Contract Risks Associated With Compiling Tender Documents

Task instructions: 

As a Domestic Builder (company including yourself, a carpenter and an apprentice), you are required to research the contract risks associated with the compiling of tender documents.

Browse through the Request from Tender (Appendix 1) and other documents provided to get a general idea of what they contain. 

PART A

You are required to research the contract risks associated with the compiling of tender documents

1.     Six potential risks interpreting and pricing tender documents from the client’s point of view.

·         Risk of letdown to conform to responsibilities (express or implied) of the tender papers will consequence in susceptibility to litigation claims.

·         Risk of unsuitable finance stages and funding shortages for the development, causing a deferment or annulment of the development or renegotiation of the guiding principles in the course of the development.

·         Risk of evasion or non-functional of one or more of the main performers, comprising of the customer, the builder and subcontractors.

·         Risk of clashes over payments, either payments from the customer to the builder.

·         Risk of selecting an incompetent contractor that may lead to poor performance.

·         Industrial clashes through errors onsite or through overt action.

2.     Six potential risks interpreting and pricing tender documents from the potential contractor’s point of view.

·         Risk of susceptibility through sections that function contrary to the construction society, for instance clauses that embrace the constructor answerable for situations beyond their control.

·         Risk of clashes over payments, disbursement from your business to subcontractors. Evaluate your money flow to confirm that you can make disbursements to subcontractors even if you have not been salaried by the customer for a specific period.

·         Inappropriate labour or supplies prices, or inaccuracies in any statistics given, underbidding and execution at a loss.

·         Risk of legal responsibility due to delays triggered by conditions beyond the contractor’s control, such as; supply delays that interrupt scheme conclusion, consequent delays in progress disbursements, labour scarcities, and weather conditions.

·         Risk of evasion or non-functional of one or more of the main performers, comprising of the customer, the constructor and subcontractors.

·         Risk of mistake in the bid documents that may lead to disqualification.

3.     Give brief outline of how the risk may affect the outcome.

·         Mistake in bid documents by the contractor may lead to automatic disqualification from the tender.

·         Non- pfunctional of one or more of the key players in the contract would lead to penalties to that particular party and hence termination of the contract.

·         Inappropriate labour or resources prices, or inaccuracies in any figures given, underbidding by the contractor will eventually lead to performing at a loss.

·         Delayed payments by the customer to the builder or by the builder to the subcontractors would lead to late time of accomplishment of the project. 

Part B

Using AS4120 Code of Tendering answer the following. 

1.     List at least three Australian standards which is relevant to the tendering process. 

·         Tendering at all stages in the building industry shall be executed justly in a way that is impartial to all people involved.

·         People shall conform to all jurisdictive responsibilities comprising of those necessary by trade practices and customer affair regulation.

·         Bidders shall only bid where they anticipate to perform the work. 

2.     Which Australian standard for tendering is used specifically for design and construction contract?

AS 4301—1995 General conditions of tendering and tender form for design and construct contract. 

3.     In the Code of Tendering, what is the definition of:

o   Construction industry- Comprises of all structures, renovations, repairs, Civil engineering, progression engineering, mining and weighty engineering developments. It disregards cottage building.

o    Principal- any contractor or sub-contractor welcoming and receiving bids. 

4.     In Part 6 of the Code of tendering, explain briefly (in your own words) the obligation of the principal at the following stage: 

o    Pre tender

The principal is bound to make sure that the project to be executed is clear, brief and specific.

The principal shall ensure that the superiority assurance standards apply to complete procedure of outlining and detailing the necessity.

The principal should also arrange for sufficient budget to carry out the development.

o    Tendering

The principal should allow ample time between welcoming bids and closing bids.

The principal should also arrange the development budget before starting bidding process. 

5.     In the Code of Tendering, what should be the accepted procedure for the closing of tenders? 

·         Tenders should not be closed before 2:00pm

·         Tenders should not be closed on a Monday or day after a public holiday.

·         Tenders should be closed one clear day after a weekend, construction business holiday or rostered day off.

·         Tenders should be closed no less than one week subsequently to the documented business Christmas close down. 

6.     In the Code of Tendering, explain the process of evaluation of tenders. 

·         Tenders should act in accordance with Pre-qualification standards and applicable code of practice.

·         Tenders should conform to tender papers.

·         Qualifying tenders should show value for money.

·         Technical, administrative and monetary resources to execute the required project.

·         Tenders should depict other obligations affecting ability to execute the contract. 

7.     What are 5 main obligations for tenderers?

·         Tenderers are required to submit tenders for only the projects that they are competent to execute.

·         Failed tenderers are required to return tender documents to the principal as long as they were informed about this condition before receiving the documents.

·         Tenderers are required to acquaint themselves with the official papers and the site where the structure is set for construction.

·         Tenderers should not be engaged in any acts that would compromise the business legitimacy and hinder other tenderers.

·         Tenderers should be answerable to the principal on whether they have entered the contract directly or indirectly. 

8.     What would be an example of malpractice as mentioned in clause 7.5 of the Code of Tendering, explain your reasoning? 

An instance of a misconduct is when the tenderer offers a bribe to the principal in order to win the tender.

Another example of a malpractice is when the tenderer gets to know the confidential information such as the budget of the project regarding the project to be executed prior application of tenders. This allows the tenderer to bid according to the budgeted figure. 

9.     Why is it important that information provided by the tenderer to the principal should remain confidential?

It is vital to keep the statistics private to avoid acts that would compromise the business legitimacy and hinder other tenderers from winning the tender. 

PART C 

1.     Refer to request for tender (Appendix 1)  and find out

o    What are the tender dates and times?

Date when the tender was issued 1 February 2016

o    Record date, time and

Closing date: 1 March 2016 

o    Address for lodging a tender. 

Postal lodgement: PO Box 1234 Holmesglen

Fax number for lodgement: 8765 4321

2.     Make a list of all the contract requirements you can identify.

Variations

The customer may alter the bond with the tenderer after conjoint arrangement to variations and fee.

Superiority of resources and workmanship

Except otherwise indicated, all constituents cast-off ought to be new and appropriate for the nature, oddity and requirement of the works.

The tenderer is obligated retain the works hygienic and tidy and confirm that garbage is on a regular basis removed from site.

The tenderer ought to give the customer five working days’ notification in inscription of the date upon which it anticipates to start the construction works.

When the tenderer contemplates the works have been accomplished, the tenderer ought to guide the customer in inscription and issue an announcement to this effect. 

3.     Identify those requirements that are specialist in nature that are beyond the usual scope of work and may have to be outsourced or otherwise addressed. These are areas that pose a risk to you in terms of cost blowouts.

·         Prime costs.

There should be a budget to cater for prime costs during the project.

·         Provisional sums.

There should be a budget for the provisional costs.

·         Safety and Health measures.

There should be a comprehensive safety and health measures to avoid catastrophes on site. 

4.     Describe, in your own words, practical solutions for the risk associated to the specialist requirements.

There should be a budget to cater for prime costs during the project.

There should be a budget for the provisional costs.

There should be a comprehensive safety and health measures to avoid catastrophes on site. 

5.     Make a list of your sources of information for each of the contract requirements 

AS 4301—1995 General conditions of tendering and tender form for design and construct contract.

             AS 2124-1991 General Conditions of Contract. 

Reference

CCH Australia Limited. (2017). Australian Fair Work Act 2009: with regulations and rules, consolidated to 20 September 2017. 

International Symposium on Advancement of Construction Management and Real Estate, Wang, J., Ding, Z., Zou, L., & Zuo, J. (2013). Proceedings of the 17th International Symposium on Advancement of Construction Management and Real Estate.

Marien, M. (2012). Your guide to tendering: construction works. Sydney, N.S.W., Dept. of Public Works and Services.

Mohd, Haslina, Robie, Muhammad Afdhal Muhammad, Baharom, Fauziah, Muhd Darus, Norida, Saip, Mohamed Ali, & Yasin, Azman. (2016). A secured e-tendering modeling using misuse case approach.

Standards Association of Australia. (1994). Code of tendering. Homebush, N.S.W., Standards Australia.