Chapter 4 pre tender planning and procedures PDF

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The pre-tender planning phase entails the identification of current position and needs, the resources and time planning and budgeting, the project preparation including the definition of the requirements and the choice of methods. Therefore, the pre-tender planning phase is considered to be crucial ...

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04 – Pre-Tender Planning & Procedures

FACULTY OF ENGINEERING DEPARTMENT OF CIVIL ENGINEERING AND SURVEYING DIPLOMA: ENGINEERING: CIVIL MANAGEMENT II (MACI021) --- 2020 --- Ms S Ramkison

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PRE-TENDER PLANNING AND PROCEDURES

The pre-tender planning phase entails the identification of current position and needs, the resources and time planning and budgeting, the project preparation including the definition of the requirements and the choice of methods. Therefore, the pre-tender planning phase is considered to be crucial as the right planning minimises the necessity of contract modifications.

Pre-tender planning comprises of the following steps: 

The decision to tender.



Examination of the drawings and specifications to identify the various items of work.



Conducting a site investigation and market survey to assess the availability and rates of materials, labour, plant, and other available services.



Identification of methods of executing the work – consideration of alternate, newer, more efficient, and more economical methods.



Estimation of the quantities of the work items and the time and resources required to complete them.



Preparation of a tentative construction programme/schedule in keeping with stipulated time frames.



Deciding the overheads and margin of profit.



Finalisation of the tender price.

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4.1 FACTORS INFLUENCING THE DECISION TO TENDER

When deciding to tender for a job, there are many factors that influence the final decision – some specific (relevant to company) and some general (common to any company).

General influencing factors is as follows:



Current workload (i.e. commitments to projects/contracts currently in progress and/or awarded contract/s soon to begin)



Tender preparation time (i.e. tender submission date/s)



Departmental current workloads (viz. surveying, estimating, buying)



Capital availability (i.e. ability to finance new project and effect/s on capital committed on current project/s)



Human Resources availability



Plant Resources availability



Project Location



Size, Type, and Value of project



Extent and/or value of own work versus that of nominated sub-contractor/s



Competitors (i.e. number and class of competitors)



Previous experience/knowledge of key project role-players (viz. client, consultant, etc.)



Previous experience/knowledge of nominated sub-contractors and suppliers

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

Terms and Conditions of contract, such as:  contract period  retention limits  defects liability period  extent of the liquidation damages  extent of provision of bond  fixed price or fluctuating contract



Labour (i.e. availability and characteristics of local labour, degree of trade union influence, pay policy of competitors, alternative opportunities)



Market Conditions at the time of tender submission. Market conditions likely to affect tendering are:  general market conditions in relation to the availability of contract work and the number of enquiries received  government policy and its effects on the construction industry (i.e. funds allocated to road construction, school construction, and industrial development may encourage or depress activity; availability of grants for areas of redevelopment; grants available to industry)  availability of finance (i.e. current lending rates)

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4.2 PRE-TENDER CONSULTATION

The preparation of the estimate and finalisation of a tender follows a similar process in most organisations.

The procedures used within a smaller organisation may, however, be less formal than in larger and more complex organisations (i.e. some smaller companies may have one person fulfilling two or more key roles).

Larger organisations generally adopt a more formal approach to estimating as the responsibility is shared among the engineering and construction, estimating, and buying teams, with senior management finalising the tender price.

Following the decision to tender, a pre-tender consultation/meeting is held to plan and phase the activities of the tender in order to develop an estimate.

4.2.1 Key Personnel Involved



General Manager/Director (usually acts as Chairperson of meeting)



Planning Engineer



Contracts Manager



Chief Estimator



Office Manager



Buyer



Job Estimator

Note: Personnel is dependent on the size of the company (as mentioned above).

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4.3 PRE-TENDER REPORT

A pre-tender report describes the complete circumstances of the work and the conditions under which the work is likely to be carried out.

The report comprises of the following: 

site investigation/visit details



geography of the area



local weather records



availability of resources (viz. materials, labour, plant, services, etc.)

4.4 SITE INVESTIGATION

The initial examination of a site may be divided into 3 stages, namely: 

The site visit



The desk-top study



Soil exploration/insitu testing (these usually result in a laboratory analysis of soil samples and a formal report for use by the tender team)

Site inspection offers the opportunity to gather in-depth information regarding the proposed project construction site. Site inspections are invaluable for gathering information that will strengthen quality responses, especially those that focus on health and safety, contract implementation, and risk assessment and mitigation. It also assists in clarifying any doubts/concerns about information provided in the tender document. Site visits vary according to whether the site is compact (traditionally enclosed area) or extended (sewer runs, pipelines or coastal defences).

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A site inspection report should aim to gather the following information:

ITEM

INFORMATION REQUIRED

PURPOSE/EFFECT ON TENDER Affects methods of excavation, selection of plant, output of

Ground conditions including type of ground, water 1

excavation plant and rates utilised

table levels, extent of temporary support to be for earth support. Provision for provided.

plant pumping. Location

and

availability

of

boreholes. Location of tipping facilities, distance to tip site, and Affects

rates

of

disposal

of

2 tipping charge.

excavated materials. Allows for assessment of extent of re-usable materials or credits to be

3

Demolition of existing structures

allowed for recovered materials and also assessment of demolition costs. Affects the extent of temporary roads to be provided in the contract preliminaries. Access difficulties for plant and vehicles must be noted.

4

Access to site

Phased delivery of materials may be necessary on a site with limited access and storage facilities. Height and loading limits on bridges in the vicinity of the site must be noted. Directly affects the location of storage facilities on site, extent of

5

Restriction due to site location temporary hoardings or fencing to be provided.

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On restricted sites the location of offices may involve the provision of scaffold gantries. Affects the build-up of the all-in rate which will be affected by the Labour items for consideration include:

plus rates payable in the area.

a) Availability of local skilled, semi-skilled, and Extent of travelling time to be unskilled labour.

allowed

in

the

rates

and

b) Assessment of other major works in the preliminaries. 6 vicinity and the likely effect on the contract.

Degree of labour importation.

c) Local rates of pay.

Provision

d) Availability of accommodation.

facilities and allowances.

e) Transport to be provided for labour.

Transportation of labour to site to be

of

accommodation

allowed

in

contract

preliminaries. Allowances to be made in contract preliminaries

for

temporary

lighting, power supply for large equipment, etc. Services:

Temporary water service required for site staff consumption, site

a) Location of temporary water, electricity, and 7

offices, toilets, and for site mixing telephone services.

plant for concrete or bricklaying.

b) Location of foul and surface water services. Provisions

of

temporary

standpipe/metered connection. Site toilets to be chemical type or connected to the foul sewer with a temporary connection. Affects the overall prices of materials, plant and equipment, Availability of local suppliers, plant and haulage and sub-contract work.

8 facilities, and sub-contractors

Hire rates for plant and haulage may be established locally at MACI021 – 4 Pre-Tender Planning and Procedures

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tender stage as these may differ from normal rates. Provision of site fencing either to complete site boundary or to compound area only. The contract documents may specify protection of the public by 9

Site security

using footpaths adjacent to the site, or the protection of personnel during alterations. The provision and extent of temporary dust screens will also require assessment. Topography of sites in relation to ease and movement of plant. Extent

of

underground

or

overhead obstructions. 10

Other factors Watercourses. Surface contamination. Public transport services serving the site.

The nearest local authorities as well as nearby residents can be a valuable source of local knowledge and cautionary information that may not be visible and obvious during the first inspection of the site.

Many other considerations will apply on a site by site basis and most companies adopt a standardised site visit report or check list to ensure that items are not overlooked.

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4.5 THE METHOD STATEMENT

Before cost estimation of given work items is performed, it is essential to prepare the method statement. Method statement represents the way in which the work will be carried out.

This includes:

a) Site staff details who are going to supervise the work. b) A schedule of the required materials and the proposed sources of supply. c) A schedule of the basic costs, at the time of tender, of the plant and equipment, labour, and materials. d) Details of the proposal for staff offices, workshops, stores, and accommodation. e) A list of sub-contractors proposed to be used. f) Site layout. g) Construction method of each work item. h) List of risks and uncertainties the contractor is going to carry and the responses to deal with them. i) Work breakdown structure of the work. j) A schedule of the activities showing the labour and materials required. k) A detailed program of the work schedule showing the proposed duration of each work item.

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4.6 ESTIMATING

Estimating is not an exact science. Knowledge of construction, level of experience, common sense, and judgement are required.

Estimating is the process of analysing a specific scope of work and predicting the cost of performing the work. The basic challenges the contractor faces are to estimate the cost of constructing a project, schedule the specific construction activities, and then build the project within the estimated cost and schedule.

The objective of estimating is to produce an accurate and cost effective prediction of what a project will most likely cost.

Estimating is a complex process involving the collection of available and pertinent information relating to the scope of the project, expected resource consumption, and future changes in resource costs.

The following information is required to calculate the estimate:  detailed plans and specifications  available site data  available resource date (i.e. plant and equipment, materials, and labour)  contract documents  resource cost information  pertinent government regulations  applicable owner requirements Note: There is no industry standard that has been established for defining estimates.

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The two distinct tasks in cost estimation is: 1) determination of the probable cost 2) determination of the probable time to construct the project

Estimates are performed throughout the life of a project, beginning with the first estimate and extending through the various phases of design and into construction. Initial cost estimates form the basis to which all future estimates are compared. Future estimates are often expected to agree with (i.e. be equal to or less than) the initial estimates. The true cost of the project will not be known until the project has been completed and all costs have been recorded.

4.7 TYPES OF ESTIMATES

There are many types of estimates that can be performed on a project with each type having different levels if accuracy. The estimating process becomes increasingly more expensive and time consuming as more detailed and accurate techniques are applied.

Traditionally, the different classifications of estimates conclude that there are three main types of estimates:

1 – Conceptual Estimate 2 – Semi-Detailed Estimate 3 – Detailed Estimate

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4.7.1 Conceptual Estimate

A conceptual estimate is known as a top-down, order of magnitude, feasibility, analogous, or preliminary estimate. It is the first serious effort made at attempting to predict the cost of the project. A conceptual estimate is usually performed as part of the project feasibility analysis at the beginning of the project. In this way, the estimate is made with limited information on project scope, and is usually made without detailed design and engineering data.

Considerable experience and judgment are required to obtain a dependable estimate of the cost.

4.7.2 Semi-Detailed Estimate

A semi-detailed estimate is developed while basic design decisions are being made to verify that the project can be constructed at its intended scope within the owners’ budget. Some aspects of the project may be completely designed. Detailed estimating methods can be used to estimate the cost of project components that have been designed, and conceptual estimating methods are used to estimate the cost of those components that remain to be designed. This means that databases are used to estimate the cost of components for which the design is not yet complete, and project data is used to estimate the cost of components for which design is complete. Therefore, these estimates are known as semi-detailed estimates.

4.7.3 Detailed Estimate

A detailed estimate is also known as bottom-up, fair-cost, or bid estimate. Detailed estimates are prepared once the design has been completed and all construction documents prepared. The estimator divides the project into individual elements of work and estimates the quantities of work and resources required for each element. Next, the individual elements of work are priced to determine as estimated cost for each one. The estimated costs are summed, and overhead costs are added to cover the contractor’s cost of managing the work.

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The tender price consists of two components: 1) the construction cost estimate 2) the mark-up (margin) The direct cost is the combined costs of labour, plant and equipment, materials, and subcontractor costs. The addition of site overheads and office overheads to the direct cost produces the construction cost estimates. The second component of the tender price is the mark-up (margin) which consist of the profit margin, risk allowance, and financial charge.

As the project progresses, the amount of unknowns and uncertainties decreases, while the level of details and the project information increases. In this way, the accuracy of the estimate improves as it moves from conceptual to detailed estimate.

A detailed estimate is prepared from a complete set of contract documents before the submission of a bid. It follows a systematic procedure beginning with a thorough review of the complete set of contract documents, drawings and technical specifications. A site visit should be carried out to observe factors that can influence the cost of construction (viz. available space for materials storage, security, control of traffic, existing underground and above ground services).

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4.8 CONSTRUCTION PROJECT COSTS

The primary components of a contractor’s costs and expenses result from the use of labour, plant and equipment, materials, and sub-contractors. Additional general overhead cost items include taxes, premiums on bonds and insurance, and interest on loans. The sum of a project’s direct costs and its allocated indirect costs is termed as the project cost.

The costs that are spent on a specific activity or project can be classified as follows:



Fixed Cost Costs that are spent once at a specific point of time (e.g. the cost of purchasing equipment).



Time-Related Cost Costs that are spent along the activity duration (e.g. labour wages, plant and equipment rental costs).



Quantity- Proportional Cost Costs changes with the quantities (e.g. materials cost).

4.8.1 Direct Costs

Direct costs refer to the cost and expenses that are incurred for a specific activity. These costs are estimates based on detailed analysis of contract activities, the site conditions, resources productivity data, and the methods of construction being used for each activity. A breakdown of direct costs includes labour costs, materials costs, plant and equipment costs, and subcontractor costs.

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4.8.2 Indirect Costs

Other costs such as the overhead costs are termed as indirect costs. Part of...