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TENDERS

Tender is an offer made by one party to another for execution of specified work at a specified cost
in keeping with all the terms and conditions set there in the tender document including the extent of
the work shown on the plans. It remains floating till the time it receives a seal of acceptance either
by the employer and / or his architect/ engineer and thereafter forms a binding contract.
The architect or engineer who prepares detailed tender papers on behalf of the owner/employer and
issues to the contractors against a specified tender fees.
, It is the duty of the architect to see that:
(1) All the plans, specifications and details are not only clear and correct, but without any
ambiguity.
(2) Bill of quantities should be as accurate as possible.
(3) Special conditions if any should be thoroughly checked .
*Prior to filling of the tender, the contractor is required to make a careful study of plans,
specifications, special conditions, etc., and further inspect the site in order to ascertain the
difficulties which will be met with in the execution of the work.He has to estimate the probable
period of completion of work, number of technical and non-technical staff that will be required on
the job. This will help him to work out the cost of establishment charges. Also works like
temporary hoarding, road work, office, godown, toilet for workers, wear and tear of the plants and
equipments. After taking into consideration all the above facts including cost of materials and
labour, he is able to quote for the work.
Invitation to Tender
There are three ways in which the tenders can be called for namely
(i) by. private invitation,
(ii)by public notice and
(iii)by negotiations.
By Private Invitation (Selected or Limited Invitation)
Generally, the architects and the engineers do maintain a panel of contractors and from the panel a
few are invited to quote for a particular job. In such a case, the architect knows the contractor,
together with his intelligence, integrity and financial standing and thus he is sure of the type of
work that he will get from him. It also prevents inexperienced persons from entering the contract
line. This is suitable for private works.
By Public Notice
All public works are required .to be advertised in the newspapers for the purpose of tenders and any
contractor can quote for the same. There are chances of getting the work at a cheaper rate and these
tenders are also not free from collusion. At time the tenders are so low that it will not be possible to

imagine whether the contractors will be able to complete the work. Such tenders usually end in
dispute, poor quality of work and a lot headaches for the architects.
-The reverse is also true that the architect or the engineer may come in contact with new and
intelligent contractors and this opens the field for new entrants in the contracting line.
-The work is generally given to the contractor quoting the lowest amount. provided he is otherwise
equally qualified. By Negotiations
In this case the architect / engineer do possess some base for negotiations like the work of a
building not to cost more than Rs per S.M. of plinth area or at certain percentage above or
below the schedule of rates. With this base . negotiations are done with one or two contractors and
work thereafter is assigned to the right contractor. This mode is popular with developers and for
repair jobs .The UP PWD or CPWD schedule of rates are taken as the base.
Nature of Tender
Tenders set out paths for completion of building jobs. The paths may vary from item rate to labour
work and the said paths have different terms and conditions. The accepted contracts derive their
names from the type of tender like
(i)
item rate contracts derived from
(ii)
item rate tender. lump-sum contract from lump-sum tender etc.
Besides the above other paths available for execution of the works are:(1) Day work.
(2) Piece work.
(3) Dally labour.
Thus, nature of tenders leads to nature of contracts, and discussion hereunder will apply to nature of
contract also however, we shall study while discussing the Contracts
Nature of Tender can be Classified as Under
(1) (a) the ,rate tender.
(b) Schedule of rates with percentage up or down the basic. rate with rise and fall clauses . .
(2) (a) Lump-sum tender.
(b) Lump-sum percentage tender (target tender).
(3) (a) 'Cost plus percentage or "cost plus fee tender".
(b) Cost plus fixed fee tender.
(c) Cost plus fixed fee with bonus and penalty.
(4) Labour tender.
(5) Tender for demolition work.
Item Rate Tender
It is an offer to execute the work based on the rates of different items of work. The tender form
usually contains the bill of quantities wherein all the items of work are fully described with their
quantities. The quantities given are always approximate and are not binding on the owner. The

contractor is required to fill in the rates of the items and thus it becomes a simplified job so far as
the calculations and estimating are concerned.
The contractor is paid on the measurement of the work executed at the rates quoted by him in the
tender. In fact the rates of the items are the part of the contract and the approximate quantities are
not.
This is a balanced method of execution and the chances for extra works are minimized. It is not
risky for the contractor and hence quality of workmanship will be assured. Reasonable variations
can be made in the plans and also in the quantities during the execution of work.
It is suitable for all types of works .
Schedule of Rates with Percentage Up or Down
It is also known as basic rates (mostly UP PWD or CPWD )with rise and fall clauses. It is a
modified form of item rate tender. In this case a bill of quantities duly priced is given to each of the
tenderers and they are asked to quote only the percentages above or below the priced schedule of
rates. at which they are prepared to execute the work. All other facts as given for the item rate
tender will hold good in this case also. This type of tender is suitable for the repair works, new
buildings as well as for maintenance works.
Lump-sum Tender
In a lump-sum tender the contractor undertakes to carry out the work as shown on the plans and
describe in the specifications till completion. supplying all the materials and labour sum or at a
fixed rate per cubic or square metre of work. The contractor will be paid from time- to- time or
lump sum at the completion o works as specified in the contract .
Work to be executed should be clearly specify in advance
(i)the plans elevation sections and the relevant details
(ii)the specifications with special conditions. if any.
(iii)Time for completion
The Advantages of this Type of the Tender total cost of construction is known in advance .and the
contractor will try to complete the work early Work load of the engineer and the architect is
reduced, as no detailed measurements are required .
Lump-sum Plus Percentage (Target) Tender
It is the same as the lump-sum tender except that if the contractor completes the works before the
specified date, he is usually granted certain bonus in terms of percentage of the cost of the project.
All other facts as given for lump-sum tenders will hold good in this case also.
"Cost Plus Percentage Tender" or "Cost Plus Fee Method"
The expenditure incurred by the contractor will paid by the owner as agreed and over and above he
is paid certain percentage as profit for his professional services. At times such tenders are invited

from a few contractors asking them to name the price at which they will execute the work and fees
that they expect for the same. The fees are usually fixed at a certain percentage of the cost of work:
Cost Plus Fixed Fee Tender
A modified form of this system of tendering is "Cost plus Fixed fee" ~ wherein the contractor is
given a fixed fee irrespective of the cost of the work and as such, he becomes a disinterested
adviser and tries to complete the work in time.
All the cost of the materials and labour are directly paid by the owner and thus the contractor's
financial liability is nil As such, he is paid a higher percentage for works done by him.and lower
percentage for those works which are given on sub-contract. The fees charged by him will include
his professional services as well as the rentals for all. his implements. plants, etc.. including the cost
of repairs if required. His fees sho41d be paid in four to five instalments and the last instalment
should be paid after the completion of the work.
.
Cost Plus Fixed Fee with Bonus and Penalty
In order to keep a check over the cost of the work, tlps form of tender is slightly modified and is
known as "Cost plus Fixed fee with Bonus and Penalty". If the cost ofthe work as executed remains
the same as has been estimated in advance. the contractor receives his agreed fees with no profit
and no penalty deduction. If the cost of the work as executed turns out to be less than the estimated
cost, the contractor is to receive certain percentage from the savings effected up to a maximum of
50 per cent plus his agreed fees. If the cost ofthe executed work turns out to be more than the
estimated cost, certain percentage of the increased cost will be deducted from his agreed fees. and
such deductions shall not be more than 66 per cent of his agreed fees.
Labour Tender
In this case the contractor agrees to carry out the complete labour work of all the items of the work
at the rates quoted by him. The contractor has to supply all the tools plants, scaffolding. centerillg
materials. coirs and nails. etc.. and the owner supplies only the materials required for the
construction work. The contractor is responsible for line, level and setting out of the work.
The labour tender generally includes the labour work for the conStruction of water tank for storage
of water required for construction purpose as well as labour work for putting up temporary sheds
for office and cement godown of reasonable size.
The owner has to keep a close watch over the materials used by the contractor as he is least
concerned with their wastages.
This method of execution of work is very popular as the materials used and the workmanship will
be of standard quality. The points of dispute are minimised and the payments for extra works are
restricted to the labour charges only.
The labour tenders are invited sometimes on the basis of rate per square meter or cubic meter'of the
construction work:4'he contractor agrees to execute the complete work of the building right from

the stage of foundation till the completion of the building at a specified rate per square meter or
cubic meter. excluding drainage and electric Works.
It is suitable for all types of works like buildings, bridges. culverts, and Specially the works of
additions, alterations and repairs to the existing buildings.
Demolition Tender
These tenders are usually called for the demolition of the existing building up to ground level or up
to road level and removal of all the materials of the same including carting away of the debris. The
tenderer usually takes away all the materials that are there in the old building and in turn he pays a
specified amount to the owner:
Other Modes of Execution of Works The execution of the works can also be carried out by anyone
of the following arrangements depending upon the nature of works and other factors:
(1) Day work.
(2) Piece work.
(3) Daily labour.
Day Work This method of execution of the work is adopted for all small items of work which
cannot either be measured or valued, e.g., architectural
features 'like petals or domes for mosques or temples, decorative design in plaster'work or for
works under water where time of working is limited due to rise and fall of tide level.
The payments made to the contractor consist of net cost of materials and labour to complete the
work and usually, about 20 to 25 per cent on the same which will cover contractor's profit,
establishment charges, and rentals for the plants, if any. It requires proper check on the materials
consumed and labour employed and the reports to that effect must be countersigned daily by the
clerk of work. The contractor is required to submit a weekly report of the same to the architect
concerned .It is the duty of the architect and the engineer to sanction those extra works in writing
which cannot be measured or valued properly to be paid at day work prices.
DailyLabour This method is suitable for the maintenance works of roads, canals, etc., and is also
known as departmental method of execution. The owner or the Government agencies usually
employ all the labours required like masons, bhistis, mazdoors, etc., whose attendance is recorded
daily in the muster roll by the'Jr. Engineer. The materials of construction, and tools, etc., are
obtained from the central stores department by sending the necessary indent for the same. The
works executed are recorded in the measurement book and are checked by the sub-divisional
engineer and executive engineer before the payments are effeted. The labour is usually paid weekly,
fortnightly or monthly as agreed upon.
Earnest Money It is an initial deposit made along with the tender in order to show the genuineness
of the contractor. The amount of earnest money varies from I to 2 per cent of the estimated cost of
the project. This amount remains in the safe custody of the architect or the engineer till the work is
allotted to a particular contractor who will be asked to deposit further sum towards the security

deposit. The earnest money of the other contractors whose tenders are not accepted are refunded to
them. The main purpose of the earnest money is ~ see that a fair competition takes place for the
work.
The earnest money is forfeited in favour of the owner in case the contractor refuses to enter into a
contract after his tender has been accepted. It is accepted in cash or cheque at times in the form of
negotiable Government securities.
Security Deposit The approved contractor is asked to deposit a further amount of 2 to 5% of the
estimated cost of project with the architect as security deposit. It includes the earnest money
already deposited by the contractor. It is paid in cash or cheque and at times in the form of
negotiable Government securities.
This amount is kept as a check so that the contractor fulfills all the terms and conditions of the
contract, carries out the work to entire satisfaction and maintains proper progress of the work. If he
fails the whole or part of the security deposit is forfeited. It does not carry any interest and is
returned to the contractor after his defect liability period is over.
Retention Amount When a contract of the work is assigned, it is essential for a contractor to
deposit a fixed amount either with the architect or with the owner as a guarantee for the faithful
performance of the terms of the contract.
If it is very difficult for a contractor to pay such amount all at once as his business it is arranged
that the contractor should pay the so called security deposit by installments from the payments due
to him for the works already executed. .It is usually 10 % of the value of the work . As soon as the
total retention fund of 10 per cent of the tendered amount has been collected, the subsequent
interim certificates are required to be issued at their full values.. The Retention Amount is a
Security Deposit. Normally 50% of the said amount is paid after the virtual completion of the
work.. Final installment of50% is paid after the defect liability period has passed and after issue .of
the final certificate by the architect. In case of bankruptcy of the contractor, he will have no claim
over the retention fund, till the final certificate has been issued by the architect for the work. The
Retention fund does not carry any interest.
Mobilisation Fund ' In case of big projects a lot of money is required by the Contractor , for the
recruitment of labour ,travel of staff ,erection of temporary accommodation staff/ labour ,storage of
certain , insurance premium etc .Therefore Employer pays the Contractor certain amount called
Mobilisation Funds, the main purpose of which are to enable the contractors to make all initial
arrangements for commencement of works on basis of interim certificates it may be 90% or even
95% of its value and materials on site paid at varying percentages from 50% to 75% o( the value of
such materials on site depending upon the terms and conditions as may have been agreed upon
subject to 2% deduction of the amount released as deduction of Income-tax at source. i.e.TDS
Mobilisation Fund is essential for construction of big projects It is required before executing .
Maximum amount is limited to about 10% of the contract amount, exact percentage depends upon
the terms of contract.
2. It is paid in f\ill or paid in two to three stages like:

Stage-1-: 50% of the mobilisation fund as agreed is paid within one month of the award of the work
and signing of the contract against bank guarantee for it.
Stage-2 Part is released on completion of preparatory works depending upon their value.
Stage-3- is released on bringing plants and machineries on site again depending upon their value. '
. It is recovered from each of the interim bill at specified percentage of interim payment and entire
mobilisation fund is recovered on completion of 80% of the work. It can be interest free fund or
carrying a specified rate of interest..
The mobilisation fund is the backbone of successful implementation of big construction projects.

Tender Document.
The tender documents occupy important position for contractors and employers, the architects.
And comprise of the following:
1) Tender notice.
(2) Specta1 notice.
(3) Letter of offer.
(4) Specla1 conditions.
(5) Form of Contract with conditions.
(6) General Spec1fications.
(7) One complete set of drawings .
(9) Bill of quantities. (OR) Detailed description of work for tender on lump-sum basis. (OR) Unit
of S.M. basis: which at times take the form of "Supplementary specifications" .
Tender Notice and Cost of Tendering It is the notification for the contractors at large possessing
either expertise in that branch of civil work for which the notification has been issued or having the
skill and human resources to get the work in question executed, to give their offers for the specified
work. In the notification the employer invites the offer and does not make art offer by himself that
he is prepared to give the contract for the work for a specified sum. Even if the owner has made an
offer, still he has got rights to withdraw the same at any time before acceptance is confirmed by
him
Cost of Tendering It is usually a practice in vogue that cost involved in preparation and completion
of the tender papers including site inspection by the contractor as well his adm1n1strative expenses
are to be borne by the contractors alone and the owners are not saddled with such tender expenses.
Characteristics of a Tender Notice
1. Tender notice must mention the name of the owner, the place, nature and extent of work, and the
estimated cost.
2. It must mention amount of earnest money and tender fees.
3. Minimum time of returning the tender by the contractor should be atleast 15 to 20 days from the
date of issue of the same.
4. The place of delivery of the tenders by the contractors should be specified.
5. The contractors should be requested to inspect the site prior to filling of the tender, so that they
can ascertain well in advance the Working Conditions, the nature of soil for the foundation etc.

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