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TENDERING Lecture Note

This document discusses tendering procedures for construction projects. It defines tendering as sending drawings and bills of quantities to contractors to request pricing for contract items. There are three main types of tendering: open tendering invites any firm to submit a tender, selective tendering uses a shortlist of 5-8 preselected competent contractors, and negotiation involves direct negotiations with one preferred contractor. The estimating department is responsible for preparing estimates that become tenders, considering factors like contract conditions, program, site conditions, construction methods, and rates for labor, materials, plant, overhead and profit.
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0% found this document useful (0 votes)
54 views21 pages

TENDERING Lecture Note

This document discusses tendering procedures for construction projects. It defines tendering as sending drawings and bills of quantities to contractors to request pricing for contract items. There are three main types of tendering: open tendering invites any firm to submit a tender, selective tendering uses a shortlist of 5-8 preselected competent contractors, and negotiation involves direct negotiations with one preferred contractor. The estimating department is responsible for preparing estimates that become tenders, considering factors like contract conditions, program, site conditions, construction methods, and rates for labor, materials, plant, overhead and profit.
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TENDERING (1.0) 1.

1 Definition Tendering is the administrative procedure of sending out drawing and


bills of quantities or specifications to contractors for them to state their prices for all the items of one
contract. Besides the contractors price, other considerations include his competence and financial
standing. 1.2 Types of Tendering Open Tendering: An advert is placed in the press to invite any firm that
wishes to do so to submit a tender for a project, the advert will give a brief description of the works to be
undertaken. Interested firms apply for the tender document, collect them, upon payment of money deposit
which are usually non-refundable in Nigeria the deposit covers the cost of documents and discourages
the non-serious bidders. Advantages 1. It gives the opportunity for all firms including relatively unknown
but capable ones to tender. 2. Since there is no restriction, they can be no change of favourism in drawing
up a list of tenders 3. the prevent firms in area from forming an exclusive clique to keep up prices. 4.
Above all, open tendering should secure maximum competition and therefore the lowest process.
Disadvantages 1. The system result in increased cost of tendering arising from a great number of firms
likely to be involved in tendering and only one of them succeeding. 2. Also, a lot of time is taken up and
lost through the placing of notices in the press, the preparation of drawings, bills or specification, sending
out and receiving the same volume back to be sorted and checked. 3. the lowest tender may not
necessary be competent to handle the project. Although, most organization stipulate that they are not
bound to accept the lowest tender. One would need some justification for by-passing or rejecting the
lowest tender particularly with regards 6

7 to the spending of public funds. There is always the likelihood of involving a charge of favouritism. 4.
Many good contracting firms avoid open tendering, while others resort to this only times of dire need. The
chances of selecting the irony contractor is therefore high Selective Tendering This procedure as its name
implies is to select a limited number of firms and invite them to submit tenders. A short list of between 5 8
competent contractors is usually drawn up with one or two reserve firms to replace any on the original list
who fails to accept the invitation to tender. The criteria for drawing up the list of tenderers would depend
on the character of the project and size. The following points however have to be considered (i) The
standard of workmanship required (ii) The equipment such as plant and workshops owned by the firm (iii)
The business records and standards of the firm e.g whether completion dates were met on previous jobs,
the project were brought in within budget, claims policy of the firm etc. (iv) The financial stability and
length of time in business (v) The capacity available in relation to the firms current work load. (vi) The
local history in respect of labour relations (vii) The real willingness to tender The short list is usually
prepared from the client s approved list of contractors. Otherwise an adhoc list of contractors with
established schemes, integrity, responsibility and proven competence for work of the character and size
contemplated. Selective tendering makes good many of the deficiencies of open tendering and provides a
restricted but adequate list of technical suitable firms and of comparable standing. However, selective
tendering might mean higher quotations than are obtainable by open tendering partly because there is
less competition and also because the standards of firms and that of their workmanship and performance
may be higher than the others. 7

8 There is also the possibility on tenderers being rigged and inflated by collusion if the firms get to know
the probable limit of the list of tenderers in an area. The only remedy to this is to periodically change the
selected list either entirely or in part. In some cases, such firms are not interested in a particular job, but
do not consider it politic to decline an invitation to tender, they put in high tenders so as to put them out of
the race, or so high to ensure that should they win the contract it would be on very attractive terms. This
restricts the number of firms going really competitive tenders, therefore the lowest tenders if often higher
than it might have been with open tendring Negotiation There may be times when the client has a
satisfactory association with a particular firm and is prepared to give them the contact on the
recommendation that their price is reasonable. Also in cases where the work is of a specialized nature or
requires a special skill which is possessed by a particular agreement with that particular firm without
involving other firms. In such cases, a BOQ may be prepared in the normal way, and sent to the builder to
price. When priced, it is returned to the Q.S for examination and reporting. Further classifications may be
required to determine whether pricing is reasonable. This is the simplest type known as single stage
negotiations. An alternative type known as two-stage negotiations starts with a first stage involving limited
selective competition. All firms concerned are given a fair warning of what is intended to follow. The
competition may aim to reducing the field to one firm or at least to a manageable number. The basis of
selection will be factors such as: 1. General basis of pricing 2. A construction programme or method
statement 3. A design offer especially in the case of system building The client or his consultant will
carryout the first stage with various firms until one firm is chosen. The second stage negotiation will
proceed with this one firm until an agreement is reached and the contract awarded. 8

9 Advantages 1. The procedure is often time saving since the two parties are able to take shut-cuts 2.
more factors can be discussed in detail between the parties during negotiations, including matters of
construction method and procedure. 3. competition no longer depends on price alone but also on
competence Disadvantage 1. Negotiation contract tend to have higher prices than where agreements are
reached through competitive means 2. Conditions for public accountability are rarely satisfied when
negotiation is used. 9

10 WEEK 2: TENDERING PROCEDURE (2.0) 2.1 Estimating Department: The estimating department
carries out technical functions within the building/commercial field. Basically they are responsible for the
preparation of estimate, which transform to a tender. As soon as full tender documents are available, the
estimating department initiates action and articulate a lot of factor towards the realization of the firms
objectives. Useful information are collected especially by paying attention on (1) The preliminaries
ascertained if (a) Standard condition of contract apply and the likely effect(s) of any amendment(s)
therein. (b) The starting and completion dates (c) Stated time limit for completion time for the certification
of final account and the limit of the retention funds (d) Stated defects liable period (e) The nature of
contract: fixed price or fluctuating. (2) The trade preambles so as to: (a) Check that all the stated
materials are available and assurance from suppliers of non interference with completion dates (b)
Arrange for handling / storage facilities (c) Ensure the availability of labour / expertise to be involved in the
projects (3) The drawing and technical report with a view to: (a) Assessing the likely requirement for
mechanical plant and scaffolding (b) Assessing the relationship between the value of new work and works
in alteration (c) Check access and working space for plant (d) Assessing requirements for huts, welfare
facilities, toilet and temporary roads. (e) Assessing the competence of the drawings, bill of quantities and
the existence of any discrepancy(s) (f) The consideration of other technical reports before visiting the site,
for instance, engineer s report on soil condition. (4) Project Appreciation which includes 10

11 (a) Visit site ascertain the position of site vis-à-vis transport facilities, locality, topographical details of
site, facilities for disposal of soil, services (water, electricity etc), labour situation, weather condition
among others (b) Determination of construction method by discussion with the likely stake holders who
will be responsible for managing the construction and for providing plant and other services on successful
tender. (c) Pre-tender construction programme which comprises a comprehensive pre-tender construction
methods, strength of labour force, type of plant and sources of materials. 2.2 Establishment of All-in-rate
Onwusonye (2000) defines rates as ingredients of labour, plants, materials, overhead and profit
synthesized for the purpose of inserting against each item of work in a given project so as to arrive at a
tender figure Labour This refers to contractor s men operating on site. They include tested and non-tested
artisans, appearances, foremen and general labourers. All these men are paid and the resultant cost will
be the labour cost for the given unit of work. In calculation of all-in-rate for labour, considerations are
given to the prevailing basic wage rate; statutory approved allowances. Allowances such as holidays, wet
weather, annual leave, absenteeism, sick leave are Saturdays/Sundays are consideration so as to arrive
at effective working days in a year Material Material in the building industry as opined by Owunsonye
(2000) refers to varying components delivered to site which when articulated or appropriately combined
result to functional element of a building project. The calculation for materials cost usually consider the
cost delivered to site; cost of unloading the transportation to site; pilfering and waste due to breakage,
cutting, depreciation / deterioration, bulk, compaction, and loss of bulk. 11

12 2.2.3 Plant Plant is equipment employed on a building site in order ro save money, labour or time, or
combination of all. According to Owunsonye (2000), plant elements involve mechanical and non-
mechanical items. Mechanical items include; lorries, bulldozer, concrete mixers, hoist, vibrator, cranes,
dumpers, et-cetera, while the non-mechanical includes: tools, workbenches, water tanks, pulley,
resharpening tool et-cetera. The cost involved in the non-mechanized tools are taken care of in the
preliminaries and are normally calculated on a percentage basis. The cost of items in the mechanical
lumpsum or in the unit of work item in the section of work to be executed needing such plant.
Consideration is usually given to hiring, running cost, depreciation, insurance and licenses among others
in arriving at the cost to be inserted. 2.3 Calculation of Unit Rates Unit rates involve the major items in the
bills which consist of element of labour plant and materials. Each element is estimated separately so that
total element cost for labour, plant and material can be provided for further action by management. 2.4
Projects Overhead and Profit Projects Overhead is the total cost incurred in a given project less prime
cost and include such cost as office salaries (Head office administration), rent/rates, office expenses such
as telephone, stationary, insurance policies of the office, advertisement, maintenance and depreciation of
office equipment. Each item of project overhead cost should be estimated separately. The report sent to
management for further action usually incorporate such information as: (a) A brief description of the
project (b) A description of the method of construction (c) Note of any usual risks which are inherent in the
project and which are not adequately covered by the conditions of contract or bills. (d) Any unresolved
technical or contractual problems. (e) An assessment of the state of the design process (f) Note of any
major assumption made in the preparation of the estimate (g) Assessment of the profitability of the project
(h) Any pertinent information concerning market and industrial conditions 12

13 (i) Any need for qualification of the tender or for an explanatory letter (j) The terms of the quotation
from our sub-contractors which have been included in the estimate (k) The time for which the tender is to
remain open for acceptance. 2.5 Management Decision to Tender) The following factors forms the basis
of consideration during adjudication of an estimate to produce a tender by the management. These
include: (a) All substantive items in the project reports (b) The condition of contract (c) Contractual risks
(including the firm price tender risk where applicable) (d) The terms of quotations for own sub-contractors
(e) The capital required for the project (f) Technical and managerial manpower requirements (g) Work
load (h) The market conditions (i) Reputations of the client and the consultants. In addition to the above
factors, management also put into consideration the company tendering policy. The additional cost which
management now adds to the estimate to arrive at tender figure are costs associated with risk, general
overheads including additional administrative costs due to introduction of VAT, the financial implication of
items mentioned above (a-i) and profit which may be on a percentage, lumpsum or a combination of both.
The general summary of the bills of quantities is now accordingly totaled producing a TENDER FIGURE.
The tender figure is now reflected at the appropriate section of the priced bill of quantities including the
FORM OF TENDER and ARTICLES OF AGREEMENT, which together with other relevant tendering
documents are sent to client for consideration. A specimen of a typical layout of such representation is as
follows: Tender for: Date Due: Date of Completion: 13

14 Net Value of firm Own Work: Gross Labour Rate: Craftsman: Labourer: Preliminaries: Labour:
Materials: Plant: Add for Overhead: Add for Profit: Approved Subcontractor: Add for Profit: Nominated
Supplier: Provisional Sum: 14

15 Week 3: Stages In Tendering (3.0) 3.1 Tender Documents Depending on the form of contract and the
contract arrangement, tender document are as follows: 3.1.1contract with Quantities (1) Complete set of
drawings (2) The bill of quantities (3) Form of tender (4) Articles of agreement and conditions of contract
(5) Form of performance bond (6) Schedule of basic prices of a labour, material and plant charges and
daywork (7) Resources questionnaire - Personnel - Plant - Details of jobs previously completed (8)
Specially marked envelops for (a) Submission of priced bill of quantities (b) Submission of form of tender
containing the tender sum. Items 4-7 are usually bound together with the bills of quantities in one
document. The contractor put a price to each of the terms listed in the BOQ and totals them Contract
without Quantities (1) Complete set of drawings (2) Form of tender (3) Detailed specification (4) Articles of
agreement (5) Specially marked envelop for return of form of tender The contractor will have to measure
quantities to arrive at his tender figure 3.3 Preparation of Tender Documents: Done by consultants after
detailed design of the project. Usually includes drawings and bill of quantities (B.O.Q). 15

16 Where B.O.Q is not provided (which is not advisable) all contractors prepare their own. B.O.Q contains
the following: Instructions to tenders. Forms of tender Preambles (Specifications) Conditions of contracts
Preliminaries Measured works List of basic labour and material prices typical forms to show 3.3
Prequalification: To prevent unqualified firms from tendering, prequalification exercise now come before
actual tendering in most projects of significant value. It is sometimes called Expression of Interest
Prequalification Many Contractors Actual Tender Successful One Contractor Fewer Contractors Advert is
placed for prequalification. Interested contractors submit particulars of their technical and financial
capabilities and legal status for assessment. All contractors who meet the minimum requirements are
shortlisted for tender. Documents usually required from contractors include: Certificate of business
registration or corporation Tax clearance certificate VAT registration certificate Certificate as contractor.
Personnel available Plants and equipments available List of previous and ongoing projects Financial Audit
report Evidence of financial capability 16

17 3.4 Invitation to Tender Modality depends on the type of tendering. Open tendering -usually through
adverts in media newspaper, technical journals like the tender journal, sometimes through radio, T.V and
websites. Selective tendering and negotiation- usually by letters of invitation, sometimes through the
media informing short listed Collection of Tender Documents: Tenderers may be required to pay a non-
refundable tender fees before collecting the tender documents (This is to discourage unserious ones)
3.11 Preparation of Tenders: Each tendering contractor will estimate the prime or net cost of the project
then add profit and overheads to arrive at the tender sum Submission of Tender: Time and place of
submission usually stated in instruction to tenders in the B.O.Q or in the advert or letter of invitation Late
submission will be rejected Tenders submitted in sealed envelopes Tenderers may be required to submit
tender with bid bond which is a bond from a bank or insurance company to guarantee that the tenderer
will accept the contract if awarded. This is to guard against ridiculously low tenders Opening of Tender
Tenderers usually invited to witness the opening. Tenders sums, completion periods and any special
conditions given in any tender should be publicly announced, recorded and signed by client, consultants
and tenderers representatives. 17

18 WEEK 4: CONTRACTORS ACTIVITIES DURING TENDER (4.0) 4.1 The Activities of a Contractor
During the Tender Process are Summarized in Flow Chart. Look Out For Contract Opportunities Invitation
To Tender YE S Decision To YES Collect Tender Documents NO Gather Project Information Prepare
Estimate Submit Tender YE S Is Tender YES? Sign Contract NO 18

19 4.2 Decision to Tender: Factors to be considered by a contractor: FACTORS Existing workload


Anticipated workload Type of project Location of project Size and complexity of project Caliber of other
tenderers How busy now? ISSUE TO ASSESS High hopes in already tendered projects? Reputation of
client Logistics and security. How strategic is the project location. Technical, financial and managerial
competence Who are the competitors After assessing the factors, a decision to or not to tender is taken. If
the decision is positive, the tender documents will be collected. After collecting the tender documents, a
lot of activities are involved before a contractor aims at his final tender sum. These activities are shown in
table below: ACTIVITIES PURPOSE Examination of tender documents Visit to proposed project site
Pretender meeting Preparation of estimates To note details and any ambiguity To get necessary
information For estimation To arrive at total project cost Adjudication of tender To arrive at final tender
sum to be submitted After adjudication, the tender is sealed and submitted to the specified location
BEFORE the slated submission deadlines. 4.3 Examination of Tender Documents: Note detailed
conditions Any ambiguities Get clarifications from client or consultant 19

20 Prepare B.O.Q if not provided Possible front loading of bill items Site Visit: Once it has been decided
to proceed with the tender preparation, and the estimator has become familiar with the documentation,
then a visit to the site should be undertaken. This may be done in conjunction with a contracts manager,
who will be able to advise on the practical working conditions that might be encountered. This may also
be required in order to price the works on site or spot items, normally associated with alterations and
extensions projects. A comprehensive report should be produced on a standard format. This will seek to
establish more clearly, the following aspects: - Topography of the site and ground conditions - Availability
of existing site services - Need for temporary roads and any site access difficulties - Security needs such
as fencing the perimeter, hoarding, security guards, etc. - Nature and use of any adjacent buildings - Any
demolition work requirements - Site accommodation and material storage locations - General availability
of labour and materials - Special difficulties, such as restrictions that might be imposed, for example, on
the use of tower cranes and other similar mechanical plant 4.4 Project Appreciation Once a contractor
has decided to submit a tender the following will need to be established. - What type of contract
conditions are being used and have been altered in any way? - Are there restrictions on the way that the
work is to performed, such as access to the site, sectional completion, evening or weekend restrictions? -
Are there financial disincentive concerned with insurance, period of payments, retention, liquidated
damages or guaranteed bond? - How much of the work can the firm undertake and how much will need to
be done by subcontractors? - What proportion of the project are prime cost sums, perhaps indicating
more of the management role for the contractor and little work for the contractor s own employees? - Are
there any apparent inconsistence in the document? 4.5 Pretender Meeting: 20

21 Agenda is to decide on:- Construction method Plant requirement Major material sources Level of profit
required Attendance by relevant staff For minor projects, estimator can take all decisions 4.6 Operational
Estimating Operational estimating is a method that is based essentially on an analysis of the work content
of a project on the basis of how costs are incurred. It is claimed at each identifiable site operation can be
performed by a gang of men and materials without interruption from other operations. For example, the
cost of reinforced concrete suspended floor are an amalgamation of the formwork, reinforcement and
concrete items. An in situ concrete staircase that is to be cast at the same time can also be part of this
same operation. Instead of attempting to separate the costs and allocating these to the individual
measured items, the cost of the entire operation only is calculated. Operational estimating, to be effective,
really requires the use of operational bills, since the layout of traditional bills is unsuitable for this form of
estimating. The development of operational estimating largely arose out of criticism of the traditional unit
rate estimating applied to bills of quantities as described above, for the following reasons. - The unit rate
provided in a bill of quantities does not segregate labour, materials and plant. This is an essential
requirement for future cost control purpose. - The unit rates are not reliable principally because of
individual locations e.g second lift of brickwork, are not separately classified. - The costs, for example, of
excavation are likely to be as much as related to overall plant usage as the depth of excavation. - The
representation of unit quantities does not allow for opportunity to estimate in an organized manner. - The
calculation of the unit rate is time consuming and expensive, it is important that as much as possible of
this information can be reused throughout the project. Unit rate do not allow this. - The application of unit
rate variations can give misleading results to both the contractor and the client. 21

22 However, whilst the above points are valid, the difficulty still remains of capturing the site feedback
data, both economically and in a manner that allows their useful reuse in the future estimating process.
4.7 Tender Adjudication The conservation of the estimate to the tender is the responsibility of
management. This is a separate commercial function using the estimate and the supporting
documentation as a basis. The main purpose now is to consider the financial and other implications that
any business would need to assess. Whilst the estimator may work within a narrow prject framework, it is
management s function to look at the submission of the tender more broadly. The various matters to be
considered include: - Project type: consultant, client - Management: method statement, contract
programme, manpower - Contractual: contract conditions, contract period, damages, insurances -
Financial: fixed price, payments, retention, bond, cash flow - Mark-up: profit, return, risk, overheads,
discounts - Cost estimate: analysis - Competition: work load, other work, past performance - Allowance:
to be added in the case of firm price tenders. The meeting may recommend that the all-in-rates used in
the cost estimate should be changed. This should not be done without realistic expectations of changes in
performance. The use of computer aided estimating has now allowed the different computations to be
easily performed and their effects on cost

WEEK 5: TENDER ANALYSIS (5.0) 5.1 A Typical Tender Analysis of proposes classroom block for the
Federal Polytechnic, Kaduna Introduction Scope of Work The work comprises the erection/completion of
a storey block complex containing ten classrooms and associated ancillaries facilities. 5.2 Tender Action
Preliminary Invitation/Enquiry to Tender A total of six (6) contractors were short-listed by the Polytechnic
to indicate their willingness to tender for the project. This exercise was however based on the Polytechnic
previous knowledge of the levels of performance and capability of the contractor. It was therefore
assumed that each of the contractors. It was therefore assumed that each of the tenderers was capable
of executing the proposed project Invitation to Tender The tendering process witness five (5) tenderers
only that indicated their willingness to tender by collecting all the document associated with tendering.
Tenderers were instructed to submit completed tender documents to the Polytechnic on or before
Wednesday, November 29, Only three (3) tenders were received subsequently. However, none of the
tenderers complained of time constraint or want of any information 5.3 Tender Result Tender received
The following tenders were received and opened by the management of the polytechnic and the project
quantity surveyor on December 1, the tender documents were later handed over to the project quantity
surveyor on December 1, 2000 for analysis on report. The official record of the tenders were as follows 23

24 TENDER RECEIVED s/no Tenderers Tender figure Completion period 1 ABC Engineering Ltd 56,080,
Not stated 2 Newton & John Ltd 53,950, months 3 Sijang Turnkey Ltd 59,430,280 Not stated 4 Project
Quantity Surveyor s estimate 53,558, months BREAKDOWN OF TENDERS RECEIVED Table 1 s/no
Tenderers Preliminaries Contingencies & insurance Main building External works 1 ABC Engineering Ltd
6,953, ,300, ,769, ,057, Newton John Ltd. 2,498, ,300, ,345, ,805, Sijang Turkey Ltd.
2,276, ,300, ,045,556 1,797, Project Q.S s Estimate 4,320, ,300, ,151, ,787, Table 2 s/no Tenderers
Tender figure Pc & Contingencies Preliminaries Total % of builders Provisional & insurance Builder s
work from Sum work tender figure 1 ABC Eng 56,080,690 14,175,000 3,300,000 6,953,500 31,652, Ltd 2
Newton & 53,950,000 14,175,000 3,300,000 2,498,750 33,976, John Ltd 3 Sijang 59,420,280 14,175,000
3,300,000 2,276,874 39,668, Turnkey Ltd 4 Project Q.S s Estimate 53,558, ,175,000 3,300,000 4,320,000
1,787, Table 3 (Using corrected tender figure) s/no Tenderers Tender figure Pc & Contingencies
Preliminaries Total % of builders Provisional & insurance Builder s work from Sum work tender figure 1
ABC Eng 55,796,276 14,175,000 3,300,000 6,953,500 31,367,

25 Ltd 2 Newton & John Ltd 3 Sijang Turnkey Ltd 4 Project Q.S s Estimate 54,154,870 14,175,000
3,300,000 2,498,750 34,181, ,729,986 14,175,000 3,300,000 2,276,874 39,978, ,558, ,175,000 3,300,000
4,320,000 1,787, Analysis/Comments on Tender Tenderer: Messrs ABC Engineering Ltd Tender figure
N56,080,690 Corrected tender figure N55,796, Arithmetical errors - N284, Percentage errors 0.15%
Project quantity surveyor s estimate N53,558, Percentage BELOW/ABOVE Estimate (corrected tender
figure) 4.18% ABOVE Completion period not stated Project quantity surveyor s estimate N53,558,
Recommendation award range ±5% of estimate i.e N50,881, N56,236, Comments The tender figure is
quite on high side and lacks competitiveness. The rates are not evenly distributed. The rates for concrete,
reinforcement and decoration are on the high side while that of finishing is considered low. This appears
to be a deliberate effort of Front loading. Furthermore, the tender contains a huge arithmetical error,
indiscriminately spread and this is no credit. Actually, the tender is within ±5% of the project Quantity
Surveyors Estimate but did not state completion period. This is serious. The tender lacks primary
ingredients required for consideration for an award Tenderer: Messrs Newton and John Ltd Tender figure
N53,950,

26 Corrected tender figure N54,154, Arithmetical errors +N204, Percentage errors 0.38% Project quantity
surveyor s estimate N53,558, Percentage BELOW/ABOVE Estimate (corrected tender figure) 1.11%
ABOVE Completion period 12 months Project quantity surveyor s estimate N53,558, Recommendation
award range ±5% of estimate i.e N50,881, N56,236, Comments This is well priced tender with negligible
errors. A few cases or inconsistency in pricing and extension/totaling errors were observed. This situation
has been brought to the knowledge of the tenderer and they have confirmed that they will abide by the
corrected tender figure and its subsequent implications. The corrected tender figure is 1.11% above is
within the range recommended for consideration for an award. Their completion time of 12 months is
feasible. This tender can be considered for an award Tenderer: Messrs Sijan Turnkey Ltd Tender figure
N56,420, Corrected tender figure N59,729, Arithmetical errors +N309, Percentage errors 0.52% Project
quantity surveyor s estimate N53,558, Percentage BELOW/ABOVE Estimate (corrected tender figure)
11.52% ABOVE Completion period not stated Recommendation award range ±5% of estimate i.e
N50,881, N56,236, Comments 26

The rates of this tender has been thoroughly scrutinized and found to be consistent but not competitive
though some are quite high, hence the comparative high tender figure. This tender lacks very important
information regarding BASIC RATES for labour and materials including source(s) of supply. This is
dangerous and may likely expose project administration to frustration leading to cost overrun and project
abandonment. Furthermore, the tender has left most of the items unpriced including not starting project
completion period thereby generating doubts. This tender is 11.52% ABOVE the project quantity surveyor
s estimate and therefore well outside the range for consideration for an award. 5.5 General remark /
recommendations The tenders received are very wide apart to be considered as competitive. The
difference between the highest and the lowest tender is N5,570, (five million, five hundred and seventy
thousand, two hundred and eighty naira) From the yardstick recommended as the award range, the
following tenderers qualify for consideration (1) Messrs Newton and John Ltd (2) Messrs ABC
Engineering Ltd. It will be remarked that these tenders received are above the project quantity surveyor s
estimates of N53.56 million. However, the total PC and provisional sums included in the bills amount to
N14,175, (fourteen million, one hundred and seventy five thousand naira only) excluding insurance and
contingencies (see breakdown of tenders received) It is our hope that desired savings could be made
from the PC and provisional sums thereby finally erasing whatever difference between considered tender
and project quantity surveyor s estimate. We also inclined to recommend that Messrs. Newton & John
Ltd. be considered for the award as their corrected tender is not only lowest but reasonable and realistic.
27

28 WEEK 6: TENDER REPORT (6.0) 6.1 Report on Tenders When the client and his advisers are
considering the tenders received, factors other than price may be of importance. The time required to
carryout the work, if stated as a requirement on the form of tender, may be compared. Time is frequently
an important matter to the client. Although there may be reasonable excuses for failing to keep to time
agreed, and even justification for avoiding liquidated damages provided for by the contract, the time
stated by a reputable contractor may betaken as a reasonable estimate, having regard to the prevailing
circumstances. If the contract is subject to adjustment of the materials, the schedule of basic rates of
materials must also be considered. The question should be asked. Has the tender assume reasonable
basic prices for materials?, If they are too low there can be an excessive increased cost on a rising
market or too little in reduced costs on a falling market. Where tenders are very close, the schedules of
basic rates may be compared, since the lower tenderer may have less favourable price. Only a
preliminary examination will be made at this stage to ascertain which tender or tenders should be
considered for acceptance. The quantity surveyor will write a report for the client or committee concerned,
setting out clearly the arguments in favour of acceptance of one tender or another. 6.2 Contractor
Selection and Appointment There are essentially two ways of selecting a contractor: through competition
or by negotiation. This will apply to any working arrangement, including strategic partnering, which is the
first instance requires the appointment of a contractor partner. Competition may be restricted to a few
selected firms or open to almost any firm that wishes to submit a tender. The contract options described
later are used in conjunction with one of these methods of contractor selection. European legislation
imposes restriction on tendering arrangements for the procurement of public goods and works. Where
government related expenditure is involved above a prescribed contract value, it is necessary tenders
from member states by advertising the project in the official journal of European committee. The
subdivision of contract value, it is necessary to invite with the intent of falling within the threshold value is
not allowed. At present, it seems that this European initiative is not having a major effect upon
competition 28

29 for construction work in the UK. It does, however, impact significant on securing publicly funded
projects. The Construction Industry Board (CIB) has developed a code of Practice for the selection of
main contractor. This replaces the previous Code of Tendering Procedure issued by the National Joint
Consultative Committee and suggested good practice on the selection of contractors and the awarding of
construction contracts. With reference to the CIB document, the key principles of good practice to be
adopted when appointing contractors in competition (either by single or two-stage tendering) are: - Clear
procedure should be followed that ensure fair and transparent competition in single round of tendering
consisting of one or more stages. - The tender process should ensure receipt of compliant, competitive
tenders where contractors feel it necessary to attach conditions to tender submissions due to their
inability to fully comply with the tender documents, tender evaluation becomes more complex. - Tender
list should be compiled systematically from a number of qualified contractors. As stated, it may be
necessary to consider European procurement law when compiling lists of tenders. Considerations to be
made when selecting the preliminary list of firms include: the firm s financial standing and record; its
recent experience of building over similar contract periods; the general experience and reputation of he
firm for similar building types of adequacy of its management; and its capacity to undertake the project.
Although in some respects, the inclusion of some tenderers may appear to be automatic due to their size
and previous record, consideration differ from the national or another regional standing, resources abd
reputation which may differ from national or another regional position. General, with a pre-qualified list of
tenderers, there should be no doubt as to the ability of any of the tenderers to satisfactorily complete the
contract. - Tender list should be as short as possible. While the rational for this guidance is not in doubt,
in practice, client must consider the possibility of collusion and breaches in confidentiality. The risk of this
are increased here the list of tenders is very small. - Condition should be the same for all tenderers -
Confidentiality should be respected by all parties - Sufficient time should be given for the preparation and
evaluation of tenders - Sufficient information should be provided to enable the preparation of tenders -
Tenders should be assessed and accepted on quality as well as price - Practice that avoid or discourage
collusion should be followed - Tender prices should not change on an unaltered scope of works 29

Suites of contract and standard un-amended forms of contract from recognized bodies should be used
where they are available - There should be a commitment to teamwork from all parties. This is very much
the essence of the way ahead for improving the construction industry, central to the partnering approach
and desired in all forms of contracting. 6.3 Signing of contract: The contract agreement usually included
as part of the B.O.Q is signed between the client and the contractor. After signing the contract,
construction work commences on site until completion in accordance with the signed agreement. This
period is known as the Construction period 30

31 WEEK 7: CONVENTIONAL CONTRACTUAL ARRANGEMENT I (7.0) 7.1 Traditional Types of


Contract There are three main traditional types of contracts: 1. Fixed price contract 2. Cost reimbursable
contract 3. Package deal Fixed Price Contract May be of three types: (a) Bill of Quantities Contract This
type of contract is preferred by both consultant and clients. In this type of contract, the tender drawings
which makes it easier for him to estimate his tender figure. The BOQ contains every item of cost required
to complete a project and the contractor is expected to fix his price against each of the item listed.
Contractors have precise information for tendency or less work to do to make up their tender than with
unbilled contracts. Consultants also find it easier to compare tenders from different contractors. The
priced billed item from the basis for valuation of variations which may occur during the contract and also
for stage or interim payment. To date, the majority of building contracts are let on this basis. (b) Lumpsum
Contract: There, the contractor agrees to carryout work out for a fixed sum of money. He is provided with
drawings and specifications and with these, he calculates his tender figure. BOQ are not usually provided.
This type of contract is only used for small projects especially when the bulk of the work is above ground
and well detailed. Although, in theory, the contractor will carryout the whole of the work for a fixed sum,
provision id usually made in the contract conditions for the valuation of any variations made in the design
by the architect or engineer. (c) Schedule Contract: These may be in one or two forms: 31

32 (i) (ii) (iii) The contractors tendering for the project are supplied with a list of description of work to be
undertaken with no quantities. Against each item is appended a unit (i.e a figure in N and K) Each
contractor will indicate whether he is prepared to do the work at the stated rate or not, the amount (usually
stated as percentage) he requires to be added or deducted from the figure shown. The contractors return
their list to the employer, and the Q.S on his behalf, examines the rates and recommend which rate
should be accepted. The contractor recommended is awarded the contract. All work done by the
contractor will be measured on the site and valued at the agreed unit rates. Alternatively And more often,
the contractors append the unit rates they require against the items of work listed, thereafter, the
procedure is just as described in (a) above. This type of contract is listed mainly for maintenance
contracts where accurate quantities of work cannot be measures. It is very difficult to assess which
contractor s rates are most favourable. Approximate quantities of the various items of work can facilitate
the choosing of the contractor Cost Reimbursable Contract: These are sometimes known as cost plus
contract or prime cost contract. Prime cost of a project is the net cost of materials, labour, plant and other
preliminary items expended on the project and in addition a fee to the contractor to cover his profit and
overheads. The price cost is ascertained by the contractor submitting material invoices, labour hiring
invoices and plant hiring charges for claims, the fees paid to the contractor is usually calculated on a
previously agreed method which gives rise to a number of forms of cost reimbursement contracts. (a)
Cost Plus Percentage Fee: Under this type of contract, the net cost of labour, material, plant etc.
expended on a project are ascertained and percentage added to cover the contractors profit and
overheads. The percentage is agreed on before the contract is signed and may be subjected to
completion i.e several contractors submit the percentage addition they require on the net cost of the
various element. The main advantage of this type of contract is that a contractor can be selected and
work started with the minimum delays. It is ideal therefore for emergency situations possible before bill of
quantities can be 32

33 prepared or when there is insufficient information for a bill of quantities to not prepared. The
disadvantage is that almost invariably the final cost of the project will be much higher than say a BOQ
contract. There is no mean time for the contractor to economize, the longer it takes him to complete the
work and the higher the level of wastage, than the higher the net cost of the project and as a result his
profit will be higher. It sometimes help to have an agreed contract period for such contract. (b) Cost Plus
Fixed Fee The net cost of labour material and plant is ascertained on completion of the project. This total
is paid to the contractor in addition to a fixed fee to cover his prift and overheads. The fee is fixed and
agreed bwteen the parties before the contract is agreed. Much more information is required at this stage
because reasonable accurate estimate of the work is required before a fixed fee can be agreed on. It is a
better type of contract than the previous one because there is a slight incentive for the contractor to
economize time-wise and earn his fee as soon as possible. However, there is no incentive to reduce
waste since his fee is not affected either way. (c) Cost plus fluctuation fee: This is an improvement on the
last type of contract described in that the contractors fee is increased by an agreed, usually on a sliding
scale basis, should the final cost be below the estimated cost. (d) Target Cost with Variable Fee: Further
development on the described form of contract. A target estimate is agreed between the parties to the
contract. Should the final cost of the project be less than the target estimate, the contractors fee will be
increased by an agreed percentage of the saving on the other hand, if the cost exceeds the target
estimate, the contractor s fee will be reduced by an agreed percentage of the over-expenditure. Thus the
contractors has a considerable incentive to economize, since the greater the saving on the target
estimate, the higher will be his fees and vise-versa 33

34 Package deal or all-in service contract This is a system of contracting which originated from the states
of America. With this arrangement, a contractor agrees with his client to take full responsibility for design
and construction. This eliminate some of the delays involved in co-operation with consultants but it
increases the risk to the client of unsuitable construction. The client gives the brief directly to the
contractor of his choice, who then submit a proposal in terms drawings, specifications, cost and
completion time. If his terms are acceptable, a formal agreement is signed and the contractor undertakes
all the works of the consultant using his in-house staff or by commissioning outside consultant and also
carries out the construction of the project. It is also possible to go into package deal contract by notifying
a number of qualified contactors to submit independent proposals after which one is chosen. This
provides a measure of competition and ensures that the client gets value for money. To further protect the
interest of the client, a team of independent consultants may be appointed to supervise the post-contract
work to ensure that the contractor keeps to specification and maintaining standards. Package deal
contact tends to have higher final accounts particularly when there is limited or no competition. Secondly,
because this system is based on a lumpsum price without quantities, it is quite difficult to secure a basis
for valuation of variations. Again, the conditions for public accountability are not met since these is not
enough evidence to convince people that the cost are justified. In addition to these, there are other
developments that have worked for complex projects. These include - Turnkey - Management contracting
- Project management etc. 34

WEEK 8: CONVENTIONAL CONTRACTUAL ARRANGEMENT II (8.0) 7.2 Design and Build Building
Contracts The desirable benefits of early contract participation might be brought about when the
contractor is appointed directly by the client and made responsible for the whole process from initial
briefly to the production of the finished building, this occurs in the design building contract and here the
contractor effectively takes on the role of the leader of the team. Here the client deals directly with the
contractor for the complete building and it is the contractor who is not only responsible for but also co-
ordinates the separate design and contraction processes including engagement of the design team who
are therefore contractually linked with the contractor and not the client. The construction process is wide
linked, is still separate from the design process leaving the consultant free to concentrate on their own
role. The contractor may also be committed to performance specification for the project and so take on
much greater responsibility in a normal contracting situation. The client may however, directly appoint
either in-house staff or a separate consultant to check that the product the contractor is providing is value
for money and that the content and quality are satisfactory. In a design build contract, the contractors
manager is responsible for co-ordinating all members of the design team and for the construction
process. Management of the contract is separated from the management of each design function, leaving
design consultants. Free to concentrate on their own design role. 35

36 Employer Licensees Contractor Architect Quantity Surveyor Domestic subcontractors Consultant


Domestic Suppliers Fig 8.1 Design and build Advantages (1) Design and construction are undertaken by
one organization (2) Past experience should be blended into current design. Since these is competition
over the design as well as the construction, the design build service may achieve a result which is
cheaper per unit of accommodation provided. (3) The arrangement is most useful for building with a
family single form or function (4) Design build services is often quite quick from initial brief of handling
over of the finish building. Disadvantages (1) Very often the design service remove the element of
competition entirely. (2) The client may find that he is not getting what he imagine he might get (3) In this
method, the design may revolve around the contractors own favorite method of construction as a result,
the building may suffer in its function arrangement or aesthetics quality. (4) It may not be cheap to
operate or it may have high maintenance cost. (5) Because the method is based upon a lumpsum price
with quantities, it is not more difficult to secure a basis of valuation. 36

37 7.3 Management Contract The management contract is a contract procurement method in which a
management contractor provides management expertise on a construction project in return for a fee. The
management construction is appointed at the feasibility study. In this role the management contractor who
may be a general contractor in other situations is appointed by the building owner to work alongside his
professional consultant. The management contractor is appointed on a similar professional basis as the
consultant to enable him give a construction management service in return for reimbursement on a fees
basic. The management contractor unlike the design build contractor does not carryout any of the
construction and each element of the work is let out on a competitive basis to a number of specialist
subcontractors. In most cases, the management contractor is responsible for the setting up of overall site
establishment and general backup of services for the use of various specialist subcontractors. The
underlined philosophy of the approach is to allow the contractor to become part of the client s team and
for the total management function to be carried out in partnership with the members of the design team to
the overall benefit of the client. The essential difference from a design build contract is that a contractor
while co-ordinating design with the construction of the project does not directly carryout the role of
designer or contractor and is concern strictly with management. He also reimburse on a fee and prime
cost basis rather that on variable profit 37

38 Employer Licensees Management Contractor Architect Quantity Surveyor Work contractors Consultant
Clear of works Fig 8.2 management contract Advantages (1) The management contractor can advice on
the design implications and cost (2) He co-odinate the work on site very efficiently (3) He controls the
tendering procedure and contractual arrangement for the work elements (4) The total time frame from
brief to commissioning is reduced (5) Cost monitoring is instituted Disadvantages (1) The management
contractor will require to be paid for his pre-contract work if the project does not go ahead as scheduled
(2) If the contract is let late, little or no time will be available for negotiating cost reduction of the overall
project. (3) Detailed bill of quantities is necessary for costing variations (4) Work starts on the site while
the scheme is yet to be fully design architecturally and structurally, this affects the eventual cost of the
project. 38

39 WEEK 9: MODERN METHODS OF PROCUREMENT (9.0) 9.1 Types of Procurement We have two
major types of procurements, they are partnering and public private partnership 9.2 Partnering
Background US car industry in response to Japanese efficiency In UK engineering and construction North
Sea oil & gas Definitions Being closely involved with someone in someway (Cambridge online) Sharing
an activity with someone (Encarta) Associates working towards a common goal (Wordnet) Long-term
agreements between companies to cooperate to an unusually high degree to achieve separate yet
complimentary objectives Variety of managerial practices and organisational designs that enhance and
maintain collaboration In Construction - can be long-term or project-based Includes the concepts of
teamwork between supplier and client, and of total continuous improvement Identifying problems and
risks at outset & strategies to manage and resolve them Requires Openness between parties Ready
acceptance of new ideas Trust Perceived mutual benefit Time and commitment When Traditional method
not suitable Efficiency improvement Cost reduction Promote organisational learning Enable supply chain
management 39

40 Encourage innovation How BENEFITS Improves capacity to innovate Process and product Enables
organisational learning Continuity Feedback and feed forward Continuous improvement Faster decision
making Shorter lead times Supports sustainable development Improved productivity Greater consistency
in delivery time, cost, quality Mutual benefits Shared vision Monetary Risk Knowledge exchange and
transfer Cultural alignment Dispute resolution Increases certainty of workload & profit margins for
suppliers CONSTRAINTS Tensions and conflicts between partners Objectives Strategy Transfer of
knowledge (or lack) Communication Absorptive capacity of partners Quality Knowledge retention and
distribution Absence of champions Mistrust Organisational culture 40

41 Retaining competition 9.3 Public Private Partnerships (PPP) PFI Corporate PFI LIFT Where the private
sector works with or for the public sector in order to help provide a public service E.g. project to build and
run a new facility such as a school or hospital A long-term outsourcing contract to run services A PPP
refers to any alliance between public bodies, local authorities or central government, and private
companies. PPPs typically involve the joint ownership of a special purpose vehicle established under
company law. TYPES 1. Asset sales 2. Financially free-standing contracts services which are self-
financing over a period of time e.g. Road tolls 3. Joint Ventures (JV) partnerships between public and
private sector 4. Local Education Partnership (LEP) contracts to improve standard of secondary school
property & services 5. Local Improvement Finance Trust (LIFT) contracts to improve provision of primary
care services in NHS 1. There are 42 LIFT schemes underway in England, representing 1bn 6.
Partnership companies e.g. NATS 7. Partnership investments 8. Policy partnerships 9. Private Finance
Initiative (PFI) 1. Variants Design Build Operate (DBO) Design Build Finance (DBF) Design Construct
Manage Finance (DCMF) 10. Sales of business (by floatation or trade sale) e.g. BNFL & CDC 11. Wider
markets 41

42 9.3.1 PFI Government s initiative to enable public sector works to be undertaken using input from
private sector Inception November 1992 by Norman Lamont Alternative route for to procure facilities &
services without immediate effect on Public Sector Borrowing Requirement (PSBR) Bates review
endorsed its use after the change of government 29 recommendations for change made Usually a
consortium (SPV) will be responsible for providing an integrated approach to the design and construction
and also the ongoing maintenance and facilities services over a contract period of 25 to 35 years.
Traditional over budget 73%; Projects late 70% PFI Projects over budget 20%; Projects late 24% The PFI
report found that where there were cost overruns, these were generally the result of changes to the
project instigated by the client and not the contractor. BENEFITS & DISBENEFITS Benefits Disbenefits
There can be greater price certainty. The department is tied into a longterm The department and
contractor agree contract (often around 30 years). the annual unitary payment for the Business needs
change over time so services to be provided. This should there is the risk that the contract may usually
only change as a result of become unsuitable for these changing agreed circumstances. needs during the
contract life. Responsibility for assets is transferred Variations may be needed as the to the contractor.
The department is department's business needs change. not involved in providing services Management
of these may require renegotiation which may not be part of its core of contract terms and business.
prices. PFI brings the scope for innovation in There could be disbenefits, for service delivery. The
contractor has example, if innovative methods of incentives to introduce innovative service delivery lead
to a decrease in ways to meet the department's needs. the level or quality of service. 42

43 Often, the unitary payment will not The unitary payment will include start until, for example, the building
is charges for the contractor's acceptance operational, so the contractor has of risks, such as construction
and incentives to encourage timely service delivery risks, which may not delivery of quality service.
materialise. The contract provides greater There is the possibility that the incentives to manage risks over
the contractor may not manage transferred life of the contract than under risks well. Or departments may
traditional procurement. A reduced believe they have transferred core level or quality of service would
lead business risks, which ultimately to compensation paid to the remain with them. department. A long-
term PFI contract encourages The whole life costs will be paid the contractor and the department to
through the unitary payment, which consider costs over the whole life of will be based on the contractor
the contract, rather than considering arranging financing at commercial the construction and operational
rates which tend to be higher than periods separately. This can lead to government borrowing rates.
efficiencies through synergies between design and construction and its later operation and maintenance.
The contractor takes the risk of getting the design and construction wrong. OTHER BENEFITS Enhance
government s capacity to develop integrated solutions Facilitate creative & innovative approaches
Reduce the cost to implement the project Reduce the time to implement the project Transfer certain risks
to the private sector partner Attract larger, potentially more sophisticated bidders to the project Access
skills, experience and technology 43

44 9.4 Key Differences between Traditional Public Sector Procurement and PFI Area of Consideration
Characteristics of traditional public sector procurement Characteristics of PFI (generalised) (generalised)
Duration of private sector involvement in the project Until construction of facility is compete (plus the
defects liability period) Normally for at least 25 years for construction related PFI projects Specific
company involvement Appointed by the public sector client on an individual basis for the supply of specific
skills Involved as part of a concessionaire consortium with all the skills necessary or taking a key supply
contracting role, being appointed by the bidding firm or concessionaire Private sector risks Specific to the
area of Wide ranging and long term involvement and limited to defect liabilities Remuneration Lump sum
or percentage fee Annualised payment Opportunity for private Limited Considerable sector to suggest
improvements Key financial consideration for the private sector Maintaining a positive cash flow and
margins Having an adequate asset base and debt facility company Attitude required of the Reactive
Proactive 44

45 private sector from the public sector 45


46 WEEK 10: ESTIMATING (10.0) 10.1 Definition: Estimating according to Seely, involve both calculation
and assessment, and both technical data and human judgment of circumstances and probabilities must
be brought together in its production. Therefore, estimating is defined as the technical process of
predicting cost of construction. 10.2 Types of Estimating 10.2.1 Approximate Estimate (1) Unit Method:
This method produces total single price for the project and is based on cost per unit or person to be
accommodated. This technique is between the cost of the construction and the number of functional unit
its accommodate. Examples are Type of Project Schools Hospital accommodation Hostel Cinema Hotel
Stadium Mosque Unit Rate cost/ student place cost/bed space cost/bed space cost/sit cost/room cost/sit
cost/space Total estimate cost is equal to no of functional unit multiply by unit rate. A lot of skills are
required in selecting an appropriate rate. Rate can be obtained by careful analysis of the number of
recently completed projects of similar types, size and constructional method. However, adjustment would
need to be made to account for (1) Varying site condition (2) Specification changes (3) Market condition
Advantage (1) It is simple and quick to use Disadvantage 46

47 (1) Lack of precision (2) It is advisable to express cost within a range of prices 10.2.2 Cube Method
This method was used extensively between the World War I and World War II. But it is not in common
used anymore. Rules of must as defined by Royal Institute of British Architect (RIBA) are external plan
area of a building is multiply by a height to get the volume of the building. The height is measured from
the top of concrete foundation to half way of the roof if pitched or to 600mm above the roof if flat. If the
roof space is occupied the height is taken up to ¾ (0.75) way up the roof. If the flat roof has a parapet, the
height is taken up to the top of the parapet or 600mm whichever is greater. Total estimated cost is equal
to cubic content/m 3 multiply by cost/m 3 All projections such as porches, steps, domes, bays are
measures and added to the cubic content of the building. Where parts of the building vary substantially in
constructional method or quantity of finish then it is preferable to calculate separate volume and to apply
different rate. Advantage (1) It is useful in estimating the cost of heating and air conditioning
Disadvantages (1) Building cost could relate better in floor area than with volume (2) It does not give the
client an indication of the amount of the usable floor area (3) It takes no account of number of stories or
plan shape which is known to affect cost. (4) It produces a large cubic quantity that will increase the
possibility of further inaccuracy in estimating. (5) Large amount of variation have been known to occur in
case rate of building of the same type 10.2.3 Superficial or Floor Area Method This is probably the most
popular method of cost prediction during the early stages of a project once the general outline drawings
are been prepared, the method relate a unit cost to floor area and is more readily appreciated. The area
of each of the floor is measured 47

48 and then multiply by cost/m 2 by the convention the superficial area is measured between the inside
faces of the external wall and no deduction are made for partitions, stairs. Lift and etc. It should be borne
in mind that if the client expresses his requirement in term of usable space, it is necessary to add to this
area, circulation and other non-usable space to make the building function correct. The rate to be used is
usually obtained from cost analysis of previously completed building of similar plan shape, storey height
level of finish and method of construction, certain rules must be applied. (1) if the building is made up of
parts that varies substantially in terms of quality of finish and construction method, it is preferable to price
it independently using rates appropriate for each part. Items of work which cannot be related to the floor
area will need to be priced at separate rate or using different methods and added items such as piling,
heating and air conditioning, lift installation and external work. Allowances should be made for site
condition, construction method, materials, quality of finish and number and quality of fittings. Total
estimated cost equal to gross floor area multiply by cost/m2 Advantage (1) Ease of calculation (2) Cost
are expressed in a way which is readily understood by the average building client (3) Rates are readily
available from may sources and also can be very easily calculated from existing project. (4) Majority of
items in the building and the cost impact are related more to floor area than the volume Disadvantages (1)
Does not directly take account in changes in plan shape or total height of the building which also have a
cost impact. (2) Adjusting from the variables mention is not easy 10.3 Approximate Quantities This
method is probably the most favoured by quantity surveyor because it used idea which are similar to
those used in preparing bill of quantities. It provides a more detailed estimate than the other method
described. Quantities are measured from the drawings and similar omnibus description is given to this
measurement. The description will include all items which are associated with that drawing e.g a floor slab
will include the stripping of 48

49 vegetable soil, reduced level excavation, hardcore filling under the floor, concrete bed and
reinforcement. An upper floor will include the ceiling finish and painting of the surface of the slab, the floor
construction, the floor screed and floor finish. Using approximate quantities: the strip foundation as 1m
depth level and compacting, dieldrex anti-termite treatment. Back filling, disposal of surplus material from
site, concrete (1:3:6) in foundation 225mm thick, 225mm hollow sandcrete blockwall in cement mortar
(1:4) filled solid with weak concrete. The item is then given a composite price to include every unit in this
omnibus description. Special paper is printed for this form of estimating. It has dimension column on the
left and the usual billing price column on the right. With a multi rate system, it is essential to allow for
preliminary and contingency in addition to the actual cost of work in pricing also care must be taken to
include for all the items ion the description and make any necessary allowance for minor work or labour
covered by the overall measurement and prices, accuracy of this method is high, changes in design
shape and specification can be allow for both the preparation and calculation is lengthy and labourous.
Advantages (1) It is reliable and give a more detail estimate than any other method (2) In practice only
major items that are of course important are measured Disadvantages (1) It required more time and effort
than any other method (2) More detail information is required from the designer and with other method
10.4 Introduction to Unit Rate To analyse something is to break it down into its constituent parts and study
each part in detail. Therefore analytical estimating involves the analysis and costing of construction
resources to produce an estimate. The production of an estimate normally involves the calculation of unit
rates i.e. the cost of an individual measured item for example a square metre of brickwork, a cubic metre
of concrete or a metre of skirting. As found in a Bill of Quantities. Analytical estimating is therefore the
most accurate form of estimating as each resource and unit rate is analysed and costed individually. This
form of estimating is used for pricing 49

50 contracts with bills of quantities, specifications and drawings or where the contractor has measured
and prepared their own quantities of work. 50

51 WEEK 11: INTRODUCTION TO UNIT RATES (11.0) 11.1 Elements of a Unit Rate Labour Materials
Plant Unit Rate Overheads Profit 11.2 Calculation of Unit Rates Unit Rates maybe calculated in one of
two ways: Net Rate (Excludes Overheads and Profit) Gross Rate (Includes Overheads and Profit) In our
industry most estimators will calculate costs based on net rates these will then be enhanced later to
include overheads and profit. Gross rates are sometimes referred to as allin rates. The Resources which
compromise a unit rate are labour, materials and plant. In the construction industry labour is often
employed in two main ways, these are: 1. Direct Often referred to as cards in, the employer pays all the
costs of employment including for example national insurance and sick pay amongst others. 2. In-Direct
51
52 These workers are self employed or referred to in industry as on the lump these are often labour only
sub-contractors without the normal costs of employment along with the other legal protections such as
redundancy, sick pay and minimum notice periods. Labour may be paid for on an hourly, daily, weekly or
piecework basis. Directly employed operatives are usually paid in accordance with a working rule
agreement which will specify the rates and allowances to be paid. However, some contractors are trying
to move away from the national wage bargaining and introduce local wage rates. Ultimately the actual
rates paid for labour will depend on market forces. 11.2.1 Materials Several factors affect the cost
contractors pay for materials. In the box below highlight the factors you think impact on the price a
contractor pays. In the material element of a unit rate, in addition to the actual cost of the material the
estimator must also consider: Transportation costs Unloading and Stacking costs Materials movement on
site Extra Materials to compensate for: o Wastage o Allowance for materials being measured net in B o Q
o Loss in consolidation, shrinkage etc Note: Where prices of materials are described by suppliers as ex
works this means the price at the factory and delivery costs will have to be added. 11.2.2 Plant Plant may
be divided into two main categories, the costs of which can be allocated to contracts in differing ways.
Non-Mechanical Plant Basic items of plant including barrows, hosepipes, spades, trestles, scaffolding,
small powered hand tools etc With the exception of scaffolding and one or two other items it is virtually
impossible to allocate the cost of non-mechanical plant items to a contract, let alone to a specific unit rate
e.g. a wheelbarrow may be used on several contracts in its lifetime. 52

53 The cost may be included in overhead charges as a percentage, as a lump sum in the preliminaries bill
or, more accurately, on longer contracts a list of non-mechanical plant items is prepared, costed and
included in the contract sum. Mechanical Plant Mechanical plant such as excavators, lorries, dumpers,
mixers etc require a more complex approach. Mechanical plant can be very expensive. Contractors may
buy, hire or lease plant. The purchase of plant must be viewed as an investment on which a return is
required. Only detailed analysis will show whether it is in the contractor s interest to buy, hire or lease
mechanical plant. 11.2.3 Overheads Overheads may be defined as the cost of maintaining (running) the
contractors organisation. There are two types of overheads: (1) Head Office Annual cost of staff salaries,
expenses, rents, rates, gas, water, electricity, telephones, office equipment, postage, insurance,
maintenance of buildings and equipment etc. The cost of these items is expressed as a percentage of a
company s turnover and included in the tender. (2) Project or Site Project site costs including non
productive (manual) site staff, site office costs, storage facilities and other preliminary / site organisation
costs. Items are priced as individual items and may be fixed or time related costs or a mix of fixed and
time related costs. The costs of these items are included in the tender. 11.2.4 Profit The amount of profit
that a contractor can make is determined by a number of factors largely outside the remit of an estimator.
However, in larger companies the senior or managing estimator may be a member of the management
team and in smaller companies / firms the estimator may be a director or the managing director. In both
cases they may be party to, or may have to make commercial decisions regarding profit margins. Factors
affecting profit levels are: Market forces of supply and demand Amount of competition 53

54 Who the competitor are Size / Value of contract Risk involved in contract Interest rates. Student
Questions 1. Define analytical estimating 2. Explain the difference between net and gross unit rates 3. List
the elements of a unit rate 4. Identify the organizations, which produce working rule agreements 5. Define
non-productive time and holiday credits. 54

55 WEEK 12: ALL-IN RATES (12.0) 12.1 Cost of Labour Cost of labour seeks to consider the recognized
basic wage rate for both skilled and unskilled operatives, including appropriate allowances, employer s
statutory payments and other payments relating to voluntary or trade agreement. According to Seely
(1993), the cost of labour is aimed at arriving at a labour rate per hour which is realistic and which reflects
the actual cost of labour to the contractors including plus rates and guaranteed bonus. The following
items as presented by Davis (1992), required the combination of all or some in arriving at the all-in labour
rate. (1) Basic wage rates and guaranteed bonus (2) Traveling time, fares and subsistence allowances
(sometimes contained in project overheads as it is a variable item) (3) Holiday with pay scheme covering
public holidays and annual holidays (4) Tool allowance (5) Sick pay (6) Employer s national Health
Insurance contributions (7) Employer s liability and third party insurances (8) Construction industry
Training board levy However, if the project is of firm contract, additional allowances are added to take
care of possible increase in labour rate by recognizing the size and likely duration of the contract. 12.2.
Calculation of All-in-rate of Labour 12.2.1 Labour Unskilled Labour Cost of unskilled labour per year:
12480 x 12 = N149,760 Add 2% for gang leadership = N2995.00 Add for pension of gratuity 2 ½% =
N3744.00 Add for compensation insurance 1 ½% = N2246.00 Add for transport allowance 5% =
N7488.00 Add for housing allowance 40% = N59904.00 55

56 Add for leave allowances 10% = N14976.00 N241,111.40 Effective working day in a year i.e 365 days
Less (a) Saturdays and Sundays (52 x 2) = 104 (b) Wet weather say = 20 (c) Annual leave say = 14 (d)
Public holidays say = 10 (e) Absenteeism and sick leave say = 10_ 158 365 days 158 = 207 days Hence,
the effective working days = 207 Cost of labourer to employer per day: 241,111.40 = N1,165.00 207 The
sum of N1,165.00 is therefore the all-in-rate payable for a labour by the employer. Futhermore,
considering the legally approved eight (8) working hours; then the hourly rate is 1,165.00 = N145.63 8
Skilled Labour (trades men or craftsmen) Assume basic pay per month = N16,700.00 Cost of mason per
year = N200,400.00 Add 2% for gang leadership = N4,008.00 Add 3% for pension and gratuity =
N6,012.00 Add workman insurance competition 2% = N4,008.00 Add tools allowance say N50.00 weekly
i.e 50 x 4 x 12 yearly = N10,020.00 Add transport allowance 5% = N80,160.00 Add housing allowance
10% = N20,040.00 N20040.00 Cost per day = 329448 = N1,591.50 207 56

57 Hourly rate = 1,591.50 = N198.94 8 12.2.2 Cost of Materials Material in the building industry refers to
varying components delivered to site which when articulated or appropriately combined, result to
functional element of a building project. Materials cost affect the estimate greatly and this depends on the
source of supply and the competitiveness of quotation received by the estimating department. The
estimating department does send out enquiries to suppliers of materials with a view to obtaining a more
realistic and workable information. The CIOB code of estimating practice outlined this information to
include: (a) Title and location of the work (b) Specification, class and quality of the material (c) Quality of
material required (d) Likely delivery programme and special delivery requirements (e) Access to site and
any restrictions (f) Date by which the quotation is required (g) Period for which the quotation is to remain
open (h) Whether a fluctuation or firm price required (i) Discount required and (j) Person in the contractor
s organization to be contacted when queries arise. The code recommended a further check on the
obtained information so as ascertain that the following criteria are satisfied: (1) The material comply with
the specification (2) The material will be available insufficient quantities to meet the requirements of the
construction programme (3) The supplier has imposed no special delivery conditions (4) The method and
rate of delivery complies with the contractors requirement(s) (5) The condition contained a counter offer,
which is at variance with the terms and conditions of the enquiry. (6) The quotation is valid for the
required period 57

58 (7) Prices are given for small quantities where applicable (8) Discount conform to the requirements of
the enquiry (9) Requirement concerning fixed or fluctuating prices are satisfied. The next line of action for
estimating department id the calculation of the unit rates for material. Farrow (1979), recommend that
when building up the unit rates, for material, that prices should include the basic price, less discounts
retained by the contractor, allowance for waste, unloading, stacking, storing, disturbing around the site
and the return of crates or packings where appropriate. 12.2.3 Cost of Plants Plant element according to
Owunsonye (2000)comprises mechanical items employed on a building site in order to save money,
labour or time, or a combination of all. The cost associated with the items in the mechanical are
accommodated in the bills of quantities as an item, or as a lumpsum or in the unit of work item in the
section of work t be executed needing such plant. The costs involved in the non-mechanized tools are
taken care of in the preliminaries and are normally calculated on a percentage basis. For any given
project, the estimate department obtains information on plant to be required from the method statement
and the programme while the period of requirement is found from the tender programme. Basically, plants
to be used categorized. The CIOB of estimating practice category includes: (1) Mechanical plant with
operator (2) Mechanical plant without operator; and (3) Non-mechanical plant A further factor which
affects the costs of plant is the source of provision. According to the code of Estimating practice, a
contracting firm has three alternatives to make a choice and these are. (1) Purchase plant for the contract
58

59 (2) Hiring existing company owned plant; and (3) Hiring plat for external sources The purchase of plant
by a contracting firm for any given project is a function of many variables including the nature of the
contract, the size of the project, the type of the client, the location and complexity of the project.
Oftentimes, contracting firms resort to hiring plant from external sources. This action has relatively proved
to be cheaper. However, reasonable carefulness is usually required to ensure that quotations obtained
are for plants, which will meet the contractor s requirements including the job specification(s). Articulating
these requirements the code of estimating practice posit that clarification should be that: (1) The plant
complies with the specifications (2) It is available to meet the needs of the construction programme (3)
Delivery and collection charges can be identified (4) Where appropriate all operator costs are included
and that operators will conform to the intended working hours of the site; (5) Any attendance or supplies
to be provided by the contractor are clearly identified (6) Maintenance responsibilities, charges and
liabilities are identified (7) The quotation conforms to the terms and conditions of the enquiry and does not
represent a counteroffer; and (8) Requirements concerning fixed or fluctuating prices are met. If the
contracting firm chose hiring existing company owned plant for the proposed project, then action shifts to
the calculation of the associated costs. In the building-up of costs of plant, contracting firm normally
create two divisions. These divisions according to Langdon and Spon (1992); include (1) Small plant and
tools which are the subject of a direct charge to contracts and for estimating purposes, are normally
allowed for as a percentage of the labour costs in site on cost. (2) Power driven plant and major items of
non-mechanical plant such as steel trestles, scaffolding and gantries. Such plant is normally charged to
the contract on a rental basis, except in the case of plant specially made or purchased for a specific
operation. The letter 59

60 plant is normally charged in full to contracts and allowance made for disposal on completion, often at
scrap value. Calculation of Unit Rate for Mechanical Plant It is desire of the estimating department to
build-up unit rate to be inserted in the bills using a tractor and scraper belonging to the contracting firm for
excavation. Assuming that the capacity of the tractor and scraper = 4m 3 Capital cost = N15,000,000.00
Replacement = after 5 years Replacement every year = 20% Cost of capital = 25% Repairs and
maintenance = 20% Total annual cost = 65% of 15,000,000 = N9,750,000.00 Considering usage = 160
days in a year Cost per day = 9,750,000 = N160,937.50 160 Labour Operating Assistant to driver =
N145.63 per hour rate 2 lobourer (2 x 145.63) = N291.26 per hour rate Driver = N198.94 per hour rate
N635.83 Hence cost per day = 635.83 x 8 = N5,086.64 Fuel cost Assume fuel, petrol etc. at say
N3500/day Summary Plant = N60,957.50 Labour = N5,086.64 Fuel = N3,500.00 60
61 N69,544.14 Considering that the plant turns 5 times per day hour - Capacity per hour = 5 x 4 = 20m 3
Capacity per day = 20 x 8 = 160m 3 Therefore, 160m 3 cost N69,544.14 1m3 will cost 69544.14 =
N434.65 160 Add for profit and overhead say 25% 25% of 434.65 = N108.66 Cost per m3 = N543.31
Cost per unit rate = N543.31 61

62 WEEK 13: DOMESTIC AND NOMINATED SUBCONTRACTORS (13.0) 13.1 Subcontractors


Subcontractors derive their definition from the mode of selection including the type of service they are
required to render in a given project. The college of Estate Management (1985) generally defined
subcontractor as individuals or firms who enter into a legal contract with the main contractor to complete
an agreed part of the contract. Furthermore, this definition is divided thus: (1) Domestic: and this is
referred to as the main contractor s own subcontractors (2) Nominated: which arises where the design
team/client requires control in the selection of a specialist (3) Labour only: which exists where the main
contractor employs people on a labour only cost, supplying the materials and plant (4) Listed: which goes
to exhibit a compromise requiring a limited control of the selection including naming a number of firms (1-
3) in the tender documents for a particular section of work. The eventual contract arrangement is that they
become domestic subcontractors. (5) Designated or named: is similar to listed subcontractor and only
vary the fact that only one name is given in the tender documents. In order to arrive at the likely cost of
items consider to be undertaken by the domestic subcontractor, the estimating department abstract from
the bills items applicable to each trade including the trade preamble. Thereafter, inquires are sent with a
view to obtaining subcontractors bills of quantities from selected number of tenderers. The sent out
inquiries usually contain conditions of the main contract and the date by which the tenders are to be
submitted to enable the main contractor determine the rates to be inserted in the tendering bills. The main
contractor adjust rates obtained from the subcontractors by adding to the most competitive subcontractors
rates, a percentage to accommodate profit and attendance before inserting in the tendering bills of
quantities. Nominated subcontractors undertake works included in the bills as provisional or prime cost
sums. According to Atton (1971), the main contractor is allowed to add an amount of money or
percentage to cover any profits he may require on such work. He is also required to provide 62

63 general attendance on nominated subcontractors and to allow the use of general facilities such as
standing scaffolding, mess-room and sanitary accommodation, welfare facilities, storage for plant and
material, provision of water and electricity and clearing away of rubbish. It is usual for such attendance to
be described in the bills and the main contractor is allowed to add an amount of money or percentage to
cover the cost involved. 13.2 Nominated Suppliers Nominated suppliers are involved when goods and
materials expected to be used in a given project are covered by the inclusion of a provisional or prime
cost sums in the bills. Under the arrangement, the main contractor is allowed to add an amount of money
or a percentage to cover any profit he may require on such items. Atton (1971), posits that the cost of
fixing goods and materials which are obtained from a nominated supplier is measured and the unit items
are priced in accordance with the trade involved. The cost of unloading, storing, hoisting the
goods/materials and returning packing cases etc, to the nominated supplier, carriage paid and obtaining
credits therefore, is included with the item of fixing. 13.3 Provisional and Prime Cost (PC) Sums In a
typical bill of quantities where the contract is with quantities and specification where contract is without
quantities, some parts of the work remain unmeasured and/or specified in details. Lumpsums are usually
appropriate included to take care of this shortfall. A prime cost sum according to JCT Practice note 23
(1987); is a sum provided for work or services to be executed by nominated subcontractor, a statutory
authority or a public undertaking or for materials or goods to be obtained from a nominated supplier.
Furthermore, a provisional sum is a sum provided for either defined or undertaken work. It is defined
when work is not completely designed at the time of tender documents are issued but fir which certain
specified information can be given. On the other hand, undefined related to work for which such
information cannot be given. In either case of prime cost and provisional sums, Seely (1993) posits that
elementary precaution should be taken of, checking to ensure that the sums of money included in the text
are extended into the pricing column. Following each prime cost item there will provisional 63
64 for addition of profit and attendance. Profit is normally calculated on a percentage basis while
attendance will be assessed on the cost of the services to be provided and entered as a lumpsum. 13.4
Profit and Overheads. Milne (1980), has defined profit as the difference between the contract sum and
that required to pay for overheads site costs, labour, plant and materials to complete the contract. The
amount or percentage allowable as profit is a function of many variables. Onwusonye (2000); posit these
variables as the form of contract, the size and nature of the contracting firm, the organization of the
contracting firm, the client and even the disposition of the project consultants. In addition, the risks
associated with the project also affect the nature of the profit allowable. These risk according to Milne
(1980); include (a) Contractual risks. These are risks stemming from the contract documents and the
necessary arrangements for work to be done by subcontractors and/or deliveries from suppliers of
materials or components. Also included would be the firm price tender risk. (b) Technical risks. These
risks revolve around the form of construction (whether traditional or non-traditional) and the ease of
otherwise of executing the work, previous experience of erecting buildings of similar construction and the
problems of programming and plant utilization. Basically, the greater the risk involved the higher the profit
requirement and vise versa. In practice however, the following allowances provided by most contracting
firms to accommodate the much cherished profit. (1) Builders work(10 15%) (2) Subcontractors and
suppliers (contractor s own) 5 10% (3) Nominated subcontractors (2 ½ - 7 ½ %) (4) Nominated suppliers
(5 10%) 64

65 Overhead have been variously defined. According to Owunsonye (2000); overheads in the
construction industry and to a contractor is the additional cost of labour, plant and materials required for
the execution of the contract. It includes cost associated with the followings. (a) Salaries of principal
heads of section and supervisors (b) Office salaries (administrative staff) (c) Rents and rates (d) Office
expenses (printing, stationery, telephone etc) (e) Insurance policies (f) Advertising (g) Maintenance and
depreciation of office equipment Contributing, Harrison (1981); defined overheads as those costs incurred
in the operation of a business which are not directly related to individual items of production. There are
two main groups of overheads: 1. Site overheads which include such costs as site supervisory staff, site
building, temporary roads and services; and 2. head office overheads which cover the costs incurred in
operating the business in its entirely and cannot be related directly to an individual contract, and include
head office staff and buildings. The techniques and methods applicable in the calculation of overheads
revolve on the policy of the contracting firm and the type of overhead involved. According to Seely (1993);
with site overheads each contract will have will have a calculated allowance in the tender, but head office
overheads as a percentage of budget turnovers and to apply this to all contracts. Similarly, Farrow (1976);
described how most contractors use systems which record past and present overheads, the projection of
overheads for the future, and rate at which overheads are being recovered. An important part of a
contractor s general overheads is the cost of financing construction works in advance of payment, which
needs to be calculated and included in the tender. 65

66 The appropriate addition for head office overheads according to Langdon and Spon (1992); varies with
the extent of centrally provided services and the size of organization, but could be in the range of 4 to 8%
of turnover. 66

67 WEEK 14: E-TENDRING (14.0) 14.1 Key Points E-Tendering can provide for: Faster better exchange
of information; Increased security and integrity of tendering; Automation of the evaluation process; MOD
encourages the use of e-tendering for some competitions, but the ability to do so is not yet widespread
throughout the Department or Industry; MOD aspires to introduce a corporate capability to undertake e-
tendering, which ideally will be a Government-wide system or. 14.2 What is E-Tendering? The exchange
of information by digital files and electronic communications has been normal practice within the Defence
Sector for some time, indeed tender documentation has often been supported by the use of floppy disks,
CD-ROMs or even, in some cases, e-mails. However e-tendering is more fundamental. It is the conduct of
the complete tendering exercise from the advertising of the requirement through to the placing of the
contract, including the exchange of all relevant documentation all by electronic communication. Ultimately,
contract management and the monitoring of contract performance will be conducted by electronic
communications which we ll now call electronically. 14.3 The Benefits of E-Tendering In addition to
supporting the Governments revised targets for conducting business by electronic communications, there
are business benefits for both the MOD and Industry in doing so. The range of benefits continue to
expand as business processes are changed to maximise the opportunities that electronic tendering can
deliver and detailed below are the most notable: Making the Government easier for Industry to do
business with; Opportunities to stimulate increased interest in the market, by reducing the burden that
Tendering to Government can be; Efficient and effective electronic interfaces between Industry and the
MOD leading to reduced costs and timesaving on both sides; 67

68 Quick and accurate pre-qualification and evaluation which enables the automatic rejection of Industry
partners that fail to meet stipulated fixed criteria; Opportunity for the transmission of quality information to
and from Industry to enable a clearer understanding of the requirements and proposals; Opportunity to
respond quickly to any questions and points of clarification during the tender period Reductions in the
traditionally labour intensive tasks of receipt, recording and distribution of tender submissions. Reducing
the paper trail on tendering exercises, reducing costs to the MOD and Industry alike and supporting green
issues; Providing a clearer audit trail demonstrating integrity; Provision of quality management
information; Improved opportunity for like for like comparisons of qualitative and quantitative information
resulting in a faster more accurate evaluation of tenders; However, in doing so it is vital that current
principles commonly applied in procurement in the Defence Sector are maintained, namely those of
confidentiality, fairness and equity. However care must also be taken to ensure that we do not
unintentionally inhibit competition by moving ahead of the ability of our supplier base to operate using e-
tendering 14.4 What Tendering Tasks Can be Done Electronically With the improved capability across
some areas of the MOD and Industry, it is now possible to enable the electronic conduct of competitive
and single tender responses, as well as acceptances and declines. However, this is subject to the
following conditions being satisfied: Electronic signatures for documents originating from Industry are
created and managed by a Public Key Infrastructure (PKI), backed by a commercial provider that has
been approved by the MOD PKI Policy Management Authority; Electronic signatures for documents
originating from the MOD and created and managed by a Public Key Infrastructure managed or
authorised by the MOD PKI Policy Management Authority; The security and operating procedures of
MOD and Industry internal information systems (IS) are maintained; 68

69 The current principles, and not the entire practice, of the MOD Tender Board are fully replicated, by
the use of a virtual tender box which restricts access to tenders until after the due date and time for
receipt; The integrity of stored tender documentation is maintained through the use of an appropriate
technical infrastructure. If these conditions are fully met, the requirement for a paper master copy is no
longer necessary as there is no legal requirement for paper documentation, provided that electronic
information is sufficiently robust to enable it to be produced as evidence. However, discretion should be
exercised and factors such as the tender value, familiarity of those involved and experience of e-tendering
should be given due consideration. The requirement for a paper master copy of contracts is likely to
remain until confidence in an electronic repository for contracts has been developed. 14.5 The Future for
Electronic Tendering It is the MOD s aspiration to introduce an e-tendering solution that will encompass
the endto-end tendering process, including Pre-Qualification Questionnaire, the invitation to tender,
managing the tender process through to Contract award, contract management and performance
monitoring. MOD is currently developing a User Requirement Document and business case to introduce a
facility which, it is hoped, might be provided via a pan- Departmental solution being developed by the
OGC 14.6 Key Principles to Consider When Conducting e-tendering Until corporate solutions become
available, the key principles which should be considered when conducting e-tendering are as follows:
Security Flexible Process Confidentiality Future Proofing Integrity Audit trail Authentication Affordability 69

70 Equity/ Transparency Compatibility/ Interoperability Liability Firewalls Trust Scalability Business


Benefits Reliability/ Availability Portability of Data Whilst it is intended to deploy corporate e-tendering
solutions in the future, e-tendering may already be undertaken where the local capability exists to do so
as described above. However, it remains as important as ever to ensure that all the necessary
procedures are followed and a robust audit trail created. 70

71 WEEK 15: PRACTICE QUESTIONS FOR TUTORIAL CLASS (15.0) 15.1 Questions (1) Building A is a
proposed 100 bed private hospital while building B is a similar 75 bed hospital which was completed in
2005, the tender of building B less external works and contingency and adapted to current day price level
is N128,325,982 Design information Design features Building A Building B Basement floor 350m 2 304m
2 Ground floor 800m 2 790m 2 1 st, 2 nd floor 2445m 2-1 st 4 th floor - 3,180m 2 Floors 3,595m 2 4,274m
2 Roof area 910m 2 888m 2 Storey height Below ground level 2.7m 2.7m At ground level 3.40m 3.50m 1
st 3 rd floor 3.00m 3.40m Volume 12,966m 3 17,819m 3 External wall area Basement 278 304 Ground
floor 800 1027 1 st 3 rd floor 2160-1 st 4 th floor - 3.40m 3238 5147 Calculate the cost of building B using:
(a) Unit method (b) Cubic method (c) Superficial method 71

72 (2) The choice and/or application of any type of contractual arrangement is a function of certain
factors. Comment (3) The Vice-chancellor of Samuelson University, Oweri, proposes to undertake repairs
and maintenance of the University library. As a commissioned consultant Quantity Surveyor to the project,
advise him on the best type of contract suitable and explain your decision. (4) Profit is the main motivator
to a tender. Discuss. What are the factors that affect the net profit of a contractor. (5) General overheads
to a profit is allowed. As a quantity surveyor, profer explanation(s) to your client. Illustrate how to
apportion overheads for a project construction company whose total labour cost is construction company
whose total labour cost is N9m, turnover is N350m and overheads is N3m (6) (a) Certain items are
important in all-in labour rate calculation. Comment (b) Calculate the all in-hourly rate craftsmen
considering Basic monthly = N3000.00 5% for gang leadership and pension Insurance 3% Tools and
transport 8% Housing and leave 50% (7) Profit and overhead appear to be more important to the
contractor that any other items of the unit rate. Explain stating the factors that affect their allowances. (8)
Why allow certain percentages for profit and attendance for the builder (main contractor) for work
undertaken in electrical installations? (9) What are the implication of prime cost sums on the efficient
delivery of construction projects. 72

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