ae
‘TENDER ADJUSTMENTS.
The winning of a contract can be more than simply giving the lowest price. The style of
presentation, for example, is important for design and build contracts, and method statements are
commonly required by construction managers. There is, of course, a balance to be achieved
between what the client wants and appearing to be too clever; different clients have different
expectations,
The contractor needs to consider the criteria the client will use for selection.
These can be:
1. Price; will the lowest price alone be the basis for selection?
2. Time; will a programme show the client that the contractor has thought about how the job can
be finished on time, or ahead of time?
3. Allocation of money; will the way in which money is distributed in the priced bills help or
irritate the client?
4. Method statement; would the client wish to know the methods to be adopted before accepting
the offer?
5. Safety and quality; does the client expect a statement of safety or quality showing how the
contractor will manage this particular contract?
6. Construction team; is the contractor proposing to supervise the job with experienced staff who
will work as an effective team with the consultants?
7. Presentation; how important is an accurate, well-presented offer?
Completion of priced bills
The Tender Summary form produces a tender sum which must be transferred to the bills of
quantities for submission. If a priced bill of quantities has to be submitted with the tender, then
the way in which money is spread in the bill should be decided at the final review meeting. The
contractor often changes the actual breakdown of prices in a priced bill of quantities to
1. Produce a reasonable cash flow from interim valuations.
2. Apportion monies in a way which the client will find acceptable.
3. Increase the money set against under measured items and decrease the price of over measured
items.The example tender analysis forms given show the first bill total was £664 705 before the project
overheads were added and any adjustments were made, The tender sum arrived at after final
review was £698 437. If the bill was inked in using the first pricing level, the amount remaining
for project overheads would be:
£698 437 - £664 705 = £33 732
This is not the true project overheads sum but is the amount needed to bring the bill total up to
the tender sum. If the parties agreed to proceed on this breakdown a part of the project
overheads, overheads and profit would remain in the measured work portion of the bill. In
particular, the items to be carried out by domestic sub-contractors would carry a considerable
mark-up.
‘Taking the example a stage further, if the estimator had the use of a computer and hiad made the
tender adjustments before inking in the bill for the client, the breakdown would be in line with
the tender summary below:
£ £
Measured work and provisional sums: 529 398
(including £620 fluctuations on labour)
Project overheads
Labour 12.960
Plant 37890
Materials 5.780
Sub-contracts 3.300
Staff 37619
Fluctuations 1675
Water 650
Insurances 5.000
Risk/opportunity 10.000
Bond 1050
Overheads and profit 18.000 133 924
Provisional sums and dayworks 45100
Tender total 708 422The client should not be surprised to see this large sum (£133 924) for project overheads because
it is based on the true allowance. If the contractor anticipates a problem with this breakdown, he
can move some money, either:
1. Into ‘safe’ items in the measured work portion of the bill, looking for work which will be
carried out early in the contract (safe items are those which appear to be measured correctly or
are judged to be undermeasured at tender stage), or
2. By using a computer system to add a percentage to all the rates in a bill of quantities.
The project overheads total should be broken down in the bill of quantities with sums for fixed
and time-related items. A surprising number of contractors ignore this breakdown and prefer to
insert a lump sum in the collection; they assume that if their tender is the lowest, more details
can be submitted to meet the needs of the quantity surveyor (or engineer) for valuation purposes.
The contractor also knows that if there are some small queries raised by the client then his tender
is (probably) being considered for acceptance.
‘When contractors are tendering in a competitive market in which work is scarce, they know that
their bids must be close to the predicted cost of carrying out the work, with little mark-up.
Sometimes tenders can be slightly below cost. The contractor, in taking a calculated risk on how
the contract will tum out, may price some items in a way which appears to be inconsistent. As an
example, assume that a bill of quantities has two equal amounts in items for breaking out rock
one in reducing the site levels and the other in excavations for drains. Contractor A priced both
items at £18.00/m3 and contractor B priced the rock in open excavations as nil and in drains at
£36.00.The overall effect on the tender sum was the same but contractor B had discovered a
serious undermeasurement in the drainage bill; he was therefore hoping the drainage bill would
be remeasured and valued at the higher rate. This might appear to make sense but, as many
contractors have leamed to their cost, plans can go wrong. If the quantity of rock in open
‘excavation increased substantially, the contractor would suffer a serious financial loss.