean

higher quotations than are obtainable by open tendering partly

because there is less competition and also because the standards of

firms and that of their workmanship and performance may be higher

than the others.

Advantages of Restricted/Selective Procedure

I. The procedure is often time saving since the two parties are able

to take shut-cuts

II. More factors can be discussed in detail between the parties

during negotiations, including matters of construction method

and procedure.

III. Competition no longer depends on price alone but also on

competence

Disadvantages of Restricted/Selective Procedure

I. Negotiation contract tend to have higher prices than where

agreements are reached through competitive means

II. Conditions for public accountability are rarely satisfied when

negotiation is used.

The tendering process in Nigeria consists of three basic crucial

stages. These stages include;

1. The Pre-Qualification,

2. The Technical, and

3. The Commercial stages.

2.2 The Tendering Stages

2.2.1 The Pre-Qualification Stage

The pre-qualification stage basically consists of the Pre-

qualification Procedures for Procurement of Works which is usually

preceded by a pre-qualification questionnaire (PQQ). A pre-

qualification questionnaire (PQQ) is a questionnaire assessing the

suitability of an organization’s commercial, technical and financial

capabilities towards carrying out a project. It provides a method of

shortlisting interested parties meeting the required minimum

qualification criteria. This aids the contracting authority in controlling

the cost of the tendering process.

After the contracting body advertises tenders in the appropriate

media, usually the local press and relevant professional magazines,

interested suppliers will respond by submitting a written ‘expression

of interest’ (EOI) by the required date, as stated within the advert. The

contracting body will then send all interested supplier a copy of the

pre-qualification questionnaire (PQQ).

The PQQ is to be completed by all qualified parties or parties

interested in delivering the specific contract or tender. Information

contained in the PQQ is used to judge an organization’s capacity to

deliver services and who to invite to tender. The length and detail of

each PQQ varies with each purchaser, but most will include the

following questions;

1. Company profile

Names and details of key staff in the organization

What is the legal status of the supplier?

Has the organization undergone any quality assurance

scheme?

2. Company policies

Statements on health and safety

Equal opportunities and diversity

Sustainability

Environmental

3. Technical ability

What are the supplier’s skills and qualifications that enable

them to meet this contract?

What is the average number of staff employed over a three-

year period?

Have the supplier sufficient resources available for the

contract?

What similar work has the supplier undertaken in the last five

years?

What references can the supplier give from recent clients?

4. Financial standing

Provide a copy of the most recently audited accounts.

Provide evidence of relevant insurance and indemnity cover.

Provide a statement of the organization’s turnover, profit and

loss and cash flow for the most recent year, or a statement of

the forecast cash flow for the coming year.

The PQQ is usually submitted alongside the tender documents.

2.2.1.1 Tender Documents

Tender documents are legal documents that stipulate the

characteristics of a design, construction or engineering contracts. The

tender documents contain the following:-

I. Instructions to Tenderers: - instructions to be followed during the

tender process, when the closing date is, how to submit the

tender etc.

II. Items to be submitted with the tender: - which parts of the tender

should be completed and whether any additional items are

required such as method statements, delivery times etc.

III. Specification/Project Brief to include:

1. Description of the works/goods/services required and background

information about the contract.

2. Details of the relationship between the contracting body and the

contractor and who is responsible for what.

3. Requirements in relation to staff training, recruitment etc.

4. Policies and procedures to be considered such as complaints,

Health and Safety and confidentiality.

5. Contract monitoring, management and quality control.

6. Details of the evaluation criteria, how the importance of quality

and price is weighted e.g. 40% price 60% quality.

7. Any other details that are relevant to the contract e.g.

timescales, meetings, progress reports and delivery schedules.

IV. Terms and Conditions of contract: - the general terms and

conditions of the contract to which the successful company and

the contracting body must adhere to and the duration of the

contract. Some typical terms and conditions will include

obligations of the parties, timescale/ meeting milestones,

payments, insurance requirements, monitoring of service,

provision for termination, conflict of interests and resolution of

disputes.

V. Form of Tender: - this forms the basis of the offer to the

contracting body should it be accepted, i.e. that the company is

committed to providing the service as stated within the tender

submission. The company is required to sign and date the Form

of Tender.

VI. Schedule of prices: - this will vary from one project to another. It

is a list of all items that must be individually priced. For

construction based contracts these will be priced bills of

quantities or Schedules of Rates. When completing the schedule

of prices it is important to refer to the specification.

VII. Certificates: - there are usually two certificates to be signed, one

to declare that the information provided in the PQQ is still

accurate and another to declare that the company has not been

involved in price fixing or collusion with another company, and

that the tender submission is a bona-fide bid.

Once tenders have been compiled and submitted, they are

received in a tender box by the tender evaluation committee.

2.2.2 The Technical Stage

After the contractors have submitted the pre-qualification

questionnaire along side with the tender documents, the tender

evaluation committee evaluates the tender document submitted by

each bidder by using their recommended criteria. The purpose of this

evaluation is to identify which bid in a process offers the most

economically advantageous proposal based on the criteria specified in

the invitation to tender.

During the pre-qualification evaluation, the tender evaluation

committee will assess the bids against the criteria issued in the

invitation. These bids are assessed based on what information is

provided with the submission. The bids are scored based on their

performance against a set scoring model which was included in the

invitation document. Bidders who were successful with respect to the

scoring criteria will then be invited to tender for the technical phase.

A technical phase of the tendering process is quite synonymous

to that of the pre-qualification phase, but with more detailed technical

description of how the bidder intends to carry out the project, the

foreign technical partners involved and their experience with similar

work scope.

Similarly, after the technical tender is submitted, the same

evaluation process just like the one carried out during the pre-

qualification phase is used to evaluate the technical capability, and

score the bidders. Only the technically compliant bidders will then be

invited for the commercial phase or bidding.

2.2.3 Commercial Stage

Tenderers that meet the technical specification and criteria of the

project in question will be invited for the commercial bid. A

commercial tender involves the prospective suppliers sending in a

detailed price quote (usually in a spread sheet) of how much the

intended project will cost them to execute. After the submission, the

contract evaluation committee will evaluate the prices and go for the

“lowest best” bidder. The lowest best bidder in this context does not

mean awarding the contract to the prospective contractor that offer to

execute the project at the cheapest rate but the contractor that offers

the lowest price at the best quality.

The successful tenderer is notified. The unsuccessful companies

are informed that their tender was not favourable. Unsuccessful

companies may request feedback from the evaluation committee as

to why their tender bid was not successful and what points were

lacking. This encourages companies to improve and increase their

chances for success in the future.

Figure 2.1 Flow Chart for Open Procedure Tendering Process

Open Procedure The contracting body places tender advert in the media

Intrested firms sends in a written Expression of Interest (EOI) to the

contracting body in order to receive a Pre-Qualification Questionaire (PQQ)

Based on the assesment of the PQQ by the contracting body, an Invitation to Tender (ITT) is sent to the interested

firms.

Tenderers prepare PQQ tender document, gather project information

and return them to the contracting firm.

The tender is evaluated by the tender evaluation committee and the tenderers

that offers the most economically advantageous proposal based on the criteria specified in the invitation to tender is invited to tender for the

technical phase.

Technical tender is then prepared by the tenderers and returned to the contracting firm for evaluation.

Technical tender is evaluated and only the technically compliant firms are

invited to tender for the commercial phase.

Tenderers prepare a detailed price quote of how much the intended project will

cost them to execute and submit to the tender evaluation committee.

Commercial tender is evaluated and the contract is awarded to the lowest best bidder (best value at the lowest price)

Figure 2.2 Flow Chart for Restrictive/ Selective Procedure Tendering Process

Restricted/ Selective Procedure

The contracting body sends an invitation letter to limited number of firms from

thier approved contractor's list or places a tender advert in the media informing

shortlisted firms

Intrested firms sends in a written Expression of Interest (EOI) to the

contracting body in order to receive a Pre-Qualification Questionaire (PQQ)

Based on the assesment of the PQQ by the contracting body, an Invitation to Tender (ITT) is sent to the interested

firms.

Tenderers prepare PQQ tender document, gather project information

and return them to the contracting firm.

The tender is evaluated by the tender evaluation committee and the tenderers

that offers the most economically advantageous proposal based on the criteria specified in the invitation to tender is invited to tender for the

technical phase.

Technical tender is then prepared by the tenderers and returned to the contracting firm for evaluation.

Technical tender is evaluated and only the technically compliant firms are

invited to tender for the commercial phase.

Tenderers prepare a detailed price quote of how much the intended project will

cost them to execute and submit to the tender evaluation committee.

Commercial tender is evaluated and the contract is awarded to the lowest best bidder (best value at the lowest price)

There can be instances where a formal tender process is not

required. Such instances include but not limited to:

1. Contracts are of low value.

2. There is only one supplier who can provide the goods or

services.

3. No bids or tenders were received in an open, competitive

procurement process.

4. Need for repeat purchase due to compatibility issues.

5. For technical or artistic reasons e.g. patent or copyright.

6. Need to proceed immediately due to unforeseeable

circumstances.

When these circumstances as stated above arises, a contract is

usually executed by the contracting body requesting for quote (RFQ)

from the companies that are qualified and capable to do execute such

contract.

A request for quotation (RFQ) is a standard business process

whose purpose is to invite suppliers into bidding process to bid on

specific products or services. An RFQ typically involves more than the

price per item. Information like payment terms, quality level per item

or contract length are possible to be requested during the bidding

process.

An RFQ typically involves more than the price per item.

Information like payment terms, quality level per item or contract

length are possible to be requested during the bidding process. The

suppliers have to return the bidding by a set date and time to be

considered for an award. Discussions may be held on the bids (often

to clarify technical capabilities or to note errors in a proposal).

An RFQ allows different contractors to provide a quotation, among

which the best will be selected. It also makes the potential for

competitive bidding a lot higher, since the suppliers could be quite

certain that they are not the only ones bidding for the products.