Types of Tendering

Course: - Construction Management

 Group Members

Name ID No.
1 Bethlehem Ashenafi etr/8113/10

2 Deborah Tamrat etr/6853/10

3 Mahlet Yoseph etr/ 1669/10

4 Manyazewal Abera etr/4263/10

5 Natnael Nigatu etr/8577/10

6 Paulos Mitiku etr/2990/10

7 Saminas Demoz etr/9270/10

8 Sara Usman etr/0819/10

9 Tesfamikael Birhane etr/1717/10

10 Tsion Dirsha etr/7922/10

11 Yoftahe Assegnew etr/9732/10

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 Acknowledgment

In writing this assignment, we had to take the help and guidance of some respected people, who
deserve our greatest gratitude. We would like to extend our gratitude to Mr. Teklebirhan for
giving us a good guideline for the assignment through numerous carefully planned consultations.
We would also like to expand our deepest gratitude to all those who have directly and indirectly
guided us in writing this assignment.

The contribution of each and every team member was significant as the many valuable
comments and suggestions that were made have served as an inspiration to further improve and
develop the content of the assignment.

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Abstract

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 Table of Contents

1. Introduction..................................................................................................................................6

1.1 Tender in construction...........................................................................................................6

1.2 The tendering process in construction...................................................................................6

2. Background of Tendering............................................................................................................6

2.1 Stages involved in the tendering process...............................................................................6

2.1.1 Pre tender stage...............................................................................................................6

2.1.2 Invitation for bids............................................................................................................7

2.1.3 Submission of bids..........................................................................................................7

2.1.4 Tender selection..............................................................................................................7

2.1.5 Awarding of contract.......................................................................................................7

2.1.6 Project execution.............................................................................................................7

2.2 Types of tendering.................................................................................................................8

2.2.1 Open Tender....................................................................................................................8

2.2.2 Limited/selective tender..................................................................................................8

2.2.3 Negotiation tender...........................................................................................................9

2.2.4 Serial tender.....................................................................................................................9

2.3. List of tender documents.....................................................................................................10

2.4. Important terms related to tender........................................................................................10

2.4.1 Earnest money...............................................................................................................10

2.4.2 Security money..............................................................................................................11

2.4.3 Tender drawings............................................................................................................11

3. Ethiopian context (practice) of the different types of tendering................................................11

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 3.1 Tender or bid regulations in Ethiopia..................................................................................12

3.1.1 The Powers of the Agency............................................................................................12

3.1.2 Preferences and non-discrimination..............................................................................13

3.1.3 Form of communications and language........................................................................13

3.1.4 Qualification of Candidates...........................................................................................13

3.1.5 Rejection of Bids, Proposals and Quotations................................................................14

3.2 Tender or Bid Procedures in Ethiopia..................................................................................15

3.2.1 Procedures for Open Tender..........................................................................................15

3.2.2 Procedures for Two-Stage Bidding...............................................................................17

3.2.3 Procedures for Restricted Tendering.............................................................................18

4. Conclusion.................................................................................................................................20

Reference.......................................................................................................................................21

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1. Introduction

1.1 Tender in construction

Tender is an invitation from the owner/perpetrator to the contractor to execute some work at
specified cost in specified time. It is published in the form of tender notice in newspapers, notice
boards, gussets, etc. according to the cost of works. It is generally based on a bill of quantities
and specifications of quantities and specifications of the statement of work.

The term tender formally means an invitation to trade under the terms of offer, while the term
contract is used when two parties have reached agreement.

1.2 The tendering process in construction

Tendering is the process of inviting bids for significant projects, which is typically used by
government entities. The primary goal of the tendering process in construction is to eradicate
bias and corruption in the granting of construction contracts.

The tendering process is highly regulated for government projects, but it can be less formal for
private projects. However, it follows more or less the same procedure.

2. Background of Tendering

2.1 Stages involved in the tendering process

The tendering process is highly regulated for government projects, but it can be less formal for
private projects. However, it follows more or less the same procedure. The necessary steps are:

2.1.1 Pre tender stage

When a client has a concept at the pre tender stage the client employs a consultant to discuss the
project further. The consultant will advise, manage the tender and contract, and also translate the
idea into a drawing. At this point, The clinet and consultants will be discussing the scope,
timeline and budget.
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2.1.2 Invitation for bids
Here the project owner sends a bid request (RFB) or an invitation to bidders (IFB). For public
projects, these are usually large and open invitations. This is when the project owner outlines
the project requirements, specifies the type of contract, and defines the delivery method to be
used.

2.1.3 Submission of bids

The next step is submission. This should contain all relevant company information. This has all
the previous plans, management plans, and a track record of the company getting things done
on time. The offer must be as accurate as possible. It should also include a cost estimate based
on the nomenclature and master plans.

2.1.4 Tender selection

There are few rules, especially in government projects, to ensure that the rock bottom bidder
wins the contract. This resolves any fraud or bias in the awarding of contracts so that in the end
price is the ultimate equalizer. However, with private construction projects, there is more room
to consider other factors when choosing a winning bid but the price always acts as a tiebreaker
when contractors have very similar bids.

2.1.5 Awarding of contract

After the owner has selected an offer that meets his requirements, the parties involved must
prepare and sign a legally binding contract prior to the pre-construction consultation. It is also
an opportunity for final price negotiations by the winning company. Any other inaccurate
contractual clause can also be discussed and finalized.

2.1.6 Project execution

After awarding the contract for the selected contractor, the construction project is ready to roll
depending on the project delivery method used.

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2.2 Types of tendering

2.2.1 Open Tender

This is the primary tendering technique used by both the private and public sectors. The
customer promotes the tender offer in the local newspaper, with crucial details about the
intended works and invites interested contractors.

Advantage

 There are high levels of transparency and competition

 More opportunities are created
 There is no partiality in the selection of contractors

Disadvantage

 The wrong contractor may be chosen because the background can be unknown
 Client must bear expensive cost of tendering
 It consumes additional time

2.2.2 Limited/selective tender

This is an option that has been created to address the limitations of the open tender system. It
seeks to improve the quality of proposals by ensuring that only contractors with the necessary
experience can submit.

The contractor who submits the lowest tender is generally awarded the contract; however, they
are chosen for their expertise and experiences

Advantages

 Time efficient and cost effective resource utilization ensues

 There is a better tender management
 A dependable competent contractor can be chosen

Disadvantages

 Less competition can lead to bias

 The tender price is almost always greater than it would have been in open tendering

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  Favoritism may occur throughout the shortlisting process

2.2.3 Negotiation tender

This tendering process is commonly used in the engineering and construction industries where
pre contract and post contract negotiations take place.

Under this method only one contractor is approached; following the completion of the design,
the contractor will price the bill of quantities and then enter into a negotiation with the quantity
surveyor.

Advantage

 It can decrease the danger of failure

 Work on the job site will begin as soon as possible.
 Special circumstances, like emergencies or security concerns are the best alternatives for
the employer to consider

Disadvantage

 The cost of work is likely to be higher than the cost of a competitive tender
 It reduces the amount of work available to other contractors

2.2.4 Serial tender

Serial tendering generally involves the preparation of tenders based on a typical or notional bill
of quantities or schedule of works. The rates submitted can then be used to value works over a
series of similar projects, often for a fixed period of time following which the tender procedure
may be repeated.

Serial tendering may use where the client has a regular program of works that they would like to
be undertaken by a single contractor, often minor works, repetitive works (such as housing) or
maintenance work.

Advantage

 It can reduce tender cost

 May encourage suppliers to submit low rates to secure an ongoing program of work

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Disadvantage

 The contractor might accept a small loss on the first project

2.3. List of tender documents

Tender documents may be prepared for a range of contracts, such as equipment supply, the main
construction contract (including design by the contractor), demolition, enabling works, etc.

Tenders documents may include:

 Tender Form
 Special and general terms and condition
 Specification and tender drawings
 Bill of quantities (BOQ)
 Labor laws and clauses
 EHS clause
 BIM Protocol ( in case of large & complex project)

2.4. Important terms related to tender

Some important terms I am listing below which you must aware of before knowing further about
what is tender in construction.

2.4.1 Earnest money

It is a guarantee in the shape of money, given by the contractors along with their tenders,
confirming their willingness to work for the department. The mode of earnest money to be sent is
informed by the department which is in the shape of a draft in favor of the department
(competent authority). It is generally about 2-2.5 % of the estimated tender value.

If the tender of the contractor is rejected, the money is returned to the contractor immediately,
otherwise, it is adjusted at the time of final payment to the contractor.

2.4.2 Security money

This is the money that the contractor has to deposit to the department or to the employer when
the contract is allotted to them. It is 10 % of the total estimate. This money also includes earnest
money already deposited by the contractor.

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This deposit is kept as a check so that the conditions of the contract that are agreed upon are
fulfilled and the work is completed to the satisfaction of the authorities within time. This money
can be forbidden by the employer if progress and the quality of the work are not up to the mark.

2.4.3 Tender drawings

These are the set of drawing which is issued during the tender by the employer. These sets of
drawings are issued to have an overview of the volume and complexity of the project. These
drawings help out the contractor to calculate the price for the tender.

These drawings are different from GFC ( good for construction) drawings and are only given for
reference purposes.

3. Ethiopian context (practice) of the different types of

tendering
Tender or bid in Ethiopia is something the majority of businesses would like to participate in
since the biggest buyer in Ethiopia is the government and the various governmental ministries,
authorities, offices, public enterprises, corporations, etc. are required to buy through tender. So it
is necessary to know the regulation and procedures of tender or bid in Ethiopia. (Melese, 17
March 2009)

Federal Government in Ethiopia is the major purchaser of construction. And the tendering
process for award of construction projects in Ethiopia is usually based on the lowest-bidding
method. In this method, the firm which is responsive and submits the lowest bid, gets the right
for the construction project. It is generally accepted that competitive lowest bidding method
saves public money and protects public interest. (Mebratu)

There are definite benefits and drawbacks to the low-bid award system. Promoting competition
amongst contractors, compelling contractors to lower their costs, usually through innovation are
clear benefits to the process. In addition, the process is beneficial specifically to the public sector
because of the transparency, an important criterion of public policy. However, allowing projects
to be awarded based on the least price has inherent flaws. Delays in meeting the contract
duration, increment of the final project cost due to high variations, tendency to compromise

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quality, and adversarial relationship among contracting parties are the major drawbacks
associated with low-bid award procedure. (Mebratu)

3.1 Tender or bid regulations in Ethiopia

3.1.1 The Powers of the Agency

(Article 16 of the Proclamation)
The Agency has the following powers to:

1. Require any information, documents, records and reports in respect of any aspect of the
public procurement process where a breach, wrongdoing, mismanagement or collusions has
been alleged, reported or proven against any public body;
2. Summon witnesses, call for the production of books of accounts, plans, documents and
examine witnesses and parties concerned on oath;
3. Give warning to or suspend for a definite or indefinite period of time from participating in
public procurement፡ candidates, suppliers or persons involved in the disposal of public
property where it proves that they have offered a price higher than the market or committed
an act contravening the provisions of the Proclamation and the directives issued by the
Minister;
4. Conduct audit on its own program or cause audit to be conducted where it receives
allegations of misconduct warranting such audit on a process of public procurement and
property administration;
5. Up on the request of public bodies, exceptionally and when justified on sound grounds, may
permit the use of a procedure which is not consistent with the procedures laid down by the
Proclamation or the procurement directives.

3.1.2 Preferences and non-discrimination

(Article 25 and 24 of the Proclamation)
According to article 25 of the Proclamation, goods produced in Ethiopia (which also includes
goods whose value has been added by 35%), works carried by Ethiopian nationals, and for
consultancy services rendered by Ethiopian nationals, will get preference in the evaluation
process. In particular, where in the evaluation of bids for procurement of goods, services or

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works equal percentage points are resulted for bidders offering similar price and quality,
preference shall be given to local goods, services or companies.

Other than the above preference, a public body must not discriminate potential candidates on the
basis of nationality, race or any other criterion not having to do with their qualifications.

3.1.3 Form of communications and language

(Article 26 and 27 of the Proclamation)
Communications between candidates and public bodies must be in writing (electronic may also
be used). Any communications not made in written form shall be subsequently referred to and
confirmed in writing.

The language used in a national bid (which doesn’t involve international bidders) is Amharic.
However, if it is found to facilitate the procurement process, the public body concerned may
authorize the use of English language in the preparation of bid documents and bid proposals in a
national bid in which only local bidders participate, provided that such an act is not prejudicial to
fair competition. English language is also used for international bids.

3.1.4 Qualification of Candidates

(Article 28-29 of the Proclamation)
In order to participate in public procurement, candidates must qualify by meeting the following
criteria and such other criteria, as the public body considers appropriate under the circumstances:

a. that they possess the necessary professional and technical qualifications and competence,
financial resources, equipment and other physical facilities, managerial capability,
experience in the procurement object, reputation, and the personnel, to perform the contract;
b. that they have the legal capacity to enter into the contract;
c. that they are not insolvent, in receivership, bankrupt or being wound up, their business
activities have not been suspended, and they are not the subject of legal proceedings for any
of the foregoing;
d. subject to the directives that are issued by the Ministry, that they are registered in the
suppliers list;

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e. that the period for which they were suspended from participating in public procurement is
over;
f. that they have renewed trade license and fulfilled their obligations to pay taxes according to
Ethiopian tax laws;
g. that they have a bank account

The above stated requirements along those established by the public body should be set forth in
the bid documents or other documents for solicitation of proposals, and should apply equally to
all candidates.

Note, that the submission of false, inaccurate or incomplete information would disqualify such
candidate.

The bid should also contain technical specifications and descriptions laying down the
characteristics of the goods or services to be procured. In particular, the bid should clearly
describe public body’s requirement with respect the quality, performance, safety and where
necessary dimensions, symbols, terminology, packaging, marking and labeling, or the processes
and methods of production and requirements relating to conformity assessment procedures.

3.1.5 Rejection of Bids, Proposals and Quotations

(Article 30 of the Proclamation)
Public bodies may for one or more of the following reasons reject in whole or in part bids,
proposals or quotations at any time prior to the conclusion of procurement contract where:

a. there is proof of error in the procurement proceeding which could affect the outcome of the
bid;
b. it is ascertained that the procurement has no use in enabling the public body to obtain a better
technical or economic advantage as a result of a change of work plan or another alternative
representing a better option to meet the requirement of the public body;
c. bidders fail to meet the minimum criteria set forth in the bid document;
d. the minimum price offered in the bid does not match with the market price circulated by the
Agency and the public body expected that it can get a better price advantage by re-
advertising the bid;

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e. the price offered by the successful bidder exceeds the budgetary allocation made for the
procurement and the public body cannot make up for the deficiency from any other source;
f. It is proved that the bidding is not sufficiently competitive as a result of connivance among
candidates.

Public bodies have to give notice to candidates forth with disclosing the reasons for rejecting
bids, proposals or quotations wholly or partially. However, they are not required to justify the
reasons. If the decision to reject all bids results before the opening date and time, the bids
received shall be returned unopened to the candidates submitting them.

3.2 Tender or Bid Procedures in Ethiopia

3.2.1 Procedures for Open Tender

Advertisements and Invitation to bid

(Proclamation 35 and 36 of the Proclamation)

The first procedure is an ‘invitation to bid’ which must be consistent to the standard bid
documents prepared by the Ministry. Invitation to bid must be advertised in at least one times in
a national newspaper of general circulation which is published in the language the bidding
document is prepared. The public body may also advertise the bid on a national radio or
television where it finds it necessary.

Apart from the standard bidding document, an invitation to bid should include the following
particulars:

a. The name and address of the public body;

b. A brief description of the goods, works or services to be procured;
c. The means and conditions for obtaining the bidding documents and the place from which
they may be obtained;
d. The place and deadline for the submission of bids; and
e. The place and time for opening of bids, along with an announcement that bidders or their
representatives are allowed to attend at the opening of bids.

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Bidding Document

(Article 37-40 of the Proclamation)

After the invitation to a bid, the public body issues a bidding document. The bidding document
must contain sufficient information to enable competition among bidders, such as instructions for
the preparation of submission of bids, date of submission, bid submission forms, the number of
copies to be submitted with the original bid, general and specific conditions of the contract and
the type of evidence for qualifications. Further the bidding document includes the conditions for
furnishing bid security.

Submission and Receipt of Bids, and Opening of Bids

(Article 41and 42 of the Proclamation)

Next, potential candidates are required to submit their bids to the public body issuing the bidding
document. Bids should be submitted in writing, signed and sealed in an envelope, before the
deadline stated in the invitation to bid. Then the public body will open the bids which were
submitted before the deadline.

Examination and Evaluation of Bids

(Article 43 of the Proclamation)

A bid becomes tenable if it conforms to salient requirements provided in the bidding document.
The public body may ask bidders for clarification of bids in order to assist in the examination
and evaluation of bids. However, the assistance should not result in a change in substance of the
bid (e.g. change in price). In particular, a bid is deemed as valid even if it contains minor
deviations i.e. those defects that do not alter the substance of the bid (usually arithmetic
corrections). If the bidder rejects such arithmetic corrections then the bidder will be disqualified.

A bid may also be deemed as unfit if it has failed to demonstrate the qualification requirements
(discussed earlier or see article 28 of the Proclamation)

In other words, a successful bid is:

a. The bid that is found to be responsive to the technical requirements and with the lowest
evaluated price;

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b. If the bidding document sets a preference for potential candidates who offer a better
economic advantage then such bidder will become successful.
c. Where it is ascertained in post evaluation of bids that the legal, financial and technical
standing of the candidate selected as the successful bidder conforms to the requirements
stated in the bidding document.

Notification of Award and Signing of Contract

(Article 46 and 47 of the Proclamation)

A qualified bidder, who presented a successful bid, is notified that his bid has been accepted
before the expiry period of bid validity. The bidder, then, will sign a contract of agreement with
the public body. In certain circumstances the bidder is required to furnish contract security to
make good any damage the public body may sustain as a result of the supplier’s default.

3.2.2 Procedures for Two-Stage Bidding

(Article 57 and 58 of the Proclamation)
Public bodies may engage in procurement by means of two-stage bidding:

1. When it is not feasible for the public body to formulate detailed specifications for the
goods or works and in the case of services, to identify their characteristics and, in order to
obtain the most satisfactory solution to its procurement needs;
2. When the public body seeks to enter into a contract for the purpose of research,
experiment, study or development, except where the contract includes the production of
goods in quantities sufficient to establish their commercial viability or to recover research
and development costs;
3. Where bid proceedings are initiated but no bids are submitted as a result of the nature of
the object of procurement not being clearly described or where all bids are rejected due to
failure on the part of the public body concerned to draw up a clear and complete
specification; or
4. Because of the technical character of the required goods or works or because of the
nature of the consultancy or other services it is necessary for the public body to negotiate
with the suppliers.

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Two-stage bidding as its name denotes involves two stages.

In the first stage the public body prepares a solicitation documents that call upon suppliers to
submit their proposals without a tender price. The solicitation documents may also solicit
proposal relating to the technical, quality or other characteristics of the goods, works or services
as well as to contractual terms and conditions of supply, and where relevant the professional and
technical competence and qualifications of the suppliers.

The public body, then, identify responsive bids by evaluating the proposals submitted by the
bidders at the first stage of the bid proceeding against its requirements. The public body may
without prejudice to their intellectual property rights at the first stage hold discussion with the
candidates on the content of their proposals.

Next, the public body draws up a specification which is more appropriate to its requirements on
the basis of the evaluation against the requirements of the proposals submitted to it at the first
stage of the bid proceeding. It then proceed to communicate the revised specification to the
candidates who submitted responsible bids at the first stage and invite such candidates to submit
proposals on the basis of the revised specification.

Therefore, the second stage commences upon the invitation to bid based on the revised
specifications. A supplier not wishing to participate in the second stage of tendering in
accordance with the reformulated specification may withdraw from the proceeding. Note that
article 43 of the proclamation, dealing with examination and evaluation on open tender, is also
applicable to two-stage bidding.

3.2.3 Procedures for Restricted Tendering

(Article 49 and 50 of the Proclamation)
A public body may use restricted tendering as a method of procurement only where the
following conditions are satisfied:

1. It is a ascertained that the required object of procurement is available only with limited
suppliers;
2. The cost of procurement does not exceed a certain threshold to be specified in a directive to
be issued by the Minister; or

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3. Where a repeated advertisement of the invitation to bid fails to attract bidders.

Restricted tendering procedures are the same as those applied in open tendering, except that:

 Where the object of procurement is available only with limited suppliers the invitation to bid
is sent to all such suppliers. Therefore such bid is not subjected to advertisement.
 If restricted tendering is used for the reason stated above in bulletin 2 and 3, the invitation to
bid shall as far as possible be sent to limited suppliers chosen from among those registered in
the suppliers list on the basis of the following consideration:
 Any selection shall allow opportunities for suppliers on the list,
 The number of suppliers to whom the invitation to bid is sent shall be such that it is sufficient
to ensure effective competition and shall not as far as possible be less than five competitors.

4. Conclusion

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Reference

Mebratu, S. (n.d.). Tender aluation System for Public Building Projects in Ethiopia.

Melese, D. (17 March 2009). How to Participate in Government Tender or bid in Ethiopia:
Regulations and Procedures. General Info.

Nick. (OCTOBER 6, 2020). What Is Tender in Construction- Distinctive Guide.

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