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Tenders and Bidding

Tenders are usually conducted in four stages: Prequalification; the issue of tender documents; receipt and review of tenders; award of contract.

Prequalification

Prequalification is a means of identifying contractors who indicate that they are qualified and would be interested in tendering for a potential project. Prequalification is not tendering; it is not always used and it is not always necessary that it be used. Most contracts are publicly advertised for tendering without the need for prequalification. Prequalification is primarily applied for large, complex projects that require specialised technical expertise. Prequalification also allows for “Early Contractor Involvement“(ECI) provides an efficient means of designing and planning infrastructure projects in a cost-effective, more efficient and less adversarial structure in which qualified contractors can offer their expertise prior to the start of a project.

Advantages of prequalification

Prequalification saves the owner of the project time and money by eliminating unqualified contractors from the start. It short lists contractors which have the required competence to comply with the terms of the contract and the financial and technical ability to undertake the work. Read more
In the case where prequalification is used, only contractors which have been pre-qualified are eligible to bid on the contract. Guidance on suitable forms for prequalification is given by FIDIC.

Issuance of tender documents

Regardless of the type of tender procedure used, owners of projects should realise that the lowest tender or price may not necessarily be the most advantageous. The working methods, including environmental impacts, and risk assessment are also important considerations. Generally speaking, bidding for dredging contracts is identical to bidding for civil engineering construction contracts, i.e., in the form of competitive tendering on the basis of tender documents made available by the prospective employer and drafted by the employer or by consulting engineers appointed by the employer.

Tender documents

The tender documents usually set out in detail the various conditions applicable to the tender procedure itself, and the contract conditions that will govern the relationship between the employer and the successful tenderer, regarding the execution of the works that are the subject of the tender procedure. Sufficient information must be provided, as a result of the design, to describe clearly the elements of the works and present to tenderers the data and information required for the preparation of a responsible tender.

Evaluating risk

Generally speaking, the more detailed engineering information available and specified, the less risk the contractor has to include in the price to accomplish the work. This can have the effect of lowering the cost of the project by shifting the risk and initial engineering costs to the client or owner. When starting tender procedures, employers and consulting engineers should be aware that the fewer details given and the more vague the specifications and information contained in the invitation to the prospective tenderers, the greater the risk that irresponsible bidders will participate. The smaller the risk to be borne by the contractor, the better the comparison of the various tenderers can be effected.

Receipt, review and award of tenders

The procedure to receive and review tenders will fall within strict deadlines and policy guidelines established by the employer. These methods should be defined, documented and understood by all parties. The employer will review tenders and decide on which contractor has the capability and resources to meet the stipulated requirements. These review will consider risks and risk allocation including environmental risks. Employers should be wary that if risks are difficult to evaluate, some marginally qualified contractors may offer lower prices, as they have not anticipated some of the risks. However, if these risks materialise, the contractor may not be able to bear them, which can lead to unexpected damages for the employer. In this context, collecting the most extensive and complete information about soil conditions may be costly, but it will pay for itself and often leads to the most economical contract price with the least amount of surprises and risks. Since dredging works are subject to the influence of external factors such as climatic conditions or navigational requirements, which may prohibit the uninterrupted use of the dredging equipment, provisions for standing by and idleness are provided for (see FIDIC Blue Book). Costs of weather downtime are usually included in the dredging costs as a contractor’s risk.

Awarding the contract

The award of the tender to a specific contractor will hopefully take risk evaluation and allocation into consideration. The award will hopefully also strive for the Best Value contract. Such a contract may be higher in price in the short term, but will provide a better result in the long term. When considering a “Best Value” contract, factors such as quality, options and incentives, ongoing maintenance and/or a longer project lifespan are considered and not just the lowest price.