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WESTERN MINDANAO STATE UNIVERSITY
ENVIRONMENTAL ENGINEERING DEPARTMENT
COLLEGE OF ENGINEERING AND TECHNOLOGY
ZAMBOANGA CITY, PHILIPPINES
1. Enumerate and discuss the various bidding processes involve in engineering
projects.
Bidding is the lifeblood of the construction industry. Most contracts are only awarded after a competitive bidding process, and unless there’s a longstanding relationship, competitive bidding is the only way to find work in the construction industry. Naturally, these bids get competitive – so mastering the bidding process is vital to bringing more business to your constriction company. The various types of bidding processes that are involve in engineering projects are contract bidding, competitive bidding, closed-bidding, negotiation bid and etc. Anyhow, the types of bidding and the steps are relatively quite and conductive regardless of the nature of bidding process and the engineering projects. Here are the common bidding processes and basic construction bidding procedure in engineering projects: Research and Planning Before you can bid, you must do the due diligence. That means finding the project that fits your company’s qualifications. You should only bid on projects in fields where you have extensive experience and have already proven your skill. You can look at your business plan as a resource, and if the project aligns with your company, then you should start working on a plan. That plan must include why your business is the one to best take on the project, so do research on the company you’re bidding on. Use all the information you can to structure your bid to meet their various requirements. Prepare the Bid Once you’ve done the research and have a tentative plan in place to show how your company is right for the project, you now must customize your business plan to show how you can fulfill the bid request. Of course, you must consider the costs of materials, time and labor, but never under bid for the job. Note: Whoever offers the lowest bid for the project doesn’t always win. Submit the Bid The bid can be submitted in any number of ways. Governmental agencies usually have an online portal where you can upload your bill for consideration. If so, make sure you know how the platform works and that the submission goes through correctly. Sometimes, digital file is becoming the standard as it can be easily distributed. Presentation You did the research; you submitted the bid, and now you’re invited to meet with the company. Congratulations, you’ve cleared one hurdle, but you’ve not crossed the finish line yet! You’ll be invited to present your pitch and meet the people you’re hoping to work for. This, like submitting the bid, can be done in more than one way.
Being Awarded the Contract As the bidding process comes to a close, know when the company is making their final decision. If you got it, great, you know sooner than later. But if they pass on your bid, then you want to know when that happens, so you don’t expend any extra time or energy on a lost prospect. Basic Construction Bidding Procedure Government jobs are highly regulated, but bidding and procurement for private projects will be less formal, and owners have broad discretion to use whatever procedure best suits them. Still, most bidding procedures follow the same basic format… Bid Solicitation This is when the owner sends out an Invitation for Bid (IFB) or a Request for Proposals (RFP). Unlike public projects, these aren’t usually large, open invitations. Rather, they’re sent to a smaller group of contractors. This phase will lay out all the specifications, requirements, contract type, and delivery method. Generally, the contract will most likely be awarded based heavily on the bid price. Still, the bid solicitation phase of the procurement process will require other information beyond the price – like a request for qualifications (RFQs) asking for more information on the prospective contractor’s company history. Bid Submission A bid submission should include all of the bidder’s relevant business information. This will be a list of the contractor’s past projects, plans for management, and their track record of staying on schedule and under budget. When calculating a bid, it should be as accurate as possible. The estimate, based off of blueprints and the bill of quantities, should include all costs. That includes things like overhead, labor, materials, equipment, and of course, profit margin. To win a bid, this number should represent the best quality at the most reasonable price. The bid should be as clean and organized as possible. A bid sheet serves as the face of the bidder’s company. Be sure it has a professional touch, and that it is submitted to the right place at the right time. Bid Selection On government construction projects, rules are in place to make sure the government selects the low bidder (or, one of the low bidders). Meaning, the lowest contract price wins out. The reason behind this is to prevent any fraud, abuses, or favouritism. By mandating that the lowest responsible bid be accepted, the idea is that price will be the ultimate equalizer. On private projects, owners have much more leeway to pick a bid for reasons beyond price. Don’t get us wrong – price is almost always among the determining factors when it comes to bid selection. But, if two contractors have comparable bids, factors other than price might matter a lot more than they do with public projects. Contract Formation When the owner selects which bid or proposal best suits their needs, the contract must still be formed and signed. If your company wins the bid, this is an opportunity to negotiate. At this point in the process, the type of contract has already been established, but there’s still an opportunity to set out the final pricing and terms of the contract itself.
Unit Price Contracts Unit price contracts divide the total work required to complete a project into separate units. They are also known as measurement contracts, measure and pay contracts, or remeasurement contracts. The contractor provides the owner with price estimates for each unit of work, rather than an estimate for the project as a whole. Unit price contracts simplify invoicing. Unit price contracts allow for increased transparency. Owners can easily understand each cost that goes into the final price of the contract because the price of each unit is predetermined. This helps avoid disputes and arguments when it’s time to pay up. If more work is required, the profit margin stays the same. Any extra work that’s needed is simply added on as another pre- priced unit, making it easier to manage change orders and other alterations to the scope of work. Predicting the final value of the contract can be difficult. Usually, the number of units needed to complete a project isn’t known immediately. This means owners may pay more than they expected. Remeasurement can delay payment. Remeasurement, or the owner’s ability to compare the price of each unit with the total cost of the project, can slow down payment. GMP Contracts Guaranteed maximum price (GMP) contracts establish a cap on the contract price. With this type of construction contract, the property owner won’t exceed the contract price. Any material or labor costs above that price should be covered by the contractor. GMP contracts make for quicker projects. Having a final contract price accelerates the bidding process, and it makes financing projects easier because lenders know the maximum amount a given project will cost early on. GMP contracts incentivize savings. Having a fixed price overhead incentivizes contractors to reduce costs and finish ahead of schedule. Owners usually agree to share cost savings with their contractors. GMP contracts place risk on contractors. Unfortunately, GMP contracts force the party doing the work to absorb cost overages in the event the contract price maximum is exceeded. GMP contracts can take longer to review and negotiate. In order to protect themselves from exceeding the price cap, contractors may try to increase the maximum price of the contract. When this happens, the negotiation process is elongated and the project takes longer to start.
3. Identify the processes involve in the preparation of contract for engineering
projects.
In engineering projects, just like bidding, project contract is probably really important that building surveyors and contractors do their due diligence before bid documents are created. That way, there is less likely to be any legal issues. Although it can vary, but the following are the most common steps for preparation of contracts. Prepare the Statement of Work (SOW) / Terms of Reference (TOR) Regardless of the terminology, the first step is to produce a written statement of what is required from the subcontractor. The most important thing is to be comprehensive. There is no way to sugar coat this. An incomplete SOW is a recipe for project problems. Contractors will want additional money for work they didn’t think was part of the contract, and it will be discovered and dealt with at the worst possible time when the contractor is in place and halting their work until it’s dealt with. In short, there no substitute for a thorough statement of work. Determine the Project Estimate/ Preparation of Project Estimate In engineering projects, the engineers or architects will itemize each piece of material within the design and estimate the time and materials required to arrive at the final tender estimate. Capital budgeting methods such as the net present value are used in conjunction with project estimates when expenditures and returns are spread out over several years, or the feasibility of a project is being studied. When the project results in non-tangible benefits, such as a road construction project, a cost benefit analysis is used to justify the expenditure. Prepare Bid Documents The bid documents are usually called names like Invitation to Tender, Request for Proposal (RFP), or Request for Quote (RFQ). These documents include the statement of work and/or terms of reference. There are three types of contracts which may be utilized: Fixed Price - The contractor bids a lump sum which includes all of the risk of project changes within the project scope. Cost plus - There is a reimbursement component (cost) and a profit component (plus). The contractor is selected based the sum of both components. The reimbursement component is subsequently paid based on time and materials, and the profit component is paid based on percent complete. Time and Materials - The contractors are selected based on the expected total time and materials required, and subsequently paid based on time and materials expended. Usually, the total bid price becomes a fixed maximum fee. The contractor’s profit must be included within the unit rates, for example, the hourly rate for construction equipment includes profit. Advertise Once the bid documents are finalized, the project can be advertised on the medium that is ideal for that industry. It is common that the bid documents require clarification during the bidding process. This is done via an “addendum” which becomes part of the bid documents. Addenda must be acknowledged by the bidders when submitting their bid or it must be rejected. This is because the bids must be evaluated equally. A contractor that missed an addendum might have
To prevent this situation, it is often necessary to dedicate important resources (money, personnel, time, etc.) to monitor and control the process. A great potential for improvement was detected if state of the art technologies such as, electronic mail, EDI (Electronic Data Interchange), bar codes, and other systems were applied to the procurement process. The following are the common evaluation of the procurement planning: Phase I- Characterization Of The Company And The Project This phase seeks to characterize the company, in order to facilitate the process of problem review and later analysis within the methodology. This phase involves the characterization of the Company using pre-designed instruments to collect information about general aspects of the company, description of the way they face projects, and management of know – how, and experience within the company. Phase Ii- Diagnose In this phase, some elements of the process are checked, to detect the status of the procurement process compared with some general strategies or considerations that were found more appropriate during the current research. This stage involves analysis of the following items: procedures used, purchasing strategy, suppliers, programs, information flows, and technological instruments. This stage includes the development of an initial value stream map of the procurement process. Phase III- Selection And Use Of Indicators Indicators are an important part of the methodology itself. They can give “signals” to management regarding how the process is performing and they can facilitate the evaluation within the project. Nevertheless, the particular project considerations are the most important for the selection because not all the indicators might be necessary or might be available for a given project. Phase IV- Evaluation Of Problems, And The Cause And Effect. The evaluation stage comprises the following steps: establishing the group of people to be interviewed; value stream maps, general and detailed; project surveys; review of performance indicators; analysis of nonconformity reports; cause – effect analysis regarding delays, costs, time cycles and others. Three tools are used below to diagnose the reality regarding procurement in projects: a survey of problems (all projects), analysis of nonconformity reports (case of industrial project) and cause-effect analysis for cycle times (all projects). Phase V- Selection Of Instruments And Strategies During this phase there is a search for appropriate solutions to reduce or eliminate waste detected in the process. It involves the following stages: generation of instruments and strategies, setting of priorities for the instruments proposed, and implementation of strategies and instruments for improvement. Instruments are specific tools, technologies, actions or simple methods. The strategies for improvement are compounds of instruments.
