Re: PREDETERMINED TENDER VALUE [ENGINEER’S ESTIMATE]

**RSM** Fri May 28, 2010 7:46 pm

RJM

I have an ugly practical experience of using Engineer's estimate in the evaluation of Tenders I came across some time ago.

One PE had prepared an Engineers Estimate for the project which was around Tshs. 28 billion. The submitted tenders were all above Tshs. 35 billion and the PEs evaluation committee recommended to the Centralized Tender Borad (outside the PE) that an award be made to a contractor whose lowest evaluated bid was Tshs. 49 billion Tshs. This recommendation was not accepted and the PE was requested to justify why an award should be made to a firm at 49 billion while the Engineers estimate was 28 billion.

In order for them to justify their recommendation, they reviewed the estimate to Tshs. 42 billion Tshs. on claim that the estimate was prepared long time ago and since then there has been an increase in most of the construction materials.

On this submission, they were again requested to justify if they had a budegt, since in most cases it is expected the Engineer's estimate reflects the budget allocation for the project. They failed to justify the existence of budget. Actually agreed funds for the project were Tshs 20 billion only. The PE was then directed to reduce the scope of the project and re-tender again.

This example shows problems we have with relying on Engineer's estimates which were not prepared and updated as appropriate.

Any comment on this? This is an interesting topic lets have your experience.

**RJM** Thu Jan 14, 2010 11:21 pm

HAPPY YEAR COMRADES!

I was asked by friend of mine, what is the essence of the Predetermine Tender Value commonly known as an Engineer’s Estimate (EE). The first thing I recalled was the real practice of using Engineer’s Estimate in the evaluation of tenders. I think most of us we have evident that tenders are rejected solely because the bid price above or below EE. Besides, this has posed a lot of questions to the practitioners such as; what happen if the EE is not realistic? He further asked what is the essence of having EE while S67(3) of PPA, Cap 410 states that “Any procedure under which tenders above or below a predetermined assessment of tender value are automatically disqualified may not be accepted” and this also repeated under R90(14)/97/2005 [Examination, Evaluation and Comparison of Tenders]. I think it is worth to share experience in this issue through this forum.

I will try to analyze this issue from the preparation to application EE in the evaluation process. I believe the main problems have been at the preparation stage of the EE. These are kind of questions we should ask ourselves; are the rates built-up from the first principle, do they reflect market prices of the inputs [materials, labours and equipment/plants] and do thorough site investigation and surroundings done?

The procurement legislations have provided adequate platform how the EE should be prepared. Regulation 53/97/2005 requires an accurate detailed estimate of cost based on the contract schedule to be prepared before the tenders are called and any provisional or alternative items be clearly defined. Furthermore, the estimate should be reviewed and updated when the contract information sheet is prepared and the tender advertised provided that where, for any reason, there is a significant delay between the preparation of the contract information sheet and the date of tenders closing, the estimate is to be reviewed again. The aforesaid estimates for all works should be signed by a registered engineer, registered architect or registered quantity surveyor certifying that they have been prepared capably and checked. No doubt that the estimates prepared as described above will be construed as EE that will be used to the submitted offers. As a professional in this field how do you prepare your estimates (EE) normal you use to compare bidders’ price??? Do you review your rates to reflect market prices prior to advertising tenders?? Take example of the estimates prepared April this year [during budgeting and preparation of Annual Procurement Plan] and tender for that project being advertised April next year. Do you think the prices of the inputs will be the same when advertising or executing the projects?

The EE prepared as per above outlined procedures will be used to compare the bid prices submitted by the bidders when analyzing critical bill totals of the submitted bids to ascertain unbalanced rate, front loading and any other risks associated with the bid prices. At this stage Evaluation Committee (EC) will be in the position to ascertain which bids prices are below or above EE. During evaluation process the measure of acceptability of the bid should rather be the “reasonableness” of a bid price. The reasonableness may be establish by considering all factors such as market conditions, special terms specified in the bidding documents, prices of similar items procured in the recent past any other relevant factors. If great differences between bid prices and EE are found, the reasons for the discrepancy must be analyzed. I believe this is the spirit of Section 67(3) of PPA, Cap 410 and R90(14)/97/2005 to prohibits automatically disqualification of tender for reasons that tenders are above or below EE. In other words, justifications are required to justify that the rates are abnormal in the sense that they do not reflect market conditions or bidders cannot execute the contract with quoted prices. Therefore, before you reach a decision of whether bid prices are above or below EE do the following:-

1. Review EE to discover whether any unusual provisions are included which may have affected the prices ; and
2. Analyze current market conditions to discover whether they would tend to increase or decrease the bid prices.

If these reviews would account for the discrepancy three alternative conclusions may be
Reached;

i/. Bid is reasonable under given circumstances and should be accepted ;
ii/. If the bid prices are marginally low the bidder should be requested to prove to the satisfaction of the PE, how the bidder intends to procure such items/perform the works/provide the services as per the quoted rates, for such purposes the bidder may be asked to provide a rate analysis[rates built-up]; if the PE is of the view that the justifications/explanations provided by the bidder is unacceptable, and hence the bidder would fail in the performance of his obligations within the quoted rates, a higher performance security may be requested to mitigate such risks; if the bidder refuses to provide such additional performance security, his bid should be rejected and finally if the PE is of view that even increase performance security won’t be enough to mitigate such risks, the bid should be rejected; and

iii/. Aspect of bidding documents are suspected to be the likely cause; all bids may be rejected and initiate re-bidding with modified bidding documents.

What are your views on this?

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