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Construction Bids

Method and Procedure

Friday, March 24, 2017

Construction Bids

Construction Bids are written offers from contractors to undertake a construction job in return of a certain sum of money. The job can be one or more of the following:

Invitation to tender 

When all the preliminaries are completed and the owner has decided to proceed with the work, tenders are invited. Legally this is an attempt to check if there would be interested contractors to carry out the work  within the estimated limit of time and finance. The invitation to Tender is not binding to the owner to proceed with the work and does not cause any liability for any expenses to which contractors would spend in preparing and submitting their construction bids.

Bids can be either:

Negotiated Construction Bid

In this method the price to be paid in return of the work to be done is negotiated with a single contractor. This , obviously, does not provide the owner with a comparative prices. Though the cost of a work will be higher in this method, an owner may expect some advantages from employing a particular contractor whose policies and methods are known and who has in the past proved capable of fulfilling his obligations. The higher cost may be offset by better quality , early completion, and smooth administration.
The negotiated construction bid procedure can be adopted to the owner's advantage if the chosen contractor is one in which the Owner and the Engineer have confidence, and which is of known integrity and reliability. Moreover, the work to be carried out is within his special scope and experience.

The procedure of the negotiated bid is as follows:

Limited Competition Construction Bids

In this method the Owner calls for bids from a few contractors who are known to have specialized in the special type of work and from whom he has, in the past, experienced excellent results. This procedure is usually adopted for private works, where the owner has the right to negotiate directly and to enter into agreement with whomsoever he chooses. This procedure is recommended for the public sector when the work requires specialized knowledge such as industrial construction.

Open Competition Construction Bids

In this method bids are called by public advertisement. The method is usually adopted for public works, as the rules generally require that government and other public contracts be advertised publicly, to obtain the most advantageous terms. Any contractor who is willing to undertake a work and who has the requisite finance and construction equipments to complete it satisfactorily is allowed to submit a bid.

This open competition procedure has the following advantages:

The drawback is the possibility of having a lowest bid submitted by contractor who is unsuitable for carrying out the work and thereby resulting in waste of time and effort.

Information to be given in a Call for Bids Notice

The notice must be as short as possible, but conveying an adequate idea of the nature and scope of the proposed work and all essential details.
The text of a good advertisement should at least include the following information:
Mode of submitted bids: Bidders should be asked to submit bids in sealed covers, in order to maintain secrecy of quotations.
Form of Bid: It is advisable to get all offers in the same form to facilitate scrutiny, and comparison
Name of the inviting authority: This helps the bidder know the persons he will have to deal with and the co-operation he may receive, if his bid is accepted, and such may also affect his quotation.
Nature of the work and its location: If the nature and location of work is within his operating area, the prospective contractor will want to learn more about the job; else he may not waste time in reading further details
Estimated cost of the work: This most briefly indicates the magnitude of the work and enables him o see whether it is too small to interest him or perhaps too large for him to handle.
Time Limit: The time limit within which the work is to be completed should be mentioned. This will be of great help to the bidder to work out a realistic price of the work.. The time limit may influence the type and number of construction equipments and workers to be employed, and will vitally affect the contractor's bid.
The availability of Data and forms:
where, from whom, at what cost and up to which date blank bid forms and specifications may be obtained and whether a refund will be made upon their return in satisfactory conditions.
Earnest money required with the bid: The amount and form of security; whether the amount will be accepted i the form of cash, bank guarantee, check or others. Also the number of days within which the amount will be refunded to the unsuccessful bidder.
Performance security: The amount, form, and procedure of recovering.
Information regarding drawings: where and when drawings can be examined by bidders.
Last date, place and time of receipt of sealed bid.
The date, time and place and procedure of opening bids.
Reservation to reject bids.

However the lowest construction bid is likely to be rejected on account of any of the following cases among others:
Improper offer; e.g. an offer to execute the work at a cost of so much dollars below the lowest offer" is not a proper offer.
Inadequate finance: The lowest bidder may not have sufficient finance to handle the job. (Use Our Online Cash Flow Forecasting Service)
Lack of experience in similar works.
Inadequate construction equipments and staff

Tips for consideration in preparing construction bids

Careful study of the contract documents: The contract documents issued to the contractor or supplied for his inspection include general contract conditions, drawings, specifications, bills of quantities etc. These documents are to be studied carefully to check if any unusual conditions, specifications, or any feature of the work would demand special attention during pricing.
Sub-contractor's work: Make relative inquiries about prices with sub-contractors and material suppliers for their respective portions of the job.
Site visit: This is important to ascertain the conditions under which the work has to be carried out and their impact on pricing. 

Time for completion: The bidder then estimates the length of time the work will take and the number and category of permanent staff suggested by the nature of the work for construction management . This helps to calculate the establishment charges.
Temporary works: The value of any temporary works needed to commence the construction and to clear away on completion, such as temporary office required for construction management purpose, store sheds for building materials, access road, water supply, depreciation of construction equipments, insurances, taxes, etc.

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