Explain Different Types of Tenders
Explain Different Types of Tenders
Explain Different Types of Tenders
1. OPEN TENDER
Open tendering is the main tendering procedures employed by both the government and private
sector. The client advertises the tender offer in the local newspaper giving detail and key
information of the proposed works and inviting interested contractor to tender. In the legal
sense such tender notices constitute invitation to treat, a mere request by the employer for
suitable contractor to submit their bids or offers.
If the pre-requisite to tendering on the form of possession of the necessary registration has
been identified in the tender notice, then the advertisement is directed to only that particular
class of the public having the said qualifications. In order to reduce number of enquiries,
earnest money is deposited (for private project). Until the receipt of a bone fide tender selected
then it will be returned. Although price is very important in the decision on which tender or
bid to accept, it is not the only factor taken into account. Client does not bind to accept the
lowest or any offer. The advantages and disadvantages of open tender are stated below:
Advantages
Allowing the tender list to be made without bias. Client will obtain the bargain possible.
No favouritism in selecting contractors.
Ensuring good competition not obliged to accept any offers.
Traditional method of tendering, familiar to all sector of the engineering and
construction industry.
Disadvantages
2. SELECTIVE TENDER
Selective tendering is the one alternatives developed to address the limitations of the open
tendering procedure. In this method, a short list of contractor is drawn up and they are invited
to submit tenders. The purpose of the elective tendering are to improve the quality of the bids
received, to ensure that contractors with the necessary experience and competence are given
the opportunity to submit the necessary bids, due to urgency work involved, for specific
reasons of the employer, eg security reasons in government projects. etc. and to make the
tendering procedure more manageable and less a burden on the parties involved. Such list may
be prepared through recommendation from the Client’s professional adviser whom have
knowledge of the Contractors undertaking the work in the past or advertisement through the
newspaper (prequalification). The advantages and disadvantages of the selective tendering are
stated below.
Advantages
Only the competent contactors were invited to tender, then the lowest can be accepted.
It reduces the cost of tendering (economic use of resources, reduced tender
documentation, shorter tender periods, better management of the tender process, etc.)
Disadvantages
Reduces the availability of work for other contractors especially new contractors.
Tender Price may be invariably higher than would have been in open tendering.
Greater chance of collusion.
Tendering period longer because it involves two distinct stages.
Favoritisms may occur in the short listing.
Two stage selective tendering combines elements of competition and negotiation into a
formula where the employer could utilize the contractor’s expertise at an early stage of the
project cycle so as to maximize innovation, ingenuity and quality and simultaneously optimize
cost, time and resource input. A contractor is selected competitively early in the design
process. The tender documents contain approximately quantities of the major value items. As
design and planning proceed, the final tender is developed from cost and priced data supplied
with the initial tender. Two stage selective tendering was very popular in developed countries.
It was different from selective tendering because has two (2) distinct stages namely:
This involves the selection of a suitable contractor and the establishment of a level of pricing
for subsequent negotiations.
The objective is to select suitable contractor as early as possible is to work together with the
professional team and to establish a level of pricing for subsequent negotiation.
The criteria for short listing is normally confined to items such as technical and financial
capability, experience in similar works and extent of resources (manpower, plant and
equipment).
The pricing document should be flexible enough to cater for adjustment of price fluctuation
for the period between two stages and the pricing of the second stage.
In selecting a suitable candidate, a basis for pricing the subsequent second stage should be
established accordingly.
During this stage, a negotiation to reach an agreement on the final contract price is undertaken
and the pre contract process is perfected.
If no agreement being reached, the employer has an option to abandon the tendering exercise
and re-tender the works using any other tendering procedure.
The application of two stage selective tendering might be appropriate where the works are a
very complicated nature, where at the time of selection of the contractor, the magnitude of the
work may not be known with sufficient certainty and where it is an essential pre-requisite for
works to be finished by an early completion date. Table below are some advantages and
disadvantage of two stages selective tendering.
Advantages
Disadvantages
Its application requires a high level of familiarity and commitment on the part of
employers and contractors.
Owing to a relatively smaller element of competition, but on the other hand higher
negotiations content, the tender process is relatively more expensive and longer than
other common procedures.
Should the second stage be deadlocked or result in no acceptable agreement being
reached, the tender process has to be initiated all over again, albeit, through a different
route. This incurs a time and cost penalty to the project as a whole.
This procedure requires a high level of commitment, integrity and good faith on the part
of both sides which sadly is usually lacking, hence the apparent failures encountered to
date.
4. NEGOTIATION TENDER
Identification by the employer of a suitable contractor to negotiate with. The contractor can be
selected either from the employer’s own list of preferences or on the advice of the professional
team.
The selected contractor is issued with details such as the scope of work involved, relevant
drawings, design and /or information to enable him to appreciate the extents of obligations and
the employer’s actual needs. Some employers prepare and issue to the contractor proper tender
documents inclusive of a nominated bills of quantities to assist contractor in pricing the works
for the forthcoming negotiations. Negotiations can be applied to the following type of contract:
Advantages
Disadvantages