FIDIC Procurement Procedures Guide 1st Ed (2011)

FIDIC PROCUREMENT PROCEDURES GUIDE
1st Edition 2011
Fdration Internationale des Ingnieurs-Conseils

International Federation of Consulting Engineers
Internationale Vereinigung Beratender Ingenieure
Federacin Internacional de Ingenieros Consultores ISBN 978 2 88432 062 5
Contents
Foreword 3
Disclaimer 4
Notes 4
Acknowledgements 4
1 Introduction 5
2 Basic Considerations 9
3 Developing a Project Strategy 23
4 Management of Procurement 43
5 Contract Types 51
6 The Project Strategy 81
7 Prequalification: Consultancy Appointments 87
8 Prequalification of Tenderers: Contracts for Works 97
9 Consultancy Appointments 109
10 Obtaining Tenders: Minor Works Contracts 113
11 Obtaining Tenders: Construction Contracts 115
12 Obtaining Tenders: Plant and Design-Build Contracts 125
13 Obtaining Tenders: EPC/Turnkey Contracts 137
14 Obtaining Tenders: Dredging and Reclamation Works 149
15 Receipt and Opening of Proposals and Tenders 159
16 Evaluation and Recommendations: Consultancy Appointments 163
17 Tender Evaluation and Recommendations: Contracts for Works 169
18 Award of Contracts: Consultancy Appointments 177
19 Award of Contracts for Works 183
References 187
1
Contents
Appendices 188
A FIDIC Code of Ethics
2.6.6 Basic Considerations - Operation and Maintenance

2.6.10 Basic Considerations - Sustainable Development
2.7.1 Basic Considerations - Feasibility Studies Report
5.5.1 Contract Types - Preparation of the Employers Requirements

5.5.2 Contract Types - Performance-Based Procurement (PBP)
5.6.2 Contract Types - Privately Financed Projects (PFPs) and Public -Private Partnerships (PPPs)
5.9.3 Contract Types - Purchasing, Expediting and Inspection
8.3.1 Prequalification of Tenderers: Contracts for Works - Standard Prequalification Form for Contractors
11.1.1 Obtaining Tenders: Construction Contracts - Example Letter of Invitation to Tender

11.1.2 Obtaining Tenders: Construction Contracts - Example Form of Tender Security
11.1.3 Obtaining Tenders: Construction Contracts - Example Form of Instructions to Tenderers
12.1.1 Obtaining Tenders: Plant and Design-Build Contracts - Example Letter of Invitation to Tender
12.1.2 Obtaining Tenders: Plant and Design-Build Contracts - Example Form of Tender Security
12.1.3 Obtaining Tenders: Plant and Design-Build Contracts - Example Form of Instructions to Tenderers
12.1.4 Obtaining Tenders: Plant and Design-Build Contracts - Typical Schedules
12.1.5 Obtaining Tenders: Plant and Design-Build Contracts - Typical Contents of a Contractors Proposal
13.1.1 Obtaining Tenders: EPC/Turnkey Contracts - Example Letter of Invitation to Tender

13.1.2 Obtaining Tenders: EPC/Turnkey Contracts - Example Form of Tender Security
13.1.3 Obtaining Tenders: EPC/Turnkey Contracts - Example Form of Instructions to Tenderers
14.1.1 Obtaining Tenders: Dredging and Reclamation Works - Example Letter of Invitation to Tender
14.1.2 Obtaining Tenders: Dredging and Reclamation Works - Example Form of Tender Security
Index 254
Foreword
The International Federation of Consulting Engineers sample documents covering such matters as prequalification
(FIDIC) published the First Edition of Tendering Procedure in and instructions to tenderers. The intention is that users do not
1982. This dealt primarily with procedures for awarding civil need to refer to all parts of this guide but will nevertheless
engineering contracts. The Second Edition, published in 1994, easily find the practical advice for which they are looking to fulfil
took account of the then current Fourth Edition of the FIDIC their specific duties successfully, and in accordance with best
Conditions of Contract for Works of Civil Engineering international practice. In addition, the established and well-
Construction (the 1987 Red Book) and the Third Edition of known procedures of the IFIs are acknowledged, including
the FIDIC Conditions of Contract for Electrical and Mechanical their mandatory provisions.
Works (the 1987 Yellow Book). The opportunity was also
taken to reflect the thinking of the International Financing Thus, this guide also promotes a freedom and flexibility
Institutions (IFIs) and of the consulting engineering industry which means that the procedures described can be adapted
practice of the day. and used in conjunction with, for example, procedures normally
adopted by some employers or which are required by the IFIs.
This new guide is much more than a further edition of Users are, however, reminded to be aware of the prevailing
Tendering Procedure. First, it takes account not only of the requirements and/or restrictions of certain employers and,
publication of new FIDIC forms of contract since the late particularly, of national and locally applicable laws and
1990s, particularly the new suite dated 1999, but also of the regulations, to ensure that all mandatory provisions are properly
gradual introduction and widening acceptance of novel applied during tendering.
approaches to the procurement of engineering projects,
including new methods of contract management and FIDIC believes that this new guide provides
implementation. internationally acceptable, comprehensive, best-practice
procedures, which will encourage and enhance the objective of
Second, the early chapters give essential guidance on receiving responsive, clear and competitive tenders, so that
the underlying concepts and philosophy of projects in the contracts can be awarded which will deliver satisfactory results.
broadest sense, to the point where a contract type is chosen. Users are also encouraged to refer to other relevant FIDIC
They stress that the tender process is preceded by important publications, such as those on sustainable development,
initial and feasibility studies and other vital professional quality and integrity management, risk management and
activities. These activities must be carried out carefully as they professional indemnity insurance, as well as the FIDIC standard
provide the basis for the development of the all-important forms of agreement and contracts.
project strategy. Once the project strategy has been defined it
must be followed throughout all the subsequent phases of the All FIDIC publications are available from:
procurement. It is the project strategy that governs the FIDIC Bookshop
tendering processes and, if correct, should ensure that a Box 311
satisfactory project is achieved, that is to say, one in which CH-1215 Geneva 15, Switzerland
there is clarity of objectives, ethical conduct, fair allocation of
risks, and outcomes where the employer receives his project Tel: +41-22-799 49 00
on time, within budget, and to the specified quality, and the Fax: +41-22-799 49 01
contractors and advisers are paid a fair price for their services. E-mail: [email protected]
In particular, a multi-discipline approach is adopted, making the Web: www.fidic.org/bookshop
guidance directly applicable to the increasingly common
situation where civil, electrical, electronic, and mechanical Use www.fidic.org/bookshop for online information,
works, information technology systems and other engineering orders and payments.
services are provided within a single project.
Third, this guide provides up-to-date detailed guidance

on each step in the tendering processes, complemented by
3
Disclaimer
The information contained in this guide is documents based thereon, or signing any contracts,
intended for use as a general statement only. Neither should in all cases take appropriate professional advice
FIDIC nor any committee or individual connected with on the matters referred to in this guide to ensure they are
FIDIC can accept liability for any loss or damage which suitable for use in relation to any specific project. Users
may be suffered by any person as a result of the use in are themselves solely responsible for ensuring that any
any way of the information contained herein. wording or information taken from this guide is
consistent with and appropriate to the remainder of the
Any persons using such information or drafting material employed for their project.
tender dossiers, contracts, specifications or other
Notes
In this guide, words and terms defined in the firm may be organised as a sole proprietorship,
FIDIC forms of contract or other FIDIC publications are not partnership or company, depending on the size and type
distinguished in any special way, and users are referred to of its operation and the conditions set by its national
these sources for formal definitions, as required. association.
It is noted that a consulting engineer is a Membership in a FIDIC national Member

professionally qualified engineer in private practice, Association provides an assurance that the consulting
maintaining an engineering office, either alone or in engineer subscribes to a code of conduct on professional
association with other engineers, employing staff to status, independence and competence, in accordance
provide consulting services. A consulting engineering with FIDICs Code of Ethics, see Appendix A.
Acknowledgements
The Fdration Internationale des Ingnieurs- Associates, Ireland; Axel-Volkmar Jaeger, Consulting
Conseils (FIDIC) extends special thanks to the following Services, Germany; Philip Jenkinson, Atkins, UK;
members of the task group responsible for preparing this Michael Mortimer-Hawkins, Consulting Engineer,
FIDIC Procurement Procedures Guide: Christopher Sweden; Christopher Seppl, White and Case LLP,
Wade (Group Leader), Consulting Engineer, UK; John France; Christoph Theune, Pyry Environment GmbH,
Greenhalgh, Greenhalgh Associates, UK; Philip Germany; Christopher Wade, Consulting Engineer, UK;
Jenkinson, Atkins, UK; Damian Lewandowski, Scott Zoltan Zhonyi, Skye Consulting Engineers, Hungary.
Wilson, Poland; John Shaw, Consulting Engineer, UK;
with Colin Marshall, Consulting Engineer, UK, as a FIDIC also wishes to thank Geoff French,
corresponding member. Executive Committee member responsible for the FIDIC
Contracts Committee; Enrico Vink, Managing Director,
The preparation was carried out under the FIDIC, and Peter Boswell, formerly General Manager,
general direction of the FIDIC Contracts Committee, FIDIC, for their support and help in producing this
members of which comprised Nael Bunni, Bunni and document.
4
1 Introduction
Contents
1.1 Procurement Figure
1.2 Organisation of the guide Fig. 1.1 Project development
1.1 Procurement
This guide presents a systematic approach to the Generally, procurement activities up to the start of
procurement of engineering and building works for projects of construction/installation are to:
all sizes and complexity. For the purposes of the guide,
procurement means the processes from identification of a - establish what is to be procured;
project up to receipt of tenders and award of contracts for its - decide on procurement strategy;
implementation, i.e., up to the point of commitment to start - solicit tender offers;
the design and/or manufacture and/or construction, as the - evaluate tender offers; and
case may be. - award contracts.
This guide does not cover the subsequent phases for Therefore, not covered by this guide are procedures to
the construction and/or installation of the works or facility nor administer contracts and confirm compliance with
its operation thereafter. requirements.
The body who promotes the development and The path from identification of the need for a project
implementation of a project is often called the promoter. until a reliable contractor is appointed is often a long and
However, he may also be called the owner, if that is applicable. arduous journey with many pitfalls. The end purpose of the
procurement journey is to obtain for the employer sound
The owner is usually called: competitive tenders for his project from capable, experienced
contractors. The tenders should be in accordance with the
- the client when he employs a consultant, and requirements of the tender dossier the set of documents
- the employer when he employs a contractor. prepared by the employer and issued to contractors to enable
them to submit tenders so that these tenders can be quickly
For consistency with FIDICs standard contract forms, and efficiently assessed and evaluated prior to contract award.
the promoter is throughout this guide called the employer
(even though, strictly speaking, he does not become an If the tender dossier and all its component documents
employer until he has entered into a construction contract with have been properly and fully prepared by experienced staff,
a contractor). Similarly, the term tender is used for the offer to and the correct standard form of FIDICs conditions of contract
perform work submitted by a contractor, and this term is has been included, and the contract has been awarded in
identical with the alternative term bid. compliance with best accepted practice to a competent
contractor, then the basis will have been provided for the
This guide is primarily intended to assist employers satisfactory design, construction and/or installation and
interested in developing and implementing a project as well as completion of the project within the allotted time, to the
their consultants. It will also be of interest to all other parties required quality and within budget.
involved in engineering and the construction industry.
1.2 Organisation of the guide

This guide begins by setting out basic matters that continues by describing how typical projects develop from
must be considered and studies that must be undertaken by inception, through stages of initial and feasibility studies,
an employer during the initial stages of a project. The text through choice of a management structure and the selection
5
1 Introduction
of a contract type, to the establishment of a project employer to read the other chapters dealing with
strategy for consulting services as well as the tendering contract types which do not apply to his chosen
processes for works and the subsequent award of strategy. Where factors or processes are applicable to
contracts for implementation. more than one contract type they are repeated in the
respective chapters for the convenience of readers).
The text is supported by flow charts and
accompanying notes to illustrate the logical developments. Chapter 15 is general and deals with the formal
receipt and opening of all proposals and tenders.
Chapters 2 - 6 are general sections applicable to
the establishment of a project strategy for the various Chapter 16 covers the evaluation of proposals
types of projects. for the award of consultancy appointments and the
formation of consultancy services agreements.
Chapters 7 and 8 follow, dealing with the
prequalification of consultants and of contractors for Chapter 17 deals with the stage of procurement
construction works, respectively. covering receipt and evaluation of tenders for works up
to award of the contracts.
Experience has shown that for most projects,
and especially those of significant cost and complexity, Chapter 18 describes the processes and
the prequalification of tenderers for works contracts is documentation necessary for the award of consultancy
most desirable, since it enables the employer or his appointments, and Chapter 19 for the award of works
consultant to establish in advance the competence of contracts.
contracting companies subsequently to be invited to
tender. It is also in the interest of contractors since, if Appendices follow Chapter 19. For the purpose
prequalified, they will know that they are competing of making this guide as user-friendly as possible by
against other firms, all of whom possess the required reducing the general text, discussions and commentary
competence and capability. At the same time, on aspects of the procurement process which may be
contractors are provided with the opportunity and important for individual projects have been placed in the
incentive to respond to invitations to tender for projects appendices. The appendices are noted in the applicable
which they are qualified to undertake. The adoption of a sections of the main text. It is hoped that readers will
prequalification procedure minimises tendering costs refer to the appendices that have relevance to their
and ensures that all tenderers receive a fair and equal projects.
opportunity to submit their offers on a reasonable and
comparable basis. These recommended procedures are suitable for
procurement of contractors for most engineering and
Chapter 9 provides FIDICs recommendations for construction works, but may need to be adapted to suit
obtaining proposals for consulting appointments. the particular requirements of an unusually large or
complex project, and/or any special conditions imposed
Chapters 10 - 14 contain, in separate chapters, by the established procedures of a specific employer or
a detailed description of the tendering requirements for financing institution. The recommended procedures
each of the main types of works contract in common reflect best current practice worldwide. FIDIC
use, from invitation to tender to submission of tenders. recommends their use by employers, consulting
They include descriptions of the documentation to be engineers, contractors, financiers, development
prepared and included in the tender dossiers. agencies, and others involved throughout the global
engineering industry.
The main types are also illustrated by flow
charts. The aim has been to be brief, but to present the The flow chart of Fig. 1.1 on the opposite page
logic and factors that need to be considered by the indicates the typical phases of development of a project
presumptive employer. The reader should choose only from inception until completion and operation.
the chapter applicable to his chosen project strategy. (It
is not intended and may even be confusing for an
6
Fig. 1.1 Project development
A conceptual illustration of the sequence of activities associated with project procurement.
DECISION DECISION DECISION START

Proceed Proceed Proceed Issue of tender
with with with dossiers
feasibility project estimates & P&DB
study strategy design EPCT
Basic considerations and Project inception and APPOINTMENT OF CONSULTING ENGINEER

project strategy identification (AND OTHER SPECIALIST ADVISERS)
Initial studies FEASIBILITY

REPORT
Feasibility studies, including
budgets PROJECT
STRATEGY MANUAL
Project strategy, including
financing
CONTRACTOR SELECTION
Programming Project and contract
PROJECT PROGRAMMING
programmes
CONTRACT TYPE SELECTED
Employers design and/or Conceptual design ALL PERMISSIONS

requirements OBTAINED FOR
Detailed design PROJECT TO PROCEED
(by employer for CONS)
Selection of contractor Prequalification of

tenderers
Prepare tender
dossier
Tender
period
Tender
evaluation
Contractor executes and Contractor design

completes the works (for P&DB & EPCT)
Manufacture, construction
and installation
Testing and
commissioning
Project in use Operation and maintenance

Notes
1 Activities shown are sequentially indicative only and are not shown to any timescale.
2 Some activities may start before approval/authorisation/permission has been obtained. Under certain administrations this may not be possible,
and the overall programme would be correspondingly lengthened.
3 In addition to the three major contract types of CONS, P&DB and EPCT shown on the chart, the other contract forms for Minor Works,
Dredging and Reclamation Works, and Design, Build and Operate Projects may be used, as appropriate to the circumstances.
4 The design for the works may be carried out in-house by the employer, or undertaken by a consulting engineer retained under an agreement
with the employer or the contractor, as appropriate to the form of contract.
START START START Plant Fully

Issue of Contract Contract installed. operational
tender awards awards Start
dossiers P&DB CONS commissioning
CONS EPCT
Construction: CONS
Plant and Design-Build: P&DB
EPC/Turnkey: EPCT
The periods after contract

awards are not covered by this
guide.
CONTRACT AWARD
CONTRACT AWARD
CONTRACT COMPLETE
7
2 Basic Considerations
2.1 Development of a project 2.6.10 Environmental impacts and sustainability

2.2 Parties involved Appendices
2.3 Advisers: consulting engineers and other 2.6.6 Operation and maintenance
specialists 2.6.10 Sustainable development
2.4 Initial studies 2.7 Feasibility Studies Report
2.5 Decision to proceed with feasibility studies Appendix
2.6 Feasibility studies 2.7.1 Feasibility Studies Report
2.6.1. Location: planning; geophysical studies
2.6.2 Legal: laws and regulations Figure
2.6.3 Financing: project viability Fig. 2.1 Basic considerations
2.6.4 Programmes and time constraints
2.6.5 Scope and design
2.6.6 Operation and maintenance
2.6.7 Preliminary cost estimates
2.6.8 Employer involvement during
implementation
2.6.9 Project risk
2.1 Development of a project

When a need arises in a community, for example for implementation. Nevertheless, for an appropriate project
the supply of electricity or water, the authorities responsible strategy to be determined, it is necessary to take into
will have to take steps to satisfy that need, usually by the consideration how the works stage shall be dealt with and
provision of a facility of some kind, such as an electricity who will operate the facility when construction is complete.
generating station or a water treatment plant.
The employer may be a government, a government
Unless the authorities have sufficient resources of their agency, a public company, a corporation or a private body, or
own to design and construct the required works, they will have an individual developer. The project can normally be expected
to engage help from outside their organisation for this task. to involve financing, design, manufacture, construction,
The same applies to a private individual wishing to construct a installation of plant and equipment and, if necessary,
house, or to a private company wishing to obtain a facility, for operation and maintenance of the completed facility. Some
example, a hotel building or a factory. The authority or private projects may instead involve the decommissioning and
individual or company then takes on the role of employer and demolition of a facility, or perhaps the clean-up of a polluted
his project is to procure or implement the required works or site, or some other undertaking. The actual physical work will
facility. be carried out by the contractor, who may be a single
contracting company, or a joint venture or a consortium of
Procurement is the act of obtaining something, contracting companies.
especially by care or effort, so the employer wishes to procure
his project, or, in other words, to have his facility constructed The works required to carry out a project, however
or otherwise put into effect. small or large, will first need to be defined in outline by the one
promoting the project, that is, the employer. Thereafter, the
In this guide, the word project covers all the stages development of a physical project will entail several stages
from the initial idea to solve a need (or part of a need) by from initial and feasibility studies, through preliminary design to
constructing a given physical asset or facility to the final taking final engineering, before manufacture, construction and
over by the employer of the completed facility, and also, where installation can be commenced. The extent of the design and
prescribed, the operation thereafter of the facility to provide a level of detail to be specified by the employer will depend on
service to the users. This guide, however, only deals with the the project strategy that is chosen, but they must anyway be
procurement stages of the project, i.e., up to the award of sufficient to enable contractors to give responsive offers to
the contract or contracts for the construction or carry out the required works.
9
A project therefore goes through a number of tenderers, who then become the contractors for the
identifiable stages before construction or implementation execution of the various works.
can commence (see Fig. 2.1):
After the procurement of the contractor (or
- Inception Identification of a project based on contractors) for the physical works, there are further
need and defined purpose. stages in the project cycle (which are not covered by this
- Initial studies Preliminary consideration of possible guide):
solutions, alternatives and conceptual
designs. - Final design Contractor or employer may have
- Feasibility Studies to establish whether the continuing design obligations.
proposed solution is viable. - Manufacture May be necessary on plant, process
- Project strategy Choice of implementation strategy and other contracts.
and contract type. - Implementation Construction and/or installation of the
- Specification Design criteria, technical requirements works.
and performance targets to be - Commissioning Test running and taking-over by the
established. employer.
- Design Detailed design drawings and - Operation Operation, maintenance and training
specifications or, alternatively, (OMT) may also be included in the
performance specifications to be contractors work, or else by the
prepared/developed. employer.
- Documentation Preparation of tender dossier, including - Guarantee Defects notification period during
instructions to tenderers, conditions of which the contractor is responsible
contract and pricing document. for defects.
- Prequalification Selection of suitable contractors,
often by prequalification.
- Tendering Invitation and receipt of tenders from
contractors.
- Evaluation Checking and evaluation of tenders,
selection of the contractor(s).
- Contract(s) Award of construction/
implementation contract(s).
Thus the accepted tenders become the subject

of contracts between the employer and the successful
2.2 Parties involved

A number of parties will become involved during implemented, and the employer will be paying for the
the various stages of an engineering project. These project.
parties will provide the many specialists needed to carry
out the large number of diverse tasks necessary to During the development stages of the project,
implement the project. from initial and feasibility studies, through conceptual and
preliminary design up to final design, the employer will
The party which will be involved in the project normally employ a consulting engineering firm to carry
through all its stages from inception to completion and out the studies and design work. Large employers may
operation will be the employer, who will normally be the have engineering staff of their own that can carry out
promoter or owner of the project, sometimes even called some or all of this work in-house, but normally an
the client. It is for the employers benefit, or at the employer will engage a consultant specialised in the
employers order, that the project is being procured and actual type of project.
10
The processes recommended for retaining the - Inception EMPLOYER

services of a single consultant or a firm of consulting - Development EMPLOYER
engineers by an employer are described in Chapters 7, 9, CONSULTANT (consulting engineer)
15, 16, and 18. - Implementation EMPLOYER
ENGINEER
The consultant usually will continue to assist the CONTRACTOR
employer throughout the procurement stage until the
implementation contracts are signed. Thereafter, the In certain types of two-party implementation contracts
consultant may be employed during the construction or the duties of the engineer may be performed by the employer.
installation stages to check that the work of the contractors is
carried out in accordance with their respective contracts. For As far as other parties are concerned, they may or
these duties the consultant would normally take on the role of may not become involved as the project proceeds:
engineer under the implementation contracts.
- Financing institutions to provide loans and grants to the
The contractors, who will carry out the physical employer
execution of the required works, have in past decades only - Banks to provide working funds for the
become involved in the project when it is time to award the contractors
construction or installation contracts. In recent years, for - Insurance companies for insurance of the works
certain types of project, it has become more common for - Subcontractors for specialist parts of the works
contractors to become involved earlier, and to carry out much - Suppliers for materials and equipment
of the detailed design work. - Specialists of many disciplines
- Lawyers to check documents for legal
Thus, as far as the principal parties are concerned, compliance
their involvement will depend on the stage reached in the
realisation of the project: and never to be forgotten:
- The public has the power to make or break

any project.
2.3 Advisers: consulting engineers and other specialists

At the outset of most projects it is often difficult for an environmentalists to advise on the short and the long-term
employer to fully grasp the complexities involved in the variety commercial viability of the project, bankers on funding
of professional services required to develop a solution. It may methods and sources, insurers on risk aspects, and others,
be necessary to appoint professional advisers, including such as lawyers, on land and legal issues.
consulting engineers, to provide the necessary expertise at the
crucial early stages of the project. Working together, the Whether professional advisers or the employers own
employer and the consulting engineer can define the project staff or a mix of both are employed, it is vitally important that
objectives in detail and agree upon the services required to the employer ensures that one senior manager is responsible
make the project a reality. for defining the tasks, priorities and programmes for carrying
out the initial and subsequent feasibility studies, as well as for
Other specialist advisers may include economists and monitoring the progress of the studies to completion.
2.4 Initial studies

The object of the initial studies is to enable the preparation of detailed feasibility studies of the proposed
employer to decide whether or not to proceed to the stage of project. It will be necessary to set realistic parameters in terms
11
of scope, location, time and cost. Early tasks will include sustainability and the impact on the environment of the
identification of options, the preparation of conceptual project in the context of current and foreseeable future
designs and the consideration of suitable sites for the economic and commercial conditions. The responsibility
project together with estimates of the time and cost for financing and managing future operation and
constraints. An initial appreciation of the potential size maintenance of the project will also need foresight.
and complexity of the project usually assists in the
examination of other subjects within the studies. Consideration may also be given at this early
stage, depending upon the size and scope of the
Larger and more costly projects will generally project, for the need to divide the project into separate
require more thorough and detailed consideration than contracts for ease of management and administration
smaller projects but, whatever the size, assessments are during the implementation phases. In addition,
to be made of the overall time scale of implementation, preliminary assessments of major risks and the capability
the approximate capital and life-cycle costs and potential and strength of the employers resources for managing
sources of finance for the project. all aspects of the implementation of the project will need
to be examined.
Other matters may include the need for initial
reviews of the economic and social viability, future
2.5 Decision to proceed with feasibility studies

The results of the initial studies will influence the be necessary for the employer to arrange for the
decision on whether or not to proceed to the stage of preparation of suitable feasibility studies with the aim of
undertaking full-scale feasibility studies to verify the reaching a recommendation, in the form of a report, on
overall economic and social viability of the project. whether or not to continue with the implementation of
the project.
Following a decision to proceed, it will normally
2.6 Feasibility studies

The aim of feasibility studies is to confirm the The feasibility studies are to:
investment justification of the project and to determine
the most advantageous method for its implementation. - provide a preliminary identification of the scope and
The scope of the feasibility studies will generally vary cost of the project and its principal technical
according to the nature, size, importance, complexity, parameters;
and urgency of the project. - evaluate financing, operation and maintenance and to
specify their required time schedules;
Feasibility studies preclude progressing directly - identify financing sources;
from initial studies to detailed project designs by - assess whether the project is justified from both an
providing the opportunity for consideration of alternative economic and a social viewpoint;
methods and options for project delivery. - select the optimum project option;
- identify potential problems related to the delivery and
It is also to be noted that, if particular alternative running of the proposed project.
methods and options for project delivery have been
shown to be unsatisfactory at the feasibility studies At the feasibility studies stage neither all details
stage, the need to undertake detailed studies at a later of the technical solutions nor conditions related to
stage of such methods and options can be avoided, with delivery and implementation of the project are likely to be
a likely saving in both cost and time. known. In this preparatory phase of the project the
12
estimates made of the total time and costs required to - Preliminary cost estimates
execute the project will be preliminary. The fundamental aim of - Employer involvement during implementation
the feasibility studies is to provide confirmation or rejection of - Project risk
the justification to proceed with implementation of the project. - Environmental impacts and sustainability
The matters listed below, therefore, although not These matters, and the Feasibility Studies Report
necessarily comprehensive, are to be considered and studied. itself, are described in further detail in Sections 2.6.1 to 2.6.10
They will form the basis, as applicable, of the Feasibility below and 2.7, which indicates the format and content of a
Studies Report: typical Feasibility Studies Report.
- Location: planning In subsequent stages of preparation of the project,

geophysical studies data and estimations are developed in greater detail to provide
- Legal: laws and regulations increasing accuracy. Depending on the character of the
- Financing: project viability project, the approximate accuracy of assessments at the
- Programmes and time constraints feasibility study stage should normally aim to be in the range
- Scope and design of 20-30%.
- Operation and maintenance
2.6.1 Location: planning; geophysical studies

It may be necessary to consider alternative sites with It is most important to carry out comprehensive site
regard to land purchase price, ease of access, environmental investigations over the chosen locations for the project. Failure
considerations, construction costs, life-cycle costs, and to carry out thorough and comprehensive site investigations
installation, operation and maintenance factors, in order to prior to design and construction work may well result in
assess the most advantageous location for the project. unavoidable changes to the required works during
implementation, with consequent delays in completion and
Of particular importance is the need to undertake unexpected additional costs. The cost of the site
thorough land use, aerial, photographic and, where investigations will be a small percentage of the total project
appropriate, hydrographic surveys together with geological cost. The potential savings by avoiding such additional costs,
and geotechnical sub-surface investigations of the potential which would almost inevitably arise from delay owing to late
locations for the facilities. This will be essential for the re-design following the discovery of unforeseen ground
development of suitable designs. It also will reduce the conditions during construction, are likely to far outweigh the
likelihood of unforeseen conditions being encountered during initial cost of proper site investigations.
implementation, which could have an adverse effect on the
final cost of the project.
Such preparatory surveys and investigations normally

require the placing of contracts with specialist site
investigation firms.
2.6.2 Legal: laws and regulations

The employer will have to consider what effect importance of the project, the works may require agreements
applicable laws may have upon his proposed project. Major to be made and ratified between affected countries and/or
works may require government legislation or a government parties, or consents to be obtained.
licence before construction can begin. Normally requisite
steps for such would have to be initiated by the employer, and The employer may also have to investigate any laws
the time required to formulate and pass the legislation or and regulations that relate specifically to the project,
obtain the licence would have to be allowed for in the overall particularly those concerning land use, ownership, mineral
project programme. In any case, irrespective of the size or rights, and environmental aspects.
13
Designers will have to adhere to local building, safety, and welfare;

environmental and other regulations and controls over - subcontracting, including nominated subcontractors,
industrial and infrastructure development. liens on plant and equipment, legislation, and the
protection of subcontractors rights;
Even at this early stage, the employer should be - protection of antiquities, fossils and articles of value
aware that, assuming the project advances to the found on the site;
implementation stage, permits, licenses and authority - liquidated damages, whether payable for delay or non-
approvals of various types may be required under the performance;
applicable laws before construction can commence. A - the taking over or acceptance of the works;
wide variety of laws and regulations (including case law) - liability for defects after completion or take over, e.g.,
of the country where a project is to be carried out may decennial liability;
apply to procurement procedures including any resulting - variations of the works, including whether prior
works contract. These may differ according to whether agreement is necessary;
the project is a public one, that is, one being carried out - foreign currency;
for a sovereign state or one of its agencies, or a private - taxation, customs duties and other governmental
one, that is, one carried out for a private developer or impositions;
investor. The laws and/or regulations may be mandatory - the right of the contractor to suspend work for non-
in nature (e.g., because they are matters of public policy payment or some other reason;
in the state concerned) and, therefore, must be complied - the right of the employer to terminate;
with whereas some regulations may be optional, or may - intellectual and industrial property rights;
be subject to exemptions, and consequently, may be - insurance, including any mandatory obligation to insure,
departed from in an individual contract. This is a matter - performance security and retention money;
which needs to be determined in each case. - advance payments and security therefor;
- forms of demand guarantees and surety bonds;
While local legal advice will be necessary when - value engineering;
preparing documentation for a project, the laws and - limitations on rates of interest, such as usury;
regulations may include, by way of example, those - limitations of liability and limitations on forfeiture;
dealing with: - bribery and corrupt practices; and
- dispute resolution procedures and arbitration.
- the procurement and tendering for projects, public and
private; It may need to be ascertained and, in some
- a specific industry or business; cases, confirmed in the works contracts or in a
- zoning; consultancy agreement for a given project which party
- building permits, licences or approvals; (the employer, the contractor or the engineer) is
- operating licences or permits; expected to be responsible for complying, or ensuring
- environmental matters; compliance, with laws and regulations dealing with these
- local and foreign labour, including laws and regulations and other matters.
governing wages, conditions of employment, health,
2.6.3 Financing: project viability

During the initial studies a preliminary implemented and budgets established. Whether the
assessment of the approximate capital cost of the finance will be provided by the employer or whether it will
project and, where appropriate, the life-cycle cost of the come from outside his organisation, reliable cost
completed facility including operation and maintenance estimates will certainly be required.
will have been made.
Funding providers will normally require
How and where the finance is to be obtained is a comprehensive economic studies to be carried out to
fundamental consideration, and will have an important confirm the commercial viability over the whole life of the
bearing on the manner in which the project is proposed facility in terms of projected revenue flow or
14
cost-benefit. For some projects they may require detailed and beneficial life-cycle economic results and social viability of the
careful analyses to demonstrate the social as well as the project. They may also stipulate terms which affect the work
economic benefits. In such cases, and particularly for all large scope, location, time and cost of the project. Such financing
and complex projects, employers are advised to appoint may dictate the form or forms of contract and how project
economists, specialist consultants and financiers to carry out risks are to be allocated.
these studies.
Financing of the project by some funding providers

may be conditional on analyses that demonstrate the
2.6.4 Programmes and time constraints

The initial studies will normally contain an approximate If the date for completion of the project is fixed in
estimate of the expected time programme for development of advance, e.g., facilities to be completed in time for an Olympic
the project. During the feasibility studies this estimate should Games, it is absolutely necessary to have a reliable time
be examined and elaborated into a reasonably detailed overall programme, essentially worked out backwards from the fixed
time programme. An indication of the main phases which completion date, and containing throughout ample reserve
should be included in the programme is given below in time in case of unexpected difficulties.
Section 4.1.
A major failing of many employers is to underestimate
The overall time programme is of great importance the time required for administrative activities, e.g., purchase of
because it indicates the times when significant milestones are land for the project, and obtaining permissions from
planned to be achieved. For example, the date when authorities. Sufficient time must be allowed for all activities
commercial production of the facility is planned to commence throughout the development of the project. Particularly in the
forms an integral part of the financial calculations. The project early stages it is necessary to allow sufficient time for the vital
cash-flow is dependent on the time schedule. So are many initial and feasibility studies to be performed properly.
other essential project matters, such as the times to be
allowed for studies, design, tendering, construction, Certainly time programmes may have to be adjusted
completion, and so on. Many of the cost estimates are also at later stages, but the time programme prepared during the
reliant on the time programme, as costs are normally time- feasibility studies is of major importance for all subsequent
related. Resources will have to be planned and provided and it planning and actions.
will have to be ensured that they are sufficient to enable
milestones to be met.
2.6.5 Scope and design

The employer will need to decide whether he wishes employer may also wish other aspects, apart from lowest
to have control himself over the detailed design development cost, to be taken into consideration, such as environmental,
of the project or whether he wishes the selected contractor or aesthetic and social aspects and the time for implementation.
contractors to be responsible for this aspect of the work. Designers should consider the possible future need to add to,
alter or modify the project. They should also consider
In any event, development by the employer of an initial decommissioning and/or demolition at the end of the useful
conceptual design is required as the basis for estimating the working or operational life of the facility, including the
cost of the project, the time it will take, and other relevant possibility of recycling materials.
matters. It is usual for the employer to appoint a consulting
engineer or specialist designer for this task. The designs must comply with all planning, zoning
and construction or building laws and regulations applicable in
Alternative design solutions should be considered the region of the project. The designers should establish
during the feasibility stage. Those that meet the employers suitable specifications for the materials, plant and equipment,
objectives should be cost estimated, and a comparison made workmanship, quality, and health and safety standards for the
to determine the best solution from the financial aspect. The construction and installation work.
15
2.6.6 Operation and maintenance

The employer will have to consider whether a employers own personnel to be ready to take over the
facility, when completed, is to be handed over to him for operation progressively or at the end of a fixed period.
operation and maintenance or whether he will require a
contractor to undertake this work. If a contractor is to
operate and maintain the facility, will it be on a
Aspects determining whether the employer should
permanent basis, or only for a transition period?
operate and maintain his facility himself, or whether
he should employ a contractor for this work are
If only a transition period is required, then the
discussed in Appendix 2.6.6.
arrangement might usefully include training of the
2.6.7 Preliminary cost estimates

Preliminary cost estimates are an essential part - Design and specification
of any feasibility study. If there is more than one - Preliminary design
acceptable solution, then a cost estimate should be - Specification of materials and plant
made for each solution. - Final design and construction drawings
- Preparation of tender dossier
What is to be included in the cost estimate will
depend upon the nature of the project and on the - Selection of contractors
circumstances of the employer, for example, his funding - Tenderer prequalification
arrangements or his engagement after hand-over of the - Tendering procedure
facility. If the project is to construct a road or water - Tender analyses
pipeline it may suffice for the cost estimate to cover the - Contract award procedure
costs up to completion of construction.
- Implementation
If, however, the project is for the provision of an - Design and manufacture of plant and equipment
industrial plant, it can be expected that it is the total cost - Construction of civil works
of the project over the lifetime of the plant which is of - Installation, testing and commissioning
most interest to the employer, rather than just the cost of - Supervision and control of construction
constructing the facility. The total cost of the project - Handing over procedures
would then be the sum of all initial costs, the cost of - Guarantee period
construction or implementation of the facilities, plus the
cost of operation and maintenance over the projects life - Operation and maintenance
cycle. - Training of operatives and labour
- Supervision and control of maintenance
Items that should normally be included in a - Raw material for operation
preliminary estimate of the capital cost of a project cover - Spares and maintenance materials
the costs of studies, design, construction, plant and - Periodic overhaul and maintenance.
equipment, and if applicable operation and
maintenance for a specified period. These might be: All these assessments and estimates,
representing anticipated future expenditure, should be
- Studies time-related against the overall project programme to give
- Geological and land surveys an indication of the financing requirements over time.
- Site and soil investigations
- Access and transportation studies If the project is for a commercial operation that is
- Natural and manufactured materials expected to provide an income after completion of
- Identification of suitable sources of finance construction/installation, then an estimate of income over
- Conceptual design time should be prepared. This can be compared with the
- Environmental studies costs of the project to judge its economic viability.
16
2.6.8 Employer involvement during implementation

The degree to which the employer has the knowledge,
resources, experience, and desire to be involved in the Employer involvement during implementation is discussed
development of the design, the supervision of the construction further in Section 3.9.
or installation works, the subsequent operation and
maintenance of the facilities, and in the overall administration
of the project must be considered and clarified by the
employer at an early stage. His wishes in this regard will have
an important effect on the project strategy and on the choice
of forms of construction and other contracts to be adopted in
implementing the project.
2.6.9 Project risk

Project risks can be considered under two categories: account of the impact of all types of project risk. If the
risks which are unavoidable and risks which could be avoided employer bears certain of the risks, he will have to pay the
or controlled by the parties to the project. The feasibility financial effect only if any of those risks eventuate. If the
studies should include identification and consideration of the contractor is asked to bear risks, he will anyway have to make
significant risks associated with the project, and the optimum allowance for them in his contract price, whether they
way to manage and control these risks should be indicated. eventuate or not, and the employer will pay for that allowance.
As a general rule responsibility for risk should be Many risks can be set off by the purchase of
allocated to the party best able to manage and control the insurance cover. As this is a specialist subject it is advisable to
risk. An equitable sharing of risk will promote efficient refer such matters to insurance specialists so that estimated
management of the risk and will reduce potential for adverse costs can be determined.
impacts on the project. Contracts which have a reasonably
balanced sharing of risks, as defined in their terms and
conditions, are considered to provide the lowest outturn cost
for the project in comparison with other forms of contract.
Contracts where the contractor is required to carry the
majority of risks are generally expensive.
Project risk is discussed further in Section 3.12.
Cost and time estimates will need to take some
2.6.10 Environmental impacts and sustainability

Almost all projects have some impact on the report should identify all effects, whether positive or negative.
environment, at least in the immediate locality. This may be an The feasibility studies should address how any adverse effects
inevitable consequence of the construction or installation of the impacts can be managed and contained within
work, or due to the subsequent operation of the facility. The acceptable limits.
impact may be of short or of long duration, and the impact
may be of minor consequence or it may be severe. The need to make development sustainable is based
on sound evidence showing that man is using up critical
An environmental impact assessment report is resources and ecological carrying capacity faster than they
required for virtually all projects of a significant size, and most can be renewed, replaced or replenished. This is happening at
funding institutions make such a report compulsory. This all levels, from local pollution of streams and lakes, to the loss
report will catalogue the expected effects of the project on the of biodiversity and a warming of the Earth probably caused by
environment, including the sociological effects on the local human activities. At the same time, competition for scarce
population and the anticipated effects on flora and fauna as resources involving, for example, water removal from major
well as on the surrounding countryside, rivers and so on. The rivers and aquifers, deforestation and depletion of fish stocks,
17
causes socio-political conflicts within and between managed maintenance programmes and planned
countries. The evidence is viewed by many as sufficient decommissioning at the end of the projects working life.
to change our approach to economic growth.
A document published by FIDIC entitled Project
For these reasons, many employers aim to Sustainability Management Guidelines provides guidance
commit to the principles of sustainable development in to assist consulting engineers and their clients in setting
their projects by building or refurbishing facilities and meaningful sustainability goals and objectives for their
infrastructure using designs and methodologies that projects.
make more efficient use of resources and energy, protect
ecological systems and benefit community needs.
Consulting engineers and others concerned should
foster the aims of sustainable development in their work
and encourage their clients and others to adopt designs
and methods that will maintain and improve the quality of
life without jeopardising the ability of future generations
to do the same.
Designers, therefore, taking regard to the

Sustainable design and development is discussed
working life of the project, should prepare sustainable
further in Appendix 2.6.10.
schemes and specifications for the project including
2.7 Feasibility Studies Report

At the end of the feasibility studies a - Location: planning; geophysical studies
comprehensive report should be prepared. Most - Legal: laws and regulations
financing agencies make mandatory the submission of a - Financing: project viability
Feasibility Studies Report with clear recommendations, - Programmes and time constraints
and often they will specify the format and contents of the - Scope and design
report. In any case, a clear and well set out report will - Operation and maintenance
greatly assist the understanding, recommendations and - Preliminary cost estimates
conclusions of the feasibility studies. - Employer involvement during implementation
- Project risk
The report should begin with a brief description - Environmental impacts and sustainability.
of the employers proposals together with a summary of
the recommendations for methods of implementation. The report should then provide the general
This part of the report should be written in non-technical conclusions to be drawn from the analyses of the
language so that it can be rapidly understood by those recorded facts and data. These may include:
who do not wish to spend time reading details. The
report could then describe the background and history - Assessing whether the project is economically viable,
behind the need for the project and, if appropriate, will based on realistic cost estimates, and, if so, proposed
state any special requirements or limitations imposed by sources of finance together with an evaluation of the
the employer on the scope of the studies. financing alternatives.
The report should continue by recording the - The advantages and disadvantages of the employer
facts and data from the examination of each of the being directly responsible for operating and maintaining
subjects studied, and include explanations of the the completed facility, and any alternative arrangements
technical analysis, interpretation and conclusions which could be made.
regarding each subject. At least the following should be
covered: - The overall time programmes for land purchase,
18
completing negotiations for finance, obtaining approvals and should indicate the most advantageous project option. The
licences, and other preliminary arrangements as may be conclusions will also provide information of use in the
necessary, for preparing the designs and the tender dossier, development of the project strategy and the form or forms of
for the tendering and tender evaluation periods as well as for contract to be adopted.
the construction and installation periods, and, if required, the
period for the operation and maintenance to be carried out The quality and usefulness of the feasibility studies will
by a contractor. depend upon the time available to complete them, the validity
and sufficiency of the information used, and, in particular, the
- Assessing whether the proposed project is justified from the soundness of the experience and expertise of those carrying
social and/or sustainability viewpoints. out the work.
- Identification of potential problems related to the delivery and

operation of the project.
Recommendations for implementation, or otherwise, A typical format for a Feasibility Studies Report is included
of the proposed project will be drawn up based on the in Appendix 2.7.1.
conclusions of the studies. If it is considered viable, the report
19
Fig. 2.1 Basic considerations
Flowchart notes
Activity Description
Project inception and The procurement process begins with identification of the purpose and need for a
identification project. Projects may be promoted by governments, government agencies, public
companies, corporations or private bodies.
Initial studies The object of the initial studies is to enable the employer of a project to decide
whether to proceed to the stage of detailed feasibility studies.
Advisers: consulting engineers Depending upon the size and complexity of the project, assistance and advice from
and other specialists consulting engineers and other specialists may be sought.
Decision to proceed with The initial studies will influence the decision whether or not to proceed with
feasibility studies feasibility studies of the overall viability of the project.
Feasibility studies The matters shown in Figure 2.1 for consideration are to be studied to form the
basis of the Feasibility Studies Report.
- Location - Planning; Alternative sites should be considered. Geophysical investigations should be

geophysical studies carried out for design purposes and to reduce the likelihood of unforeseen ground
conditions.
- Legal - Laws and regulations The importance of obtaining legal approval and adhering to regulations affecting the
project must be recognised.
- Financing - Project viability Identification of the sources of finance is key to the success of a project. Projects
may be financed directly by the employer, by loans from International Financing
Institutions (IFIs) or by grants from wealthy countries. Life-cycle project costs
should be shown to be socially and economically beneficial.
- Programmes and time It is important to prepare a realistic project programme of all activities.
constraints
- Scope and design The employer has to decide whether he has the resources to design the works in-
house or whether a separate designer is to be appointed. Alternatively, the design
responsibility for all or parts of the works may be given to the contractor(s).
- Operation and maintenance The employer must decide at an early stage whether he has the experience,
knowledge and resources to carry out the operation and maintenance of the
completed facility or whether contractor(s) should do this work.
- Preliminary cost estimates The total capital cost of the project and of ongoing operation and maintenance
costs are to be assessed.
- Employer involvement during The degree to which the employer has the wish, knowledge, resources, and
implementation experience to be involved in the implementation of the project must be clarified.
- Project risk The proportions of the risks to be borne by the contracting parties will govern the
terms and conditions of the works contracts.
- Environmental impacts and Specialists should examine the sustainability of the project and study the effects
sustainability that the proposed works may have on the environment.
The Feasibility Studies Report The report is to be clearly set out and well-written. It will commence with a
summary of its findings and recommendations for project implementation. The
report will contain detailed results of the findings and conclusions of the studies and
give advice and recommendations for the project strategy to be adopted.
20
Fig. 2.1 Basic considerations.
Consulting engineers
and specialist
assistance from others
as may be required:
- economists
- bankers
- environmentalists
Location: Legal: Financing: Programmes Scope

Planning; Laws and Project and time and
geophysical studies regulations viability constraints design
By Private Through By By
employer arrangements an IFI or PPP* employer contractor
* PPP: Public-Private Partnership

Project inception and identification
providing purpose, need and objective
Initial studies
to include:
Initial concept of size and complexity of project Conceptual designs
Sources of finance Overall time programmes
Assessments of capital and life-cycle costs Economic and social viability of project
Responsibility for future operation and maintenance Impact on environment/sustainability
In-house resources Major risks
Decision to proceed with feasibility studies
Feasibility studies
to include issues for consideration given below.
Operation Preliminary Employer Project risk Environmental

and cost involvement during impacts and
maintenance estimates implementation sustainability
By Outsourced By Very Little High Medium Low

employer contractor contractor involved involved
Feasibility Studies Report

provides basis for the development of a project strategy
21
3 Developing a Project Strategy
Contents
3.1 General 3.12 Risk
3.2 Financing 3.12.1 Risk allocation
3.2.1 Traditionally financed projects 3.12.2 Contract price
3.2.2 Privately financed projects 3.13 Insurance
3.2.3 Public-Private Partnerships (PPPs) 3.14 Prequalification of tenderers
3.2.4 Contractor financed projects 3.15 Contract price and payment
3.3 Contract packaging 3.15.1 Remeasurement
3.4 Budget planning 3.15.2 Lump sum
3.5 Contract time programming 3.15.3 Reimbursement
3.6 Cost estimates 3.15.4 Target price
3.7 Operation and maintenance 3.16 Decision to proceed
3.8 Design responsibility
3.9 Role of the employer during implementation Figures
3.10 Role of the contractor during implementation Fig. 3.1 Apportioning risk
3.11 Role of the engineer during implementation Fig. 3.2 Developing a project strategy
3.1 General
The recommendations contained in the Feasibility structure for the project. The management structure will
Studies Report will provide the basis upon which the develop from the strategy adopted and will need to be clearly
appropriate project procurement strategy is developed. defined. This will enable all involved to be aware of their
responsibilities and levels of authority.
Irrespective of the size of the project the employer will
look for a strategy in tendering processes leading to After receipt and approval of the Feasibility Studies
contractual arrangements that will provide a defect-free Report the employer will arrange for the conceptual designs
project, fit for its purpose, completed in a timely fashion and for the works to be progressed to the preliminary design
within budget. In addition the adopted strategy for the project stage. (For some design-build and turnkey contracts the
should take account of the need for economic whole-life contractor may take over the design from the conceptual
operating and maintenance costs. design stage.)
The employer should consider retaining the expertise In the initial stages of the development of the project
and experience of consulting engineers and perhaps other strategy:
specialists to assist in developing a suitable project strategy
and in managing the processes required. In this regard the - the overall project time programme will be reviewed;
reader is referred to: - the estimated capital cost of construction and installation of
the facilities included in the preliminary designs will be
- Chapter 7 Prequalification: Consultancy Appointments evaluated;
- Chapter 9 Consultancy Appointments - the life-cycle costs of operation and maintenance will be
- Chapter 15 Receipt and Opening of Proposals and estimated;
Tenders - identification will be made of the sources of finance and the
- Chapter 16 Evaluation and Recommendations: manner in which funds will be made available;
Consultancy Appointments - the relative magnitude and complexity of the project will be
- Chapter 18 Award of Contracts: Consultancy assessed;
Appointments - the overall economic and social viability of the project will be
reviewed;
The size, complexity, value and location of the project - the environmental impact assessments will be reviewed; and
will dictate, to a large extent, the general management - the environmental sustainability of the project will be confirmed.
23
The size and complexity of the project may - risk management planning;
indicate that the construction and installation of the - apportionment of risk between the employer and the
facilities should be carried out under a number of contractor;
separate contracts. In such a case it will be necessary to - arrangements for insurances;
define the work to be executed under each contract. - arrangements for prequalification of tenderers;
This is often known as contract packaging. - basis on which the contractor will be paid; and
- decision on whether or not to proceed.
Thereafter, major issues which will require
consideration and decisions in the formulation of the These issues are considered in greater detail in
project strategy will include: the following sections from which the fundamentals of
the project strategy can be established. The project
- programme for receipt of financing; strategy will lead to the appropriate type for each
- time programme for each contract; contract, and to the conditions to be incorporated into
- cost estimate for each contract; each particular contract, as described in Chapter 5.
- responsibility for operation and maintenance;
- responsibility for the designs to be provided to, and/or
to be carried out by, the contractor;
- role of the employer during implementation;
- role of the contractor during implementation;
- role of the engineer during implementation;
3.2 Financing
Fundamental to any project is the provision of For large construction or development projects,
finance, i.e., funds to pay for the construction work and employers in some countries may have adequate funds
the plant and equipment to be installed, together with of their own to finance the project, but for the majority of
the overall administrative and design development costs. employers it is necessary for them to borrow the required
A preliminary assessment of the approximate capital cost funds. In developing countries, finance for the work of
of the project will be available from the initial studies and the consultants can sometimes be obtained from an
the Feasibility Studies Report. This information will assist International Financing Institution (IFI) established in the
the employer to seek and obtain the necessary funding country of the consultant. However, financing for the
for the project. Such funds may come from one or construction work, or a portion of it, is usually by way of
several sources. soft loans from one or more of the larger IFIs.
A relatively small or medium-sized project would For larger, usually public sector projects, too costly
typically be financed directly by the employer, whether in to be financed directly by taxes, employers typically seek
the private or in the public sector. The employer might be loan funding from the Multilateral Development Banks
a private individual or private developing company, or (MDBs) such as The World Bank, or through grants.
might be a local authority or government department or
agency. Alternatively, where these sources are not
available, large projects may be financed with private
An employer in the private sector, such as a participation. Privately-Financed-Projects (PFPs) are
substantial commercial company, contemplating such a based on an agreement in which the original initiator of
project, would generally have the resources to finance the the project, known as the principal, who holds the legal
work directly, or would be able to apply for and obtain power to do so, grants exclusive rights to an
suitable bank funding and/or raise equity capital by the organisation, normally a consortium of contractors, for
issue of shares. An employer in the public sector would the responsibility of financing, design, construction,
generally be a department or agency of government with operation and maintenance of an asset or facility over
finance raised by taxes, or through grant aid. the period of the agreement.
24
It has to be borne in mind that, particularly where determine the risk to be carried by the financiers and will affect
private sector finance is to be involved, financiers will the conditions that will apply to the engineering contracts.
participate only under terms that will, as far as reasonably
foreseeable, ensure a safe return on their outlay. The terms will
3.2.1 Traditionally financed projects

For traditionally financed projects being promoted by before entering contracts, take local legal advice to check on
governments or other bodies for the benefit of the public, the status and authority of the prospective employer.
funds have normally been raised by central or local
government through taxation or similar levies, or else provided If the employer is not a government body or an
by grants or obtained by government borrowing. This is the incorporated company, and, for example is a private person or
usual case in developed countries. In developing countries, otherwise unincorporated, then a consultant or contractor
where a project is often too costly to be financed directly by should check that funds are actually available and that the
taxes, and where national funds are insufficient for the desired person(s) signing the contract have the necessary resources
development of the infrastructure, financing is usually met, or and authority to make the requisite payments when due.
partly met, by loans or grants from the IFIs such as The World
Bank, the Asian Development Bank, the African Development
Bank, the Inter-American Development Bank, or the other
Multilateral Development Banks.
However, many other projects are financed directly by

promoters (employers) who have sufficient own funds, or who
obtain loan funding from banks, finance houses or other
private lenders. Examples of such organisations might be
electricity supply corporations, oil refineries, manufacturing
companies, and private developers.
If the employer is a central or local government body

or an incorporated company, a consultant or contractor
entering into a valid contract with such body can normally
assume that the body has, or will obtain, the required funds for
the work. However, the legal status of government bodies and
companies varies, and consultants or contractors should,
3.2.2 Privately financed projects

It has become increasingly common for the financing years of operation by charges made to the users of the
of public projects to be provided by the private sector. One service. In a typical such Build-Operate-Transfer (BOT) project
usual way to achieve private participation for such projects is the contractor group will hand the facility over to the
for the government or national authority to issue a government at the end of the concession period, which could
concession whereby the concessionaire is granted the right typically be 20-30 years.
to provide a particular service to the public sector.
Several variations to the BOT theme have been
Instead of a government raising its own funds, e.g., by developed. These total project solutions include Build-Own-
taxation, to construct a particular road or railway or water Operate-Transfer (BOOT), Build-Lease-Transfer (BLT), Design-
supply or similar, the government grants a concession Build-Finance-Operate (DBFO) and a number of other similar
whereby it gives a private group (usually of contractors, arrangements. Some governments have actively encouraged
suppliers, financiers and operators) the right to construct the the private financing of infrastructure and other projects and a
facility and operate it for a fixed number of years. The group considerable number of projects are now being financed by
will provide the financing, which will be recouped over the private funds. Such projects have included construction and
25
running of schools, prisons, hospitals, water and sewage project is expected to pay for itself, or largely pay for
treatment plants, roads, and railways. The contracts itself, in the long run. Those lenders providing the initial
usually include financing, design, construction, funds for the project look primarily to the revenues
operation, and maintenance of the facilities, but tuition in generated by the completed facility for repayment of the
schools and medical staff in hospitals are not included. loans, and to all the project assets as security for the
loans. Project finance differs from traditional loan
The majority of BOT type schemes are project structures in that lenders generally have recourse only to
financed. In project finance, as the term is commonly the assets of the project or limited recourse to other
used, a project is developed and financed on a non- assets or finance.
recourse or limited recourse basis. In other words, the
3.2.3 Public-Private Partnerships (PPPs)

It is clear that a number of useful and socially necessary. In such cases where public funding has to
desirable projects will never manage to be entirely complement private funding, the project is nowadays
financed on a non-recourse basis, i.e., entirely pay for commonly called a PPP project, i.e., a Public-Private
themselves over time. For example, a road construction Partnership project.
project in a remote area cannot be expected to raise
sufficient income via road tolls to recoup the outlay. For
such projects it will be necessary to raise other funds to
Further information on such PPP projects is given in
supplement the private sector financing. Probably the
Section 5.6.2.
local government will have to provide the extra funding
3.2.4 Contractor financed projects

As a further variation on the BOT theme, some There also exist a number of large construction
larger construction companies have themselves projects, for example motorway projects, where the
identified promising projects, for example, hydropower contractor consortium has itself provided the financing
projects, in various countries. They have then contacted against the granting of an operation concession for a
the local national authorities and presented them with a considerable number of years, for instance, 25 years,
proposal for design and construction, and often during which it can recoup its outlay, including the costs
operation for a number of years, of the facility. As regards of borrowing the funds and profit, by charging users for
financing of the project, the construction company or the use of the facility by means of road tolls.
consortium will usually have arranged for the provision of
the necessary finance, possibly in return for the granting
of a concession to operate the facility.
3.3 Contract packaging

For small or minor works projects only one turbines, another plant contract for the generators, a
construction/installation contract will normally be contract for the switchyard equipment, and so on. There
sufficient. In some cases, however, an employer may may also be contracts for design and supervision by the
wish to purchase plant and equipment separately from engineer.
the construction contract.
For such projects, and for larger multi-discipline
For medium to large projects, such as a projects, and complex projects, as well as mega-
hydropower project, there may be several contracts, projects, decisions on the number and scope of
often divided according to type of work, for instance, a contracts may be extremely critical to the eventual
civil works contract, a mechanical plant contract for the success of the project.
26
When deciding on contract packaging, the first co-ordination. If the project is late, or fails in another way, it will
consideration is to determine who will have the responsibility be the responsibility of the contractor.
for co-ordinating the different works comprising the project. In
the hydropower project example above, probably the The cost and risk of the co-ordination will anyway
employer will have this responsibility. He will have engaged a have to be paid by the employer, and if the contractor is
consultant to design the hydropower plant and to prepare the responsible for the co-ordination then that will be reflected in
tender dossiers for the various contracts. The consultant will his increased contract price.
have prepared co-ordinated designs, as well as an overall time
programme which will show the implementation time for each There are other factors that have an influence on the
contract. The various contractors will undertake to complete division or otherwise of the total project work into several
their works by the specified dates, and if they fail they will have contracts. If finance cannot be arranged to cover the entire
to pay to the employer damages for delay. project, or if the timescale of the project means that the
different parts are spread over considerable time, then
Nevertheless, this arrangement has the disadvantage consideration should be given to division into packages. If the
that the failure of one of the contractors may adversely affect project is very large and there is doubt that a single contractor
and delay the activities of the other contractors. This would be or consortium could manage the whole works, or be
likely to give rise to costly claims from the other contractors, interested in accepting the large risk entailed, it might be
who would have been delayed through no fault of their own. advisable to split it into packages. Similarly, the employer
Such claims would be difficult to resist, making the project might wish to ensure that local contractors are given the
more expensive for the employer. chance to compete for parts of the project.
The alternative is to place the responsibility for co- Sometimes it is felt that having a number of contracts
ordination of the different works on the contractor. This can be may give the employer more control than under a single
done in several ways, for example: by having one main contract for the entire project, and may be more economical
contractor who will have subcontractors; by using a by maximising competitive pricing. However, these
management contractor; or by placing a design-build or a advantages may be offset by the greater co-ordination risk
turnkey contract. By using such single responsibility being borne by the employer.
arrangements, the employer is relieved of the responsibility for
3.4 Budget planning

The Feasibility Studies Report will have provided a first operation and maintenance costs as well as the projected
assessment of the capital cost of the project. It should also revenues from the facility.
have investigated the life-cycle cost of the completed project
and the estimated revenue inflow over time. It should at least Depending on how recent and how reliable the figures
have estimated the annual running costs of the completed in the Feasibility Studies Report are considered to be, the
facility for the first few years of operation. Most financiers employer may decide to have an up-to-date cost estimate
require a bankability report in order for them to assess the prepared. Such cost estimate would form the basis for his
probable financial result of the project, before they will be budgeting of the costs (and expected revenue) from the
prepared to decide on whether or not to provide finance for decision to proceed with the procurement of the project to the
the project. Such a report is normally based on the findings of first few years after completion and commencement of
the Feasibility Studies Report. operation.
Assuming financing has in principle been arranged, If the employer is to be responsible for the design of
perhaps from several sources, it will be the task of the the project, the first period after the decision to proceed will be
employer to prepare a more detailed cash-flow budget taken up with the design and preparation of the design
showing expenditure during the procurement and the works documentation, i.e., the specifications, drawings and technical
implementation periods. The budget should be expanded to schedules. If the contractor is to be responsible for the design,
cover at least the first few years of operation, showing the the employer will have to prepare the performance
27
specifications and probably some degree of preliminary months need to be included in the employers budget. It
design. Thereafter the tendering documents, called the is not unusual for delays to occur and sometimes re-
tender dossier, will have to be prepared by the employer, tendering may be necessary.
and usually the prequalification documents, and the
prequalification process undertaken. All this work will When the contract with the successful tenderer
normally be carried out by the employers consultant. has actually been signed, then the procurement stages
Preparation of the detailed design, including site have been completed and the implementation period
investigations, detailed surveys and similar tasks, and commences.
preparation of the tender dossier, on an employer-
designed project may involve many months of work. It is normal and practicable for the employer to
have separate budget allocations for the design period,
For contractor-designed works, preparation by the tendering period, the manufacturing, construction and
the consultant of the performance specifications and installation period and then for the operation/maintenance
preliminary design may take less time. If the project is to period. For the first three periods the budget will only
be divided into several contracts, then this work will have consist of outgoings, while the operation period may
to be carried out for each contract. The employer will include income from the product output of the facility.
therefore have to include in his budget for the fees of the
consultant for this work. When budgeting for each of these periods it is
important for the employer to allow sufficient funds for
While these preparatory tasks are being carried contingencies. Extra costs may arise and any of the
out by the consultant, the employer may have several periods may have to be extended owing to the
preliminary tasks apart from general planning, such as occurrence of unexpected difficulties and problems.
acquisition of the site, obtaining necessary permissions Economists and administrators in the employers
for the work, liaison with public authorities, and providing organisation and in the lending institutions are often
information to the public. All these tasks require reluctant to allow contingency amounts to be included in
financing, which must be included in the employers the budget. However, engineering projects are prone to
budget estimates. the occurrence of unforeseen difficulties each
engineering project is often a prototype where exactly
While the tender dossier for a contract is being similar previous experience does not exist. Such projects
finalised, the prequalification process can proceed, often involve underground and other work where the
resulting in a list of prequalified contractors. Thereafter the conditions cannot be fully known in advance. They may
dossier can be distributed to these tenderers, and the also be affected by factors such as price escalation,
tender period can commence. Tenders must be returned currency fluctuations, inclement weather, political
within a fixed time, which will depend on the urgency and decisions, changes in legislation, and force majeure,
complexity of the project and on the tender dossier and/or particularly when construction, installation and
any minimum time stipulated by the prospective lenders. commissioning extends over several years.
The time for return of tenders may vary from two Consequently, if the employer wishes his project
days in urgent simple cases to three months or even to proceed without stoppages and delay caused by lack
longer. The tenders must then be examined and of funds in the budget all causing even more expense
evaluated, and followed by award of the contract. it is essential for him to allow, and be permitted to allow,
Expenses for the employers work and the consultants for adequate contingency amounts in his budgets for
fees during this whole period stretching over a number of each of the procurement stages.
3.5 Contract time programming

Project time programming includes not only the each of the separate contracts (if there are more than
overall project programme but also the programme for one) which form a part of the overall project. Each of
28
these time programmes must be integrated into the overall Other issues to be borne in mind in developing
project programme. contract time programmes for individual contracts include
appropriate time allowances for the requisite contractor
It is to be noted that employers often tend to mobilisation. Time will be required for such early activities as:
underestimate the time required for, and sometimes the extent
of, permissions and licences that are required by the - mobilisation and possible importation of site staff and
governmental and local authorities before construction of a labour;
project can commence. An early investigation of exactly what - provision of housing, if necessary, for staff and labour;
is required, and a realistic time allowance in the overall - making arrangements for obtaining local natural materials;
programme, will help avoid subsequent irritating and - manufacture and delivery including possible importation
expensive delays. of construction equipment and materials for the works; and
- obtaining licences, permits and grant of approvals, as
The initial stages of the development of the project required.
strategy will have called for a review of the overall project time
programme. However, as a result of decisions on contract In addition to the time periods required for design,
packaging, clarity of the requirements for licences and manufacture, delivery, construction, and installation, generous
permissions, and other developments, it may be necessary to time periods must be allowed for testing and inspection of the
revisit the review. This further review and, if necessary, works, for commissioning and, as may be required and
adjustment, is to check and ensure that, among other things, appropriate, for trial running of the completed facility.
the simultaneous activities being carried out by two or more
contractors during implementation will not be in conflict, and After take-over there follows the defects notification
are adequately co-ordinated. period(s), i.e., the period within which defects in the work shall
be notified to the contractor for rectification, otherwise known
Decisions with regard to responsibility for detailed as the guarantee period.
design may also affect the earlier review of the project time
programme. If a contractor is to be responsible for detailed
design, he will not commence this work before contract
award. On the other hand, if the employer is to be responsible
Project time programming is described further in Chapter
for the detailed design, he will be able to start long before
4, Section 4.1.
contract award.
3.6 Cost estimates

As development of the project strategy proceeds, the example, from one of the IFIs or MDBs, it is most advisable to
capital cost of the project will be better able to be estimated inform the IFI or MDB at as early a stage as possible that the
than at the time of the preliminary estimates made during the project is under development and will require financing. The IFI
feasibility studies stage, as will the ongoing costs of operation or MDB will certainly require convincing that the project is
and maintenance after completion of the project. viable and perhaps more worthy of financing than other
projects on its waiting list. Nevertheless, as it is often several
The preliminary cost estimates discussed in Section years before funds become available, the earlier the IFI or
2.6.7, and included in the Feasibility Studies Report, should be MDB can put the project on its list the more chance that funds
reviewed, revised and updated perhaps several times as the will become available when required by the project.
project develops as better and more accurate information
becomes available.
The cost estimates for the total project will form the
basis for seeking and obtaining the finance for the project.
If outside financing is to be required for the project, for
29
3.7 Operation and maintenance

An important factor in the development of the
As mentioned in Chapter 2, Section 2.6.6, aspects of
project strategy is whether the employer will himself take
this question are discussed in Appendix 2.6.6.
over the operation and maintenance of the facility when
construction/installation is complete, or whether this is to
be done by the contractor.
3.8 Design responsibility

Another important factor in the development of Of particular importance are thorough land,
the project strategy that must be addressed is whether hydrographic and geotechnical surveys for the project.
the employer will wish to have control over the detailed Such surveys involve specialist contracts.
design development of the project or will prefer the Comprehensive site investigations of high quality over
selected contractor or contractors to carry out this work. the chosen location for the project will enable accurate
planning and designs, and will save money in the long
Unless the employer has the in-house capability run by avoiding redoing of planning and design work that
to undertake the detailed design, it will be necessary for does not suit the actual conditions. The cost of such site
him, if he wishes to retain control over the design investigations will be a small percentage of the total
development, to appoint a separate designer, or project cost, but the potential savings in additional costs,
designers, for this task. An independent designer is able arising from delay due to re-design following unforeseen
to give impartial advice and recommendations to his ground conditions being encountered during
client, i.e., the employer, without being influenced by a construction and installation, are likely to far outweigh
contractors commercial considerations. the initial cost of the investigations.
With a more complex and specialised project For each contract, the party responsible for the
such as a long suspension bridge or a process plant design will develop it during the detailed design stage. If
there may well be a perceived need for separate the employer is responsible for the design (except to the
designers with specialist technical knowledge and extent that contractor-design is specified in the
expertise to be responsible directly to the employer. contract), he will have a greater control over the details.
However, problems may arise from the division of
On the other hand the integration of design and responsibility between the designer and the contractor.
construction under the responsibility of the contractor is The specifications must therefore clearly state which (if
likely to provide the advantages of early collaboration any) parts of the works are to be designed by the
between the design and construction teams, leading to contractor, and should also specify the appropriate
cost and time savings in the overall completion of the criteria with which these parts shall comply.
project.
If the contractor is to be responsible for the
Whoever carries out the designs must comply design, he will wish to develop it in his own interests,
with all applicable planning and construction or building subject to any constraints in the contract. The employer
laws and regulations. The designers will be required to will have less control over the design than he would have
establish suitable specifications and quality, health and if he was responsible for providing it. Under contractor-
safety standards for the construction and installation work. design, the contract price would typically be tendered on
a lump-sum basis, so that any change in cost (increase
The designers should also take into or decrease) to the contractor, resulting from design
consideration possible future needs to add to, alter or development, would not be passed on to the employer.
modify the project, and to allow for de-commissioning
and/or demolition and recycling at the end of the useful Where design is the responsibility of the
working or operational life of the facility. contractor he will wish to economise, in terms of his
30
costs, which may be at the expense of quality. Therefore, it is other consequences of variations should be agreed in
considered essential that the employer has (or procures) advance, so as to minimise disputes.
expert technical services, to ensure that his requirements are
elaborated fully and precisely in the tender dossier, and are In practice, these aspects can make contracts for
achieved in practice. If expertise is unavailable, problems may which the contractor is responsible for design appear
arise, particularly in respect of quality, the need for variations, somewhat inflexible. Contractor-design is typically less
and ultimate responsibility for design. amenable to variations initiated by the employer, compared
with employer-design where the designer is independent of
Designers, particularly if being retained by a the contractor.
contractor on a contractor-designed project, need to check
whether they are required to accept a more onerous and Although contractor-design prevents the employer
implied fitness for purpose risk rather than the normal from having a close involvement in the design process, it does
reasonable skill and care risk. enable him to have the benefits of:
It is to be noted that, under a contract for which the - lump-sum pricing;

contractor is responsible for the design, variations (if any) - the contractors undivided liability for the works (including
should be instructed by the employer in the form of varied design); and
requirements with which the contractors design must comply, - the potential savings (in cost and time) due to a degree of
and not as a varied design instructed by (or on behalf of) the overlap of design and construction.
employer, otherwise responsibility for the design may be
shifted from the contractor onto the employer. The costs and
3.9 Role of the employer during implementation

A factor in the development of the project strategy is under the engineering contract, the engineer will be acting for
to determine to what extent the employer wishes to be the employer.
involved in the implementation phase of the works. Generally,
the employer will always wish to be involved to a greater or If the employer does not wish to be involved with
lesser extent during this phase. In any case, he will be design or construction details, does not envisage that he
involved in such tasks as provision of the site (perhaps would wish to make changes to the works during their
including land acquisition), various approvals, permits and execution and, in particular, wants the contractor to carry out
licenses, and payment to the contractor. the detailed design, then standard forms of contract are
available to meet such needs. These forms of contract are
Greater involvement will be necessary where the particularly convenient where, for example, the employers
employer wishes to keep close control of and monitor resources are limited by the numbers of suitably qualified and
construction work that has to be compatible with, for experienced staff. However, such contracts have the
example, subsequent installation of plant and equipment. If disadvantage that the employer would be unable, without
the engineer is named in the contract, this involvement will negotiating amendments to the terms and conditions of the
occur through him, as in accordance with the FIDIC forms of contract, to instruct changes to or be involved in the design or
contract, whenever carrying out duties or exercising authority execution of the works.
3.10 Role of the contractor during implementation

The contractors role is to execute and complete the contract documents. The conditions of contract establish the
works, for which he has submitted his winning tender, in terms under which he shall operate, and the rights, duties and
accordance with the contract he has signed. He has to do this responsibilities of the parties. The specifications and drawings
in accordance with all the requirements set out in the various describe the technical requirements of the works. If something
31
is not set out in any of the documents forming the employers requirements for the works, i.e., he sets out
contract, the contractor does not have to do it. Thus, if the purpose, scope and/or outline design and/or other
something which the employer wishes to be included in data which he requires, but without detailed
the works has been omitted from the contract specifications or drawings. The contractor will accept the
documents, a variation will have to be instructed and outline design prepared by the employer, and then will
requisite extra payment made to the contractor. elaborate and complete the design to final design stage
to enable him to construct the facility. Usually under such
The contractor (except where specified design-build or turnkey contract arrangements the
otherwise) shall provide all plant and contractors risks and costs associated, not only with foreseen, but
documents specified in the contract, and all labour, also with unforeseeable difficulties, are borne by the
materials, construction equipment, supervision, contractor.
consumables, and other things and services, whether of
a permanent or temporary nature, required to carry out Additional payment and extensions of time may
and complete the works. The contractor prepares the be claimed by the contractor in case of extra work
time programme, which shall comply with the deadlines ordered by the employer and under certain other
set out in the contract, and he is responsible for ensuring circumstances, all in accordance with the conditions of
that he completes the works within the required time. He contract. The contractor has the right to terminate his
is normally responsible for the design and execution of all contract in the event of serious default by the employer.
temporary works, and he is responsible for the
management and safety of all site operations and for his Normally there will be one main contractor
methods of carrying out the works. He is responsible to responsible for the execution of the works, and he would
the extent specified in the contract for the design and have a number of subcontractors undertaking specialist
specification of the works. engineering activities. The subcontractors would be
responsible to the main contractor for workmanship,
The contractor is also responsible for the care of performance and progress. The main contractor would
the works throughout the construction period until the be responsible for all subcontractors works as if he
works are handed over to the employer. He accepts and himself had undertaken them.
complies with instructions from the engineer or, if the
form of contract does not provide for an engineer, from Under many contract forms the employer may
the employer or his authorised representative. Normally choose the subcontractor for a particular task based on
the contractor ensures that all necessary insurances for his knowledge of his specialist skills or for some process
the works, for third-party liability and for his own staff which the employer especially wishes to be
and work force are in place. incorporated. Subcontractors chosen in this way are
known as nominated subcontractors and once they
Under contracts where the employer provides have been accepted by the main contractor become his
the design, the contractor will not be responsible for the subcontractors and are responsible to him. The main
function of the completed facility, provided he has contractor is responsible for the work of nominated
complied with all the requirements of the contract. subcontractors as for his own subcontractors.
Further, if during the construction period he encounters
unforeseeable adverse physical conditions or artificial In major projects it is frequently the case that a
obstructions on the site, he will normally be reimbursed number of contractors form a joint venture or
for any extra costs and granted any extra time required consortium, often by way of a special new company, for
for completion caused by such conditions or the purpose of undertaking the contract as main
obstructions. contractor. In such cases the same principles apply as if
only one company was the main contractor.
Under contracts where the contractor
undertakes the complete design and implementation of
the works, however, the contractor will be responsible for
ensuring that the completed facility is fit for its intended
purpose. In such contracts the employer sets out the
32
3.11 Role of the engineer during implementation

There are only two parties who sign a traditional adhered to, and that the contractor receives the correct
construction contract, the employer and the contractor. payment for his work.
However, by signing the contract these parties agree that a
third party, namely the engineer, shall undertake a number of To enable him to perform his duties, the engineer may
necessary duties to administer the contract and ensure that have to employ at the site a considerable staff of technical
the works are carried out in accordance with it, and to ensure engineers, in several disciplines, and administrative personnel.
that the parties fulfil their respective obligations. All He may also have to employ inspectors to check plant being
instructions and any variations that the employer may wish to manufactured at factories and elsewhere off-site. On his
give or make are directed through the engineer, who will give appointment, the engineer should establish a detailed
appropriate instructions or variations to the contractor. programme and necessary routines to be followed by his
However, the engineer has no authority to change or amend supervision staff.
the contract.
Because the engineer gives consent or approval to
There will be a separate contract, usually called an materials, plant or workmanship, it does not mean that the
agreement, between the employer who appoints the engineer assumes any responsibility for that material, plant or
engineer and the engineer. workmanship the responsibility remains with the contractor
to provide what is agreed in the contract and to abide by the
In some forms of contract, notably contracts for minor contracts terms.
works and for turnkey works, there is no engineer, and his
duties will be carried out by the employer himself, often In design-build types of contract where the
through his employers representative. contractor has carried out the major part of the design, the
engineers duties may be less extensive as regards detailed
In FIDICs traditional construction and plant contracts checking of the contractors work. This is because the
the engineer has two distinct roles. The first is to be the contractor has the responsibility that the completed facility will
extended arm of the employer in that he acts for the work as planned, i.e., is fit for purpose. If it does not function
employer in carrying out his specified duties of administering as planned, it will probably be due to inadequate or incorrect
the contract, supervising the work carried out by the design, but it might also be due to poor materials or
contractor, ensuring that the contractor complies with the workmanship. To the employer it is immaterial as to which of
terms of the contract, and checking that the work in progress these factors has caused the failure, as all of these come
and the completed work is as specified. His second role is to under the responsibility of the contractor.
make a determination which shall be fair and in accordance
with the contract on each matter where the parties are not in Under such contracts it is necessary for the employer,
agreement. A disagreement might concern a technical or a or his consultant, to provide at least a performance
procedural matter, or the rights and obligations of either of the specification or perhaps an outline or preliminary design. This
parties, e.g., a payment to or from either party or a time will be included in the tender dossier in the employers
extension to the contractor. requirements where the employer will also specify all other
requirements he may have for the work. The contractor will
In contracts where the employer (or his consultant) then have to develop and complete the design including
has carried out the design and prepared the technical checking of the employers preliminary design to enable him
specifications and drawings, the engineer also has extensive to construct the works and to take his responsibility that the
duties of checking and testing the ongoing work of the completed facility will be fit for the purposes intended.
contractor. The aim is to ensure as far as is possible that Consequently, after contract signature, the engineer will have
the work executed by the contractor is carried out in to review the contractors designs and proposals for general
accordance with the specifications, i.e., that the plant and conformity with the requirements laid down in the contract.
materials supplied are to the specified standard and quality,
that the workmanship is to the required standard, that the Whereas the engineer might not have to carry out all
facilities are constructed and the plant installed as shown on detailed ongoing checking which is required under an employer-
the drawings and specifications, that the time programme is designed contract, he still has extensive duties, such as:
33
- checking the contractors work for compliance with the The engineers role requires considerable
requirements of the contract; professional knowledge and expertise, and the frequent
- approving tests on completion of the works, and exercise of sound, mature judgement to the highest
sometimes performance tests after completion; ethical standards.
- monitoring construction time programmes;
- issuing necessary variations;
- providing cost monitoring and certification of the
contractors applications for payment; and
- determining on claims for extra payment and/or time
extensions.
3.12 Risk
The construction and engineering industry is a permanent works during construction; defects in
high risk industry. There are serious risks for all parties construction; loss or damage to plant or materials during
involved, and these have to be addressed and suitably transport; delay or disruption due to failure to provide
dealt with by the parties. It is thus fundamental for those drawings or access to the site in time; changes to
involved to understand the concept of risk and to know specifications or other variations.
how to manage properly the many and varied risks
which may be encountered. If a constructed facility has a defect it could have
been the result of a number of circumstances, e.g., poor
Management of the risks, and their allocation design, bad materials, bad workmanship, wrong
between the parties, may be said to have an overriding instructions, adverse weather conditions, force majeure,
importance in any engineering project, and to govern the and war. If the defect is so severe that it cannot be
conditions under which the work is executed, the cost of rectified and the completed facility cannot fulfil its
the work, and often the eventual overall success or intended function, then it may be that the cause is
failure of the project, not only to the employer but also to defective design. Thus, one of the most important
the contractor, the subcontractors and the others considerations regarding risks in an engineering contract
involved. A main purpose of the conditions of contract is is which party shall carry out and be responsible for the
to identify the principles of allocating the risks facing the design, as discussed in Section 3.8 above.
contracting parties.
Before undertaking any major project it is
The risks in achieving completion of a contract recommended that the prospective employer considers
within the originally programmed time and within budget the need to carry out a comprehensive risk analysis.
can be reviewed under two categories: risks which are Such analysis should, as a minimum, include a
unavoidable and risks which could be avoided or qualitative risk analysis, this is the process of assessing
managed by the parties. The Feasibility Studies Report the impact and liklihood of identified risks, and a
should have included an indication of the significant risks quantitative risk analysis, that is the process of
associated with the project. analysing numerically the probability of each risk and its
consequences on project objectives as well as the extent
Unavoidable risks include, among others: of overall project risk. Such analyses should provide the
exceptionally adverse physical and climatic conditions; prospective employer with a suitable basis for his risk
political decisions; unforeseeable shortages caused by management planning, and should be included in the
epidemics or government actions; archaeological Project Strategy Manual (see Section 6.2).
discoveries, force majeure events and contractor insolvency.
Avoidable risks which could be managed

include, among others: failures of temporary or
34
3.12.1 Risk allocation

Every risk must be allocated to one or other of the two employer will choose to bear the risks of unknown or
parties to a contract, i.e., the employer or the contractor. A unforeseeable circumstances.
risk cannot be not allocated to one or other of the parties a
risk cannot be left hanging in the air. An overriding principle Practice over many years and a great many projects
is that the most beneficial distribution of risks is to allocate has shown that a sensible, balanced risk sharing between the
each risk to the party that is best able to deal with and handle contractor and the employer results in the lowest overall total
that particular risk. Such risk distribution will in general lead to cost for completed projects. Balanced risk sharing follows the
the lowest contract price. mentioned principle that the party most suitable to bear a
particular risk is allocated that risk. Thus the contractor takes
This principle, however, is not always easy to follow as all the risks associated with his business of contracting, while
it can be difficult to determine which party can deal best with a the employer takes the risks, inter alia, of the unforeseen and
certain risk. Nevertheless, in all construction and engineering unexpected, i.e., items that are difficult or impossible to price
contracts the contractor certainly is the best placed to deal accurately in advance. Consequently, the employer only pays
with all risks concerned with the planning and execution of the the extra costs incurred when an unforeseeable event or
work, for example, the provision of labour, materials and circumstance actually occurs he does not have to pay what
construction equipment, and all risks that may arise therefrom, the contractor would have allowed for in his price to cover
such as the quality of materials and workmanship, the safety himself for the risk of that event or circumstance eventuating.
of site operations and so on. All risks arising from design are
obviously borne by the party responsible for the design, and
similarly all financing risks are borne by the parties providing
the finance. The employer clearly has to take the risks of
providing the site and seeing that it is available for the
contractor to carry out his work, and usually all risks arising
from information he has collected about the site and other
information contained in the tender dossier. Traditionally, the
3.12.2 Contract price

It is to be noted that risks cost money. The party extra will be payable but the final price will anyway be close
allocated a risk is responsible for the consequences if an to the initial price. A sensible and fair sharing of risks between
undesirable event or circumstance actually occurs as a result the employer and the contractor produces over the long run
of that risk. Therefore, from the employers point of view, the the lowest final contract prices, considerably lower than is the
fewer risks he asks the contractor to bear, the lower the case for either of the extremes mentioned above, i.e.,
contract price will be. reimbursable type versus fixed price, turnkey type.
At the one end of the scale, where a cost-plus or This is the route that FIDIC has traditionally followed,
reimbursable type of contract is used, the employer carries the and there is a balanced risk-sharing between the employer
bulk of the risks, and the initial contract price is low. On such and the contractor in the FIDIC Construction Contract and the
contracts whenever an unexpected undesirable event occurs FIDIC Plant and Design-Build Contract. There is, however, the
the contractor is reimbursed his extra costs by the employer. likelihood that the final price may be higher than the accepted
The result is that the final contract price is often much higher contract amount at contract signature, and that also the time
than the initial price. for completion may be longer than expected. In the FIDIC
EPC/Turnkey Contract, more risk is placed on the contractor,
At the other end of the scale, where a fixed price or to try to ensure a final price and time, fixed from the outset.
turnkey type contract is used, the employer seeks to pass
over as many of the risks as possible to the contractor, and In the latter type of contracts, where the contractor
the initial contract price is high. The aim in this case is that the takes all or most of the responsibility for both design and
employer will not pay any extra although invariably some construction and, consequently, most of the risks, completion
35
tends to be achieved in a timely fashion. This is mainly likely to be more costly than the traditional forms on
due to the closer coordination possible between design account of the additional risks carried by the contractor
and construction teams. However, such contracts are (see Fig. 3.1).
3.13 Insurance
All parties will try to reduce exposure to their will be responsible for the consequences. If a fire
risks as far as is possible. To this end it is normal for the destroyed the works at an early stage in their
parties to arrange for insurance to the extent that such is construction, the damage would be relatively small.
available on reasonable terms. However, if the damage occurred later it would be more
severe, with maximum possible damage immediately
Normally an employer will make it a condition in before hand-over of the completed facility. The works
the tender dossier that the contractor takes out insurance will mean that both the contractor and the
insurance to cover several categories of risk. The reason employer will be covered for the costs of replacing or
is that if an event occurs, for which the contractor is repairing the loss or damage.
responsible, which has expensive consequences, the
contractor may not have the finances to cover them. The It is important to keep in mind that the amount of
contractor and/or the employer could then be the works insurance cover shall be the current
reimbursed from the insurance company. The insurances replacement value. On a contract stretching over several
should be taken out in the names of both the contractor years, the replacement value of a destroyed facility may
and the employer. In effect the cost of the insurances will be considerably larger than the original construction
be met by the employer, as it will be reflected in the price. The insured value should also include the costs of
contractors prices. It is therefore not wise for the demolition, removal of debris, professional fees, and
employer to demand an unreasonable level of insurance profit.
from the contractor.
When setting the amount of the third party
The categories of risk for which an employer insurance cover, it is useful to try to consider what the
usually requires the contractor to insure against are: maximum damage to third parties that a catastrophic
accident could cause. For example, if the contract is for
- loss or damage to the works, plant, materials, and work on an airfield, perhaps the maximum damage might
contractors documents, and to the contractors occur if one of the contractors trucks was crossing the
equipment; runway and was hit by a landing aircraft.
- third party liability for loss, damage, death or bodily
injury to any physical property or any person; On larger projects it is not unusual for the
- liability for injury, sickness, disease, or death to any employer to take out an insurance policy that covers
person employed by the contractor. much of the contractors risks as well as his own. On
very large, multi-contract projects, the employer may
The applicable law may also require the consider taking out one umbrella policy to cover all
contractor to have other insurance cover, for example, parties involved, including designers, contractors and
insurance for the use of motor vehicles is compulsory, subcontractors. Such a policy avoids arguments as to
almost universally. which insurer shall pay if a claim arises, and may be
cheaper than having a number of different insurances.
The insurances are to be in place before the
contractor commences work at the site. The contractor Insurance is a specialised industry. Issues,
is responsible for the care of the works until they are particularly on large multi-contract projects, can become
handed over to the employer on or after completion. complex and, in most cases, it is advisable to refer such
Thus, if a fire or another event causes loss or damage at matters to insurance specialists.
any time during the construction period the contractor
36
Employers risk is above the original accepted tender sum line
Reimbursable type of contract

where the employer carries
nearly all the risks, resulting in
an unknown and uncontrolled
final contract price.
Fixed price type of contract
where the contractor
carries nearly all the risk,
Employer resulting in high tenders,
carries risk but a known final price.
Balanced
Original accepted
risk
tender sum
Contractor
carries risk
Contractors risk is below the original accepted tender sum line
Final contract price
Original tender sum
Reimbursable or actual cost Balanced risk by use of the Fixed price or turnkey type
plus fee type of contract FIDIC Construction or Plant and of contract
Design-Build contracts
Fig. 3.1 Apportioning risk

A sharing of the risks can be a more acceptable solution, resulting in a lower final contract price.
3.14 Prequalification of tenderers

Experience has shown that, particularly for contracts invite to tender. Restricting tendering to a pre-determined
which include contractor-design, prequalification of tenderers number of tenderers encourages the better qualified to tender
is a highly desirable component of the overall strategy, and in the knowledge that they have a reasonable chance of
will save the employer and the lesser qualified prospective success.
tenderers much time and effort. Prequalification enables the
employer to establish in advance the competence of Procedures for the prequalification of prospective
prospective tenderers. He may then select a limited number tenderers may be imposed by applicable laws and regulations,
of companies or joint ventures whom he will subsequently or by the requirements of the financial institutions that will be
37
providing funds for the project. Some institutions A sound advice to employers is: Never
mandate procedures which do not permit any limit on prequalify any contractor to whom you would not wish to
the number of prequalified tenderers. This is often award the contract. The time to exclude unsuitable
unfortunate as the employer may be overwhelmed with contractors is at the prequalification stage, not after
many tenders, most of which would not anyway be tenders have been received.
acceptable, and all these tenderers will have been
involved in considerable unnecessary and wasted work
preparing their tenders. More importantly, the more
attractive tenderers will probably have considered it not
worthwhile to compete against such a large field.
Typically, the employer initiates the

prequalification stage of the project by publishing
advertisements which either:
- contain briefly all necessary information on the project,

and on how applicants should apply for The procedures for prequalification are described in
prequalification; or Chapter 7 Prequalification: Consultancy
- describe how to obtain a document which contains all
Appointments and Chapter 8 Prequalification of
the prequalification information and application
Tenderers: Contracts for Works.
requirements.
3.15 Contract price and payment

FIDIC contracts provide the employer with Irrespective of the selected contract price
flexibility in the selection of the most suitable method of format, the contract price may be subject to adjustment
paying the contractor and the payment provisions. in accordance with the terms of the contract to take
account of events that occur during the execution of the
The principal payment methods and contract works, such as variations, imposition of new taxes, and
price formats are: valid contractual claims.
- Remeasurement The format selected for establishing the contract

The contract price is determined based on the actual price will impact on the level of risk taken by each party,
quantities of work performed. the amounts to be paid, the administration of progress
payments, and the valuation of variations.
- Lump sum
The contract price is the lump-sum amount accepted An important basic difference between
for the performance of the whole works. remeasurement and lump sum is the allocation of risk in
respect of the accuracy of the estimated quantities that
Other formats may also be used such as: are used as a basis for the contract price.
- Reimbursement
The contract price is determined using actual costs as
a basis.
- Target price
The contract price is based on a target amount together
with a shared proportion of the difference between the
target amount and the final amount.
38
3.15.1 Remeasurement
A remeasurement contract is where the contractor is Progress payments during the construction work are
paid for the actual quantities of work performed based on calculated based on the actual quantities of work items carried
tendered rates and prices. This is the traditional approach or out, and at the rates set out in the bill of quantities.
method for much civil engineering and building work.
A contract subject to remeasurement would suit a
With a remeasurement contract each tenderer inserts project where the quantities of work are uncertain, and where
unit rates in a bill of quantities prepared by the employer. The changes to the required works may be made after the
bill of quantities lists descriptions and estimated quantities of contract has been awarded.
work items to be performed. This facilitates receipt by the
employer of tenders priced in comparable formats. The FIDIC Construction Contract is frequently used
where the contract price is determined by remeasurement of
When the contract is signed, based on the tendered quantities actually performed.
price, the amount signed is called the accepted contract
amount. This may not be the actual amount that the employer
will pay, i.e., the contract price, because the amount will be
determined based on a remeasurement of the actual
quantities of work items performed multiplied by the unit rates
tendered by the contractor. A contract subject to
remeasurement must include detailed rules setting out the
method of measurement of the works, based on
measurements taken from the drawings and/or physical
measurements taken on the site.
3.15.2 Lump sum

The essence of a lump-sum contract is that the of variations. The schedule of rates may include a list of lump-
contractor performs and completes the works in return for a sum prices for which payment becomes due on achievement
lump-sum payment. of predefined milestone events.
Based on the proposed contract documents such as The following are some situations for which different
the drawings and specifications included in the employers formats of lump-sum contracts may be appropriate:
requirements, each tenderer will offer a lump-sum price for
completion of the works. On complex projects this may be - Lump-sum tender without any supporting details
impractical and not cost effective as the contract price will This may be suitable for minor works where variations are
include for any inaccuracy in the contractors tender estimates, not anticipated and the works will be completed in a short
and will include amounts for risk and contingencies that may time period, perhaps requiring only one payment to the
not be encountered. contractor.
However, at the time of contract award the employer - Lump-sum tender with schedules of rates prepared by the
and contractor know the amount to be paid for the complete tenderer
works. This may be a significant factor for the financing of the This alternative may be suitable for a larger contract where
project. On the other hand, the employer will not benefit from variations may occur, and stage payments are required, and
any savings that the contractor may be able to make the employer does not wish to prescribe the format and
compared to his tender estimate. content of the schedules of rates.
The lump-sum accepted contract amount is often - Lump-sum tender with schedules of rates prepared by the
broken down into a schedule of rates to facilitate the employer
calculation of progress payments and for use in the valuation This is the same as above but the employer prepares a
39
schedule of rates, which the contractor prices for the The FIDIC Plant and Design-Build Contract and
purpose of the valuation of any variations and for stage the FIDIC EPC/Turnkey Contract are often used where
payments. the contract price is a lump sum.
3.15.3 Reimbursement
Under a reimbursement contract the contractor This payment method has the disadvantage that
performs work as required by the employer and, provided the contractor has little incentive to complete the
the contractor does so in accordance with the contract contract expeditiously: the more material and other
terms, the contractor is reimbursed for all the costs he resources he uses, and the longer he takes to complete
incurs including any agreed amounts for overheads and the work, the greater his costs and, therefore, the greater
profit. The employer benefits from any engineering, the reimbursement he receives and the larger the profit
material or construction cost savings, but carries the risk he makes.
of cost increases. The employer does not know the
actual contract price until the works are complete.
This option would suit a project where the extent

of work cannot be ascertained before the contract is
awarded. It would require a specific set of particular
conditions or procedures to be set out in the contract
governing how the actual costs expended shall be verified.
3.15.4 Target price

At the time of contract award a target price is This option would suit a project where the
determined based on lump-sum prices, remeasurement employer wishes to share the financial risk with the
rates and prices, or anticipated costs. The contract will contractor. It also provides the contractor with incentive
set out specific terms that describe the method by which to work as expeditiously as possible, in order to enhance
the final price is to be calculated. his chances of sharing a positive financial result.
In the event that the final price is less or more

than the target price, the employer and the contractor
will share the financial benefit or burden. Based on an
agreed formula, an amount will be added to or deducted
from the target price in order to determine the contract
price to be paid to the contractor.
3.16 Decision to proceed If it is confirmed at this stage that the project should
go forward, then:
Having considered all aspects of the issues
- the management structure for the procurement of
involved, as discussed above, the basis of the project
the project should be established (see Chapter 4
strategy can be established, and the decision can be
and Section 6.1),
taken of whether or not to proceed with the project.
- decisions upon the appropriate contract type
between employer and contractor for each contract
should be made (see Chapter 5), and
- the principles of the chosen and agreed project
strategy should be carefully recorded in the Project
Strategy Manual (see Section 6.2).
40
Fig. 3.2 Developing a project strategy
The principal contract types are briefly described.
Development Description
Recommendations within The recommendations of the feasibility studies should have taken due account of the size of the
Feasibility Studies Report project and other matters considered in the initial studies.
Further analyses The overall project time programme must allow sufficient time for all the preliminary activities of
studies, arrangements to secure finance, all governmental and legal approvals, tendering and
contract award procedures, manufacture and delivery of plant and materials, design, construction,
installation, testing, commissioning, and handover operations. Reviews of capital and life-cycle costs,
the sources of finance, the economic and social viability, environmental impacts, and sustainability of
the project will be necessary to further advise and satisfy the organisation(s) that will finance the
project.
Consulting engineers and Further to that already obtained earlier at the basic considerations stage, and depending upon the
professional advisers size and complexity of the project and on the resources of the employer, assistance and advice from
consulting engineers and other specialists may be necessary.
Small-scale works These are projects of relatively small value and for which the construction and/or installation time is
short. Larger scale works of a simple and repetitive nature may also be considered to fall into this
category.
Medium-sized works of some Examples are traditional civil works, buildings, infrastructure, and plant and equipment for power,
complexity water, and sewage treatment plants.
Large and complex works Large industrial processing and manufacturing projects such as steel or chemical works or large
scale infrastructure development works are in this category.
Financing Preferred and alternative sources of financing to be studied.
Contract packaging Depending upon the project strategy to be adopted it may be expedient to break up and divide the
project into a number of separate contracts each with its own procurement strategy.
Decisions reached for each The decisions reached from the results of the initial and feasibility studies together with the further
contract within the project from analyses will provide the project strategy to be adopted, prior to decisions on the payment and
studies and analyses contractual terms to be written into each contract
Payment terms for each contract Although one of the four different methods considered here would normally be adopted for a
contract, it is possible to introduce more than one method for parts of the works.
- Remeasurement The work carried out is measured and then priced by multiplying the actual quantities completed by
the unit rates entered in the bill of quantities forming a part of a contract.
- Lump sum Schedules provide prices to be paid to the contractor on completion of a major stage, section or
part of the works. The prices may be adjusted due to variations to the works but are not normally
subject to adjustment for the effects of inflation or deflation in the costs of labour and materials.
- Reimbursement The contractor is paid all the actual costs of labour, materials and plant plus a fixed sum or a
percentage for financing, overheads, management and profit.
- Target price The target price is the anticipated final cost agreed between the employer and contractor at the
commencement of the works. In the event that the final admeasured price is less or more than the
target, the contractor will share the savings with the employer or share the burden of the overrun in
cost, as the case may be, subject to previously agreed formulae.
Decision on the payment plan for As a result of decisions being made on all the issues studied and reviewed under Chapter 2 Basic
each contract within the project Considerations, and Chapter 3 Developing a Project Strategy, the appropriate selection of FIDIC
conditions of contract, as described in Chapter 5, can then be made.
Provides basis for the development of a project strategy
Consulting engineers Conceptual design progressed to preliminary design

and specialist stage
assistance from others
as may be required:
- economists Further analyses of:
- bankers - Overall project time programme
- environmentalists - Estimates of capital and life-cycle costs
- Sources of finance
- Economic and social viability
- Environmental impacts and sustainability
Small-scale Medium-sized works Large and

works of some complexity complex projects
Financing
Contract packaging
Decisions made for each contract within the project with regard to:
- Budget planning
- Contract time programming
- Cost estimates
- Operation and maintenance
- Design responsibility
- Role of employer during implementation
- Role of contractor during implementation
- Role of engineer during implementation
- Risk
- Insurance
- Prequalification of tenderers
leading to:
Contract price and payment
Remeasurement Lump sum Reimbursement Target price
Decision on payment plan for each contract within the project leading to:
Decision to proceed and

Need to study and decide upon contract types (see Chapter 5)
41
4 Management of Procurement
Contents
4.1 Project time programming and planning 4.3 Management of tendering
4.1.1 Contract time programmes 4.4 Employers information to tenderers
4.1.2 Planning considerations 4.4.1 All relevant data
4.1.3 Public procurement regulations 4.4.2 Employers responsibilities
4.2 Project financing schedule 4.5 Corruption
4.1 Project time programming and planning

The importance of project time programming and The programme should also establish all milestones of
planning cannot be overstressed. Normally, a preliminary overall significance in connection with each phase.
programme covering all major activities of the whole project is
prepared in the early stages. As a minimum, this programme will A typical overall project programme is shown on the
comprise the main phases and activities of the project, namely: project development flowchart of Fig. 1.1. It is important to
note that this programme only indicates a sequence of
- project inception and identification activities, and does not indicate the relative time duration of
- initial studies; appointment of the consultant the activities.
- feasibility studies; consideration of alternative solutions
- initial cost estimates and budget
- project strategy and financing
- land acquisition arrangements
- project time programming
- engineering development and preliminary cost estimates
- detailed design, specification and detailed cost estimate
- contract packaging and contract strategy
- tender dossiers preparation
- obtaining grants, permits and licences for construction
- prequalification of tenderers
- preparation of tenders by contractors
- evaluation of tenders
- award of contract(s)
- utilities relocation
- contractor design, manufacture, construction, and installation
- testing and commissioning
- operation and maintenance
- guarantee undertakings.
4.1.1 Contract time programmes

Depending upon its size and complexity and upon the for the all-important preparatory tasks, followed by the
strategy adopted for its implementation, a project may be tendering activities necessary for the procurement of contracts
apportioned into several contracts. Such contracts may be in accordance with good practice prior to contract award and
carried out consecutively, but more often they will be carried commencement of work on-site. It is also important that the
out concurrently or overlapping in time. activities involved in the contract procurement process are
carried out in a systematic and timely manner. They too are,
Sufficient time must be allowed and incorporated in therefore, to be carefully planned.
the overall project time programme, not only for the later
construction and installation activities of the works, but also Experience has shown that problems frequently occur
43
in connection with land acquisition of the site for the - land acquisition and funding (if applicable)
construction of the works and also with the location or - preparation of tender dossier, including:
relocation of utility services. Purchase or expropriation of - design and specifications teams activities
land for the construction of any project, and for the - quantity surveyor teams activities
necessary relocation of services, should be completed - contractual teams activities
before the construction contracts are signed. This may - preparation of prequalification documents
be particularly valid for roads, railways, pipelines and - periods for seeking and gaining documentation
similar projects where the land has to be obtained from a approvals and authorisation, including: legal issues
number of owners. In numerous cases, difficulties in regarding land use and ownership and compliance with
securing the necessary land have led to serious delays, regulations applicable to construction works, transport,
disturbances and consequent extra costs for employers. the natural resources of water and the opening of
quarries
Some employers try to pass to the contractors - prequalification of tenderers
the task and the risk of obtaining the necessary land for - obtaining tenders
the project. This practice is not generally recommended, - opening of tenders
as the employer is usually in the best position to obtain - evaluation of tenders
the land and would anyway have to pay the contractor - award of contract.
the cost of the land. More importantly, the contractor
should not be asked to take the risk of the time that may Sufficient time should be allowed in each time
be required for this task and the associated uncertainties. programme or schedule for the employer to make
Many contractors would, rightfully, refuse to accept such necessary decisions and to give or obtain the required
a requirement. approvals. In particular, financing institutions will generally
require time for scrutiny and approval of tender dossiers.
To ensure compliance with the overall project
time programme, detailed schedules should be made for Further information about content and scope of
implementing the tendering procedure for each contract each of these activities is given in later chapters.
(if more than one) forming part of the project. These
schedules should specify duration and deadlines for at
least the following activities in connection with each
potential contract:
4.1.2 Planning considerations

When preparing the programme for each contract, stretching over a number of months need to be included
it is important to ensure that the sequence of activities is in the employers budget. It is not unusual for delays to
such that all necessary data and information are available occur and sometimes re-tendering may be necessary.
when each activity is to be carried out. This applies in
particular to the order in which the activities involved in the It should also be recalled that the manufacture/
preparation of tender dossiers and in the preparation of construction/implementation period commences once
prequalification documents are carried out. Consideration the contract with the successful tenderer has been
should be given to the extent the tender dossiers should signed and the procurement stages have been
be prepared and agreed, before the prequalification completed.
documents can be finalised and issued. This has to be
decided for each intended contract, since key information
from the tender dossiers will often have to be incorporated
in the prequalification documents in order to give adequate
details to those seeking prequalification.
It should be recalled that the employers work

and the consultants fees during this whole period
44
4.1.3 Public procurement regulations

Many states and international financing organisations - The public procurement procedures include requirements
have strict regulations covering public procurement, and it is relating to:
obligatory that these are complied with. By way of example, a - transparency of information;
party involved in public procurement in the European Union - the publication of information notices drawn up in
(EU) should be aware that: accordance with standard forms;
- time limits for carrying out procurement activities;
- Public procurement in the EU is governed by a number of - alternative types of procurement procedure such as open,
directives and regulations that are implemented in the restricted, negotiated, and competitive dialogue;
national legislation of EU member states. - the criteria for contract award such as the lowest price
- These directives and regulations require detailed procedures only or most economically advantageous tender.
to be followed for the procurement and award of public - Full details of EU procurement regulations should be
contracts whose value equals or exceeds various financial obtained by reference to the EU and member states
thresholds. publications.
4.2 Project financing schedule

Management of the financing of a project involves not have the necessary funds earmarked for the project. The IFIs
only the provision of the necessary funds, but also the flow of have mandatory, and sometimes complicated, regulations that
the funds to pay for the various activities and meet costs at must be strictly followed. These may apply to the agreement
the times when they are required. Therefore, a financing time to make a loan to the project, but also to the actual use of the
schedule should be prepared in conjunction with the project funds provided. If the regulations are not abided by, the IFI will
time programme. normally cancel the loan. The IFI certainly will wish to examine
and approve the financing time schedule.
Sources of financing and the economic analyses
required by the providers of the finance are summarised in The financing time schedule should be prepared at
Sections 2.6.3 and 3.2. the same time and in coordination with the project time
programme, and to the degree of accuracy possible at that
If financing is being provided by the government or time. As the phases of the project progress, the financing
from within the employers organisation, the relevant schedule should be updated and developed to correspond to
application rules can be expected to apply, particularly with the latest information. All the various tasks listed in Section 4.1
regard to approval of the use of the funds and the advance above should be shown and priced on the financing schedule,
notice required before each instalment is needed. It is together with the times when the various amounts will be
important for the employer to follow all the required rules to required. Obviously the costs for the preliminary studies and
ensure that the flow of funds is maintained throughout the the various design and tendering stages will normally be
implementation phases. If a contract under implementation is relatively small compared with the capital outlay during the
suspended owing to the lack of employers funds the manufacturing, construction and installation stages. It is
consequences can be financially very severe for the employer, common for the costs for the consultancy services and other
in addition to the other undesired effects. preliminary works to be financed by one of the smaller IFIs,
whereas financing of the construction and the plant
If financing is to be provided by one or more of the manufacture and installation is financed by one or more of the
International Financing Institutions (IFIs), then it is usually larger IFIs.
necessary to contact the IFI at an early stage, and probably
several years before the funds will be required. This will The amounts to be paid under engineering contracts
provide the IFI with the chance if it is likely to approve are well known for being often subject to changes. These may
financial assistance for the project to put the project onto its be the result of ordered variations, quantities of work being
list of projects worthy of financing. Thus, by the time the more than originally estimated, increases in taxes and costs
project has matured to the implementation stage, the IFI will generally, and many other reasons. Therefore the financing
45
schedule should always contain reasonable allowance make the checked and approved payments to the
for such contingencies. contractors, suppliers, consultants and others concerned.
The employers financial department should

constantly follow up in detail the provision and use of the
funds according to good accounting practices, ensuring
that funds are always available in the correct amounts to
4.3 Management of tendering

On a complex engineering project there may be - receiving and responding to queries from prospective
several contracts to be awarded. There will also be many tenderers as follows:
persons or parties, apart from the general public, who - a question which could have been asked by any
have an interest in the project, and most of these will tenderer
have different specialities and interests. For instance, a (for example, seeking clarification of any aspect of
large employer organisation will have various the tender dossier or of any arrangements on-site, a
departments with different functions, e.g., financial clarification which will apply whoever is awarded the
control, legal matters, operation and maintenance, contract) should be answered as described in the
personnel, and public relations, each with an interest in instructions to tenderers, typically by the tendering
the project but with different specialities and probably coordinator issuing a list of tenderers questions
different priorities and objectives. with the employers answers to all tenderers;
- a question which relates solely to the tenderers
Therefore, particularly on a large and complex particular proposals for carrying out the contract
project, but even on a relatively simple one-contract (for example, regarding the acceptability in principle
project, to manage the tendering procedures effectively of a possible alternative design) should be regarded
and without confusion, it is strongly recommended that as confidential and answered to the enquiring
the employer or the engineer (or the employers tenderer only, the other tenderers not being advised;
representative) appoints one suitable senior and
experienced person to be in charge of the tendering If amendments need to be made to the tender
procedures, i.e., a tendering coordinator. dossier the tendering coordinator should issue to
prospective tenderers an addendum to tender dossier,
If selection of tenderers is to be through a and ensure that each tenderer has formally
prequalification procedure, then the tendering co- acknowledged receipt.
ordinator should be in charge of this procedure as well,
with duties similar to those for the actual tendering Unsuccessful tenderers will retain the copyright
procedure. of their designs. The employer must return their designs,
without copies being retained and without releasing
The tendering coordinator will be mainly details to the successful tenderer, i.e., the contractor.
responsible for:
- despatching the tender dossier to each prospective

tenderer;
- ensuring that each tenderer has formally acknowledged
receipt of the tender dossier;
- managing the site visit, having ensured that tenderers
have received details of the arrangements (the
tendering coordinator should prepare an agenda,
appropriate supplementary briefing information for the
visitors, and a record of the visit); and
46
4.4 Employers information to tenderers

Before a serious offer for an engineering project can risks and foreseeable and unforeseeable problems are to be
be submitted by a tenderer, the tenderer must have adequate borne by the contractor at a fixed contract price. If, for
information and data about the actual site conditions as well example, the risk of sub-surface conditions is allocated to the
as all relevant information about the country or province in contractor, each tenderer needs to assess how difficult the
which the site is situated, such as governing laws and actual conditions may be, both in terms of working in these
regulations, the labour market, the availability of materials, conditions and in terms of their effect on the design of the
transportation facilities, weather conditions, and all other permanent works. If the risk of adverse sub-surface conditions
factors that may affect the work he will be required to carry out is significant, taking into account the type of works, it may be
and the risks he will assume. Clearly, the more factual in the employers interests for the contract to allocate this risk
information that the employer can give to the tenderers the to the employer either by amending the contract conditions or
better. Not only will the individual tenderers avoid the costs by adopting a more equitable form of contract.
and effort of making their own investigations, but
comprehensive information from the employer will mean that Similarly, if other risks which are to be carried by the
all tenderers can submit their tenders on the same basis, contractor under a fixed price type of contract are significant,
which will facilitate comparison and evaluation of the tenders. the employer should carefully consider the consequences of
allocating these risks to the contractor. A fairer allocation of
For many types of project, the employer may have risks under a more equitable form of contract might well yield
carried out relevant investigations. These could include studies a better probability of success.
concerning feasibility (to verify the likelihood of the project
being economically advantageous), and various sub-surface, Conversely, less risk entails less need for pre-contract
hydrological and environmental investigations. Tenderers data. For example, under a contract for the supply of an item
typically need the factual results of all these investigations, so of plant, the supplier will not need data which has no effect on
that they can foresee the conditions in which the works are to the items design. He may need to have details of the
be implemented. environmental and other conditions in which the plant will be
required to operate, but would not normally be interested in
Tenderers for a construction contract need to study knowing the depth of bedrock around the site.
hydrological and sub-surface data, to the extent that this data
is relevant to the particular type of works, in order to plan and
estimate the costs of the excavation and other related works.
In contracts which include a significant element of

contractor-design, tenderers will require additional data on
hydrological, sub-surface and other conditions on the site
(again, to the extent that this data is relevant) in order to
design and determine the details of the works for which costs
are to be estimated. Tenderers for contractor-design works
require as much data as that required by the employers
designer under an employer-designed form of contract. They
may even require more data, because the employers designer
would co-ordinate the pre-tender sub-surface investigations to
suit, for example, his preferred location for each pier of a multi-
span bridge. In contrast, when the employer arranges for pre-
tender investigations in order to obtain the data needed by the
tenderers designers, he may find it difficult to anticipate their
preferred locations.
Tenderers require extensive data for the preparation of

tenders for a type of contract under which the majority of the
47
4.4.1 All relevant data

Under the FIDIC forms of contract the employer - any data which is clearly not relevant to the contractors
is required to make available all relevant data in his performance of obligations under the contract;
possession, which would include; - information which is known to be incorrect and thus not
data (but dubious data should be made available, albeit
- data which he obtained from investigations for the with suitable explanations);
works; and - experts opinions and other non-factual interpretations,
- data obtained by others, including data which may be which are not data;
publicly available but is in the employers possession. - information which is neither data on sub-surface
conditions nor data on hydrological conditions noting that:
The employer should make as much information - sub-surface conditions
as possible available to tenderers, although it would be are the conditions below the surface, including those
unwise for him to state that no other information was within a body of water and those below the river-bed
available. For a successful contract, it is in both parties or sea-bed;
interests for all of the tenderers and (subsequently) both - hydrological conditions
of the parties to have as much factual information, means the flows of water, including those in rivers
relevant to the site and works, as is available. However, and the underwater currents in open seas, and
the employers obligation is only to make all relevant - environmental aspects
data ......... on sub-surface and hydrological conditions include such matters as the (known or suspected)
available. The employer does not have to (although he presence of pollutants.
may) make available:
4.4.2 Employers responsibilities

Under the FIDIC forms of contract the employer important or unexpected data becomes available
asserts that all his relevant data have been made thereafter, such data must be made available, and it may
available to the tenderers, but he also asserts that he be appropriate to consider postponing the date for
shall similarly make available to the contractor any data submission of tenders.
which thereafter comes into his possession. Failure by
the employer in this respect may have significant Under most contracts the contractors price is
consequences under the contract in general and, in deemed to have been based on the information given to
particular, under the clauses dealing with the extent to him by the employer before contract signature as well as
which conditions will be regarded as being what the tenderer could reasonably have found out
unforeseeable. In some countries, negligent or during the tendering period, including at the site visit.
intentional withholding of data may entitle the contractor Therefore, if the employers information was inadequate
to termination, and consequential personal injury may or incorrect, the result may be at least a claim from the
result in civil and/or criminal liability. In any case, contractor for extra payment and/or extra time.
withholding of significant data may result in the
contractor making a claim for misrepresentation. However, the contractor is responsible for the
interpretation of the site data, and for obtaining other
The employer should endeavour to ensure that necessary information, so far as was practicable. The
he obtains all his data as early as possible: preferably practicality of obtaining information will clearly depend
before the tender dossier is issued to prospective upon the time allowed for the preparation of the tender,
tenderers, so that they can study the data before they and for aspects such as the accessibility of the site. For
visit the site for the first time. Under the FIDIC forms of most employer-design contracts, the contractor will be
contract the employer makes data available at the latest deemed to have obtained all other necessary information
by 28 days before the tenders must be submitted, so to the extent which was practicable, which clearly
that the tenderers have this time within which to review depends upon the cost and time necessary to obtain the
the final items of data and finalise their tenders. If information, within the prescribed tendering period.
48
Under design-build and turnkey type contracts, the work and his risks. For example, if the borehole data shows
employers information is equally important, but often the dry boreholes, the employer should not then inform the
contractor is required, before or sometimes after contract tenderers that the work will be carried out in the dry. If he
signature, to verify the data given by the employer, and take does so, then immediately water from whatever source is
over the responsibility for it, with the employer only being liable encountered, the contractor can be expected to consider
to the limited extent specified in the contract. making a claim.
The employer should therefore provide as much useful

information to tenderers as possible. However, the information
should be factual. It should be the actual borehole reports, the
actual weather statistics, the actual records of river flows, etc.
It should not contain conclusions reached by the employer or
his staff on that data. It is up to the tenderers to come to their
own conclusions as to what the data mean to the employers
4.5 Corruption
Corruption is a serious problem in certain parts of the For the purposes of this Sub-Clause:
world. Such corruption may be limited, or may even be
widespread, and it is known that certain countries accept a corrupt practice means the offering, giving, receiving or
some forms of corruption as part of normal business practice. soliciting of any thing of value to influence the action of a
The construction industry unfortunately provides a number of public official in the procurement process or in the
opportunities for individuals or companies to believe they can contract execution.
achieve an unfair advantage by resorting to corrupt dealings.
b fraudulent practice means a misrepresentation of facts in
FIDIC is totally opposed to corruption in all its forms, order to influence a procurement process or the execution
which it believes is a major factor in sabotaging the good of the contract to the detriment of the employer, and
efforts of those interested in relieving poverty and other ills in includes collusive practice among tenderers (prior to or
many developing countries. In all countries where it is present after tender submission) designed to establish tender
it provides unfair gain albeit sometimes short-lived to those prices at artificial non-competitive levels and to deprive
involved while placing unnecessary financial burdens on the the employer of the benefits of free and open competition.
law-abiding citizens.
c collusive practice means a scheme or arrangement
Tendering procedures promoted by FIDIC are devised between two or more tenderers, with or without the
to emphasise transparency at all stages of the process, with knowledge of the employer, designed to establish tender
the aim of eliminating corruption, fraud and collusion, and the prices at artificial, non-competitive levels.
FIDIC forms of contract contain strict undertakings by the
parties to counteract such practices. The FIDIC forms contain d coercive practice means harming or threatening to harm,
the following or similar strict clauses in relation to the directly or indirectly, persons or their property to influence
avoidance of corruption: their participation in the procurement process or affect the
execution of a contract.
If the employer determines that the contractor has engaged
in corrupt, fraudulent, collusive or coercive practices, in
competing for or in executing the contract, then the
Employer may, after giving 14 days notice to the contractor,
terminate the contractors employment under the contract
and expel him from the site, and the provisions of Clause 15
(Termination by Employer) shall apply as if such expulsion
had been made under Sub-Clause 15.2.
49
5 Contract Types
Contents
5.1 General Appendix
5.2 FIDIC Client/Consultant Model Services 5.9.3 Purchasing, expediting and inspection
Agreement 5.10 Alliance contracts, framework agreements and
5.3 Minor works contracts partnering
5.4 Construction contracts 5.10.1 Alliance contracts
5.5 Plant and design-build contracts 5.10.2 Framework agreements
5.5.1 Electrical and mechanical plant designed 5.10.3 Partnering
by the contractor 5.11 The appropriate FIDIC form of contract
5.5.2 Building and engineering works designed
by the contractor Figures (*typical management structures)
Appendices Fig. 5.1 Contract types
5.5.1 Preparation of the employers Fig. 5.2 Minor works*
requirements Fig. 5.3 Construction contracts*
5.5.2 Performance-Based Procurement (PBP) Fig. 5.4 Electrical and mechanical plant
5.6 Engineer-procure-construct/turnkey contracts contracts and contractor-designed
5.6.1 Employer financed construction contracts*
5.6.2 Contractor financed BOT type projects Fig. 5.5 EPC/turnkey contracts*
Appendix Fig. 5.6 Privately financed EPC/turnkey
5.6.2 Privately Financed Projects (PFPs) and contracts*
Public-Private Partnerships (PPPs) Fig. 5.7 Design, build and operate contracts*
5.7 Design, build and operate contracts Fig. 5.8 Construction management contracts*
5.8 Dredging and reclamation works contracts Fig. 5.9 Management contracting contracts*
5.9 Other contract types Fig. 5.10 Which FIDIC conditions of contract to
5.9.1 Construction management contracts use
5.9.2 Management contracting contracts Table
5.9.3 Supply contracts Table 5.1 Features of contract types
5.1 General
Standardisation, both in technical and administrative training of personnel in contract management and
matters, is desirable for the satisfactory execution of many administration, reducing the need for them having to work with
types of commercial projects. Major projects, whether they are ever-changing contract conditions.
predominantly building, civil engineering, chemical
engineering, electrical engineering, mechanical engineering, or The scope of the project and the aims and wishes of
any interlocking combination, are often technically complex. the employer will influence the management structure to be
With the resulting complexity of contractual relationships, it is developed for the project and the contractual relationships to
becoming increasingly important for them to be based upon a be formed between the parties.
form of contract with which the contracting parties and
financial institutions are familiar. Different contractual relationships will require different
conditions of contract. It is also to be noted that within a larger
In the majority of cases, the contracting parties will project there is likely to be more than one type of contract
react favourably to standard forms of contract, which should adopted.
lessen the likelihood of unsatisfactory performance, increased
costs and disputes. Where the contract is to be based on Recommendations for the use of particular FIDIC
standard conditions, tenderers should not need to make standard forms for the conditions of contract suitable for the
financial provision for unfamiliar contract conditions. The various contract types that may be applicable within each
widespread use of standard conditions also facilitates the project are given in the following, together with descriptions of
51
5 Contract Types
some of the more usual wishes of employers and the - FIDIC Conditions of Contract for EPC/Turnkey Projects
likely effect of such wishes on the final contract prices. In (Silver Book or EPCT, 1st Edition 1999), which may be
addition, typical management structures, appropriate to suitable, where:
particular contractual relationships and to the employers - a higher degree of certainty of final price and time is
requirements, are described and illustrated with required, and
appropriate charts. - the contractor takes total responsibility for the design
and execution of the project, with little involvement of
FIDIC has published standard forms of contract the employer.
since the 1950s, and they have colloquially been known - FIDIC Conditions of Contract for Design, Build and
according to the colour of their cover, notably the 1987 Operate Projects (Gold Book or DBO, 1st Edition
Red Book for construction works and the 1992 Yellow 2008), recommended for the provision of electrical
Book for electrical and mechanical works. FIDICs current and/or mechanical plant or systems, and for building or
range of conditions of contract includes: engineering works designed by the contractor where
the contractor is required to operate and maintain the
- FIDIC Client/Consultant Model Services Agreement completed facilities for a number of years.
(White Book, 4th Edition 2006), recommended for - FIDIC Conditions of Contract for Dredging and
general use for the purposes of pre-investment and Reclamation Works (2006 Blue- Green Book or
feasibility studies, designs and administration of Dredgers Contract, 1st Edition 2006).
construction and project management, where
proposals for such services are invited from The FIDIC Contracts Guide (1st Edition, 2000)
consultants. and the FIDIC DBO Contract Guide (1st Edition, 2011)
- FIDIC Short Form of Contract (Green Book, 1st Edition give comprehensive guidance on the use of the three
1999), recommended for building or engineering works major forms of contract the Construction, Plant and
of relatively small capital value and/or short Design-Build and EPCT contracts and on the Design-
construction time. Depending upon the type of work Build-Operate Contract, respectively.
and the circumstances, this form of contract may also
be suitable for contracts of greater value, particularly for
relatively simple or repetitive work.
- FIDIC Conditions of Contract for Construction (1999
Red Book or CONS, 1st Edition 1999), recommended Selection of the appropriate form of contract is critical
for building or engineering works designed by the to the success of a project. However, the appropriate
employer or by his representative, the engineer. form cannot be selected until certain decisions have
However, the works may include some elements of been made on project procurement aspects.
contractor-designed civil, mechanical, electrical and/or While the decision making process is illustrated in
construction works. Table 5.1 Features of contract types, and the charts
- FIDIC Conditions of Contract for Plant and Design-Build of Fig. 5.1 Contract types, the important
(1999 Yellow Book or P&DB, 1st Edition 1999),
procurement aspects are described in the general
recommended for the provision of electrical and/or
guidance on the selection of the appropriate form, as
mechanical plant, and for building or engineering works
set out in Sections 5.2 to 5.11 below.
designed by the contractor.
5.2 FIDIC Client/Consultant Model Services Agreement

FIDIC has developed a standard form of project, a contractor wishing to have design work carried
agreement for use when an entity wishes to retain the out, an IFI, or any other organisation requiring consulting
services of a consultant to carry out specific services of a services or advice. Under such arrangements that
consulting or advisory nature. The entity may be an organisation is referred to as the client and it will sign an
employer or developer wishing to develop or monitor a agreement with the consultant.
52
5 Contract Types
FIDICs standard form is called the FIDIC intended that where applicable the general conditions shall be
Client/Consultant Model Services Agreement (White Book), linked together with the particular conditions which must be
currently 4th Edition, 2006. It is recommended for general use specially drafted to suit each individual agreement and type of
for the purposes of pre-investment and feasibility studies, service required.
designs and administration of construction and project
management, both for employer-led design teams, and for FIDIC publishes a White Book Guide which includes
contractor-led design teams under design and build comments on clauses in the model services agreement and
procurement, where proposals for such services are invited on notes which may be helpful in the preparation of the
an international basis. It is equally adaptable for national necessary appendices to the White Book, namely: A Scope
agreements. of Services; B Personnel, Equipment, Facilities and Services
of Others to be Provided by the Client; C Remuneration and
The FIDIC Client/Consultant Model Services Payment; and D Time Schedule for Services.
Agreement represents the basic form of an agreement of
appointment between a client and his consultant. It is FIDIC also publishes a standard form of Joint Venture
intended to cover the minimum requirements of a typical (Consortium) Agreement for use between consultants wishing
appointment contract. Additional or amended clauses may be to undertake a project for a client under a joint venture
required to address particular project and commercial issues arrangement, and a standard form of Sub-Consultancy
between the parties. Agreement for a consultant wishing to employ a sub-
consultant for a particular commission.
As for the other FIDIC contracts and agreements, the
clauses which are considered to be of general application
have been grouped together in the general conditions. It is
5.3 Minor works contracts

A minor works form of contract was originally and without the need for specialist sub-contracts. However, it
developed by FIDIC for projects with capital value under US$ has been shown that the form can be suitable for certain
500,000, a construction time of not more than six months, larger construction projects and for longer construction time.
EMPLOYER
Use FIDIC Short Form of

EMPLOYERS Contract
REPRESENTATIVE (Green Book)
Minor works are considered to

CONTRACT be those of relatively small
DOCUMENTATION capital value, or of short
duration or are relatively simple
or repetitive in nature, without
the need for specialist
subcontractors.
MINOR WORKS
Note: the employer may
CONTRACTOR
appoint an employers
representative to act for the
Fig. 5.2 Minor works: typical management structure employer.
53
Fig. 5.1 Contract types: flowchart notes
The principal contract types are briefly described.
Contract Description
Minor Works Works of relatively small value and for which the construction and/or installation time is short. Larger
scale works of a simple and repetitive nature may also be considered to fall into this category. For such
contracts FIDIC recommends that the FIDIC Short Form of Contract (Green Book) is used.
Construction Nearly all design for traditional contracts for civil engineering infrastructure and buildings is done by the
(with engineer) employer or his retained consulting engineer. The engineer administers the contract, monitors the
construction work and certifies payment by measurement of work done valued at the tendered unit
rates, schedules of prices or lump sums. The employer is kept fully informed and can vary the works
through the engineer. For such contracts FIDIC recommends the use of the FIDIC Conditions of
Contract for Construction for Building and Engineering Works designed by the Employer (1999 Red
Book).
Plant and The majority of the design for traditional contracts for electrical and mechanical plant, including
Design-Build erection on-site, is done by the contractor to meet the outline or performance specifications prepared
(with engineer) by the employer.
Similarly, in design-build contracts the contractor will carry out the majority of the design, including
design for infrastructure and other works as required, to fulfil outline or performance specifications
prepared by the employer.
The engineer administers the contract, monitors manufacture, delivery and erection on-site or
construction and certifies payment normally according to achieved milestones on a lump sum basis.
The employer is kept fully informed and can vary the works through the engineer. For such contracts
FIDIC recommends the use of the FIDIC Conditions of Contract for Plant and Design-Build for
Electrical and Mechanical Plant, and for Building and Engineering Works, designed by the Contractor
(1999 Yellow Book).
Engineer, Procure, For large projects where the employer:

Construct/Turnkey - wishes the contractor to take total responsibility for design and construction and to hand over a
(with employers completed facility at the turn of a key;
representative) - does not wish to be involved in the day-to-day progress of the work;
- is prepared for the project to be organised on a strictly two party approach, i.e., without an engineer
being named in the contract;
and, in particular, is prepared to pay the contractor more for carrying the risks associated with a high
certainty of final price and time, the FIDIC Conditions of Contract for EPC/Turnkey Projects (Silver
Book) can be used. This form of contract is not suitable in situations where there may be high
unforeseeable risk.
Design, Build and A variant to the design-build contract requires the contractor, upon completion of the works, to be
Operate responsible for the operation of the facility for a pre-determined period. The engineer administers the
(with employers contract, monitors manufacture, delivery and erection on-site, construction and subsequent operation
representative) and will certify payment due in accordance with the contract. The employer is kept fully informed and
can vary the works through the employers representative. For such contracts the use of the FIDIC
Conditions of Contract for Design, Build and Operate Projects (Gold Book), which incorporates the
requirement for operation by the contractor, is recommended.
The tender documents should be prepared by suitably qualified engineers who are familiar with
technical aspects of the operational works.
Dredging and For dredging, reclamation and ancillary construction works it is assumed that the contractor will not be
Reclamation responsible for extensive design. Realistic and balanced risk allocations need to be embodied in the
(with engineer) terms of the contract for application in the event of weather and adverse subsurface conditions
causing delay and creating additional costs. For such contracts, FIDIC recommends the use of the
FIDIC Form of Contract for Dredging and Reclamation Works (Blue-Green Book).
It is to be noted that the contractors normal defect rectification responsibilities are excluded from this
form of contract.
Note: As indicated in Fig. 2.1 - Basic considerations and its accompanying notes, numerous factors are involved in the
process to decide upon the form of contract under which the work is to be carried out.
54
Fig. 5.1 Contract types
After establishing the basis of the project strategy

(see Chapter 3) the next step is
to review and decide upon contract types
Client/Consultant Minor works contracts Construction contracts Plant and design-build

agreement (option for engineer) (with engineer) contracts (with engineer)
Consultant Employer or Employer design Contractor design,

provides contractor design and manufacture, erect & install or
services and contractor construct contractor construct contractor design & construct
USE USE USE USE

FIDIC Client/Consultant FIDIC Short Form FIDIC CONS Contract FIDIC P&DB Contract
Model Services Agreement Green Book 1999 Red Book 1999 Yellow Book
2006 White Book
Decision on contract type
Finalise project strategy

and
formulate the Project Strategy Manual
(see Chapter 3)
Engineer-Procure-Construct (EPC)/ Design-Build-Operate contracts Dredging and Reclamation
turnkey contracts (no engineer) (with employers representative) contracts (with engineer)
Contractor design, manufacture, Contractor design, Employer or contractor design

construct build and and
and erect or install operate contractor construct
USE USE USE

FIDIC EPCT Contract FIDIC DBO Contract Dredgers Contract
Silver Book Gold Book Blue-Green Book
55
5 Contract Types
The form is regularly used in suitable cases for contracts - the employer may wish to order variations to the
with value of up to US$ 10,000,000. For simple repetitive works;
work there may be no upper limit to the contract sum. - the employer may wish to appoint an individual or firm,
as his representative, to carry out certain duties; and
Regarding the duration of the construction time, - the employer has optional choices for valuation and
the limiting factor is the time when the contract sum can payment methods.
remain fixed, i.e., without allowance for escalation and
other changes in costs. Usually contractors will agree to If these arrangements suit the employers
keep prices firm for up to 12 months, and sometimes requirements, FIDIC recommends using the FIDIC Short
even up to 18 months, but thereafter some provision for Form of Contract (Green Book).
price escalation should be included in the contract.
The FIDIC Short Form of Contract has been
Under the usual arrangements for this type of prepared with short sentences and simple
project: straightforward language, and is suitable when the work
is uncomplicated, and the parties do not wish the
- the employer provides the finance; complexities of the forms of contract for major works.
- the works comprise construction but may include, or The Short Form is only 10 pages in length, and the
wholly comprise, electrical, mechanical or other simple language assists easy translation.
engineering work;
- the contractor constructs the works irrespective of A typical management structure for a Minor
whether the design is provided by the employer or by Works contract is shown on Fig. 5.2.
his representative (if any) or by the contractor;
5.4 Construction contracts

Procurement of construction works has for many necessary for contractors to submit their tenders. The
years principally taken place according to a standard tender dossier should generally comprise the following
pattern. Following the earlier stages of the project, such principal documents:
as pre-feasibility and feasibility studies, the body
responsible for the development of the project, i.e., the - instructions to tenderers (how and when to submit the
owner or employer, will engage a consultant to develop tender, etc);
conceptual or preliminary designs, perhaps illustrating - information to tenderers (information about the site,
various alternatives. After decision on the preferred local conditions, etc.);
solution, the consultant will then prepare the final design - general conditions of contract (standard form for all
of the project. Normally, the final design prepared by the construction work);
consultant will be a comprehensive set of drawings and - particular conditions of contract (applying to the
technical specifications which will show and describe in specific project);
detail exactly what works are required, what quality - technical specifications (for materials, workmanship,
standards shall apply to the various materials and etc.);
workmanship, and often precisely the methods by which - bills of quantities (for measurement and payment of
the various parts of the work shall be carried out. work done);
- various forms (of tender, agreement, securities, etc.);
The consultant prepares the tender dossier - drawings (showing where and what physical parts are
which shall contain, not only the drawings, technical to be constructed).
specifications and other documents describing the
technical requirements, but also the conditions of In parallel with the preparation of the tender
contract setting out the legal and commercial dossier, the employer or his consultant should give
requirements for the execution, i.e., the rules of the notice of the project in suitable publications and then list
game, the bill of quantities and the other documents those contractors expressing the wish to participate in
56
5 Contract Types
tendering for the works. If the work is of a high or complicated independent committee be established for this purpose, and
standard or involves specialised competence requiring an to oversee the tender evaluation process, the actual evaluation
experienced contractor, then a prequalification procedure may often being carried out by the employers consultant.
be necessary. The purpose of prequalification is to ensure that
only contractors who are capable of satisfactorily carrying out Criteria to be used in the evaluation of tenders shall be
the work, and are financially stable, shall be permitted to set out in the tender dossier, and these will be applied by the
submit a tender (see Chapter 8 Prequalification of Tenderers: evaluation committee. The tenders will first be checked for
Contracts for Works). compliance, both technical and contractual, with what is set
out in the tender dossier. The complying tenders will then be
The tender dossier will then be distributed to those evaluated, and as a rule the contractor submitting the lowest
contractors wishing to participate or, in the case of evaluated tender will be awarded the contract for construction
prequalification, to those who are prequalified, and they will be of the works.
invited to submit their tenders. In applicable cases a site visit
will be arranged so that all tenderers can familiarise When the contract has been awarded and the work
themselves with the actual local conditions. Allowance shall be carried out, payment is made to the contractor on the basis of
made for tenderers wishing to ask questions or for completed work. At the end of every month the work
clarifications, and strict procedures shall apply to the way completed is measured, and then payment is calculated by
answers shall be given. multiplying the units of each work item satisfactorily completed
by the unit rate stated in the relevant bill of quantities. This type
Strict rules also apply to the conduct of the tendering of contract is often referred to as a remeasured work contract.
procedure and the opening of tenders and their subsequent Thus payment can also be said to be made on inputs, i.e., the
evaluation. It is advisable, and mandated by the IFIs, that an contractor is paid against the inputs he delivers.
Use FIDIC EMPLOYER Use FIDIC

Client/Consultant Model Conditions of Contract for
Services Agreement Construction
(White Book) (1999 Red Book)
CONTRACT CONTRACT
DOCUMENTATION DOCUMENTATION
DESIGNER/ WORKS
Functional link
ENGINEER CONTRACTOR
Use
FIDIC
Construction
Subcontract SUBCONTRACT SUBCONTRACT SUBCONTRACT
DOCUMENTATION DOCUMENTATION DOCUMENTATION
SUBCONTRACTOR SUBCONTRACTOR SUBCONTRACTOR

For building and engineering
works designed by the
employer. Sometimes called
Fig. 5.3 Construction contracts: typical management structure design-bid-build contracts.
57
5 Contract Types
This procedure for the procurement and Under the usual arrangements for this type of
engagement of the contractor for the execution of project:
engineering works, usually works of civil engineering
construction, e.g., infrastructure, buildings, hydropower - the employer:
plants, roads, railways, tunnels, and bridges, has been - provides the finance;
the norm for many decades both for national and - appoints a consulting engineer to carry out the
international projects. It is applicable to civil works design work and prepare the bill of quantities;
construction projects of all sizes, from medium to very - appoints the engineer to administer the contract,
large and complicated projects, where the employer (or monitor the construction works and certify payment.
his consultant) has prepared the design, or most of the - the engineer (on behalf of the employer) may initiate
design. variations;
- the employer wishes to be kept fully informed;
FIDICs recommended procedure for obtaining - payment to the contractor will be according to a bill of
tenders for such a construction project is set out in quantities or lump sums for approved work done;
Chapter 11 Obtaining Tenders: Construction - the employer seeks to ensure an equitable sharing of
Contracts. construction risks in the contractual arrangements,
e.g., he takes the risk of unexpected adverse ground
A typical management structure for a traditional conditions; and
construction project is shown in Fig. 5.3. - owing to the decision to carry a part of the construction
risk, the employer accepts that the quantities are
Larger and more complex than minor works estimated and overruns may occur to the original
projects, traditional construction projects involve civil contract sum and, possibly, the completion date.
engineering and building works required by an employer
who, unless he carries out the design in-house, would If these arrangements suit the employers
normally commission a consulting engineer to design the requirements, FIDIC recommends using the FIDIC
works. It is to be noted that traditional construction Conditions of Contract for Construction for Building and
projects often also include some elements of contractor- Engineering Works designed by the Employer, commonly
designed civil, electrical or mechanical engineering work. known as CONS or the 1999 Red Book.
5.5 Plant and design-build contracts

5.5.1 Electrical and mechanical plant designed by the contractor
Contracts for the supply and installation of plant features can be especially noted:
and equipment, as opposed to civil works construction,
involve the design, manufacture, supply, installation, and - much of the plant is manufactured off-site at a factory,
commissioning of specially engineered plant and whereas for construction work the execution of the
equipment, such as turbines, generators, boilers, work is for the most part carried out at site;
switchyards, pumping stations, telecommunications - the detailed design of the plant is the responsibility of
equipment, process and treatment plants, and the like the contractor, with usually only concept or preliminary
for power, water, sewerage, telecommunication, and design being done by the employer;
similar projects. - the contractor is usually associated with a plant
manufacturer or supplier alone or associated with a civil
Procurement of works covering the supply and works contractor;
installation of plant and equipment has traditionally - payment is mainly on a schedule of payments based
closely followed the same procedure as for construction on achievement of predefined measurable progress or
works described above, however with certain significant milestones; and
differences. The differences are due to the disparity - testing and commissioning are more comprehensive
between the two types of projects, of which the following and stringent on a plant project.
58
5 Contract Types
With regard to the design of the plant and/or milestone is achieved, for example, 20% of the contract sum
equipment, this is the responsibility of the contractor, who will as advance on contract signature, 30% on completion of
design his plant or equipment to fulfil outline or performance manufacture of the plant, 10% on shipping, 10% on arrival at
specifications set by the employer or his consultant, normally site, 20% after installation and successful commissioning, and
contained in the document entitled employers requirements. the final 10% after compliant performance testing.
Thus, when the consultant prepares the tender The procurement process, while still in accordance with
dossier he will usually only include drawings to show the the usual principles of international competitive bidding, may be
location, size, connection points, interfaces, and limits of carried out according to two distinct procedures. The first is
delivery of the plant or equipment and such other information single-stage tendering and the second is two-stage tendering.
as may be necessary for the contractor, but no detailed design
of the plant or equipment itself. Single-stage tendering
Notes concerning the preparation of the employers The procedure for single-stage tendering for plant and
requirements are given in Appendix 5.5.1. equipment is very similar to that for construction works
described above. The consultant prepares the tender dossier
The essential differences indicated above often require for which an output or a performance specification is included
that the total payment will be divided into a number of lump (which contains the employers requirements, but does not
sums, corresponding to completion of the various important include the detail design of the plant) which is distributed to
stages of the work. Payment will then be made when each interested contractors/suppliers.
EMPLOYER
Use FIDIC Use FIDIC
Client/Consultant Model Conditions of Contract for
Services Agreement Plant and Design-Build
(White Book) (1999 Yellow Book)
CONTRACT CONTRACT
ENGINEER Functional link CONTRACTOR
SUBCONTRACT SUBCONTRACT SUBCONTRACT

SUBCONTRACTOR SUBCONTRACTOR SUBCONTRACTOR

For electrical and mechanical
plant, and for engineering
works, designed by the
Fig. 5.4 Electrical and mechanical plant contracts and contractor-designed construction contractor. Sometimes called
contracts: typical management structure design-build contracts.
59
5 Contract Types
Usually the tenderers will have been chosen contracts should be awarded to the qualified bidder
through the prequalification process, but in cases where who offers the bid offering the lowest evaluated cost
there is only a limited number of possible to the Borrower [2].
contractors/suppliers the invitation to tender may be 5 For turnkey contracts or contracts for large complex
sent directly to all of them. plants or works of a special nature or for procurement
of equipment which is subject to rapid technological
When the tenders are received they are advances, The World Bank, the European Bank for
evaluated by the employer or his consultant according to Reconstruction and Development and other IFIs allow
the evaluation criteria contained in the tender dossier. As a two-stage bidding process [3], as follows:
before, invariably the lowest evaluated tender or the - In the first stage the employer provides a conceptual
one considered to be the economically most design or performance specification to which
advantageous tender is the successful one. When the bidders provide unpriced technical proposals. These
contract has been awarded, payment is made to the technical proposals may include a list of any
contractor on a lump-sum basis on the successful deviations to the technical and commercial
completion of each stated milestone. This single-stage conditions in the employers documents or any
tendering procedure for plant and equipment alternative technical solutions (provided that such
procurement has been the norm for many decades. deviations or alternative solutions do not change the
basic objectives of the project) [4].
Two-stage tendering - Following evaluation by the employer of the first-
stage bids, the employer may conduct a clarification
The second procedure, the two-stage tendering meeting with each qualified bidder [5] where the
procedure, has been introduced mainly for the purpose whole bid is reviewed. Any required modifications
of allowing contractors/suppliers more chance to offer will be noted in a memorandum.
their own solutions to the employers requirements. The - The second-stage bid [6] will consist of an updated
reasons for and essential features of the two-stage technical bid incorporating all required modifications,
tender process can be expressed as follows: plus the commercial bid.
- The employer will check that all modifications and
1 Most systems or equipment requirements can be conditions have been complied with and then award
solved in more than one way [1]. the contract to the lowest evaluated bidder.
2 By employers specifying only the required function,
i.e., functional or performance specifications, The two-stage tendering process is acceptable
contractors and suppliers are free to present their and standard practice on international projects for the
own solutions. The employer can therefore benefit by supply and installation of large and/or complex plants
choosing the most beneficial solution. and/or equipment [7].
3 However it is not usually easy to compare different
solutions and determine which is the most beneficial. The two-stage tendering process lends itself to
4 The World Bank and other International Financing procurement based on performance-type specifications.
Institutions have as their procurement policy that A useful paper setting out the advantages and
References
[1] Consider various methods for: water or sewage treatment plants; harbour handling equipment; railway rolling stock;
IT equipment; manufacturing plants; transmission lines; and virtually any other plant project, and even civil works such
as bridge construction, buildings and road construction.
[2] World Bank Guidelines for Procurement Sub-Clause 2.4.
[3] World Bank Guidelines for Procurement Sub-Cause 2.6.
[4] World Bank SBD Supply and Installation of Plant and Equipment Two Stage ITB Sub-Clause 9.2
[5] World Bank SBD for Supply and Installation of Plant and Equipment Sub-Clause 18.1.
[6] World Bank SBD for Supply and Installation of Plant and Equipment Sub-Clause 19.1
[7] Both the single stage and the two stage tendering procedures are described and embodied in the World Bank
Standard Bidding Documents for Supply and Installation of Plant and Equipment dated November 1997 (Revised
January 1999). Appendix 5 Two-Stage Bidding Procedure Flowchart shows the procedure for the World Banks
two-stage tendering process.
60
5 Contract Types
disadvantages of Performance-Based Procurement (PBP) as - the engineer may initiate variations; and
well as its basic features is to be found at Appendix 5.5.2. - the employer wishes to be kept fully informed, and
- payment to the contractor will be according to achieved
Management structure milestones generally on a lump-sum basis; and
- the employer seeks to ensure an equitable sharing of
A typical management structure for a traditional construction risks in the contractual arrangements; and
electrical and mechanical plant project is shown in Fig. 5.4. - owing to a decision to carry a part of the construction risk,
the employer accepts that overruns may occur to the original
Larger and more complex than minor works projects, contract sum and, possibly, the completion date.
traditional plant projects involve the design, manufacture,
delivery, erection, testing, and commissioning of mechanical If these arrangements suit the employers
and electrical plant by a contractor to an outline or requirements, FIDIC recommends the use of the FIDIC
performance specification prepared by the employer. Conditions of Contract for Plant and Design-Build for Electrical
and Mechanical Plant, and for Building and Engineering
Under the usual arrangements for this type of project: Works, designed by the Contractor, commonly known as
P&DB or the 1999 Yellow Book.
- the employer:
- provides the finance; and
- will appoint the engineer to administer the contract,
monitor the design and manufacturing activities, the
installation and erection on-site and construction work and
to certify payment; and
5.5.2 Building and engineering works designed by the contractor

As an alternative to the design of building and be necessary for the contractor, but no detailed design of the
engineering works being carried out by the employer or his building/facility itself.
consultant, it is sometimes decided that the design should be
carried out by the contractor, and that it should be the A useful discussion setting out the advantages and
contractor who is responsible for the design and that the disadvantages of Performance-Based Procurement (PBP) as
completed works will be fit for purpose and otherwise well as the basic features of this procurement approach is to
satisfactory. This arrangement is usually called design-build. be found at Appendix 5.5.2.
Under design-build contracts the employer provides The tender dossier will comprise similar content to
his employers requirements and the contractor shall design that of a construction contract. However, as for a plant
and build/construct the facility in accordance with these. contract, the technical specifications of the construction
contract will be replaced by the employers requirements
Thus design-build contracts are similar to plant which must contain all the technical and other requirements,
contracts, as described in Sub-Section 5.5.1 above. However, which the employer wishes the contractor to carry out or
instead of designing the electrical, mechanical or other plant, comply with. Also, as for a plant contract, a schedule of
the contractor will in this case design the building or payments will usually replace the bill of quantities.
engineering facility before he builds/constructs it.
Notes concerning the preparation of the employers
As for plant contracts, the contractor will design and requirements are to be found at Appendix 5.5.1.
build/construct the works according to outline or performance
specifications set by the employer or his consultant. When the The procurement process, while still in accordance
consultant prepares the tender dossier he will usually only with the principles of international competitive bidding, may be
include drawings to show the outline, conceptual or carried out according to either single-stage tendering or two-
preliminary design of the building or facility, together with the stage tendering as described above in Section 5.5.1 for a
location, limits of delivery and such other information as may plant contract.
61
5 Contract Types
Under the usual arrangements for this type of A typical management structure for a design-
project: build project designed and constructed by the contractor
is shown on Fig. 5.4.
- the employer:
- provides the finance; and If these arrangements suit the employers
- will appoint the engineer to administer the contract, requirements, FIDIC recommends the use of the FIDIC
monitor the design and construction activities and Conditions of Contract for Plant and Design-Build for
certify payment; and Electrical and Mechanical Plant, and for Building and
- the engineer may initiate variations, and; Engineering Works, designed by the Contractor,
- the employer wishes to be kept fully informed; and commonly known as P&DB or the 1999 Yellow Book.
- payment to the contractor will be according to
achieved milestones generally on a lump-sum basis;
and
- the employer seeks to ensure an equitable sharing of
construction risks in the contractual arrangements; and
- owing to a decision to carry a part of the construction
risk, the employer accepts that overruns may occur to the
original contract sum and, possibly, the completion date.
5.6 Engineer-Procure-Construct (EPC)/turnkey contracts

5.6.1 Employer financed
In recent years considerable effort has been desire of owners, investors, and developers who do not
expended in trying to find viable alternatives to the have their own technical staff capable of designing the
traditional way of procuring construction works and facility in question, or who do not wish to take the
obtaining plant and equipment. There are several responsibility of designing their own facility, to go directly
reasons for this, but perhaps the most important has to suitable contractors to design and construct their
been the lack of public funds to finance infrastructure project on a turnkey basis. Some also believe that the
and other development. total implementation time can be shortened if the design
work is carried out by the contractor during the early
Traditionally, funding of public development stages of the contract, e.g., partly in parallel with his
projects has been done by government with public funds mobilisation work.
(either raised from taxation or financed by multilateral or
bilateral IFIs). Whereas all involved would like to know at The term turnkey can mean different things to
the outset what the final contract price actually will be, it different people. In its purest form it means the complete
is imperative where private funds are concerned that the design and construction of a facility, for example a
final contract price (and time of completion) is as certain factory, by a contractor. On completion he will merely
as is humanly possible. Whereas government can usually hand over the key to the owner, i.e., the employer, who
find additional funds to cover a project cost overrun, will turn the key and the factory will start up and begin
private investors will not fund a project at all unless they to produce its product. The specification provided by the
can be sure of the final sum and final time so that their employer will be a performance-type specification, i.e.,
calculations can be relied upon. This has led to the need defining the output and performance to be achieved by
for contract forms where the emphasis is on a fixed final the facility, with very little, if any, detailed requirements.
price and time as an alternative to the traditional forms However, turnkey projects also include the whole range
where the final price and time are somewhat variable. of projects, from those with minimum specification by the
employer right through to those with very detailed and
Complementary to the above, a further reason complex requirements being specified by the employer.
for wishing to deviate from the traditional method is the Sometimes an employer will specify in great detail
62
5 Contract Types
sections of the work, while leaving the remaining sections with Examples of fixed-price EPC/turnkey projects include:
minimal specification.
- a process plant or a power plant;
Normally the majority of the design in a turnkey - an infrastructure project such as a road, rail link, bridge,
project is carried out by the contractor, but on occasion a water or sewage treatment plant, transmission line, or even a
substantial part of the design is provided to the contractor by dam or hydroelectric power plant;
the employer. The term turnkey can perhaps be said to be - a building project generally complete with all furniture, fittings
more used in Europe, while the substantially equivalent term and equipment.
used in the US and elsewhere is EPC meaning Engineer-
Procure-Construct. Under the usual arrangements for this type of project:
For this type of project, the contractor is responsible - the employer:

for all the engineering, procurement and construction to - provides the finance for the project, and
provide a full-equipped facility ready for operation (at the turn - wishes the contractor to take total responsibility for the
of the key). design and construction of the facility and to hand it over
ready to operate at the turn of a key; and
Notes concerning the preparation of the employers - wishes a high degree of certainty that the agreed contract
requirements are given in Appendix 5.5.1. price and time will not be exceeded, and
Use FIDIC
EMPLOYER Conditions of Contract for
EPC/Turnkey Projects
(1999 Silver Book)
EMPLOYERS
ADMINISTRATION
CONTRACT
DOCUMENTATION
CONTRACTOR
Additional organisation and

Use FIDIC Use FIDIC CONS or corresponding contract
Client/Consultant Model P&DB or EPCT or Short documentation, as may be
Services Agreement Form as appropriate appropriate, to be set up by the
contractor who becomes the
employer under such additional
CONTRACT CONTRACT CONTRACT FIDIC conditions of contract.
DESIGNER Projects in which the contractor

AND/OR SUBCONTRACTOR SUBCONTRACTOR takes total responsibility for the
ENGINEER design and execution of the works
under CONS and/or with little involvement of the
P&DB contracts employer. The contractor carries
Functional links
between contractors out all the Engineering,
and subcontractors Procurement and Construction
(EPC) and provides a fully
equipped facility, ready for
Fig. 5.5 EPC/turnkey contracts: typical management structure operation at the turn of the key.
63
5 Contract Types
- wishes the project to be organised on a strictly two- If unforeseeable physical conditions are likely,
party approach, i.e., without an engineer or, in the but the employer still wishes to utilise the Silver Book
case of a building project, without an architect being features, then FIDIC recommends that Clause 4.12 of
involved; and CONS or P&DB be suitably embodied in the particular
- does not wish to be involved in the day-to-day conditions of EPCT.
progress of the work, provided the end result meets
the performance criteria he has specified; and Similarly, if other EPCT risks are significant, the
- is willing to pay more for the construction of his employer should carefully consider the consequences of
project (than would be the case if CONS or P&DB allocating them to the contractor. FIDICs publication of
were used) in return for the contractor bearing the EPCT does not constitute any indication of its suitability
extra risks associated with enhanced certainty of for a particular set of circumstances. P&DBs fairer
final price and time. However, if the project involves allocation of risks may yield a better probability for
sub-surface works in uncertain and difficult ground, success.
or involves other risks which are difficult for a
tenderer to foresee and price, the risk of such The contractor should ensure that, if he intends
unforeseeable physical and other conditions should to subcontract work, the terms of the subcontract do
be borne by the employer. not expose him to additional unnecessary risk under the
- the contractor, if he does not have the resources and terms of the EPC/turnkey conditions of contract with the
expertise to undertake all the work himself, may enter employer.
into services or subcontract agreements, as
appropriate, to carry out parts of the works. A typical management structure for a fixed-price
EPC or turnkey project designed and constructed by the
If these arrangements suit the employers contractor is shown on Fig. 5.5.
requirements, FIDIC recommends using the FIDIC
Conditions of Contract for EPC/Turnkey Projects,
commonly known as EPCT or the Silver Book, for the
contract between the employer and the contractor.
5.6.2 Contractor financed BOT type projects

Another trend away from traditional procurement Several developments to the BOT theme have
developed in recent years is the method by which a emerged during the last few years. These total project
contractor (or group of contractors) is granted a solutions include Build, Own, Operate and Transfer
concession by a government or national authority (BOOT), Build, Lease and Transfer (BLT) and a number
(which is authorised to do so) to provide a particular of other similar arrangements. In the UK, PFI, the
service to the public sector. Instead of the government Private Financing Initiative, aimed at encouraging the
raising its own funds, for instance, by taxation, to private financing of construction projects. This opened
construct a particular road or railway or water supply or the way to a large number of projects being financed by
similar, the government grants a concession whereby it private funds. Such projects have included the
gives a private group (usually of contractors, suppliers, construction and operation as a public service of
financiers, and operators) the right to construct the schools, prisons, hospitals, water and sewage treatment
facility and operate it for a fixed number of years. plants, and roads. The concessions usually included
financing, design, construction, operation and
The group (i.e., the concessionaire) will provide maintenance of the facilities. For example, in some
the financing which will be recouped over the years of cases school and hospital catering have been included,
operation by charges made to the users of the service. but tuition and medical staff were not included.
In a typical Build-Operate-Transfer (BOT) project the
contractor group will hand the facility over to the The majority of BOT type schemes are project
government at the end of the concession period, which financed. In project finance, as the term is now
would typically be 20-30 years. commonly used, a project is developed and financed on
64
5 Contract Types
a non-recourse or limited recourse basis. In other words, the only to project assets or limited recourse to other assets or
project is expected to pay for itself, or largely pay for itself, finance.
over the concession period. Those lenders providing the initial
funds for the project look primarily to the revenues generated As far as the World Bank and other IFI and donor
by the completed facility for repayment of the loan, and to all organisations are concerned, they are and will continue to be
the project assets as security for the loan. Project finance major lenders for any such approved projects. It is clear that a
differs from traditional loan structures in that (in the event of number of useful and socially desirable projects will never
default by the concessionaire) lenders generally have recourse manage to be entirely financed on a non-recourse basis, i.e.,
PRINCIPAL
(GRANTOR)
or
EMPLOYER
(SPONSOR)
CONCESSION
AGREEMENT SUPPLIERS
LENDERS
(during operation)
CONCESSIONAIRE All agreements/contracts will be

LOAN SUPPLIER with concessionaire/
usually a Consortium
AGREEMENTS AGREEMENTS concession company/SPV.
or joint venture.
formed as a
concession company
SPECIAL PURPOSE
SHAREHOLDER VEHICLE (SPV)
REVENUE
AGREEMENTS
USERS
SHAREHOLDERS
(during operation)
Use FIDIC Use FIDIC Use FIDIC DBO

Client/Consultant CONS or P&DB or or bespoke
Model Services EPCT or Short Form O&M as
Agreement as appropriate appropriate
CONTRACT CONTRACT CONTRACT CONTRACT

DOCUMENTATION DOCUMENTATION DOCUMENTATION DOCUMENTATION
PLANT SUPPLIERS OPERATION AND

DESIGNERS CONSTRUCTORS AND MAINTENANCE
INSTALLERS CONTRACTORS
Fig. 5.6 Privately financed EPC/turnkey contracts: typical management structure
65
5 Contract Types
entirely pay for themselves over time. For such projects it employers do not have to be too concerned about
will be necessary for these lenders, and probably the local checking the quality of the contractors construction
government as well, to provide the extra funding necessary. work. However, if the concessionaire is only required to
In such cases where public funding has to complement operate and maintain the facility for a few years, the
private funding, the project is commonly called a PPP tendency will be to provide a lower quality facility, just
project, a Public-Private Partnership project. sufficient to last until the end of the concession period.
Some notes on Privately Financed Projects Therefore, the quality of the facility can be
(PFPs) and Public-Private Partnerships (PPPs) are given expected to be related to the time the concessionaire
in Appendix 5.6.2. will be required to operate and maintain the facility the
shorter the time the lower the quality. This means that for
Another basic idea behind BOT projects is that projects where there is a short operation period by the
the concessionaire shall in effect achieve the lowest concessionaire the employer may have serious
lifetime cost of the project. The lifetime cost is a difficulties in obtaining a high-quality facility. The
combination of the capital cost and the annual operation condition required of the physical assets at the time of
and maintenance costs. The concessionaire therefore final handover to the employer therefore has to be
has to balance his capital outlay against his maintenance carefully considered and specified in the concession
and operation costs. Thus, if he is to operate the agreement.
completed facility for many years, he probably will see to
it that the quality of the facility is such that little A typical and simplified management structure for
maintenance or rehabilitation will be required, and that a privately-financed turnkey contract is shown in Fig. 5.6.
operation will be as efficient as possible. In such cases
5.7 Design, build and operate contracts

Following the publication of the 1999 FIDIC Under the DBO regime, the contractor will be
Conditions of Contract for Plant and Design-Build, it responsible, not merely for providing the facility, but in
became clear that there was a growing need for a fact for providing a lasting service. The contractor will be
document which combined a design-build obligation encouraged to provide a facility of good quality in all
with a long-term operation commitment. respects, otherwise he will suffer during the operation
period by way of heavy maintenance, repair and
The Design-Build-Operate (DBO) approach to replacement costs. For the contractor, he will normally
contracting combines long-term operation (and be given the opportunity to provide a lasting system of
maintenance) of a facility into one single contract his own choice which should provide benefits owing to
awarded to a single contractor. The contractor will balancing construction costs against long-term
usually be a joint venture or consortium representing all maintenance (and operating) costs. He should also
the skills called for in a DBO arrangement. benefit from a relatively long-term assured income.
This arrangement will be attractive to many Whilst it is recognised that there are alternative
owners and employers and also to contractors for a scenarios encompassing the DBO concept for
variety of reasons. For owners, the most important example the green-field scenario of DBO, and the
benefit probably will be that they will have the assurance brown-field scenario of Operate-Design-Build it was
that the facility will remain in good operating condition, at also recognised that different scenarios require different
least until the end of the contracted operation period. contract conditions. Also, the conditions applicable to
This must be felt to be an advantage by those owners short-term operation differ considerably to those
who have seen their facilities suffer failure or rapid applicable to long-term operation. A further
deterioration soon after handover from the construction consideration was whether it was best to approach a
contractor, owing to inadequate design, low quality DBO project as a single long-term contract or two
materials or poor workmanship. separate or linked contracts.
66
5 Contract Types
FIDIC has chosen to adopt the green-field DBO, with Modifications may be required in some jurisdictions,
a 20-year operation period, and has selected the single particularly if the conditions are to be used on domestic
contract awarded to a single contracting entity (which will contracts.
almost certainly be a consortium or joint venture) to optimise
the coordination of innovation, quality and performance, rather As for the other FIDIC contract forms, the DBO
than award separate contracts for design-build and for contract attempts to include all conditions of a general nature,
operation. The contractor has no responsibility for financing which are likely to apply to the majority of DBO contracts, into
the project nor for its ultimate commercial success. This is the Part 1 General Conditions. However it was recognised that
basis upon which the DBO contract has been prepared. many employers or governments or even different jurisdictions
may require special conditions of contract, or indeed particular
The FIDIC Conditions of Contract for Design Build and procedures, which differ from those included in the general
Operate Projects, the Gold Book, as written, is unsuitable for conditions. For this reason, the DBO document contains
contracts which are not based on the traditional DBO Guidelines for the Preparation of Special Conditions which are
sequence, or where the operation period differs significantly intended to assist users in drafting clauses to replace or
from the 20 years adopted. supplement the clauses to be found in Part 1.
Users who wish to adopt these conditions for use on FIDIC also recognises that the successful performance
a different scenario, such as a brown-field scenario, or with an of a long-term DBO contract requires that the parties fully
operation period significantly different to the 20-year period understand the overall time framework and the need for a
assumed, are referred to the FIDIC DBO Contract Guide, long-term commitment by both the employer and the
which identifies the areas which will require amending and contractor. In trying to achieve this understanding and
gives comprehensive guidelines and suggestions on how they commitment, it has been necessary to introduce new
should be addressed. However, the guide does not claim to procedures and new terminology which are not found in the
address all issues requiring attention, and users should seek other FIDIC forms of contract.
expert advice.
The FIDIC Conditions of Contract for Design Build and
The DBO contract is recommended for general use Operate Projects includes a number of visual flow charts to
where tenders are invited on an international basis. facilitate this understanding. The flow charts show the critical
EMPLOYER Use FIDIC Conditions of

Contract for Design, Build
and Operate Projects
EMPLOYERS
REPRESENTATIVE
CONTRACTOR
Design / Planning
DISPUTE Build / Construction

ADJUDICATION BOARD
AUDITING BODY Operation / Maintenance
Fig. 5.7 Design, build and operate contracts: typical management structure
67
5 Contract Types
sequences of activities which are specific to the DBO contract and the specific wording of the clauses may be
form of contract. These cover: compromised.
- the full sequence of Design, Build and Operate A typical and simplified management structure
activities; for a design, build and operate contract is shown in Fig.
- the sequence of payment events; 5.7. It shows the overall responsibility of the contractor
- the determinations of the employers representative to design, build and then operate a facility, probably by
under Sub-Clause 3.5; and forming a consortium or joint venture of suitable firms.
- the handling of claims and the settlement of disputes
under Clause 20. For projects for the design-build and operation of
a facility or installation FIDIC recommends using the
The contract also includes a number of sample FIDIC Conditions of Contract for Design, Build and
forms to help both parties have a common Operate Projects, commonly known as DBO or the Gold
understanding of what is required by third parties such Book, for the contract between the employer and the
as providers of securities and guarantees, and what is contractor.
considered to be accepted good practice by FIDIC and
the major International Funding Institutions. Users are
warned once again that if these forms are changed in
any significant way, there is a risk that the balance of the
5.8 Dredging and reclamation works contracts

Dredging and reclamation work is usually - quantities stated in the bill of quantities will be less
procured as for other types of civil engineering accurate than is normal in other branches of civil
construction work, as described in Section 5.4 above. engineering, owing to the relative difficulty of surveying
However, there are important differences which need to existing sub-water surfaces;
be taken into account when preparing tender dossiers for - the availability to tenderers of all data related particularly
these rather specialised activities, including the following: to ground, hydraulic and environmental conditions, and
all other relevant aspects, is especially important, as is
- the contractor is not normally held responsible for the necessity for a site visit; and
remedying defects and/or for maintenance of the works - appropriate insurances, including marine risks, will be
after taking-over; required.
- the works are usually taken over in sections as they are
completed; These and other special considerations relating
- the contractor can only work economically if he is to obtaining tenders for dredging and reclamation work
allowed to work continuously on a twenty-four hour are discussed in more detail in Chapter 14.
basis, including local holidays and rest days;
- equipment costs (mobilisation, supply and For projects for dredging and/or reclamation
demobilisation), predominantly including dredgers and works FIDIC recommends using the FIDIC Conditions of
ancillary vessels, form a much higher proportion of total Contract for Dredging and Reclamation Works,
cost for a dredging and reclamation contract than is the commonly known as the Blue-Green Book, for the
case for general construction; contract between the contractor and the employer.
- the contractors equipment almost invariably includes
vessels on charter, so the employer cannot be given
the unrestricted right to sell such items in certain
situations of contractor default;
- the employer may effect cover against the risks of non-
completion by increasing the amount of the
performance security;
68
5 Contract Types
5.9 Other contract types

5.9.1 Construction management contracts
A typical management and organisational structure for The contractual risks which are not passed on to the
a construction management contract is shown in Fig. 5.8. individual works contractors will be carried by the employer,
while the construction management contractor will be paid a
In this type of project, which is normally divided into a management fee.
number of separate works packages, the employer enters
into an agreement with a designer for the overall design of the The aims of these arrangements for construction
works and, at the same time, concludes an agreement with a management contracts is to increase the involvement of
construction management contractor who is to liaise closely constructors during the design stages of a project, and to
with the designer and be responsible for managing the reduce the overall period from project inception to project
implementation of the works. completion. An advantage of these arrangements over the
traditional methods of project procurement is considered to
The construction management contractor will arrange be that the designers can concentrate on their design work
for the invitation of tenders for the separate works packages while leaving the supervision of construction to the
for contracts to be entered into directly with the employer. management teams.
EMPLOYER Under construction management,

the employer enters into the
construction contracts with the
works package contractors and
shares the contractual risks. The
CONTRACT Use FIDIC Use FIDIC CONTRACT construction management
DOCUMENTATION Client/Consultant Client/Consultant DOCUMENTATION contractor is responsible for the
Model Services Model Services
management of the works
Agreement Agreement
package contractors for a fee.
CONSTRUCTION
DESIGNER Functional links MANAGEMENT
CONTRACTOR
Use FIDIC Use FIDIC Use FIDIC

CONS or P&DB or CONS or P&DB or CONS or P&DB or
EPCT or Short Form EPCT or Short Form EPCT or Short Form
as appropriate as appropriate as appropriate
CONTRACT CONTRACT CONTRACT

WORKS PACKAGE WORKS PACKAGE WORKS PACKAGE

CONTRACTOR CONTRACTOR CONTRACTOR
Functional links
Fig. 5.8 Construction management contracts: typical management structure
69
5 Contract Types
Under the usual arrangements for this type of Client/Consultant Model Services Agreement, commonly
project: known as the White Book, for the agreements between
the employer and the designer and between the
- the employer: employer and the construction management contractor.
- provides the finance; and
- appoints the construction management contractor to For the various works packages FIDIC suggests
administer the contract, monitor the design and using either the FIDIC Conditions of Contract for
manufacturing activities and the installation and Construction for Building and Engineering Works
erection on-site and the construction work, and to designed by the Employer, commonly known as CONS
certify payment; and or the 1999 Red Book, or the FIDIC Conditions of
- the construction management contractor may initiate Contract for Plant and Design-Build for Electrical and
variations; and Mechanical Plant, and for Building and Engineering
- payment to the contractor will be according to Works, designed by the Contractor, commonly known
achieved milestones generally on a lump-sum basis or as P&DB or the 1999 Yellow Book, or the FIDIC
on a measure and value basis depending upon the Conditions of Contract for EPC/Turnkey Projects,
form of conditions of contract used; and commonly known as EPCT or the Silver Book,
- the employer seeks to ensure an equitable sharing of whichever may be applicable, for the contracts between
construction risks in the contractual arrangements. the employer and the works package contractors.
If these arrangements suit the employers

requirements, FIDIC suggests using the FIDIC
5.9.2 Management contracting contracts

A typical management and organisational The management contractor may also be
structure for a management contracting contract is responsible for the design. He is paid a management fee.
shown in Fig. 5.9.
The suitable FIDIC forms of contract may be
In management contracting, the client/employer similar to those for construction management contracts
appoints designers and a separate management as in Section 5.9.1. However, it will be the management
contractor. The project is divided into works packages contractor who enters into contracts with the works
and tenders are invited for each contract to be entered package contractors, and not the employer.
into with the management contractor, who carries those
contractual risks that are not passed on to the individual
contractors.
The responsibility lies with the management

contractor for managing the overall project procurement
process and for the coordination and supervision of the
works contractors.
5.9.3 Supply contracts

FIDIC does not have a standard form of contract Chamber of Commerce (ICC) based in Paris also
for supply only contracts as there are ample standard publishes many books and guides on established good
forms produced by other institutions. For example, in the practice in the conduct of international trade and finance.
UK the Chartered Institute of Purchasing and Supply
publishes model forms and other literature, including
Useful notes in this connection may be found in
advice on e-commerce, though in practice most
Appendix 5.9.3 Purchasing, Expediting and
organisations have evolved their own procedures to suit
Inspection.
their particular requirements and practice. The International
70
5 Contract Types
5.10 Alliance contracts, framework agreements and partnering

5.10.1 Alliance contracts
Alliance contracts between employers and contractors In the execution of the works the employer will wish to
have been developed with the prime aims of cost and time minimise his total costs of the project and its ongoing future
reduction in the completion of large complex, multi-discipline, operation and maintenance costs and the contractor will
multi-contract projects and the avoidance of conflict and wish to make a profit.
disputes. Other aims have been to improve the quality of
completed works and safety records in the execution of To achieve these aims it is clear that the employer will
works. ideally wish to see no delays in the implementation of the
Under management contracting,

CLIENT/EMPLOYER the client enters into contracts
with a designer and a
management contractor. The
management contractor then
enters into contracts with the
works package contractors and
Use FIDIC Use FIDIC shares the contractual risks.
Client/Consultant Client/Consultant
Model Services Model Services
Agreement Agreement
CONTRACT CONTRACT
MANAGEMENT
CONTRACTOR
Functional link
DESIGNER (becomes the
employer under
FIDIC contracts)
Use FIDIC Use FIDIC Use FIDIC

CONS or P&DB or CONS or P&DB or CONS or P&DB or
EPCT or Short Form EPCT or Short Form EPCT or Short Form
as appropriate as appropriate as appropriate
CONTRACT CONTRACT CONTRACT

WORKS PACKAGE WORKS PACKAGE WORKS PACKAGE

CONTRACTOR CONTRACTOR CONTRACTOR
Fig. 5.9 Management contracting contracts: typical management structure
71
5 Contract Types
works and no monetary claims that would increase the contractor will make his profit must be understood by
costs of the works. On the other hand, the contractor the employer who will help in obtaining it.
will wish to make an acceptable profit.
- The alliance should be initiated at the inception of the
With a lump-sum/turnkey contract the project so that the experience and expertise of
contractor will allow in his tender for the cost of the risks contractors may be able to influence advantageously
as well as other possible unforeseen costs. If the the development of design and, possibly, materials and
potential risks are not experienced and the unforeseen plant procurement early on.
costs do not arise, the contractors tender will be
unnecessarily high. In addition, the contractor can be - A definition of how the risks to be carried by each party
expected to be looking for every opportunity to submit to the contract are to be equitably shared will be drawn
claims for additional costs and associated additional up and included in the alliance contract agreement.
time for all changes and adjustments to increase his
profit. - A reasonable final cost target for the contract and of
the contract period will be agreed between the parties.
On the other hand, with the payment terms of a
reimbursable type of contract, under which the - The alliance contract agreement will be drafted with
contractor is repaid all he has spent together with a incentives of financial reward for the contractor to
percentage to represent profit, there is no incentive for reduce the targeted out-turn costs and/or the contract
the contractor to reduce expenditure. period.
It is obvious, therefore, that neither the lump- - All personnel of both parties involved in the contract
sum/turnkey type nor the reimbursable type of contract must understand and work towards meeting the aims
is likely to provide the necessary incentives to achieve of the alliance.
the aims sought.
- The alliance contract agreement will contain detailed
An alliance contract strategy attempts to achieve procedures to be followed with respect to cost and
its aims by adopting all of the following key features: time claims. Failure to follow the procedures in a timely
fashion may lead to failure in the aims of the alliance.
- Firstly, and most importantly, the senior personnel of
the organisations to form the alliance must be - An alliance charter, which will not be legally binding,
committed to the aims of the alliance and have mutual may be agreed and signed by the senior personnel of
trust and understanding. the alliance to set out its principles and aims.
- That is to say, the employers aims must be understood

and accepted by the contractor who will help to
achieve those aims and the means by which the
5.10.2 Framework agreements

A framework agreement is a long-term The method requires all the procedures of
agreement entered into between an employer and a prequalification, tender dossier preparation, tender
contractor that incorporates agreed specifications and preparation and submission by contractors and
rates and prices for work packages to be carried out as subsequent tender analysis and evaluation, to be carried
and when instructed by the employer. out in advance of the need to start the first works
package.
In recent years, employers in the transportation
and utilities industries have found framework agreements A framework agreement, once signed, does not
to be a convenient method of initiating and commencing necessarily provide work immediately to the contractor
work at short notice. but does provide the mechanism for ordering the
72
5 Contract Types
commencement of work when required. Individual works Subject to the introduction of appropriate wording in
packages may still be subject to limited competition. the particular conditions, any of the standard FIDIC conditions
of contract may be suitable for use within a framework
An advantage of the method is that it enables agreement.
employers to plan works packages well in advance knowing
that the chosen contractor will be mobilised to commence
operations relatively quickly whenever needed.
5.10.3 Partnering
The construction industry has not been considered an form of a charter and may be signed by key responsible
efficient industry. This has largely been due to the adversarial persons of each of the organisations entering into the
relationships and confrontational attitudes that have developed partnership agreement.
over the years between the various players within the industry.
It is important to note that the partnership charter or
The development of varying contractual arrangements agreement is not legally binding in itself and does not alter the
between the different parties, particularly the contractual terms legally binding terms of the engineering contracts between the
relating to payment and to the allocation of risk, has not various parties. The success of the charter will depend on the
infrequently led to delays in completion and to claims from mutual trust to be developed between and among the
contractors for additional project costs. In turn, unsettled persons within the partnering organisations.
issues have resulted in reference of contractual disputes to
arbitration and to the courts. However, it must be appreciated that problems may
arise which will be unable to be resolved under the partnering
Much of this has arisen owing to the differing charter and litigation may follow: partnering is not a panacea
immediate aims and expectations of the various parties for all difficulties.
involved in a project. These include maximisation of cash flow
and profit, in the case of contractors and suppliers, and Partnering is about ensuring that people within the
minimisation of ultimate costs in the case of employers. partnering organisations work closer and better together with
the mutual aim of satisfactory project completion to the benefit
Partnerships have been advocated in recent years to of all.
reduce the contractually confrontational attitudes that develop
between the parties to an engineering project, while at the
same time providing the contractor with acceptable profit and
the employer with good quality engineered works in a timely
fashion at reasonable cost.
Partnering commitments are normally set down in the
5.11 The appropriate FIDIC form of contract

In answer to the question Which FIDIC conditions of - the work involved in carrying out the contract is relatively
contract should be used? the considerations listed below simple or repetitive; and
should be examined. - the assessed construction period is short; and
- the estimated final contract price is relatively small; and
These considerations are also summarised in Fig. 5.10. - irrespective of whether:
- the design is to be carried out by the employer or the
Short Form contractor; and
Consider using the FIDIC Short Form of Contract (the - the contract involves construction, electrical, mechanical
Green Book) if: or other engineering work.
73
5 Contract Types
However, if the work involved in carrying out the - the work involves a design-build obligation with a long-
contract is larger and/or more complex than would be term, say 20 years, operational commitment; and
suitable for the use of the FIDIC Short Form of Contract, - the work is to be awarded to a single contracting entity
the various situations and requirements described in the (which will almost certainly be a consortium or a joint
paragraphs below should be considered in order to venture); and
choose the appropriate form of contract. - the contractor has no responsibility either for financing
the project or for its ultimate commercial success; and
1999 Red Book - the work is to be based on the traditional Design-Build-
Consider using the FIDIC Conditions of Contract Operate sequence and the operation period will not
for Construction (the 1999 Red Book) if: differ significantly from 20 years.
- the work in carrying out the contract comprises 1999 Yellow Book
infrastructure works of e.g., roads, bridges, airports, Consider using the FIDIC Conditions of Contract
docks and harbours, railways and buildings; and for Plant and Design-Build (the 1999 Yellow Book) if:
- the employer is to carry out all, or most, of the design;
and - the work involves the construction of various
- the engineer is to administer the contract, monitor the infrastructure and other types of works projects, and
construction work and certify payment; and may include the manufacture of electrical and/or
- the employer is to be kept fully informed of all aspects mechanical works, including installation and erection
of progress; and on-site; and
- the employer can initiate variations to the works, and - the contractor is to carry out the majority of the design
- payment to the contractor will be according to a bill of of the infrastructure works and including the detailed
quantities or lump-sum payments for approved work design of the plant or equipment, so that the project
done. fulfils the requirements of the outline or performance
specification prepared by the employer; and,
1999 Yellow Book - the engineer is to administer the contract, to monitor
Consider using the FIDIC Conditions of Contract the construction work, to monitor the manufacture of
for Plant and Design-Build (the 1999 Yellow Book) if: the plant and equipment (if any) and its erection on-site,
and to certify payment; and
- the work involves the manufacture of electrical and/or - the employer is to be kept fully informed of all aspects
mechanical works, including installation and erection of progress; and,
on-site, and - the employer has the right to initiate variations to the
- the contractor is to carry out most of the design works; and,
including the detailed design of the plant or equipment, - payment to the contractor will be according to
so that the plant meets the performance specification achieved milestones generally on a lump-sum basis.
prepared by the employer; and
- the engineer is to administer the contract, to monitor Silver Book
the manufacture of the plant or equipment and its Consider using the FIDIC Conditions of Contract
erection on-site and to certify payment; and for EPC/Turnkey Projects (the Silver Book) if:
- the employer is to be kept fully informed of all aspects
of progress; and - the work involves the construction of various
- the employer can initiate variations to the works; and infrastructure and other types of projects and may
- payment to the contractor will be according to include the manufacture of electrical and/or mechanical
achieved milestones that are generally on a lump-sum works, including installation and erection on-site; and
basis. - the work could, for example, be a Privately Financed (or
Public-Private Financed) project of the Build-Operate-
Gold Book Transfer or similar type, where the concessionaire takes
Consider using the FIDIC Conditions of Contract total responsibility for financing (except for any public
for Design, Build and Operate Projects (the Gold Book funds), design, construction and operation of the
first published in 2008) if: project; or
74
5 Contract Types
- the work could be a process or power plant, a factory or an 2 If construction will involve substantial work underground or
infrastructure project for roadworks, rail link, bridge, water or work in other areas which tenderers cannot inspect. For
sewage treatment works, transmission line, dam or these types of works, the risks of encountering unforeseen
hydropower plant or similar where the employer wishes to conditions may be considerable and the lowest tender may
implement the project on a fixed-price turnkey basis; or be the one submitted by the least knowledgeable tenderer
- the work could be a building project where the employer or most reckless gambler, rather than the best tenderer.
wishes to have his building constructed on a fixed-price
turnkey basis complete with all furniture, fittings and 3 If the employer intends to supervise closely or control the
equipment; and contractors work, or to review most of the construction
- the contractor is to take total responsibility for the complete drawings. With the greater extent of contractors risks, he
design, manufacture, erection, installation, and construction needs to have greater freedom of action and less
of the facility or infrastructure, as the case may be, and to interference by the employer.
hand it over complete and ready to operate at the turn of a
key and thereby fulfilling the requirements of the agreed 4 If the amount of each interim payment is to be determined
outline or performance specification prepared by the by an official or other intermediary. EPCT does not provide
employer; and for an engineer to administer the contract and determine
- the employer wishes a high degree of certainty that the the amount of each monthly (or other) interim payment.
agreed contract price and time will not be exceeded and, Therefore, payments should be pre-determined against
- the employer wishes the contract to be organised on a clear milestones and defined in a schedule of payments.
strictly two-party approach, that is to say without an engineer
or intermediary being involved; and It is to be noted that some contractors may decline to
- the employer does not wish to be involved in the day-to-day tender for contracts based on the Silver Book owing to the
progress of the work, provided that the end result meets the increased risk the contractor will bear under this form of
performance criteria he has specified; and contract.
- the parties concerned, that is the sponsors, financial lenders
and the employer, are willing for the contractor to be paid The above commentary indicates the importance of
more for the completion of the project (than would normally selecting the appropriate procurement strategy, and of then
be the case if, say, the FIDIC Conditions of Contract for Plant selecting the appropriate FIDIC conditions of contract, taking
and Design-Build were used) in return for the contractor account of the need to ensure that tenderers are provided with
bearing the extra risks associated with enhanced certainty of the data necessary for tendering. Selection of the appropriate
final price and time. form of contract requires important decisions to be made on
procurement strategy, and it is to be noted that there are
Although FIDIC cannot prevent EPCT being used in different FIDIC conditions of contract for contractor-design:
circumstances for which it is inappropriate, FIDIC stresses that P&DB and EPCT (as well as the DBO contract).
EPCT should not be used (and that P&DB may be preferable)
in the following circumstances: Tender dossiers for contractor-design contracts must
be drafted with care, particularly in respect to quality, tests and
1 If there is insufficient time, or insufficient information, for performance criteria. If tender documents are deficient, the
tenderers to scrutinise and check the employers employer may pay an exorbitant price for unacceptable works.
requirements or for them to carry out their designs, risk He must therefore ensure that adequate resources are
assessment studies and estimating before submitting their allocated to the skilled tasks of drafting the technical and
tenders. Tenderers need to take particular account of EPCT commercial aspects of the tender documents, and of
Sub-Clause 4.12 (under which the contractor is responsible analysing the tenderers proposals.
for the consequences of encountering unforeseeable
ground conditions) and EPCT Sub-Clause 5.1 (under which
the contractor is responsible for certain aspects of the
employers requirements, such as the applicability of ISO
standards). Therefore, tenderers need information on the
matters related to such risks and they need time to assess
it and to evaluate all risks.
75
Fig. 5.10 Which FIDIC conditions of contract to use
Which FIDIC
Is the contract largely NO
book?
dredging with or without
reclamation works?
Is the contract of small NO
value and short duration?
Alternatively, are the
YES works repetitive and fairly
The employer (or the
simple?
engineer) wishes to do
most of the design of the
works and for the
contractor to execute the
YES works.
Does the employer also
wish:
1 the risks of
implementation to be
equitably shared
between the contractor
and himself? and,
2 to operate the
completed facility
himself? and,
3 the contract to be
administered by the
engineer?
YES
USE USE USE

Dredgers Contract Short Form of Contract Construction Contract
Blue-Green Book Green Book 1999 Red Book
76
NO
The employer wishes the NO

contractor to carry out
both the detailed design
and the execution of the
The employer wishes the NO
works.
contractor to design and
execute the works and,
wish:
thereafter, to operate the
1 to operate the The employer (or
completed facility.
completed facility concessionaire) wishes a
himself? and, contractor to take total
wish:
2 the risks of responsibility for design,
1 the contractor to bear
implementation to be supply, installation and
most of the risks of
equitably shared construction.
implementation and
between the contractor Does the employer also
operation? and,
and himself? and, 1999 Red Book
2 the contract to be wish:
3 the contract to be FIDIC Conditions of Contract
administered by the 1 the contractor to bear
administered by the for Construction
employers most of the risks and
engineer? meet all costs for
representative?
1999 Yellow Book
successfully
FIDIC Conditions of Contract
completing the works
for Plant and Design-Build
without adjustment to
YES YES
a fixed contract price?
Gold Book
and,
2 the contractor to
for Design, Build and Operate
execute the works
Projects
without administration
by the engineer? and
Silver Book
3 to pay an enhanced
price to obtain these
for EPC/Turnkey Projects
requirements?
Blue-Green Book
YES FIDIC Conditions of Contract
for Dredging and Reclamation
Works
USE USE USE
Plant & DB Contract DBO Contract EPC/Turnkey Contract
Green Book
1999 Yellow Book Gold Book Silver Book
FIDIC Short Form of Contract
77
Table 5.1 Features of contract types (types of projects are indicative only)
There exists a range of differences. Differences and combinations may occur for individual projects.
Type of project Applicability Design responsibility Employer Involvement Risk allocation
Minor works Small works of short Employer Fully involved through Balanced risk sharing. Employer
projects duration or simple the authorised person. carries design, unforeseeable
repetitive works of Variations possible. risks, force majeure, etc.
larger value.
Traditional Traditional civil works, Employer Fully involved through Balanced risk sharing. Employer
construction buildings and the engineer. Variations carries design, unforeseeable
projects infrastructure. possible. risks, force majeure, etc.
(with engineer)
Traditional plant Plant and equipment Contractor Fully involved through Balanced risk sharing. Employer
(M&E) projects for power, water, the engineer. Variations carries unforeseeable risks,
(with engineer) sewage treatment, possible. force majeure, etc. Contractor
industrial complexes, carries design, fit for purpose.
etc.
Design-build Buildings, civil works, Contractor Fully involved through Balanced risk sharing. Employer
projects infrastructure. the engineer. Variations carries unforeseeable risks,
(with engineer) possible. force majeure, etc. Contractor
carries design, fit for purpose.
Fixed-price turnkey Any large project, Contractor Very limited. Variations Employer carries e.g., war risk.
projects plant or industrial not permitted. No Contractor carries other risks.
complex. engineer.
Dredging and Marine and river Employer Fully involved through Balanced risk sharing. Employer
reclamation projects dredging and land the engineer. Variations carries design, unforeseeable
reclamation works. possible. risks, force majeure, etc.
Design, build and

operate projects Any large project, Contractor Fully involved through Balanced risk sharing. Employer
plant or industrial the employers carries unforeseeable risks,
complex. representative. Variations force majeure, etc. Contractor
possible. carries design, fit for purpose.
Privately Financed
Projects (PFP) Roads, infrastructure, Contractor Very limited. Variations Contractor as concessionaire
buildings, etc., under not permitted. No carries almost all risk.
concession from the engineer.
employer.
Construction
management Buildings, Employer Involved through the Depends on choice of FIDIC
projects infrastructure, etc. construction form of contract.
management contractor.
Variations possible.
Management
contracting projects Buildings, Employer or Limited involvement Management contractor carries
infrastructure, etc. management through the designer. construction risks (as the
contractor Variations not permitted. surrogate employer).
Note: The term employer in the table above refers to the party who has entered into a contract with the contractor and
would not necessarily be the owner or promoter of the project, as described in the text of this guide.
78
Financing Payment method Standard contracts Other documents Handover Comments
Employer Bill of quantities, lump FIDIC Short Form of Contract Specifications and drawings On completion Suitable for smaller works.
sums or cost (Green Book). by the employer or the of construction Large variations to be avoided
reimbursement. contractor as defined. as they could create contractual
claims.
Employer Bill of quantities FIDIC Conditions of Contract for Specifications and drawings On completion Generally considered lowest
remeasured at unit rates. Construction (1999 Red Book). by the employer. of construction outturn cost. With design
(alternative: schedule of complete at tender stage, lack
payments). of opportunity for integration of
construction expertise or supply
chain involvement in design.
Adversarial. Unreliable
completion date.
Employer Schedule of payments or FIDIC Conditions of Contract for Basic requirements and/or On completion Generally considered lowest
lump sums (parts may be Plant and Design-Build (1999 performance specifications of installation outturn cost. Design changes
remeasured) Yellow Book). by the employer. and testing initiated by the employer could
adversely affect cost and time.
Less certain final cost.
Unreliable completion date.
Employer Schedule of payments or FIDIC Conditions of Contract for Basic requirements and/or On completion Good coordination possible
lump sums (parts may be Plant and Design-Build (1999 performance specifications of construction between designers and
remeasured). Yellow Book). by the employer. constructors. Design changes
initiated by the employer could
adversely affect cost and time.
Less certain final cost.
Unreliable completion date.
Employer or Schedule of payments or FIDIC Conditions of Contract for Basic requirements and/or On completion More certain out-turn cost and
Private lump sums (parts may be EPC/Turnkey Projects (Silver performance specifications of construction completion date. Performance
remeasured) Book). by the employer. Based Procurement (PBP).
However, likely to provide an
expensive project strategy.
Employer Bill of quantities, lump FIDIC Conditions of Contract for Specifications and drawings At end of Contract conditions take
sums or cost Dredging and Reclamation Works by the employer. operation cognizance of potential
reimbursement. (Blue-Green Book). period additional risks to be
encountered in marine
environments.
Employer or Schedule of payments or FIDIC Conditions of Contract for Basic requirements and/or On completion Good coordination possible
Private lump sums (parts may be Design, Build and Operate performance specifications of construction between designers and
remeasured). Projects (Gold Book). by the employer. constructors. Design changes
initiated by the employer could
adversely affect cost and
construction time. Less certain
final cost.
Private or Concessionaire borrows FIDIC Conditions of Contract for Basic requirements and/or At end of the Concessionaire provides a
Public-Private for construction. Debt EPC/Turnkey Projects (Silver performance specifications operation service. Employer does not
Partnership repaid by income from Book) or FIDIC P&DB or FIDIC by the employer. period have to fund Performance-
(PPP) users. DBO. Based Procurement (PBP)
Employer or Depends on choice of FIDIC Client/Consultant Model Specifications and drawings On completion The employer (owner) has an
Private FIDIC form of contract. Services Agreement (White Book) by the employer. of construction agreement with the designer
with other books as appropriate. and enters into separate
contracts with a contractor for
each works package.
Promoter or Management contractor FIDIC Client/Consultant Model Specifications and drawings On completion The employer (owner) has
Private to decide. Services Agreement (White Book) by the employer or the of construction separate agreements with a
with other books as appropriate. management contractor. designer and a management
contractor. Works contracts are
entered into by the
management contractor who
carries the employers risks.
79
6 The Project Strategy
Contents
6.1 Employers management structure of procurement 6.2 Project Strategy Manual
6.1.1 General 6.2.1 General
6.1.2 Use of consultants for studies 6.2.2 Finance
6.1.3 Design and project strategy decision 6.2.3 Budgeting
6.1.4 Tender stage 6.2.4 Payment to contractors
6.1.5 Continuity of consultant 6.2.5 Other contents
6.1.6 Preparation of the manual
6.1 Employers management structure of procurement

6.1.1 General
Chapter 2 Chapter 5
Chapter 2 discussed the basic considerations leading Chapter 5 described the various types of contracts
to the Feasibility Studies Report. that are available and indicated which would be most
satisfactory for the project in question.
Chapter 3
If the Feasibility Studies Report indicated that the Throughout all the above stages it is necessary for the
project would be viable and worthwhile, then Chapter 3 dealt employer to maintain strict control of the studies and
with the development of a suitable project strategy and the development work being carried out so that the costs are
matters that an employer should consider before taking the limited, so that the decisions taken are based on sound logic,
project further. and so that a reasonable time programme is followed. To this
end the employer should ensure that he provides suitable
Chapter 4 leadership and continuity throughout these stages.
Chapter 4 discussed some aspects of managing the
procurement process.
6.1.2 Use of consultants for studies

Depending on the extent of the employers post. It is also essential that this liaison officer has the authority
organisation, and if the project is not too complex, the on behalf of the employer to provide the consultant with the
employer may be able to develop the project in-house, i.e., necessary assistance, and to make decisions regarding the
with his own resources. However, during the initial studies progress of the studies, without delaying the consultants work.
period it is usual for an employer to engage a consultant, i.e., It can be frustrating for the consultant and adversely affect his
a suitable consulting engineering firm, to carry out these work if the liaison officer is not capable, or not suitably
studies. The consultant will organise the various studies that empowered by the employer, or is frequently changed.
are necessary and provide (or arrange for the provision of) the
specialists in the required disciplines, e.g., geologists, The studies phases of the project will probably be
cartographers, hydrologists, etc. complete with the presentation of the Feasibility Studies
Report including a proposal for a conceptual or preliminary
The consultant will need to have someone in the design of the proposed facility. This stage will be followed by
employers organisation as contact person with whom to liaise the stage for development of the design and, in due course,
on many aspects of the work. For example, the employer may choice of the project strategy. Again the work during this
be required to provide existing maps and weather records, or design stage may usually be carried out by the consultant.
to arrange for permits for the consultants staff to enter the land However, the specialists during this stage, e.g., doing the
areas where the facility may be constructed. Thus it is essential design work or considering the contractual aspects, may have
for the employer to name one suitable person to this liaison different disciplines from those engaged in the earlier studies,
81
although a large consulting firm should also have suitable liaison person who is easily contactable by the
available these specialists. In any case, during this stage consultant, and who has the employers authority to
close contact with the employer by the design consultant answer questions and make decisions.
will still be necessary. Matters may arise on a daily basis
where input from the employer will be necessary, and
therefore it is essential that the employer appoints a
6.1.3 Design and project strategy decision

The conceptual or preliminary design phase strategy chosen, and having started with one particular
leads into the development of the project strategy. No strategy, it is very difficult and very expensive to change
doubt the consultant will make recommendations as to to another strategy later on. For example, if it is first
the project strategy that will be most suitable for the decided that the employer shall do the design, it is very
project. However, the project strategy will depend also difficult at a later stage to change to contractor-design;
on the intentions and future plans of the employer. or if it is decided to divide the project into several
Therefore the project strategy that will determine the different contracts, it is difficult at a later stage to change
further development and implementation of the project the contract packaging; or if the employer has decided
must be carefully considered and discussed in depth on a turnkey contract and then later decides to introduce
between the employer and his consultant. The extensive variations to the works, this is likely to cause
consultant can explain and guide, but senior policy- serious problems and certainly considerable extra costs.
makers of the employer should also be actively involved
in the choice. The importance of a correct decision on
the project strategy cannot be over-emphasised. The
success or failure of the project will rest upon the
6.1.4. Tender stage

The decision on the project strategy to be the consultant will prepare the tender dossier and its
followed will probably include the decision on which enclosed documentation on behalf of the employer.
contract type(s) shall be utilised. Having reached this
stage, it will be time to commence preparation of the Towards the latter stages of preparation of the
tender dossier the document that will be distributed by tender dossier, the employer or his consultant will
the employer to prospective tenderers. If the employer is prepare the documentation for the prequalification of
to provide the design, then the tender dossier will tenderers, and set in motion the prequalification
contain the full design documentation, including procedures. In due course the tender dossier will be
technical specifications and drawings, to enable the distributed to those tenderers who have been accepted
contractor to construct the works. If the contractor is to as being prequalified. For control of these tendering
design the works, then the tender dossier will only procedures it is recommended that the employer
contain conceptual or preliminary design documentation appoints a tendering co-ordinator as described in
and outline or performance-type specifications. Typically, Section 4.3 above.
6.1.5 Continuity of consultant

There are many advantages in having the same must continue to show that he is suited to the various
consultant who carries out the preliminary studies to tasks, and he must maintain the confidence and trust of
continue with the design, and also with the subsequent the employer. Some employers and funding agencies
stages, i.e., preparation of the tender dossier and demand a change of the consultant before a new stage
tendering procedures, followed by supervision of the of the project on the grounds that the consultant might
construction or installation work. In other words, to cover up in a subsequent stage a mistake made in an
employ the same consultant throughout all stages of the earlier stage. This unfortunately means that the
development of the project. However, the consultant advantages of retaining the same consultant, e.g., the
82
consultants familiarity with the project, and often with its new consultant to assimilate the project history and to
background, and the built-up co-operation and trust with the develop a close working relationship with the employer.
employers organisation, will be lost. It will take time for the
6.1.6 Preparation of the manual

This Chapter 6 follows on the previous chapters by team. The procedures set out in the manual are expected to
discussing the requirements necessary for the employer to be strictly followed by all the employers staff.
ensure that the strategy he has decided upon is followed and
will lead to successful procurement of suitable contractors and The manual will also serve to record the bases for the
ensure the successful implementation of the project. This decisions made in the development of the project strategy.
chapter also points to the necessity to categorically record the This will be invaluable at later stages of the project when
project strategy that has been decided upon. This is best questions may be raised about decisions taken earlier, and
done in the form of a Project Strategy Manual which will be when possible re-evaluation of aspects of the project are
distributed to the employers management staff and project undertaken.
6.2 Project Strategy Manual

6.2.1 General
The Project Strategy Manual may be prepared to The Project Strategy Manual should therefore be
follow the headings given in Chapter 3 Developing a Project prepared with care, and should be made available to all the
Strategy. It should extract from the development process the employers management and project staff, and it should be
matters that will be of importance during the implementation obligatory that all follow the directions and procedures set out
stage of the project. The principles and decisions set out in in the manual. It may also be useful for the manual to be made
the manual should then be followed by all the employers staff. available to the project financiers, government policy-makers,
It is most important to follow without deviation the adopted and others concerned.
decisions throughout the whole implementation stage. Much
confusion can be caused if changes are made to the adopted The manual should commence with an outline
philosophy during implementation, with consequent time and description of the project as a whole, and of the various
cost effects. To change the type of contract, for example, contracts involved in the project, if there are to be several
during implementation is almost impossible. To change the contracts. If it is a large and/or complicated project, the
time programme, or to change the scope of work, or make description of the whole project might be followed by a more
other radical changes of another type during the detailed description of the particular contract or discipline in
implementation stage will, as a minimum, cause a variation to question, for use by those involved with only specific parts.
the contractors work, and may, as a maximum, lead to
serious difficulties, complications and argument, with possible
termination of the contract as a final result.
6.2.2 Finance
The provision of sufficient funds to finance the cash-flow requirements throughout the implementation period,
implementation of the facility, and thereafter its operation and together with any maximum or minimum limitations to
maintenance, is a primary duty of the employer. The manual applications for periodic funds.
should state where finance for the project, and for each
contract, is being obtained. It should include any regulations, Procedures for applications for funds by the employer,
restrictions or obligations imposed by those providing the together with information about time notices required, possible
finance, which must be complied with by the employers staff. securities required by the financiers, standard form for the
There should be a cash-flow diagram indicating the expected employers application, required signatories, their powers of
83
attorney, and the documentation to be attached to period and any guarantee periods. Those within the
periodic applications and to final applications, should be employers organisation responsible for handling,
included. The manual should also contain precise preserving and safeguarding all such securities should be
information concerning who in the employers stated.
organisation may sign applications for funds, any
limitations to such authority, as well as complete Employers should not forget to include in their
addresses and other practical information regarding budget requirements sufficient funds for financing the
submission of applications for funds. Dispute Adjudication Board.
The manual should contain full information of all

bank or other guarantees or securities required from
contractors and others during the project implementation
6.2.3 Budgeting
The Project Strategy Manual should state which genuine requirement for extra payment from the
department or person within the employers organisation employer. It is not therefore prudent for an employer to
is responsible for preparing the project budget, both the refuse to include a contingency allowance in a contract,
overall budget and also the detailed budgets for each because as soon as a genuine requirement for extra
contract within the project, as well as the costs for the payment to the contractor arises the employer does not
employers staff and other expenses, as indicated in have funds available, and the process of organising
Section 3.4 above. The budgets should be monitored further funds can take a long time.
and updated at regular intervals. They should include
procedures for early warning in case any particular
budget provision is likely to be exceeded, so that the
employer can be made aware of the situation and steps
taken in time to control the expenditure.
As stated in Section 3.4 above, it is prudent for

an employer to include adequate contingency
allowances in his budgets. Firm restrictions should be
placed on the use of such contingencies, but most
projects need variations of one type or another, as it is
impossible to foresee all eventualities that may occur on
an engineering project. This is even often true in the case
of so-called fixed-price turnkey contracts. Such
variations or unforeseen eventualities usually result in the
6.2.4 Payment to contractors

The manual should include details of the full How the works completed by the contractor
procedure for obtaining periodic and final payment should be measured or certified for payment will normally
applications from the contractor(s). Such details should be set out in the relevant clauses of the contract.
cover the times when applications for interim payments However, for the sake of clarity, and for the information of
may be submitted, or, if applicable, the milestones that staff (for example, in the finance department, who might
need to be reached before an application can be made. not be familiar with the details of the contract), the
It should be stated precisely which documents should requirements for acceptance or otherwise of the
accompany a payment application from a contractor, contractors invoices or statements should also be set
and who should sign such documents or how they out in the manual. The procedure to be followed in case
should be verified. there is disagreement between the contractor and the
84
measurement engineer or other person certifying the payment All too often staff in employers organisations have not
due should also be set out in the manual for the avoidance of understood the seriousness to the contractor when payments
confusion resulting in possible late payment to the contractor. are made late. Sometimes late payment is not at all the fault of
an employer, but is due to red tape along the payment line,
The employers staff should be made aware in the even in the financiers organisation. Therefore it is essential for
manual of the serious consequences of payments being made the employer to consider when preparing the tender dossier
late to contractors, not only the payment of interest or and before signing any contract that he and his staff can abide
financing charges, but the eventual claim for damages or even by the times for payment specified in the contract. If the
termination. A contractor is dependent on receiving his due employer believes that he may have difficulty in making
payments in time, which can be called his lifeblood. Late payment to the contractor within the time specified in the
payment will not only undermine the relationship between the contract, then it is far better for him to increase the specified
parties, but may also cause cash-flow problems for the time period to one with which he can comply.
contractor that may have serious adverse effects on his
business.
6.2.5 Other contents

A Project Strategy Manual typically also includes, - land/property acquisition
together with any other specific project matters, such matters - technical and design standards
as: - environmental policy
- planning/programming
- risk identification, assessment and management
- cost control
- health and safety policy
- training
- contract details
- public relations policy
- purchasing/expediting/inspection
- quality control/assurance standards and procedure.
85
7 Prequalification: Consultancy Appointments
Contents
7.1 General Tables
7.2 Selection methods Table 7.1 Analysis of prequalification applications
7.3 Preparation of prequalification documents for for consultancy appointments: 1st stage
consultancy services Table 7.2 Analysis of prequalification applications
7.4 Invitation to prequalify for consultancy appointments - Quality-
7.5 Issue and return of prequalification documents based selection: 2nd stage - scoring
7.6 Assessment of prequalification applications Table 7.3 Analysis of prequalification applications
7.6.1 Assessment for quality-based selection for consultancy appointments - Quality-
7.6.2 Assessment for subsequent selection with based selection: 2nd stage - effect of
price comparisons weighted percentages
7.7 Notification to prequalification applicants Table 7.4 Analysis of prequalification applications
7.8 Financing agencies guidelines for consultancy appointments -
Applications in which price will be a
Figures factor: 2nd stage - suitable/unsuitable
Fig. 7.1 Choice of fee payment terms marking
7.1 General
Unless the owner or promoter of a project has Selecting a consultant is one of the most important
sufficient suitable, competent staff to undertake the necessary decisions to be made by a client. The success of any project
professional work, he will require assistance and support to often depends upon obtaining the most able, experienced and
carry out the crucial early studies described in Chapter 2 and reputable expertise available.
to develop the project strategy described in Chapter 6. The
owner will also need help to prepare some or all of the detailed The best project results are achieved when there is a
engineering and technical design for the project and, possibly, true professional relationship of absolute trust between the
for the subsequent supervision of the works after the award of client and his consultant. This is because the consultant must
an implementation contract. make sound, objective decisions and act in the best interest of
his client at all times. The method of selection should therefore
Such assistance may be obtained by the owner, as seek to develop mutual confidence between the two parties.
the client, entering into a consultancy services agreement with
a suitable consulting engineer or other consultant to provide There are two key issues to consider when deciding
the services required. the method of selection to apply.
As mentioned in Chapter 3, it is important that, if the 1 It is very difficult, if not impossible, to write a precise
services of a consulting engineer are considered necessary or professional performance specification for a consultant for
even indispensable for the satisfactory implementation of the the equitable application of competitive selection. If the
project, a suitable appointment should be made as early as competitive selection is based on price, different
possible. In addition to the information given in this chapter the consultants may anticipate providing very different levels of
reader is referred to the chapters listed below which describe service which are likely to be reflected in the differences
the subsequent procedures leading to a satisfactory between the offered fees. This difficulty arises because
consultancy services appointment: factors such as the extent of investigations, the
consideration of alternatives, the quality of design and level
- Chapter 9 Consultancy Appointments of innovation cannot be quantified.
- Chapter 15 Receipt and Opening of Proposals and Tenders
- Chapter 16 Evaluation and Recommendations for Award: 2 Successful and satisfactory consulting services depend on
Consultancy Appointments sufficient time being spent on the project by properly
- Chapter 18 Award of Contracts: Consultancy Appointments qualified and suitably experienced people. The method of
87
selection should not force consultancy fees down to necessary resources and experience to perform the
the point where consultants cannot afford to allocate intended services satisfactorily, and that they meet any
properly qualified staff for sufficient periods of time. eligibility criteria required by applicable laws and
Inadequate fees lead to the reduction of the scope regulations.
and quality of the service by less time being spent on
the project and/or lower paid and usually less qualified Although there are many similarities between
personnel being assigned to the work. competitions for consultancy services and competitions
for works contracts, there are sufficient differences for
The most important criteria on which to judge a the procedures to be described separately. It is to be
prospective consultants suitability to carry out services noted that when a contractor gives an offer to carry out
for a particular project are: work his offer is normally called his tender (or bid),
whereas when a consultant is offering his services his
- professional competence and reputation offer is normally referred to as his proposal. This
- managerial ability chapter, therefore, describes the procedures for
- availability of suitable experienced staff prequalification for consultancy services appointments,
- impartiality whilst Chapter 8 covers the prequalification of tenderers
- fairness of fee structure for works contracts.
- professional integrity
- quality assurance system. The procedures described and recommended in
this chapter should be consistent with the current legal
Whenever an appointment for consultancy framework and financial regulations applicable to the
services is planned, prequalification of applicants is project.
strongly recommended to ensure that they have the
7.2 Selection methods

It is firmly believed that it is neither in the best consulting fees for a project is typically only a small
interest of the client nor of the project itself that percentage of the total implementation costs
consultants be selected on the basis of a procurement construction work and plant/equipment comprising the
system which includes a price comparison of their majority of costs and noting that an experienced
professional services. Once a price is introduced the professional consultant can often save much
selection process becomes biased in favour of lowest construction work by elegant design solutions,
fee rather than quality. avoidance of mistakes and other wasted time and costs,
it will be clear that a small increase in the cost of
Practice has shown that lower consulting fees consulting services can lead to large savings in the
do not give any assurance of lower total project costs. In overall construction costs.
fact, the opposite is generally true. Lower consulting fees
may mean: The method that best serves the clients interests
is known as quality-based selection. That is, the client
- inadequate investigations, chooses the consultant on the basis of professional
- less consideration of alternatives, competence, managerial ability, availability of resources,
- poor engineering and design, professional independence, fairness of fee structure,
- less attention to detail, professional integrity, and quality assurance systems.
- use of less qualified staff, and After the choice is made, the client negotiates the fee
- other means of reducing the cost of consultancy work. structure with the consultant for entering into a
consultancy services agreement.
All of these factors will react negatively on the
development of the project, and may lead to higher Detailed guidance on the selection of consulting
implementation costs. Considering that the total cost of engineers together with the advantages to be gained in
88
the adoption of the quality-based selection procedure is to be also given in the publication FIDIC Guidelines for the Selection
found in the FIDIC publication Quality-Based Selection for the of Consultants mentioned above.
Procurement of Consulting Services and also in the FIDIC
Guidelines for the Selection of Consultants. These distinctions are pointed out at this stage
because the recommended initial prequalification processes
Some jurisdictions and client bodies specifically forbid for quality-based selection are normally more rigorous than for
selection of consultants on the basis of price. If, however, a other methods. The reason for this is that in quality-based
client is compelled to include price as an element in the selection most of the important aspects of the overall
selection of his consultant, then there are different procedures evaluation processes will already have been completed at the
for calling for consultancy proposals and different methods for end of the prequalification stage.
the subsequent selection of consultants in which the price of
the services is an element in the final choice. Procedures and Whichever method is adopted it will be necessary to
basic methods of selection in which price plays a part in the prepare a list of consultants considered to be qualified for the
decision-taking process are described in Chapter 9 project as described in the section below.
Consultancy Appointments.
Wherever established procurement procedures require

prices for professional services to be prepared, guidance is
7.3 Preparation of prequalification documents for consultancy services

The prequalification documents for consultancy The prequalification documents should include at least
services appointments are prepared by or on behalf of the the following particulars:
client and will normally include:
- name, address, telephone and telefax numbers and email
- letter of invitation to apply for prequalification; address of the client;
- information about the prequalification procedure; - location where the project will be implemented;
- project information, and information about the scope of - description of the project and scope of services to be carried
services to be tendered; and out under the consultancy services agreement;
- prequalification application forms and prequalification - if the project is to be subdivided into a number of
questionnaires. consultancy services packages:
- the scope of the consultancy services involved in each, and
The prequalification procedure should: - information as to whether it is possible to submit proposals
for one, more than one, or for all packages.
- be based on questionnaires. - anticipated time programme, indicating the proposal
A standard questionnaire will help maintain conformity of preparation period, date for entering into a consultancy
information sought, thus making the responses quicker and services agreement and any other relevant key dates;
cheaper to provide, and at the same time making them more - form of agreement to be used;
readily comparable. - criteria for prequalification (see Section 7.6 below);
- be relatively simple and yet flexible so as to permit - anticipated sources of finance;
consideration of new organisations. - payment arrangements envisaged (including currencies);
- take account of both the technical and financial aspects of - insurances to be carried by the successful applicant;
the project. - whether cost adjustment formulae will be included;
- allow for the updating of information previously provided by - language and law of the consultancy services agreement;
firms to the same client for an earlier project, thus avoiding - any aspect of the intended consultancy services which is
unnecessary duplication of effort. unusual and would thus have a bearing on the consultants
- authorise the client to seek supplementary information from obligations;
other sources. - consultants liability for defects;
89
- professional indemnity insurance cover required; and Choices for the payment methods available are
- aggregate limit of liability. indicated in Figure 7.1 Choice of fee payment terms.
Whichever method is adopted, it is clearly
Prospective applicants should also be advised advantageous to the client if the briefing information
of: available to the consultant at the time of the
appointment is as full and complete as possible: the
- The policy of the client concerning preference for local greater the information available the less will be the
products and services. initial investigations and studies required to be carried
- The attitude of the client to joint ventures. out by the consultant and, correspondingly, the lower
It is recommended that joint ventures should be allowed will be the total fee.
to prequalify but, in doing so, each member of the joint - The name, address and latest date for receipt of
venture should submit separate prequalification submissions, including any particular instructions for
documentation. However, because it reduces the labelling.
breadth of competition, any subsequent formation of - The language to be used for the submission.
joint ventures from amongst prequalified organisations - The currency to be used for presenting financial
should be restricted. Nevertheless, a prequalified information.
organisation should be allowed to strengthen its - Any requirement for power of attorney for authorised
capability by the subsequent incorporation, during the signatories.
proposal evaluation period, of non-prequalified firm(s),
subject to the approval of the client. If the project involves or may involve the
- The number of copies of prequalification applications to exchange of confidential information or the client wishes
be submitted. to control the release of information about the project
- The terms of payment for the services which are to be into the public domain, the client should require the
incorporated into the consultancy services agreement. consultant to enter into a confidentiality agreement.
7.4 Invitation to prequalify

The client would normally publish a notice - name of the client;
inviting interested consultants to apply for prequalification - description and location of the project and scope of the
documents. The notice should state that the quality- consultancy services;
based selection method is to be applied or, if not, that - estimated cost range or budget for the services;
proposal dossiers will be issued only to a limited number - sources of finance;
of consultant firms/joint ventures selected by or on - anticipated time programme dates (i.e., for entering into
behalf of the client as having the necessary qualifications consultancy services agreement, completion and any
to perform the work satisfactorily. other key dates);
- the payment terms, as appropriate, see Figure 7.1;
The notice should be published in appropriate - planned dates for quality-based selection negotiation or
newspapers, official publications, technical journals and for issue of proposal dossiers and submission, as
on the internet, to give sufficient publicity according to appropriate;
the particular circumstances of the project. The notice - criteria for quality-based selection or for
may also be issued to financing institution prequalification;
representatives, if relevant, and to government agencies - criteria for selection of short-listed applicants;
responsible for foreign trade so that the international - criteria for evaluation of proposals;
community receives timely notification of the proposed - instructions for applying for prequalification documents;
project and instructions on how to apply. - date by which applications to prequalify must be
submitted; and
The notice would need to be in accordance with - minimum qualification requirements and any particular
any government regulations and should be reasonably aspects which could be of concern to prospective
brief and contain: applicants.
90
The period between the notice of invitation to - FIDIC Member Associations;

prequalify and the latest date for the return of completed - persons or organisations that have employed consultants for
applications should not be less than four weeks. similar projects.
Subject to any local regulation, in addition to the issue

of a notice of invitation to prequalify, as described above,
names of possible consultants can be obtained from other
sources including:
7.5 Issue and return of prequalification documents

On receipt of requests from applicants, the client In the event that the quality-based selection method is
should issue the prequalification documents. These not to be adopted and if it is intended to charge for the
documents should state how an application is to be packaged subsequent issue of the proposal dossier, details should be
and submitted. given in the prequalification notice. However, it is customary to
issue dossiers free of charge.
The client should acknowledge receipt of the
completed prequalification applications.
7.6 Assessment of prequalification applications

It is usual for the client to appoint a committee of The first stage requires the committee to check the
suitably experienced persons to evaluate the applications and completeness of applications and the eligibility of applicants to
prepare a shortlist of suitable consultants. The evaluation prequalify. An applicant declared bankrupt or convicted of
analysis can conveniently be described in two stages. fraud, money laundering or corruption or who has knowingly
ALL Fixed fee
Percentage of proposal price plus percentage of final cost
Percentage of final cost

Briefing
information
available Target man-hours at agreed rates
at time of
appointment
Reimbursable plus fixed fee
Fully reimbursable
VERY
LITTLE
LOW Scope for variations HIGH
LOW Complexity of the project HIGH
MIN Employer control MAX
Fig. 7.1 Choice of fee payment terms
91
submitted false information with the object of gaining unsuitable applicants against each of the described
prequalification should be excluded from the evaluation. criteria.
In addition, the committee should be satisfied The outcome of the subsequent assessment of
that the applicant has the financial resources and the second stage of the evaluation process for
backing to meet salaries, wages, materials, supplies and prequalification for the quality-based selection, as
all other costs until the forecast payments become due compared with prequalification for the submission of
under the agreement and to meet the costs of all other proposals in which price will be a subject of comparison,
ongoing commitments during the period of the services. will differ.
As a guide the committee will expect the total annual
turnover of the applicant to be in the order of at least The important difference is that with quality-
three times the anticipated annual turnover of the based selection the chosen applicants with whom
contract. Failure to meet the minimum financial negotiations are to be carried out are identified upon
requirements should result in the applicant being completion of the prequalification stage.
excluded from further evaluation.
However, if price is to be a factor in the
The results of this first stage of the assessment evaluation, the successful applicant is not known until
can be conveniently recorded, as shown in Table 7.1 - completion of evaluation of all proposals received at the
Analysis of prequalification applications for consultancy end of an evaluation period, as described in Sections 9.3
appointments, by marking either s for suitable or u for and 16.3.
7.6.1 Assessment for quality-based selection

When the quality-based method of selection is relatively high or low, the scoring against each criterion for
adopted, great care must be taken to identify differences all applicants should be made by the same evaluators,
at the prequalification stage between potential who should be not less than four, and the scores
applicants abilities and qualities. The aim at the averaged. To assist in the comparison of applicants, it is
prequalification stage is to rank all applicants so that it is also recommended that all applicants are scored for a
the highest ranking applicant only who is taken forward particular criterion before considering the next criterion.
to negotiate a consultancy services agreement.
It is suggested and recommended that the
It is recommended that the second stage of the criteria to be considered for comparison between
quality-based selection analysis uses a numerical applicants should include all, but need not be limited to,
comparison between applicants for each of the criteria. the following factors:
Each criterion is given a maximum score of 100.
- Organisation and management; administration; location
To avoid possible distortion in scoring values, of offices.
which might be caused by different evaluators marking - Available resources in terms of management capability
Prequalification Criterion Code for Prequalification Applicants

1 2 3 4 5 6 7 8 9 10 11 12
Eligibility and Completeness of Application s s s s s s s u s s s s

Financial Stability s s s u s s s s s s u s
Notes 1 An s is marked for suitable and a u for unsuitable applicants.

2 Applications found to be incomplete or ineligible or lacking in financial stability are excluded from the
second-stage of the analysis for quality-based selection and from the third stage of the analysis for selection
with price comparison, as applicants 4, 8 and 11 marked by a u in this example.
Table 7.1 Analysis of prequalification applications for consultancy appointments: 1st stage
Matrix example for the evaluation of eligibility and completeness of applications and of financial stability
92
and experience of professional and technical staff. - Experience in both the type of consultancy services required
- Extent to which any consultancy services would be likely to and the country or region in which the relevant works
be subcontracted. contracts are to be undertaken.
- Relevant projects completed; capacity to complete the work; - Relationships with local consultants, taking into account any
project performance skills; past performance for other potential language difficulties.
clients; methodology; innovation; efficiency. - Quality assurance procedures, health and safety plan and
- Relevant projects in progress. environmental policy.
Prequalification Criterion Code for Prequalification Applicants Weighting

1 2 3 4 5 6 7 8 9 10 11 12 Applied
1 Structure, organisation & management 75 65 75 - 70 90 95 - 50 80 - 65 20%

2 Available resources & design capability 60 75 85 - 65 95 95 - 15 70 - 65 35%
3 Services to be subcontracted 15 10 25 - 90 50 5 - 0 0 - 0 -10%
4 Experience: relevant projects completed 90 60 60 - 20 85 85 - 90 90 - 70 20%
5 Experience: relevant projects in progress 85 60 75 - 15 85 85 - 85 85 - 40 20%
6 Experience: geographical 35 30 45 - 60 50 45 - 20 10 - 25 5%
7 General suitability 30 20 25 - 30 30 40 - 25 30 - 25 5%
8 Quality assurance system, health and 50 50 40 - 40 50 50 - 60 10 - 60 5%
safety plan and environmental policy
Total: 100%
Notes 1 Applications found to be suitable with regard to eligibility, completeness of application and financial stability are evaluated
in the second stage of the analysis. Applicant numbers 4, 8 and 11 are excluded as a result of the findings shown in the
example of Table 7.1.
2 The average scores against each of the criteria out of a maximum of 100 for each criterion are entered in this matrix in
this second stage of the analysis.
3 In this analysis, all applicants, except numbers 4, 8 and 11 are taken forward for the scores to be weighted.
Table 7.2 Analysis of prequalification applications for consultancy appointments
Quality-based selection: 2nd stage - scoring
Prequalification Criterion Reference Code for Prequalification Applicants Weighting

1 2 3 4 5 6 7 8 9 10 11 12 Applied
1 Structure, organisation & management 15.00 13.00 15.00 - 14.00 18.00 19.00 - 10.00 16.00 - 13.00 20%
2 Available resources & design capability 21.00 26.25 29.75 - 22.75 33.25 33.25 - 5.25 24.50 - 22.75 35%
3 Services to be subcontracted -1.50 -1.00 -2.50 - -9.00 -5.00 -0.50 - 0.00 0.00 - 0.00 -10%
4 Experience: relevant projects completed 18.00 12.00 12.00 - 4.00 17.00 17.00 - 18.00 18.00 - 14.00 20%
5 Experience: relevant projects in progress 17.00 12.00 15.00 - 3.00 17.00 17.00 - 17.00 17.00 - 8.00 20%
6 Experience: geographical 1.75 1.50 2.25 - 3.00 2.50 2.25 - 1.00 0.50 - 1.25 5%
7 General suitability 1.50 1.00 1.25 - 1.50 1.50 2.00 - 1.25 1.50 - 1.25 5%
8 Quality assurance system, health and 2.50 2.50 2.00 - 2.00 2.50 2.50 - 3.00 0.50 3.00 5%
Average weighted scores: 70.25 67.25 74.75 - 41.25 86.75 92.50 - 55.50 78.00 - 63.25
Notes 1 The criteria headings and weighted percentages to be applied will have been set out in the proposal request and cannot
be amended at the prequalification evaluation stage.
2 In the example above applicant number 7 would be invited to negotiate a consultancy agreement as described in
Chapters 9 and 16. Applicants with lower scores would be held in reserve.
Quality-based selection: 2nd stage - effect of weighted percentages
93
Each criterion will have been previously given a and key personnel, to visit their offices and work places,
weighting factor as shown on the right-hand side of the to examine systems and methods of work, to hold
example shown in Table 7.2. The average score against discussions with their past clients and to inspect their
each criterion for each applicant is then adjusted by the completed projects. This is important if the scores of the
weighted percentage. Table 7.3 provides an example of highest ranking applicants are very close to assist in
the effect of the weighted percentages. making a final decision.
In Tables 7.2 and 7.3 it is considered for this The agreed decisions on the shortlist by the
example that the subcontracting of services would be a committee are then recorded on an evaluation matrix
detriment to the quality of services to be provided and, form, an example of which is provided by Table 7.3.
accordingly, has been given a negative weighting. While
negative weighting and scoring will not generally be If the quality-based selection method is adopted,
necessary, the example demonstrates how negative the highest ranked applicant applicant number 7 in the
weighting may sometimes be appropriate. example matrix shown in Table 7.3 should be invited to
negotiate a consultancy services agreement. In the event
The criteria headings and weightings may, of that the negotiations with the highest ranked applicant
course, be adjusted to suit the circumstances of the founder, the next highest ranked applicant should be
project. Where appropriate and feasible, it is of invited to negotiate.
advantage to interview each applicants management
7.6.2 Assessment for subsequent selection with price comparisons

The second stage of the analysis for selection and financial stability, will be recorded as s for suitable
with price comparison will determine, for each of the or u for unsuitable.
applicants remaining at the end of the first stage, their
suitability based on criteria for comparison between The agreed decision of the selection committee
applications and may include but need not be limited to is then recorded on an evaluation matrix form, an
the following: example of which is shown in Table 7.4. In practice
certain criteria for some applicants are not likely to be
- organisation and management; administration; location entirely satisfactory. In such cases supplementary notes
of offices; may be made of any shortcomings for attachment to the
- available resources in terms of management capability evaluation form.
and experience of the consultants professional and
technical staff; For the procurement of consulting services in
- extent to which any consultancy services would be which price is to play a part in the selection process, it
likely to be subcontracted; would normally be satisfactory to carefully select not
- relevant projects completed; capacity to complete the more than three to five applicants from the
work; project performance skills; past performance for prequalification analysis who have been described as
other clients; methodology; innovation; efficiency; suitable as, for example, three to five applicants from
- relevant projects in progress; numbers 1, 2, 3, 6, 7, and 10 shown in Table 7.4.
- experience in both the type of consultancy services
required and the country or region in which the relevant Whenever the number of prequalified applicants
works contracts are to be undertaken; is greater than five, the analysis of the prequalification
- relationships with local consultants, taking into account applications may be re-examined carefully to reduce the
any potential language difficulties; number. A review of any supplementary notes attached
- quality assurance procedures, health and safety plan to the evaluation form should be made by the committee
and environmental policy. to identify the best prequalified candidates.
The marking will be subjective and, as already A review may be supplemented by previous
assessed for eligibility and completeness of application experience of the client and by confidential enquiries
94
made to previous clients, trade associations and directories or An unofficial advice to clients is do not prequalify any
national company registers. The committee may also wish to consultant to whom you would be unhappy to award the
visit some of the firms, to meet with senior staff, to examine consultancy services agreement. The success of the project
systems and methods of work, and to enquire as to computer may depend to a large extent on the close co-operation and
hardware and software capabilities. trust between the client and his consultant. Clearly, a client
must have a substantial reason for excluding a consulting firm
If the number of prequalified applicants is less than from prequalification.
three, the client may invite additional applications for
prequalification analysis.
The committee should record and document the

reasons for the decisions made in reaching the final shortlist of
prequalified applicants.
7.7 Notification to prequalification applicants

When the recommended quality-based selection competitive proposals. If a potential consultant wishes to drop out
method is adopted, it is advised that a minimum of three and at this stage, the next best-placed applicant should be invited and
not more than five of the highest ranked applicants are held in requested to confirm his intention to submit a proposal.
reserve in the event that negotiations with the initially identified,
highest ranked applicant founder. The remainder should be Following this, all applicants should be notified of the
advised that their applications have not been successful. list of selected prequalified consultants without their being
given an explanation of the decisions.
When price is a factor in the subsequent evaluation
process and the list of selected and prequalified applicants The client should advise successful applicants when
has been prepared, successful applicants should be notified they can expect to receive proposal dossiers, and should
and requested to confirm their intention to submit a proposal. notify all other prequalification applicants that they have not
This should ensure, as far as possible, an adequate number of been selected.

1 2 3 4 5 6 7 8 9 10 11 12
1 Structure, organisation and management s s s - s s s - u s - s

2 Available resources and design capability s s s - s s s - u s - s
3 Experience: relevant projects completed s s s - u s s - s s - s
4 Experience: relevant projects in progress s s s - u s s - s s - u
5 Experience: geographical s s s - s s s - u s - u
6 General suitability s s s - s s s - s s - s
7 Quality assurance system, health and s s s - u s s - s s - s
Notes 1 Applications found ineligible or lacking in completeness of application or financial stability are excluded from the
second-stage analysis, as are applicants number 4, 8 and 11 in this example.
2 An s is marked for suitable and a u for unsuitable.
3 Any application marked with a u against a prequalification criteria should be rejected.
4 In the example above, applicants number 1, 2, 3, 6, 7, and 10 are satisfactory and, therefore, prequalified to prepare and
submit proposals in which price will play a part.
Applications in which price will be a factor: 2nd stage - suitable/unsuitable marking
95
7.8 Financing agencies guidelines

Many projects in developing countries are In view of the great variety of procurement
financed by the International Financing Agencies (IFIs) or guidelines, and as they are generally well documented,
bilateral financing agencies. These financing institutions further details are not presented here, but readers are
and agencies generally require that the works contracts referred to the various websites of these financing
and consultancy services agreements are procured institutions or agencies for information about their
under their own guidelines. Whilst there are many specific requirements. In general, the guidelines of these
similarities between the procurement guidelines of the bodies correspond well to FIDICs guidelines.
various institutions and agencies, they differ significantly
as regards selection methods, prequalification
procedures, instructions to tenderers, standard bidding
documents, standard contracts, evaluation criteria, etc.
96
8 Prequalification of Tenderers:
Contracts for Works
Contents
8.1 General 8.8 Notification to prequalification applicants
8.2 Tendering methods
8.2.1 Open Tables
8.2.2 Selective Table 8.1 Analysis of prequalification applications
8.2.3 Negotiated for the tendering of contracts for works
8.2.4 Competitive dialogue - financial stability
8.3 Prequalification documents: contracts Table 8.2 Prequalification form and weighting
for works factor for each criterion for Tables 8.3
Appendix and 8.4.
8.3.1 Standard Prequalification Form for Table 8.3 Analysis of prequalification applications
Contractors for the tendering of contracts for works
8.4 Invitation to prequalify - scoring sheet
8.5 Issue and return of prequalification documents Table 8.4 Analysis of prequalification applications
8.6 Assessment of prequalification applications for the tendering of contracts for works
8.7 Selection of tenderers - applicatiion of weighting
8.1 General
Prequalification of tenderers is strongly recommended chapter, and in Chapters 15, 17 and 19, should be applied
to ensure that tenders are sought only from contractors for consistently within the current legal framework and financial
works whom the employer has established as having the regulations applicable to the project.
necessary resources and experience to perform the intended
work satisfactorily and as meeting any eligibility criteria that For example, some financing institutions require that
may be required by the applicable laws and regulations. all applicants, who possess the ability to perform the
proposed contract, should be prequalified.
The procedures described and recommended in this
8.2 Tendering methods

Before dealing with the documents to be prepared for should be clearly stated in the prequalification invitation
prequalification enquiries, it is useful to be aware of the documents.
alternative methods of tendering which can be employed.
Descriptions of four of the more usual methods,
The method to be adopted will be influenced by the generally known as the open, selective, negotiated and
size, complexity and anticipated cost of the contract and competitive dialogue methods, are given below.
8.2.1 Open
Notices advertising the call for tenders from This method is not generally recommended by FIDIC
contractors for works are given wide publicity through as it is clearly wasteful of tenderers and employers resources.
appropriate media. The number of responses and subsequent However, the procurement regulations in the country must be
tenders is unlimited. Each respondent to the call for tenders is checked because the open method may be obligatory for
sent both a prequalification questionnaire and a tender dossier. public works projects under the regulations of some
jurisdictions. The method is more frequently used for contracts
A completed prequalification questionnaire is then of small value.
submitted with the tender to the employer.
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Contracts for Works
8.2.2 Selective
This method is also known as the restricted In his own interests (unless he is not permitted
method. In the first stage of this method invitations to by regulations to do so), the employer should limit the
prequalify for submission of tenders are issued through number of prequalified tenderers. The invitation to
appropriate media to contractors for works. Subject to prequalify issued by the employer should ideally indicate
any regulations governing tendering procedures the number of firms and joint ventures which is expected
applicable in the country, invitations may also be made to be prequalified. This number should be determined
by direct approaches to suitable firms. carefully, taking account of the requirements of any
financial institution providing funds for the project, and of
Following the issue of prequalification the work required for the preparation of a compliant
questionnaires and the return of completed submissions, tender.
a list is prepared of all the applicants who satisfactorily
meet the prequalification criteria. Whereas a maximum of six to eight tenderers
might be appropriate for an uncomplicated employer-
In the second stage of this method a limited designed construction contract, five might be preferable
number of prequalified firms or joint ventures is then asked for contractor-designed works, while three might be
whether they wish to tender for the specific contract. sufficient for complex turnkey works.
8.2.3 Negotiated
This method is typically used only in situations In such situations negotiations normally take
where: place with one selected contractor. The selection is
made from a list of firms who have met the qualifying
- there is urgency in getting work done, or criteria. However, a minimum of three tenderers may be
- a satisfactory tender is not expected from a repeat of a required under some jurisdictions and circumstances. If
tender enquiry from which no award was made, or negotiations take place with more than one tenderer, the
- minor work cannot be separated without disadvantage confidentiality of each of the negotiations must be strictly
from larger work already awarded, or maintained.
- specialised equipment can only be supplied by one
firm, or
- the work is subject to secrecy regulations.
8.2.4 Competitive dialogue

This is a relatively new method which is being requirements of the employing authority;
progressively used for large and complex infrastructure - discussion may be conducted in successive stages
projects. It is adopted where the employing authority is with the aim of reducing the number of tenders;
not readily able to finalise the technical requirements of - there are explicit rules on post-tender discussion;
the project by itself and identifies a need to discuss in - contract award is made on the most economically
detail all aspects of the proposed project with tenderers. advantageous tender complying with the award criteria.
Discussions or dialogues with tenderers prior to The main differences from the negotiated
tender submission will cover all technical and environmental method are that a structured tendering approach is
aspects and specifications, as well as financial, legal and adopted in the development of the technical
commercial issues including payment terms. specifications, and that further discussions for
clarification only may be held with the tenderers after
The main features of the method are: submission of tenders.
- discussion takes place with selected tenderers to Prior to prequalification and the submission of
identify and define solutions to meet the needs and tenders a notice of invitation to take part in a competitive
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Contracts for Works
dialogue is issued through appropriate media to organisations, When acceptable solutions are defined, a date is then
often joint ventures of contractors, to undertake the works. usually set for the tenderers to submit their tenders based on
The notice states the award criteria and the number of the requirements that were formed at the conclusion of the
organisations that are expected to be selected to take part in dialogue.
the competitive dialogue.
Tenders may be required to follow a two-stage
From a prequalification analysis the employing process, as described in Chapter 17.
authority selects at least three organisations to take part in the
competitive dialogue. The discussions then take place Without changing the fundamental requirements of the
separately with each organisation. The employing authority project or the terms of the contract, the employing authority
ensures that each organisation is treated equally and its may seek further clarification from tenderers. The contract is
information kept confidential. The discussions may proceed in awarded on the basis of the most economically advantageous
stages to reduce the number of solutions being discussed and tender in accordance with the award criteria.
may involve interviews and written and oral presentations
together with simulated exercises that try to identify future
problems and risks that may develop during implementation.
8.3 Prequalification documents: contracts for works

Prequalification documents should give information - Allow for the updating of information previously provided by
about the project/contract, the prequalification procedure, the contractors to the same employer for an earlier project, thus
tendering procedure and the contract award criteria. They avoiding unnecessary duplication of effort.
should set out the dates for return of the completed - Authorise the employer to seek supplementary information
prequalification documents and for issue of the tender dossier, from other sources.
the tendering period and the programmed contract award
date. The documents must also specify what data is required In order to ensure orderly and easily appraised
from contractors wishing to prequalify. responses, the FIDIC Standard Prequalification Form for
Contractors, reproduced in Appendix 8.3.1, is recommended.
The prequalification documents are prepared by or on However, applicable laws and regulations may prescribe
behalf of the employer and will normally include: detailed procedures for the prequalification of tenderers, in
which case due regard must be taken of these requirements.
- letter of invitation to apply for prequalification;
- information about the prequalification procedure; The prequalification documents should include at least
- project information, and information about the scope of the the following particulars:
contract to be tendered;
- prequalification application forms and questionnaires. - Name, address, telephone and telefax numbers and email
address of the employer.
The prequalification procedure should: - Name, address, telephone and telefax numbers and email
address of the engineer (if appointed) or other employers
- Be based on questionnaires. representative.
A standard questionnaire will help maintain uniformity of - Location of the project/contract.
information sought, thus making the responses quicker and - Description of the project and scope of work to be included
cheaper to provide, and at the same time making them more in the contract, including, if necessary, any requirement for
readily comparable. Questionnaires should be so worded that training of operators and/or post-commissioning operation
responses may be classified quickly and easily by evaluators. and maintenance.
- Be relatively simple and yet flexible so as to permit - If the project is to be subdivided into a number of works
consideration of new organisations. packages:
- Take account of both the technical and financial aspects of - the scope of the work involved in each, and
the project/contract. - information as to whether it is possible to tender for one,
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Contracts for Works
more than one, or for all works packages. - The attitude of the employer to joint ventures.
- Anticipated time programme, indicating the tender It is recommended that joint ventures should be allowed
period, contract award date, to prequalify but, in doing so, each member of the joint
design/manufacture/construction/installation/ venture should submit separate prequalification
commissioning periods and any other relevant key documentation. However, because it reduces the
dates. breadth of competition, any subsequent formation of
- Form of contract to be used. joint ventures from amongst prequalified organisations
- Criteria for prequalification, described in Section 8.6 should be restricted. Nevertheless, a prequalified
below. organisation should be allowed to strengthen its
Criteria for evaluation of tenders. capability by the subsequent incorporation, during the
- Details of any work intended to be carried out by tender period, of non-prequalified firm(s), subject to the
nominated subcontractor(s). approval of the employer.
- Anticipated sources of finance (including any - The number of copies of prequalification applications to
requirements for contractor financing). be submitted.
- Payment arrangements envisaged (including currencies). - The name, address and latest date for receipt of
- Any financial guarantees including parent company submissions, including any particular instructions for
guarantees, if applicable, to be given by the tenderer. labelling.
- Whether provision for changes in cost will be included - The language to be used for the submission.
(cost escalation/inflation provisions). - The currency to be used for presenting financial
- Language and law of the contract. information.
- Any aspect of the intended work which is unusual and - Any requirement for power of attorney for authorised
would thus have a bearing on the contractors signatory.
obligations.
- Charges for purchase of tender dossier, if applicable. If the project involves or may involve the
exchange of confidential information, or the client wishes
Prospective applicants should also be advised of to control the release of information about the project
the following: into the public domain, the client should require the
contractor to enter into a confidentiality agreement.
- The policy of the employer concerning the use of local
labour, facilities and materials.
8.4 Invitation to prequalify

The employer should publish a notice inviting responsible for foreign trade so that the international
interested contractors to apply for prequalification community receives timely notification of the proposed
documents. Except when a call for open tenders is project and instructions on how to apply.
made (when the tender dossier will be issued with the
prequalification documentation) the notice should state The notice should be reasonably brief and,
that tender documents will be issued only to a limited where possible, contain:
number of companies/joint ventures selected by or on
behalf of the employer as having the necessary - Name of the employer.
qualifications to perform the work satisfactorily. - Name of the engineer (if appointed), or other employers
representative.
The notice should be published in appropriate - Location of the project/contract.
newspapers, official publications, technical journals, and - Description of the project/contract and scope of work.
on the internet, to give sufficient publicity according to - Estimated cost range or budget for the contract.
the particular circumstances of the project/contract. The - Sources of finance.
notice may also be issued to financing institution - Anticipated programmed dates (i.e., award of contract,
representatives, if relevant, and to government agencies completion and any other key dates).
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Contracts for Works
- Planned dates for issue of tender dossiers and submission of The period between the notice of invitation to
tenders. prequalify and the latest date for the return of completed
- Criteria for prequalification. applications should not be less than four weeks.
- Criteria for selection of short-listed tenderers.
- Criteria for evaluation of tenders. For most contracts, the notice of invitation should be
- Instructions for applying for prequalification documents. published between ten to fifteen weeks before the planned
- Date by which to submit applications to prequalify. date for issue of tender dossiers, and completed
- Minimum qualification requirements and any particular prequalification applications should be submitted to the
aspects which could be of concern to prospective tenderers. employer four to eight weeks before that date.
8.5 Issue and return of prequalification documents

On receipt of requests from respondents, the The employer should acknowledge receipt of the
employer should issue the prequalification documents. As completed prequalification applications from the respondents.
mentioned in Section 8.3, the FIDIC standard prequalification
form is shown in Appendix 8.3.1. If it is intended to charge for the issue of the tender
dossier, details should be given in the prequalification
The documents should state how the application is to documents.
be packaged and returned.
8.6 Assessment of prequalification applications

The employer should evaluate the prequalification submitted false information with the object of gaining
applications to identify those companies/firms/joint ventures prequalification should be excluded from the evaluation.
considered to be suitably qualified and experienced to
undertake the intended contract. For this task it is usual for the The committee should be satisfied that the applicant
employer to appoint a committee of suitably experienced has the financial resources and backing to meet salaries,
persons to evaluate the applications and prepare a shortlist of wages, materials, supplies, and all other costs until the
suitable contractors. forecast payments become due under the contract, and to
meet the costs of all other ongoing commitments during the
The committee should check the eligibility of period of the contract. As a guide the committee will expect
applicants to prequalify and that the applications are the total annual turnover of the applicant to be at least three
complete. An applicant declared bankrupt or convicted of times the anticipated annual revenue from the contract. Failure
fraud, money laundering or corruption or who has knowingly to meet the minimum financial requirements should result in

1 2 3 4 5 6 7 8 9 10 11
Eligibility and Completeness of Application u s s s s s s s s s s

Financial Stability s s s u s s s s s s s
Notes 1 An s is marked for suitable and a u for unsuitable applicants.

2 Any application marked with a u against either criterion should be rejected.
3 In the example above, applicants 1 and 4 would be rejected.
Table 8.1 Analysis of prequalification applications for the tendering of contracts for works
Matrix example for the evaluation of eligibility and completeness of applications and of financial stability
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Works Contracts
the applicant being excluded from further evaluation by confidential enquiries made to previous employers or
the committee. clients, and from trade associations and directories or
national company registers.
A convenient method of comparison of eligibility,
completeness of applications and financial stability of the A convenient method of comparing applications
applicants is by the completion by members of the is to record scores against criteria representing various
committee of the form shown in Table 8.1. Each aspects of the submissions. The resulting scores are
applicant, having been given a reference code, is marked then suitably weighted. An example of this method is
as either suitable or unsuitable. Unsuitable applicants illustrated in the analysis given in Tables 8.3 and 8.4.
would normally be excluded from further consideration.
An example of the use of a matrix comparison
The committee should then determine for each form before the application of weighting is illustrated in
applicant its capacity and suitability based on: Table 8.3. The criteria are shown on the left-hand side of
the table while columns are provided for entries of the
- Structure and organisation; location. scores against the headings under each of the
- Available resources in terms of management capability, prequalification applicants 1 to 11 (eleven applicants in
technical staff, construction equipment, fabrication this example). The scoring against each criterion is in the
facilities, and any other relevant factors such as, if range 0-100, 100 being exceptional and going down
appropriate, training facilities and operation and through the ranges of very good, good, average,
maintenance capabilities. poor and weak to 0 showing no data.
- Extent to which any work would be likely to be
subcontracted. It is good practice for the same evaluators, who
- Experience in both the type of work and the country or may be more but never less than two, to score each
region in which it is to be undertaken. criterion for each applicant and for the evaluators scores
- Relationships with local companies, taking into account for each criterion for each applicant to be averaged. This
any potential language difficulties. method avoids possible distortion in scoring values,
- Quality assurance procedures; health, safety and which might be caused by different evaluators marking
environmental policy. relatively high or low. To assist in the comparison of
- Litigation and arbitration history. applicants, it is also recommended that the evaluators
- Security level required. score all applicants for a criterion before the next
criterion is considered.
Evaluation of the capacity and suitability of
potential contractors should be made on the basis of the In the case of joint ventures, for which each
prequalification application. This may be supplemented member will have been given separate subjective scores
by previous experience of the employer and by under each criterion, it is suggested that averages of the
Criterion Maximum Score Prequalification Form Weighting Percentage
1 Structure and organisation 100 C, E and F 10%

2 Resources: directors, managers and staff 100 G and H 10%
3 Resources: labour force/subcontractors 100 I 5%
4 Resources: plant, equipment and facilities 100 J 5%
5 Experience: geographical 100 K 5%
6 Experience: relevant contracts completed 100 L 15%
7 Experience: all contracts in progress 100 M 15%
8 Quality assurance system, health and 100 N, O and P 15%
9 Litigation and arbitration history 100 S 20%
Maximum possible: 100%
Table 8.2 Prequalification form and weighting factor for each criterion for Tables 8.3 and 8.4
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Contracts for Works

1 2 3 4 5 6 7 8 9 10 11 to Apply
1 Structure and organisation - 90 87 - 75 60 78 58 70 89 82 10%

2 Resources: directors, managers and staff - 67 89 - 59 89 87 78 67 86 82 10%
3 Resources: labour force/subcontractors - 74 85 - 78 60 78 83 77 78 76 5%
4 Resources: plant, equipment and facilities - 78 83 - 85 88 75 89 66 85 79 5%
5 Experience: geographical - 76 63 - 65 69 78 87 90 56 88 5%
6 Experience: relevant contracts completed - 70 75 - 77 67 88 90 90 55 50 15%
7 Experience: all contracts in progress - 68 65 - 80 66 66 50 55 85 73 15%
8 Quality assurance system, health and - 85 88 - 75 86 90 95 95 86 84 15%
9 Litigation and arbitration history - 40 45 - 60 66 70 60 50 48 70 20%
Notes 1 The average scores of evaluators are given against each criterion for each suitable applicant.
2 Maximum score against each criterion is 100.
3 In the example above, applicants 1 and 4 had been eliminated after the evaluation of eligibility, completeness of
application and financial stability.
Matrix example: scoring sheet

1 2 3 4 5 6 7 8 9 10 11 Applied
-
1 Structure and organisation - 9.00 8.70 - 7.50 6.00 7.80 5.80 7.00 8.90 8.20 10%
2 Resources: directors, managers and staff - 6.70 8.90 - 5.90 8.90 8.70 7.80 6.70 8.60 8.20 10%
3 Resources: labour force/subcontractors - 3.70 4.25 - 3.90 3.00 3.90 4.15 3.85 3.90 3.80 5%
4 Resources: plant, equipment and facilities - 3.90 4.15 - 4.25 4.40 3.75 4.45 3.30 4.25 3.95 5%
5 Experience: geographical - 3.80 3.15 - 3.25 3.45 3.90 4.35 4.50 2.80 4.40 5%
6 Experience: relevant contracts completed - 10.50 11.25 - 11.55 10.05 13.20 13.50 13.50 8.25 7.50 15%
7 Experience: all contracts in progress - 10.20 9.75 - 12.00 9.90 9.90 7.50 8.25 12.75 10.95 15%
8 Quality assurance system, health and - 12.75 13.20 - 11.25 12.90 13.50 14.25 14.25 12.90 12.60 15%
9 Litigation and arbitration history - 8.00 9.00 - 12.00 13.20 14.00 12.00 10.00 9.60 14.00 20%
Total weighted score: - 68.55 72.35 - 71.60 71.80 78.65 73.80 71.35 71.95 73.60
Notes 1 The average scores of evaluators are given against each criterion for each suitable applicant.
2 In the example above, applicants 1 and 4 had been eliminated after the evaluation of eligibility, completeness of
application and financial stability.
3 In the example above, if five prequalified candidates were to be selected, these would be 7, 8, 11, 3, and 10.
Matrix example: application of weighting, showing effect of percentage weighting
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Contracts for Works
members scores under each criterion are calculated and project/contract. It is to be added that where appropriate
then entered on a new matrix sheet to represent the and feasible, discussions may be held with applicants.
score of the joint venture. Alternatively, the scores of
each member could be weighted in proportion to its In this regard it will be noticed that no provision
stated financial percentage commitment to the joint has been made in the examples given to show the effect
venture. of prequalification submission for training of the
employers personnel or for ongoing operation and
Each criterion will have been previously maintenance of a completed facility (Forms Q and R of
weighted. The average score against each criterion for Appendix 8.1). If such information is required from the
each applicant is then adjusted by the weighting applicants, it is then necessary to take account of this by
percentage. Table 8.2 gives the corresponding page or the introduction of additional criteria to Tables 8.3 and
pages of the standard prequalification form, shown in 8.4 and by suitable adjustment of the weighting
Appendix 8.3.1, for each of the criteria in the examples percentages to ensure that the maximum total score
of Tables 8.3 and 8,4, together with the weightings and remains at 100.
maximum possible score.
Any information provided by prequalification
The total score of each applicant is then applicants on Form U Additional Information of the
calculated as a percentage of the maximum possible standard prequalification form should be taken into
score of 100. account by the shortlist committee in the assessment of
Forms E to T, as may be appropriate.
The applicants with the highest percentages are
then considered to be the best qualified.
The prequalification criteria and weightings may,

of course, be adjusted to suit the circumstances of the
8.7 Selection of tenderers

Contractors considered ineligible from the contract. Clearly, an employer must have a substantial
assessments above, and those who do not meet the reason for excluding a contractor from prequalification.
satisfactory financial requirements, should be excluded
from the final stage of the selection process. Where the tenderer is a subsidiary in a group of
companies, it needs to be appreciated that the only
It is recommended that the selection of security for the performance of the subsidiary is the
tenderers is made from those with the highest subsidiarys assets and that it would be wholly imprudent
percentages assessed in the analysis procedure and unwise to rely on the fact that the subsidiary is part
described above in order to arrive at: of a larger and/or well-known group of companies. In
such a case the employer should consider insisting on
- no more than eight for an uncomplicated employer- receiving a guarantee from the parent company which
designed construction project; or would have the assets and resources necessary to
- no more than five for contractor-designed works; or assure good performance of the construction contract.
- no more than three for a complex turnkey contract or
for tenderers selected under the competitive dialogue
method; or
- usually one but not more than three for negotiated
tenders.
An advice to employers is do not prequalify any

contractor to whom you would be unhappy to award the
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Contracts for Works
8.8 Notification to prequalification applicants

When the list of selected and prequalified tenderers The employer should advise successful applicants
has been prepared, successful applicants (except in the case when they can expect to receive the tender dossier, and
of the open tendering method, where tenders will have already should notify unsuccessful applicants that they have not been
been submitted) should be notified and requested to confirm prequalified.
their intention to submit a tender. This should ensure, as far as
possible, an adequate number of competitive tenders. If a
potential applicant wishes to drop out at this stage, the next
best-placed applicant should be invited and requested to
confirm his intention to submit a tender.
Following this, all applicants should be notified of the

list of selected tenderers without giving explanation of the
decisions.
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9 Consultancy Appointments
Contents
9.1 General 9.3.3 Issue of proposal dossier
9.2 Quality-based selection: request for proposals 9.3.4 Applicants queries
9.3 Proposals with price as a factor 9.3.5 Addenda to proposal dossier
9.3.1 Proposal methods 9.3.6 Submission of proposals
9.3.2 Basic pricing methods 9.3.7 Subsequent processes
9.1 General
In the following, by applicant is meant the consultant subsequent process is to negotiate a scope of services and a
who is applying to be awarded a consultancy agreement by suitable fee structure with the selected firm, as described in
the client for the execution of certain consultancy services. Section 9.2 below.
The consultant may be a consulting engineer or other
professional, who will be a suitably qualified person or However, if against FIDICs recommendations price
engineering firm or consortium (or other joint venture) of such is to play a part in the decision-making process, the preferred
firms. The consultancy services may involve giving advice or and recommended procedure for selection of a consultant is
carrying out investigations, studies, designs, supervision of to:
construction or installation works, or any other such services
in connection with engineering projects of any type. - Identify not more than three to five prequalified consultants
with relevant experience as described in Section 7.6.2.
Chapter 7 has described procedures for the - Issue proposal dossiers to the chosen consultants with
prequalification of applicants for consultancy appointments. In requests for proposals, as described in Sub-Sections 9.3.1
carrying out the prequalification processes the client wishing to 9.3.7.
to retain professional services will have decided whether or not - Evaluate the submitted proposals and recommend the
price is to be a factor in the choice of the consultant. acceptance of the most economically advantageous tender
as described in Chapters 16 and 18.
If the quality-based selection procedure is chosen, in
which a fair and satisfactory price is to be negotiated, the
selection of the consultant will have already been decided by
use of the process described in Section 7.6.1. The
9.2 Quality-based selection: request for proposals

Under the quality-based selection method, which is - The scope of services required.
the method recommended by FIDIC, the choice of the most - Terms of reference and supporting documents.
technically satisfactory consultant will already have been made - List of additional information to be provided by the
upon completion of the prequalification processes. consultant.
- Date by which an agreement is to be concluded.
The client then has to invite the highest ranked - Expected start date and programme for the provision of the
consultant to commence negotiations to develop jointly a services.
scope of services, fee and commercial terms and to conclude - Arrangements as may be required for visiting the site of
a consultancy services agreement. the proposed works.
Information to be provided to the highest ranked Further aspects of the negotiations are described in
applicant, after completion of the prequalification procedure Chapter 16.
and prior to the start of the negotiations, should include:
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9.3 Proposals with price as a factor

The procedures to be followed in obtaining Where established procurement procedures
competitive proposals for consultancy appointments if require prices for professional services to be prepared,
price is to be an element in the choice of applicant, are guidance is also given in publication FIDIC Guidelines for
described in the sub-sections below. the Selection of Consultants.
9.3.1 Proposal methods

Two of the generally adopted methods for institution providing funds for the project, and of the work
obtaining proposals for consultancy services required for the preparation of a compliant proposal.
appointments are known as the selective and
negotiated method. Both are described below. Typically up to five but not less than three
applicants would be selected from those qualified to be
Selective method invited to submit proposals.
The selective method is also known as the Negotiated method

restricted method.
The negotiated method is typically used only in
In this method invitations to prequalify for the situations where:
submission of proposals are issued by the client through
appropriate media to consultants for services. Subject to - there is urgency in provision of the services, or
any laws and regulations governing procedures for the - the required services are relatively limited and cannot
submission of consultancy proposals applicable in the be separated without disadvantage from larger services
country, invitations may also be made by direct already awarded, or
approaches to suitable consultants. - the services are subject to secrecy regulations, or
- a satisfactory proposal is not expected from a repeat of
From the responses received, a list is prepared an invitation for proposals from which no award was
of all applicants who satisfactorily meet the made, or
prequalification criteria, as described in Chapter 7, and a - the agreement arises from the result of the rules of a
shortlist is prepared of a limited number of prequalified design competition.
consultants or joint ventures, who are then invited to
submit a proposal. In such situations negotiations may take place
between the client and, separately, with one or more
In his own interests (unless he is not permitted selected applicants, as may be appropriate. The
by regulations to do so), the client should limit the selection is made from a list of consultants who have
number of prequalified applicants on the shortlist. The already met the qualifying criteria. However, a minimum
invitation to prequalify issued by the client should ideally of three applicants may be required in some jurisdictions
indicate the number of consultants and joint ventures and circumstances. If negotiations take place with more
which are expected to be on the shortlist. than one applicant, the confidentiality of each of the
negotiations must be strictly maintained.
This number should be determined carefully,
taking account of the requirements of any financial
9.3.2 Basic pricing methods

There are a number of different methods for the Two-envelope method
selection of consultants in which price plays a part in the
decision-making process, following prequalification and This method is similar to the recommended
submission of proposals. These methods are described quality-based selection method, with the difference that
below. the applicants are asked to submit a priced proposal in
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two sealed envelopes: the first contains the engineering and normally paid for by the client on a predetermined cost basis.
management proposal, the second the pricing. If this is not done, design competitions have the effect of
raising overall prices.
All the engineering and management proposals are
evaluated and ranked in order of merit. The second envelope The competing consultants are sometimes requested
of the highest ranked applicant is then opened and the rates to submit their fee proposals and/or estimates of construction
and pricing information then form the basis for negotiations to and installation costs with their designs.
lead to a consultancy services agreement.
The client has the advantage of having a clear idea of
All other second envelopes should remain sealed and, the consultants proposed solution and its costs, as the quality
if agreement is reached with the highest ranked applicant, and scope of the work can be more clearly defined. However,
should be returned unopened to their respective applicants. the method has the disadvantage of being an expensive
approach to selection and can mean that too much emphasis
However, if agreement is not reached with the highest is placed on technical rather than managerial ability.
ranked applicant, he should be notified in writing and
negotiations undertaken with the second highest ranked Budget method
applicant and so on until a satisfactory agreement is concluded.
In this method, applicants are provided with a budget
Cost-weighted method figure together with terms of reference outlining the
consultancy services required. The applicants submit their
In this method, consultants are asked to submit their detailed proposals to meet the clients requirements.
proposals in two parts. The first part comprises the engineering
and management submissions. These are evaluated and Selection is then made on the basis of the best quality
assigned weighted scores against a set of qualification criteria. proposal submitted which meets the clients requirements for
The totals of the engineering and management scores for each a price within the budgeted cost.
applicant are then ranked. Proposals with a total score below a
predetermined minimum may be omitted from further Price negotiation method
evaluation. The rates and prices submitted in the second
envelopes are then analysed and ranked. With the issue of terms of reference and description of
the scope of the services required, selected or prequalified
FIDIC recommends that no more than 10 percent of applicants are asked to negotiate their fees. With consultants
the assessed final price score should be added to the competing against each other, this method may degenerate
engineering and management qualification score. An example into a reverse-auction with the result that the price of offered
of this method of selection is demonstrated in Section 16.3. services may be driven down resulting in a lower quality of
service. This method is not recommended by FIDIC.
Design competition with prices
A design competition between qualified consultants is
9.3.3 Issue of proposal dossier

After the prequalification and preparation of a shortlist case with contractor tendering.
of suitable applicants and with price playing a part in the
decision-taking process, the client should issue a proposal The proposal dossier should contain at least:
dossier to each short-listed applicant formally inviting it to
submit a proposal for carrying out the required services. - The scope of services required.
- Terms of reference and supporting documents.
It is not usual to require consultants to pay for the - Deadline for submission.
proposal dossier, and nor should the consultant applicants be - Date up to which a short-listed applicant may request
required to obtain a tender bond or other security, as in the clarification of requirements.
109
- Basis of evaluation. of the proposal dossier will be provided simultaneously

- Instructions, as may be appropriate, if it is required that to all applicants within a stated number of days prior to
the proposal is to be submitted using the two-envelope the proposal submission deadline.
system in which the wrapped tender contains two
separately sealed envelopes: one holding all the tender The submitted proposal will be expected to
documents exclusive of any pricing information; the cover such topics as:
other holding the proposed prices for the services.
- List of information to be included in the proposal. - Past experience with similar projects.
- Period during which proposals are binding. - Details of consultants organisation, project and
- Expected selection date, start date and programme for financial control.
the provision of the services. - Type of organisation and managerial approach
proposed for the services.
Where appropriate, the request for a proposal - CVs of key personnel.
should also include the following details which may - Size of consultancy and staff responsibilities.
influence the cost of providing the services: - Quality assurance system.
- Knowledge of local conditions.
- Methodology to be adopted. - Local resources.
- Alternatives to be considered; innovative approaches. - Planned methodology.
- Transfer of knowledge and technology, local - Resources.
participation and training required. - Approach and commitment to technology transfer.
- Detailed target or budget cost estimates for the project.
- Project programme. The proposal dossier should be compiled and
- Arrangements as may be required for visiting the set out in such a manner that the anticipated responses
site of the proposed works. would be readily comparable for the purposes of
- Statement that any additional information or clarification evaluation of the proposals.
9.3.4 Applicants queries

Applicants queries can be handled during the The intended method or methods should be
proposal submission period by correspondence or by described in the proposal dossier.
applicants conference or by a combination of these
methods.
9.3.5 Addenda to proposal dossier

Explanations, revisions, additions, or deletions to whether other changes to the documents are required as
the proposal dossier may be necessary during the a consequence. Addenda become part of the proposal
proposal submission period and these should be notified dossier.
in accordance with the procedure described below.
The client should avoid the issue of addenda, if
Each addendum should, when issued, carry a possible. If unavoidable, the client should consider
serial number for reference purposes and contain a extending the proposal submission period to allow
receipt slip which should be signed by the applicant and applicants a reasonable time for their incorporation. It
returned immediately to the client. should also be remembered that changes of a minor
nature can usually be dealt with in discussions with the
Every addendum must be issued to each selected applicant prior to award. Addenda should never
applicant that is invited to submit a proposal. be issued during the latter part of the proposal
submission period.
Addenda should be complete and clear and
applicants should not have to consider and decide
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9.3.6 Submission of proposals

It is the responsibility of applicants to ensure that their Each applicant should ensure that both his name and
proposals are delivered to the client by the due submission address are clearly marked on the inner wrapper to enable the
date and time, properly signed by authorised signatories. client to identify the applicant in the event of a late tender
having to be returned unopened.
Applicants should be instructed to return their
proposals double-wrapped in plain envelopes or packages
using pre-addressed labels provided by the client. The labels
are to be affixed to the outer wrapping and should preferably
be distinctive and carry the words Proposal for Agreement
No. . - to remain sealed until official opening.
9.3.7 Subsequent processes

The procedures to be followed for the receipt and proposals in which the prices are an element in the
opening of proposals are described in Chapter 15. assessments.
If quality-based selection is adopted, Chapter 16

describes the practice and process to be followed in
negotiations. It also describes the evaluation processes for
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10 Obtaining Tenders: Minor Works Contracts
Contents
10.1 General
10.2 Preparation of tender dossiers
10.3 Tender procedure
10.1 General
The recommended form of contract for engineering simple or repetitive work or work of short duration without the
and building work of relatively small capital value is the FIDIC need for specialist subcontracts.
Short Form of Contract (the Green Book) comprising:
Under the usual arrangements for this type of
- Agreement: Offer; Acceptance; Appendix contract, the contractor constructs the works in accordance
- General Conditions with a design provided by the employer or by his consultant.
- Particular Conditions However, this form may also be suitable for contracts which
- Rules for Adjudication include, or wholly comprise, contractor-designed civil,
- Notes for Guidance (not forming part of the contract) mechanical and/or electrical works. In addition, the employer
has a choice of various valuation methods.
Depending on the type of work and the
circumstances, the conditions may be suitable for contracts of
greater value. They are most likely to be suitable for fairly
10.2 Preparation of tender dossier

A single document is provided for the form of tender There is no engineer or employers representative in
and the agreement. The intention is that all necessary the formal sense used in most of the other FIDIC forms of
information should be provided in the appendix to the contract. The employer takes all necessary actions. However,
agreement, the latter incorporating the tenderers offer and the the employer must nominate his authorised spokesman and, if
employers acceptance in one simple document. he wishes to engage a consultant to administer the contract,
may appoint a representative with specific delegated duties
The general conditions are expected to cover the and authority. The contractor also nominates a representative.
majority of contracts. Nevertheless, users are able to introduce Although there is no reference to an impartial engineer, the
particular conditions if they wish, to cater for special cases or employer may appoint an independent engineer to act
circumstances. The general conditions and the particular impartially, should he wish to do so.
conditions together comprise the conditions of contract
governing the rights and obligations of the parties. The conditions contain no overall limit on the
contractors liability. If such a limit is required, a clause should
One result of this simple form of contract is that there be inserted in the particular conditions.
is an increased burden on the employer to set out in the
specification and drawings the full scope of works, including To assist in the preparation of tender dossiers using
the extent of any design to be done by the contractor. these conditions, the publication includes notes for guidance.
10.3 Tender procedure

The following chapters present a systematic approach various contractual arrangements for major works. These
to the obtaining and evaluation of tenders which apply to approaches are also generally suitable for minor works.
113
11 Obtaining Tenders: Construction Contracts
Contents
11.1 Preparation of tender dossier 11.2 Issue of tender dossier
11.1.1 General 11.3 Visit to site by tenderers
11.1.2 Letter of invitation to tender 11.4 Tenderers queries
11.1.3 Instructions to tenderers 11.4.1 Correspondence method
11.1.4 Conditions of contract 11.4.2 Tenderers conference method
11.1.5 Specification 11.5 Addenda to tender dossier
11.1.6 Drawings 11.6 Dispute Adjudication Board (DAB)
11.1.7 Schedules, including bill of quantities 11.7 Submission of tenders
11.1.8 List of documents/Information to be
submitted by tenderers Tables
Appendices Table 11.1 Instructions to tenderers checklist
11.1.1 Example letter of invitation to tender Table 11.2 Typical specification items
11.1.2 Example form of tender security Table 11.3 Documents to submit with tenders
11.1.3 Example form of instructions to tenderers

11.1.1 General
In this chapter the promoter of a contract is referred to conditions) together with any sample forms such as bank
as the employer. Strictly the term employer should only be guarantees;
used after a contract has been signed but it is used here, - specification;
when describing the employers activities in obtaining tenders - drawings;
before the award of a contract, for the sake of simplicity and - bill of quantities with method of measurement and payment
clarity. procedure;
- schedule of rates and/or prices;
Before the employer can obtain tenders from suitable - other schedules for completion by tenderers;
contracting companies he must have prepared: - information data; and
- list of additional documents/information to be submitted by
- a list of tenderers whom he will invite to tender; and tenderers.
- a set of tender documents (the tender dossier).
The scope of the contract and an outline of the tender
The employer must also initiate the appropriate documents should be prepared before the prequalification
notification procedures required by applicable laws and/or the documents (when applicable) in order to achieve consistency
funding agency(ies). between these two sets of documents.
The list of suitable tenderers will normally have been Some of the above items, such as the letter of
arrived at following a prequalification process, as described in invitation to tender and the instructions to tenderers will
Chapter 8. normally not form part of the contract agreement (see Chapter
19). It is therefore essential that all requirements and
The tender dossier is prepared by the employer, or by conditions applying after award of contract are incorporated
a consultant on behalf of the employer. It will normally include: elsewhere in the tender dossier.
- letter of invitation to tender; Detailed features of each of the documents to be

- instructions to tenderers; included in a typical tender dossier are described below.
- form of letter of tender and appendix to tender;
- conditions of contract (general conditions and particular
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11.1.2 Letter of invitation to tender

The letter of invitation to tender should be on the The letter of invitation should be kept as short as
employers official headed paper and should include: possible. Detailed information on tendering should be
contained in the instructions to tenderers.
- tender reference and title;
- list of documents issued (i.e., included in the tender An example letter of invitation is given in
dossier); Appendix 11.1.1. This example is a suggestion, and
- receipt form for the tender dossier (to be signed and should be carefully reviewed and amended as necessary
returned by each tenderer); to take account of the relevant circumstances. It avoids
- instruction to inform the employer/engineer in writing of repeating information contained in the other tender
any significant changes to the data supplied in the documents, in order to avoid inconsistencies.
prequalification application; and
- date, time and place of tender submission and tender
opening.
11.1.3 Instructions to tenderers

General Tenderers should be informed whether the
successful tenderer will be required to establish a locally
The instructions to tenderers should be prepared registered company for the purpose of the contract, or to
by or on behalf of the employer to meet the particular have an agent.
requirements of individual contracts. The purpose of the
document is to convey information and instructions that The instructions to tenderers should state that
will govern the preparation, submission and evaluation of the employer does not bind himself to award a contract
tenders. to any of the tenderers.
When tenders have been received and evaluated Remuneration is not normally made to tenderers
this document will no longer be needed, and it should who submit tenders, so there should be a stipulation that
not form part of any resulting contract. It should therefore all costs and expenses associated with the preparation
not contain any text which remains valid after award of and submission of tenders shall be borne by the
the contract. tenderers.
Tenderers should be notified of the language in Tender period

which the tenders are to be written. They should also be
notified of the number of copies of their tender that are When determining the tender period, the
required, stipulating that one set of the documents employer must ensure that adequate time is allowed for
should be clearly marked Original Tender and the tenderers to prepare their tenders, taking into account
others (which should be photocopies) marked Copy the size, complexity and location of the project.
and that, in the event of discrepancy, the Original Important factors to be considered are whether there is
Tender shall take precedence. likely to be a number of major subcontractors from
whom tenderers will have to obtain offers, or whether
If a power of attorney is required for the supply of materials and plant generally only involves off-
authorised signatory(ies) of the tender, precise the-shelf supplies.
requirements should be given.
Some straightforward or repeat work may not
The tenderers attention should also be drawn to require a long tender period. On the other hand, complex
any requirement for documents to be notarised and projects, works requiring considerable pre-tender
legalised at the embassy or consulate of the employers investigation of site conditions, and projects likely to be
country. tendered for by consortia, may require tender periods of
116
a number of months. In any case, it is unwise for an employer to should be instructed to provide information as to their
allow too short a period, resulting in tenderers having insufficient source(s) of finance, their amount and the conditions which will
time to consider fully their risks and obligations, or to allow too apply.
long a period, which may result in tenderers not commencing
serious preparation work until well into the tender period. Currencies and payments
Documents Specific instructions should be given concerning the

currencies to be used in the preparation of the tender.
The instructions to tenderers should contain a list of Tenderers should also be advised in which currency/currencies
the documents required to form a complete tender. payments will be made.
Tenderers should be informed that a tender will be Where tenderers are required to express their tenders
rejected unless it is substantially responsive. in a single currency (usually the currency of the country in
which the works are to be carried out), it is necessary to define
It should be made clear to tenderers that any the rates of exchange which have been used to convert the
corrections must be initialled. Documents provided in electronic various currencies in which payment is required into a single
format should be protected so that they cannot be changed. currency unit. As more than one tenderer may request part
payment in one particular currency, it is preferable that the
Alternative tenders exchange rates to be used should be consistent and,
therefore, that they should be defined by the employer and
Tenderers should be informed whether alternative notified to each tenderer a reasonable time before the date of
tenders will be considered, and if so, what technical and submission. Normally, these rates should be the selling prices
commercial conditions will be applied. In any event, a quoted by the local central bank, and the rates should be
compliant tender is normally a precondition for considering those quoted at the time of closing 28 days before the tender
alternative tenders. submission date. The rates quoted will then be incorporated in
the contract when awarded.
Alternative tenders must include a comprehensive and
precise description of the parts of the tender documents which If payments are to be adjusted for changes in the cost
have been altered. The alternative tender should include full of labour and/or materials, the formulae for calculating such
details of commercial terms and conditions, specification, changes and the source(s) of the applicable published indices
drawings, calculations, environmental impacts and costs for the for use in the formulae should be included in the conditions of
parts of the works that have been altered, in order to allow a fair contract. If these formulae use different currencies, care
technical and financial evaluation of the alternative proposal. should be taken to ensure that variations in their respective
rates of exchange do not lead to distortions.
Modification to tenders
Preference for local products and services
The tenderer should be informed that, if he has
delivered, posted or dispatched his tender prior to the formal Tenderers should be advised if and how preference, if
submission date he has the right to modify or make any, for local products and services will be applied in the
corrections to it, provided that any such modifications or evaluation of tenders.
corrections are received by the employer in writing prior to the
deadline specified for submission of tenders. The original Tender security
tender thus modified or corrected would then be considered
as the official tender. The requirements for a tender security, if any, will be
determined by the circumstances of each contract. If a tender
Financing arrangements security is required, a form should be included in the tender
dossier. An example form of tender security is shown in
Tenderers should be informed of the source(s) of finance, Appendix 11.1.2. The amount and currency(ies) of the security
their amount and related conditions for the proposed works. should be stated. In all cases, the guarantor(s) or the surety or
Where tenderers are required to provide financing they sureties must be satisfactory to the employer. If a tender
117
security has been requested, any tender which has not

Table 11.1 Instructions to tenderers checklist
been so secured will be rejected.
Language of the tender.
Tenderers should be advised of the period of Number of copies of the tender that are required.
validity which is required for the tender security, and the Which documents have to be filled in by the tenderer
events which will entitle the employer to cash the and returned by the submission date, and which have
security. The period of validity of the security should to be signed.
equal the period of validity of the tender plus the time Precise requirements for each tenderer to provide a
allowed for the successful tenderer to provide his power of attorney for the authorised signatory(ies) to
performance security under the terms of the eventual the tender.
contract between the contractor and the employer. Any special rules regarding treatment of taxes, duties
Tenderers should be informed that their tender securities and other fiscal matters in the tender.
will be returned to them as soon as the security is no Validity period of the tender.
longer in full force and effect. Any documents other than those issued as part of the
tender dossier which the tenderer must include with
The employer should select the type and amount his tender, see Note [1] for examples.
of security most appropriate to the contract to be Financing (contractor funding), if applicable.
awarded. It is preferable that the amount of security Procedure for issuing addenda to the tender
should be stated as a specific sum rather than as a documents.
percentage of the tender price. Procedure for dealing with queries raised by
tenderers.
Evaluation criteria Instructions for packing, labelling and addressing the
tender (including a supply of standard labels if this is
The evaluation criteria, which will form the basis the practice of the employer).
for the selection of the most advantageous tender, Procedure to be adopted for tenderers to visit and
should be stated. The criteria should be consistent with inspect the site.
the information which tenderers are asked to submit and Procedure for inspecting any special documents not
may include updating of the information supplied as part issued with the tender dossier, see Note [2] for
of the prequalification procedure. examples.
Circumstances under which alternative offers may be
If a specific method of evaluation is to be used in submitted.
selecting the successful tender, the method should be Confidentiality of tender documents.
described in the Instructions to tenderers.
Procedure for the return of tenders submitted by
unsuccessful tenderers (if required).
While evaluation generally may be primarily on
Procedure for dealing with requests for extension of
the basis of tender price, other factors which could be
time by tenderers.
relevant to achieving best value for money include:
Arrangements for the opening of tenders.
- time for completion;
Procedure for dealing with arithmetic errors found in
Notes to Table 11.1 tenders during evaluation.
[1] Drawings and calculations; technical descriptions; Rules relating to disqualification/rejection of tenders,
proposals for management, designers, subcontractors see Note [3] for examples.
and suppliers; proposals for site establishment/facilities;
programme for design (if any) and construction; payment Any unusual features of the particular tendering
plan/cash flow forecast; proposed methods of procedure.
construction, with resources; proposed environmental Information about the requirements of local (national)
protection measures; health and safety and
regulations.
environmental protection plan; quality management and
control; and pricing document. Information about the evaluation criteria and method.
[2] Site investigation reports and environmental impact Award of contract procedure, including submission of
assessments. the performance security, appointment of the Dispute
[3] Late arrivals, altered figures, incomplete submissions,
Adjudication Board (DAB), and other formalities.
and deviations.
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- suitability of technology and personnel; security, the procedure to be followed if the security is forfeit,
- life-cycle cost of the works; arrangements for its release and the currency of any monetary
- environmental impact during the lifetime of the project; transactions involved.
- avoidance of hazardous materials;
- quality and serviceability of specialised contractors The procedure for the successful tenderer to submit
equipment; the performance security should be described in the
- project financing; instructions to tenderers.
- operation and maintenance costs; and
- claims record. Checklist
These factors should, to the extent practicable, be The checklist given in Table 11.1 may help in the
expressed in monetary terms and/or given a weighting in the preparation of instructions to tenderers and shows subjects
evaluation provision of the tender dossier. To help users, a which should be covered.
detailed example of a tender evaluation process is given in
Chapter 17. Sample form
Performance security An example form of instructions to tenderers is given

in Appendix 11.1.3. This example is a suggestion, and must
If a security (guarantee or bond) for performance is be carefully reviewed and amended to take account of the
required, the type and terms should be specified in the employers normal procedures and requirements, and all other
conditions of contract. relevant circumstances for each tender enquiry.
The terms should include the period of validity of the
11.1.4 Conditions of contract

The recommended form of contract for construction is Detailed guidance on its use is given in The FIDIC
the FIDIC Conditions of Contract for Construction for Building Contracts Guide.
and Engineering Works designed by the Employer. This
publication comprises: This form of conditions of contract has been prepared
to provide a fair sharing of risk and responsibility between the
- General Conditions; employer and the contractor, and contains many
- Appendix: General Conditions of Dispute Adjudication interdependent clauses. They should therefore be adopted
Agreement and (Annex) Procedural Rules; with as few alterations as possible.
- Guidance for the Preparation of Particular Conditions;
- Annexes: Forms of Securities (Example Forms of Parent Where general conditions need to be changed, the
Company Guarantee, Tender Security, Performance Security, amendments and additions must be contained in particular
Advance Payment Guarantee, Retention Money Guarantee, conditions, not in amended and/or retyped general conditions.
Payment Guarantee by Employer); This is so that tenderers can rapidly identify any changes and
- Forms of Letter of Tender with Appendix to Tender, Contract assess their effects from the well-known and widely accepted
Agreement and Dispute Adjudication Agreement. FIDIC form of contract.
11.1.5 Specification
The specification document is where the employer must include for such topics as those listed in Table 11.2
specifies his precise requirements for all matters not covered Typical specification items.
by the conditions of contract or shown on the drawings. It is
here that he gives all details and descriptions of the materials, These matters should not be covered in the
plant and equipment, workmanship and other matters instructions to tenderers, because they would then not be
required for or relevant to the construction of the works, and (if contractually binding. However, they are all referred to in the
necessary) a time programme showing the work sequence, conditions of contract. It is important to ensure that all these
phases and completion dates. Contents of the specification topics are dealt with once only and not duplicated
119
unintentionally, which may cause inconsistencies and

Table 11.2 Typical specification items
ambiguities.
Definition of the location of the site.
The specification defines precisely the scope and Permissions being obtained by the employer.
technical requirements of the contract, including quality, Phased possession of foundations, structures, plant
performance and testing, and any requirements for or means of access.
training and transfer of technology. However, it is not Detailed specification of materials to be used.
necessary to specify any matters which are imposed by Detailed specification of plant forming part of the
the applicable laws. permanent works.
Detailed specification of workmanship.
The quality of materials and the standards of Requirements for temporary works and contractors
workmanship to be provided by the contractor must be equipment.
clearly described, together with requirements for quality Any design to be carried out by the contractor.
assurance to be performed by the contractor and the Other contractors (and others) on the site.
required health, safety and environmental measures to Setting-out points, lines and levels of reference
be observed during the execution of the works. The Involvement of third parties.
extent, if any, to which the contractor will be responsible Environmental constraints
for the design of the permanent works should also be Access constraints: road, rail, air and sea.
specified. Details should be included of samples to be Electricity, water, gas and other services available on
provided and tests to be carried out by the contractor the site.
during the course of the contract. Employers equipment and free-issue material.
Facilities for the employers personnel.
Any limitations on the contractors freedom of Samples
choice in the order, timing or methods of executing the Testing during manufacture and/or construction.
work or sections of the works should be clearly set out Tests on completion.
and any restrictions in his use of the site, such as Taking-over procedure
interface requirements with other parts of the work, or Operational training for the employers personnel.
provision of access or space for other contractors, As-built drawings and other records of the works.
should be given. Operation and maintenance manuals.
Provisional sums
The specification should as far as possible follow
recognised local (national) and international standards. supplier, or the description of any material, plant or
The specification should also promote the broadest equipment available only from an indicated manufacturer
possible competition, and to this end should not specify or supplier, is unavoidable, then the specification should
or describe materials, plant or equipment which are state that material, plant or equipment of equal quality
available from only one supplier. If the naming of a sole will be acceptable.
11.1.6 Drawings
The drawings included in the tender dossier detailed written text in the specification and less on the
should provide the tenderers with sufficient detail to drawings. Whatever the practice, it is most important to
enable them, in conjunction with the specification, to specify each element of a work item only once.
make an accurate assessment of the nature and scope Repeating any descriptive requirement, often done in
of the works. slightly different wording and in different parts of the
contract, is a recipe for ambiguity with consequent
The drawings primarily describe pictorially each dispute, and should be avoided.
physical item of the permanent works. Some employers
practice is to put much materials and workmanship All the drawings should be listed in the
detail on the drawings and less in the text of the specification.
specification. However, others prefer to have more
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11.1.7 Schedules, including bill of quantities

The schedules are prepared by the employer/engineer As an alternative to a bill of quantities, the employer
and included in the tender dossier, and, where required, are to may ask for tenders on a lump-sum basis. It is also common
be completed by the tenderers. The form and extent of the for parts of the works to be priced on the basis of one or more
schedules will depend on the information and data which the lump sums, the remainder being priced on the basis of a bill of
employer requires, both for the tender evaluation and for quantities. If the tenders are based, partly or wholly, on lump
inclusion in the contract. The schedules include the bill of sums, a breakdown of such sums into constituent parts
quantities, and may include other data, lists and schedules of should be provided by tenderers.
rates and/or prices. When preparing the schedules, the
employer should consider carefully the extent of information Where there is the possibility of variations or extra
required, taking account of the work being imposed on each work, particularly where work not covered by the unit rates in
tenderer, as well as on the employers or engineers personnel the bill of quantities is involved, it is usual to have a schedule
who will be carrying out the detailed evaluation and of rates or prices to enable valuation of the varied or extra
comparison of the tenders. Requesting tenderers to give work, and also a daywork schedule to pay for work of a minor
unnecessary or over-detailed information in the bill of or incidental nature. As such schedules are not subject to
quantities and other schedules should be avoided wherever competition in the offered tender price before inclusion in the
possible. contract, the employer should check that the rates or prices
given are consistent with the price level of the bill of quantities.
The bill of quantities should comprise brief identifying
descriptions and estimated quantities of work comprised in The schedules may also include other information of
the execution of the works. The employer may choose to all types required from tenderers. Some lists may require
divide the bill of quantities into work groups or otherwise to information and prices, such as lists of recommended spare
facilitate comparison of tenders, as well as to facilitate the parts, others may just require information, such as lists of
making of interim payments during the progress of the work. proposed subcontractors.
However, the bill of quantities should be formed in such a way
as to ensure that tenderers fill in rates and prices that cover, Section 11.1.8 gives a list of additional information
without duplication or omission, for the total work to be carried often required from tenderers. After the evaluation of tenders
out as well as for all other obligations of the contractor under and the choice of the most advantageous tender, the
the contract. The preamble to the bill of quantities should employer and the successful tenderer decide on which parts
describe the measurement procedures adopted for its of the additional information shall be included in the contract.
preparation and to be used in measuring work done, which Such information becomes part of the schedules, which are
may be a published standard method or the employers own. defined as the documents completed by the contractor as
The method of measurement and payment for each work item included in the contract.
may be related instead to the corresponding technical clause
in the specification.
11.1.8 List of documents/information to be submitted by tenderers

The employer should specify the documents and estimate of disbursements (excluding provisional sums) to be
information that tenderers are required to submit with their made by the employer during the period of the contract. The
tenders. To ensure completeness and uniformity between instructions to tenderers should clearly state the periods to be
tenderers, a suitable form should be prepared and issued as adopted for this estimate.
part of the tender dossier.
The estimates of cash flow will not become part of
Information should not be sought on matters which the contract. This is because the figures may have to be
affect neither the evaluation of tenders nor the subsequent reviewed and adjusted as the work proceeds. The
contract. expenditure under provisional sums will affect the figures,
and so also will changes in the source of supply of goods
In order to assist the employer in forward budgeting, and modifications to either or both the programme or the
tenderers may be requested to provide with the tender an extent of the works.
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Depending on particular requirements, the It should be clearly stated which items will form
information required may include items listed in Table 11.3. part of the tender evaluation and which items are to be
This list is indicative and is not intended to be exhaustive. incorporated into the contract.
11.2 Issue of tender dossier

The tender dossier should be issued by the As an alternative to posting, or despatching by
employer only to those firms which have been selected other means, tenderers should be given the option of
to tender. collecting tender documents from the employer from the
due despatch date. Tenderers should be asked whether
If a charge for documents is to be made, issue they wish to collect the documents and, if so, be
should only be against payment. instructed as to the time and place for collection.
11.3 Visit to site by tenderers

A formal visit to the site by all the tenderers - is only responsible for making those arrangements
should be arranged by the employer as laid down in the necessary for the actual inspection of the site;
instructions to tenderers. If possible, individual tenderers - should make a record of tenderers representatives
should not be refused permission to visit the site at other visiting the site;
times, but care should be taken to ensure that the same - may require tenderers visiting the site to indemnify the
information is given to each tenderer. employer/engineer against any claims for damage,
injury or death as a result of the visit.
The primary purpose of the visit is to enable
each tenderer to inspect the site and obtain all relevant
information required for the preparation of his tender.
Table 11.3 Documents to submit with tenders

Tenderers should be advised of the probable
duration of the formal visit, the period during which the Tenderers organisation for executing the contract.
visit may be made and the maximum number of persons Tender programme for execution of the works.
from each tenderer allowed to participate. Breakdown of prices.
Estimates of cash flow.
The arrangements for the site visit should be List of proposed major subcontractors, together with
determined so that equal opportunities are open to all details of those parts of the works which the
tenderers. The visit should take place at approximately tenderer would propose to subcontract.
the end of the first half of the tender period and should Details of key staff who would be employed on the
include a tenderers conference. contract.
Proposed guarantor or surety for performance
security.
Tenderers should make their own travelling Proposal for accommodation of the contractors
arrangements and bear the costs, including fares, employees.
accommodation and subsistence and they should be Projected build-up of labour on the site, both local
advised of this in the instructions to tenderers. and foreign.
Contractors estimated electrical power requirements
It is usual for tenderers to be given a receipt on the site.
certifying their visit to the site, which should be included Method statements.
with their tender. List of contractors equipment proposed.
Update of prequalification information, e.g., financial
The employer: status and contracts in hand.
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11.4 Tenderers queries

Tenderers queries can be handled by The intended method or methods should be
correspondence or by tenderers conference or by a described in the instructions to tenderers.
combination of these methods.
11.4.1 Correspondence method

A tenderer requiring clarification of any document in the required to acknowledge receipt of all the information.
tender dossier should submit his queries to the employer or
engineer in writing, as stated in the instructions to tenderers. Tenderers should be instructed that queries will not be
accepted by the employer/engineer unless received 28 days
The employer/engineer should prepare and despatch before the date for submission of tenders.
written replies to queries. These replies, together with the text
of the queries, should be issued to all tenderers without Replies to queries should, where appropriate, be
quoting the source of the queries, and the tenderers should be issued as addenda to the tender dossier.
11.4.2 Tenderers conference method

With the conference method, queries from the Within a reasonable time after the conference, the
tenderers to the employer/engineer are dealt with at a tenderers employer/engineer should send all tenderers, whether present
conference arranged by the employer, normally taking place at at the conference or not, a full set of minutes recording both
the time of the site visit. Tenderers queries should be in writing the queries and formal replies. Where appropriate, an
and should identify the party raising the query. addendum to the tender dossier should be issued. Receipt of
the minutes should be acknowledged by the tenderers.
As far as possible, oral answers should be given by Representation from each tenderer should be limited to two or
the employer/engineer during the conference. three persons at the conference.
11.5 Addenda to tender dossier

Explanations, revisions, additions or deletions to the extending the tender period to allow tenderers a reasonable
tender dossier may be necessary during the tender period and time for their incorporation. It should also be remembered that
these should be notified in accordance with the procedure changes of a minor nature can usually be dealt with in
described below. discussions with the selected tenderer prior to award.
Each addendum should, when issued, carry a serial The tender period should not be extended unless the
number for reference purposes and contain a receipt slip circumstances are exceptional. In considering the need for
which should be signed by each tenderer and returned extensions which might arise, either as the result of major
immediately to the employer. amendments to the tender documents or as a direct request from
one or more tenderers, the following criteria should be applied:
Addenda should be complete in themselves and
should not rely on tenderers having to appreciate the - Is there a convincing reason for granting an extension?
implications and decide whether other changes to the - Would the refusal of an extension reduce the number of
documents are required as a consequence. Addenda become tenders to be submitted?
part of the tender dossier. - Would an extension give preferential treatment to those
tenderers who are unable to meet the original tender
The employer/engineer should avoid if possible the submission date?
issue of addenda during the latter part of the tender period. If - Would an extension create unacceptable delay to the project
unavoidable, the employer/engineer should consider programme?
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11.6 Dispute Adjudication Board (DAB)

The FIDIC Conditions of Contract for essential for the DABs proper and fair operation, and the
Construction stipulates the establishment of a standing, FIDIC DAB agreements contain strong sanctions to ensure
or full-term Dispute Adjudication Board (DAB) before the the independence and impartiality of the DAB members.
commencement of the contract works, which typically will
visit the site on a regular basis thereafter. The DAB is to Consequently, for international contracts, i.e.,
comprise one or three members depending on the size where the parties come from different countries, no DAB
and complexity of the contract works, and an important member should be from the same domicile as any of the
purpose is to assist the parties to avoid disputes. Normal contracting parties or the engineer. The reason is that in
exchanges of viewpoint or differences of opinion between many jurisdictions it may be very difficult for a national to
the parties are not considered as disputes. However, find or decide against his own state organisation. Such a
when it becomes apparent that it is not possible for the situation (appointment of a national) can lead to that DAB
parties to come to agreement on a contentious matter member departing from the independent and impartial role
then it can be said that a dispute has arisen. If a dispute that is required of every member. It is unfair to place a DAB
does arise then either party may refer the dispute to the member in such a situation. Furthermore, a similar situation
DAB, which will then adjudicate on the dispute and give may arise if either party makes a habit of appointing the
its decision on the entitlements of each party with regard same DAB member for successive projects.
to the dispute. The DABs decision is binding on the
parties, and is to be given prompt effect by both parties In order to establish the DAB in an effective way
and the engineer. If a party does not accept the DABs and without delay, it is recommended that the employer
decision, that party may give notice of its dissatisfaction, includes in the tender dossier a short list of persons, with
and the dispute may then be submitted to arbitration. The their CVs, who the employer considers suitable to act as
decision shall nevertheless be binding and complied with members of the DAB. Each tenderer then may accept
until the arbitration award is made. the employer's list, or delete names from the list and/or
add names of his own choice. This may help the parties
Until the mid-1990s the FIDIC forms of contract to agree upon the members of the DAB, so that their
had an independent engineer who was required to be selection may be confirmed in conjunction with the
impartial when making decisions on matters concerning signing of the contract. To avoid subsequent problems, it
the rights and obligations of the parties, e.g., when is important that the DAB is put in place at or about the
assessing and awarding extensions of time or dealing with time the relevant contract is signed.
claims from either party. This procedure led to complaints
that the engineer might not always act in an unbiased As the costs of the DAB are to be met equally by
manner, as he was appointed by and paid for by the the employer and the contractor, both parties must
employer. FIDIC therefore introduced the DAB procedure remember to include adequate funds in their financial
where the DAB members are required to be independent calculations for these costs.
of the parties and be strictly unbiased in all their actions
and decisions. True impartiality of every DAB member is
11.7 Submission of tenders

It is the tenderers responsibility to ensure that their Contract No. . - To remain sealed until official
tenders, properly signed by authorised signatories, are opening. Tenderers should ensure that both their name
delivered to the employer by the submission date and time. and address are clearly marked on the inner wrapper to
enable the employer to identify the tenderer in the event of
Tenderers should be instructed to return their a late tender having to be returned unopened.
tenders double-wrapped in plain envelopes or packages
using pre-addressed labels provided by the employer. The If tenders are delivered by hand, tenderers
labels are to be affixed to the outer wrapping and should should obtain a receipt from the employer recording the
preferably be distinctive and carry the words Tender for date and time of delivery.
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12 Obtaining Tenders:
Plant and Design-Build Contracts
Contents
12.1 Preparation of tender dossier 12.1.4 Typical schedules
12.1.1 General 12.1.5 Typical contents of a contractors proposal
12.1.2 Letter of invitation to tender 12.2 Issue of tender dossier
12.1.3 Instructions to tenderers 12.3 Visit to site by tenderers
12.1.4 Conditions of contract 12.4 Tenderers queries
12.1.5 Employers requirements 12.4.1 Correspondence method
12.1.6 Drawings 12.4.2 Tenderers conference method
12.1.7 Schedules, including schedule of prices 12.5 Addenda to tender dossier
and/or payments 12.6 Dispute Adjudication Board (DAB)
12.1.8 Contractors proposal 12.7 Submission of tenders
12.1.9 List of documents/information to be
submitted by tenderers Tables
Appendices Table 12.1 Instructions to tenderers checklist
12.1.1 Example letter of invitation to tender Table 12.2 Examples of tender documents
12.1.2 Example form of tender security Table 12.3 Typical employers requirements items
12.1.3 Example form of instructions to tenderers Table 12.4 Documents to submit with tenders

12.1.1 General
In this chapter the promoter of a contract is referred to Further details of these features, and their effect on
as the employer. Strictly the term employer should only be the tendering procedure, are to be found in Section 5.5.
used after a contract has been signed but it is used here,
when describing the employers activities in obtaining tenders The tender dossier is prepared by or on behalf of the
before the award of a contract, for the sake of simplicity and employer, or by a consultant on behalf of the employer. It will
clarity. normally include:
Before the employer can obtain tenders from suitable - letter of invitation to tender;
contracting companies he must have prepared: - instructions to tenderers;
- forms of letter of tender and appendix to tender;
- a list of tenderers whom he will invite to tender, and - conditions of contract (general conditions and particular
- a set of tender documents (the tender dossier). conditions) together with any sample forms, such as bank
guarantees;
The employer must also initiate the appropriate - employers requirements;
notification procedures required by the applicable laws and/or - schedules for completion by tenderers including pricing;
the funding agency(ies). - information data; and
- list of additional documents/information to be submitted by
The list of suitable tenderers will normally have been tenderers.
arrived at following a prequalification process, as described in
Chapter 8. The procedure for obtaining tenders for plant and The scope of the contract and an outline of the tender
design-build contracts includes several special features since: documents should be prepared before the prequalification
documents (when applicable) in order to achieve consistency
- the contractor is responsible for the design; between these two sets of documents.
- the plant and equipment is manufactured off-site;
- testing, commissioning and performance are based on Some of the above items, such as the letter of
functional and/or output requirements. invitation to tender and the instructions to tenderers will
125
normally not form part of the contract agreement (see Detailed features of each of the documents to be
Chapter 18). It is therefore essential that all requirements included in a typical tender dossier are described below.
and conditions applying after award of contract are
incorporated elsewhere in the tender dossier.

The letter of invitation to tender should be on the - date, time and place of tender submission and tender
employers official headed paper and should include: opening.
- tender reference and title; The letter of invitation should be kept as short as
- list of documents issued (i.e., included in the tender possible. Detailed information on tendering should be
dossier); contained in the instructions to tenderers.
- receipt form for the tender dossier (to be signed and
returned by each tenderer); An example letter of invitation to tender is given
- instructions to inform the employer/engineer, in writing, in Appendix 12.1.1. This example is a suggestion, and
of any significant changes to the data supplied in the should be carefully reviewed and amended as necessary
prequalification application; to take account of the relevant circumstances. It avoids
- information on whether single- or two-stage tendering; repeating information contained in the other tender
and documents, in order to avoid inconsistencies.

General If a power of attorney is required for the
authorised signatory(ies) of the tender, precise
The instructions to tenderers should be prepared requirements should be given.
by or on behalf of the employer to meet the particular
requirements of individual contracts. The purpose of the The tenderers attention should also be drawn to
document is to convey information and instructions that any requirement for documents to be notarised and
will govern the preparation, submission and evaluation of legalised at the embassy or consulate of the employers
tenders. When tenders have been received and country.
evaluated, this document will no longer be needed, and
it should not form part of any resulting contract. It should Tenderers should be informed whether the
therefore not contain any text which remains valid after successful tenderer will be required to establish a locally
award of the contract. registered company for the purpose of the contract, or to
have an agent.
Tenderers should be informed if the tendering is
to be carried out according to the two-stage procedure The instructions to tenderers should state that
(see Section 5.5.1 for a description and further details), the employer does not bind himself to award a contract
whereby unpriced technical solutions are presented in to any of the tenderers.
the first stage, and the price for an approved solution in
the second stage. If remuneration is to be made to tenderers who
submit responsive tenders, the amount should be
Tenderers should be notified of the language in stated. If not, it should be stipulated that all costs and
which the tenders are to be written. They should also be expenses associated with the preparation and
notified of the number of copies of their tender that are submission of tenders shall be borne by the tenderers.
required, stipulating that one set of the documents
should be clearly marked Original Tender and the Consideration should be given to offering some
others (which should be photocopies) marked Copy remuneration to tenderers if they have to undertake
and that, in the event of discrepancy, the Original extensive studies and preliminary design work in order to
Tender shall take precedence. submit a responsive tender.
126
Tender period Alternative tenders must include a comprehensive

and precise description of the parts of the tender documents
When determining the tender period, the employer which have been altered. The alternative tender should
must ensure that adequate time is allowed for tenderers to include full details of commercial terms and conditions,
prepare their tenders taking into account the size, complexity specification, drawings, calculations, environmental impacts
and location of the project. Important factors to be considered and costs for the parts of the works that have been altered, in
are whether there is likely to be a number of major order to allow a fair technical and financial evaluation of the
subcontractors from whom tenderers will have to obtain offers, alternative proposal.
or whether supply of materials and plant generally only
involves off-the-shelf supplies. Modification to tenders
Some straightforward or repeat work may not require The tenderer should be informed that, if he has
a long tender period. On the other hand, complex projects, delivered, posted or dispatched his tender prior to the formal
works requiring considerable pre-tender investigation of site submission date, he has the right to modify or make corrections
conditions, local circumstances, and/or preliminary design, to it, provided that any modifications or corrections are received
and projects likely to be tendered for by consortia, may require by the employer in writing prior to the deadline specified for
tender periods of a number of months. submission of tenders. The original tender thus modified or
corrected would then be considered as the official tender.
In any case, it is unwise for an employer to allow too
short a period, resulting in tenderers having insufficient time to Financing arrangements
consider fully their risks and obligations, or to allow too long a
period, which may result in tenderers not commencing serious Tenderers should be informed of the source(s) of
preparation work until well into the tender period. finance, their amounts and related conditions for the proposed
works.
Documents
Where tenderers are required to provide financing they
The instructions to tenderers should contain a list of should be instructed to provide information as to their source(s)
the documents required to form a complete tender. of finance, their amount and the conditions which will apply.
Tenderers should be informed that a tender will be Currencies and payments

rejected unless it is substantially responsive.
Specific instructions should be given concerning the
It should be made clear to tenderers that any currencies to be used in the preparation of the tender.
corrections must be initialled. Documents provided in electronic Tenderers should also be advised in which currency/currencies
format should be protected so that they cannot be changed. payments will be made.
Alternative tenders Where tenderers are required to express their tenders

in a single currency (usually the currency of the country in
The employer may not wish to specify a particular which the works are to be carried out), it is necessary to define
design or type for the plant/equipment required, nor the method the rates of exchange which are to be used to convert the
of construction/installation, because he wishes specialist various currencies in which payment is required into a single
contractors to offer their own solutions and proprietary systems currency unit.
which will fulfil his overall performance requirements.
As more than one tenderer may request part payment
However, if the employer has indicated the design he in one particular currency, it is preferable that the exchange
requires, then tenderers should be informed of whether rates to be used should be consistent and, therefore, that they
alternative tenders will be considered or not, and if so, what should be defined by the employer and notified to each tenderer
technical and commercial conditions will apply. In any event, a a reasonable time before the date of submission. Normally,
compliant tender is normally a precondition for considering these rates should be the selling prices quoted by the local
alternative tenders. central bank, and the rates should be those quoted at the time
127
Plant andDesign-Build Contracts
of closing 28 days before the tender submission date. The

rates quoted will then be incorporated in the contract
when awarded.
Whether single- or two-stage tendering will apply.
Number of copies of the tender that are required.
If payments are to be adjusted for changes in the
Which documents have to be filled in by the tenderer
cost of labour and/or materials, the formulae for
and returned by the submission date and which
calculating such changes and the source(s) of the
have to be signed.
applicable published indices for use in the formulae
The precise requirements for each tenderer to provide
should be included in the conditions of contract. If these
a power of attorney for the authorised signatory(ies)
forumulae use different currencies, care should be taken
to the tender.
to ensure that variations in their respective exchange
Any special rules regarding treatment of taxes, duties
rates do not lead to distortions.
and other fiscal matters in the tender.
Validity period of the tender.
Preference for local products and services Any documents other than those issued as part of the
Tenderers should be advised if and how his tender (see Table 12.2 for examples).
preference, if any, for local products and services will be Financing (contractor funding) if applicable.
applied in the evaluation of tenders. Procedure for issuing addenda to the tender dossier.
Procedure for dealing with queries raised by
Tender security tenderers.
Instructions for packing, labelling and addressing the
The requirements for a tender security, if any, will tender (including a supply of standard labels if this is
be determined by the circumstances of each contract. If the practice of the employer).
a tender security is required, a form should be included Procedure to be adopted for tenderers to visit and
in the tender dossier. An example form of tender security inspect the site.
is shown in Appendix 12.1.2. The amount and Procedure for inspecting any special documents not
currency(ies) of the security should be stated. In all cases issued with the tender dossier (e.g., site investigation
the guarantor(s) or the surety or sureties must be reports and environmental impact assessments).
satisfactory to the employer. If a tender security has Circumstances under which alternative offers may be
been requested, any tender which has not been so submitted.
secured will be rejected. Confidentiality of tender documents.
Table 12.2 Examples of tender documents unsuccessful tenderers (if required).
Documents other than those issued as part of the
time by tenderers.
his tender include: Procedure for dealing with arithmetic errors found in
- Drawings and calculations tenders during evaluation.
- Technical descriptions/specifications Rules relating to disqualification/rejection of tenders
- Proposals for management (e.g., late arrivals, altered figures, incomplete
- Designers submissions, and deviations).
- Subcontractors and suppliers Any unusual features of the particular tendering
- Proposals for site establishment/facilities procedure.
- Programme for design and construction Information about requirements of local (national)
- Payment plan/cash flow forecast regulations.
- Proposed methods of construction, with resources Information about the evaluation criteria and method.
- Proposed environmental protection measures Award of contract procedure, including submission of
- Health and safety and environmental protection plan the performance security, appointment of the
- Quality management and control Dispute Adjudication Board (DAB), and other
- Pricing document formalities.
128
Tenderers should be advised of the validity period - environmental impact during the lifetime of the project;
required for the tender security, and the events which will - avoidance of hazardous materials;
entitle the employer to cash the security. The period of validity - quality and serviceability of plant;
of the security should equal the period of validity of the tender - project financing;
plus the time allowed for the successful tenderer to provide his - operation and maintenance costs;
performance security under the terms of the eventual contract - claims record;
between the contractor and the employer. Tenderers should - suitability of management/staff;
be informed that their tender securities will be returned as - suitability of construction methods and sequence.
soon as the security is no longer in full force and effect.
These factors should, to the extent practicable, be
The employer should select the type and amount of expressed in monetary terms and/or given a weighting in the
security that is most appropriate to the contract to be evaluation provision of the tender dossier.
awarded. It is preferable that the amount of security should be
clearly stated as a specific sum rather than as a percentage of Performance security
the tender price.
If a security (guarantee or bond) for performance is
Evaluation criteria required, the type and terms should be specified in the
conditions of contract. The terms should include the period of
The evaluation criteria, which will form the basis for the validity of the security, the procedure to be followed if the
selection of the most advantageous tender, should be stated. security is forfeit, arrangements for its release and the
The criteria should be consistent with the information which currency of any monetary transactions involved.
tenderers are asked to submit and may include updating of
the information supplied as part of the prequalification The procedure for the successful tenderer to submit
procedure. the performance security should be described in the
instructions to tenderers.
If a specific method of evaluation is to be used in
selecting the successful tender, the method should be Checklist
described in the instructions to tenderers. An example of a
method of evaluation is described in detail in Chapter 17. The checklist given in Table 12.1 may help in the
preparation of instructions to tenderers and shows subjects
While evaluation generally may be primarily on the which should be covered.
basis of tender price, other factors which could be relevant to
achieving best value for money include: An example form of instructions to tenderers is given
in Appendix 12.1.3. This example is a suggestion, and must
- time for completion; be carefully reviewed and amended to take account of the
- suitability of technology of tenderers proposal; employers normal procedures and requirements, and all other
- life-cycle costs of the works; relevant circumstances for each tender enquiry.
12.1.4 Conditions of Contract

The recommended form of contract for design and - Annexes: Forms of Securities (Example Forms of Parent
build is the FIDIC Conditions of Contract for Plant and Design- Company Guarantee, Tender Security, Performance Security,
Build for Electrical and Mechanical Plant, and for Building and Advance Payment Guarantee, Retention Money Guarantee,
Engineering Works, designed by the Contractor. This Payment Guarantee by Employer);
publication comprises: - Forms of Letter of Tender with Appendix to Tender,
Contract Agreement and Dispute Adjudication
- General Conditions; Agreement.
- Appendix: General Conditions of Dispute Adjudication
Agreement and (Annex) Procedural Rules; Detailed guidance on its use is given in the FIDIC
- Guidance for the Preparation of Particular Conditions; publication The FIDIC Contracts Guide.
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It should be noted that this form of conditions of amendments and additions must be contained in
contract has been carefully prepared, and contains many particular conditions, not in amended and/or retyped
interdependent clauses. They should therefore be general conditions. This is so that tenderers can rapidly
adopted with as few alterations as possible. Where identify any changes and assess their effects, from the
general conditions need to be changed, the well-known and widely accepted FIDIC form of contract.
12.1.5 Employers requirements

This document is where the employer specifies subsequent stages of design development and
his precise requirements for the completed works, implementation to completion of the works.
including all matters not covered by the conditions of
contract. It is here that he gives his performance or Table 12.3 Typical employers requirements items
output specification for the completed works, in other
words the performance or result that the completed
Definition and purpose of the works.
installation or facility must achieve. If the employer has
Scope, design and other technical criteria.
any particular requirements as to how any parts of the
Applicable technical standards, codes and
works shall be constructed or installed, it is here that his
regulations.
wishes must be expressed.
Quality and performance criteria.
Permissions being obtained by the employer.
If the employer has prepared a conceptual
Customs requirements.
design or preliminary design which the contractor must
Proposed or required time programme.
accept and use as the basis for development, this must
Phased possession of foundations, structures, plant
also be included in the employers requirements. Usually,
or means of access.
the employer will also wish to include an outline time
Other contractors (and others) on the site.
programme showing the desired work phases and
Setting-out points, lines and levels of reference.
completion dates.
Involvement of third parties.
Environmental constraints.
If the employer omits to state certain of his
Access constraints: road, rail, air and sea.
requirements in this document, then the contractor will
Electricity, water, gas and other services available on
not be obliged to carry them out, unless they are
the site.
subsequently ordered as variations, with consequent
Employers equipment and free-issue material.
price and time changes.
Criteria for design personnel.
Contractors documents required, and whether
The document entitled employers requirements
required for information, review and/or approval,
must include topics such as those listed for convenience
and number of copies.
in Table 12.3 Typical employers requirements items.
Facilities for the employer, the engineer and his
representative, as well as for the contractors
These matters should not be covered in the
personnel.
instructions to tenderers, because they would not then
Samples.
be contractually binding. However, they are all referred to
Testing during manufacture and/or installation and
in the conditions of contract. It is important to ensure
construction.
that all topics are dealt with once only and not duplicated
Tests on completion
unintentionally, which may cause inconsistencies and
Damages for failure to pass tests on completion.
ambiguities.
Operational training for the employers personnel.
As-built drawings and other records of the works.
The extent of the contractors design obligation
Operation and maintenance manuals.
must be defined without doubt, including responsibility
Tests after completion
for all design from initial concept, or alternatively,
Damages for failure to pass tests after completion.
checking and assuming responsibility for the employers
Provisional sums.
conceptual or preliminary design, followed by all
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The employers requirements will define precisely the requirements should specify all tests on and after completion
scope and technical requirements of the contract, including to demonstrate that the completed works meet the
quality, performance and testing, and any requirements for performance criteria.
training and the transfer of technology. However, it is not
necessary to specify any matters which are imposed by The employers requirements should also make the
applicable laws. contractor responsible for quality assurance, as well as the
required health, safety and environmental measures to be
The quality of materials and the standards of observed during the execution of the works.
workmanship must be clearly described to the extent not
covered by the applicable laws, but in terms which are not so Any limitations on the contractors freedom of choice
detailed as to reduce the contractors design responsibilities. in the order, timing or methods of designing and executing the
On the other hand, they should not be so imprecise as to be work or sections of the works should be clearly set out and
difficult to impose, and not reliant on the future opinions of the any restrictions in his use of the site, such as interface
engineer, which tenderers may consider impossible to requirements with other parts of the work, or provision of
forecast. Sampling and testing both on- and off-site can be access or space for other contractors, should be given.
specified, but more often the employer is interested mainly in
the result to be achieved. Thus, he may leave the detailed The employers requirements should promote the
specification to the contractor, in the knowledge that the broadest possible competition by being as flexible as possible,
contractors responsibility is to provide a fully functioning thereby encouraging tenderers to adopt an innovative
facility which will fulfil his performance specifications. approach, however respecting both recognised local (national)
Therefore, it is most important that the employers and international standards.
12.1.6 Drawings
The employers requirements may include drawings, consequences, including any ultimate responsibility for this
on which the proposed works may be outlined. In such cases, design by the employer.
the employers requirements should define the extent to which
(for example) the works must comply with the outline. The The drawings should be listed in the employers
incorporation of design aspects into the drawings should be requirements.
carried out with care, with full consideration being given to the
12.1.7 Schedules, including schedule of prices and/or payments

The schedules are prepared by the employer/engineer Plant and design-build contracts are usually carried
and included in the tender dossier, and, where required, are to out on a lump-sum basis. This can include pricing the works
be completed by the tenderers. The form and extent of the on the basis of several lump sums, each representing a
schedules will depend on the information and data which the defined section of the works. The schedule of prices (or
employer requires, both for the tender evaluation and for pricing document) may provide identifying descriptions and
inclusion in the contract. An example list of schedules is given estimated quantities of work to be carried out in each section,
in Appendix 12.1.4. thus facilitating the breakdown of such lump sums into
constituent parts.
The schedules should reflect the type of contractor-
design to be included in the contract. These schedules may Where there is the possibility of variations or extra
include a questionnaire, tables and/or lists, setting out the work, it is usual to have a schedule of rates to enable valuation
information required from the tenderers. When preparing the of the varied or extra work. A daywork schedule may also be
schedules, the employer should consider carefully the extent of included to pay for work of a minor or incidental nature. As
information required, taking account of the work being imposed such schedules are not subject to competition in the same
on the tenderers and on his own personnel, who will be way as the tender price, the tender evaluation should include a
carrying out the detailed evaluation and comparison of tenders. check that the rates proposed are reasonable before including
Requesting tenderers to fill in unnecessary or over-detailed them in the contract. However, the employer should avoid
information in the schedules should be avoided. making variations as far as possible.
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The schedules may also include other advantageous tender, the employer and the successful
information of all types required from tenderers, such as tenderer decide on which parts of this additional
lists of recommended spare parts and proposed information shall be included in the contract. Such
subcontractors. Section 12.1.9 below gives a typical list information becomes part of the schedules, which are
of additional information often required from tenderers. defined as the documents completed by the contractor
After evaluation of tenders and the choice of the most as included in the contract.
12.1.8 Contractors proposal

The contractors proposal is the document through being awarded the contract. Typical contents for
containing the tenderers preliminary design, which he a contractors proposal are given in Appendix 12.1.5.
has prepared and submitted with his tender. The
employer should define in the instructions to tenderers In his proposal, the tenderer should identify any
what will be regarded as a responsive tender. The aspects where he proposes not to comply with any
employer might, on the one hand, prefer an outline, in particular aspect of the employers requirements, so that
order to minimise the costs of tendering and/or of the these deviations can be resolved before the tender is
evaluation and comparison of tenders. However, he accepted. If deviations are not identified, and thus are
might prefer detailed drawings, in order to reach not clarified in the contract, the employers requirements
agreement on the details at the outset. take precedence. However, if the contractors proposal
includes elaboration of any matter which is consistent
Although the employer can specify what will with the other contract documents, the matter becomes
constitute a responsive tender, tenderers will be reluctant an obligation, and either party can enforce it.
to carry out a costly detailed design if they consider that
they will have little chance of recovering their costs

The employer should specify the documents and
information that tenderers are required to submit with
their tenders. To ensure completeness and uniformity Tenderers organisation for executing the contract.
between tenderers, a suitable form should be prepared Tender programme for execution of the works.
and issued as part of the tender dossier. Breakdown of prices.
Information should not be sought on matters List of proposed major subcontractors, together with
which affect neither the evaluation of tenders nor the details of those parts of the works which the
subsequent contract. tenderer would propose to subcontract.
Details of key staff who would be employed on the
In order to assist the employer in forward contract.
budgeting, tenderers may be requested to provide with
Proposed guarantor or surety for performance security.
the tender an estimate of disbursements (excluding
Proposal for accommodation of the contractors
provisional sums) to be made by the employer during the
employees.
period of the contract. The instructions to tenderers
Projected build-up of labour on the site, both local
should state the periods to be adopted for this estimate.
and foreign.
Contractors estimate of the electrical power
The estimates of cash flow will not become part of
requirements on the site.
the contract as the figures may have to be reviewed and
Method statements.
adjusted as the work proceeds. Expenditure under
List of contractors equipment proposed.
provisional sums will affect the figures, and so also will
Update of prequalification information, e.g., financial
changes in the source of supply of goods and
status and contracts in hand.
modifications to the programme or the extent of the works.
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Depending on particular requirements, such additional It should be clearly stated which items will form part of
information may include some or all of the items listed in Table the tender evaluation and which items are to be incorporated
12.4. This list is not intended to be exhaustive. into the contract.

The tender dossier should be issued by the employer As an alternative to posting, or despatching by other
only to those firms which have been selected by the means, tenderers should be given the option of collecting
employer to tender. tender documents from the employer from the due despatch
date. Tenderers should be asked whether they wish to collect
If a charge for documents is to be made, issue the documents and, if so, be instructed as to the time and
should only be against payment. place for collection.

A formal visit to the site by all the tenderers should be tenderers. The visit should take place at approximately the end
arranged by the employer as laid down in the instructions to of the first half of the tender period and may include a
tenderers. If possible, individual tenderers should not be tenderers conference.
refused permission to visit the site at other times, but care
should be taken to ensure that the same information is given Tenderers should make their own travelling
to each tenderer. arrangements and bear the costs, including fares,
accommodation and subsistence and they should be advised
The primary purpose of the visit is to enable each of this in the instructions to tenderers.
tenderer to inspect the site and obtain all relevant information
required for the preparation of his tender. It is noted that the employer:
Tenderers should be advised of the probable duration - may require tenderers visiting the site to indemnify the
of the formal visit, the period during which the visit may be employer/engineer against any claims for damage, injury or
made and the maximum number of persons from each death as a result of the visit;
tenderer allowed to participate. - is only responsible for making those arrangements necessary
for the actual inspection of the site;
The arrangements for the site visit should be - should make a record of tenderers representatives visiting
determined so that equal opportunities are open to all the site.

correspondence or by tenderers conference, or by a described in the instructions to tenderers.

A tenderer requiring clarification of any document in The employer/engineer should prepare and
the tender dossier should submit his queries to the despatch written replies to queries. These replies, together
employer/engineer in writing, as stated in the instructions to with the text of the queries, should be issued to all tenderers
tenderers. without quoting the source of the queries, and the tenderers
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should be required to acknowledge receipt of the received not less than 35 days before the date for
information. submission of tenders.
Tenderers should be instructed that queries will Replies to queries should, where appropriate, be
not be accepted by the employer/engineer unless issued as addenda to the tender dossier.

With the conference method, queries from the whether present at the conference or not, a full set of
tenderers to the employer/engineer are dealt with at a minutes recording both the queries and formal replies.
tenderers conference arranged by the employer Where appropriate, an addendum to the tender dossier
normally taking place at the time of the site visit. should be issued.
Tenderers queries should be in writing and should
identify the party raising the query. Receipt of the minutes should be acknowledged
by the tenderers.
As far as possible, oral answers should be given
by the employer/engineer during the conference. Representation from each tenderer should be
limited to two or three persons at the conference.
Within a reasonable time after the conference,
the employer/engineer should send all tenderers,

Explanations, revisions, additions or deletions to be remembered that changes of a minor nature can
the tender dossier may be necessary during the tender usually be dealt with in discussions with the selected
period and these should be notified in accordance with tenderer prior to award.
the procedure described below.
The tender period should not be extended
Each addendum should, when issued, carry a unless the circumstances are exceptional. In considering
serial number for reference purposes and contain a the need for extensions which might arise, either as the
receipt slip which should be signed by each tenderer and result of major amendments to the tender documents or
returned immediately to the employer. Addenda should as a direct request from one or more tenderers, the
be complete in themselves and should not rely on following criteria should be applied:
tenderers having to appreciate the implications and
decide whether other changes to the documents are - Is there a convincing reason for granting an extension?
required as a consequence. Addenda become part of - Would the refusal of an extension reduce the number of
the tender dossier. tenders to be submitted?
- Would an extension give preferential treatment to those
The employer/engineer should avoid if possible, tenderers who are unable to meet the original tender
the issue of addenda during the latter part of the tender submission date?
period. If unavoidable, the employer/engineer should - Would an extension create unacceptable delay to the
consider extending the tender period to allow tenderers project programme?
a reasonable time for their incorporation. It should also

The FIDIC Conditions of Contract for Plant and Dispute Adjudication Board (DAB) with the purpose, if a
Design-Build stipulates the establishment of an ad hoc dispute arises, of adjudicating on the dispute and giving
134
its decision on the entitlements of each party with regard to national) can lead to that DAB member departing from the
the dispute. The DAB is to comprise one or three members, independent and impartial role that is required of every
depending on the size and complexity of the contract works member. It is unfair to place a DAB member in such a
and the matter in dispute, who are only appointed if and when situation. Furthermore, a similar situation may arise if either
a particular dispute arises, and whose appointment typically party makes a habit of appointing the same DAB member for
expires when the DAB has issued its decision on the dispute. successive projects.
Normal exchanges of viewpoint or differences of In order to establish the DAB in an effective way and
opinion between the parties are not considered as disputes. without delay when it is called upon to make a decision on a
However, when it becomes apparent that it is not possible for dispute, it is recommended that the employer includes in the
the parties themselves to come to agreement on a tender dossier a short list of persons, with their CVs, who the
contentious matter then it can be said that a dispute has employer considers suitable to act as members of the DAB.
arisen. If a dispute does arise then either party may refer that Each tenderer then may accept the employer's list, or delete
dispute to the DAB. The DABs decision is binding on the names from the list and/or add names of his own choice. This
parties, and is to be given prompt effect by both parties and may help the parties to agree upon the members of the DAB
the engineer. If a party does not accept the DABs decision, in conjunction with the signing of the contract, so that the
that party may give notice of its dissatisfaction, and the DAB may be rapidly appointed without disagreement and
dispute may then be submitted to arbitration. The decision delay if called upon to decide on a dispute.
shall nevertheless be binding and complied with until the
arbitration award is made. As the costs of the DAB are to be met equally by the
employer and the contractor, both parties must remember to
Until the mid-1990's the FIDIC forms of contract had include allowance in their financial calculations should these
an independent engineer who was required to be impartial costs arise.
when making decisions on matters concerning the rights and
obligations of the parties, e.g., when assessing and awarding For many design-build contracts, particularly those
extensions of time or dealing with claims from either party. This where works are to be carried out on the site from an early
procedure led to complaints that the engineer might not stage, experience has shown that it is most advantageous to
always act in an unbiased manner, as he was appointed by have a standing DAB in place from the commencement of
and paid for by the employer. FIDIC therefore introduced the the works, and which is active throughout the contract, rather
DAB procedure where the DAB members are required to be than having an ad-hoc DAB that only comes into operation
independent of the parties and be strictly unbiased in all their after a dispute has arisen. An important purpose of a standing
actions and decisions. True impartiality of each and every DAB is to assist the parties to avoid contentious matters
member of the DAB is essential for the proper and fair actually developing into disputes, and this is not possible
operation of the DAB, and the FIDIC DAB agreements contain when the dispute has already arisen. The FIDIC Conditions of
strong sanctions to ensure the independence and impartiality Contract for Construction makes provision for a standing DAB
of the DAB members. (see Section 11.6 above) and these provisions can be easily
incorporated into a plant and design-build contract in place of
Consequently, for international contracts, i.e., where the ad-hoc procedure.
the parties come from different countries, no DAB member
should be from the same domicile as any of the contracting
parties or the engineer. The reason is that in many jurisdictions
it may be very difficult for a national to find or decide against
his own state organisation. Such a situation (appointment of a

Tenders are binding for a fixed period which must be It is the responsibility of tenderers to ensure that their
at least for a sufficient period for proper evaluation and tenders are delivered to the employer by the due submission
contract award. date and time, properly signed by authorised signatories. If
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there is a two-stage tendering procedure then this The employer should mark all tenders with the
applies to each of the stages. time and date of receipt and ensure that they are kept
secure and unopened until the date and time appointed
Tenderers should be instructed to return their for the official opening. If tenders are delivered by hand,
tenders double-wrapped in plain envelopes or packages tenderers should obtain a receipt from the employer
using pre-addressed labels provided by the employer. recording the date and time of delivery.
Labels should preferably be distinctive and carry the
words Tender Document - To remain sealed until official Tenders received after the appointed time should
opening. The labels should identify the particular be immediately returned, unopened, to tenderers,
contract for which the tender is submitted but neither the accompanied by an explanatory letter giving the date
label nor any other markings on the outer wrapper of the and time of receipt.
tender envelopes or packages must identify the tenderer.
The identity of the tenderer is to be concealed between
the outer and inner wrappings of the tender envelopes or
packages for use in the event of late tenders having to
be returned unopened.
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13 Obtaining Tenders: EPC/Turnkey Contracts
Contents
13.1 Preparation of tender dossier 13.2 Issue of tender dossier
13.1.2 Letter of Invitation to tender 13.4 Tenderers queries
13.1.5 Employers requirements 13.5 Addenda to tender dossier
13.1.7 Schedules, including schedule of 13.7 Submission of tenders
payments
13.1.8 Tender Tables
13.1.9 List of documents/information to be Table 13.1 Instructions to tenderers checklist
submitted by tenderers Table 13.2 Examples of tender documents
Appendices Table 13.3 Typical employers requirements items
13.1.1 Example letter to invitation to tender Table 13.4 Documents to submit with tenders
13.1.2 Example form of tender security
13.1.3 Example form of instructions to tenderers
13.1 Preparation of tender dossiers

13.1.1 General
In this chapter the promoter of a contract is referred to there may only be a limited number of contracting companies
as the employer. Strictly the term employer should only be with the required expertise. In such cases prequalification may
used after a contract has been signed but it is used here, when be unnecessary, and the employer may himself prepare a list
describing the employers activities in obtaining tenders before of those companies or consortia who specialise in the required
the award of a contract, for the sake of simplicity and clarity. work and whom he wishes to invite.
When considering embarking on an EPC/turnkey For this type of contract the number of tenderers
contract, an employer should study carefully the introduction invited to tender should be strictly limited. If the work is very
to the FIDIC Conditions of Contract for EPC/Turnkey Projects. specialised, and there is keen competition between the
specialist firms, it may suffice with as few as three tenderers
Before the employer can obtain tenders from suitable being invited. In most cases the number of invited tenderers
contracting companies or consortia for an EPC/turnkey should certainly not exceed six or seven. This is because the
project he must have prepared: tenderers are required before tender submission and contract
award to have thoroughly examined all possible difficulties
- a list of tenderers whom he will invite to tender; and and risks that may be encountered, and to have allowed for
- a set of tender documents (the tender dossier). them in their tender price. This may involve extensive
investigation and preliminary design work, before tenders can
The employer must also initiate the appropriate be submitted. This preliminary, normally unpaid, work requires
notification procedures required by applicable laws and/or the considerable input from each tenderer and may be costly.
funding agency(ies).
If there are many invited to tender then the individual
The list of suitable tenderers will normally have been tenderers are likely to consider that the effort and expense are
arrived at following a prequalification process, as described in probably not worthwhile. As a result the tenderers may
Chapter 8. However, if the project is for construction of a very withdraw from tendering, or alternatively may submit a poorly
specialised facility, such as a factory for manufacture of a worked-through offer with possible negative results for the
particular product, or a process plant of a specialised type, tendering process.
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The procedure for obtaining tenders for an - employers requirements;

EPC/turnkey project also includes a number of special - schedules for completion by tenderers, including
features because: pricing;
- information data; and
- the contractor is responsible for the design; - list of additional documents/information to be
- the plant and equipment is manufactured off-site; submitted by tenderers.
- testing, commissioning and performance are based on
functional and/or output requirements. The scope of the contract and an outline of the
tender documents should be prepared before the
Section 5.6 give further details of these special prequalification documents (when applicable) in order to
features, and their effect on the tendering procedure. achieve consistency between these two sets of
documents.
The tender dossier is prepared by the employer,
or by a consultant on behalf of the employer. It will Some of the above items, such as the letter of
normally include: invitation to tender and the instructions to tenderers will
normally not form part of the contract agreement (see
- letter of invitation to tender; Chapter 19). It is therefore essential that all requirements
- form of letter of tender; and conditions applying after award of contract must be
- instructions to tenderers; incorporated elsewhere in the tender dossier.
conditions) together with any sample forms such as Detailed features of each of the documents to be
bank guarantees; included in a typical tender dossier are described below.

employers official headed paper and should include: possible. Detailed information on tendering should be
contained in the instructions to tenderers.
- list of documents issued (i.e., included in the tender An example letter of invitation to tender is given
dossier); in Appendix 13.1.1. This example is a suggestion, and
- instruction to inform the employer, in writing, of any repeating information contained in the other tender
significant changes to the data supplied in the documents, in order to avoid inconsistencies.
prequalification application (if applicable);
- information on whether single- or two-stage tendering;
and
- date, time and place of tender submission and tender
opening.

General evaluated, this document will no longer be needed, and
it should not form part of any resulting contract. It should
The instructions to tenderers should be prepared therefore not contain any text which remains valid after
by or on behalf of the employer to meet the particular the award of the contract.
requirements of individual contracts. The purpose of the
document is to convey information and instructions that Tenderers should be informed if the tendering is to
will govern the preparation, submission and evaluation of be carried out according to the two-stage procedure (see
tenders. When tenders have been received and Section 5.5.1 for more details), whereby unpriced
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technical solutions are presented in the first stage, and the price works requiring considerable pre-tender investigation of site
for an approved solution is then presented in the second stage. conditions, local circumstances, and/or preliminary design,
and projects likely to be tendered for by consortia, may require
Tenderers should be notified of the language in which tender periods of a number of months. In any case, it is
the tenders are to be written. They should also be notified of unwise for an employer to allow too short a period, which
the number of copies of their tender that are required, means that tenderers have insufficient time to consider fully
stipulating that one set of the documents should be clearly their risks and obligations, or to allow too long a period, which
marked Original Tender and the others (which should be may result in tenderers not commencing any of the required
photocopies) marked Copy and that, in the event of serious preparation work until well into the tender period.
discrepancy, the Original Tender shall take precedence.
Documents
Precise requirements should be given if a power of
attorney is needed for the authorised signatory(ies) of the tender. The instructions to tenderers should contain a list of
the documents required to form a complete tender.
The tenderers attention should be drawn to any
requirement for documents to be notarised and legalised at Tenderers should be informed that a tender will be
the embassy or consulate of the employers country. rejected unless it is substantially responsive.
Tenderers should be informed whether the successful It should be made clear to tenderers that any
tenderer will be required to establish a locally registered corrections must be initialled. Documents provided in
company for the purpose of the contract, or to have an agent. electronic format should be protected so that they cannot be
changed.
The instructions to tenderers should state that the
employer does not bind himself to award a contract to any of Alternative offers
the tenderers.
Often for this type of project the employer will not have
If remuneration is to be made to tenderers who submit specified a particular design or type for the plant/equipment
responsive tenders, the amount should be stated. If not, it required, nor the method of construction/installation, because
should be stipulated that all costs and expenses associated he wishes specialist contractors to offer their own solutions
with the preparation and submission of tenders shall be borne and proprietary systems which will fulfil his overall performance
by the tenderers. requirements. However, if the employer has indicated the
particular design he requires, then tenderers should be
Consideration should be given to offering some informed of whether alternative tenders will be considered or
remuneration to tenderers if they have to undertake extensive not, and if so, what technical and commercial conditions will
studies and preliminary design work in order to submit a apply. In any event, a compliant tender is normally a
responsive tender. precondition for considering alternative tenders.
Tender period Alternative tenders must include a comprehensive and

precise description of the parts of the tender documents
When determining the tender period, the employer which have been altered. The alternative tender should include
must ensure that adequate time is allowed for tenderers to full details of commercial terms and conditions, specification,
prepare their tenders, taking into account the size, complexity drawings, calculations, environmental impacts, and costs for
and location of the project. Important factors to be considered the parts of the works that have been altered, in order to allow
are whether there is likely to be a number of major a fair technical and financial evaluation of the alternative
subcontractors from whom tenderers will have to obtain offers, proposal.
or whether supply of materials and plant generally only
involves off-the-shelf supplies. Modification to tenders
Some straightforward or repeat work may not require a The tenderer should be informed that, if he has
long tender period. On the other hand, complex projects, delivered, posted or dispatched his tender prior to the formal
139
submission date he has the right to modify or make

corrections to it, provided that any such modifications or
corrections are received by the employer in writing prior
Whether single- or two-stage tendering will apply.
to the deadline specified for submission of tenders. The
Number of copies of the tender that are required.
original tender thus modified or corrected would then be
Which documents have to be filled in by the tenderer
considered as the official tender.
and returned by the submission date and which
have to be signed.
Financing arrangements
Precise requirements for each tenderer to provide a
power of attorney for the authorised signatory(ies) to
Tenderers should be informed of the source(s) of
the tender.
finance, their amount and related conditions for the
Any special rules regarding treatment of taxes, duties
proposed works.
Validity period of the tender.
Where tenderers are required to provide Any documents other than those issued as part of the
financing they should be instructed to provide tender dossier which the tenderer must include with
information as to their source(s) of finance and the his tender (see Table 13.2 for examples).
conditions which will apply. Financing (contractor funding) if applicable.
Procedure for issuing addenda to the tender dossier.
Currencies and payments Procedure for dealing with queries raised by
tenderers.
Specific instructions should be given concerning Instructions for packing, labelling and addressing the
the currencies to be used in the preparation of the tender (including a supply of standard labels if this is
tender. Tenderers should also be advised in which the practice of the employer).
currency or currencies payments will be made. Procedure to be adopted for tenderers to visit and
inspect the site.
Where tenderers are required to express their Procedure for inspecting any special documents not
tenders in a single currency (usually the currency of the issued with the tender dossier (e.g., site investigation
country in which the works are to be carried out), it is reports, environmental impact assessments).
necessary to define the rates of exchange which are to Circumstances under which alternative offers may be
be used to convert the various currencies in which submitted.
payment is required into a single currency unit. As more Confidentiality of tender documents.
Procedure for the return of tender documents
Table 13.2 Examples of tender documents submitted by unsuccessful tenderers (if required).
Documents other than those issued as part of the
time by tenderers.
his tender include: Procedure for dealing with arithmetic errors found in
- drawings and calculations tenders during evaluation.
- technical descriptions/specifications Rules relating to disqualification/rejection of tenders
- proposals for management (e.g., late arrivals, altered figures, incomplete
- designers submissions and deviations).
- subcontractors and suppliers Any unusual features of the particular tendering
- proposals for site establishment/facilities procedure.
- programme for design and construction Information about requirements of local (national)
- payment plan/cash flow forecast regulations.
- proposed methods of construction, with resources Information about the evaluation criteria and method.
- proposed environmental protection measures Award of contract procedure, including submission of
- health and safety and environmental protection plan the performance security, appointment of the
- quality management and control Dispute Adjudication Board (DAB), and other
- pricing document. formalities.
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than one tenderer may request part payment in one particular Evaluation criteria
currency, it is preferable that the exchange rates to be used
should be consistent and, therefore, that they should be defined The evaluation criteria, which will form the basis for the
by the employer and notified to each tenderer a reasonable time selection of the most advantageous tender, should be stated.
before the date of submission. Normally, these rates should be The criteria should be consistent with the information which
the selling prices quoted by the local central bank, and the rates the tenderers are asked to submit and may include updating
should be those quoted at the time of closing 28 days before of the information supplied as part of the prequalification
the tender submission date. The rates quoted will then be procedure.
incorporated in the contract when awarded.
If a specific evaluation method is to be used in
Normally EPC/turnkey contracts are procured on a selecting the successful tender, the method should be
fixed-price lump-sum basis. However, if payments are to be described in the instructions to tenderers. An example of a
adjusted for changes in the cost of labour and/or materials, typical evaluation method is described below in Chapter 17
the formulae for calculating such changes and the source(s) of Tender Evaluation and Recommendations: Contracts for
the applicable published indices for use in the formulae should Works.
be included in the conditions of contract.
While evaluation generally may be primarily on the
Preference for local products and services basis of tender price, other factors which could be relevant to
achieving best value for money include:
Tenderers should be advised if and how preference, if
any, for local products and services will be applied in the - time for completion;
evaluation of tenders. - suitability of technology;
- life-cycle costs of construction and plant;
Tender security - environmental impact during the lifetime of the project;
- avoidance of hazardous materials;
The requirements for a tender security, if any, will be - quality and serviceability of plant;
determined by the circumstances of each contract. If a tender - project financing;
security is required, a form should be included in the tender - operation and maintenance costs;
dossier. An example form of tender security is shown in - claims record;
Appendix 13.1.2. The amount and currency(ies) of the security - suitability of management/staff;
should be stated. In all cases the guarantor(s) or the surety or - suitability of construction methods and sequence.
sureties must be satisfactory to the employer. If a tender
security has been requested, any tender which has not been These factors should, to the extent practicable, be
so secured will be rejected. expressed in monetary terms and/or given a weighting in the
evaluation provision of the tender dossier.
Tenderers should be advised of the period of validity
which is required for the tender security, and the events which Performance security
will entitle the employer to cash the security. The period of
validity of the security should equal the period of validity of the If a security (guarantee or bond) for performance is
tender plus the time allowed for the successful tenderer to required, the type and terms should be specified in the
provide his performance security under the terms of the conditions of contract.
eventual contract between the contractor and the employer.
Tenderers should be informed that their tender securities will The terms should include the period of validity of the
be returned to them as soon as the security is no longer in full security, the procedure to be followed if the security is forfeit,
force and effect. arrangements for its release and the currency of any monetary
transactions involved.
The employer should select the type and amount of
security most appropriate to the contract to be awarded. It is The procedure for the successful tenderer to submit
preferable that the amount of security should be stated as a the performance security should be described in the
specific sum rather than as a percentage of the tender price. instructions to tenderers.
141
Checklist An example form of instructions to tenderers is

given in Appendix 13.1.3. This example is a suggestion,
The checklist given in Table 13.1 may help in the and must be carefully reviewed and amended to take
preparation of instructions to tenderers. The checklist account of the employers normal procedures and
shows subjects which should be covered when requirements, and all other relevant circumstances for
preparing the instructions. each tender enquiry.

The recommended form of contract for engineer, They should therefore be adopted with as few
procure and construct (EPC) or turnkey works is the alterations as possible.
FIDIC Conditions of Contract for EPC/Turnkey Projects. - Where general conditions need to be changed, the
This publication comprises: amendments and additions must be contained in
particular conditions, not in amended and/or retyped
- General Conditions; general conditions, so that tenderers can rapidly
- Appendix: General Conditions of Dispute Adjudication identify any changes from the well known and widely
Agreement and (Annex) Procedural Rules; accepted FIDIC form, and assess their effects.
- Guidance for the Preparation of Particular Conditions; - This form of conditions of contract has been prepared
- Annexes: Forms of Securities (example forms of Parent to provide as certain a final price and time for
Company Guarantee, Tender Security, Performance implementation as reasonably possible. To this end
Security, Advance Payment Guarantee, Retention Money more risks are passed over to the contractor, the total
Guarantee, and Payment Guarantee by Employer); price is a fixed lump sum, it is intended that the
- Forms of Letter of Tender, Contract Agreement and employer will not require variations to the works, and
Dispute Adjudication Agreement. other provisions are included to reduce the risk of
changes to the price and time for completion.
Detailed guidance on its use is given in the FIDIC - The employer should expect to pay a higher price as the
publication The FIDIC Contracts Guide. It should be contractor includes in his price for a higher level of risk.
noted that: - If contractors are unwilling or unable to quantify the risk
it is likely to result in unresponsive tenders, which may
- This form of conditions of contract has been carefully cause delay to the procurement process.
prepared, and contains many interdependent clauses.
13.1.5 Employers requirements

The employers requirements is where the programme showing the desired work phases and
employer specifies his precise requirements for the completion dates.
completed works, including all matters not covered by
the conditions of contract. It is here that he gives his If the employer omits to state certain of his
performance or output specification for the completed requirements in this document, then the contractor will
works, in other words, the performance or result that the not be obliged to carry them out, unless they are
completed installation or facility must achieve. subsequently ordered as variations, with consequent
price and time changes.
If the employer has any particular requirements
as to how any parts of the works shall be constructed/ The contents of the document entitled employers
installed, it is here that his wishes must be expressed. requirements must include for topics such as those listed
in Table 13.3.
If the employer has prepared a conceptual
design or preliminary design which the contractor must These matters should not be covered in the
accept and use as the basis for development, this must instructions to tenderers, because they would then not be
also be included in the employers requirements. Usually, contractually binding. However, they are all referred to in
the employer will also wish to include an outline time the conditions of contract. It is important to ensure that all
142
topics are dealt with once only and not duplicated unintentionally,
Table 13.3 Typical employers requirements items
which may cause inconsistencies and ambiguities.
The extent of the contractors design obligation must Definition and purpose of the works.
be defined without doubt, including responsibility for all design Scope, design and other technical criteria.
from initial concept, or alternatively, checking and assuming Applicable technical standards, codes and regulations.
responsibility for the employers conceptual or preliminary Quality and performance criteria.
design, followed by all subsequent stages of design Permissions being obtained by the employer.
development and implementation to completion of the works. Customs requirements.
Proposed or required time programme.
The employers requirements will define the Phased possession of foundations, structures, plant or
performance required of the completed facility, and to means of access.
whatever degree that the employer wishes to specify the Other contractors (and others) on the site.
scope and technical requirements of the contract, including Setting-out points, lines and levels of reference.
quality, performance and testing, and any requirements for Involvement of third parties.
training and technology transfer. However, it is not necessary to Environmental constraints.
specify any matters which are imposed by applicable laws. Access constraints: road, rail, air and sea.
Electricity, water, gas and other services available on the site.
The employer may wish to specify, for some or all of the Employers equipment and free-issue material.
works, the quality of materials and the standards of Criteria for design personnel.
workmanship to be provided by the contractor. He may also Contractors documents required, and whether required for
specify samples to be provided and tests to be carried out by information or review, and number of copies.
the contractor during the course of the contract. However, more Facilities for the employer, his representative and the
often the employer is basically interested in the result to be contractors personnel.
achieved, and will be satisfied to leave the detailed specification Samples.
for the contractor to choose, knowing that the contractors Testing during manufacture and/or installation and
responsibility is to provide a fully functioning facility which will construction.
fulfil the required performance specifications. Therefore the Tests on completion.
employers requirements should fully specify all testing and other Damages for failure to pass tests on completion.
measures to be taken on and after completion to prove that the Operational training for the employers personnel.
completed utility fulfils the stated performance criteria. As-built drawings and other records of the works.
Operation and maintenance manuals.
The employers requirements should also make the Tests after completion.
contractor responsible for quality assurance, as well as the Damages for failure to pass tests after completion.
required health, safety and environmental measures to be Provisional sums.
observed during the execution of the works.
Any limitations on the contractors freedom of choice in The employers requirements should promote the
the order, timing or methods of designing and executing the broadest possible competition by being as flexible as possible,
work or sections of the works should be clearly set out and any thereby encouraging tenderers to adopt an innovative
restrictions in his use of the site, such as interface requirements approach, however respecting both recognised local (national)
with other parts of the work, or provision of access or space for and international standards.
other contractors, should be given.
13.1.6 Drawings
The employers requirements may include drawings with the outline. The incorporation of design aspects into the
(drawings should be listed), on which the proposed works may drawings should be carried out with care, with full
be outlined. In such cases, the employers requirements should consideration being given to the consequences, including any
define the extent to which (for example) the works must comply ultimate responsibility for this design by the employer.
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13.1.7 Schedules, including schedule of payments

The schedules are prepared by the employer provide identifying descriptions of work to be carried out
and included in the tender dossier, and are, where in each section, thus facilitating the possible breakdown
required, to be completed by the tenderers. of such lump sums into constituent parts.
The form and extent of the schedules will Where there is the possibility of variations or
depend on the information and data which the employer extra work, it is usual to have a schedule of rates to
requires, both for the tender evaluation and for inclusion enable valuation of the varied or extra work. A daywork
in the contract. An example list of schedules is given in schedule may also be included to pay for work of a
Appendix 12.1.4. minor or incidental nature. As such schedules are not
subject to competition in the same way as the tender
The schedules should reflect the type of price, the tender evaluation should include a check that
contractor design to be included in the contract. These the rates proposed are reasonable before including them
schedules may include a questionnaire, tables and/or lists, in the contract. However, the employer should avoid
setting out the information required from the tenderers. making variations as far as possible.
When preparing the schedules, the employer should
consider carefully the extent of information required, taking The schedules may also include other
account of the work being imposed on the tenderers, and information of all types required from tenderers, such as
on his own personnel, who will be carrying out the detailed lists of recommended spare parts and proposed
evaluation and comparison of the tenders. Requesting subcontractors. Section 13.1.9 below gives a typical list
tenderers to give unnecessary or over-detailed information of additional information often required from tenderers.
in the schedules should be avoided. After evaluation of tenders and the choice of the most
advantageous tender, the employer and the successful
Usually the employer will require the works to be tenderer decide on which parts of this additional
completed on a fixed-price lump-sum basis. This can information shall be included in the contract. Care should
include pricing the works on the basis of several lump be taken to avoid unnecessary requirements that
sums, each representing a defined section of the works. interfere with the contractors execution of the works.
The schedule of payments (or pricing document) may
13.1.8 Tender
The tender is the document containing the particular aspect of the employers requirements, so that
tenderers offer to carry out and complete the works. It these deviations can be resolved before the tender is
should be his complete offer to fulfil all the employers accepted. If deviations are not identified, and thus are
requirements as well as to comply with the conditions of not clarified in the contract, the employers requirements
contract and other provisions of the contract. The tender take precedence. However, if the contractors tender
should be accompanied by all information required. includes elaboration of any matter which is consistent
with the other contract documents, the matter becomes
In his tender, the tenderer should identify any an obligation, and either party can enforce it.
aspects where he proposes not to comply with any

The employer should specify the documents and which affect neither the evaluation of tenders nor the
information that tenderers are required to submit with subsequent contract.
their tenders. To ensure completeness and uniformity
between tenderers, a suitable form should be prepared If tendering is to take place according to the
and issued as part of the tender dossier. two-stage procedure, then the whole and complete
technical solution being offered by the tenderer must be
Information should not be sought on matters submitted in the first stage. No rates or price information
144
are submitted in this stage, only technical and perhaps

contractual information.
Tenderers organisation for executing the contract.
Tender programme for execution of the works.
During or after evaluation, the employer may require
Breakdown of prices.
amendments to the technical solution. If the tenderer and the
employer come to agreement on the technical solution with
List of proposed major subcontractors, together with
amendments (if any), then the tenderer calculates his price for
details of those parts of the works which the tenderer
the agreed solution, and his price and amended solution are
would propose to subcontract.
then submitted in the second stage.
Details of key staff who would be employed on the contract.
Proposed guarantor or surety for performance security.
If the tenderer is proposing a specific system or
Proposal for accommodation of the contractors
equipment or method to fulfil the performance specification,
employees.
then he must provide sufficient information for the employer to
Projected build-up of labour on the site, both local and
be able to adequately evaluate his proposal, for purposes of
foreign.
comparison with the competing offers.
List of contractors equipment proposed.
Update of prequalification information, e.g., financial status
In order to assist the employer in forward budgeting,
and contracts in hand.
tenderers may be requested to provide with the tender an
estimate of disbursements to be made by the employer during
the period of the contract. The instructions to tenderers should It should be clearly stated which items will form part of
state the periods to be adopted for this estimate. the tender evaluation and which items are to be incorporated
into the contract.
Depending on particular requirements, additional
information may include some or all of the items listed in Table
13.4. This list is not intended to be exhaustive.

only to those firms which have been selected by the employer means, tenderers should be given the option of collecting
to tender. tender documents from the employer from the due despatch
date. Tenderers should be asked whether they wish to collect
If a charge for documents is to be made, issue should the documents and, if so, be instructed as to the time and
only be against payment. place for collection.

A formal visit to the site by all the tenderers should be Tenderers should be advised of the probable duration
arranged by the employer as laid down in the instructions to of the formal visit, the period during which the visit may be
tenderers. If possible, individual tenderers should not be made and the maximum number of persons from each
refused permission to visit the site at other times, but care tenderer allowed to participate.
should be taken to ensure that the same information is given
to each tenderer. The arrangements for the site visit should be
determined in order that equal opportunities are open to all
The primary purpose of the visit is to enable each tenderers. The visit should take place towards the end of the
tenderer to inspect the site and obtain all relevant information first half of the tender period and may include a tenderers
required for the preparation of his tender. conference.
145
Tenderers should make their own travelling of the site. The employer should make a record of
arrangements and bear the costs, including fares, tenderers representatives visiting the site.
accommodation and subsistence and they should be
advised of this in the instructions to tenderers. The employer may require tenderers visiting the
site to indemnify the employer against any claims for
The employer is only responsible for making damage, injury or death as a result of the visit.
those arrangements necessary for the actual inspection


A tenderer requiring clarification of any document tenderers should be required to acknowledge receipt of
in the tender dossier should submit his queries to the the information.
employer in writing, as stated in the instructions to
tenderers. Tenderers should be instructed that queries will
not be accepted by the employer unless received not less
The employer should prepare and despatch than 28 days before the date for submission of tenders.
written replies to queries. These replies, together with the
text of the queries, should be issued to all tenderers Replies to queries should, where appropriate, be
without quoting the source of the queries, and the issued as addenda to the tender dossier.

With the conference method, queries from the both the queries and formal replies. Where appropriate,
tenderers to the employer are dealt with at a tenderers an addendum to the tender dossier should be issued.
conference arranged by the employer normally taking
place at the time of the site visit. Tenderers queries should Receipt of the minutes should be acknowledged
be in writing and should identify the party raising the query. by the tenderers.
As far as possible, oral answers should be given Representation from each tenderer should be
by the employer during the conference. limited to two or three persons at the conference.
Within a reasonable time after the conference,

the employer should send all tenderers, whether present
at the conference or not, a full set of minutes recording

Explanations, revisions, additions or deletions to Each addendum should, when issued, carry a
the tender dossier may be necessary during the tender serial number for reference purposes and contain a
period and these should be notified in accordance with receipt slip which should be signed by each tenderer and
the procedure described below. returned immediately to the employer.
146
13 Obtaining Tenders: EPC/Turnkey contracts
Addenda should be complete in themselves and extensions which might arise, either as the result of major
should not rely on tenderers having to appreciate the amendments to the tender documents or as a direct request
implications and decide whether other changes to the from one or more tenderers, the following criteria should be
documents are required as a consequence. Addenda become applied:
part of the tender dossier.
- Is there a convincing reason for granting an extension?
The employer should avoid if possible, the issue of - Would the refusal of an extension reduce the number of
addenda during the latter part of the tender period. If tenders to be submitted?
unavoidable, the employer should consider extending the - Would an extension give preferential treatment to those
tender period to allow tenderers a reasonable time for their tenderers who are unable to meet the original tender
incorporation. It should also be remembered that changes of a submission date?
minor nature can usually be dealt with in discussions with the - Would an extension create unacceptable delay to the project
selected tenderer prior to award. programme?
The tender period should not be extended unless the

circumstances are exceptional. In considering the need for

The FIDIC Conditions of Contract for EPC/Turnkey act in an unbiased manner, as he was appointed by and paid
Projects stipulates the establishment of an ad hoc Dispute for by the employer. FIDIC therefore introduced the DAB
Adjudication Board (DAB) with the purpose, if a dispute arises, procedure where the DAB members are required to be
of adjudicating on the dispute and giving its decision on the independent of the parties and be strictly unbiased in all their
entitlements of each party with regard to the dispute. The DAB actions and decisions. True impartiality of each and every
is to comprise one or three members, depending on the size member of the DAB is essential for the proper and fair operation
and complexity of the contract works and the matter in dispute, of the DAB, and the FIDIC DAB agreements contain strong
who are only appointed if and when a particular dispute arises, sanctions to ensure the independence and impartiality of the
and whose appointment typically expires when the DAB has DAB members.
issued its decision on the dispute.
Consequently, for international contracts, i.e., where the
Normal exchanges of viewpoint or differences of parties come from different countries, no DAB member should
opinion between the parties are not considered as disputes. be from the same domicile as either of the contracting parties.
However, when it becomes apparent that it is not possible for The reason is that in many jurisdictions it may be very difficult for
the parties themselves to come to agreement on a contentious a national to find or decide against his own state organisation.
matter then it can be said that a dispute has arisen. If a dispute Such a situation (appointment of a national) can lead to that
does arise then either party may refer that dispute to the DAB. DAB member departing from the independent and impartial role
The DABs decision is binding on the parties, and is to be given that is required of every member. It is unfair to place a DAB
prompt effect by both parties. If a party does not accept the member in such a situation. Furthermore, a similar situation may
DABs decision, that party may give notice of its dissatisfaction, arise if either party makes a habit of appointing the same DAB
and the dispute may then be submitted to arbitration. The member for successive projects.
decision shall nevertheless be binding and complied with until
the arbitration award is made. In order to establish the DAB in an effective way and
without delay when it is called upon to make a decision on a
Until the mid-1990s the FIDIC forms of contract had an dispute, it is recommended that the employer includes in the
independent engineer who was required to be impartial when tender dossier a short list of persons, with their CVs, who the
making decisions on matters concerning the rights and employer considers suitable to act as members of the DAB.
obligations of the parties, e.g., when assessing and awarding Each tenderer then may accept the employers list, or delete
extensions of time or dealing with claims from either party. This names from the list and/or add names of his own choice. This
procedure led to complaints that the engineer might not always may help the parties to agree upon the members of the DAB in
147
conjunction with the signing of the contract, so that the commencement of the works, and which is active
DAB may be rapidly appointed without disagreement and throughout the contract, rather than having an ad-hoc
delay if called upon to decide on a dispute. DAB that only comes into operation after a dispute has
arisen. An important purpose of a standing DAB is to
As the costs of the DAB are to be met equally by assist the parties to avoid contentious matters actually
the employer and the contractor, both parties must developing into disputes, and this is not possible when the
remember to include allowance in their financial dispute has already arisen. The FIDIC Conditions of
calculations should these costs arise. Contract for Construction makes provision for a standing
DAB (see Section 11.6 above) and these provisions can
For many EPC/turnkey contracts, particularly be easily incorporated into an EPC/turnkey contract in
those where works are to be carried out on the site from place of the ad-hoc procedure.
an early stage, experience has shown that it is most
advantageous to have a standing DAB in place from the

Tenders are binding for a fixed period, which The identity of the tenderer is to be concealed between
must be at least sufficient for a proper evaluation and the outer and inner wrappings of the tender envelopes or
contract award. packages for use in the event of late tenders having to
be returned unopened.
It is the responsibility of tenderers to ensure that
their tenders are delivered to the employer by the due The employer should mark all tenders with the
submission date and time, properly signed by authorised time and date of receipt and ensure that they are kept
signatories. secure and unopened until the date and time appointed
for the official opening. If tenders are delivered by hand,
If there is a two-stage tendering procedure, then tenderers should obtain a receipt from the employer
this applies to each of the stages. recording the date and time of delivery.
Tenderers should be instructed to return their Tenders received after the appointed time should
tenders double-wrapped in plain envelopes or packages be immediately returned, unopened, to tenderers,
using pre-addressed labels provided by the employer. accompanied by an explanatory letter giving the date
Labels should preferably be distinctive and carry the and time of receipt.
words Tender Document To remain sealed until official
opening. The labels should identify the particular
contract for which the tender is submitted but neither the
label nor any other markings on the outer wrapper of the
tender envelopes or packages must identify the tenderer.
148
Dredging and Reclamation Works
Contents
14.1 Preparation of tender dossier 14.2 Issue of tender dossiers
14.1.2 Letter of invitation to tender 14.4 Tenderers queries
14.1.5 Specification 14.5 Addenda to tender dossier
14.1.7 Bill of quantities 14.7 Submission of tenders
14.1.8 Site data
14.1.9 List of documents/information to be Tables
submitted by tenderers Table 14.1 Instructions to Tenderers Checklist
Appendices Table 14.2 Information to be Submitted with Tenders
14.1.1 Example letter of invitation to tender
14.1.2 Example form of tender security

14.1.1 General
Before the employer can obtain tenders from suitable - list of additional documents/information to be submitted by
contracting companies he must have prepared: tenderers.
- a list of tenderers whom he will invite to tender; and Some of the above items, such as the letter of
- a set of tender documents (the tender dossier). invitation to tender and instructions to tenderers will normally
not form part of the contract agreement (see Chapter 19). It is
The employer must also initiate the appropriate therefore essential that all requirements and conditions
notification procedures required by applicable laws and/or the applying after award of contract are incorporated elsewhere in
funding agency(ies). the tender dossier.
The list of suitable tenderers will normally have been Detailed features of each of the documents to be
arrived at following a prequalification process, as described in included in a typical tender dossier are described below.
Chapter 8.
The tender dossier is prepared by the employer, or by

a consultant on behalf of the employer. It will normally include:
- letter of invitation to tender;

- instructions to tenderers;
- form of letter of tender and appendix to tender;
conditions) together with any sample forms such as bank
guarantees;
- specification;
- drawings;
- schedules for completion by tenderers, including bill of
quantities and/or schedule of prices;
- site data;
149

employers official headed paper and should include: possible. Detailed information should be contained in the
- list of documents issued (i.e., included in the tender An example letter of invitation is given in
dossier); Appendix 14.1.1.This example is a suggestion, and
- instruction to inform the employer/engineer in writing of repeating information contained in the tender
any significant changes to the data supplied in the documents, in order to avoid inconsistencies.
prequalification application; and
- date, time and place of tender submission and of
tender opening.

General registered company for the purpose of the contract, or to
have an agent.
The instructions to tenderers should be prepared
by or on behalf of the employer to meet the particular The instructions to tenderers should state that
requirements of the individual contract. The purpose of the employer does not bind himself to award a contract
the document is to convey information and instructions to any of the tenderers.
that will govern the preparation, submission and
evaluation of tenders. When tenders have been received Remuneration is not normally made to tenderers
and evaluated this document will no longer be needed, who submit tenders, so there should be a stipulation that
and it should not form part of any resulting contract. It all costs and expenses associated with the preparation
should therefore not contain any text which remains and submission of tenders shall be borne by the
relevant after award of the contract. tenderers. However, consideration could be given to
offering some remuneration to tenderers if they have to
Tenderers should be notified of the language in undertake extensive studies and/or preliminary design
which the tenders are to be written. They should also be work in order to submit a responsive tender.
notified of the number of copies of their tender that are
required, stipulating that one set of the documents Tender period
should be clearly marked Original Tender and the
others (which should be photocopies) marked Copy When determining the tendering period, the
and that, in the event of discrepancy, the Original employer must ensure that adequate time is allowed for
Tender shall take precedence. tenderers to prepare their tenders, taking into account
the size, complexity and location of the project. An
If a power of attorney is required for the important factor to be considered is whether there is
authorised signatory(ies), precise requirements should be likely to be a number of major subcontractors from
given. whom tenderers will have to obtain offers.
The tenderers attention should be drawn to any Some straightforward or repeat work may not
requirement for documents to be notarised and legalised at require a long tender period. On the other hand, complex
the embassy or consulate of the employers country. projects, works requiring considerable pre-tender
investigation of site conditions, and projects likely to be
Tenderers should be informed whether the tendered for by consortia, may require tender periods of
successful tenderer will be required to establish a locally a number of months.
150
In any case, it is unwise for an employer to allow too Where tenderers are required to provide financing they
short a period, resulting in tenderers having insufficient time to should be instructed to provide information as to their
consider fully their risks and obligations, or to allow too long a source(s) of finance and the conditions which will apply.
period, which may result in tenderers not commencing serious
preparation work until well into the tender period. Currencies and payments
Documents Specific instructions should be given concerning the

currencies to be used in the preparation of the tenders.
The instructions to tenderers should contain a list of Tenderers should also be advised in which
the documents required to form a complete tender. currency/currencies payments will be made.
Tenderers should be informed that a tender will be Where tenderers are required to express their tenders
rejected unless it is substantially responsive. in a single currency (usually the currency of the country in
which the works are to be carried out), it is necessary to define
It should be made clear to tenderers that any the rates of exchange which are to be used to convert the
corrections must be initialled. Documents provided in electronic various currencies in which payment is required into a single
format should be protected so that they cannot be changed. currency unit. As more than one tenderer may request part
payment in one particular currency, it is preferable that the
Alternative tenders exchange rates to be used should be consistent and,
therefore, that they should be defined by the employer and
Tenderers should be informed whether alternative notified to each tenderer a reasonable time before the date of
tenders will be considered or not, and if so, the technical and submission. Normally, these rates should be the selling prices
commercial conditions that will apply. In any event, a quoted by the local central bank, and the rates should be
compliant tender is normally a precondition for considering those quoted at the time of closing 28 days before the tender
alternative tenders. submission date. The rates quoted will then be incorporated in
the contract when awarded.
Alternative tenders must include a comprehensive and
precise description of the parts of the tender documents If payments are to be adjusted for changes in the cost
which have been altered. The alternative tender should include of labour and/or materials, the formulae for calculating such
full details of commercial terms and conditions, specification, changes and the source(s) of the applicable published indices
drawings, calculations, environmental impacts and costs for for use in the formulae should be included in the conditions of
the parts of the works that have been altered in order to allow contract.
a fair, technical and financial evaluation of the alternative
proposal. Preference for local products and services
Modification to tenders Tenderers should be advised if and how preference, if

any, for local products and services will be applied in the
Tenderers should be informed that, if a tenderer has evaluation of tenders.
delivered, posted or dispatched his tender prior to the formal
submission date he has the right to modify or make corrections Tender security
to it, provided that any modifications or corrections are received
by the employer in writing prior to the deadline specified for The requirements for a tender security, if any, will be
submission of tenders. The original tender thus modified or determined by the circumstances of each contract. If a tender
corrected would then be considered as the official tender. security is required, a form should be included in the tender
dossier. An example form of tender security is shown in
Financing arrangements Appendix 14.1.2. The amount and currency/currencies of the
security should be stated. In all cases the surety or sureties
Tenderers should be informed of the source(s) of must be satisfactory to the employer. If a tender security has
finance, their amount and related conditions for the proposed been requested, any tender which has not been so secured
works. will be rejected.
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Tenderers should be advised of the period of

validity which is required for the tender security, and the
events which will entitle the employer to cash the Language of the tender.
security. The period of validity of the security should Number of copies of the tender that are required.
equal the period of validity of the tender plus the time Which documents have to be filled in by the tenderer
allowed for the successful tenderer to provide his and returned by the submission date and which
performance security under the terms of the eventual have to be signed.
contract between the contractor and the employer. Precise requirements for each tenderer to provide a
Tenderers should be informed that their tender securities power of attorney for the authorised signatory(ies) to
will be returned to them as soon as the security is no the tender.
longer in full force and effect. Any special rules regarding treatment of taxes, duties
The employer should select the type and Validity period of the tender.
amount of security most appropriate to the contract to Any documents other than those issued as part of the
be awarded. It is preferable that the amount of security tender dossier which the tenderer must include with
should be stated as a specific sum rather than as a his tender.
percentage of the tender price. Procedure for issuing addenda to the tender
documents.
Evaluation criteria Procedure for dealing with queries raised by
tenderers.
The evaluation criteria, which will form the basis Instructions for packing, labelling and addressing the
for the selection of the most advantageous tender, tender (including a supply of standard labels if this is
should be stated. The criteria should be consistent with the practice of the employer).
the information which tenderers are asked to submit and Procedure to be adopted for tenderers to visit and
inspect the site.
may include updating of the information supplied as part
Procedure for inspecting any special documents not
of the prequalification procedure.
issued with the tender dossier (e.g., site investigation
reports and environmental impact assessments)
If a specific method of evaluation is to be used in
Circumstances under which alternative offers may be
selecting the successful tender, the method should be
submitted.
described in the instructions to tenderers.
Confidentiality of tender documents.
While evaluation generally may be primarily on
unsuccessful tenderers (if required).
the basis of tender price, other factors which could be
relevant to achieving best value for money may be
time by tenderers.
applicable.
Procedure for dealing with arithmetic errors found in
Performance security
tenders during evaluation.
Rules relating to disqualification/rejection of tenders
If a security (guarantee or bond) for performance
(e.g., late arrivals, altered figures, incomplete
is required, the type and terms of the security should be
submissions and deviations).
specified in the conditions of contract. The terms should
Any unusual features of the particular tendering
include the period of validity of the security, the
procedure.
procedure to be followed in the event that the security is
Information about requirements of local (national)
forfeit, arrangements for the release of the security, and
regulations.
the currency of any monetary transactions which are
Information about the evaluation criteria and method.
involved.
Award of contract procedure, including submission of
the performance security, appointment of the
The procedure for the successful tenderer to
Dispute Adjudication Board (DAB), and other
submit the performance security should be described in
formalities.
the instructions to tenderers.
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Checklist This example is a suggestion, and must be carefully

reviewed and amended to take account of the employers
The checklist of Table 14.1 is included to assist in the normal procedures and requirements and all other relevant
preparation of instructions to tenderers and shows subjects circumstances for each tender enquiry.
which should be covered.

The recommended form of contract for dredging and without alteration or with as few alterations as possible.
reclamation is the FIDIC Conditions of Contract for Dredging
and Reclamation Works. This publication comprises: Where general conditions need to be changed, the
amendments and additions must be contained in particular
- Agreement; Offer; Acceptance; Appendix conditions, not in amended and/or retyped general conditions.
- General Conditions This is so that tenderers can rapidly identify any changes and
- Particular Conditions assess their effects from the well-know and widely accepted
- Rules for Adjudication FIDIC form of contract.
- Notes for Guidance
- Annexes: Forms of Securities (example forms of
Performance Security, Advance Payment Guarantee,
Retention Money Guarantee.
This form of conditions of contract has been prepared

to provide a fair sharing of risk and responsibility between the
employer and the contractor, and contains many
interdependent clauses. It should therefore be adopted
14.1.5 Specification
The specification defines precisely the scope and - The nature of the material to be dredged and/or used in the
technical requirements of the contract. reclamation (to be determined by surveys and included in the
site data).
The quality of materials and the standards of - Ordnance, wrecks and obstructions (to be determined by
workmanship to be provided by the contractor must be clearly surveys and included in the site data).
described, together with requirements for health, safety and - The depth of dredging and quantity of material to be handled.
environmental measures to be observed during the execution - The location of disposal or reclamation areas (which will
of the works. affect sailing and/or pumping distances).
- The ground conditions at the reclamation site (which will
Dredging and reclamation work usually requires affect settlement and the quantity of fill material required).
various permits, licences and approvals to be obtained in - The season of execution (which will affect productivity due to
order for the works to proceed. These often take a varying weather conditions).
considerable amount of time to obtain and those that are - The period for execution (which will impact on availability of
provided by the employer or that are to be obtained by the dredging equipment).
contractor should be clearly specified. - Environmental, pollution and navigation restrictions (which
may dictate a specific method of work).
The dredging equipment forms a significant proportion - Maintenance and handover requirements (which impact on
of the total cost of a dredging and reclamation contract. The the length of time that the dredging equipment is required to
selection of appropriate dredgers and supporting vessels is be deployed).
fundamental to the tender price and contract duration and the
following are some of the main issues that need to be The survey requirements should also be specified. As
specified: a minimum these will include an in survey of the site prior to
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dredging and reclamation work commencing and an out and any restrictions in his use of the site, such as
survey to verify that the completed works have been interface requirements with other parts of the work, or
carried out to the specified lines and levels. A plus/minus provision of access or space for other contractors,
tolerance should be specified for both lines and levels. should be given in the specification.
The extent, if any, to which the contractor will be The specification should promote the broadest
responsible for the design of the permanent works possible competition by being as flexible as possible,
should also be specified. Details should be included of thereby encouraging tenderers to adopt an innovative
samples to be provided, surveys to be performed and approach respecting, however, both recognised local
tests to be carried out during the course of the contract. (national) and international standards.
Any limitations on the contractors freedom of

choice in the order, timing or methods of executing the
work or sections of the works should be clearly set out
14.1.6 Drawings
The drawings included in the tender dossier Boundaries and limits for the purpose of
should provide tenderers with sufficient detail to enable measurement and payment for dredging and reclamation
them, in conjunction with the specification, to make an should be defined on the drawings.
accurate assessment of the nature and scope of the
works. Drawings should be listed in the specification.
14.1.7 Bill of quantities

The bill of quantities/schedule of prices should The bill of quantities should include items to
provide identifying descriptions and estimated quantities allow the tenderer to state working and standby rates for
of work to be carried out. A method of measurement all the main dredging equipment and support vessels.
should describe how the works are to be measured such
as the difference between an in survey and out survey
or measurement in the hopper of the dredger or lines
and levels shown on the drawings.
If the tenders are based on lump sums, a

breakdown of such sums into constituent parts should
be provided by the tenderer.
14.1.8 Site data

This should include all data in the employers including hydrological, sub-water surface and sub-
possession relevant to the execution of the works, bottom conditions, and environmental aspects.

The employer should specify the documents and which affect neither the evaluation of tenders nor the
information that tenderers are required to submit with subsequent contract.
their tenders. To ensure completeness and uniformity
between tenderers, a suitable form should be prepared In order to assist the employer in forward
and issued as part of the tender dossier. budgeting, tenderers may be requested to provide with
the tender an estimate of disbursements (excluding
Information should not be sought on matters provisional sums) to be made by the employer during the
154
period of the contract. The instructions to tenderers should

Table 14.2 Information to be submitted with tenders
state the periods to be adopted for this estimate.
Tenderers organisation for executing the contract.
These estimates of cash flow will not become part of Tender programme for execution of the works.
the contract as the figures may have to be reviewed and Method statements.
adjusted as the work proceeds. Expenditure under provisional Breakdown of prices.
sums will affect the figures, and so also will changes in the Estimates of cash flow.
source of supply of goods and modifications to the List of proposed major subcontractors, together with
programme or the extent of the works. details of those parts of the works which the tenderer
would propose to subcontract.
Depending on the particular requirements, such Details of key staff who would be employed on the contract.
additional information may include some or all of the Proposed guarantor suretiy for performance security.
documents listed in Table 14.2. Proposal for accommodation of employees.
Projected build-up of labour on the site, both local and
This list is not intended to be exhaustive. It should be foreign.
clearly stated which items will form part of the tender List of contractors equipment proposed.
evaluation and which items are to be incorporated into the Update of prequalification information, e.g., financial status
contract. and contracts in hand.

only to those firms who have been selected by the employer means, tenderers should always be given the option of
to tender. collecting tender documents from the employer from the due
despatch date. Tenderers should be asked whether they wish
If a charge for documents is to be made, issue should to collect the documents and be instructed as to the time and
only be made against payment. place for collection.

A formal visit to the site by all the tenderers should be tenderers. The visit should normally take place towards the
arranged by the employer as laid down in the instructions to end of the first half of the tender period and should include a
tenderers. If possible, individual tenderers should not be tenderers conference.
refused permission to visit the site at other times, but care
should be taken to ensure that the same information is given Tenderers should make their own travelling
to each tenderer. arrangements and bear the costs, including fares,
accommodation and subsistence and they should be advised
The primary purpose of the visit to the site by of this in the instructions to tenderers.
tenderers is to enable each tenderer to inspect the site and
obtain all relevant information required for the preparation of The employer should only be responsible for making
his tender. those arrangements necessary for the actual inspection of the
site.
Tenderers should be advised of the probable duration
of the visit, the period during which the visit may be made and The employer should make a record of tenderers
the maximum number of persons from each tenderer allowed representatives visiting the site.
to participate.
The employer may require tenderers visiting the site to
The arrangements for the site visit should be indemnify the employer/engineer against any claims for
determined so that equal opportunities are open to all damage, injury or death as a result of the visit.
155
14 Obtaining tenders:


Any tenderer requiring clarification of any and the tenderers should be required to acknowledge
document in the tender dossier should submit his receipt of the information.
queries to the employer/engineer in writing, as stated in
the instructions to tenderers. Tenderers should be instructed that queries will not
be accepted by the employer/engineer unless received 35
The employer/engineer should prepare and days before the date for submission of tenders.
despatch written replies to queries. These replies,
together with the text of the queries, should be issued to Replies to queries should, where appropriate, be
all tenderers without quoting the source of the queries, issued as addenda to the tender dossier.

With the conference method, queries from the whether present at the conference or not, a full set of
tenderers to the employer/engineer are dealt with at a minutes recording both the queries and formal replies.
tenderers conference arranged by the employer to take Where appropriate, an addendum to the tender dossier
place at the time of the site visit. Tenderers queries should should be issued.
be in writing and should identify the party raising the query.
Receipt of the minutes should be acknowledged
As far as possible, oral answers should be given by the tenderers.
by the employer/engineer during the conference.
Representation from each tenderer should be
Within a reasonable time after the conference, limited to two or three persons at the conference.
the employer/engineer should send all tenderers,

Explanations, revisions, additions, or deletions to Addenda become part of the tender dossier.
the tender dossier may be necessary during the tender
period and these should be notified in accordance with The employer/engineer should avoid, if possible,
the procedure described below. the issue of addenda during the latter part of the tender
period. If unavoidable, the employer/engineer should
Each addendum should, when issued, carry a consider extending the tender period to allow tenderers
serial number for reference purposes and contain a a reasonable time for their incorporation. It should also
receipt slip which should be signed by each tenderer and be remembered that changes of a minor nature can
returned immediately to the employer. usually be dealt with in discussions with the selected
tenderer prior to award.
Addenda should be complete in themselves, and
should not rely on tenderers having to appreciate the The tender period should not be extended
implications of the tender and decide whether other unless the circumstances are exceptional. In considering
changes to the documents are required as a the need for extensions which might arise, either as the
consequence. result of major amendments to the tender documents or
156
as a direct request from one or more tenderers, the following - Would an extension create unacceptable delay to the project
criteria should be applied: programme?
- Is there a convincing reason for granting an extension?

- Would the refusal of an extension reduce the number of
tenders to be submitted?
- Would an extension give preferential treatment to those
tenderers who are unable to meet the original tender
submission date?

The FIDIC Conditions of Contract for Dredging and strong sanctions to ensure the independence and impartiality
Reclamation Works stipulates the establishment of a of the DAB members.
standing or full-term Dispute Adjudication Board (DAB)
before the commencement of the contract works, which Consequently, for international contracts, i.e., where
typically will visit the site on a regular basis thereafter. The the parties come from different countries, no DAB member
DAB is to comprise one or three members depending on the should be from the same domicile as any of the contracting
size and complexity of the contract works, and an important parties or the engineer. The reason is that in many jurisdictions
purpose is to assist the parties to avoid disputes. Normal it may be very difficult for a national to find or decide against
exchanges of viewpoint or differences of opinion between his own state organisation. Such a situation (appointment of a
the parties are not considered as disputes. However, when it national) can lead to that DAB member departing from the
becomes apparent that it is not possible for the parties independent and impartial role that is required of every
themselves to come to agreement on a contentious matter member. It is unfair to place a DAB member in such a
then it can be said that a dispute has arisen. If a dispute situation. Furthermore, a similar situation may arise if either
does arise then either party may refer that dispute to the party makes a habit of appointing the same DAB member for
DAB. The DAB will then adjudicate on the dispute and give successive projects.
its decision on the entitlements of each party with regard to
the dispute. The DABs decision is binding on the parties, In order to establish the DAB in an effective way and
and is to be given prompt effect by both parties and the without delay, it is recommended that the employer includes in
engineer. If a party does not accept the DABs decision, that the tender dossier a short list of persons, with their CVs, who
party may give notice of its dissatisfaction, and the dispute the employer considers suitable to act as members of the
may then be submitted to arbitration. The decision shall DAB. Each tenderer then may accept the employer's list, or
nevertheless be binding and complied with until the delete names from the list and/or add names of his own
arbitration award is made. choice. This may help the parties to agree upon the members
of the DAB, so that their selection may be confirmed in
Until the mid-1990s the FIDIC forms of contract had conjunction with the signing of the contract.
an independent 'engineer' who was required to be impartial
when making decisions on matters concerning the rights and As the costs of the DAB are to be met equally by the
obligations of the parties, e.g., when assessing and awarding employer and the contractor, both parties must remember to
extensions of time or dealing with claims from either party. This include in their financial calculations for these costs.
procedure led to complaints that the engineer might not
always act in an unbiased manner, as he was appointed by As an alternative to a standing DAB, which is
and paid for by the employer. FIDIC therefore introduced the appointed at the commencement of the contract and is active
DAB procedure where the DAB members are required to be throughout the contract, provision may be made for an ad-
independent of the parties and be strictly unbiased in all their hoc DAB which will only be appointed when a dispute actually
actions and decisions. True impartiality of each and every arises (see Section 12.6 above).
member of the DAB is essential for the proper and fair
operation of the DAB, and the FIDIC DAB agreements contain
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14 Obtaining tenders:

It is the responsibility of tenderers to ensure that Tenderers should ensure that both their name
their tenders are delivered to the employer by the due and address are clearly marked on the inner wrapper to
submission date and time, properly signed by authorised enable the employer to identify the tenderer for use in the
signatories. event of a late tender having to be returned unopened.
Tenderers should be instructed to return their If tenders are delivered by hand, tenderers
tenders double-wrapped in plain envelopes or packages should obtain a receipt from the employer recording the
using pre-addressed labels provided by the employer. date and time of delivery.
The labels are to be affixed to the outer wrapping and
should preferably be distinctive and carry the words
Tender for Contract No. ...... - To remain sealed until
official opening.
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15 Receipt and Opening of Proposals and Tenders
Contents
15.1 General
15.2 Initial preparations
15.3 Receipt of proposals/tenders
15.4 Opening of proposals/tenders
15.1 General
The guidelines for procedures described in this All procedures adopted should also comply with the
chapter apply equally to the receipt and opening of proposals applicable laws and regulations.
for consultancy services and of tenders for works contracts.
15.2 Initial preparations

Before the opening of proposals/tenders the although a shorter period would normally be sufficient for
client/employer should make arrangements to appoint the proposals for consultancy and other services.
chairman and members of an evaluation committee of which
the proposal/tenderer coordinator shall normally be a The evaluation committee and its assistants should be
member. The evaluation committee shall conduct the opening allocated suitable accommodation in which they can work.
of proposals/tenders and organise and manage the Access to the accommodation should be strictly controlled
subsequent evaluation process. and rigidly restricted to authorised persons. The
accommodation should be able to be locked in the absence of
The evaluation committee should normally comprise authorised persons. If considered necessary or expedient,
up to no more than six persons and should be formed security de-bugging of the premises in which the evaluation is
sufficiently early to ensure that the appointed members will be to take place may be undertaken.
available throughout the whole of the evaluation and
recommendation processes. The accommodation should be provided with internal
photocopying and typing facilities and external telephonic and
However, it may be necessary, particularly in the case electronic communication would normally be barred.
of large and complex works contracts, for the client/employer
to co-opt a number of assistants to help in undertaking the An initial task of the chairman of the evaluation
detailed tasks of evaluation and analysis of the committee should be to inform the members of their specific
proposals/tenders duties and responsibilities and to stress to them the
importance of confidentiality during the whole evaluation
The chairman and all members of the evaluation process. In particular, the chairman should stress that no
committee and all co-opted assistants should be carefully proposal/tender or part of a proposal/tender should leave the
chosen from suitable and experienced persons aware of the allocated evaluation area before the final completion of the
need for confidentiality at all stages in the evaluation process. work of the committee.
It will be the task of the committee to ensure that the

processes are carried out and the recommendations made in
a transparent manner in accordance with established strict
anti-corruption procedures.
Depending upon the magnitude of the task involved,

the work of the evaluation committee may take place over a
period of 60 up to 90 days in evaluating tenders for works,
159
15.3 Receipt of proposals/tenders

Clear procedures and instructions should be The procedures and instructions should ensure
established by the client/employer for the receipt of that proposal/tender envelopes and packages are
proposals/tenders and for ensuring that the procedures identified and numbered upon delivery, stamped with the
described below are followed. This is necessary to date and time of receipt and immediately placed
safeguard the confidentiality of proposals/tenders. unopened in a locked proposal/tender box or room for
storage until the fixed date and time of opening.
Those submitting will have been instructed to
label their submitted envelopes and packages with the A proposal/tender received after the appointed
words Proposal/tender to remain sealed until official time for opening should be immediately returned
opening and with a code to identify the particular unopened to the submitter, who will be identified by a
contract. The identity of the submitters must not be visible process of elimination or, in the situation where there is
on any envelope or package, prior to the official opening. more than one late offer, by removal of the outer wrapper
to expose the name of the submitter. The returned offer
Proposal/tender envelopes and packages may should be accompanied by an explanatory letter giving
be delivered by mail or by hand. If delivered by hand, the the date and time of receipt.
bearer is to be given a receipt by the employer recording
the date and time of delivery.
15.4 Opening of proposals/tenders

The time fixed for the opening of also attend, as would representatives of any government
proposals/tenders should be as soon as reasonable or other authority who are required so to do.
after the time for receipt. A recommended procedure
would be for the closing time of receipt to be 12:00 noon - In private
on a specified date at the offices of the client/employer, Where the offers are opened in closed session by
and the official opening to commence at 14:00 on the members of the evaluation committee. This procedure
same day at the same venue. is not usually appropriate when public funding is
involved.
The evaluation committee will open the
proposals/tenders. At the date and time fixed for the official opening,
the client/employer should check and display the sealed
Depending upon applicable laws and regulations condition of each offer prior to its being opened.
or procedures adopted by the client/employer, the
opening session may be carried out in one of a number Upon opening the proposals/tenders, the
of ways as appropriate to the circumstances. chairman of the evaluation committee should announce
and record at the time that each envelope or package is
- In public opened:
The date, time and place of opening should be advertised
in the press and notified to proposers/tenderers. - proposers/tenderers name;
- proposal/tender price;
- Restricted - price of alternative proposals/tenders, if appropriate;
In the presence of those proposers/tenderers wishing and
to attend, all having been advised of the date, time and - tender security (if required).
place of the opening.
However, in the case of consultancy proposals
Under both the in-public and restricted procedures any under the quality-based selection approach (see Section
persons specifically invited by the client/employer may 9.2) the proposal or alternative proposed price shall not
160
be announced. The procedure for the receipt and opening of Two members of the evaluation committee in
proposals/tenders in the second stage of a two-stage attendance at the opening of offers will normally initial each
tendering procedure will follow that of the first stage. page of each original document.
If appropriate, the chairman of the evaluation The evaluation committee should record on suitable
committee may also announce that reservations or deviations forms a list of every original document submitted with each
appear to be included in a covering letter or other attached proposal/tender together with a note of the number of copies
document. However he will not normally read out such received of each document. The completed forms will provide
reservations or deviations, and will certainly be unlikely to be a record of the proposal/tender opening session. The forms
able to determine their financial or other effect on the should be signed by the chairman of the evaluation committee
proposal/tender. This determination should be left to the and appropriate witnesses.
evaluation process as described in Chapter 16/Chapter 17.
The original of each proposal/tender is normally
Following this, the chairman should announce and placed in safe keeping by the chairman of the evaluation
record the names of any proposers/tenderers disqualified committee. Copies are used for evaluation.
owing to late or non-receipt of proposals/tenders.
The opening of offers should always be held on the
At the opening stage, it is advisable to allocate a fixed day that has been advised and should not be delayed.
confidential code to each proposers/tenderers documents.
FIDIC recommends that, unless specifically required
For example, for six offers the code could be in the by applicable laws and regulations or by financing or other
series 1 to 6. Both original documents and all copies should institutions, the opening of offers using the in-public procedure
be marked with the allocated code. The marking is should be avoided. The reason for this recommendation is that
recommended for both confidentiality purposes and disclosure of the offered sums is likely to create unnecessary
convenience during the subsequent detailed evaluation period and premature speculation that the contract will be awarded
when, depending upon the size of the submissions, a number to the submitter of the apparently lowest sum. As the technical
of evaluators may be employed. and financial content of the offers has still to be evaluated, any
speculation at this early stage will be premature and may be
The evaluation committee should check and record misleading, and subsequent correction may cause
the general compliance of each submission with the complications.
instructions given in the proposal/tender dossier.
This preliminary check should confirm whether the

following has been complied with or submitted:
- the proposal/tender had been correctly wrapped and sealed;

- the form of offer has been correctly completed and signed;
- the tender security has been provided (for tenders for works);
- the required details of a joint venture, if applicable, have been
provided; and
- the correct copies of schedules and other documents,
whether in hard copy or CD format, and as requested in the
instructions.
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16 Evaluation and Recommendations:
Consultancy Appointments
Contents
16.1 General Table 16.2 Evaluation of proposals for consultancy
16.2 Quality-based selection appointments: 2nd stage - Engineering
16.3 Evaluation of proposals with price comparison and management capability
16.4 Award recommendations Table 16.3 Evaluation of proposals for consultancy
16.5 Rejection of all proposals appointments: 2nd stage - Engineering
16.7 Notification to unsuccessful applicants and management capability
Table 16.4 Evaluation for consultancy appointments:
Tables 3rd stage - Financial scoring
Table 16.1 Evaluation of proposals for consultancy Table 16.5 Evaluation for consultancy appointments:
appointments: 1st stage - Eligibility, 3rd stage - Matrix example: combined
completeness of proposal and financial scoring
stability
16.1 General
The criteria used for evaluating proposals should making a reasonable financial profit from his participation in the
concentrate on bringing out and emphasising skills and project, the consultants main interest should be to impart to the
expertise relating to a tenderers understanding of the clients project good professional advice aimed at ensuring successful
needs in terms of creativity, innovativeness, relevant experience, execution of the project for the benefit of his client, i.e., the
mature judgement, and best practice, all in the best interest of employer. As for the client employing a doctor or a lawyer, it is
the client in return for fair and adequate payment. foolhardy to look blindly at the cheapest. The client should
consider first the documented ability of the doctor or lawyer,
As mentioned in Chapter 7, the selection of a and thereafter expect to reimburse him at a reasonable level.
consultant based on quality ultimately provides the best value The same applies to the appointment of a consulting engineer.
for the client. Experience has shown that the competence of
the consultant is the key to an efficient, cost-effective and Detailed guidance on the selection of consulting
successful project. The Quality-Based Selection (QBS) engineers together with both the advantages to be gained in
process encourages consultants to continually improve their the adoption of the quality-based selection procedure and the
skills and strive for creativity and innovation because their disadvantages of other procedures, is to be found in the
selection depends on it. The client is the beneficiary of these publication FIDIC Guidelines for the Selection of Consultants.
best practices at competitive fees.
However, despite FIDICs advice to the contrary, where
Clients should note that a consultancy appointment is established procurement procedures require prices for
not to be viewed in the same light as a contract for the professional services to be compared, guidance is also given
construction of a facility or for the supply of materials or in the FIDIC publication mentioned above.
equipment. The appointment of a consultant can be compared
to the engagement of a medical doctor or a lawyer in that the The FIDIC Client/Consultant Model Services
employer or client is appointing a professional adviser to give Agreement (the White Book) may be used to establish a fair
the best possible advice based on his professional skill, and sound relationship between the client and the consultant,
education and practical experience. Whereas a contractor and will protect both parties.
constructing a project is primarily a business-man intent upon
16.2 Quality-based selection

Section 7.6 explained that, if the quality-based applicant at the end of the prequalification procedure will be
selection method is to be adopted, the highest ranked invited to negotiate a consultancy services agreement.
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16 Evaluation and Recommendations
Information to be provided to the consultant prior The negotiations for the fee structure will be
to the start of negotiations should include: based on an agreed scope of services which takes into
consideration commercial and legal requirements,
- The scope of services required. including time schedules, payment terms and
- Terms of reference and supporting documents. appropriate risk allocations between the parties.
- List of additional information to be provided by the
consultant. The client may refer to fee schedules by various
- Date by which an agreement is to be concluded. FIDIC Member Associations and/or client bodies to
- Expected start date and programme for the provision of assist in the negotiations.
the services.
- Arrangements, as may be required, for visiting the site If agreement cannot be reached with the highest
of the proposed works. ranked prequalified applicant, the negotiations shall be
terminated and commenced with the second ranked
All the criteria considered at the time of applicant, and so on down the list until agreement is
prequalification (see Chapter 7) should be reviewed in finally reached.
depth during the negotiations to ensure that written
prequalification information submitted by the preferred
consultant is not only comprehensive but up-to-date.
16.3 Evaluation of proposals with price comparison

Normally, the evaluation of proposals is stability of each applicant. Again, this check would have
undertaken by an appointed evaluation committee. The been made previously for prequalification, but it is
formation of an evaluation committee is described in inevitably worthwhile to ensure that no adverse movement
Section 15.2. It is important that the evaluation has occurred to the financial status of an applicant.
committee is appointed early and that all necessary
arrangements for carrying out the evaluation work in a The committee should be satisfied that the
confidential manner are in place before the date for the applicant has the financial resources and backing to
opening of proposals. meet salaries, wages, materials, supplies, and all other
costs until the forecast payments become due under a
Evaluations in which the financial offers are consultancy services agreement and to meet all other
considered in the comparisons of proposals may be ongoing commitments during the period of the
considered in three stages: the first stage checks the consultancy services.
eligibility of each applicant and the completeness of the
proposals; the second stage considers the engineering As a guide the committee will expect the total
and managerial capabilities of the applicants; the final annual turnover of the applicant to be on the order of at
stage compares capabilities with the financial offers. least three times the anticipated annual turnover of the
services. Failure to meet the minimum financial
1st stage: Eligibility, completeness of requirements should result in the applicant being
proposal and financial stability excluded from further evaluation. These checks
complete the first stage of the evaluation.
While the eligibility check would have been
carried out for prequalification, it is advisable to check The results of the first stage analysis of eligibility,
again to ensure that circumstances have not changed. completeness and financial stability can be conveniently
An initial task is also to check the completeness of each recorded on an evaluation matrix form by marking each
proposal to ensure that all documentation required has applicant as either s for suitable or u for unsuitable
been correctly submitted. against the described criteria, an example of which is
shown in Table 16.1. Any applicant marked as unsuitable
Thereafter, it is necessary to check the financial against any criterion should be rejected at this stage.
164
2nd stage: Engineering & managerial capabilities The criteria in the example are:
Careful comparison of the proposals is then required - Organisation and management

in the second stage of the analysis to evaluate the engineering - Available resources: design capability
and managerial capabilities by use of a subjective scoring - Services to be subcontracted
system to rank the applicants in order of merit. - Experience: relevant projects completed
- Experience: relevant projects in progress
A convenient method of comparing proposals in the - Experience: geographical
second stage analysis is to record subjective scores against - General suitability: language
criteria representing various aspects of the submissions. The - Quality assurance system; health & safety; environmental policy
resultant scores are then suitably weighted. An example of use
of this method is given in the evaluation matrices shown in In Table 16.2 and 16.3 it is considered for this
Tables 16.2 and 16.3. example that the subcontracting of services would be
Proposal Evaluation Criterion Applicant Code

1 2 3 4 5
Eligibility and Competence of the Tenderer s s s s s

Financial Stability s s s s s
Notes 1 An s is marked for suitable and a u for unsuitable.

2 Any tenderer with a u mark against any criterion should be rejected.
3 In this example, all tenderers are taken forward to Stage II.
Table 16.1 Evaluation of proposals for consultancy appointments
1st stage - Eligibility, completeness of proposal and financial stability
Matrix example: suitable/unsuitable marking
Proposal Evaluation Criterion Applicant Code Weighting

1 2 3 4 5 to Apply
Organisation and management 75 75 95 95 80 20%

Available resources: design capability 60 85 95 95 70 35%
Services to be subcontracted 15 25 5 5 0 -10%
Experience: relevant projects completed 90 60 85 85 90 20%
Experience: relevant projects in progress 85 95 85 85 85 20%
Experience: geographical 35 45 50 50 65 5%
General suitability: language 30 25 35 40 25 5%
Quality assurance system; health and 50 40 50 50 60 5%
safety; environmental policy
Total: 100%
Notes 1 Scores are the average scores of all evaluators for each proposal under each criterion.
2 The effect of the application of the weighting percentages is shown in Table 16.3.
3 The criteria and the weighting percentages to be applied are examples only: the particular circumstances
of the proposed project will define the requirements for possible alternative or additional criteria and
weightings to be included in a proposal dossier.
2nd stage - Engineering and management capability
Matrix example: average of evaluators scores
165
detrimental to the qulaity of services to be provided and, Technical score of proposal under consideration
accordingly, has been given a negative weighting. While = [(weighted score of proposal under consideration)/
negative weighting and scoring will not generally be (weighted score of best technical proposal)] x 100
necessary, the example demonstrates how negative
weighting may sometimes be appropriate. From the engineering and managerial scores
shown in Table 16.3 the best three proposals, namely 3,
Where appropriate and feasible, discussions 4 and 5, are short-listed and taken forward for
may be held with applicants. This provides an comparison of their financial scores.
opportunity of meeting and assessing the personal
capabilities of key personnel who would be intimately Consideration has now to be given to the
associated with the project. financial aspects of the proposals. It is necessary to
check that the fee structures, on which the rates and
The criteria above are shown on the left-hand prices and totals of the proposal sums have been
side of the matrices while columns are provided for submitted, are acceptable for comparison purposes.
entries of the scores against the criterion under each of
the applicants numbered 1 to 5 (five applicants are Applicants should be advised of any arithmetic
considered in this example). The scoring against each errors in their proposals. Any other clarifications should
criterion is in the range 0 - 100, 100 being exceptional be sought from the applicants as necessary, such as, for
and going down through the ranges of very good, example, the reasons for any abnormally low-priced
good, average, poor and weak to 0 showing no proposals.
data.
From the analyses of the proposal sums the
It is good practice for the same evaluators, who assessed effective total proposal prices from the
may be more but never less than two, to score each applicants are assessed. The assessed total prices are
criterion for each proposal and for the evaluators scores then calculated as follows:
for each separate criterion for each proposal to be
averaged. This method avoids possible distortion in - the lowest assessed total price is given a financial
scoring values, which might be caused by different score of 100;
evaluators marking relatively high or low. To assist in the - the other proposals are scored by the inverse ratio:
comparison of proposals, it is also recommended that
the evaluators score all proposals for a particular criterion Financial score of proposal under consideration
before the next criterion is considered. = [(lowest total assessed total price)/
(assessed total price being considered)] x 100
Each criterion will have been previously
weighted. The average score against each criterion for Using the method of scoring explained above,
each proposal is then adjusted by the weighting the financial scores and their relative rankings are shown
percentage. In the example given in Table 16.3, the effect in Table 16.4. The most economically advantageous
of the weighting percentages is shown in the matrix. The proposal is identified by combining the evaluated
criteria and weightings may, of course, be adjusted to engineering and managerial scores with the financial
suit the circumstances of the project. scores on a 90/10 basis.
3rd stage: Capabilities and proposal prices In the example shown in Table 16.5 it will be
seen that, after adding the engineering and technical
For scoring comparison with the proposal sums, scores multiplied by 0.90 to the scores of the financial
the engineering and management scores are then scores multiplied by 0.10, applicants numbered 3 has
calculated as follows: the most economically advantageous proposal.
However, it is also to be noted that this applicant is
- the proposal with the highest percentage is given a neither the highest ranked applicant in the engineering
technical score of 100; and managerial evaluation nor the applicant with the
- the other proposals are scored by the ratio: lowest assessed total price.
166
Weighting
Proposal Evaluation Criterion Applicant Code
to Apply
1 2 3 4 5
Organisation and management 15.00 15.00 19.00 19.00 16.00 20%

Available resources: design capability 21.00 29.75 33.25 33.25 24.50 35%
Services to be subcontracted -1.50 -2.50 -0.50 -0.50 0 -10%
Experience: relevant projects completed 18.00 12.00 17.00 17.00 18.00 20%
Experience: relevant projects in progress 17.00 19.00 17.00 17.00 17.00 20%
Experience: geographical 1.75 2.25 2.50 2.50 3.25 5%
General suitability: language 1.50 1.25 1.75 2.00 1.25 5%
Quality assurance system; health and safety; 2.50 2.00 2.50 2.50 3.00 5%
environmental policy
Total average weighted score: 75.25 78.75 92.50 92.75 83.00
Notes 1 The proposal with the highest average technical and managerial weighted score, applicant 4 in this example, is
given a final evaluation score of 100 and the remaining applicants are given a final engineering and managerial
score in the ratio of (actual average weighted score/highest average weighted score) x 100, as shown below.
2 In this example the three highest scoring applicants numbers 4, 3 and 5, are short-listed and taken forward
for comparison with the financial scores.
Applicant Code: 1 2 3 4 5
Total weighted score: 81.13 84.91 99.73 100.00 89.49

2nd stage - Engineering and management capability
Matrix example: application of evaluators scores
Note
Applicant Assessed Total Proposal Financial Financial In this example, all applicants
Code Price, $USD Score Ranking are taken forward for
comparison and evaluation with
their engineering and
1 389,422 97.44 2
management capability.
2 392,678 96.64 4
3 390,648 97.14 3
4 408,655 92.86 5
5 379,472 100.00 1
Table 16.4 Evaluation for consultancy appointments

3rd stage - Financial scoring
Note
Applicant Engineering & Financial Engineering & Financial Overall Final
In this example, applicant 3 is
Code Managerial Score Score Managerial Score x 0.90 Score x 0.10 Combined Score considered to be the most
economically advantageous
1 81.13 97.44 73.01 9.74 82,75 proposal.
2 84.91 96.64 76.42 9.66 86.08
3 99.73 97.14 89.76 9.71 99.47
4 100.00 92.86 90.00 9.29 99.29
5 89.49 100.00 80.54 10.00 90.54
Table 16.5 Evaluation for consultancy appointments
3rd stage - Matrix example: combined scoring
167
16.4 Award recommendations

Upon completion of the quality-based selection - reasons for rejection of proposals; and
process or, alternatively, where price is an element in the - recommended proposal with reasons for
selection process, a report of recommendation for the recommendation.
award of a consultancy services agreement will normally
be prepared for submission to the client by the If the client accepts the recommendation he may
evaluation committee. proceed to prepare and sign an agreement for the
required services with the recommended consultant.
The report will contain:
In the process of awarding the consultancy
- a summary of the recommendations followed by a agreement, relevant provisions set out in Chapter 19
detailed text of the object, method and conclusions of concerning the award of contracts for works may be
the quality-based selection negotiations; applicable. However, it is not normal for the consultant to
be asked to provide a performance security as described
or, where a number of proposals have been analysed: in Section 19.5.
- proposals opening (as appropriate) and initial review;

- evaluation process/procedure;
16.5 Rejection of all proposals

In the unlikely event of rejection of all applications considering the rejection of all proposals because the
and proposals, the applicants should be advised of the lowest priced proposal exceeds the cost estimates or the
reason. If new proposals are to be invited, the client clients budget by a significant amount, the client may
should carefully review the causes leading to the rejection negotiate with the most favourably placed applicants.
and should consider modifying the prequalification
documents or proposal dossiers or adding to the list of In conducting such negotiations, the guiding
applicants before inviting new proposals. It is also principle must be to ensure that the confidentiality and
recommended that any new proposal dossiers should be fairness of competition is preserved. In the event of a
updated to incorporate any modifications previously satisfactory agreement not being negotiated, all
issued as addenda to proposal dossiers and/or replies to proposals may be rejected.
applicants queries.
Rejection of all proposals is also justified when:
Proposals should not be rejected and completely
new proposals invited against the original proposal - proposals are not substantially responsive to the issued
dossiers for the sole purpose of trying to obtain lower proposal dossier; or
prices. - too few proposals are received to ensure competition.
Subject to any particular conditions or regulations

governing the formation of agreements, if the client is
16.6 Notification to unsuccessful applicants

Upon commencement of the consultancy a quality-based selection process) or other applicants in
services, the client should promptly notify the other writing that their proposals have been unsuccessful.
successful prequalification applicants held in reserve (for
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17 Tender Evaluation and Recommendations:
Contracts for Works
Contents
17.1 Evaluation committee Tables
17.2 Tender evaluation tasks Table 17.1 Evaluation of tenders for works: average
17.2.1 Administrative and contractual group tasks of engineering and technical evaluators
17.2.2 Financial and pricing group tasks scores
17.2.3 Engineering and technical group tasks Table 17.2 Evaluation of tenders for works:
17.3 Tenders containing qualifications application of weighting percentages to
17.4 Alternative tenders engineering and technical evaluators
17.5 Tender evaluation methods scores
17.5.1 Administrative and contractual group Table 17.3 Evaluation of tenders for works: financial
methods scoring
17.5.2 Financial and pricing group methods Table 17.4 Evaluation of tenders for works: combined
17.5.3 Engineering and technical group methods scoring
17.6 Overall adjudication of tenders and
recommendations for award
17.7 Rejection of all tenders
17.1 Evaluation committee

Tenders are confidential and all tender evaluation work In Section 8.2.4, a description is given of the
should be carried out confidentially. The only exception to this competitive dialogue method of obtaining tenders for large
is where the tender opening is held in public and the names of and complex contracts. With this method, technical solutions
each tenderer and their tender sums are announced. and specifications are jointly developed through progressive
However, even in such cases all subsequent tender dialogue with selected contractors which then form the bases
assessment and evaluation work is to be carried out for the submission of priced tenders. The submissions may
confidentially. involve a two-stage tender process in which the technical
submissions are considered and clarified through further
Normally the evaluation of tenders is undertaken by an discussions prior to the submission of final prices. Whichever
appointed evaluation committee. The formation of an method is adopted the final evaluation of tenders will follow
evaluation committee is fully described in Section 15.2, to the general procedures outlined in this chapter.
which the reader is referred. It is important that the evaluation
committee is appointed early and that all necessary If there is a two-stage tendering procedure, for
arrangements for carrying out the evaluation work in a example for a contractor-designed turnkey project, when the
confidential manner are in place before the date for the first stage deals with outline technical proposals only, the
opening of tenders. procedure described in Section 17.2.2 would apply in the
second stage, which would include any amended technical
An initial task of the chairperson of the evaluation proposals together with the tender price and other financial
committee will be to inform the members and co-opted proposals.
members of the evaluation committee of their specific duties
and to stress to them the importance of confidentiality during Similarly, when the two-envelope tendering method is
the whole tender evaluation process. At this early stage the used, the procedure described in Section 17.2.2 would apply
chairperson will usually find it convenient to appoint a after the engineering and technical group has completed its
coordinator or secretary to organise and manage all the evaluations and upon opening of the second envelope
subsequent administration tasks throughout the whole
evaluation and recommendation processes. This work should
be carried out in an orderly manner to a predetermined time
schedule leading to contract award.
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Contracts for Works
17.2 Tender evaluation tasks

The tasks of evaluation of tenders for works can programmes and construction and installation methods
conveniently be carried out under the following headings: of the tenderers.
1 Administrative and contractual It is normal good practice for the engineering

and technical group to be restricted from gaining access
Typically this group will form the lead group to any pricing or other financial information about any of
headed by the appointed coordinator or secretary. This the tenders during the period of their evaluation. This
group will undertake and be responsible for the general ensures that the evaluation of technical matters is not
administration of the committee. influenced by the evaluators knowing the lower or higher
priced tenders.
This group will deal with tenderers contractual
submissions and tender qualifications and modifications. Significant matters to be scrutinized in the
The group will liaise closely with the other groups. tenders would have been explained in the instructions to
tenderers to assist tenderers in the preparation of their
2 Financial and pricing tenders. These matters would include the methods of
tender evaluation and the particular factors which
This group will check for arithmetic errors in the influence the tender analyses. The objective of the
tenders, review rates and prices and will examine evaluation is to lead to a fair and objective judgment.
financial offers (if applicable), calculate future
comparative cash-flow requirements and assess A method of evaluation recommended by FIDIC
comparative final cost predictions including operating is for a contract to be awarded to the most economically
and maintenance costs. advantageous tender established by weighting the
evaluated engineering and technical content of a tender
3 Engineering and technical against its evaluated financial cost on an 80/20 basis as
described in Section 17.6.
This group will study the relative proposed time
17.2.1 Administrative and contractual group tasks

Headed by the tendering coordinator and - Careful checks to ensure that all the submitted copies
working closely with the chair of the evaluation of each tender document are exactly the same as the
committee, this group will carry out and take original tender document.
responsibility for all administrative tasks, including - Ensuring that each original tender is held securely and
making available tender documentation for and liaison safely and not used for tender evaluation by any
with other groups of the committee. Ultimately, based on member of the evaluation committee.
its own analyses and those of the other groups, it will - Maintenance of records of the names and times of all
normally prepare the final report and recommendation for evaluation committee members and co-opted
contract award for submission to the employer. members entering and leaving the tender evaluation
area.
Depending upon the particular arrangements - Obtaining and maintenance of all signed declarations
being made, the group may be responsible for the of impartiality and confidentiality from evaluation
following administrative matters: committee members and co-opted members, if such
declarations are required by the employer.
- Maintenance of the records of the tender opening - Making additional copies of tender submissions (or parts
meeting (see Chapter 15). of tender submissions), as may be required by members
- Preparation of a detailed tender evaluation time of the different groups for their evaluation work, and
programme setting out interim and final report dates maintaining a record of the additional copies produced.
and taking particular note of the tender validity period - Ensuring that no part of a tender submission (or a
and the available evaluation resources. copy), which is made available to a group member
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Contracts for Works
specifically engaged in technical evaluations, bears either the the administrative and contractual group will begin by a review
name of a tenderer or any tendered rate, price or sum. of all tenders. The review will scrutinise and check general
compliance with the instructions to tenderers to ensure that
In this latter regard it is important to note that those the tenders are consistent with the invitation to tender and are
parts of tenderers covering letters involving price or financial without errors or omissions.
matters should to be blacked-out before being handed to
members of the engineering and technical evaluation group or, The scrutinies will include:
alternatively, restricted to evaluation by the administrative and
contractual group and the financial and pricing group only. - form of tender;
This is necessary to avoid undue influence over the technical - tender security;
evaluation of the tenders. - for open tenders, checking that the prequalification
information is complete;
- Preparation and issue of any correspondence and - tender validity;
communication with tenderers regarding clarification of - guarantees: e.g., parent company;
aspects of a tender. - securities: e.g., performance; advance payment;
- Preparation of interim reports as may be called for by the - warranties: e.g., collateral; contractor design;
employer during the tender evaluation. - insurances;
- Preparation of the final report and recommendation for - record of litigation and arbitration history.
contract award for submission to the employer.
- Preparation of correspondence to tenderers whose tenders Further procedural advice and recommendations on
are rejected. how this group should examine and evaluate any tender
qualifications and alternative tenders are given in Sections
Specific tender evaluation tasks to be undertaken by 17.3 and 17.4 below.
17.2.2 Financial and pricing group tasks

Working in close liaison with the administrative and - advances and downpayments;
contractual group, the financial and pricing group will be - capital cost;
responsible for the tasks listed below and will report, normally - discounted cash flow and net present value;
in writing, to the administrative and contractual group. - time programme of payments;
- costs of alternative tenders;
Tasks of the financial and pricing group will include - retentions;
reviews and analyses including: - financing arrangements;
- financial offers (if applicable);
- checking for possible pricing errors: - payment currencies;
where arithmetical errors are found, these should be - securities;
corrected in accordance with the provisions in the - interest rates;
instructions to tenderers; - contract price adjustment proposals;
- identifying pricing anomalies either abnormally high or low; - daywork rates; and
- valuation of deviations; - operating and maintenance costs (as may be appropriate).
7.2.3 Engineering and technical group tasks

Working without knowledge of either the tender rates - plant and equipment;
and prices or other financial proposals which may be included - materials compliance;
in the tender submissions, this group will analyse and make - specification compliance;
comparative assessments of the engineering and technical - qualifications to the tender dossier, as may be advised by the
aspects of the tenders, as listed below: administrative and contractual group;
- alternative tenders (if appropriate);
- time programme; - contractor-design proposals (if appropriate);
- construction methods/temporary works; - management;
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Contracts for Works
- staff: experience and qualifications; - quality assurance;

- labour: build-up; run-down and source; - compliance with local regulations, e.g., labour, building,
- health and safety policy and record; environment.
17.3 Tenders containing qualifications

A qualified tender is one where the tendering withdrawn. Alternatively and where the monetary value of
contractor does not provide an offer fully complying with a qualification is not provided by the tenderer, the value
the terms and conditions included in the tender dossier of the qualification should be determined by the
but submits a tender that in some way deviates from the employer and added to or subtracted from the tender
required terms and conditions. Such tenders containing price to arrive at the anticipated real cost of the tender
qualifications cause the employer difficulty when reviewing for comparison with other tenders received. The
tenders and can inhibit fair evaluation by rendering the calculation should be carried out using information
tender unable to be readily compared with the others. contained in the tender or, if appropriate information is
not given, by applying commercial rates and prices.
The objective when employers prepare tender
dossiers should be to reduce the likelihood of tenderers If the nature of the qualifications is such that it is
wishing to submit qualified tenders. This is achieved by impossible to determine their monetary value, it is
the preparation of tender dossiers that are unambiguous recommended that the tender should be judged to be
and by anticipating and avoiding terms and conditions substantially unresponsive and returned to the tenderer.
that are inappropriate for the scope of the contract or the
project circumstances. The procedure for dealing with qualifications will
depend on the employers policy towards tenders which
The employer often states in the instructions to do not comply fully with the instructions to tenderers.
tenderers that tenders containing qualifications may be The procedure described above is the one
rejected. There may, however, be circumstances where it recommended by FIDIC as most likely to ensure fairness
is in the best interests of the employer that he should to both employers and tenderers and in the long term to
consider and assess the qualifications in tenders. ensure that employers receive compliant competitive
tenders. Certain employers, particularly those who
If the employer anticipates that tenders may receive a number of tenders each year, may prefer to
contain qualifications, to facilitate comparison of tenders adopt a stricter approach and to reject any tenders
he may in the instructions to tenderers: which contain qualifications. If this is the case, a
statement to this effect should be included in the
- provide a schedule for tenderers to list, describe and instructions to tenderers and this procedure should then
price qualifications; and be strictly observed.
- require tenderers to submit a conforming tender as well
as the alternative tender that includes qualifications. Where financing institutions are involved, their
procedures may prescribe strict rules for dealing with
Where a tender contains qualifications, the qualifications and in particular are likely to prohibit any
tenderer should normally be asked for them to be change in tender price.
17.4 Alternative tenders

The instructions to tenderers should have stated aspects of any alternative submitted to see if it is
the policy regarding alternative tenders. If alternative acceptable. If it is, then its cost should be evaluated and
tenders are to be considered, the employer should ranked in the order of evaluated costs. The finally
examine the contractual, engineering and technical accepted tender for an alternative design may not be
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Contracts for Works
that from the tenderer submitting the most advantageous all tenderers might submit tenders for alternative designs,
conforming tender and the employer should be permitted to none of which might be acceptable to the employer. The
accept the alternative design if it is in his interests to do so. employer should make a detailed assessment of all
However, alternatives should only be considered if a compliant conforming tenders using the evaluation criteria specified in
tender has also been submitted, otherwise there is a risk that the tender documents.
17.5 Tender evaluation methods

While the foregoing sections and sub-sections of this the reports the committee will reduce the total number of
chapter describe the matters to be considered in the tenderers to a shortlist of, say, three or four.
evaluation of tenders, some recommendations are needed to
provide evaluators with suggestions for the methods to be At this stage, the employer may wish to seek
used for making comparisons between tenders and between clarification of information contained in the short-listed tenders.
the different aspects and issues contained within tenders. The employer should not raise queries in such a manner as to
elicit supplementary information beyond the minimum required
The evaluation process is typically carried out in two, for clarification and should state that any such further
or perhaps three, stages. The first stage of evaluation could information given will be disregarded. At the same time, a
involve confidential interim reports from the evaluation groups summary of any arithmetical correction made by the employer
to the chairman of the evaluation committee. On the basis of should be submitted to the respective tenderers for agreement.
17.5.1 Administrative and contractual group methods

A list of every original document submitted with each qualifications within the tenders which should be dealt with as
tender together with a note of the number of copies received described in Section 17.3.
of each document will normally have been recorded by the
tender evaluation committee, as suggested in Section 15.4. Scrutiny of all the particular documents listed in
Section 17.2.1 should be carried out with care to ensure that
It is recommended that comprehensive notes of the they have been fully and correctly completed and endorsed.
details of any errors, omissions, non-compliances,
shortcomings, qualifications, and alternatives are made, as it Tenders found to be substantially unresponsive should
will be necessary to advise the other evaluation groups of be rejected and returned to the tenderers.
these as appropriate for the possible need to clarify these with
the relevant tenderer. It is particularly important to record all
17.5.2 Financial and pricing group methods

Tenderers should be advised of any arithmetic errors - bills of quantities/pricing document;
in their tenders and other clarifications should be sought as - daywork rates and prices;
necessary. The group should carry out net present value and - contract price adjustment formulae;
discounted cash-flow calculations, taking into account - down payments and projected cash-flow schedules;
funding offers, if applicable, and requirements for advance - funding offers (if applicable);
payments, for the overall comparison of the financial offers of - financial effect of acceptable qualifications;
the tenders. - net present values and discounted cash flows; and
- risk.
In addition to potential front-end loading of tenders and
possible abnormally low-priced tenders, which may require From the analyses the assessed effective total tender
clarification and/or confirmation from the tenderers, the principal price for each tender is established. The lowest assessed total
issues which have to be analysed by the group both for tender price is given a financial score of 100. The other
compliant and alternative tenders include: tenders are scored by the inverse ratio:
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Contracts for Works
financial score of tender under consideration On completion of the above procedures the
= (lowest assessed total tender price)/ tenders should be placed in order of evaluated cost.
(assessed total tender price being considered) x 100
The financial scores of all tenders are then made
In the example shown in Section 17.5.3, four available for the overall evaluation described below in
tenders, namely A, B, E, and H, with the best engineering Section 17.6.
and technical evaluation scores are short-listed and chosen
for consideration with their total assessed tender prices.
Using the method of scoring explained above, the financial
scores of the four tenders are shown in Table 17.4.
17.5.3 Engineering and technical group methods

Typically it is the engineering and technical for each separate criterion for each tender to be
content of tenders which causes the greatest concern in averaged. This method avoids possible distortion in
the evaluation process. A method of comparison scoring values, which might be caused by different
recommended by FIDIC is described in this section. evaluators marking relatively high or low. To assist in the
comparison of tenders, it is also recommended that the
A convenient method of comparing tenders is to evaluators score all tenders for a particular criterion
record subjective scores against criteria representing before the next criterion is considered.
various aspects of the submissions. The resultant scores
are then suitably weighted. An example of this method Each criterion will have been previously
using a matrix is given below. weighted. The average score against each criterion for
each tender is then adjusted by the weighting
The subjects of an example evaluation form percentage. In the example given in Table 17.2 the effect
shown in Table 17.1 provide the criteria as listed below of the weighting percentages is shown.
- Organisation structure: key personnel The tenderer with the highest percentage is then
- Resources: labour and subcontractors given a technical score of 100. The other tenders are
- Resources: plant and equipment scored by the ratio:
- Time schedule: programme
- Method statements Technical score of tender under consideration
- Commitments: other contracts in progress = (weighted score of tender under consideration)/
- Quality assurance system (weighted score of best technical tender) x 100
- Health and safety
- Environmental policy The criteria and weightings may, of course, be
- Litigation and arbitration history. adjusted to suit the circumstances of the project. Where
appropriate and feasible, discussions may be held with
The criteria listed above are shown on the left- applicants. This provides an opportunity of meeting and
hand side of the form while columns are provided for assessing the personal capabilities of key personnel who
entries of the scores against the criteria under each of would be directly involved with the contract.
the tenderers A to H (eight tenderers in this example).
The scoring against each criterion is in the range 0-100, From the engineering and technical scores
100 being exceptional and going down through the obtained the best four tenders, namely A, B, E, and H,
ranges of very good, good, average, poor and are short-listed and taken forward for comparison with
weak to 0. the financial scores.
It is good practice for the same evaluators, who

may be more but never less than two, to score each
criterion for each tender and for the evaluators scores
174
Tender Evaluation Criterion Tenderer Codes Weighting
A B C D E F G H to Apply
Organisation structure: key personnel 87 90 89 81 92 76 79 90 10.0%

Resources: labour and subcontractors 76 87 67 66 80 60 78 82 10.0%
Resources: plant and equipment 85 76 89 53 87 65 85 78 12.5%
Time schedule: programme 83 76 67 67 76 70 83 86 15.0%
Method statements 92 85 78 76 92 53 87 90 20.0%
Commitments: other contracts in progress 67 69 56 76 50 56 67 90 10.0%
Quality assurance system 89 59 90 58 83 87 89 78 5.0%
Health and safety 80 87 85 79 84 76 74 74 5.0%
Environmental policy 79 70 83 76 84 85 67 69 5.0%
Litigation and arbitration history 76 76 67 56 90 83 57 71 7.5%
Notes 1 Scores are the average scores of all evaluators for each tender under each criterion.
2 The criteria and the weighting percentages to be applied are examples only: the particular circumstances
of the proposed contract will define the requirements for possible alternative or additional headings and weighting
percentages to be included with the tender dossier.
3 The effect of the application of the weighting percentages is shown in Table 17.2.
Table 17.1 Evaluation of tenders for works
Matrix example: average of engineering and technical evaluators scores
Tender Evaluation Criterion Tenderer Codes Weighting

A B C D E F G H Applied
Organisation structure: key personnel 8.70 9.00 8.90 8.10 9.20 7.60 7.90 9.00 10.0%
Resources: labour and subcontractors 7.60 8.70 6.70 6.60 8.00 6.00 7.80 8.20 10.0%
Resources: plant and equipment 10.63 9.50 11.13 6.63 10.88 8.13 10.63 9.75 12.5%
Time schedule: programme 12.45 11.40 10.05 10.05 11.40 10.50 12.45 12.90 15.0%
Method statements 18.40 17.00 15.60 15.20 18.40 10.60 17.40 18.00 20.0%
Commitments: other contracts in progress 6.70 6.90 5.60 7.60 5.00 5.60 6.70 9.00 10.0%
Quality assurance system 4.45 2.954 4.50 2.90 4.15 4.35 4.45 3.90 5.0%
Health and safety 4.00 4.35 4.25 3.95 4.20 3.80 3.70 3.70 5.0%
Environmental policy 3.95 3.50 4.15 3.80 4.20 4.25 3.35 3.45 5.0%
Litigation and arbitration history 5.70 5.70 5.03 4.20 6.75 6.23 4.28 5.33 7.5%
Average engineering and technical weighted score: 82.58 79.00 75.91 69.03 82.18 67.06 78.66 83.23
Final engineering and technical evaluation scores: 99.22 94.92 91.20 82.91 98.74 80.56 94.50 100.00
Notes 1 The tender with the highest average engineering and technical weighted score, in the example tender H, is given a
final evaluation score of 100; remaining tenders are given a final engineering and technical score in the ratio of
actual average score/highest average score, as shown in the final row above.
2 In this example, the four highest scoring tenderers H, A, E, and B are short-listed and taken forward for consideration
with the financial offers.
3 The criteria and the applied weighting percentages will have been set out in the tender dossier and cannot
be amended at the tender evaluation stage.
Table 17.2 Evaluation of tenders for works
Matrix example: application of weighting percentages to engineering and technical evaluators scores
Tender Total Tender Financial Tender Engineering Financial Engineering & Financial Overall Final
Code Price, USD Score Code & Technical Score Technical Score x 0.20 Combined
Score Score x 0.80 Score x 0.20
A 26,894,224 100.00 A 99.22 100.00 79.38 20.00 99.38

B 28,879,437 93.13 B 94.92 93.13 75.94 18.62 94.56
E 27,635,864 97.32 E 98.74 97.32 78.99 19.46 98.45
H 27,135,864 99.11 H 100.00 99.11 80.00 19.82 99.82
Table 17.3 Evaluation of tenders Table 17.4 Evaluation of tenders for works
for works Matrix example: combined scoring. In this example, tender H is
Financial scoring considered to be the most advantageous offer.
175
Contracts for Workss
17.6 Overall adjudication of tenders and recommendations for award

The most economically advantageous tender is - Prequalification - process and outcome
identified by combining the evaluated engineering and - Description of the tender process
technical assessments with assessed tender prices on - Tender evaluation
an 80/20 basis. - Receipt and opening of tenders
- Administration and contractual matters
In the example shown in Table 17.4 it will be - Qualifications and contractual issues
seen that, after multiplying the engineering and technical - Alternative tenders
scores by 0.80 and the scores of the tender prices by - Financial analysis and price comparisons
0.20, the tender with the lowest assessed tender price, - Engineering and technical appraisal
tender A, is not ranked as the most economically - Conclusions
advantageous tender: the first ranked tender is H, the - Preferred tenderer
highest ranked in the engineering and technical - Recommendation for award
adjudication. - Annexes
- Minutes of meetings of the tender committee
Upon completion of the adjudication of tenders - Minutes of the final meeting of the prequalification
the evaluation committee will normally prepare a report committee
with a recommendation for award to the employer. The - Report of the tender opening meeting
tender evaluation report should contain as a minimum - Forms used for tender evaluation
the following: - Completed compliance check forms
- Copies of clarification correspondence with tenderers
- Executive summary - Price comparison and analysis sheets
- Introduction - Completed technical review summary form.
17.7 Rejection of all tenders

In the unlikely event of rejection of all tenders, the Subject to any particular conditions or
tenderers should be advised of the reason. If new regulations governing the award of contracts, if the
tenders are to be invited, the employer should carefully employer is considering the rejection of all tenders
review the causes leading to the rejection and should because the lowest tender exceeds the cost estimates
consider modifying the tender documents or adding to or the employers budget by a significant amount, the
the list of selected tenderers before inviting new tenders. employer may negotiate with the most favourably placed
It is also recommended that any new tender documents tenderers.
should be updated to incorporate any modifications
previously issued as addenda to the tender dossier In conducting such negotiations, the guiding
and/or replies to tenderers queries. principle must be to ensure that the confidentiality and
fairness of tendering is preserved. In the event of a
Tenders should not be rejected and completely satisfactory contract not being negotiated, all tenders
new tenders subsequently invited against the original may be rejected.
tender dossiers for the sole purpose of trying to obtain
lower prices. Rejection of all tenders is also justified when:
The release of tender securities should not be - tenders are not substantially responsive to the tender
withheld, even if it is the intention of the employer to dossiers; or
invite some or all of the tenderers to re-tender against - too few tenders are received to ensure competition.
new tender dossiers.
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18 Award of Contracts: Consultancy Appointments
18.1 Letter of acceptance 18.6 Contract agreement

18.2 Negotiations 18.7 Notification to unsuccessful consultants
18.3 Letter of intent Table
18.4 Pre-award work agreement Table 18.1 Checklist of documents forming part of
18.5 Performance security the contract
18.1 Letter of acceptance

The client will normally seek to enter into a may not be the consultants original proposal, but something
consultancy services agreement with the proposer who that has been modified in the process of negotiation.
appears to have the capability and resources to carry out the
agreement effectively, whose proposal has been determined to It is therefore important that the letter of acceptance
be responsive to the proposal dossier and who has offered (all indicates clearly what has finally been accepted, both in terms
aspects taken into consideration) the most favourable and of scope of services and remuneration, as well as the legal
economically advantageous proposal. framework for the agreement between the parties. The letter
of acceptance should:
The client should notify the preferred consultant in
writing that the proposal has been accepted and draw - refer to the agreement and the services to be provided;
attention to any arithmetical errors which were corrected - refer to and attach any agreed memorandum of
during the evaluation process. understanding (or memorandum of pre-award clarifications);
- accept the proposal as clarified/amended in discussions and
The award must be made during the period of possibly in an agreed memorandum of understanding;
proposal validity or any extension thereto accepted by the - state the agreed compensation that the client will pay to the
consultant in his proposal. consultant in accordance with the terms of the contract;
- list the documents that constitute the agreement;
At the latest before taking the award decision, the - require the submission by the consultant of the various
client should have ensured that there is no alert relating to documents required to be submitted under the agreement,
prior misdemeanours by the selected consultant. such as insurance documentation.
If the proposal does not require any clarification then The letter of acceptance is normally regarded as the
the client may simply enter into the agreement by a signed instruction for the consultant to proceed. If the wording of the
letter of acceptance. letter indicates that this is the intention, it must be
remembered that an enforceable contract now exists between
Generally, however, the client and consultant need to the parties, even if the formal agreement has not yet been
reach agreement with regard to any outstanding matters, completed. The letter of acceptance will constitute the
including remuneration and the method of payment. The formation of the agreement that may be formalised by a
clarification of aspects of the proposal may also be required contract agreement for the services.
before the proposal can be accepted, and the agreement
signed. The FIDIC Client-Consultant Model Services
Agreement (the White Book) does not specify the format of the
acceptance.
Some clients send a formal letter of invitation to

negotiate to the selected consultant. Following negotiation,
and after agreement has been reached with regard to any
outstanding matters, the client should send a letter of
acceptance to the preferred consultant, indicating that he has
accepted the consultants proposal. What has been accepted
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18.2 Negotiations
The process of proposal clarification and/or such substitution unavoidable, or for reasons such as
negotiation may involve several meetings and may result death or medical incapacity. For some clients, if it is
in information that is additional to that set out in the established that key staff were included in the proposal
proposal dossier and submitted as part of the proposal. without confirming their availability, the consultant may
be disqualified and negotiations continued with the next
In negotiating an agreement with the proposer, ranked proposer.
the negotiations should include discussion of:
Any key staff proposed for substitution should
- the Terms of Reference (ToR); have equivalent or better qualifications and experience
- the methodology; than the key staff initially proposed. Any proposed
- the time programme; substitute should be submitted by the consultant within a
- staffing; specified period of time. Proposed unit rates for
- personnel schedule; remuneration should not be altered and other expenses
- the clients counterpart inputs and facilities; should not be negotiated on account of staff substitutions.
- the quantities of cost items in the firms financial
proposal; and When all issues have been adequately clarified
- the general and special conditions of the agreement. and/or negotiations concluded, the client should prepare
a memorandum of understanding or a memorandum of
Financial negotiations should include clarification pre-award clarifications recording details of all the
of the consultants tax liability in the clients country (if matters that have been clarified and agreed.
any). Great care is required during the process of
proposal clarification and/or negotiation to ensure that fair The memorandum of understanding should be
competition rules are not contravened and that it does submitted to the proposer for his agreement and signature
not result in a counter offer being made by the client. and will constitute the basis upon which an agreement
could be concluded. The agreed memorandum of
The discussions should not substantially alter the understanding should incorporate statements that it:
original ToR or the terms of the agreement, lest the quality
of the services, their cost, and the relevance of the initial - shall be binding on the proposer as an acceptable
evaluation be affected. Major reductions in work inputs clarification or amendment of his proposal until its
should not be made solely to meet the budget. validity period expires;
- shall be wholly subject to a subsequent services
Having selected the consultant on the basis of, agreement; and
among other things, an evaluation of proposed - shall not bind the client nor commit him to entering into
professional staff, the client expects to negotiate a any agreement under any terms.
agreement on the basis of the professional staff named
in the proposal. Before negotiations, the client will require
assurances that the professional staff will be actually
available. The client will generally not consider
substitution of the staff or experts unless both parties
agree that undue delay in the selection process makes
18.3 Letter of intent

When the proposer has agreed the Where it is not immediately possible for the client
memorandum of understanding then the client may enter to sign the agreement and issue a formal letter of
into an agreement with him by a letter of formal acceptance, the client may wish to advise the proposer
acceptance, signed by the client. of his intention to award the agreement. However, this
178
does not normally establish any binding obligation on the client acceptance, then the client and the proposer should agree
to carry out his intentions. To eliminate uncertainty on this specific terms and conditions for any pre-award work.
point, FIDIC recommends to stipulate in the letter that the letter
does not establish any legally binding obligation on the client. It should be noted however, that it is relatively rare for
a letter of intent to be issued for consultancy services.
A letter of intent should not be used to require
proposers to carry out preparatory work in expectation of an
award. If the client requires preparatory work to be
commenced, but is not able to issue a formal letter of
18.4 Pre-award work agreement

Where it is not immediately possible for the client to methodology in the scope of services which forms an annexe
sign the agreement and issue a formal letter of acceptance, to the contract agreement for services.
the employer may wish the proposer to commence work in
anticipation of the issue of a formal letter of acceptance. Successful negotiations conclude with a review of a
draft agreement that includes the agreed scope of services
In such situations, which are fairly rare for consultancy annexe, and the client and the consultant will initial a final
services, the client and the proposer should agree specific agreement.
terms and conditions for any pre-award work. Care should be
exercised in formulating an agreement for any pre-award work If negotiations fail, the client will invite the consultant
so that it is not construed as being the letter of acceptance. whose proposal received the next highest score to negotiate,
and so on, until an agreement is reached. The consultant shall
Any pre-award work agreement should normally be informed of the reasons for termination of the negotiations.
contain: Once negotiations are commenced with the next ranked
consultant, the client should not reopen the earlier
- a clear statement that the client intends to issue a formal negotiations. After negotiations are successfully completed the
letter of acceptance to the proposer; client should promptly notify other consultants which made
- details of work that the proposer is to undertake; proposals that their proposals were unsuccessful.
- the basis of payment for work authorised and a limit (if any)
to the financial liability which may be incurred before formal
acceptance; and
- a statement that if the agreement is subsequently not
awarded to the proposer, the properly audited costs incurred
by him in performing work authorised will be paid by the
client, but otherwise the client shall have no other obligation
to the proposer.
As mentioned, for consultancy services, the client

generally does not issue a letter of intent and it is fairly rare for
there to be pre-award preparatory work. The more usual
process is to incorporate the final ToR and the agreed
18.5 Performance security

Unlike contracts for works, proposal and performance consultancy services. More generally, any form of contract
securities and liquidated damages are not recommended for guarantee, such as a money deposit, bid bonds, performance
179
bonds and retention funds, serve little useful purpose. delivery of services depends in many ways upon actions
Their enforcement is often subject to judgment calls, by the client it is difficult to establish the sole
they can be easily abused, they tend to increase the responsibility of the consultant when there are delays, so
costs without obvious benefits to the client, and they the application of liquidated damages is not
have an adverse effect on the relationship between the recommended for consultancy services.
client and consultant which should be based on mutual
trust and cooperation. In addition, because the timely
18.6 Contract agreement

It is in everyones interests to have a formal shortlist report, proposal opening report, evaluation
contract drawn up and signed as soon as possible after report, guidelines for applicants, proposal opening and
the issue of the letter of acceptance. This will finally administrative check report, evaluation reports, and any
confirm the understanding of all parties about what is to other relevant information;
be done, and for how much. - three originals of the proposed agreement based on a
standard form such as the FIDIC White Book.
Whichever way the contract agreement is made
it is important that all of the issues be fully documented. A useful checklist of the documents which would
The formal agreement is the complete written contract be included and which would form part of an agreement
between the client and consultant. It will comprise at is given in Table 18.1.
least a formal statement of agreement, signed by both
parties, along with the scope of services to be supplied, This formalisation of the agreement by a contract
the remuneration to be paid, the time schedule, and the agreement may be a legal or procedural requirement for
legal framework within which the contract will be carried it to be effective. For an agreement under the FIDIC
out. White Book it is envisaged that the agreement will only
come into full force and effect on the date stated in the
In order to promote clarity of the services agreement. The letter of invitation to make proposals and
agreement, the client should prepare the agreement, the instructions to proposers issued by the client should
which should be signed by the client and consultant. not normally be included in the agreement.
This should include all the documents that form the
agreement, such that each page is identified by a
document reference or title and each page is numbered
in the format page x of y.
Table 18.1 Checklist of documents forming part
of the agreement
The documents to be incorporated in the signed
Contract Agreement with Memorandum (if any)
agreement will be those required by the particular form of
Letter of Acceptance dated
agreement being used (for example, the FIDIC White
Letter of Proposal dated
Book) and will also need to incorporate any
Addenda to the Proposal Dossier Nos.
clarification/amendments that have been agreed
Conditions of Client/Consultant Services Agreement
following submission of the proposal during negotiation.
- General Conditions of Agreement
- Particular Conditions of Agreement
In preparing the agreement for signature, the
A. References from Clauses in the General Conditions
client should prepare a dossier record and include:
B. Additional Clauses (if any)
Appendx A Scope of Services
- explanatory note;
Appendix B Personnel, Equipment, Facilities and
- minutes of any negotiation meetings;
Services to be Provided by the Client
- where appropriate, a copy of the financing agreement
Appendx C Remuneration and Payment
authorising the project;
Appendix D Time Schedule
- copies of the call for proposals, announcements,
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18.7 Notification to unsuccessful consultants

After the award to the selected consultant and counter evaluation of proposals and recommendations concerning
signature of the agreement the client may publish the award, awards should not be disclosed to the consultants who
and promptly notify the other proposers in writing that their submitted the proposals or to other persons not officially
proposals have been unsuccessful. concerned with the process, until the publication of the award.
The client should consider publishing the following However, in the case of a request for further
information: information from a consultant who was not successful, it is the
general practice to disclose any information which is not
- the names of all consultants who submitted proposals; confidential. An example may be comments regarding their
- the technical points assigned to each consultant; strengths and weaknesses as this may assist them to be
- the evaluated prices of each consultant; successful in future calls for proposals.
- the overall ranking of the consultants;
- statistical information concerning the procurement After counter signature of the agreement, the client
procedure; should return the unopened financial proposals to the
- the name of the winning consultant and the price, duration, unsuccessful proposers as soon as possible.
and summary scope of the agreement;
- the value of the agreement. In some cases, notably for awards by public
authorities, a contract award notice must be submitted to the
The same information should be sent to all funding agency no later than a fixed number of days after the
consultants who submitted proposals within a specified time conclusion of the agreement. The contract award notice may
(say 15 days from receipt of the countersigned agreement by then become the basis for publishing the award, generally
the client). depending on the value of the award, except where the
contract is declared secret or where the performance of the
In the publication of contract award the client may contract must be accompanied by special security measures,
specify that any consultant who wishes to ascertain the or when the protection of the essential interests of the client is
grounds on which its proposal was not selected should involved, or the beneficiary country so requires, or where the
request an explanation from the client. The client should publication of the award notice is deemed not to be
promptly provide the explanation as to why such proposal was appropriate.
not selected, either in writing and/or in a debriefing meeting, at
the option of the consultant. The requesting consultant should
bear all the costs of attending such a debriefing.
It is to be noted that information relating to the
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19 Award of Contracts for Works
Contents
19.1 Letter of acceptance 19.6 Contract agreement
19.2 Memorandum of understanding 19.7 Notifications to unsuccessful tenderers
19.3 Letter of intent Table
19.4 Pre-contract work agreement Table 19.1 Checklist of documents forming part of
19.5 Performance security the contract
19.1 Letter of acceptance

A contract for works will be created when the there is a period of negotiation to select the most favourable
employer accepts, without reservation, a letter of tender. tender with the contract only coming into full force and effect
on the date stated in the contract agreement.
The employer will normally seek to award the contract
to the tenderer who appears to have the capability and When a letter of acceptance is required it should:
resources to carry out the contract effectively, whose tender
has been determined to be responsive to the tender dossier - refer to the contract and the works to be executed;
and who has offered (all aspects taken into consideration) the - acknowledge receipt of the letter of tender;
most favourable and economically advantageous tender. The - refer to and attach any agreed memorandum of
award must be made during the period of tender validity or understanding (or memorandum of pre-award clarifications);
any extension thereto accepted by the tenderers. - accept the tender as clarified/amended by the agreed
memorandum of understanding;
If the tender does not require any clarification then the - state the accepted contract price that the employer will pay
employer may simply award the contract by a signed letter of to the contractor in accordance with the terms of the
formal acceptance of the tender. contract;
- list the documents that constitute the contract;
The agreements to the FIDIC Short Form of Contract - require the submission by the contractor of the various
and the FIDIC Form of Contract for Dredging and Reclamation documents required to be submitted under the contract,
Works envisage this simple procedure and set out a printed such as performance security, the advance payment
form for the offer and acceptance within the agreement. guarantee, and insurance documentation.
In respect of the other FIDIC forms of contract, the The letter of acceptance will constitute the formation
format of the acceptance is not specified as it is often of the contract that may subsequently be formalised by a
necessary for the employer/engineer to require clarification of contract agreement.
aspects of tenders before a tender can be accepted.
For contracts based on the FIDIC Conditions of

Contract for EPC/Turnkey Projects, a letter of acceptance is
not issued as it is envisaged that following receipt of tenders
19.2 Memorandum of understanding

The process of tender clarification and/or negotiation that fair competition rules are not contravened and that it does
may involve several meetings and may result in information not result in a counter offer being made by the employer.
that is additional to that set out in the tender dossier and
submitted as part of the tender. Great care is required during When all issues have been adequately clarified
the process of tender clarification and/or negotiation to ensure and/or negotiations concluded, the employer/engineer
183
should prepare a memorandum of understanding or a - shall be binding on the tenderer as an acceptable

memorandum of pre-award clarifications recording clarification or amendment of his tender until its validity
details of all the matters that have been clarified and period expires;
agreed. Either of these two documents may include - shall be wholly subject to a subsequent contract
details of the agreed arrangements for the appointment agreement; and
of the Dispute Adjudication Board (DAB). - shall not bind the employer nor commit him to entering
into any contract under any terms.
The memorandum of understanding should be
submitted to the tenderer for his agreement and When the tenderer has agreed the memorandum
signature and will constitute the agreed basis upon of understanding then the employer may award the
which a contract could be concluded. The agreed contract to the tenderer by a letter of formal acceptance,
memorandum of understanding should incorporate signed by the employer.
statements that it:
19.3 Letter of intent

Where it is not immediately possible for the letter of acceptance, then the employer and tenderer
employer to award the contract and issue a formal letter should agree specific terms and conditions for any pre-
of acceptance, the employer may wish to advise the contract work.
tenderer of his intention to award the contract. However
this does not normally establish any binding obligation on
the employer to carry out his intentions. But to eliminate
any uncertainty on this point, FIDIC recommends to
stipulate in the letter that it does not establish any legally
binding obligation on the employer.
A letter of intent should not be used to require

tenderers to carry out preparatory work in expectation of
a contract award. If the employer requires preparatory
work to be commenced, but is not able to issue a formal
19.4 Pre-contract work agreement

Where it is not immediately possible for the - a clear statement that the employer intends to award
employer to award the contract and issue a formal letter the contract and to issue a formal letter of acceptance
of acceptance, the employer may wish the tenderer to to the tenderer;
commence work in anticipation of the issue of a formal - details of such parts of the works (e.g., mobilisation,
letter of acceptance. ordering of materials, letting of subcontracts, etc.) that
the tenderer is to commence and execute;
In such situations the employer and tenderer - the basis of payment for work authorised and a limit (if
should agree specific terms and conditions for any pre- any) to the financial liability which may be incurred
contract work. Care should be exercised in formulating before formal acceptance of the tender; and
an agreement for any pre-contract work so that it is not - a statement that if the contract is subsequently not
construed as being the letter of acceptance. awarded to the tenderer, the properly audited costs
incurred by him in performing work authorised will be
Any pre-contract work agreement should paid by the employer, but otherwise the employer shall
normally contain: have no other obligation to the tenderer.
184
19.5 Performance security

It is normally a requirement of the contract that the If the timing is such that it will be impossible for the
contractor shall furnish a performance security within the time, contractor to provide the performance security before the
and in the amount, currency and form, prescribed in the validity period of the tenders has expired, and in compliance
contract. Where the employer is relying on project funding with the terms of the contract, the employer should protect
from external financial institutions, he should confirm the form himself by asking the other tenderers to extend the validity
of performance security to be used with that institution. period of their tenders accordingly. Refusal by any tenderer to
extend the validity period of his tender for this reason would
The performance security should be furnished before not entitle the employer to call his tender security.
the expiry of the validity period of the tender. Tenderers should
be informed in the tender dossier of the consequences of As soon as the successful tenderer has furnished the
failing to produce a performance security according to the performance security, the tender security provided by each
stated requirements. Such consequences would normally be tenderer should be returned.
that the contract is declared null and void and the contractor
forfeits his tender security.
The employer is then free to award the contract to the

next most favourable tenderer.
19.6 Contract agreement

In order to promote clarity of the conditions of
Table 19.1 Checklist of documents forming part
contract, the employer/engineer should prepare the contract of the contract
agreement, which should be signed by the employer and
Contract Agreement with Memorandum (if any)
contractor This should specify all the documents that form the
Letter of Acceptance dated
contract, such that each page is identified by a document
Letter of Tender dated
reference or title and each page is numbered in the format
Appendix to Tender (as may be amended and agreed after
page x of y.
tender submission)
Addenda to the Tender Dossier Nos.
The documents to be incorporated in the signed
General Conditions of Contract
contract agreement will be those required by the particular
Particular Conditions of Contract
form of contract being used and will also need to incorporate
Specification(s)/Employers Requirements
any clarification/amendments that have been agreed following
Drawings
submission of the tender.
Bill of Quantities with Method of Measurement and
Payment, if appropriate
Table 19.1 gives a checklist of the documents which
Schedules of Rates or Prices
would be included and which would form part of a contract.
Other Schedules completed by Tenderer
Forms of Security
This formalisation of the contract by a contract
- Parent Company Guarantee
agreement may be a legal or procedural requirement for the
- Performance Security Demand Guarantee or Surety
contract to be effective. For contracts based on the FIDIC
Bond
Conditions of Contract for EPC/Turnkey Projects form it is
- Advance Payment Guarantee
envisaged that the contract will only come into full force and
- Retention Money Guarantee
effect on the date stated in the contract agreement.
- Payment Guarantee by Employer
Dispute Adjudication Agreement
The letter of invitation to tender and the instructions to
- General Conditions
tenderers issued by the employer to tenderers should not
- Procedural Rules
normally be included in the contract.
185
19.7 Notification to unsuccessful tenderers

Upon the furnishing of the performance security arrange for the return of such securities to the
by the successful tenderer in accordance with the unsuccessful tenderers.
provisions of the contract, the employer/engineer should
promptly notify the other tenderers in writing that their
tenders have been unsuccessful.
At the same time, if tender securities have been

provided by tenderers, the employer/engineer must
186
References
FIDIC Client/Consultant Model Services Agreement, 4th Edition, FIDIC, 2006.

FIDIC Joint Venture (Consortium) Agreement, 1st Edition, 1992.
FIDIC Sub-Consultancy Agreement, 1st Edition, FIDIC, 1994.
FIDIC Model Representative Agreement, Test Edition, FIDIC, 2004.
FIDIC Guide to the Joint Venture and Sub-Consultancy Agreements, 1st Edition, 1994.
FIDIC Definition of Services Guidelines Building Construction, 2009.
FIDC Conditions of Contract for Construction, 1st Edition, 1999.
FIDIC Construction Subcontract, 1st Edition, 2011.
FIDIC Conditions of Contract for Plant and Design-Build Projects, 1st Edition, 1999.
FIDIC Conditions of Contract for EPC/Turnkey Projects, 1st Edition, 1999.
FIDIC Conditions of Contract for Design, Build and Operate Projects, 1st Edition, 2008.
FIDIC Short Form of Contract, 1st Edition, 1999.
Form of Contract for Dredging and Reclamation Works, 1st Edition, 2004.
FIDIC Tendering Procedure, 1st Edition, 1982.
FIDIC Tendering Procedure, 2nd Edition, 1994.
FIDIC Conditions of Contract for Works of Civil Engineering Construction, 4th Edition, 1987.
FIDIC Conditions of Contract for Electrical and Mechanical Works, 3rd Edition, 1987.
The FIDIC Contracts Guide, 2000.
FIDIC DBO Contract Guide, 2011.
187
Appendix A
FIDIC Code of Ethics
The International Federation of Consulting Impartiality

Engineers (FIDIC - Fdration Internationale des
Ingnieurs-Conseils) recognises that the work of the The consulting engineer shall:
consulting engineering industry is critical to the
achievement of sustainable development of society and - Be impartial in the provision of professional advice,
the environment. judgement or decision.
- Inform the client of any potential conflict of interest that
To be fully effective not only must engineers might arise in the performance of services to the client.
constantly improve their knowledge and skills, but also - Not accept remuneration which prejudices independent
society must respect the integrity and trust the judgement judgement.
of members of the profession and remunerate them fairly.
Fairness to others
All Member Associations of FIDIC subscribe to
and believe that the following principles are fundamental The consulting engineer shall:
to the behaviour of their members if society is to have
that necessary confidence in its advisers. - Promote the concept of Quality-Based Selection (QBS).
- Neither carelessly nor intentionally do anything to injure
Responsibility to society and the consulting the reputation or business of others.
industry - Neither directly nor indirectly attempt to take the place
of another consulting engineer, already appointed for a
The consulting engineer shall: specific work.
- Not take over the work of another consulting engineer
- Accept the responsibility of the consulting industry to before notifying the consulting engineer in question,
society. and without being advised in writing by the client of the
- Seek solutions that are compatible with the principles termination of the prior appointment for that work.
of sustainable development. - In the event of being asked to review the work of
- At all times uphold the dignity, standing and reputation another, behave in accordance with appropriate
of the consulting industry. conduct and courtesy.
Competence Corruption
The consulting engineer shall: The consulting engineer shall:
- Maintain knowledge and skills at levels consistent with - Neither offer nor accept remuneration of any kind which
development in technology, legislation and in perception or in effect either a) seeks to influence the
management, and apply due skill, care and diligence in process of selection or compensation of consulting
the services rendered to the client. engineers and/or their clients or b) seeks to affect the
- Perform services only when competent to perform them. consulting engineers impartial judgement.
- Co-operate fully with any legitimately constituted
Integrity investigative body which makes inquiry into the
administration of any contract for services or
The consulting engineer shall: construction.
- Act at all times in the legitimate interest of the client and

provide all services with integrity and faithfulness.
188
Appendix 2.6.6 - Basic Considerations
Operation and Maintenance
Projects to be operated and maintained by the Projects to be operated and maintained by the
employer contractor
With regard to large, complex projects, the question With regard to large, complex projects, the second
arises as to which party shall operate and maintain the case to be studied is where the employer does not take over
completed facility, and the two cases are commented upon, the facility on completion of construction/installation and
the first being where the employer will take over the facility on commissioning, but the contractor operates and maintains the
completion of construction/installation and commissioning. facility for a pre-agreed number of years, and in fact provides a
service (supply of fresh water, supply of electric power,
For an employer to take over and satisfactorily operate availability of road stretch, etc.). At the end of the operation
and maintain a large, complex project it is necessary for the period the facility should be handed over to the employer as a
employer to have a well-trained, experienced and competent going concern.
staff. Some training may be included in the
contractors/suppliers contract but this would normally be This scenario should be ideal for many projects being
insufficient in the case of complex plant and systems. financed by IFIs in a large number of developing countries,
and should help eliminate those white elephant projects
Whereas in Europe, North America, Japan, and other where expensive facilities are constructed but never operated
developed countries the typical employer may have a satisfactorily to provide the intended service for the end users.
competent and experienced staff to operate and maintain the The end users are often village and town dwellers, and are
new facility, plant or system, in much of the developing world often the poor whom the donors are intending to reach.
the employers organisation is not capable of satisfactorily
operating and maintaining complex power and process plants, In such countries employers typically lack the required
equipment and/or systems over extended periods, at least not staff and resources to take over and satisfactorily operate and
without the help of the manufacturer/supplier. maintain a large, complex plant or system. For such projects it
is necessary for the employer to have well-trained and
Therefore, generally speaking, projects to be operated experienced, competent staff. Although some training may be
by the employer after commissioning should be restricted to included in the contractors/suppliers contract, this has
those employers with the necessary staff organisation, which typically proved to be insufficient, with poor results as the
usually means to employers from the developed countries. If consequence.
complex projects with these features based in the developing
countries are intended to be operated by the employer, then it The proposed solution is to leave the responsibility for
is normally essential that significant training and back-up the operation of the plant or system to the contractor who has
resources are provided by the supplied it for an agreed number of years. He will take the
contractor/manufacturer/supplier. These resources should responsibility for maintaining the plant or system to provide the
normally be provided for in the plant, equipment or systems specified service to the users. In this way the white elephant
contract. syndrome will be eliminated, and the end users will receive
and benefit from the intended service. In addition, it would
Such projects can with much benefit be procured on normally be a contractual requirement that the contractor
the basis of performance or functional specifications, rather takes steps to train local personnel, thus benefiting the
than on the basis of traditional detailed specifications and countrys development.
drawings. However, the contractor is usually only responsible
for the functioning of his plant until the end of the defects Objection may come from some contractors/suppliers.
notification period, i.e., the guarantee period. Often their primary objective is to sell their plant, equipment or
system. They are reluctant to become involved in a faraway
Tenders are submitted on the basis of the country among unfamiliar and often difficult surroundings, in
construction/installation/provision of the facility, and, apart an environment which is totally different. However, many
from any guarantee obligations, the contractor receives full responsible contractors understand that the best way to
payment upon satisfactory commissioning of the facility. expand their market is to ensure that the products they make
and sell also operate satisfactorily in practice. Therefore, it is
for their own benefit that they do all that is necessary to
189
ensure the satisfactory and lasting operation of their cost for comparison purposes would be to take the
plant, equipment or system. Consequently, they should lifetime length of the better product and compare that with
be encouraged by the donors to ensure that the the total cost of the poorer product over that same
intended service actually is provided by contractor number of years, i.e., meaning that the poorer product
involvement during the operation period. would have to be replaced with a new product when its
lifetime was over. To simplify the proposal evaluation the
Ideally such contractors should endeavour to employer should fix the number of years which will be
use as much local resources as possible. The more local considered in the evaluation. The evaluation should then
technicians they can train to satisfactorily operate the be adjusted to account for the longer lifetime of the better
facility the less will be the cost to them, and the more product.
chance they will have to sell further plant in that country.
There is, of course, the danger that a tenderer may
Therefore the tender should include, not only the give an incorrect estimate of the cost of operation and
cost of the facility itself, but also the costs for operation maintenance in order to improve his winning chances.
and maintenance and for the actual provision of the However, the contractor will be required to stick by his
intended service for the whole pre-agreed operation estimate, and by the standard of the service, with financial
period. The contractor will obviously utilise local penalties for failure. It is often advantageous to have bonus
resources as far as he judges prudent, and each provisions if the specified standard of service is exceeded.
tenderer should himself judge what resources he will This can be an important encouragement to contractors
have to engage from his own staff to supervise and providing higher quality products.
assist the local staff and labour resources to ensure that
the operation of the service is satisfactory during the said Such projects should, with much benefit, be
period. This will also encourage manufacturers to make procured on the basis of performance or functional
and supply plant and equipment that is easy to operate specifications, rather than on the basis of traditional
and requires little maintenance and is suitable for the detailed specifications and drawings of sometimes
ambient conditions. Thus, the tenders will actually outdated technology. Tenderers will thus be encouraged
represent the life-cycle cost of the service, and it will be to offer solutions they know work well, and to offer
the tenderer who offers the lowest total life-cycle cost equipment that requires minimum maintenance and
(i.e., cost of provision of the facility plus the cost of maximum reliability. During the operation period the
operation and maintenance for the stated number of contractor will be encouraged to achieve innovation and
years) who will be awarded the contract. The operation efficiency in the operation work to his financial benefit.
and maintenance cost should be stated for each year.
Payment will normally be made for the
The evaluation of tenders based on the concept construction/manufacture of the facility on the basis of a
of life-cycle cost means that the total cost of schedule of payments according to work milestones
construction of the facility plus the costs of operating achieved. However, a substantial security will be retained
and maintaining the facility over a given number of years to ensure that after commissioning the facility works on a
can be compared for the different tenders. Basically an fit for purpose basis. Payment for the operation period
employer should be more interested in the total actual will be made on a regular time basis, provided that the
cost of the project over a number of years rather than required service quality is held.
just the cost of the construction. The principle means
that it is up to the tenderer to choose whether he wishes One objection from certain major donors is that
to provide a high-quality facility which will therefore have their grants are time-limited, and long-term engagements
lower operational and maintenance costs, or whether he are not acceptable. Depending on the individual projects,
decides to have a lower quality facility, which will cost solutions or partial-solutions to this problem may exist.
more to operate and maintain.
FIDIC now has a standard form of contract for
There is a serious consideration with regard to life- design, build and operate projects, namely the DBO
cycle costing in that a good product may have a much Contract, or Gold Book, see Sections 5.1, 5.7 and 5.11.
longer lifetime than a poorer product. The true life-cycle
190
Sustainable Development
In the cause of advancing the state of practice in To these ends, the contract document must:
sustainable development engineering, the conundrum facing
engineering consultants, clients and policymakers today is - Be able to handle multi-discipline and multi-firm project
this: how do you induce engineering firms to apply a more teams.
sustainable but relatively untried technology on projects in an - Allow and encourage cooperation among team members
environment where the failure of the technology to perform as such that the members work closely together and share
expected can expose the firms to claims of negligence? information freely.
- Manage input from multiple stakeholders, both internal and
A good place to start is to change the engineering external.
services procurement and contracting process in a way that - Allow the creation of designs which incorporate promising
will enable project owners to identify and select but relatively new and unproven technologies for the purpose
knowledgeable and experienced project teams, encourage of achieving higher levels of sustainable performance.
these project teams to try new and promising technologies, - Manage change in the form of application problems and/or
provide mechanisms for managing change, and allow the unexpected results.
sharing of risks and rewards among the participants. - Incorporate learning and knowledge sharing as a defined
deliverable.
Achieving conditions of sustainable development will - Make possible the equitable sharing of risk and rewards.
be a long journey. Progress will be achieved through the
efforts of consulting engineering firms working with their clients The development and widespread dissemination and
to identify and apply new technologies that will deliver acceptance of such a document will be a substantial
increasingly more sustainable performance. An essential contribution to progress toward conditions of sustainable
enabling document for this process is a form of contract that development.
will set the appropriate boundaries, conditions and controls on
the engineering work to satisfy clients, while still giving the The publication FIDIC Project Sustainablity
engineering firms sufficient leeway to try innovative Management Guidelines gives further information on aligning a
approaches, employ new technologies and otherwise advance project to societys goals for sustainable development.
the state of the practice.
191
A Feasibility Studies Report should include as a - Title page with authors and recipients details
minimum the following contents: - Contents list
- Executive summary
- Introduction
- Description of each subject:
- Scope of studies
- Methods adopted
- Data collection
- Analysis
- Comparisons and interpretation
- Conclusions
- Recommendations
- Appendices:
- References
- Drawings
- Tables
- Charts
- Calculations
192
Appendix 5.5.1 - Contract Types
Preparation of the Employers Requirements
1 Introduction associated with the accuracy, sufficiency and completeness of

the employers requirements.
Employers Requirements is a term that is used in the
FIDIC Conditions of Contract for Plant and Design-Build and in The content of the employers requirements should be
the FIDIC Conditions of Contract for EPC/Turnkey Projects, restricted to define the specific parameters for the works and
and also in the FIDIC Conditions of Contract for Design, Build must be prepared specifically for the particular FIDIC form of
and Operate Projects. Employers requirements is a document contract that is to be used.
that specifies the purpose, scope, and/or design and/or other
technical criteria, for the works. 2 Content of the employers requirements:
FIDIC Plant and Design-Build Contract
A general obligation is that the works shall include any
work which is necessary to satisfy the employers For contracts based on the FIDIC Conditions of
requirements or is implied by the contract as necessary for Contract for Plant and Design-Build:
stability or for the completion, or safe and proper operation, of
the works. There is also a general obligation on the contractor the employers requirements should describe all
that when completed the works shall be fit for the purposes specifications, requirements, regulations, procedures,
for which the works are intended as defined in the contract. interfaces, data, information, and the like for the design,
execution and completion of the works. Some of the matters
The employers requirements are therefore crucial in to be set out in the employers requirements under plant and
defining the works and must include all things that the design-build conditions of contract are detailed in Table
employer requires in respect of the execution and completion 5.5.1A below.
of the works, including the requirement as to the intended
purpose of the works. 3 Content of the employers requirements:
FIDIC EPC/Turnkey Contract
The FIDIC Conditions of Contract for Plant and
Design-Build and the FIDIC Conditions of Contract for For contracts based on the FIDIC Conditions of
EPC/Turnkey Projects impose differing obligations on the Contract for EPC/Turnkey Projects:
employer and contractor in respect of responsibility for the
accuracy, sufficiency and completeness of the employers the employers requirements should describe the principles
requirements. and basic design of the plant on a functional basis. It is
inappropriate to set out requirements that interfere in the
It has been a long held principle of FIDIC to allocate contractors process of design, execution and completion of
risk between the parties on a fair and equitable basis, taking the works. Some of the matters to be set out in the
account of such matters as insurability, sound principles of employers requirements for EPC/turnkey projects are
project management, and each partys ability to foresee and detailed in Table 5.5.1B, below.
mitigate the effect of the circumstances relevant to each risk.
4 Content of the employers requirements:
The FIDIC Plant and Design-Build Contract generally FIDIC Design, Build and Operate Contract
follows this fair and equitable basis in that, subject to the
contractor exercising due care when scrutinising the For contracts based on the FIDIC Conditions of
employers requirements, the employer retains general Contract for Design, Build and Operate Projects:
responsibility for risks associated with the accuracy, sufficiency
and completeness of his employers requirements. the employers requirements should be based on those for
plant and design-build projects described above but with
This is not the case in respect of the FIDIC Conditions additional requirements regarding the length of operation and
of Contract for EPC/Turnkey Projects where certainty of the maintenance. Some of the matters to be set out in the
final price and time is a primary requirement of the employer. employers requirements for design, build and operate
Save for the limited exceptions stated at Sub-Clauses 5.1(a) to projects are detailed in the Table 5.5.1A.
(d) under the FIDIC Conditions of Contract for EPC/Turnkey
Projects, the contractor has the primary responsibility for risks
193
Table 5.5.1A - Matters to be set out in the employers requirements: FIDIC Plant and Design-Build Contract
Conditions of Contract for Plant and Design-Build: Contents of the employers requirements
GENERAL: This document specifies the purpose, scope and/or design and/or other technical criteria Conditions of
for the works. Contract Ref.
1 Scope and description of the works, including scheme drawings and the intended purpose of 4.1
the completed works
2 Care and supply of drawings 1.8
3 Planning, zoning and other permissions obtained by the employer 1.13
4 Rights of access to the site 2.1
5 Cooperation: coordination with contractors 4.6
6 Cooperation: possession in accordance with the contractor documents 4.6
7 Protection of the environment 4.18
8 Electricity, water and gas 4.19
9 Employers equipment and free-issue material 4.20
10 Training 5.4
11 Engagement of staff and labour 6.1
12 Facilities for the employers personnel 6.6
13 Royalties 7.8
14 Other information/requirements
15 Site data
16 Programme, including milestones
17 Working hours
18 Diversionary routes: rail and road
19 Plant possessions
20 Health and safety
21 Security
22 Quality management and assurance
DESIGN: This section specifies the terms, conditions and requirements related to design.
1 Design requirements (including design criteria, if any) 5.1

2 Contractors documents 5.2
3 Other standards relating to the design 5.4
4 Other information/requirements
5 Technical specifications
6 Drawings
7 Preparation of technical solutions
8 Responsibility for obtaining approvals
9 Preparation of preliminary and final designs
10 Performance of designers supervision duties
11 Preparation and submission of applications for building/construction permits, and
responsibility for obtaining permits
CONSTRUCTION AND COMPLETION: This section specifies the terms, conditions and
requirements related to construction and completion.
1 Other standards relating to construction 5.4

2 As-built drawings 5.6
3 Operation and maintenance manuals 5.7
4 Tests on completion 9.0
5 Employers taking over 10.0
6 Defects 11.0
194
Table 5.5.1B - Matters to be set out in the employers requirements: FIDIC EPC/Turnkey Contract
Conditions of Contract for EPC/Turnkey Projects: Contents of the employers requirements
GENERAL: This document specifies the purpose, scope and/or design and/or other technical Conditions of
criteria for the plant on a functional basis. Contract Ref.
1 Scope and description of the works on a functional basis, including scheme drawings 4.1
and the intended purpose of the completed works.
2 Care and supply of drawings 1.8
3 Planning, zoning and other permissions obtained by the employer 1.13
4 Rights of access to the site 2.1
5 Cooperation: coordination with contractors 4.6
6 Cooperation: possession in accordance with the contractor documents 4.6
7 Protection of the environment 4.18
8 Electricity, water and gas 4.19
9 Employers equipment and free-issue material 4.20
10 Training 5.4
11 Engagement of staff and labour 6.1
12 Facilities for the employers personnel 6.6
13 Royalties 7.8
DESIGN: This section specifies the terms, conditions and requirements related to design.
1 Design requirements (including design criteria, if any) on a functional basis 5.1

2 Contractors documents 5.2
3 Other standards relating to the design 5.4
CONSTRUCTION AND COMPLETION: This section specifies the terms, conditions and
requirements related to construction and completion.
1 Other standards relating to construction 5.4

2 As-built drawings 5.6
3 Operation and maintenance manuals 5.7
5 Employers taking over 10.0
6 Defects 11.0
195
Peformance-Based Procurement (PBP)
Advantages and disadvantages of PBP new technology this may be beneficial, but in other
cases it may be a disadvantage. This lag is further
Traditional procurement has worked satisfactorily increased by the time often considerable between
for the majority of projects for many years. It is accepted preparation of the specifications and commencement
worldwide, people are familiar with its use, and there is a of the construction and/or installation work.
great deal of experience of how it works in practice.
There is nothing wrong with the principle of traditional 2 Those preparing specifications for projects procured
procurement. It has been tried and proved and has by the traditional method are forbidden to specify one
shown to be an excellent system for a wide range of particular brand or product, even if they quite
projects. It should and will continue to be used for many impartially may know that a particular product or
years to come. solution is the most advantageous for the work in
question. By allowing contractors/manufacturers to
However, problems have been faced with offer their own solutions it will be possible for the
traditional procurement. Among the major problems that employer to choose that particular product or
sometimes have dogged traditional procurement can be solution.
named the often severe cost and time overruns, which
actually have been a major motive force in the 3 One important effect for aid projects may be that the
development of Performance-Based Procurement (PBP). technology gap between the developed and the
Another problem has been the widespread resorting to developing nations not only remains but also widens.
claimsmanship by contractors to try to improve their
financial returns or to recuperate contract financial 4 Detailed specifications prepared in the traditional way
balance generated by low prices offered initially in order close the door to creativity of the plant developers
to win the contract. A serious disadvantage with and equipment manufacturers. This frequently means
traditional procurement is that the final cost and time are that some advantageous technically and
uncertain, which leads to budgeting and financing environmentally advanced solutions are not even
problems. For these reasons, and because it is always eligible to be considered.
wise to be on the lookout for beneficial alternatives, other
ways of achieving the same end are coming to the fore. 5 In addition to fast technological development, there is
Among these can be named PBP. a strong tendency to the standardisation of
equipment in many areas. Instead of offering tailor-
If a comparison is made between PBP and made solutions suppliers offer more and more
traditional procurement, it becomes clear that apart from modular solutions, among other things, characterised
the said disadvantages of the traditional system, there by a high degree of prefabrication, low engineering
can be other important disadvantages with continuing costs and short delivery times.
use of the traditional system for certain types of project,
and potential benefits will be lost. Some of the more 6 Detailed specifications lead to modifications and
important aspects are the following: adjustments that are not required for functional
reasons, are costly and with longer delivery times.
1 The rate of technical development today is very high.
The prime example may be the IT sector, but several These disadvantages when using traditional
other sectors are developing technically rapidly as procurement can largely be counteracted by the use of
well. Often it is the established manufacturers who PBP (Performance-Based Procurement).
lead the technical research and development, and
naturally they do not wish to share their trade secrets Some of the more important advantages of using
with others. Consultants can obviously only prepare PBP apart from those named above may be
specifications for known and proven plant or generally listed as follows, although they may not apply
equipment. This may result in the project in all circumstances:
specifications calling for plant, equipment or solutions
which are no longer at the forefront of technical - Variety of solutions, not tied to one design.
development in the industry. In the case of unproved - Latest more efficient/cheaper technology can be offered.
196
Performance-Based Procurement (PBP)
- Industry encouraged to carry out research and development the specification by the employer based on the function the
- Avoidance of preparation of detailed specifications by the facility or system or equipment is required to perform is an
employer. alternative to the employer preparing detailed specifications.
- Employer does not have to possess advanced technical
knowledge. Some of the basic features of PBP are as follows:
- Contractors do not have to reveal trade secrets and
confidential information. - Tenderers are invited and encouraged to propose the
- Shorter implementation time. technical solutions they think are the most suitable, as seen
- Responsibility for function of project passed from the from their own background.
employer to the contractor. - The specifications provided by the employer describe the
- Limited capital expenditure by the employer, capital end performance or function required, and are not detailed
recovered (at least partly), when service provision included specifications. Thus technical requirements are expressed in
(e.g., BOT-type projects). functional terms and to defined technical standards.
- The employer often purchases a functioning service, not just - The contractor, i.e., the successful tenderer, will prepare all
a facility. detailed specification and design so that his proposed
- Greater supplier involvement, responsibility and risk. system/facility/equipment meets the specified end
- Less chance of price dumping by less serious contractors. performance or function.
- Avoidance of less competent and less experienced - The tender dossier should include a draft of the complete
contractors. contract agreement so that tenderers know precisely what is
expected to be included in the final contract.
Significant disadvantages associated with the use of - Tendering will take place according to the two-stage
PBP may be: procedure, the first stage being submission and evaluation of
the technical proposal. Any required modifications to the
- Unfamiliarity with the preparation of performance/functional technical proposal and the tender price will be submitted in
specifications by some employers new thinking required. the second stage.
- Difficulty to compare different offers and solutions need for - The evaluation criteria will be clearly set out in the tender
qualified specialist consultants to check solutions proposed. dossier, and in such form that each tenderer will himself be
- Unfamiliarity with employer and engineers role during able to evaluate the economical effect of his technical
implementation new thinking required. proposals.
- Only major contractors can compete. - The employer shall be bound to ensure evaluation of
- Larger cost of tendering for competing contractors. tenderers proposals strictly in accordance with the stated
criteria.
There may be a number of other advantages and - The employer must ensure that he has adequate
disadvantages, some only applicable to particular projects. professional capability to check that proposed technical
These, together with the more important ones listed above, solutions fully match the specified performances and
need to be studied when the procurement strategy for a technical standards.
particular project is being worked out. - The employer must ensure that he has qualified resources to
fulfil his role during the implementation period.
Basic features of the PBP process - The contractor will assume complete responsibility for his
offered system/facility/equipment and he shall warrant that it
The question of PBP has to the highest degree to do fulfils the fit for purpose criteria.
with cost efficiency and functional reliability. It is therefore - If the system/facility/equipment is to be taken over by the
notable that performance-based specifications are nearly employer on completion, then a suitable taking-over
exclusively used for so-called project financed facilities. This procedure shall be specified in the tender dossier.
is an area where the requirement for cost efficiency from the - If the system/facility/equipment is to be operated and
investors side is extremely high. The same applies to their maintained by the contractor after completion to provide a
requirements for safety and reliability of operation. service for users, then required service standards shall be
specified in the tender dossier for the whole operation
The use of performance or functional specifications is period.
not limited to one type of project. For many projects preparing - The tender dossier shall specify what availability guarantees
197
Peformance-Based Procurement (PBP)
are required and, if applicable, also in combination with Thus payment will normally be according to a
operation and maintenance undertakings from the schedule of payments corresponding to milestones
contractor. achieved. It is perhaps usual to have a 10% advance
payment, followed by several perhaps up to 10-15
With regard to payment for projects based on milestones with part payment being made on
performance specifications, the actual payment completion of of each milestone. It is recommended that
provisions will have to be individually tailored to respond each milestone be very clearly described in the contract
to the circumstances of the project in question. documents so that there can be no argument as to
Generally, payment conditions comparable to those when each part payment is due. The schedule of
normally used for plant supply and erection will apply payments should be designed to achieve an interest
during the construction phase, regard however being neutral cash flow for the contractor so that he is not
taken to the requirement to retain sufficient securities to subjected to unnecessary financial costs, which would
ensure that the facility after completion actually works tend to raise his tender sum.
satisfactorily in practice and meets the agreed
performance standards.
198
Privately Financed Projects (PFPs) and Public-Private Partnerships (PPPs)
Privately Financed Projects (PFPs) are based on an In public-private partnerships (PPPs), there is a
agreement in which the original promoter, known as the combination of finance from both the public and private
principal or granter (usually a government or government sectors, sometimes assisted by loans from international
department), who holds the legal power to do so, grants financing institutions. However, the contractual arrangements
exclusive rights to the concessionaire (a private body, normally are generally more complex than with the wholly privately
a consortium) for the responsibility of financing, design, funded concession type of projects.
construction, operation, and maintenance of a facility over the
period of the agreement. Normally the concessionaire will have to consider and
decide upon the contract packages into which the project is to
It is necessary that the agreement provides a be divided and will become the employer for each of the
satisfactory basis for attracting finance for the implementation contracts awarded.
of the project.
It is recommended that the employer uses the FIDIC
The terms of the agreement provide for either: Client/Consultant Model Services Agreement, commonly
known as The White Book, for the purposes of pre-
- regular payments from the principal to the concessionaire, or investment and feasibility studies, designs, project
- the revenue flow from the operation of the asset to the management and administration of the works, as may be
concessionaire, or required by the employer.
- a mixture of both,
A review of the advantages and disadvantages of the
to allow the concessionaire to repay financing, design, various FIDIC forms of conditions of contract will have to be
construction, and operation and maintenance costs and to carried out to choose the most advantageous form to be used
make a margin of profit. for each particular construction or engineering contract
package. It is recommended that the concessionaire
These projects are generally of the build, own, considers the arrangements suitable for use for the different
operate, transfer (BOOT) type or one of its numerous forms as described in Chapter 5, as appropriate, to assist in
derivatives. The principal provides a conceptual performance making the choices.
(output) specification for issue to bidding consortia. A
consortium is made up of fund providers, designers, Upon expiry of the concession the facility is handed
constructors, specialist facility operators, and other specialists. back to the principal in full working order.
At the completion of the bidding process the successful
consortium is chosen, enters into a concession agreement A typical and simplified management structure for a
with the principal, becomes the concessionaire for the period PFP turnkey project is shown in Chapter 5 at Fig. 5.6.
of the concession and sets up a Special Purpose Vehicle
(SPV) as a legal entity to enter into engineering contracts.
199
Purchasing, Expediting and Inspection
Introduction (normally a minimum of three companies): this is an

invitation to do business.
Purchases by means of purchase orders are - The quotations (or tenders) received are the offers.
frequently used by employers/clients to cover transactions - Analyse and evaluate the offers, and recommend a
with manufacturers, distributors, agencies, and suppliers preferred offer (with reasons).
for obtaining equipment, materials and proprietary items. - If the preferred offer does not conform to the enquiry,
The scope may be limited to supply only, or extend to then negotiations must take place until agreement on
some or all of design, erection, installation, testing, terms is reached, taking care to identify counter-offers.
commissioning, spare parts and servicing, operation and - The purchase order is the acceptance of the finally
maintenance, being required of the vendor. agreed offer, completing the formation of the contract,
which should include all relevant documents from the
In developed countries, the various statutes enquiry procedure.
covering the sale and supply of goods and services
codify the relevant legal principles. They do not displace Warnings
the law of contract except where inconsistencies arise.
The procedure for making purchases may seem
Objective deceptively simple. There are, however, many pitfalls, for
example:
The following notes are intended to provide a
guide to a uniform, comprehensive procedure for making - Contracts for the supply of goods and services do not
purchases by a consultant on behalf of a client, within in many countries have to be in writing to be legally
the scope of a project appointment. The notes may also enforceable, and may therefore be created by conduct.
be of value to employers wishing to make their own - A buyers order without prior negotiation is the offer,
direct purchases. The intention is to minimise the risk of and the sellers unqualified acknowledgement is the
disputes arising in the course of dealing with such acceptance, thus creating the contract.
transactions. - A sellers qualified response to a buyers order is a
counter-offer, which is often relevant when there are
Procedure standard written terms and conditions of business on
the reverse of company letterhead.
- Ensure that every purchase is arranged by means of a
clear offer and a matching acceptance. Expediting
- Prepare a full scope of work, including, for example,
technical requirements and quantities for each item or Expediting means the progressing of
service to be supplied. manufacture and supply of equipment, materials and
- Prepare a pricing document, if needed. information required by others, to enable design,
- Prepare a delivery programme, including inspection construction and installation to proceed in accordance
requirements, shipping plan and point(s) of delivery. with a project time programme. This activity takes place
- Prepare commercial terms and conditions, including mainly off-site in factories and workshops.
payment and documentary proof of performance, and
an invitation letter. Expediting can be a very important tool for project
- Draw up a list of suitable companies to be invited to management in ensuring that programme requirements
submit quotations, after prior check of ability to meet are met, or in identifying problems as early as possible to
both technical and commercial requirements, and enable remedial action to be taken. It should start from the
financial stability. time of placing an order, the frequency of visits depending
- Obtain approval from the client to proceed based on on the anticipated performance of the supplier concerned.
prepared documents (as above), taking care that the Depending on the location and number of suppliers
final document is complete, that it conforms with relative to the project site, there may be a team of field
preferred practice, and that the budget is properly expeditors, each based near to suppliers in different
allocated. places, and coordinated by a project expeditor in the core
- Issue enquiry documents to short-listed companies project team.
200
Purchasing, Expediting and Inspection
Inspection Equipment and materials should not be released for

dispatch from the factories/works until the appropriate
Inspection should be carried out in factories/works inspection certificates have been issued by the inspecting
during manufacture and prior to dispatch, to impose the authority according to the specified procedure.
specified level of quality control on suppliers. Quality control on
site is dealt with separately, though the continued involvement Conclusion
of specialist off-site inspectors may be needed.
Purchasing, expediting and inspection should be
The inspectors carry out stage and final inspections as recognised in project procedures as part of the consultants
specified, including the witnessing of performance tests before project management service. These activities have also to be
delivery. These activities can be co-ordinated with those linked with the technical disciplines (including design), cost
required by the client, insurers, and other third-party interests. control and planning/programming to ensure compliance with
the project plan.
The degree and extent of inspection will vary
depending on the articles being supplied, but all orders should
state the inspection requirements (see above). This ensures
that the supplier understands the standards he is required to
achieve. Satisfactory inspection must not relieve the supplier
or any other concerned contractor of his responsibility for
fulfilling the contractual obligations. The rights of inspection
should also not normally be waived.
201
Appendix 8.3.1 - Prequalification of Tenderers: Contracts for Works
Standard Prequalification Form for Contractors
A. Title Page
B. Notes to Applicants
C. Joint Venture
D. Financial Statement
E. Structure and Organisation 1
F. Structure and Organisation 2
G. Resources: Personnel 1
H. Resources: Personnel 2
I. Resources: Labour Force, Subcontractors and Fabrication
J. Resources: Contractors Plant, Equipment and Facilities
K. Experience: Geographical
L. Experience: Relevant Projects Completed
M. Experience: All Projects in Progress
N. Quality Assurance System
O. Health and Safety Plan
P. Environmental Policy
Q. Training
R. Operation and Maintenance
S. Litigation and Arbitration History 1
T. Litigation and Arbitration History 2
U. Additional Information
203
Appendix 8.3.1 - Prequalification of tenderers: Contracts for Works
Standard Prequalification Form for Contractors - A
Name and address of the Contractor
Name of the Employer
Title and location of the Project
Name of the Engineer
Date
204
Standard Prequalification Form for Contractors - B
Project
Company
Note to Applicants
1. Please answer all questions and provide information as requested.

2. Supplementary pages may be photocopied or copied and inserted if required.
3. Please number each page in the space provided at the top of each page.
4. Please retain a copy of your complete submission.
5. If a joint venture is proposed, all companies are to respond to all questions.
6. Pages Q and R are not to be completed unless specifically stated to be required.
7. Project financial data is to be given in US dollars unless otherwise requested.
Standard Pages
A. Title Page L. Experience: Relevant Projects

B. Notes to Applicants Completed
C. Joint Venture M. Experience: All Projects in
D. Financial Statement Progress
E. Structure and Organisation 1 N. Quality Assurance System
F. Structure and Organisation 2 O. Health and Safety Plan
G. Resources: Personnel 1 P. Environmental Policy
H. Resources: Personnel 2 Q. Training
I. Resources: Labour Force, R. Operation and Maintenance
Subcontractors and Fabrication S. Litigation and Arbitration History 1
J. Resources: Contractors Plant, Equipment T. Litigation and Arbitration History 2
and Facilities U. Additional Information
K. Experience: Geographical
Additional Pages
Please list below any additional pages attached to each standard page.
205
Standard Prequalification Form for Contractors - C
Project
Company
Joint Venture
If the company intends to enter into a joint venture for the project, please give the following information,
otherwise state not applicable.
1. Names and addresses of joint

venture partners
2. Name of company leading the

joint venture
3. Name and address of bankers to

the joint venture
206
Standard Prequalification Form for Contractors - D
Project
Company
Financial Statement
1. Capital
Authorised
Issued
2. Annual value of contract work undertaken for each of the last five (5) years and projected for the current year
Year Current
Home
Abroad
3. Approximate value of work in hand
4. Please attach copies of the companys previous five (5) years audited accounts (profit/loss, assets/liabilities)
and other financial data which you consider to be useful. List all attachments below.
5. Name and address of bankers from whom

references can be obtained
207
Standard Prequalification Form for Contractors - E
Project
Company
Structure and Organisation 1
1. Name of company
Address
Telephone number
Telefax number
E-mail
Web site
Registered office address
2. Description of company (for example,

General Civil Engineering Contractor)
3. Number of years experience as a

general contractor
- in own country
- internationally
4. Number of years experience as a

sub-contractor
- in own country
- internationally
5. Names and addresses of associated

companies to be involved in the project,
and whether parent/subsidiary/other
6. If the company is a subsidiary, what

involvement, if any, will the parent
company have in the project?
208
Standard Prequalification Form for Contractors - F
Project
Company
Structure and Organisation 2
7. Names and addresses of any associates the

company has in the country of the project,
knowledgeable in the procedures of customs,
immigration, etc.
8. Please indicate here or attach an organisation

chart showing the company structure including
the positions of directors and key personnel,
if relevant.
209
Standard Prequalification Form for Contractors - G
Project
Company
Resources: Personnel 1
1. Number of staff
- Technical
- Administrative
2. Please list present Executive Directors
Name Present position Years of experience with

the company and/or in the
industry
210
Standard Prequalification Form for Contractors - H
Project
Company
Resources: Personnel 2
3. List below information about other key personnel who will be committed to the
contract for its duration. Use additional sheets as may be necessary.
Name
Present position
Years of experience with the company and/or

in the industry
Major works for which responsible (type and value)
Linguistic ability relevant to the project
Name
Present position
Years of experience with the company and/or

in the industry
Major works for which responsible (type and value)
Linguistic ability relevant to the project
211
Standard Prequalification Form for Contractors - I
Project
Company
Resources: Labour Force, Subcontractors and Manufacture/Fabrication
1. On the basis of the information provided

in the prequalification documents
indicate the likely source of the labour
force required to undertake the work.
2. If it is foreseen that any part of the

contract will be sub-contracted state
the type of work to be undertaken by
the subcontractor(s) and, if known,
give the name and address of the
subcontractor(s) to be used.
3. Manufacture/fabrication facilities (to be

completed only if relevant to the project).
Summary
Description
Location
Capacity
Annual throughput
212
Standard Prequalification Form for Contractors - J
Project
Company
Resources: Contractors Plant, Equipment and Facilities
1. On the basis of the information provided in the

prequalification documents please indicate the
equipment and facilities considered by the
company to be necessary for undertaking the
project and whether this is already in the
companys ownership or will be purchased
or hired.
213
Standard Prequalification Form for Contractors - K
Project
Company
Experience: Geographical
1. Countries in which work similar to the

project has been undertaken.
2. Summary of experience of company in

country of the project and/or
neighbouring states.
214
Standard Prequalification Form for Contractors - L
Project
Company
Experience: Relevant Projects Completed
Please fill in information about the relevant projects completed over the past six years.
Use additional sheets as may be necessary.
1. Name of employer
Name, location and type of project
Name of (consulting) engineer responsible

for supervision
Contract price and date
Percentage of participation of company

in the project
Was contract satisfactorily completed,

including time provision
2. Name of employer
Name of (consulting) engineer responsible

for supervision
Contract price and date

in the project
Was contract satisfactorily completed,

including time provision
215
Standard Prequalification Form for Contractors - M
Project
Company
Experience: All Projects in Progress
Give information about all projects in progress, including those where the company has received a
letter of intent, but a formal contract has not yet been awarded. Use additional sheets if necessary.
1. Name of employer
Name of (consulting) engineer

responsible for supervision
Value of contract
Value completed and certified

in the project
Percentage of practical completion
Scheduled date of completion of work
2. Name of employer
Name of (consulting) engineer

responsible for supervision
Value of contract
Value completed and certified

in the project
Percentage of practical completion
Scheduled date of completion of work
216
Standard Prequalification Form for Contractors - N
Project
Company
Quality Assurance System
1. Please describe the companys quality

assurance system.
217
Standard Prequalification Form for Contractors - O
Project
Company
Health and Safety Plan
1. Please describe the companys health

and safety plan.
218
Standard Prequalification Form for Contractors - P
Project
Company
Environmental Policy
1. Please describe the companys environmental

policy.
219
Standard Prequalification Form for Contractors - Q
Project
Company
Training
1. If the contractor will be required to provide

training for operatives of the completed
project, please name the location(s) where
this would be carried out and the method
of training to be provided.
220
Standard Prequalification Form for Contractors - R
Project
Company
Operation and Maintenance
1. If the contractor is required to operate and

maintain the facility, please indicate in general
terms the manner and methods by which
this would be carried out.
221
Standard Prequalification Form for Contractors - S
Project
Company
Litigation and Arbitration History 1
1. Please describe the companys history of

litigation and/or arbitration from contracts
executed or completed during the last six
years or currently under execution.
222
Standard Prequalification Form for Contractors - T
Project
Company
Litigation and Arbitration History 2
1. Please indicate for each year, the name of the

employer, the main claims and counterclaims (if
any) in the litigation or arbitration, the respective
amounts claimed and counterclaimed (if any), the
court or arbitral institution or arbitration rules
concerned and the amount awarded to and/or
against the company, as appropriate.
223
Standard Prequalification Form for Contractors - U
Project
Company
Additional Information
1. Please add further information which you

consider to be relevant to the evaluation of
your application for prequalification.
If you wish to attach other documents,

please list them below.
224
Appendix 11.1.1 - Obtaining Tenders: Construction Contracts
Example Letter of Invitation to Tender
Contract: _________________________________
Project: _________________________________
We confirm having advised you that
[OR: We are pleased to notify you that] you have been prequalified
OR: you have been selected as a prospective tenderer]
for the above Contract.
The Government of _________________________ has received

[OR: has applied for]
a loan from the _____________________________ towards the cost of the above Project. Part of the proceeds of this loan shall be
used for the payments to the Contractor under this Contract, the other parts being used to finance other contracts included in the
Project.
We have appointed as the Engineer: _______________________________________________________________________________
They will soon be issuing, on our behalf, the Tender Dossier listed in Clause 1 of the Instructions to Tenderers.
We now invite you to submit a Tender in accordance with the Instructions to Tenderers which form the first part of the Tender
Dossier. In the Instructions, the following details are stated to be included in this Letter of Invitation:
a. Clause 2 refers to the eligibility of the above-named entity, to whom this letter is addressed;
b. Clause 3 refers to requests for clarification being sent to the Engineer who is named above;
c. Clause 4 refers to a joint site visit by representatives of the tenderers, and we recommend that you send either one or two
representatives to the site for this visit. It will commence at __________________________________________________________
d. Clause 6 refers to the submission of your Tender, which must be received at the address stated in the Clause not later than
10:00 local time on the Tender submission date of _________________________________________________________________
e. Clause 7 refers to the opening of Tenders in the presence of representatives of the tenderers, which will commence at 10:05 on
the Tender submission date stated above.
Please confirm, within a week of receiving this letter, that you have received the complete Tender Dossier, and also advise us
whether you will submit a Tender in accordance with the Instructions to Tenderers.
225
Example Form of Tender Security
Brief description of Contract: ______________________________________________
Name and address of Beneficiary: __________________________________________

(whom the Tender Dossier defines as the Employer).
We have been informed that ____________________ (hereinafter called the Principal) is submitting an offer for such
Contract in response to your invitation, and that the conditions of your invitation (the conditions of invitation, which are
set out in a document entitled Instructions to Tenderers) require his offer to be supported by a tender security.
At the request of the Principal, we (name of bank) _________________________ hereby irrevocably undertake to pay
you, the Beneficiary/Employer, any sum or sums not exceeding in total the amount of__________________ (say:
______________ ) upon receipt by us of your demand in writing and your written statement (in the demand) stating that:
(a) the Principal has, without your agreement, withdrawn his offer after the latest time specified for its submission and
before the expiry of its period of validity, ___________________ or
(b) the Principal has refused to accept the correction of errors in his offer in accordance with such conditions of
invitation, or
(c) you awarded the Contract to the Principal and he has failed to comply with Sub-Clause 1.6 of the conditions of the
Contract, or
(d) you awarded the Contract to the Principal and he has failed to comply with Sub-Clause 4.2 of the conditions of the
Contract.
Any demand for payment must contain your signature(s) which must be authenticated by your bankers or by a notary
public. The authenticated demand and statement must be received by us at this office on or before (the date 35 days
after the expiry of the validity of the Letter of Tender) _____________ , when this guarantee shall expire and shall be
returned to us.
This guarantee is subject to the Uniform Rules for Demand Guarantees, published as number 458 by the International
Chamber of Commerce, except as stated above.
Date: _____________________________________ Signature(s): _________________________________
226
Example Form of Instructions to Tenderers
This example form has been drafted as a suggested The instructions to tenderers should not form part of
model from which users may prepare their own Instructions, the eventual contract, and should not contain any text which
copying text as they consider appropriate. However, many remains relevant after award of the contract.
employers, International Financial Institutions and other entities
have standard forms, which may be equally suitable for use The instructions to tenderers specify the procedures
with FIDICs general conditions, and may incorporate to be followed until the employer either enters into a contract
requirements which are specific to the entity promulgating its or advises tenderers that the employer does not intend to do
standard form. The following example clauses are offered as so. In order to facilitate the preparation of the instructions, any
suggestions for those who do not have such standard forms, data which typically is unknown at this stage is referred to as
and for those who may wish to review and develop their own being contained in a letter of invitation.
standard forms whilst incorporating their specific requirements.
1 Introduction Employer either enters into a Contract with the tenderer or

advises him that the Employer does not intend to do so.
1.1 These Instructions to Tenderers (these Instructions)
relate to a Letter of Invitation (the Invitation), in which a 1.4 Words and expressions defined in Sub-Clause 1.1 of the
prospective tenderer is invited to submit a Tender. The Conditions of Contract shall have the same meanings
Invitation, which (in the case of any discrepancy) takes where used in these Instructions.
precedence over these Instructions, specifies:
1.5 The tenderer shall bear all costs incurred in the preparation
a the company or joint venture, who is considered to be and submission of the Tender, including visits and other
eligible as described in Clause 2 of these Instructions actions mentioned or implied in these Instructions.
and who is thus invited to submit a Tender;
b the Engineer, to whom requests for clarification may be 1.6 The Employer will not be responsible or liable for such
sent as described in Clause 3 of these Instructions; costs, regardless of the conduct or outcome of the
c details of how to participate in the site visit by tendering process. The Employer reserves the right to
tenderers (or how to obtain such details), if such a visit accept or reject any Tender, or to annul the tendering
is being arranged under Clause 4 of these Instructions; process and reject all Tenders, without incurring liability to
d the time by which Tenders are to be submitted in any tenderer and without being obliged to inform any
accordance with Clause 6 of these Instructions (the tenderer of the reasons for the Employers action.
Tender submission date); and
e the time when Tenders are to be opened as described 2 Eligibility of the Tenderer
in Clause 7 of these Instructions.
2.1 The Invitation (i) names the company or joint venture
1.2 The Tender Dossier, as issued to each tenderer in whom the Employer considered to be eligible to submit a
accordance with the Invitation, comprise: Tender, (ii) states whether the tenderer was prequalified or
a Volume I containing these Instructions, the Letter of selected, and (iii) may state any particular conditions or
Tender, the Bill of Quantities and other Schedules; reservations of the prequalification or selection. Nothing in
b Volume II containing the Conditions of Contract, and these Instructions entitles any other entity, company or
the Specification; joint venture to submit a Tender.
c Volume III containing the Drawings.
2.2 [Each prequalified tenderer shall notify the Employer, as
1.3 [The following documents have also been issued to each soon as practicable, of any change in the data submitted
tenderer for information: for the purpose of the prequalification. Any significant
.......] change in such data shall be deemed to invalidate the
These [documents and the] Instructions to Tenderers shall tenderers previous prequalification, but the company or
not form part of the tenderers offer, nor part of the joint venture may request the Employers permission to
defined words Tender or Contract. These Instructions reapply for prequalification. If (at his sole discretion) the
prescribe the procedures to be followed until the Employer grants such permission, the tenderers application
227
for prequalification must be received by the Employer legally binding on each of these persons; and
not less than 28 days before the Tender submission d a copy of the agreement entered into by these
date specified in Clause 6 of these Instructions.] persons shall be submitted with the Tender. This
agreement shall state (i) each such persons
[Each tenderer shall, in order to be considered for percentage participation in the joint venture, and
eligibility, submit the information listed below with the (ii) that these persons shall be jointly and severally
Tender. In the case of a joint venture of two or more liable to the Employer for the performance of the
legal persons, the information shall be submitted in Contract.
respect of each of these persons and in respect of
the joint venture tenderer. 2.4 No such person or sole tenderer shall participate in
the preparation of another tenderers Tender for the
a copies of original documents defining constitution same Contract. If any entity is found to have
and/or legal status, place of registration and participated in two or more Tenders, other than
principal place of business; alternative Tenders from the same tenderer, all such
b total annual turnover expressed as total volume Tenders will be rejected.
of engineering work carried out in each of the last
five years; 2.5 However, any entity may be proposed as a
c financial reports, including profit and loss prospective subcontractor by more than one
statements, balance sheets and auditors reports tenderer in addition to being either a sole tenderer or
for each of the past five years, and an estimated a participant in one joint venture tenderer.
financial projection for the subsequent year;
d evidence of access to lines of credit, and 3 The Tender Dossier
availability of other financial resources;
e name and address of banker(s) who will (and 3.1 The Tender shall be responsive to the complete
have been authorised to) provide references upon Tender Dossier which comprises the documents
request by the Employer; listed in Clause 1 above and any Addenda to Tender
f details of performance as prime/main contractor Dossier which may be issued as described in this
on works of a similar nature and volume over the Clause 3. The tenderer shall scrutinize each
last five years and on current works; and document immediately upon receiving it and shall
g a list of the major items of Contractors promptly give notice, to the party who issued the
Equipment proposed for carrying out the document, of any pages which appear to be
Contract including details of ownership.] missing.
2.3 In these Instructions, the expression joint venture 3.2 The tenderer must carefully examine the complete
means any of the groupings described in Sub- Tender Dossier. Failure to comply with these
Clause 1.14 of the Conditions of Contract. In order Instructions or with any other tendering requirements
that such a joint venture of two or more legal will be at the tenderers risk.
persons is to be acceptable as eligible:
3.3 If the tenderer requires any clarification of the Tender
a these persons shall have nominated a leader with Dossier, he may give notice to the Engineer. The
authority to bind the joint venture and each of notice shall be written (which includes by facsimile
these persons; and this leader shall be authorised transmission) in the language used in the Invitation,
to incur liabilities and receive instructions for and and shall be sent to the Engineers address stated in
on behalf of any and all these persons; the Invitation as soon as practicable.
b evidence of this authorisation shall be submitted
with the Tender in the form of a power of attorney 3.4 The Engineer shall respond to the notice by issuing
signed by legally authorised signatories of all (i) the text of the question or request for clarification
these persons; and (ii) the Employers clarification. This response
c the Letter of Tender, and (if it is accepted) the shall be in writing and shall give no indication of the
Contract Agreement, shall be signed so as to be identity of the tenderer who requested clarification.
228
These requests for clarification and responses shall be appropriate areas, which a competent tenderer may
sent to all prospective tenderers who received the Tender consider necessary for the preparation of a Tender.
Documents, but shall not constitute amendments to the
Tender Documents. However, if a notice is received less 4.5 The Employer shall not be bound by any oral
than 28 days before the Tender submission date, there representations which may be made during a joint site
may be no response. visit, whether by the Engineers personnel or by others;
and whether during a formal meeting or otherwise. In
3.5 If amendments are to be made to the Tender Dossier, order to minimize the possibility of misunderstanding,
arising from a notice or otherwise, the Engineer shall issue tenderers should present any requests for clarification in
an Addendum to Tender Dossier on behalf of the writing. In accordance with Clause 3 of these Instructions,
Employer. Each Addendum to Tender Dossier shall be any record of the formal meeting, requests, clarifications
sent to all prospective tenderers who received the Tender and/or Addendum to Tender Dossier shall be sent to all
Dossier, and shall be binding upon them. The tenderer prospective tenderers who received the Tender Dossier.
shall promptly acknowledge receipt of each Addendum to
Tender Dossier by written notice to the Engineer, and shall 5 Preparation of the Tender
also enter its reference number in the first sentence of the
Letter of Tender. 5.1 The Tender and all communications between the tenderer
and the Employer or the Engineer shall be typed or written in
3.6 At any time, the Engineer may similarly issue an Addendum indelible ink in the language used in the Invitation. Supporting
to Tender Dossier which amends the Tender submission documentation submitted by the tenderer may be in another
date. In this event, all rights and obligations of the Employer language if he also submits an appropriate translation of all its
and the tenderers previously related to the original date relevant passages into this ruling language.
shall thereafter be subject to the amended date.
5.2 The Tender Dossier to be submitted by each tenderer
4 Site Visit shall comprise the Volume I described in Clause 1 of
these Instructions.
4.1 The tenderer is advised to visit and examine the Site, its
surroundings and other parts of the Country, and must 5.3 The Tender Dossier issued to the tenderer, including any
obtain for himself on his own responsibility all information amendments instructed in an Addendum to Tender
which may be necessary for preparing the Tender and Dossier, shall be used without further amendment.
entering into a Contract.
5.4 The tenderer shall submit, with his Tender, a tender
4.2 The tenderer and any of his personnel or agents will be security in the form annexed to these Instructions. The
granted conditional permission to enter upon the Site. The tender security shall be issued by an entity acceptable to
permission shall be deemed to have been based upon the the Employer, and shall be valid for not less than 35 days
tenderer, his personnel and agents indemnifying the after the date on which the validity of the Tender expires.
Employer and his personnel and agents from and against The Employer will return the tender security upon the
all liability and upon the tenderer being responsible for occurrence of the first of the following events:
personal injury (whether fatal or otherwise), loss of or a the Employer receives the Performance Security from
damage to property and any other loss, damage, costs the successful tenderer;
and expenses (however caused) which would not have b the Employer abandons his intention to appoint a
arisen other than due to the exercise of such permission. Contractor; or
c the validity of all tender securities for the contract
4.3 If a joint site visit is to be arranged for all tenderers, details expires.
are given in the Invitation.
5.5 The tenderer shall price the whole of the Works, and
4.4 Such a joint visit is intended to supplement, and not to submit a Tender, in accordance with the Tender Dossier. A
replace, the individual inspections carried out by each Tender which excludes part of the Works may be rejected
tenderer. The Employer accepts no responsibility for as unresponsive.
providing any indication of relevant aspects, or access to 5.6 Each of the Schedules shall be completed as appropriate
229
to the particular Schedule. The Bill of Quantities shall information may be rejected as unresponsive.
be fully priced, with a rate entered for each item.
Each amount shall be carried forward to the 5.8 The completed Tender shall not have any alterations
Summary, the total of which shall be carried forward or erasures, except any which may be specified in an
to the Letter of Tender. All rates and prices shall be Addendum to Tender Dossier issued under Clause 3
entered in the same currency as that which is of these Instructions. However, if alterations are
named in the Letter of Tender. If any item is not necessary to correct errors made by the tenderer,
priced, there shall be no payment for the work these corrections shall be endorsed with the
described in the item, which shall be deemed signature of the person signing the Letter of Tender.
covered by other rates and/or prices.
5.9 Only one Tender may be submitted by each tenderer,
5.7 The tenderer shall also submit the following except for any alternative offers. In addition to a
supplementary information accompanying, but not compliant Tender, the tenderer may offer technical or
forming part of, his Tender: other alternatives to the requirements of the Tender
Dossier, which may include reasonable deviations or
a the information listed in Clause 2 of these other proposals. Each alternative Tender shall include
Instructions, if applicable to the tenderer; all information necessary for its complete evaluation
b name and address of the bank or other entity by the Employer, including any relevant calculations,
which will provide the Performance Security and specifications, construction methods, timing
the advance payment guarantee; and a letter implications, breakdowns of prices, and other relevant
from such entity acknowledging having received details. The Employer reserves the right to reject
the Annexes to the Particular Conditions of alternative offers.
Contract and undertaking to provide these
security documents in accordance with the exact 6 Submission of the Tender
wording of these Annexes (if the entity prefers to
make minor changes, they must be specified 6.1 The Tenderer shall prepare one original set and three
exactly); photocopy sets of the documents comprising the
c name and address of the insurers and their Tender and supplementary information, as described
principal terms for the insurances required by in Clause 5 of these Instructions. Each such set shall
Clause 18 of the Conditions of Contract, be submitted in an inner envelope within an outer
including proposed deductibles and exclusions; envelope, with each document and each envelope
d details of the arrangements and methods which being clearly marked ORIGINAL or COPY as
the tenderer proposes to adopt for the execution appropriate. If there is any discrepancy between
of the Works, in sufficient detail to demonstrate them, the ORIGINAL shall prevail.
their adequacy to achieve the requirements of the
Contract including completion within the Time for 6.2 The original and copies of the Tender shall be signed
Completion; by a person or persons duly authorised to bind the
e any proposals for subcontracting the execution of tenderer. Proof of authorisation, in the form of a
parts of the Works, excluding each subcontract written power of attorney, shall be annexed to the
which will be less than ten percent of the Tender Letter of Tender. All pages of the Appendix to Tender
sum (this exclusion does not apply to the details and Schedules where entries or amendments have
required in the Schedules, which must be been made shall be initialled by the person(s) signing
completed without exclusions); the Letter of Tender.
f the names, qualifications and experience of key
personnel proposed for the management of the 6.3 The inner and outer envelopes shall be addressed to:
Contract and the execution of the Works, both on .........
and off site, including curriculum vitae of the and shall bear the following identification:
senior personnel. .........
A Tender which is not accompanied by this 6.4 The inner envelopes shall indicate the name and
230
address of the tenderer to enable the Tender to be notice of withdrawal in accordance with Clause 6 of these
returned unopened if it is declared late. The outer Instructions shall not be opened.
envelopes shall give no indication of the tenderer.
7.4 The Employer will examine Tenders to determine whether
6.5 If a Tender is misplaced or opened prematurely because they appear to be complete, properly signed, and
an envelope was not sealed and marked as instructed generally in order. For each Tender, the Employer or the
above, the Employer shall not be responsible and the Engineer will announce the name of the tenderer, the sum
Tender may be rejected. offered in the Letter of Tender, and such other details as
the Employer may consider appropriate.
6.6 The original and copies of the Tender must be delivered to the
address specified above no later than the time, on the Tender 7.5 After this Tender opening, information relating to the
submission date, stated in the Invitation. Tenders received by processes of examination, clarification, evaluation and
the Employer thereafter will be returned unopened. comparison of Tenders and the award of a contract shall
not be disclosed, other than to those officially concerned
6.7 The tenderer may modify or withdraw his Tender after with such processes. Any effort by a tenderer to influence
submitting it, if the modification or notice of withdrawal is the Employer or the Engineer in these processes may
received in writing before such prescribed time for submission result in the rejection of the tenderers Tender.
of Tenders but not thereafter. The tenderers modification
or notice of withdrawal shall be prepared, sealed, marked 8 Tender Evaluation
and delivered in accordance with the provisions of this
Clause 6, with the inner envelopes additionally marked 8.1 Prior to the detailed evaluation of Tenders, the Employer
MODIFICATION or WITHDRAWAL, as appropriate. In will determine whether each Tender is substantially
particular, the modification or notice of withdrawal shall be responsive to the requirements of the Tender Dossier. For
signed by a person or persons duly authorised to bind the the purpose of these processes, a substantially
tenderer, and proof of authorisation shall be annexed. responsive Tender is one which conforms to all the terms,
conditions and requirements of the Tender Dossier
6.8 A Tender submitted other than as described in this Clause without material deviation or reservation.
6 may be rejected by the Employer and returned to the
tenderer. 8.2 A material deviation or reservation is one which affects in
any substantial way the scope, quality, or performance of
6.9 The Tender shall remain valid and open for acceptance for the Works, or which limits in any substantial way
the period of 140 days from the Tender submission date. (inconsistent with the Tender Dossier) the Employers
The tenderer shall calculate the date on which validity rights or the Contractors obligations under the Contract,
expires and insert this expiry date in the Letter of Tender. and the rectification of which deviation or reservation
Prior to this expiry date, the Employer may by written would affect unfairly the competitive position of other
notice request the tenderer to extend the validity period. tenderers presenting substantially responsive Tenders.
The tenderer may refuse the request, but shall not modify
his Tender other than by extending its validity. 8.3 If a Tender is not substantially responsive to the
requirements of the Tender Dossier, it will be rejected by
7 Tender Opening the Employer. The Tender shall not be made responsive
by the tenderer correcting or withdrawing the non-
7.1 Tenders and other submissions, which are in accordance conforming deviation or reservation.
with Clause 6 of these Instructions, will be opened at the
date and time stated in the Invitation in the presence of 8.4 The Employer will only evaluate and compare the Tenders
tenderers representatives who choose to attend at the which have been determined to be substantially
address for delivery of Tenders specified in Clause 6. responsive to the requirements of the Tender Dossier.
Responsive Tenders will first be checked by the Employer for
7.2 Tenderers representatives at this opening shall sign an any arithmetic errors in computation and summation, and any
attendance register. errors will be corrected as follows:
7.3 Tenders for which the Employer has received a valid a The amount entered in the Letter of Tender (as
231
announced when Tenders were opened) may be break-downs of unit rates and lump sum prices. The
considered acceptable as the Contract Amount request for clarification and the response shall be in
without any of the corrections and adjustments writing. No change in the price or substance of the
described in these sub-paragraphs. If there is any Tender shall be sought, offered or permitted except
discrepancy between amounts in figures and in as required to confirm the correction of arithmetic
words, the amount in words will take precedence. errors discovered by the Employer during the
b If there is any discrepancy between this amount evaluation of the Tenders.
and the equivalent sum computed on the basis of
the Bill of Quantities or other Schedules, the 9 Award of the Contract
Employer may make corrections and/or
adjustments (applying the principles described in 9.1 The Employer intends (i) to award the Contract to
these sub-paragraphs) and give notice to the the tenderer who appears to have the capability and
tenderer, specifying each error, correction and resources to carry out the Contract effectively,
adjustment. If the tenderer does not accept these whose Tender has been determined to be
notified corrections and adjustments, his Tender responsive to the Tender Dossier and who has
may be rejected. offered (all taken into consideration) the most
c If there is a substantial discrepancy between a favourable Tender; or (ii) to reject compliant Tenders
stated amount and the correct amount calculated and accept an alternative Tender. The Employer
by multiplying the stated unit rate by the quantity, reserves the right to reject any or all Tenders.
and the rate seems to have been stated in error
(inconsistent with the tenderers likely intentions), 9.2 [During the evaluation of Tenders, the Employer
the stated unit rate shall be amended and the may give the preferred tenderer(s) a list of the
stated amount will be binding. names of suitable professionals who are
d If there is any discrepancy between a stated acceptable to the Employer to act as DAB (sole
amount and the correct amount calculated by adjudicator) under Clause 20 of the Conditions of
multiplying the stated unit rate by the quantity, Contract. The Employer does not intend to contact
and either the discrepancy is not substantial or it such persons, and they should not be contacted
is reasonable to assume that the stated rate is by tenderers. If, in very special circumstances, the
consistent with the tenderers intentions, the Employer exchanged correspondence with any of
stated unit rate will be binding and the stated these listed persons, copies of such
amount shall be amended. correspondence will be forwarded to the tenderer.]
[OR: During the evaluation of Tenders, the
8.5 For the purpose of evaluating Tenders, the Employer Employer may give the preferred tenderer the name
will determine for each Tender the Evaluated Tender of the person whom the Employer nominates as a
Amount as follows: member of the DAB under Clause 20 of the
a making any correction for errors as described Conditions of Contract; and the tenderer may
above; likewise give the Employer the name of the person
b making an appropriate adjustment for any whom the tenderer nominates.]
acceptable variations, deviations, discounts or
other alternative offers not reflected in the 9.3 After receiving the Employers Letter of Acceptance,
submitted amount or these corrections; and the successful tenderer shall submit a Performance
c making an allowance for any acceptable varied Security in accordance with Sub-Clause 4.2, and an
times for completion offered in alternative advance payment guarantee in accordance with
Tenders, the allowance being calculated at the Sub-Clause 14.2, of the Conditions of Contract.
same rate as the rate for delay damages for the
Works which is stated in the Appendix to Tender.] 9.4 After receiving the Performance Security from the
successful tenderer, the Employer will notify the
8.6 To assist in the examination, evaluation and other tenderers that their Tenders have been
comparison of Tenders, the Employer may ask any unsuccessful.
tenderer for clarification of his Tender, including
232
Appendix 12.1.1 - Obtaining Tenders: Plant and Design-Build Contracts
See Appendix 11.1.1.
233
234
This example form has been drafted as a suggested The instructions to tenderers specify the procedures
model from which users may prepare their own Instructions, to be followed until the employer either enters into a contract
copying text as they consider appropriate. However, many or advises tenderers that the employer does not intend to do
employers, International Financial Institutions and other entities so. In order to facilitate the preparation of the instructions, any
have standard forms, which may be equally suitable for use data which typically is unknown at this stage is referred to as
with FIDICs general conditions, and may incorporate being contained in a letter of invitation.
requirements which are specific to the entity promulgating its
standard form. The following example clauses are offered as For some types of contractor-designed works, a two-
suggestions for those who do not have such standard forms, stage tendering procedure may be adopted. Under the first
and for those who may wish to review and develop their own stage, tenderers submit unpriced technical proposals, on
standard forms whilst incorporating their specific which the employer may comment when he invites some or all
requirements. of them to submit final priced offers under the second stage.
Before amending these model instructions, the employer
The instructions to tenderers should not form part of should consider carefully what he expects to achieve by the
the eventual contract, and should not contain any text which division into two stages, and how tenderers will respond
remains relevant after award of the contract. thereto.
1 Introduction ...]
1.1 These Instructions to Tenderers (these Instructions) These [documents and the] Instructions to Tenderers shall
relate to a Letter of Invitation (the Invitation), in which a not form part of the tenderers offer, nor part of the
prospective tenderer is invited to submit a Tender. The defined words Tender or Contract. These Instructions
Invitation, which (in the case of any discrepancy) takes prescribe the procedures to be followed until the
precedence over these Instructions, specifies: Employer either enters into a Contract with the tenderer or
advises him that the Employer does not intend to do so.
a the company or joint venture, who is considered to be
eligible as described in Clause 2 of these Instructions 1.4 Words and expressions defined in Sub-Clause 1.1 of the
and who is thus invited to submit a Tender; Conditions of Contract shall have the same meanings
b the Engineer, to whom requests for clarification may be where used in these Instructions.
sent as described in Clause 3 of these Instructions;
c details of how to participate in the site visit by 1.5 The tenderer shall bear all costs incurred in the
tenderers (or how to obtain such details), if such a visit preparation and submission of the Tender, including visits
is being arranged under Clause 4 of these Instructions; and other actions mentioned or implied in these
d the time by which Tenders are to be submitted in Instructions.
accordance with Clause 6 of these Instructions (the
Tender submission date); and 1.6 The Employer will not be responsible or liable for such
e the time when Tenders are to be opened as described costs, regardless of the conduct or outcome of the
in Clause 7 of these Instructions. tendering process. The Employer reserves the right to
accept or reject any Tender, or to annul the tendering
1.2 The Tender Dossier, as issued to each tenderer in process and reject all Tenders, without incurring liability to
accordance with the Invitation, comprise: any tenderer and without being obliged to inform any
tenderer of the reasons for the Employers action.
a Volume I containing these Instructions, the Letter of
Tender, and the Schedules; 2 Eligibility of the Tenderer
b Volume II containing the Conditions of Contract, and
the Employers Requirements. 2.1 The Invitation (i) names the company or joint venture
whom the Employer considered to be eligible to submit a
1.3 [The following documents have also been issued to each Tender, (ii) states whether the tenderer was prequalified or
tenderer for information: selected, and (iii) may state any particular conditions or
235
reservations of the prequalification or selection. persons is to be acceptable as eligible:

Nothing in these Instructions entitles any other
entity, company or joint venture to submit a Tender. a these persons shall have nominated a leader with
authority to bind the joint venture and each of
2.2 [Each prequalified tenderer shall notify the Employer, these persons; and this leader shall be authorised
as soon as practicable, of any change in the data to incur liabilities and receive instructions for and
submitted for the purpose of the prequalification. Any on behalf of any and all these persons;
significant change in such data shall be deemed to b evidence of this authorisation shall be submitted
invalidate the tenderers previous prequalification, but with the Tender in the form of a power of attorney
the company or joint venture may request the signed by legally authorised signatories of all
Employers permission to reapply for prequalification. these persons;
If (at his sole discretion) the Employer grants such c the Letter of Tender, and (if it is accepted) the
permission, the tenderers application for Contract Agreement, shall be signed so as to be
prequalification must be received by the Employer not legally binding on each of these persons; and
less than 28 days before the Tender submission date d a copy of the agreement entered into by these
specified in Clause 6 of these Instructions.] persons shall be submitted with the Tender. This
agreement shall state (i) each such persons
[Each tenderer shall, in order to be considered for percentage participation in the joint venture, and
eligibility, submit the information listed below with the (ii) that these persons shall be jointly and severally
Tender. In the case of a joint venture of two or more liable to the Employer for the performance of the
legal persons, the information shall be submitted in Contract.
respect of each of these persons and in respect of
the joint venture tenderer. 2.4 No such person or sole tenderer shall participate in
the preparation of another tenderers Tender for the
a copies of original documents defining constitution same Contract. If any entity is found to have
and/or legal status, place of registration and participated in two or more Tenders, other than
principal place of business; alternative Tenders from the same tenderer, all such
b total annual turnover expressed as total volume Tenders will be rejected.
of engineering work carried out in each of the last
five years; 2.5 However, any entity may be proposed as a
c financial reports, including profit and loss prospective subcontractor by more than one
statements, balance sheets and auditors reports tenderer in addition to being either a sole tenderer or
for each of the past five years, and an estimated a participant in one joint venture tenderer.
financial projection for the subsequent year;
d evidence of access to lines of credit, and 3 The Tender Dossier
availability of other financial resources;
e name and address of banker(s) who will (and 3.1 The Tender shall be responsive to the complete
have been authorised to) provide references upon Tender Dossier which comprises the documents
request by the Employer; listed in Clause 1 above and any Addenda to Tender
f details of performance as prime/main contractor Dossier which may be issued as described in this
on works of a similar nature and volume over the Clause 3. The tenderer shall scrutinize each
last five years and on current works; and document immediately upon receiving it and shall
g a list of the major items of Contractors promptly give notice, to the party who issued the
Equipment proposed for carrying out the document, of any pages which appear to be missing.
Contract including details of ownership.]
3.2 The tenderer must carefully examine the complete
2.3 In these Instructions, the expression joint venture Tender Dossier. Failure to comply with these
means any of the groupings described in Sub- Instructions or with any other tendering requirements
Clause 1.14 of the Conditions of Contract. In order will be at the tenderers risk.
that such a joint venture of two or more legal 3.3 If the tenderer requires any clarification of the Tender
236
Dossier, he may give notice to the Engineer. The notice damage to property and any other loss, damage, costs
shall be written (which includes by facsimile transmission) and expenses (however caused) which would not have
in the language used in the Invitation, and shall be sent to arisen other than due to the exercise of such permission.
the Engineers address stated in the Invitation as soon as
practicable. 4.3 If a joint site visit is to be arranged for all tenderers, details
are given in the Invitation.
3.4 The Engineer shall respond to the notice by issuing (i) the
text of the question or request for clarification and (ii) the 4.4 Such a joint visit is intended to supplement, and not to
Employers clarification. This response shall be in writing replace, the individual inspections carried out by each
and shall give no indication of the identity of the tenderer tenderer. The Employer accepts no responsibility for
who requested clarification. These requests for providing any indication of relevant aspects, or access to
clarification and responses shall be sent to all prospective appropriate areas, which a competent tenderer may
tenderers who received the Tender Dossier, but shall not consider necessary for the preparation of a Tender.
constitute amendments to the Tender Dossier. However, if
a notice is received less than 28 days before the Tender 4.5 The Employer shall not be bound by any oral
submission date, there may be no response. representations which may be made during a joint site
visit, whether by the Engineers personnel or by others;
3.5 If amendments are to be made to the Tender Dossier, and whether during a formal meeting or otherwise. In
arising from a notice or otherwise, the Engineer shall issue order to minimize the possibility of misunderstanding,
an Addendum to Tender Dossier on behalf of the tenderers should present any requests for clarification in
Employer. Each Addendum to Tender Dossier shall be writing. In accordance with Clause 3 of these Instructions,
sent to all prospective tenderers who received the Tender any record of the formal meeting, requests, clarifications
Dossier, and shall be binding upon them. The tenderer and/or Addendum to Tender Documents shall be sent to
shall promptly acknowledge receipt of each Addendum to all prospective tenderers who received the Tender
Tender Dossier by written notice to the Engineer, and shall Documents.
also enter its reference number in the first sentence of the
Letter of Tender. 5 Preparation of the Tender
3.6 At any time, the Engineer may similarly issue an 5.1 The Tender and all communications between the tenderer
Addendum to Tender Dossier which amends the Tender and the Employer or the Engineer shall be typed or written
submission date. In this event, all rights and obligations of in indelible ink in the language used in the Invitation.
the Employer and the tenderers previously related to the Supporting documentation submitted by the tenderer may
original date shall thereafter be subject to the amended be in another language if he also submits an appropriate
date. translation of all its relevant passages into this ruling
language.
4 Site Visit
5.2 The Tender Dossier to be submitted by each tenderer
4.1 The tenderer is advised to visit and examine the Site, its shall comprise the Volume I described in Clause 1 of
surroundings and other parts of the Country, and must these Instructions, and a Proposal prepared in
obtain for himself on his own responsibility all information accordance with this Clause 5.
which may be necessary for preparing the Tender and
entering into a Contract. 5.3 The Tender Dossier issued to the tenderer, including any
amendments instructed in an Addendum to Tender
4.2 The tenderer and any of his personnel or agents will be Dossier, shall be used without further amendment.
granted conditional permission to enter upon the Site. The
permission shall be deemed to have been based upon the 5.4 The tenderer shall submit, with his Tender, a tender
tenderer, his personnel and agents indemnifying the security in the form annexed to these Instructions. The
Employer and his personnel and agents from and against tender security shall be issued by an entity acceptable to
all liability and upon the tenderer being responsible for the Employer, and shall be valid for not less than 35 days
personal injury (whether fatal or otherwise), loss of or after the date on which the validity of the Tender expires.
237
The Employer will return the tender security upon Clause 18 of the Conditions of Contract,
the occurrence of the first of the following events: including proposed deductibles and exclusions;
d details of the arrangements and methods which
a the Employer receives the Performance Security the tenderer proposes to adopt for the execution
from the successful tenderer; of the Works, in sufficient detail to demonstrate
b the Employer abandons his intention to appoint a their adequacy to achieve the requirements of the
Contractor; or Contract including completion within the Time for
c the validity of all tender securities for the contract Completion;
expires. e any proposals for subcontracting the execution of
parts of the Works on the Site, excluding each
5.5 The tenderer shall complete each Schedule as subcontractor named in the Schedules;
appropriate to the particular Schedule, and submit a f the names, qualifications and experience of key
Tender for the whole of the Works in accordance personnel proposed for the management of the
with the Tender Dossier. A Tender which excludes Contract and the execution of the Works, both on
part of the Works may be rejected as unresponsive. and off site, including curriculum vitae of the
senior personnel;
5.6 The tenderers Proposal, which must form part of the g names and particulars of each proposed designer
Tender, shall include: and design subcontractor.
a a detailed description of the proposed Works; A Tender which is not accompanied by this
b drawings, including plans, elevations and typical information may be rejected as unresponsive.
cross-sections; these may be A1 size and/or
bound A3 volumes, at 1:1000 to 1:100 scales; 5.8 The completed Tender shall not have any alterations
c commentary on the Employers Requirements, or erasures, except any which may be specified in
detailing how the layout and other critical an Addendum to Tender Dossier issued under
requirements will be achieved; Clause 3 of these Instructions. However, if
d manufacturers brochures and/or other details of alterations are necessary to correct errors made by
the main items of Plant including spares; the tenderer, these corrections shall be endorsed
e details of any exceptions to the statements in the with the signature of the person signing the Letter of
Letter of Tender which otherwise state that the Tender.
Employers Requirements contain no errors and
that the Works will conform therewith. 5.9 Only one Tender may be submitted by each
tenderer, except for any alternative offers. In addition
5.7 The tenderer shall also submit the following to a compliant Tender, the tenderer may offer
supplementary information accompanying, but not technical or other alternatives to the requirements of
forming part of, his Tender: the Tender Dossier, which may include reasonable
deviations or other proposals. Each alternative
a the information listed in Clause 2 of these Tender shall include all information necessary for its
Instructions, if applicable to the tenderer; complete evaluation by the Employer, including any
b name and address of the bank or other entity relevant calculations, specifications, construction
which will provide the Performance Security and methods, timing implications, breakdowns of prices,
the advance payment guarantee; and a letter from and other relevant details. The Employer reserves
such entity acknowledging having received the the right to reject alternative offers.
Annexes to the Particular Conditions of Contract
and undertaking to provide these security 6 Submission of the Tender
documents in accordance with the exact wording
of these Annexes (if the entity prefers to make 6.1 The Tenderer shall prepare one original set and three
minor changes, they must be specified exactly); photocopy sets of the documents comprising the
c name and address of the insurers and their Tender and supplementary information, as described
principal terms for the insurances required by in Clause 5 of these Instructions. Each such set shall
238
be submitted in an inner envelope within an outer tenderer.

envelope, with each document and each envelope being
clearly marked ORIGINAL or COPY as appropriate. If 6.9 The Tender shall remain valid and open for acceptance for
there is any discrepancy between them, the ORIGINAL the period of 140 days from the Tender submission date.
shall prevail. The tenderer shall calculate the date on which validity
expires and insert this expiry date in the Letter of Tender.
6.2 The original and copies of the Tender shall be signed by Prior to this expiry date, the Employer may by written
a person or persons duly authorised to bind the notice request the tenderer to extend the validity period.
tenderer. Proof of authorisation, in the form of a written The tenderer may refuse the request, but shall not modify
power of attorney, shall be annexed to the Letter of his Tender other than by extending its validity.
Tender. All pages of the Appendix to Tender and
Schedules where entries or amendments have been 7 Tender Opening
made shall be initialled by the person(s) signing the
Letter of Tender. 7.1 Tenders and other submissions, which are in
accordance with Clause 6 of these Instructions, will be
6.3 The inner and outer envelopes shall be addressed to: opened at the date and time stated in the Invitation in
....... the presence of tenderers representatives who choose
and shall bear the following identification: to attend at the address for delivery of Tenders specified
....... in Clause 6.
6.4 The inner envelopes shall indicate the name and address 7.2 Tenderers representatives at this opening shall sign an
of the tenderer to enable the Tender to be returned attendance register.
unopened if it is declared late. The outer envelopes shall
give no indication of the tenderer. 7.3 Tenders for which the Employer has received a valid
notice of withdrawal in accordance with Clause 6 of these
6.5 If a Tender is misplaced or opened prematurely because Instructions shall not be opened.
an envelope was not sealed and marked as instructed
above, the Employer shall not be responsible and the 7.4 The Employer will examine Tenders to determine whether
Tender may be rejected. they appear to be complete, properly signed, and
generally in order. For each Tender, the Employer or the
6.6 The original and copies of the Tender must be delivered to Engineer will announce the name of the tenderer, the sum
the address specified above no later than the time, on the offered in the Letter of Tender, and such other details as
Tender submission date, stated in the Invitation. Tenders the Employer may consider appropriate.
received by the Employer thereafter will be returned
unopened. 7.5 After this Tender opening, information relating to the
processes of examination, clarification, evaluation and
6.7 The tenderer may modify or withdraw his Tender after comparison of Tenders and the award of a contract shall
submitting it, if the modification or notice of withdrawal is not be disclosed, other than to those officially concerned
received in writing before such prescribed time for with such processes. Any effort by a tenderer to influence
submission of Tenders but not thereafter. The tenderers the Employer or the Engineer in these processes may
modification or notice of withdrawal shall be prepared, result in the rejection of the tenderers Tender.
sealed, marked and delivered in accordance with the
provisions of this Clause 6, with the inner envelopes 8 Tender Evaluation
additionally marked MODIFICATION or WITHDRAWAL,
as appropriate. In particular, the modification or notice of 8.1 Prior to the detailed evaluation of Tenders, the Employer
withdrawal shall be signed by a person or persons duly will determine whether each Tender is substantially
authorised to bind the tenderer, and proof of authorisation responsive to the requirements of the Tender Dossier.
shall be annexed. For the purpose of these processes, a substantially
6.8 A Tender submitted other than as described in this Clause responsive Tender is one which conforms to all the terms,
6 may be rejected by the Employer and returned to the conditions and requirements of the Tender Dossier
239
without material deviation or reservation. d If there is any discrepancy between a stated

amount and the correct amount calculated by
8.2 A material deviation or reservation is one which multiplying the stated unit rate by the quantity,
affects in any substantial way the scope, quality, or and either the discrepancy is not substantial or it
performance of the Works, or which limits in any is reasonable to assume that the stated rate is
substantial way (inconsistent with the Tender consistent with the tenderers intentions, the
Dossier) the Employers rights or the Contractors stated unit rate will be binding and the stated
obligations under the Contract, and the rectification amount shall be amended.
of which deviation or reservation would affect unfairly
the competitive position of other tenderers 8.5 For the purpose of evaluating Tenders, the Employer
presenting substantially responsive Tenders. will determine for each Tender the Evaluated Tender
Amount as follows:
8.3 If a Tender is not substantially responsive to the
requirements of the Tender Dossier, it will be rejected a making any correction for errors as described
by the Employer. The Tender shall not be made above;
responsive by the tenderer correcting or withdrawing b making an appropriate adjustment for any
the non-conforming deviation or reservation. acceptable variations, deviations, discounts or
other alternative offers not reflected in the
8.4 The Employer will only evaluate and compare the submitted amount or these corrections; [and
Tenders which have been determined to be c making an allowance for any acceptable varied
substantially responsive to the requirements of the times for completion offered in alternative
Tender Dossier. Responsive Tenders will first be Tenders, the allowance being calculated at the
checked by the Employer for any arithmetic errors in same rate as the rate for delay damages for the
computation and summation, and any errors will be Works which is stated in the Appendix to Tender.]
corrected as follows:
8.6 The evaluation of the Tenders shall be based upon
a The amount entered in the Letter of Tender (as the principles outlined in the performance evaluation
announced when Tenders were opened) may be criteria annexed to these Instructions. Unless
considered acceptable as the Contract Amount specifically stated, no criterion will take precedence
without any of the corrections and adjustments over any other criteria, and Tender evaluation shall
described in these sub-paragraphs. If there is be based on an overall consideration.
any discrepancy between amounts in figures and
in words, the amount in words will take 9 Award of the Contract
precedence.
b If there is any discrepancy between this amount 9.1 The Employer intends (i) to award the Contract to
and the equivalent sum computed on the basis of the tenderer who appears to have the capability and
the Schedules, the Employer may make resources to carry out the Contract effectively,
corrections and/or adjustments (applying the whose Tender has been determined to be
principles described in these sub-paragraphs) responsive to the Tender Dossier and who has
and give notice to the tenderer, specifying each offered (all taken into consideration) the most
error, correction and adjustment. If the tenderer favourable Tender; or (ii) to reject compliant Tenders
does not accept these notified corrections and and accept an alternative Tender. The Employer
adjustments, his Tender may be rejected. reserves the right to reject any or all Tenders.
c If there is a substantial discrepancy between a
stated amount and the correct amount calculated 9.2 The preferred tenderer(s) may be invited to
by multiplying the stated unit rate by the quantity, participate in negotiation meeting(s) with the
and the rate seems to have been stated in error Employer, who may then issue a Memorandum of
(inconsistent with the tenderers likely intentions), Understanding recording the outcome of their joint
the stated unit rate shall be amended and the discussions of the Tender, which may include
stated amount will be binding. proposed arrangements for the appointment of the
240
DAB under Clause 20 of the Conditions of Contract. This 9.3 After receiving the Employers Letter of Acceptance, the
Memorandum of Understanding will constitute the successful tenderer shall submit a Performance Security
agreed basis upon which a contract could be in accordance with Sub-Clause 4.2, and an advance
concluded, and/or may include clarification of any payment guarantee in accordance with Sub-Clause 14.2,
alternative proposals which the tenderer may have of the Conditions of Contract.
submitted. The Memorandum of Understanding (i) shall
be binding on the tenderer as an acceptable clarification 9.4 After receiving the Performance Security from the
or amendment of his Tender until its validity expires, (ii) successful tenderer, the Employer will notify the other
shall be wholly subject to a subsequent contract tenderers that their Tenders have been unsuccessful.
agreement, and (iii) shall not bind the Employer nor
commit him to entering into any contract under any
terms.
241
Typical Schedules
Schedules means the document(s) entitled - Drawings

schedules, completed by the contractor and submitted - Furniture
with the letter of tender, as included in the contract. - Fixtures, Fittings and Equipment (FF&E)
Such document(s) may include data, lists and schedules - Plant and machinery by the contractor
of payments and/or prices. - Plant and machinery by the employer
- Spare parts
Further schedules may be issued by the - Operational requirements during construction and
employer as part of the tender dossier, to define his installation
requirements, and for subsequent inclusion in the - Performance monitoring
contract. - Tests on completion
- Taking-over procedure
Examples of the subject matter of schedules - Tests after completion
include the following, which are not intended to be - Performance requirements
exhaustive, but illustrative only: - Payment plan including price lists
- Payment procedure
- Indexation formulae and application
- Employers obligations
- Engineers duties and authority
- Document management and control procedures
- Approved subcontractors and suppliers
- Insurance policies
- Bank guarantees
- Quality plan
- Health, safety, welfare and environmental policies
- Dispute Adjudication Board members details
242
Typical Contents of a Contractors Proposal
The contractors proposal should include, but not It is to be expected that the submission will be fully
necessarily be limited to: supported by all relevant documents such as layout plans,
general arrangement drawings, and schematic diagrams.
- Preliminary design
- Description of the technology
- Description of construction method.
- Procedure for carrying out tests on completion, including
commissioning and trial operation.
- Procedure for carrying out tests after completion.
- Training programme for operating staff.
- All other information, specifications and data called for in the
243
Appendix 13.1.1 - Obtaining Tenders: EPC/Turnkey Contracts
Contract: _________________________________
Project: _________________________________
We confirm having advised you that
[OR: We are pleased to notify you that] you have been prequalified
OR: you have been selected as a prospective tenderer]
for the above Contract.
The Government of _________________________ has received

[OR: has applied for]
a loan from the _____________________________ towards the cost of the above Project. Part of the proceeds of this
loan shall be used for the payments to the Contractor under this Contract, the other parts being used to finance other
contracts included in the Project.
We have appointed as the Employers Representative: ______________________________________________________
They will soon be issuing, on our behalf, the Tender Dossier listed in Clause 1 of the Instructions to Tenderers.
We now invite you to submit a Tender in accordance with the Instructions to Tenderers which form the first part of the
Tender Dossier. In the Instructions, the following details are stated to be included in this Letter of Invitation:
a. Clause 2 refers to the eligibility of the above-named entity, to whom this letter is addressed;
b. Clause 3 refers to requests for clarification being sent to the Employers Representative who is named above;
c. Clause 4 refers to a joint site visit by representatives of the tenderers, and we recommend that you send either one
or two representatives to the site for this visit. It will commence at ___________________________________________
d. Clause 6 refers to the submission of your Tender, which must be received at the address stated in the Clause not
later than 10:00 local time on the Tender submission date of _______________________________________________
e. Clause 7 refers to the opening of Tenders in the presence of representatives of the tenderers, which will commence
at 10:05 on the Tender submission date stated above.
Please confirm, within a week of receiving this letter, that you have received the complete Tender Dossier, and also
advise us whether you will submit a Tender in accordance with the Instructions to Tenderers.
244
Brief description of Contract: ______________________________________________
Name and address of Beneficiary: __________________________________________

(whom the Tender Dossier define as the Employer).
We have been informed that ____________________ (hereinafter called the Principal) is submitting an offer for such Contract in
response to your invitation, and that the conditions of your invitation (the conditions of invitation, which are set out in a document
entitled Instructions to Tenderers) require his offer to be supported by a tender security.
At the request of the Principal, we (name of bank) ______________________________ hereby irrevocably undertake to pay you, the
Beneficiary/Employer, any sum or sums not exceeding in total the amount of______________________ (say: _________________ )
upon receipt by us of your demand in writing and your written statement (in the demand) stating that:
(a) the Principal has, without your agreement, withdrawn his offer after the latest time specified for its submission and before the
expiry of its period of validity, or
(b) the Principal has refused to accept the correction of errors in his offer in accordance with such conditions of invitation, or
(c) you entered into the Contract with the Principal and he has failed to deliver a performance security complying with Sub-Clause
4.2 of the conditions of the Contract.
Any demand for payment must contain your signature(s) which must be authenticated by your bankers or by a notary public. The
authenticated demand and statement must be received by us at this office on or before (the date 35 days after the expiry of the
validity of the Tender) _____________ , when this guarantee shall expire and shall be returned to us.
This guarantee is subject to the Uniform Rules for Demand Guarantees, published as number 458 by the International Chamber
of Commerce, except as stated above.
Date: _____________________________________ Signature(s): _________________________________
245
This example form has been drafted as a The instructions to tenderers specify the
suggested model from which users may prepare their procedures to be followed until the employer either
own Instructions, copying text as they consider enters into a contract or advises tenderers that the
appropriate. However, many employers, International employer does not intend to do so. In order to facilitate
Financial Institutions and other entities have standard the preparation of the instructions, any data which
forms, which may be equally suitable for use with FIDICs typically is unknown at this stage is referred to as being
general conditions, and may incorporate requirements contained in a letter of invitation.
which are specific to the entity promulgating its standard
form. The following example clauses are offered as For some types of contractor-designed works, a
suggestions for those who do not have such standard two-stage tendering procedure may be adopted. Under
forms, and for those who may wish to review and the first stage, tenderers submit unpriced technical
develop their own standard forms whilst incorporating proposals, on which the employer may comment when
their specific requirements. he invites some or all of them to submit final priced offers
under the second stage. Before amending these model
The instructions to tenderers should not form instructions, the employer should consider carefully what
part of the eventual contract, and should not contain any he expects to achieve by the division into two stages,
text which remains relevant after award of the contract. and how tenderers will respond thereto.
1 Introduction b the form of Letter of Tender,

c the Conditions of Contract, and
1.1 These Instructions to Tenderers (these Instructions) d the Employers Requirements.
relate to a Letter of Invitation (the Invitation), in
which a prospective tenderer is invited to submit a 1.3 [The following documents have also been issued to
Tender. The Invitation, which (in the case of any each tenderer for information:
discrepancy) takes precedence over these ]
Instructions, specifies:
These [documents and the] Instructions to Tenderers
a the company or joint venture, who is considered shall not form part of the tenderers offer, nor part of
to be eligible as described in Clause 2 of these the defined words Tender or Contract. These
Instructions and who is thus invited to submit a Instructions prescribe the procedures to be followed
Tender; until the Employer either enters into a Contract with
b the Employers Representative, to whom requests the tenderer or advises him that the Employer does
for clarification may be sent as described in not intend to do so.
Clause 3 of these Instructions;
c details of how to participate in the site visit by 1.4 Words and expressions defined in Sub-Clause 1.1 of
tenderers (or how to obtain such details), if such the Conditions of Contract shall have the same
a visit is being arranged under Clause 4 of these meanings where used in these Instructions.
Instructions;
d the time by which Tenders are to be submitted in 1.5 The tenderer shall bear all costs incurred in the
accordance with Clause 6 of these Instructions preparation and submission of the Tender, including
(the Tender submission date); and visits and other actions mentioned or implied in
e the time when Tenders are to be opened as these Instructions.
described in Clause 7 of these Instructions.
1.6 The Employer will not be responsible or liable for
1.2 The Tender Dossier, as issued to each tenderer in such costs, regardless of the conduct or outcome of
accordance with the Invitation, comprise ........... the tendering process. The Employer reserves the
volumes containing: right to accept or reject any Tender, or to annul the
tendering process and reject all Tenders, without
a these Instructions, incurring liability to any tenderer and without being
246
obliged to inform any tenderer of the reasons for the proposed for carrying out the Contract including details
Employers action. of ownership.]
2 Eligibility of the Tenderer 2.3 In these Instructions, the expression joint venture means
any of the groupings described in Sub-Clause 1.14 of the
2.1 The Invitation (i) names the company or joint venture Conditions of Contract. In order that such a joint venture of
whom the Employer considered to be eligible to submit a two or more legal persons is to be acceptable as eligible:
Tender, (ii) states whether the tenderer was prequalified or
selected, and (iii) may state any particular conditions or a these persons shall have nominated a leader with
reservations of the prequalification or selection. Nothing in authority to bind the joint venture and each of these
these Instructions entitles any other entity, company or persons; and this leader shall be authorised to incur
joint venture to submit a Tender. liabilities and receive instructions for and on behalf of
any and all these persons;
2.2 [Each prequalified tenderer shall notify the Employer, as b evidence of this authorisation shall be submitted with
soon as practicable, of any change in the data submitted the Tender in the form of a power of attorney signed by
for the purpose of the prequalification. Any significant legally authorised signatories of all these persons;
change in such data shall be deemed to invalidate the c the Contract Agreement shall be signed so as to be
tenderers previous prequalification, but the company or legally binding on each of these persons; and
joint venture may request the Employers permission to d a copy of the agreement entered into by these persons
reapply for prequalification. If (at his sole discretion) the shall be submitted with the Tender. This agreement
Employer grants such permission, the tenderers application shall state (i) each such persons percentage
for prequalification must be received by the Employer not participation in the joint venture, and (ii) that these
less than 28 days before the Tender submission date persons shall be jointly and severally liable to the
specified in Clause 6 of these Instructions.] Employer for the performance of the Contract
[Each tenderer shall, in order to be considered for eligibility, 2.4 No such person or sole tenderer shall participate in the
submit the information listed below with the Tender. In the preparation of another tenderers Tender for the same
case of a joint venture of two or more legal persons, the Contract. If any entity is found to have participated in two
information shall be submitted in respect of each of these or more Tenders, other than alternative Tenders from the
persons and in respect of the joint venture tenderer. same tenderer, all such Tenders will be rejected.
a copies of original documents defining constitution 2.5 However, any entity may be proposed as a prospective
and/or legal status, place of registration and principal subcontractor by more than one tenderer in addition to
place of business; being either a sole tenderer or a participant in one joint
b total annual turnover expressed as total volume of venture tenderer.
engineering work carried out in each of the last five
years; 3 The Tender Dossier
c financial reports, including profit and loss statements,
balance sheets and auditors reports for each of the 3.1 The Tender shall be responsive to the complete Tender
past five years, and an estimated financial projection Dossier which comprises the documents listed in Clause 1
for the subsequent year; above and any Addenda to Tender Dossier which may be
d evidence of access to lines of credit, and availability of issued as described in this Clause 3. The tenderer shall
other financial resources; scrutinize each document immediately upon receiving it
e name and address of banker(s) who will (and have and shall promptly give notice, to the party who issued the
been authorised to) provide references upon request document, of any pages which appear to be missing.
by the Employer;
f) details of performance as prime/main contractor on 3.2 The tenderer must carefully examine the complete Tender
works of a similar nature and volume over the last five Dossier. Failure to comply with these Instructions or with
years and on current works; and any other tendering requirements will be at the tenderers
g a list of the major items of Contractors Equipment risk.
247
Appendix 13.1.3 - Obtaining tenders: EPC/Turnkey Contracts
3.3 If the tenderer requires any clarification of the Tender indemnifying the Employer and his personnel and
Dossier, he may give notice to the Employers agents from and against all liability and upon the
Representative. The notice shall be written (which tenderer being responsible for personal injury (whether
includes by facsimile transmission) in the language fatal or otherwise), loss of or damage to property and
used in the Invitation, and shall be sent to the address any other loss, damage, costs and expenses (however
stated in the Invitation as soon as practicable. caused) which would not have arisen other than due
to the exercise of such permission.
3.4 The Employer shall respond to the notice by issuing
(i) the text of the question or request for clarification 4.3 If a joint site visit is to be arranged for all tenderers,
and (ii) the Employers clarification. This response details are given in the Invitation.
shall be in writing and shall give no indication of the
identity of the tenderer who requested clarification. 4.4 Such a joint visit is intended to supplement, and not
These requests for clarification and responses shall to replace, the individual inspections carried out by
be sent to all prospective tenderers who received each tenderer. The Employer accepts no
the Tender Dossier, but shall not constitute responsibility for providing any indication of relevant
amendments to the Tender Dossier. However, if a aspects, or access to appropriate areas, which a
notice is received less than 28 days before the competent tenderer may consider necessary for the
Tender submission date, there may be no response. preparation of a Tender.
3.5 If amendments are to be made to the Tender 4.5 The Employer shall not be bound by any oral
Dossier, arising from a notice or otherwise, the representations which may be made during a joint site
Employer shall issue an Addendum to Tender visit, whether by the Employers personnel or by
Dossier. Each Addendum to Tender Dossier shall be others; and whether during a formal meeting or
sent to all prospective tenderers who received the otherwise. In order to minimize the possibility of
Tender Dossier, and shall be binding upon them. The misunderstanding, tenderers should present any
tenderer shall promptly acknowledge receipt of each requests for clarification in writing. In accordance with
Addendum to Tender Dossier by written notice to Clause 3 of these Instructions, any record of the formal
the Employers Representative, and shall also enter meeting, requests, clarifications and/or Addendum to
its reference number in the first sentence of the Tender Dossier shall be sent to all prospective
Letter of Tender. tenderers who received the Tender Dossier.
3.6 At any time, the Employer may similarly issue an 5 Preparation of the Tender
Addendum to Tender Dossier which amends the
Tender submission date. In this event, all rights and 5.1 The Tender and all communications between the
obligations of the Employer and the tenderers tenderer and the Employer shall be typed or written
previously related to the original date shall thereafter in indelible ink in the language used in the Invitation.
be subject to the amended date. Supporting documentation submitted by the
tenderer may be in another language if he also
4 Site Visit submits an appropriate translation of all its relevant
passages into this ruling language.
4.1 The tenderer is advised to visit and examine the Site,
its surroundings and other parts of the Country, and 5.2 The Tender to be submitted by each tenderer shall
must obtain for himself on his own responsibility all include the documents in accordance with this
information which may be necessary for preparing Clause 5 and the Tender Dossier described in
the Tender and entering into a Contract. Clause 1 of these Instructions.
4.2 The tenderer and any of his personnel or agents will be 5.3 The Tender Dossier issued to the tenderer, including
granted conditional permission to enter upon the Site. any amendments instructed in an Addendum to
The permission shall be deemed to have been based Tender Dossier, shall be used without further
upon the tenderer, his personnel and agents amendment.
248
5.4 The tenderer shall submit, with his Tender, a tender Conditions of Contract, including proposed deductibles
security in the form annexed to these Instructions. The and exclusions;
tender security shall be issued by an entity acceptable to d details of the arrangements and methods which the
the Employer, and shall be valid for not less than 35 days tenderer proposes to adopt for the execution of the
after the date on which the validity of the Tender expires. Works, in sufficient detail to demonstrate their
The Employer will return the tender security upon the adequacy to achieve the requirements of the Contract
occurrence of the first of the following events: including completion within the Time for Completion;
e any proposals for subcontracting the execution of parts
a the Employer receives the Performance Security from of the Works on the Site, excluding each subcontract
the successful tenderer; which will be less than ten percent of the Tender sum;
b the Employer abandons his intention to appoint a f the names, qualifications and experience of key
Contractor; or personnel proposed for the management of the Contract
c the validity of all tender securities for the contract expires. and the execution of the Works, both on and off site,
including curriculum vitae of the senior personnel;
5.5 The tenderer shall submit a Tender for the whole of the g names and particulars of design subcontractors.
Works in accordance with the Tender Dossier. A Tender
which excludes part of the Works may be rejected as A Tender which is not accompanied by this information
unresponsive. may be rejected as unresponsive.
5.6 The Tender shall include: 5.8 The completed Tender shall not have any alterations or
erasures, except any which may be specified in an
a a detailed description of the proposed Works; Addendum to Tender Dossier issued under Clause 3 of
b drawings, including plans, elevations and typical cross- these Instructions. However, if alterations are necessary to
sections; these may be A1 size and/or bound A3 correct errors made by the tenderer, these corrections
volumes, at 1:1000 to 1:100 scales; shall be endorsed with the signature of the person signing
c commentary on the Employers Requirements, detailing the Letter of Tender.
how the layout and other critical requirements will be
achieved; 5.9 Only one Tender may be submitted by each tenderer,
d manufacturers brochures and/or other details of the except for any alternative offers. In addition to a compliant
main items of Plant including spares; Tender, the tenderer may offer technical or other
e proposals for training; and alternatives to the requirements of the Tender Dossier,
f proposals for post-contract technical support and which may include reasonable deviations or other
supply of spare parts. proposals. Each alternative Tender shall include all
information necessary for its complete evaluation by the
5.7 The tenderer shall also submit the following Employer, including any relevant calculations,
supplementary information accompanying, but not specifications, construction methods, timing implications,
forming part of, his Tender: breakdowns of prices, and other relevant details. The
Employer reserves the right to reject alternative offers.
a the information listed in Clause 2 of these Instructions,
if applicable to the tenderer; 6 Submission of the Tender
b name and address of the bank or other entity which will
provide the Performance Security and the advance 6.1 The Tenderer shall prepare one original set and three
payment guarantee; and a letter from such entity photocopy sets of the documents comprising the
acknowledging having received the Annexes to the Tender and supplementary information, as described in
Particular Conditions of Contract and undertaking to Clause 5 of these Instructions. Each such set shall be
provide these security documents in accordance with submitted in an inner envelope within an outer
the exact wording of these Annexes (if the entity prefers envelope, with each document and each envelope
to make minor changes, they must be specified exactly); being clearly marked ORIGINAL or COPY as
c name and address of the insurers and their principal appropriate. If there is any discrepancy between them,
terms for the insurances required by Clause 18 of the the ORIGINAL shall prevail.
249
Appendix 13.1.3 - Obtaining tenders: EPC/Turnkey Contracts
6.2 The original and copies of the Tender shall be signed expiry date in the Letter of Tender. Prior to this expiry
by a person or persons duly authorised to bind the date, the Employer may by written notice request the
tenderer. Proof of authorisation, in the form of a tenderer to extend the validity period. The tenderer
written power of attorney, shall be annexed to the may refuse the request, but shall not modify his
Letter of Tender. Tender other than by extending its validity.
6.3 The inner and outer envelopes shall be addressed 7 Tender Opening
to:
.... 7.1 Tenders and other submissions, which are in
and shall bear the following identification: accordance with Clause 6 of these Instructions, will
.... be opened at the date and time stated in the
Invitation in the presence of tenderers
6.4 The inner envelopes shall indicate the name and representatives who choose to attend at the address
address of the tenderer to enable the Tender to be for delivery of Tenders specified in Clause 6.
returned unopened if it is declared late. The outer
envelopes shall give no indication of the tenderer. 7.2 Tenderers representatives at this opening shall sign
an attendance register.
6.5 If a Tender is misplaced or opened prematurely
because an envelope was not sealed and marked as 7.3 Tenders for which the Employer has received a valid
instructed above, the Employer shall not be notice of withdrawal in accordance with Clause 6 of
responsible and the Tender may be rejected. these Instructions shall not be opened.
6.6 The original and copies of the Tender must be 7.4 The Employer will briefly examine Tenders to
delivered to the address specified above no later determine whether they appear to be complete,
than the time, on the Tender submission date, properly signed, and generally in order. For each
stated in the Invitation. Tenders received by the Tender, the Employer will announce the name of the
Employer thereafter will be returned unopened. tenderer, the sum offered in the Letter of Tender, and
such other details as the Employer may consider
6.7 The tenderer may modify or withdraw his Tender appropriate.
after submitting it, if the modification or notice of
withdrawal is received in writing before such 7.5 After this Tender opening, information relating to the
prescribed time for submission of Tenders but not processes of examination, clarification, evaluation
thereafter. The tenderers modification or notice of and comparison of Tenders and the award of a
withdrawal shall be prepared, sealed, marked and contract shall not be disclosed, other than to those
delivered in accordance with the provisions of this officially concerned with such processes. Any effort
Clause 6, with the inner envelopes additionally by a tenderer to influence the Employer in these
marked MODIFICATION or WITHDRAWAL, as processes may result in the rejection of the
appropriate. In particular, the modification or notice tenderers Tender.
of withdrawal shall be signed by a person or
persons duly authorised to bind the tenderer, and 8 Tender Evaluation
proof of authorisation shall be annexed.
8.1 Prior to the detailed evaluation of Tenders, the
6.8 A Tender submitted other than as described in this Employer will determine whether each Tender is
Clause 6 may be rejected by the Employer and substantially responsive to the requirements of the
returned to the tenderer. Tender Dossier.
6.9 The Tender shall remain valid and open for For the purpose of these processes, a substantially
acceptance for the period of 140 days from the responsive Tender is one which conforms to all the
Tender submission date. The tenderer shall calculate terms, conditions and requirements of the Tender
the date on which validity expires and insert this Dossier without material deviation or reservation.
250
8.2 A material deviation or reservation is one which affects in for delay damages for the Works which is stated in the
any substantial way the scope, quality, or performance of Particular Conditions of Contract.]
the Works, or which limits in any substantial way
(inconsistent with the Tender Dossier) the Employers 8.6 The evaluation of the Tenders shall be based upon the
rights or the Contractors obligations under the Contract, principles outlined in the performance evaluation criteria
and the rectification of which deviation or reservation annexed to these Instructions. Unless specifically stated, no
would affect unfairly the competitive position of other criterion will take precedence over any other criteria, and
tenderers presenting substantially responsive Tenders. Tender evaluation shall be based on an overall consideration.
8.3 If a Tender is not substantially responsive to the 9 Award of the Contract

requirements of the Tender Dossier, it will be rejected by
the Employer. The Tender shall not be made responsive 9.1 The Employer intends (i) to award the Contract to the
by the tenderer correcting or withdrawing the non- tenderer who appears to have the capability and
conforming deviation or reservation. resources to carry out the Contract effectively, whose
Tender has been determined to be responsive to the
8.4 The Employer will only evaluate and compare the Tenders Tender Dossier and who has offered (all taken into
which have been determined to be substantially consideration) the most favourable Tender; or (ii) to reject
responsive to the requirements of the Tender Dossier. compliant Tenders and accept an alternative Tender. The
Responsive Tenders will first be checked by the Employer Employer reserves the right to reject any or all Tenders.
for any arithmetic errors in computation and summation,
and any errors will be corrected as follows: 9.2 The preferred tenderer(s) may be invited to participate in
negotiation meeting(s) with the Employer, who may then
a The amount entered in the Letter of Tender (as issue a Memorandum of Understanding recording the
announced when Tenders were opened) may be outcome of their joint discussions of the Tender, which
considered acceptable as the Contract Price without may include proposed arrangements for the appointment
any of the corrections and adjustments described in of the DAB under Clause 20 of the Conditions of
these sub-paragraphs. Contract. This Memorandum of Understanding will
b If there is any discrepancy between amounts in figures constitute the agreed basis upon which a contract could
and in words, the amount in words will take precedence. be concluded, and/or may include clarification of any
alternative proposals which the tenderer may have
c If there is any discrepancy between an amount in the submitted. The Memorandum of Understanding (i) shall be
Letter of Tender and the equivalent sum computed on binding on the tenderer as an acceptable clarification or
the basis of the details in the Tender, the Employer may amendment of his Tender until its validity expires, (ii) shall
make corrections and/or adjustments (applying the be wholly subject to a subsequent contract agreement,
principles described in these sub-paragraphs) and give and (iii) shall not bind the Employer nor commit him to
notice to the tenderer, specifying each error, correction entering into any contract under any terms.
and adjustment.
9.3 After the Employer and the successful tenderer have
8.5 For the purpose of evaluating Tenders, the Employer will entered into the Contract Agreement in accordance with
determine for each Tender the Evaluated Tender Amount Sub-Clause 1.6 of the Conditions of Contract, the
as follows: Contractor shall submit a Performance Security in
accordance with Sub-Clause 4.2, and an advance
a making any correction for errors as described above; payment guarantee in accordance with Sub-Clause 14.2,
b making an appropriate adjustment for any acceptable of the Conditions of Contract.
variations, deviations, discounts or other alternative
offers not reflected in the submitted amount or these 9.4 After receiving the Performance Security from the
corrections; [and successful tenderer, the Employer will notify the other
c making an allowance for any acceptable varied times tenderers that their Tenders have been unsuccessful.
for completion offered in alternative Tenders, the
allowance being calculated at the same rate as the rate
251
Appendix 14.1.1 - Obtaining Tenders: Dredging and Reclamation Works
252
Appendix 14.1.2 - Obtaining Tenders: Dredging and Reclamation Works
253
Index
accepted contract amount 39 currencies 117, 127, 140, 151

addenda to proposal dossier 110
addenda to tender dossier 123, 134, 146, 156 de-commissioning 30
adverse physical conditions 32, 34, 47 design 15
advisers 11 design competition with prices 109
agreement, engineer 33 design responsibility 30
alliance contract 71 design-build contract 33
alternative offers 139 Design-Build-Finance-Operate (DBFO) 25
alternative tenders 117, 127, 151, 172 Design, Build and Operate Contract 50, 66, 74
applicable law 36 Dispute Adjudication
award recomendations, consultancy appointments 164 Board (DAB) 84, 124, 134, 147, 157
drawings 120, 131, 143, 154
bid 5, 88 Dredging and Reclamation Works Contract 50, 68, 149
bill of quantities 56, 115, 121, 154
borehole reports 49 economically advantageous tender 176
brown-field DBO 66 employer involvement 17
budget method, consultancy appointments 109 employers information 47
budget planning 27 employers representative 68
Build-Lease-Transfer (BLT) 25 employers requirements 58, 61, 63, 75, 125, 130, 142
Build-Operate-Transfer (BOT) 25, 64 employers risk 37
Build-Own-Operate-Transfer (BOOT) 25 engineers role 33
environmental impact 17
care of works 32 environmental studies 16, 47
Client/Consultant Model Services EPC/Turnkey Contract 50, 62, 74, 137, 185
Agreement 50, 70, 163, 177 European Union 45
co-ordinator, tendering 46, 159 evaluation committee 159, 169
coercive practice 49 extension of time 32
collusion 49
commissioning 10, 58 feasibility studies 12
competitive dialogue tendering 98, 104 Feasibility Studies Report 13, 18, 23, 27, 34, 81
conceptual design 12, 16, 82, 130 financing, project 14, 24, 45, 83
concessionaire 25, 64 fit for purpose 33
confidentiality agreement 90 fixed fee 91
Construction Contract 50, 56, 74, 119 fixed price 35, 64
construction management contract 69 framework agreement 71, 72
contingency 84 fraudulent practice 49
contract packaging 26
contract price 35, 38, 39 geophysical studies 13, 14, 16, 47
contractor design 30, 32, 61 geotechnical survey 30
contractor-financed project 26, 64 green-field DBO 66
contractors proposal 132 guarantee 10
contractors documents 32 guarantee, parent company 104
contractors risk 37
coodinator, proposal 159 housing 29
coordinator, tender 46, 159 hydrographic survey 30
correspondence method 123, 133, 146, 156 hydrological conditions 48
corruption 49 hydrological studies 47
cost estimate 16, 29
cost-plus 35 impartiality 124, 135, 147, 157
cost-weighted method, consultancy appointments 109 in private opening 160
254
Index
in public opening 160 owner 5

in-house capability 30
International Financing Institution (IFI) 29, 60, 62, 65, 68, 96 parties 10
information to tenderers 56 partnering 71, 73
information, employers 47 payment 38, 84
initial studies 11 performance security 119, 129, 141, 152, 179, 185
Instructions to tenderers 56, 116, 119, 125, 138, 150 performance specification 33, 60, 62, 87
insurance 36 Performance-Based Procurement (PBP) 61
International Chamber of Commerce (ICC) 70 planning 44
international competitive bidding 61 Plant and Design-Build Contract 50, 58, 74, 125
invitation to prequalify, consultancy appointments 90 pre-award work agreement 179
pre-contract work agreement 184
joint venture 32 preliminary design 82, 130
Joint Venture Agreement 51 prequalfication applications assessment, works contracts 101
prequalification 10, 37, 57
land acquisition 44 prequalification criteria works contracts 103
land survey 30 prequalification criteria, consultancy appointments 92
late payment 85 prequalification documents,
law 13, 14 consultancy appointments 89, 91
letter of acceptance 177, 183 prequalification documents, works contracts 99, 101
letter of intent 178, 184 prequalification notice to applicants, works contracts 105
letter of invitation to tenderers 116, 125, 138, 150 prequalification notice, consultancy appointments 90
letter of invitation, consultancy appointments 177 prequalification, consultancy appointments 87, 89
liaison officer 81 prequalification, works contracts 97
life-cycle cost 12, 15, 27 Price negotiation method, consultancy appointments 109
limited recourse basis 65 Privately Financed Project (PFP) 24, 25, 66
local products and services, Private Financing Initiative (PFI) 64
policy/preference 90, 117, 127, 141, 151 procurement 5, 9
location, project 13 procurement, management of 43
lowest evaluated tender 60 procurement, regulations 45
lump sum 38, 39, 59, 62, 131 programme, time 15, 28, 43
programming, contract/project time 43
managed risk 34 project 9, 10
management contracting contract 70 project financed 64
memorandum of understanding, works contracts 183 project financing 45
milestones 58, 62 project risk 17
Minor Works Contract 50, 51 project strategy 10, 23, 81
mobilisation 29 Project Strategy Manual 40, 83
Multilateral Development Bank (MDB) 24, 25, 29 proposal 88
proposal coordinator 159
negotiated method, consultancy appointments 108 proposal dossier 109
negotiated tendering 98, 104 proposal evaluation 162
nominated subcontractors 32 proposal evaluation criteria 162
non-recourse basis 65 Public-Private Partnership (PPP) 26, 66
notification of prequalification applicants,
consultancy appointments 95 Quality-Based Selection (QBS) 88, 92, 107, 163
open tendering 97 receipt of tenders/proposals 161

opening of tenders/proposals 161 regulations 13, 14
operation and maintenance 16, 30 reimbursable 35, 72, 91
255
Index
reimbursement 38, 40, 57 tender procedure 113

relevant data 48 tender security 117, 127, 141, 151
remeasurement 38, 39 tender stage 82
replacement value 36 tender sum 37
responsibilities, employer's 48 tenderers representative 122
restricted opening 160 tenderers conference method 123, 133, 146, 156
risk 34, 36 tendering 10
risk allocation 35 tendering coordinator 46, 170
risk analysis 34 tendering methods 97
risk, employers 12 tendering, management of 46
tendering, single-stage 59, 61
schedules 121, 125, 131, 144 tendering, two-stage 60, 61
scope 15 tenders containing qualifications 172
Scope of services 109, 164 terms of reference 178
selection committee 94 third-party insurance 36
selection methods 88 two-envelope method, consultancy appointments 108
selection with price comparision, two-envelope tendering method 169
consultancy appointments 94 two-stage tendering 60, 61, 169
selective method, consultancy appointments 108
selective tendering 98 unforeseen costs 72
Short Form of Contract 50, 51,73, 113 unforseeable 48
shortlist, consultancy appointments 109 unit rate 57
shortlist, contractors 101
single-stage tendering 59, 61 variations 61, 131
site data 48, 154
site visit 122, 133, 145 works package 69, 72
Special Purpose Vehicle (SPV) 65
specification 10, 115, 119, 153
Standard Prequalification Form for Tenderers 99
studies, sub-surface 47
Sub-Consultancy Agreement 51
sub-surface conditions 48
sub-surface studies 47
supply contract 70
surveys 30
sustainability 17, 19
sustainable development 17
target man-hours 91
target price 38, 40
tender 5, 88
tender coordinator 46, 159
tender documents, construction contract 115
tender dossier 5, 28, 32, 57, 68, 75, 101, 113, 115
121, 125, 132, 145, 149, 155
tender evaluation committee 169
tender evaluation criteria 118, 129, 141, 152, 174
tender evaluation methods 173
tender evaluation tasks, works contracts 170
tender period 116, 127, 139, 150
256

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FIDIC PROCUREMENT PROCEDURES GUIDE

1st Edition 2011

Fdration Internationale des Ingnieurs-Conseils

3 Developing a Project Strategy 23

6 The Project Strategy 81

7 Prequalification: Consultancy Appointments 87

8 Prequalification of Tenderers: Contracts for Works 97

9 Consultancy Appointments 109

10 Obtaining Tenders: Minor Works Contracts 113

11 Obtaining Tenders: Construction Contracts 115

12 Obtaining Tenders: Plant and Design-Build Contracts 125

13 Obtaining Tenders: EPC/Turnkey Contracts 137

14 Obtaining Tenders: Dredging and Reclamation Works 149

15 Receipt and Opening of Proposals and Tenders 159

16 Evaluation and Recommendations: Consultancy Appointments 163

17 Tender Evaluation and Recommendations: Contracts for Works 169

18 Award of Contracts: Consultancy Appointments 177

19 Award of Contracts for Works 183

A FIDIC Code of Ethics

2.6.6 Basic Considerations - Operation and Maintenance

5.5.1 Contract Types - Preparation of the Employers Requirements

11.1.1 Obtaining Tenders: Construction Contracts - Example Letter of Invitation to Tender

13.1.1 Obtaining Tenders: EPC/Turnkey Contracts - Example Letter of Invitation to Tender

Third, this guide provides up-to-date detailed guidance

It is noted that a consulting engineer is a Membership in a FIDIC national Member

1.2 Organisation of the guide

DECISION DECISION DECISION START

Basic considerations and Project inception and APPOINTMENT OF CONSULTING ENGINEER

Initial studies FEASIBILITY

Employers design and/or Conceptual design ALL PERMISSIONS

Selection of contractor Prequalification of

Contractor executes and Contractor design

Project in use Operation and maintenance

START START START Plant Fully

The periods after contract

2.1 Development of a project 2.6.10 Environmental impacts and sustainability

2.1 Development of a project

Thus the accepted tenders become the subject

2.2 Parties involved

The processes recommended for retaining the - Inception EMPLOYER

- The public has the power to make or break

2.3 Advisers: consulting engineers and other specialists

2.4 Initial studies

2.5 Decision to proceed with feasibility studies

2.6 Feasibility studies

- Location: planning In subsequent stages of preparation of the project,

2.6.1 Location: planning; geophysical studies

Such preparatory surveys and investigations normally

2.6.2 Legal: laws and regulations

Designers will have to adhere to local building, safety, and welfare;

2.6.3 Financing: project viability

Financing of the project by some funding providers

2.6.4 Programmes and time constraints

2.6.5 Scope and design

2.6.6 Operation and maintenance

2.6.7 Preliminary cost estimates

2.6.8 Employer involvement during implementation

2.6.9 Project risk

2.6.10 Environmental impacts and sustainability

Designers, therefore, taking regard to the