lesson2-sabnis

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THE TENDERING PROCESS

S M Sabnis

Mr Sharad Sabnis, Chief Engineer MSRDC is a Civil Engineer, with both his B.Tech, and M.Tech degrees from IIT, Mumbai.

Having opted for a career in the public sector, Mr Sabnis joined the Maharashra PWD and when the Maharashtra State Road

Development Corporation Limited was created in 1996, he moved there to work on road and infrastructure projects.

Mr Sabnis has worked on many successful infrastructure projects in the State, but the feather in his cap must surely be the

planning and execution of the Bandra-Worli Sea-link Project – considered one of the most prestigious public sector projects in

modern India.

This article was written by Mr Sabnis as part of the material prepared by YASHADA for the Ministry of Urban Development,

under its Rapid Training Programme initiative.

Civil works carried out by various central or state departments e.g. PWDs, Governmental

organisations or urban local bodies are usually classified into two groups viz.

Original Works: These require capital investment and are generally funded from Plan

allocations.

Maintenance and Repairs: These are in the nature of routine or periodic renewal or

maintenance works and are generally funded from non- plan allocations.

Original works that are carried out by various central or state departments, Governmental

organisations or urban local bodies are of, but not limited to, the following categories: Dams,

Head-works and Hydraulic Structures, Highways and Roads, Bridges, Flyovers and Subways,

Runways, Airports and affiliated facilities, Water Supply, Sewerage and Pipeline, Power and

Transmission Lines, Buildings and Housing (residential, offices, hospitals, schools etc.

However, only the following components of civil works are considered admissible for assistance

under the JNNURM. (Details may be obtained from the Modified Guidelines of JNNURM.)

Urban Renewal i.e redevelopment of inner (old) city areas

Water Supply and sanitation

Sewerage and Solid Waste Management

Construction and improvement of drains/storm water drains

Urban Transport, including roads, highways/expressways/ MRTS/metro projects.

Peer Experience And Reflective Learning (PEARL) www.indiaurbanportal.in

National Institute of Urban Affairs (NIUA)

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Parking lots/spaces on Public Private Partnership basis

Development of heritage areas

Prevention and rehabilitation of soil erosion/landslides only in case of Special Category

States where such problems are common, and

Preservation of water bodies.

The land acquisition component of the cost of the projects is not eligible for assistance except in

case of acquisition of private lands in the schemes in the north-eastern states and the hilly states

of Himachal Pradesh, Uttaranchal and Jammu and Kashmir.

The following components are not admissible for assistance under the JNNURM: Power,

Telecom, Health, Education, Wages of Staff etc. and e

The basic principles that need to be followed by public bodies undertaking civil works are as

follows3:

No new works should be sanctioned without careful assessment of the assets or facilities

already available and time and cost required to complete the new works.

As budgetary resources are limited and granted on annual basis, adequate provisions should

be ensured for works and services already in progress before new works are undertaken.

The construction period and sanctioned cost stipulated in the sanction of Project will not be

exceeded as far as possible.

The competent financial authority according administrative approval should be kept informed

of the progress of the work till their completion through regular periodical reports.

No project or work will be split up to bring it within the sanctioning powers of a lower

authority.

Any anticipated or actual savings from a sanctioned estimate for a definite project, shall not,

without special authority, be applied to carry out additional work not contemplated in the

original project.

Further, no works should generally be commenced or liability incurred thereon unless

i) Administrative approval has been obtained from the appropriate authority.

ii) Sanction to incur expenditure has been obtained from the competent authority.

iii) A properly detailed design has been sanctioned.

iv) Estimates containing the detailed specifications and quantities of various items has been

prepared and sanctioned on the basis of the applicable schedule of rates e.g. PWD’s District

Schedule of Rates etc.

v) Funds to cover the charge during the year have been provided by competent authority.

vi) Tenders have been invited and processed in accordance with rules.



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vii) A work order has been issued after following acceptance of tenders and obtainment of

Performance Security as stipulated

If on grounds of urgency or otherwise, it becomes necessary to carry out a work or incur a

liability under circumstances when the provisions set out above cannot be complied with, the

concerned executive officer may do so on his own judgement and responsibility However,

simultaneously, he should initiate action to obtain approval from the competent authority and

also to intimate the authorities concerned with accounts and audits as may be relevant.

Processing of Works

Project development and implementation goes through the following steps

Inclusion in the Plans (CDP)

Feasibility Studies

Preparation of Preliminary Project Report (PPR)

Acceptance of PPR and Go Ahead Sanction

Detailed Engineering

Detailed Project Report (DPR)

Administrative Approval and Budget Provision

Technical Sanction / Approval

Preparation of Draft Bid Documents

Approval to Draft Bid Documents

Tendering (Procurement) Process

Acceptance of Tenders and Award of Work

Implementation

In case of works considered for implementation on the Public Private Partnership model, the

following steps usually have to be traversed while developing and executing works:

Inclusion in the Plans (CDP)

Feasibility (Technical Feasibility and Financial Viability)

Preparation of Preliminary Project Report (PPR)

Acceptance of PPR and Go Ahead Sanction

Detailed Engineering including financial viability study and determining Viability Gap

Detailed Project Report (DPR)

Administrative Approval and Budget Provision

Technical Sanction/ Approval



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Preparation of Draft Bid Documents

Approval to Draft Bid Documents

Tendering (Procurement) Process

Acceptance of Tenders and Award of Work

Formation of SPV

Concession Agreement

Financial Close

Implementation (Construction followed by Operations Phase)

Transfer to the owner department as stipulated

Steps in Preparation of Project Reports

Preparation of Project Reports is an important step in the project development cycle in respect of

any civil work implemented by a ULB or a state department or a Governmental organisation.

The preparation of project report usually involves the following three stages:

a) Pre- Feasibility Study

b) Feasibility Study / Preliminary Project Report

c) Detailed Project Report containing detailed engineering and plan of construction

In the first instance, a feasibility study for the project is to be carried out, either in-house or more

commonly through a consultant. In some cases, especially for large projects where external funds

are sought or for projects to be implemented on the PPP model, it may be necessary to prepare a

pre-feasibility report to enable a funding agency or private financier to appreciate the broad

features of the project, the study of financial involvement and possible returns. The feasibility

study establishes the scope of the work, brings out the requirement of land, prepares social and

environmental assessments, carries out preliminary economic and financial analysis, examines

different options, works out their merits and costs, and recommends the most suitable one. In

case the project is already identified, or its utility is well established, or an existing asset is to be

improved/ upgraded/ replaced, feasibility study may be dispensed with. In another situation, it

may be found more practical as well as expedient to combine feasibility report with detailed

project report. Decision regarding these aspects may be taken in individual project situations.

The studies and recommendations of feasibility generally form the Preliminary Project Report

(PPR). On approval of PPR, or otherwise if it has been dispensed with, a Detailed Project Report

(DPR) is prepared. In this, standards, design parameters and specifications will be precisely laid

down along with technology and quality standards to be followed. Detailed drawings, bill of

quantities, detailed cost estimates form essential components of the DPR. The DPR is to be

approved by the competent authority. Sanctions to the DPR are usually in the form of

“Administrative Approval” and “Technical Sanction/ Approval” by authorities empowered to

accord such approvals.



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Administrative approval is generally accorded by the competent Financial authority to the

execution of work after due examination of Detailed Project Report and detailed estimates.

Technical sanction / Approval to detailed cost estimates is accorded by the technical authority

empowered to do so. This sanction ensures that proposals are structurally sound and that the

estimates are accurately calculated based on adequate data. In case the work is to be executed

through a Public Works Organisation as a deposit contribution work, technical sanction is

accorded by that organisation.

During preparation of DPR, or at tender processing stage, or during execution of work, or after

the completion of work, if it is felt that the project cost has or is likely to vary significantly (by

more than 10%) over the sanctioned cost, then a Revised Project Report taking into account

various possible reasons for variation like change in scope, design of work, material/ labour cost,

time overrun etc. shall be prepared and sanction of competent authority needs to be obtained3.

Projects to be implemented on the PPP model

These involve private investment, wholly or in part, and which may be domestic or foreign. They

may use various routes such as: BOT (User Fee Based) (or BOOT, BOLT, DBFO) and BOT

(Annuity), etc. Bridges, Flyovers or Bypass roads can be implemented by offering rights of the

toll revenue to the private entities. In other sectors too, the private entities can be invited to

implement the project by offering the rights to collect user charges in full or in part. The

involvement of the private sector can be looked at both during the entire project life cycle of

construction and Operations and Maintenance or purely in the O&M Phase. In such projects, the

ULB or the state department or Governmental organisation implementing the project may have

to carry out the preparatory work, arrange environmental and other clearances, and meet the cost

of land, feasibility studies, relocation of utilities, resettlement and rehabilitation, etc. In order to

improve the viability of a private funded project, the governmental body or the ULB may, within

defined limits, provide capital grants (termed as the viability gap funding), participate in equity

and offer bridge loans, besides agreeing to periodic revision of user fees, etc.

For some projects, which may be taken up on the PPP model e.g. BOT (User Fee) basis, carrying

out complete Detailed Project Report may not be necessary. Instead only Feasibility- cum-

Preliminary Design of the project may be adequate to invite bids on PPP pattern. Feasibility-

cum-Preliminary Project Report (PPR) may be prepared including the financial viability study to

reflect a reasonable assessment of project costs and project revenues and determination of

viability gap, which the project authority may have to provide to the private entity in case of

adoption of this route for the implementation of the project. These feasibility studies need to be

got carried out through consultants who have the competence to deal with the technical demands

of the project as well as the financial viability analysis of such projects.

The Feasibility-cum-Preliminary Project Report should, as a minimum, establish and evaluate

the following:

a) The basic characteristics of the project

b) Sources and availability of the project input



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c) Location, geological and soil conditions and access to site

d) Environmental and social impacts and land acquisition if any

e) Utility relocation plans

f) Preliminary design and detailing of the project

g) Financial appraisal of the project profitability, including

h) Sensitivity analysis

i) Preliminary estimation and costing

The following format can be used for reference while preparing a PPR. Modifications may be

made to suit the requirement of individual projects.

Volume-I: Preliminary Design Report

(a) Executive summary

(b) Project description

(c) Environmental Impact Assessment and Environmental Management Action Plan

(d) Summary of Resettlement Plan

(e) Updated cost estimates

(f) Updated economic and financial analyses

(g) Suggested methods of procurement and packaging

(h) Conclusions and recommendations

Volume –II: Design Report

(a) Available Facilities Inventory

(b) Summary of survey and investigations data

(c) Proposed design basis, standards and specifications

(d) Preliminary designs

Volume –III: Drawings

(a) Location map

(b) Layout plans

(c) Other relevant drawings

(d) Indicative land acquisition plans

Volume–IV: Environment Impact Assessment or Initial Environmental Examination and

Environment Management Plan.

Volume –V: Resettlement Plan and Resettlement Action Plan.



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Contents of the DPR

The Detailed Engineering covers detailed surveys and investigations e.g. soil and materials

surveys, detailed design studies, all the relevant studies e.g. drainage studies, environment

management plan based on environment impact assessment studies, detailed drawings, estimates

and implementation schedules and documents.

JNNURM Toolkit provides reference format for the preparation of a Detailed Project Report.

The project report is expected to contain the following sections2.

1. Sector background context and broad project rationale

2. Project definition, concept and scope

3. Project cost

4. Project institution framework

5. Project financial structuring

6. Project phasing

7. Project O&M framework and planning

8. Project financial viability/sustainability

9. Project benefits assessments

The key issues that need to be addressed and other relevant details are outlined in the JNNURM

Detailed Project Report Toolkit.

Objectives of Public Procurement

Procurement process is an important step in the implementation of civil works. It can be defined

as a process of acquiring goods, services or works or a combination thereof. The objective of

Public Procurement is to procure work, goods or services, of the specified quality, within the

specified time, at the most competitive prices, in a fair, just and transparent manner. The five key

parameters that must be associated with a public procurement process, are: transparency,

fairness, value for money, quality, and time.

While procurement deals with the entire gamut of activities pertaining to works, goods and

services, the discussion in this chapter restricts itself to construction works.

Construction contracts fall within the following types:

Percentage Rate Tenders

For percentage rate of tenders, the contractors are required to quote rate as overall percentage

above or below the total estimated cost. This form of tender can be used in respect of

construction and maintenance works, where the quantities of various items are based on design

of works carried out by the department/ULB. Such percentage rate contracts are usually

confined to relatively smaller works.



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Item rate Tenders

For item rate tenders, contractors are required to quote rate for individual items of work on the

basis of schedule of quantities. The contractor has to quote the rates against each item of work.

As in the case of Percentage Rate Tenders, the quantities in respect of all items of work are based

on designs prepared by the department/ ULB (as opposed to tenders where the works are based

on Contractor’s own designs.)

Piece Work

This form is to be used mainly in cases of routine maintenance activities and usually restricted to

very small works. The contract is based on calling quotations and the conditions of contract are

not as rigid as in the case of percentage rate or the item rate type of contracts. This form is

resorted to in cases where it is necessary to start the work in anticipation of formal acceptance of

contract, an agreement on piece work form may be drawn and the contract may be cancelled as

soon as regular contract is signed. In cases of running contracts e.g. for pipes, laying of sewerage

etc. quotations are called periodically and a running rate contract is drawn up as a result of those

quotations usually for one year. The piecework form provides for payment of stipulated rates

only when it refers to such quantity of time and also stipulates that the procuring entity may put

an end to the agreement at his option at any time.

Lump sum Contracts

This form is used for work in which contractors are required to quote a lump sum figure for

completing the works in accordance with the given designs, specifications and functional

requirements. Such contracts need also to include a schedule of variations, which determines the

payment to the contractor in the event of changes such as increase or decrease in quantities or

changes in the scope of works.

Design-Build Contracts

These are contracts where the works are executed on the designs prepared by the Contractor

based on the design criteria and specifications stipulated. These are usually lump sum contracts.

Being lump sum contracts these also need to include a schedule of variation, which determines

the payment to be made to the contractor in the event of changes in the scope of works.

Contracts based on PPP

Contracts based on the PPP model aim at implementing the works through a private entity that

executes the work on its own finances and is allowed to operate the facility for a specific period

during which revenues from toll/user fee collection etc. are vested either fully or partially in the

private entity. This mechanism helps Governments or ULBs to tap private finance for relatively

more viable projects and save their precious capital for other less viable projects. The mechanism

also helps risk sharing between parties in a manner that the risks get allocated to parties that are

best equipped to carry them. The project delivery and O&M can be expected to improve from the

efficiency of the private sector. The benefit allowed to the private entrepreneur to compensate



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him towards costs borne by him is called Concession. The common form of concession is in the

form of rights to collect user fees for a specific period called the Concession Period. Usually the

concession period includes the period of construction in addition to the period of Operation and

Maintenance of the facility. Various forms of this concession can be contemplated and the types

of contracts that are in vogue are as follows. The private entrepreneur who gets the concession is

called the Concessionaire.

Build, Operate and Transfer (BOT)

This is the most commonly used form especially in highway projects. The concessionaire builds

the facility, operates the facility till the end of the concession period and hands the project

facility back to the owner department.

Build, Own and Operate (BOO)

This is similar to the BOT except that the project facility continues to be with the concessionaire

who owns and operates the facility. Usually power plant projects and telecom projects are

implemented through this mechanism.

Build, Operate, Lease and Transfer (BOLT)

This is similar to BOT except that the transfer is carried out over the years through lease

adjustments. Projects involving power plants or development and operation of port terminals are

implemented through this mechanism.

Contract Forms evolved by FIDIC and the World Bank

FIDIC Forms

FIDIC i.e. FEDERTION INTERNATIONALE DE INGENIEURS-CONSEILS (International

Federation of Consulting Engineers) is an international organisation based in Geneva that has

been instrumental in the evolution of various standard forms of contracts used worldwide in civil

engineering works. The World Bank has also adopted the FIDIC standard forms with suitable

modifications for applications in the works carried out with its assistance.

The key differentiator of the FIDIC based contract is the role assigned to the “Engineer” who is

an impartial and independent expert who administers the contract between the parties viz. the

“Employer” (i.e. the public body e.g. ULB) and the “Contractor”. The conventional PWD forms

used in our country did not adequately provide for the role of project management and

supervision to be carried out by a consultant. The FIDIC form is eminently suitable for adoption

in cases where the project management of the work is to be entrusted to an expert consultant,

who functions as the “Engineer” to administer the contract.

FIDIC has developed the following forms10

Conditions of Contract for Construction: These are forms used for construction contracts and

are usually item rate type of contracts, although the form can also be used for lump sum

contracts.



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Conditions of Contract for Plant Design and Build: These forms are suitable where the works

are executed on Contractor’s own designs. These are lump sum contracts

Conditions of Contract for EPC/ Turnkey Contracts: These forms are to be used for EPC or

Turnkey contracts where the contractor carries out the design and also finances works e.g. in the

BOT type of contracts.

The standard contract documentation on individual works, using the FIDIC forms has two parts

Part I: General Conditions of Contract: These are the standard conditions of the FIDIC form

of the type above as may be suitable to the work

Part II: Particular Conditions: These are amendments to the General Conditions as may be

appropriate for the specific work and other work-specific conditions e.g. special conditions of

contract, drawings, specifications etc.

World Bank Standard Forms of Contracts

The World Bank9 has evolved standard bidding documents applicable for each of the following

types of bidding.

International Competitive Bidding (ICB): This standard form is used for the World Bank

aided projects where international bidding is resorted. The objective of International Competitive

Bidding (ICB) is to provide all eligible prospective bidders with timely and adequate notification

of the Employer’s requirements and an equal opportunity to bid for the required works.

Limited International Bidding (LIB): This is essentially ICB by direct invitation without open

advertisement. It may be an appropriate method of procurement where (a) there is only a limited

number of suppliers, or (b) other exceptional reasons may justify departure from full ICB

procedures.

National Competitive Bidding (NCB): This is the competitive bidding procedure normally

used for public procurement within the country and may be the most appropriate way of

procuring goods or works which, by their nature or scope, are unlikely to attract foreign

competition.

Request for Proposals for Selection of Consultants: These are the guidelines and the standard

documentation evolved by the World Bank for procurement of consultancy services.

Pre-qualification Document for Procurement of Works: This is the document provided by

the World Bank for adoption in World Bank aided works where the bidding process stipulates

the pre-qualification of the intending bidders.

While the documentation developed by the World Bank is meant for adoption in works aided by

the bank, various departments and organisations in the country have used these as guidelines for

developing standard contract documentation for their procurement of works.



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Steps in Procurement

Public Procurement procedure usually follows the following steps

1. Preparation of Bid Documents

2. Approval of Bid Documents by Competent Authority

3. Public Invitation for Pre-qualification (where relevant)

3.1. Issue of Instructions and Pre-qualification criteria

3.2. Pre-Application Meeting and Issue of Clarifications to Applicants

3.3. Receipt of PQ applications and scrutiny

3.4. Approval to PQ

4. Invitation for Bids

5. Issue of Bid documents to prospective bidders

6. Pre Bid Meeting and Issue of Minutes, Clarifications and Common Set of Deviations

7. Receipt of Bids

8. Scrutiny

9. Negotiations, where warranted

10. Acceptance of Bids

Preparation and Approval to Draft Bid Documents

Draft Bid Documents have to be prepared before the invitation of the bids is commenced. The

Draft Bid Documents can be based on standard documentation mentioned in the paragraphs

above. The documents have also to be approved by the authority empowered to approve such

documents. While approving the Bid documents it should be inter alia ensured that: (a) there is

no ambiguity, contradiction, or duplication in the nomenclature of items, conditions of contract,

specifications and drawings; (b) the specifications and drawings are capable of implementation at

site; and (c) the time stipulated to complete the job is adequate. There is also a practice in some

organisations for the official approving the bid documents to affix his signature on every page of

the bid document as a token of approval and a certificate of approval.

Bid Advertisements in Newspapers in Web sites

Wide publicity must be given to the Bid Invitation Notice. Tenders must be invited in the most

open and public manner possible, by advertisement in the Press and by notice in English/Hindi

and regional language newspapers of the concerned District/ State or National Levels as may be

applicable. Many departments/ organisations/ ULBs have well-managed web sites with the

practice of hosting the notices on the web site in addition to the invitation in the press. It is now

common to provide the invitation in the newspaper in a window format where the important or



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core information is provided while leading the intending bidders to the detailed tender notice on

the web site of the organisation.

CVC Guidelines on Tender Publicity:

The Central Vigilance Commission’s (CVC) communication no. OFF/CTE/ dated 4.2.2002

stipulates : (a) In order to have wider, fair and adequate competition, it is important that

sufficient time, say 4-6 weeks in case of Advertised/Global tenders is allowed. (b) The tenders

should preferably be kept open for sale till the date of tender opening or just one day prior to the

date of tender opening. (c) With the widespread use of Information Technology, the tender

notices should also be put on the website and e-mail address of the organisation should be

indicated in the tender notice.

Time Period for Bids

Period given for submission of Bids should be adequate to enable the bidder make his

investigations, visit the site, carry out his costing, and quote realistically. For domestic Bids this

period may be 30 to 60 days. For smaller works the period could be less than 30 days. For very

short works the period could be about 15-20 days. For large and complex works, this period will

depend on the demands of the work/ stipulation imposed by the funding institution (e.g. World

Bank). Usually the period is reckoned from the publication to the last date of sale of bid

documents. Some organisations prescribe a time gap of four to seven days between the last date

of sale and the receipt of bids so as to allow some time for the bidders to study the bid documents

and prepare their bids. The time period for bids is reduced for the second or subsequent calls, in

case re-bidding is resorted to.

Sale of Tenders

Tender documents must be kept ready for sale before the issue of Invitation for Bids. The

intending bidders desiring to tender should generally make a written application and pay the

price of the bid documents in the specified format. An official is designated to see that tender

documents with complete set of drawings are made available to the bidders as soon as their

applications are received. Bidders need to acknowledge receipt of the bid documents for

purposes of record.

Pre Bid Meeting

A Pre Bid Meeting is held at a specified place and time, in respect of relatively large works to

enable prospective bidders to seek clarifications about the provisions of the bid and make

suggestions to the organisation/ULB (Employer) about the work and the bidding conditions. It is

to be noted that non-attendance at the Pre Bid Meeting does not constitute a disqualification of

the bidder. A senior official connected with the bid process usually chairs the meeting. Minutes

of this meeting are prepared along with clarifications to the bidders to respond to their queries. In

case there are amendments to the bid conditions proposed at this stage ensuing from the

suggestions made by the bidders or otherwise, the same are issued in the form of Common Set of

Deviations (CSD) to the bidders. The minutes of the Pre Bid Meeting, Clarifications and the



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CSD as above need to be supplied to the bidders without delay. A minimum gap of about ten to

fifteen days is usually allowed between the Issue of these minutes and the clarifications/CSD and

the last date of sale of the bid documents primarily with a view to enable bidders who are

attracted to the bid process on account of these deviations, to purchase the bid documents and

participate in the bid.

Bid Validity

Bid documents require the bids to be valid for a stipulated period after the submission. This

period is usually 120 days. The process of scrutiny and evaluation of the bids has therefore to be

completed and acceptance communicated well within the validity period. If for some reason, the

process of scrutiny and evaluation is delayed, either the successful bidder or all the bidders could

be requested to extend their validity for a suitable period. It must be noted that extension to the

bid validity is entirely discretion of the bidder and such a request may not be responded

favourably.

Bid Security

A bid security (Normally 1% of the estimated cost of the work put to tender) is to accompany the

bids. This is also called Earnest Money Deposit. The format of the bid security as well as the

time frame and manner of its refund in case of unsuccessful bids is stipulated in the bid

documents. The successful bidders are allowed usually to convert the bid security into their

performance security.

Submission and Opening of Bids

The Organisation/ULB (Employer) needs to fix a place and a specific date and time as the

deadline for the submission of tenders. The Employer may, prior to the deadline for the

submission of tenders; extend the deadline, if necessary on account of reasons e.g. to afford

bidders reasonable time to take the clarification or modification of the minutes of Pre Bid

Meeting into account in their tender. The Employer may, in its absolute discretion, prior to the

deadline for the submission of tenders extend the deadline, if it is not possible for one or more

suppliers or contractors to submit their tenders by deadline owing to any circumstance beyond

their control. Notice of any extension of the deadline needs to be given promptly to each bidder.

The tender must be submitted in writing, signed and in a sealed envelope as per stipulations

contained in the Bid documents.

The employer may provide to the bidders a receipt showing the date and time when its tender

was received, especially when asked for. The tender received after the deadline for the

submission of tender, shall be returned unopened to the bidders who submitted the same. On the

due date and appointed time, as mentioned in the bid document, the Employer needs to open the

bids in the presence of the intending bidders or their representative. The bidder’s name, the bid

prices and discount, if any will be announced by the procuring entity during opening of bids. A

record of opening of bids is to be maintained. Where the bidding follows a two envelope bid

submission, the first envelope of the bidders containing the documents to ascertain

eligibility/qualification of the bidders and/ or technical proposals is opened on the bid



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submission date. The documents in the first envelope are scrutinized in due course. The financial

bids in respect of those bidders who qualify and whose technical proposal meets the

requirements in the bid documents are opened. The qualifying bidders are intimated about the

date on which the financial bids are to be opened. Bid documents should clearly spell out the

procedure of opening and scrutiny of the bid documents.

Responsive Bids

Scrutiny of the 'Financial Bids' is carried out to determine whether each bid has been properly

signed and is substantially responsive. For this purpose, a substantively responsive bid is one that

conforms to all the terms, conditions and specifications of the tender documents without material

deviation and reservation.

A material deviation or reservation is one: (a) which affects in any substantial way the scope,

quality, or performance of the works; or (b) which limits in any substantial way the Employer's

rights or the bidder's obligations; or (c) whose rectification would affect unfairly the competitive

position of other bidders which are substantially responsive. If a bid is not substantially

responsive to the requirements of the bid documents, it shall be rejected with the approval of the

authority empowered to accept the bid in the first instance, and may not subsequently be made

responsive by correction or withdrawal of the non-conforming stipulation. In this context,

conditional bids may be considered as non-responsive. The provisions regarding determination

of responsiveness of bid documents generally form part of the Instructions to Bidders (ITB)

incorporated in the bid documents.

Correction of Errors

Substantially responsive financial bids are checked for any arithmetic errors. Arithmetic errors

are to be rectified on the basis of the standard procedure stipulated in the ITB which is as

follows: (a) If there is a difference between the amount of rate in figure and in words of an item,

and the total amount is worked out, then the rate which corresponds to the amount worked by the

bidder shall be taken as correct. (b) If the bidder has not worked out the amount of an item, or the

same does not correspond with the rates written either in figures or in words, then the rate quoted

by him in words shall be taken as correct. (c) If the rate quoted by the bidder in figures and in

words tallies, but the amount is not worked out correctly, the rate quoted by the contractor shall

be taken as correct and not the amount.

Clarifications from Bidders

To assist the process of examination, evaluation and comparison of bids a procedure is stipulated

in the bid documents whereby, the Employer may ask the bidder individually for clarification, if

any, of their bids, including breakdown of unit rates and price. The request for clarification and

the response must be in writing, but no change in the price or substance of the bid will be sought,

offered or permitted, except as required to confirm the correction of arithmetical errors

discovered by the Employer in the course of scrutiny.



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Evaluation and Comparison of Bids

The evaluated bid Prices will be adjusted after taking into account (i) correction for errors; (ii)

adjustments for any acceptable variations, deviations and, (iii) adjustments to reflect any

discounts or other modifications offered. Variations, deviations, or alterative offers and other

factors which are in excess of the bidding documents or otherwise result in unsolicited benefits

for the Contractor should not be taken into account in bid evaluation. Duties, taxes and other

levies will not be considered in evaluation of bids. If the bid of the successful bidder is seriously

unbalanced in relation to the estimate of the cost of the work, the Employer may ask the bidder

to produce detailed price analysis for any or all the items of Bill of Quantities, to demonstrate the

internal consistency of those prices with the construction methods and schedule proposed. After

evaluation of this analysis, the Employer may require that the amount of performance security be

increased to a level sufficient to protect the Employer against financial loss in the event of

default of the successful bidder under the Contract.

Confidentiality Considerations

The ITB shall usually provide for the confidentiality of the process by stipulating that

information relating to the examination, clarification, evaluation and comparison of bids, and

recommendations for the award of a contract shall not be disclosed to bidders or any other person

not officially concerned with such process, until the award to the successful bidder is announced.

Additionally, Bidders are not to contract the Employer or his officials from the time of bid

opening to the time contract award on any matter related to the bid, except on request and prior

written permission and that any effort by the Bidder to influence the Employer in bid evaluation,

bid comparison or contract award decisions will result in the rejection of the Bidder's bid.

Acceptance of Bids

At the end of its scrutiny and evaluation of the buds a comparative statement of tenders is

prepared to compare the tenders and in order to ascertain the successful tender in accordance

with the procedures and criteria set forth in the bid documents. No criteria shall be used that has

not been set forth in the tender document. Based on the acceptance criteria stipulated in the Bid

documents, the competent authority shall accept the tender that meets the requirements of the bid

documents and the acceptance criteria stipulated. The usual criterion stipulated in bid documents,

is to regard a bidder successful if his bid quotes the lowest price subject to any margin of

preference applied pursuant to Government policy.

The Bid documents should incorporate the stipulation that the Employer shall reserve the right to

accept or reject any bid or all bids, recall the tender and to annul the bidding process, at any time

before the award of its work, without thereby incurring any liability to the affected bidder(s) or

any obligation to inform the affected bidder(s) of the grounds for this action. However, while

exercising this right the competent official of the Employer must base his action of rejection on

clear, logical reasons and keep these reasons for rejection/recall of tenders on record.



16

Negotiations: CVC Guidelines

As a general rule, negotiations should not be resorted to. However, they may become necessary

in certain situation. CVC guidelines in this regard stipulate as under:

a) There should not be any negotiations. Negotiations, if at all, shall be an exception and only in

the case of proprietary items or in the case of items with limited source of supply.

Negotiations shall be held with L-1 only. Counter offers are tantamount to negotiations and

should be treated at par with negotiation.

b) Negotiations can be recommended in exceptional circumstances only after due application of

mind and recording valid, logical reasons justifying negotiations. In case of inability to

obtain the desired results by way of reduction in rates and negotiations prove infructuous.

Satisfactory explanations are required to be recorded by the Officials/Committee who

recommended the negotiations. The Officials/Committee shall be responsible for lack of

application of mind in case its negotiations have only unnecessarily delayed the award of

work/contract.

c) In case of L-1 backing out there should be re-tendering as per extant instructions.

d) The original terms and conditions of the bid should not be varied while negotiating. A record

of the negotiations will be kept, which will form part of the agreement along with

undertakings given by the contractor.

Guidelines for Acceptance of Single Tenders

The acceptance of single tender poses difficulty and is not encouraged. Acceptance of a single

tender is to be an exception and not a general rule. The following guidelines adopted by NHAI

for its works, may be used for guidance.4.

In case only a single bid is received by the due date of receipt, normally the bid process may

be cancelled and re-bidding done by giving a shorter notice (say of four weeks) except in

cases where due to other reasons like difficult conditions, law and order etc., the tender

response is expected to be poor.

In case of re-bidding, change from pre-qualification to post-qualification may also be

considered and resorted to, if that would help increase response of tender.

In case re-bidding/change to post-qualification also results in receipt of single bid then it

should be opened and the bid amount should be compared with the estimated project cost. In

case the bid amount is within 15% of the estimated cost, then acceptance of the bid may be

considered with proper justification and reasons.

For EPC contracts such single tenders can be considered for acceptance provided if bid is

reasonable and sufficient justifications exist for acceptance.

In cases where due to reasons like difficult conditions, law and order, likelihood of poor

response etc., it is decided to open the single bid without going for re-bidding, then for



17

acceptance, the above guidelines shall be applicable as are prescribed for acceptance of

tenders where re-bidding is resorted to.

Communication of Acceptance

Acceptance of the bid is communicated to the successful bidder well before the expiry of the bid

validity period, in a standard format of acceptance letter. The bidder is requested to submit a

performance security (Usually 5 % to 10% of the contract price) within the stipulated period so

as to issue a notice to proceed with the work (Work Order)

Performance Security

The successful bidder is required to furnish to the Employer a performance security after the

receipt of Letter of Acceptance, within the time stipulated, usually of an amount equivalent to

5% to 10% of the contract price plus additional security for unbalanced bids. The Performance

Security to be provided by the successful bidder is in the form of a bank guarantee as per

prescribed format issued from any nationalized Indian bank/IDBI/ICICI/Export Import

bank/Foreign bank with counter guarantee from any nationalized Indian Bank or other bank as

may be acceptable to Employer (The bid documents need to provide clear stipulations in this

regard). The Bank Guarantee for performance security shall remain valid for a sufficient period

(as specified in the Contract) after expiry of Defects Liability Period.

After the successful bidder furnishes the performance security towards the work as stipulated in

the bid documents, the notice to proceed with the work (Work Order) is issued and the

agreement is signed.

Eligibility and Qualification of Bidders

Pre-qualification: The successful execution of contracts for large buildings, civil engineering,

supply and installation, turnkey, and design and build projects requires that contracts be awarded

only to firms, or combinations of firms, that are suitably experienced in the type of work and

construction technology involved, that are financially and managerially sound, and that can

provide all the equipment required in a timely manner. The assessment by an implementing

agency of the suitability of firms to carry out a particular contract prior to being invited to

submit a bid is a process called pre-qualification.6

Post-qualification:Where the assessment by the implementing agency of the suitability of the

firm to carry out the contract is carried out after the submission of bids, the process is called

post-qualification. The post-qualification process comprises scrutiny of the credentials of the

firm from the first envelope of the two envelopes bidding process and considering the financial

bids in the second envelope only of those bidders who conform to the stipulated qualification

criteria.



18

Pre-qualification Post-qualification

1 The process enables prospective bidders, who may be

insufficiently qualified on their own, to avoid the

expense of bidding. Conversely it is an incentive for

these potential bidders to form a joint venture that may

give them a better chance of success.

Insufficiently qualified bidders

enter the bid process and incur the

expense of bidding. There is no

incentive to form a joint venture

that may give them a better chance

of success.

2 After being pre-qualified, well-qualified firms will

price their bids with the knowledge that they are

competing against other qualified bidders meeting

realistic minimum competence criteria; the assurance

that inadequately qualified competitors will be

excluded from submitting unrealistic low bids thus

encourages leading contractors to bid.

Since the bid process is open to all,

and since there is no assurance that

inadequately qualified bidders will

be kept out, leading contractors are

relatively less keen to bid in this

process.

3 It reduces the amount of work and time involved by

Employers in evaluating bids from unqualified

contractors.

The Employer is compelled to

scrutinize and evaluate all the bids

4 Procurement lead-time may increase, although this can

be minimized by good procurement scheduling, e.g.,

undertaking the pre-qualification process while

Bidding Documents are being prepared.

Procurement Lead-time is relatively

less.

5 Collusion (and the possibility of price-rigging) is easier

among a limited number of identified bidders.

Collusion less likely.

Strategy towards Pre/Post Qualification: Considering the relative merits and demerits of pre-

qualification and post-qualification, it may be desirable to resort to pre-qualification in cases of

large and complex projects where the ability to deliver the project is a key requirement. For the

relatively medium and small jobs, the strategy of post qualification may be adopted. The criteria

to be used for pre or post qualification could be more or less similar.

Pre-qualification Process: The pre-qualification process includes four main phases: advertising,

preparation and issuing of the pre-qualification document, application preparation and

submission by bidders, and application evaluation, and pre-qualification of applicants.

Advertising: The advertisement for pre-qualification should conform to the guidelines for the

publicity of bids whereby wide publicity is accorded to the pre-qualification process. In case of

international bids, the publicity may have to be made in appropriate international newspapers.

Preparation and Issue of Pre-qualification Document: Pre-qualification documents have to be

got prepared and approved from the competent authority in a manner identical to preparation and



19

approval to bid documents. The typical pre-qualification document has usually the following

sections

Instructions to Applicants: Specifies the procedures to be followed by Applicants in the

preparation and submission of their Applications for Pre-qualification as well as information on

opening and evaluation of applications.

Work Specific Data: Consists of provisions that are specific to each pre-qualification and

supplement the information or requirements included in the section covering Instructions to

Applicants.

Qualification Criteria and Requirements: Highlights the methods and the criteria used for

carrying out the pre-qualification of applicants.

Forms and Formats: The forms and formats in which the applicants are expected to furnish

their information for pre-qualifications

Scope of Works: Specifies the scope of the work including drawings and specifications as

well as the delivery schedule in respect of the work for which the pre-qualification

applications are sought.

Application Preparation and Submission by Applicants: This is the stage where the intending

applicants study the pre-qualification documents and prepare their applications in the form and

formats stipulated. During this time the Employer is required to respond promptly to the queries

that the applicants might raise. This process could be facilitated through a Pre-Application

Meeting.

Application Evaluation and Pre-qualification of Applicants: This is the stage where the

Employer evaluates the applications and pre-qualifies the bidders based on the qualification

criteria stipulated in the application documents.

Eligibility Criteria

Eligibility criteria generally stipulated in the bid documents comprises the following:

Conflict of Interests: A firm that has provided consultancy services to the Employer in the

preparation of the project or bid documents etc. or affiliates of such a firm are not eligible to

provide services or goods and thus not eligible for bidding.

Government owned enterprises are not eligible for bidding unless they are legally and

financially autonomous and operate under the commercial law.

A firm declared ineligible for having indulged in corrupt or fraudulent practices by the

Employer shall not bid. Firms that have been debarred from participating in the bid

processes of the Employer for non- performance shall be ineligible for bidding in the period

so applicable.



20

Qualification Criteria

Generally, the following qualification criteria are specified in the pre-qualification document for

qualification of bidders. The criteria may also be used to carry out post-qualification of bidders.

The criteria could be modified and expanded to include other conditions to meet the

requirements of individual works.

Registration of Contractors in Appropriate Class: The Qualification criteria usually

stipulates that the bidders must be registered in appropriate class with the Employer or the

CPWD or State PWDs or Railways etc, The registered contractors would be eligible to tender

for the class (es) of work(s) for which they are registered and up to the limits of their

registration and area of operation.

General Construction Experience: The qualification criteria stipulates that bidders should

have been actively engaged in civil works construction business for similar work at least for

5/ 10 years immediately prior to the date of submission of application.

Particular Construction Experience: The qualification criteria stipulation may provide that

the bidder should have successfully completed or substantially completed, within the last

5/10 financial years, at least one contract of the specified percentage (e.g. 75 %) of the

contract value in question and which is similar to the one now being proposed and (ii) The

bidder should also have achieved the minimum annual production rates of the key

construction activities stipulated.

Turnover: The minimum average turnover of the bidder during the preceding 5 to 7 years

should be more than the specified value. This is usually two times the estimated cost of the

work put to tender divided by the time in years allowed for the work. While working out the

turnover of the preceding years, a compounding factor (e.g. 10% per year) may be specified.

Bid Capacity: The qualification criteria invariably provide that the bidder should possess the

bidding capacity as calculated by the specified formula. The formula generally adopted is:

Bid Capacity = A x N x F -B, where :

A = Maximum value of works executed in any one year during the last 5 years (updated at the

current price level by a compounding factor e.g. 10% per annum), taking into account the

completed as well as works in progress.

N = Number of years prescribed for completion of the work in question.

B = Value (updated at the current price level) of the existing commitments and ongoing works to

be completed in the next 'N' years.

F = A multiplier factor (Usually 1.5 to 2)

Financial Capability: With a view to ensure that the bidder has access to or possesses

adequate liquid assets and other financial assets to meet the cash flow requirements for the

contract in question, the qualification criteria provides that (i) The bidder must possess a

specified minimum value of liquid assets (Generally 10% of the annual turnover) (ii) The

bidder should have adequate sources of finance to meet the cash flow requirements of works



21

currently in progress and for future contract commitments and (iii) The bidder should possess

financial soundness as established by audited balance sheets and/or financial statements.

Towards this the bidder may be required to produce these details such as Profit and Loss

Statements and Balance Sheets for the preceding five or seven years. The bid documents may

also provide that the Employer may seek reference from the bidder’s bankers to establish his

financial soundness.

Equipment Capability: The qualification criteria may provide that the bidders should

demonstrate the availability of key equipment necessary for the contract work. This may be

through ownership of the equipment of through hire or lease. The prime consideration in this

regard would be to assure the availability of the equipment at the time when it is required to

be deployed in the contract work.

Personnel Capability: The qualification criteria may require the bidder must demonstrate

the availability of key personnel of the requisite qualification and experience for deployment

in the contract work.

Litigation History and Past Performance: With a view to weed out bidders with a history

of unsuccessful or bad litigation or poor performance in past contracts, e.g. unsuccessful

completion, or excessive delays the criteria may require the bidders to provide details of

previous works and litigations. The Employer may, in this regard insist on certificates/

independent verification from the previous Employers to ensue that the past history of the

bidder does not create a doubt about his performance in the present contract. A decision to

disqualify has to be based on solid evidence (references) from the previous Employers to

substantiate that non-performance resulted from a default by the bidder.

Joint Ventures

Intending bidders forge joint ventures to bring together their technical, financial, personnel and

equipment capabilities to meet the requirements of a contract work. For large and complex works

(say costing more than Rs. 100 Cr.), joint ventures are, therefore, permitted.4 While qualifying

joint ventures, the memorandum of understanding forming the joint venture agreement should be

carefully scrutinized. The MOU between the joint venture partners should contain details such as

Management structure of the J/V, share of individual partners in the J/V, Lead Partner and his

empowerment to incur liabilities and enter negotiations, responsibilities of individual partners in

furnishing bid security, performance security etc., their joint and several liability and remedy in

case of abdication of responsibility by one or more parties etc.

While considering qualification of a Joint Venture, some of the criteria specified above could be

met collectively and some by the Lead Partner. Some of the criteria could be applied to the

individual partners to the extent of their share in the J/V. For smaller contracts it may be

desirable to disallow joint ventures.

Consultancy Contracts/Assignments

Considering the magnitude and complexity of works faced by the Central/ State departments,

Governmental organisations or the ULBs, it is inevitable that services of high quality consultants



22

are deployed at all stages of the project life cycle. Consultants have to be engaged for conducting

feasibility studies, project preparation, preparation of bid documents and project management

during the construction stage as well as supervision during the O&M stage.

Types of Consultancy Contracts

Lump Sum Type: Lump sum contracts are used mainly for assignments in which the content

and duration of the services and the required output of the consultants are clearly defined. Areas

of application will be simple planning and feasibility studies, environmental studies, detailed

design of standard or common structures, preparation of data processing systems, and so forth.

Payments will be linked to outputs (deliverables), such as reports,' drawings, bills of quantities,

bidding documents and software programs.

Time Based Contracts: This type of contract will be an appropriate choice when it is difficult to

define the scope and length of services. Areas of application will he complex studies, supervision

of construction, advisory services, and most training assignments. Payments will be based on

agreed hourly, daily, weekly, or monthly rates for staff (who are normally named in the contract)

and on reimbursable items using actual expenses and/or agreed unit prices. The rate for staff

include salary, social costs, overheads, fee (or profit), and where appropriate, special allowances.

This contract should specify the maximum amount to be paid to the consultants. This ceiling

amount should include a contingency allowance for unforeseen work and duration, and provision

for price adjustments, where appropriate. Time based contracts need to be closely monitored and

administered in order that the assignment is progressing satisfactorily and that payments claimed

by the consultants are appropriate.

Percentage Contracts: These contracts will be relevant for architectural services. This can also

be used for procurement, inspection agents, or work supervision. In these, the fees paid to the

consultant should be related to the estimated or actual project construction cost, or the cost of the

goods procured or inspected. The contracts will be negotiated on the basis of market norms for

the service and/or estimated staff-month costs for the services, or competitive bid. These

contracts may encourage the consultants to provide proposals that are not economical.

Retainer and/or Contingency (Success) Fee Contracts: Retainer and contingency fee contracts

are widely used when consultants (e.g. financial firms) are preparing companies for sales or

mergers of firms, notably in privatization operations. The remuneration of the consultant

includes a retainer and a success fee, the latter being normally expressed as a percentage of the

sale price of the assets

Indefinite Delivery Contracts (Price Agreement): These contracts will be used when there is a

need to have '”On call' specialized services to provide advice on a particular activity, the extent

and timing of which cannot be defined in advance. These may be used to retain advisers for

implementation of complex projects, expert adjudicators for dispute resolution panels,

institutional reforms, procurement advice, and technical trouble shooting etc. The client and the

firm agree on the unit rates to be paid for the experts, and the payments are made on the basis of

the time actually used.



23

Selection of Consultant: Methods

The consultants may be drawn from various sources, wherever talent and experience of the

relevant kind are available. These may include private and public entities such as consulting

firms, engineering firms, construction managers, management firms, procurement agents,

inspection agents, investment institutions, research bodies, government agencies, individuals.

Different methods of selection and the areas to which a particular method is most appropriate,

and also the detailed procedure of evaluation, selection and appointment of consultants are:

a) Quality-and Cost-Based Selection (QCBS)

b) Quality-Based Selection (QBS)

c) Fixed Budget Selection

d) Least- Cost Selection

e) Selection Based on Consultant's Qualification

f) Single Source Selection

Quality and Cost Based Selection (QCBS)

QCBS uses a competitive process among firms that takes into account the quality of the proposal

and the cost of the services in the selection of the successful firm. Cost, as a factor of selection, is

to be used judiciously. The relative weight to be given to the quality and cost will be determined

for each case, depending on the nature of the assignment.

The weight associated with Quality i.e. Technical Proposal may be as high as 80% and that

associated correspondingly with cost i.e. Financial Proposal may be 20%. This method is the

preferred method for many of the consultancy assignments relating to works to be undertaken for

World Bank aided projects.

The process of service procurement is in the following steps:

a. Preparation of Terms of Reference (TOR);

b. Preparation of cost estimate of the services and the budget;

c. Advertising to seek expression of Interest (EOI);

d. Preparation of the short list of consultants;

e. Preparation and issuance of the Request for Proposals (RFP);

Letter of Invitation (LOI);

Information to Consultants (ITC);

Proposed contract;

f. Receipt of proposals;

g. Evaluation of technical proposals; consideration of quality;



24

h. Evaluation of financial proposal;

i. Final evaluation of quality and cost; and

j. Negotiations and award of the contract to the selected firm.

Quality Based Selection (QBS)

QBS is used in the following types of assignments:

a. Complex or highly specialized assignments for which it is difficult to define precise TOR

and the required input from the consultants, and for which the client expects the

consultants to demonstrate innovation in their proposal

b. Assignments that have a high downstream impact and in which the objective is to deploy

the services of the most eminent expert; and

c. Assignments that can be carried out in substantially different ways, such that proposals

will not be comparable.

In QBS, the RFP comprises submission of a technical proposal and the financial proposal in two

separate envelopes. The selection involves the selection of the consultant based on quality whose

financial bid is opened and considered for acceptance.

Fixed Budget Selection

This method will be used when the assignment is simple and can be precisely defined, and when

the budget is fixed. The RPF should indicate the available budget and request the consultants to

provide their best technical and financial proposals in separate envelopes, within the budget.

TOR should be particularly well prepared to make sure that the budget is sufficient for the

consultants to perform the expected tasks. Evaluation of all technical proposals shall be carried

out first as in the QCBS method followed by public opening of the financial bid envelopes.

Proposals that exceed the indicated budget shall be rejected. The consultant submitting the

highest ranked technical proposal among the rest shall be selected and invited to negotiate the

contract.

Least Cost Selection

This method is used for assignments of a standard or routine nature, where well-established

practices and standards exist and in which the contract amount is small. Under this method,

minimum inputs required will be specified and certain minimum qualifying marks for the

quality, established. Proposals to be submitted in two envelopes will be invited from a short list.

Envelopes containing the technical proposal are opened first and evaluated. Those securing less

than the minimum will be rejected and the financial proposals of the rest opened publicly. The

firm with the lowest price shall then be selected. The minimum inputs required and the minimum

qualifying marks shall be stated in the RFP.



25

Selection Based on Consultant’s Qualification

This method is used for very small assignments for which the need for preparing and evaluating

competitive proposals is not justified. In such cases, The TOR is prepared and expression of

interest requested and information on the consultants’ experience and competence relevant to the

assignment is obtained to establish a short list of consultants. The firm with the most appropriate

qualifications and references is then selected. The selected firm shall be asked to submit a

combined technical- financial proposal and then be invited to negotiate the contract.

Single Source Selection

Single-source selection of consultants does not provide the benefits of competition in regard to

quality and cost, lacks transparency in selection, and could encourage unacceptable practices.

Therefore, single-source selection is to be used only in exceptional cases. Single-source selection

may be appropriate only if it presents a clear advantage over competition: (a) for tasks that

represent a natural continuation of previous work carried out by the firm (b) in emergency cases,

such as in response to disasters and for consulting services required during the period of time

immediately following the emergency, (c) for very small assignments, or (d) when only one firm

is qualified or has experience of exceptional worth for the assignment.

Standard Provisions in Consultancy Contracts

Price Adjustment: Adjustment of the remuneration for foreign and/ or local inflation will be

done as per price adjustment provision included in the contract if its duration is expected to

exceed 18 months. In exceptional cases, contracts of shorter duration may include a provision for

price adjustment when local or foreign inflation is expected to be high and unpredictable.

Payment Provisions: Payment provisions, including amounts to be paid, schedule of payments,

and payment procedures, currencies of payment in case of foreign consultants, shall be clearly

defined in the contract agreement. Payments may be made at regular intervals (as under time

based contracts) or for agreed outputs (as under lump sum contracts).

Performance Security: Bid and performance securities are generally not recommended for

consultants’ services.5 Their enforcement is often subject to judgment calls, they can be easily

abused, and they tend to increase the costs to the consulting industry without evident benefits,

which are eventually passed on to the Borrower. However, in specific cases, performance

security amounting to about 5% of the consultancy contract may be stipulated in the form of

bank guarantee to be valid well beyond the tenure of the consultancy assignment.4

Conflict of Interest: The consultant shall not receive any remuneration in connection with the

assignment, except as provided in the consultancy contract. The consultant and its affiliates shall

not engage directly or indirectly in activities that conflict with the interest of the Employer under

the contract, and shall be excluded from downstream supply of goods or construction of works or

purchase of any asset or provision of any other service related to the assignment other than a

continuation of the 'Services' under the ongoing contract not connected with the job concerned.



26

Professional Liability: Professional liability is a term used to recognize the obligation of a

person or firm to compensate those who suffer loss or damage as a result of the negligent

performance of the professional services provided by them. The consultant will be expected to

carry out the assignment with due diligence and in accordance with prevailing standards of the

profession. He will always act, in respect of any matter relating to the Contract or the Services,

as faithful adviser to the Employer and will at all times support and safeguard the Employer's

legitimate interests in any dealings with the subcontractors or third parties. The Consultant shall

be responsible for accuracy of data (whether collected directly by him or procured from other

agencies/authorities), the designs, drawings, estimates and all other details prepared by him as

part of the Services. He shall indemnify the Employer against any negligence, deficiency in

services, or inaccuracy/deficiency in the work that might surface during implementation of the

project. The consultant will also be responsible for correcting at his own cost, the drawings

including any re-survey/investigation and correcting layout, if required.

Professional Indemnity Insurance: Professional Liability Insurance, more commonly referred

to as Professional Indemnity Insurance, is a mechanism to transfer all or part of the risk to an

insurance company for payment to those who are entitled to be compensated for their losses to

the negligent performance of the duty by a the professional. The consultant shall provide to the

Employer a Professional Liability Insurance (PLI) for a period of five (5) years or as per

applicable law, whichever is higher, after completion of services.4 The liability to the Employer

shall be limited to the total payments expected to be made under the consultant's contract, or the

proceeds the consultant is entitled to receive under its insurance, whichever is higher.

Termination: If the consultant is found to be not performing satisfactorily during the course of

the consultancy assignment, or refuses to re-do part of the work which is found unacceptable, or

fails to comply with any decision reached as a result of arbitration proceedings, or becomes

bankrupt, or is found to indulge in corrupt and fraudulent practices, or knowingly submits a false

statement which has a material effect on the rights, obligations or interests of the Employer, may

terminate the contract after giving due notice. Upon termination, the Employer shall, after

offsetting any advances, pay for the services satisfactorily done before the effective date of

termination, and also of reimbursable expenditures which have been actually incurred before the

said date

Staff Substitution Provisions: During an assignment, if substitution is necessary (for example,

because of ill health or because a staff member proves to be unsuitable), the consultant shall

propose other staff of at least the same level of qualifications for approval by the Employer. Such

substitution may be allowed only in respect of a proportion of the staff proposed, and provisions

towards penalties for such substitution may also be included in the consultancy contract. The

contract may also contain provisions for replacement of personnel found unsuitable by the

Employer.

Dispute Resolution Provisions: Consultancy contracts need to include a clause for settlement of

disputes. The dispute resolution mechanism usually provides for amicable settlement failing

which the dispute is referable to an arbitration proceeding.



27

References:

1. JNNURM: Modified Guidelines

2. JNNURM Detailed Project Report Preparation Toolkit

3. Manual on Policies and Procedures for Procurement of Works issued by GOI, Ministry of Finance (2006)

4. National Highway Authority of India : NHAI Works Manual-(2006)

5. Guidelines: Selection and Employment of Consultants by World Bank Borrowers (2006)

6. World Bank- Pre-qualification Document for Procurement of Works and User’s Guide (2006)

7. World Bank- Standard Request for Proposals for Selection of Consultants (2004)

8. World Bank- Standard Bidding Document for Procurement of Works and User’s Guide (2007)

9. World Bank- Guidelines Procurement under IBRD Loans and IDA Credits (2004)

10. FIDIC Contracts Guide to the Construction, Plant and Design-Build and EPC/Turnkey Contracts (1st Edition, 2



lesson2-sabnis

Documents

new works

original works

mr sabnis

urban local bodies

public bodies

sabnis mr sharad sabnis

urban transport

ministry of urban development