CLASS #02- Tender Documents

1. Introduction: Hi, this is my Class #02 from the subject "Principles, of Cost Estimation". In this class, we'll talk about the tender document. And you will learn about the content of the tender documents and what's the types of information we can get from such document to support the project price analysis. First, let's get a brief about the content of our class. The tender document or the basis of contractors offers to construct the work. The tender document that are the means by which the employer design and work requirements are communicated to the tendering contractors. This informs a contractor of the scope and the details of the project, the condition under which the work will be executed. And they identifies the rights and obligations of the various participants under the proposed contract. The tender documents enabled contractors to price their work requirements and submit an offer which if accepted by the employer, became a binding contract. And some of the tender document will in turn become a contract document. Actually, many, if not most, of the financial problems in building resulted from the inadequate or unclear tender documents which lead to disputes between employees and contractors over what's included in the price of the work. So it's important that quantity surveyor have a clear understanding of the nature and the purpose of the various document used for tendering purposes. As, this is the case with most document in construction industry. Tender document can vary quite dramatically from company to company and the project-to-project. But there are some better framework than others. And some general information which most companies are going to want to include. Now, let's get a brief about specific what you will learn from this class. Here in our class, you will learn about the following elements that included in the tender documents, like invitation letter for Tinder, general condition, particular condition, specifications, drawings and schedules. Which will give you a good idea of the content which will be included in tender documents for construction. And the in total provides a clear picture of the project and its implementation method, which in turn facilitates the task of analyzing its cost and determining total value. You will learn also about the priority of reading such document. To avoid the conflict may result from formulation of a specific information with different meanings in more than one document. Thank you. And let's get started. Our first lesson. 2. Letter of Invitation: First, the invitation letter to tender. It's a formal invitation from the client to all contractors nominated to make an offer for the project execution. And that by receiving the tender documents related to the project, which you have sufficient detail to enable the Tinder to prepare an accurate tender that is in a prescribed format so that it's easy to compare with other tenders. This invitation include key information about the project, such as customer name, project name, a brief description about the project, condition for participation to tender. And sometimes the expected approximate value of the project may be specified. Especially if the owner offers a project as EPC project, which is meaning the contractor will be responsible about Engineering, Procurement and Construction. It's worth noting that there are projects that are proposed to be implemented in the EPC+F. And the F here refers to Fund, which is a contractor has to provide a source of funding for the project and the present it to the owner. From here, it's clear that the letter of invitation just contain some information that may affect the initial contract of decision to participate in the pricing study for this project or not. 3. General Conditions: Second document is the General Conditions. General Conditions is the normal and the standard method prescribed for how the owner, contractors and the architect are to interact with each other during the course of construction, which include all the transactions that take place between the contracting parties during the implementation period of the project until its final delivery to the client are listed with an explanation of the step and conditions that must be followed in the implementation of any procedures related to the implementation of the Project. Which in turn leads to flexibility and the ease of implementation and avoiding any possible misunderstanding in the terms of the contract. The general conditions are listed in the form of numbers and sequential clauses. And each clause relates to a specific procedure with an explanation of the steps and the condition necessity for its implementation, which are binding on all contracting parts. What are these clauses talk about? The following are some examples for such clauses. Documents' Submittals. This clause describes the procedures and time required for submitting and approval for the project. Running documents like the shop drawings, materials' list, suppliers' list, and so on. Second is a time schedule which describe the method statement of the detailed time schedule of the project and the form in which it's presented, the information that must be available in it, and the types of reports that will be used later to display and evaluate the progress of work throughout the project. The invoicing, a statement which you clarified that the methods for submitting periodic and finally invoicing statement, what is their contents, the time period required for their approval and the disbursement of financial dues. The next clause talk about variation orders and explain the steps to be followed in the event of a request for variation order and how to claim the consequences of this change in the same way a separate clause is specific in the general condition to clarify the necessary steps and the condition to implement any expected procedures that's required to complete the work. In the fullest manner, it's worth to be mentioned. One of the most common model of general condition is included in the FIDIC contract. The term FIDIC stands for International Federation of consulting engineer. As a brief about the organization, it was established in 1917, headquartered in Geneva, and is aimed at finding a resolution in construction sector. FIDIC has become famous for its major activities of producing the standard form contract for the construction and the engineering industry, which is most flexible and useful. than the standard contract. The first edition of the conditions of the contract for works of civil engineering construction was published in August 1957. This version has been updated over the following years. The structure of FIDIC contract consists of four parties. The contract agreement, general condition, guidance for preparation of the particular condition forms of little tender. Of course, it's not the condition that the project be implemented according with the term of the FIDIC contract. And it may follow other conditions agreed upon between all parties. But and as mentioned before, the FIDIC contract is the most common contract. condition in the market. This figure clarifies part from the classification of the clause of the general condition of contracting as shown in FIDIC contract. Now let's talk about the information we can get from the general condition and how come such information supports the cost estimation analysis. Actually, general condition describes expenses that support a project without directly relating to a job site activities like pouring concrete or mounting steel beams. It's also often referred to these expenses as indirect cost. Here are a few expenses commonly placed in the general condition category. This is not an exhaustive list. Actually the general condition category can include many hundreds of expenses. However, this should give you an idea of what constitutes a general conditions. The first is pre-development fees. Construction company is typically put lots of effort into a given project before even receiving the contract. For example, staff prepare the estimates and Bids, both of which take considerable time. Naturally, there are costs associated with these activities. The most obvious of these would be the stuff salaries. Second one is administrative project costs. Of course, administrative task is don't end once the project begins. Away from the job site, staff members carry on with Tasks, such arrangement of transportation, accommodation and staff recruitment or financial issues and so on. Without this work the project will be negatively impacted. However, because these costs are not directly related to manual labor or the job site, they are classified as indirect cost. Next is a project, equipment and utilities. This category contains expenses such as fencing, temporary lighting, and site office utilities. Next one is permits. If a project requires permits, this will also typically be lumped in with general condition. Permit fees include any cost incurred during the process of receiving the legal authorization required for work to commence. Other one is loan's Interest. When construction companies take on loans to cover project costs. The associated interest will typically be including among general condition. Texas. It means many taxable events typically occure during larger scale construction project. These taxes and any fees associated with handling them fall under general condition. Project management, construction project management is a term broadly describing a whole laundry list of activities that support work on the job site. Like supervision, time management, safety, quality, contract management, and the each of these courses fall under the category of general condition, Public relations, Public facing construction companies often incur costs, is associated with maintaining their reputations and the other advertising related concerns. These expenses meet the criteria of general condition Worker Accommendation and the additional compensation. Often, construction projects require workers to relocate or even just travel a long distance to the job site. This category cover expenses related to the travel, including hotels, booking, compensation for gas and air travel. Job site setup, and cleaning costs. Costs in this category cover the initial setup of a construction project along with the cleanup. That happens once everything complete, these costs fall under general condition too. Finally, it's clearly observed that general condition can heavily influence our projects financials. In fact, profitability may impacted by the level of accuracy of cost estimation based on the extracted information from the general condition. And incorporate this figure into their planning. 4. Particular Conditions: Second Document is a particular condition. A particular condition means the document which sets out the additional terms and conditions, clarifications and the amendment to general condition or to any other documents included in the contract that have been agreed by the parties in writing in respect of the contract. Actually, this is no clause in the general condition requiring additional data to be included in the particular condition. This is done only when we need it and as much as necessary. And in the particular condition, reference is made only to the terms that will be modified in the whole or in part from the general condition. And to understand the difference between general and particular condition. The general condition can be applied for any project anywhere in the world. But we'll never be able to deal with specific issues related to a specific project nor to the legislation or a certain country. And to consider such issues in the contract we addressed them in the particular condition. Now, let's get example of a sub clause amended in general condition and was issued in a particular conditions. For example, Sub-Clause 1.3 from general condition which is called communications. The sub-clauss clarifies a process and the methods of communications between the contractors parties and not concern about the address, phone number, or e-mail that will be used throughout the such communication. Because the such data is a specific for this project only. So to incorporate such information in the contract, these sub-clause can be modified in the particular condition to indicate the right communications mean and to clarify the information about the such communications as observed the particular conditions present is the same nature of information that was explained in the general condition. Accordingly, the particular conditions will have the same manner of impact on the estimation analysis process as general conditions, which already explained previously in general condition session. 5. Specefications: The next document from the list of tender documents is a specifications. Construction's specifications. Also called the specs, are the details for the work that needs to be completed in a construction project. This detail include information such as materials, scope of work, installation process and the quality of work. And the contractual use this as a guide to choose the right materials for a specific project. Such Specs which are discussed between the project owner and the contractor and become a part of the legal documents for the project so that there is an agreed upon reference to describe each item will be executed in the project and according to the following terms. First, types of material issued for implementation, their properties and the standard quantities for the implementation for the unit of the item. Second, the method of implementing the item and the condition to be followed upon implementation. Third, The method of measuring the work executed from the Item, and that to be referred to upon receipt of the work executed by the consultant and to review their compatibility with these terms for approval. Owners, architects and designers must be specific about the work needed on a project. If you communicate what needs to be done poorly, it can result in huge delays, change orders, and rising The Cost. So, the construction industry creates a process to ensure that construction's specifications, communicate project needs efficiently. This process consists of three types of construction specification that help details the workflow. And these three types of construction specification are first prescriptive specs, performance specs, and proprietary specs. First, the prescriptive specs, which focus on the details for the types of materials used and the installation of said materials. Architect or engineer tend to take over the job of project design based on prescriptive specs as it gives a better image of what the final product will look like compared to other specs type. The structure of prescriptive specs can be broken up into three separate parts, general, products and executions. To understand the three parts, Let's take an example from the sections of concrete as follow General Part consists of information such as national quality, standards, product handling, design requirements, and the keeping quality control. While the product phase will describe the different products necessary for each task, as well as the individual performance level of each product. And the execution phase, will go over how to prepare materials and go through with installing them. And also involves testing the quality of the material and check if they were installed correctly. The second type from specs is the performance specs. Performance specs to discuss the operational requirements of a project. It details what the final installed product has to be capable of doing. In this phase the owner or general contractor doesn't give a subcontractor a detailed specs about how to finish the job. But instead, as they give contractor the detail on how the final product has to work in this phase. For example, as a contractor is required to make a pump, pumps 300 gallons per minute. There are no directions on how to make the pumping system go that fast. So it's up to the contractor to figure it out. And definitely this phase involved with most of the testing to make sure our project meets all of the operational requirements. The third type of specs is proprietary specs, which used when you need to use a single type of product for any kind of installation. And this is the least common of the three types of construction specification. But it's for jobs involving existing equipment and already completed installation. When the owner or client want to be consistent with their materials or just to prefer a specific type of material. But in this type, architect and engineer tend to try and avoid a proprietary specs because it can lead to promoting a specific manufacturer. Favoring a manufacturer can discourage competition during the bid phase of the project, which may increase the total cost of the project. So they will give the contractor a list of reliable suppliers to choose from to stop such impact. Now, let's talk about the information we can get from the specifications and the how come such information supports the cost estimation analysis. Actually, a specification describes expenses that support the direct execution of job site activities like pouring concrete or mounting steel beams. As it describes. First, the types of materials used for implementation, their properties, and the standard quantities for the implementation of the unit of the item. Second, it's described the method of implementing the item and the condition to be followed upon implementation, which give us a clear image about the required manpower for execution. So we can analyze the expected cost for each activity in Bill of quantity based on such information, which is often referred to these expenses as direct cost. Finally, it's observed that a specification regardless of its type, is considered a very important and essential source to estimate the direct cost for project items and should be read carefully before starting the project cost estimation, especially the direct cost, represents approximately 60% from the total project cost. 6. Drawings: The next document from the tender document is the drawings. Tender drawings mean drawings prepared by the consulting engineer in sufficient detail to enable those persons tendering, to correctly interpret the design of the work, and to submit a competitive tenders for the execution of the work. They identify every aspect of the construction process. they demonstrate how the building is put together. stating every material used and the method of construction, actually they cover items such as insulation types and finishes and are fully dimension at a larger scale. Otherwise, they are prepared in such detail as our necessity to give a comprehensive idea of the work to enable the contractor to accurately measure and the estimates the cost of the work without the need for the further information. Okay, now let's get a view about the components of tenders, drawings. The drawings at tendering stage will vary depending on the size and nature of the project. But in most instances, the final set of tender drawings will consist of the following information. First, builders work, surfaces reflect ceiling and finishes plan. Second is the general arrangement plans, sections and elevations. Third, Individual room drawings, Fourth, details, drawings. Finally, the schedules. Such information is reflected by the following list of drawings. Layout plan, a demolition plan, floor plan, elevations, finishing plans, interior elevations, finishing schedules, a structural drawings, mechanical drawings, plumbing drawings, and electrical drawings. Now let's describe the information included in such a tender drawings respectively. First is the layout plan. The layout is the general scope of work, including a site plan with the general condition of the worksite and the plants that show fire protection and accessibility. Seconds, demolition plan. Actually not all project to start from scratch. sometimes just it for rehabilitation or extension for existing building. So, Demolition plans show us the current state of the structure and indicate what must be demolished as part of the construction project. Floor plans. Floor plans are working drawings that show an aerial view of each level of the building. they include building dimensions, interior walls, exterior walls, and relevant fixtures. Elevations. Elevation drawings are architectural drawings that show cross-section of a building, also called section drawings. They show ceiling heights, wall construction, foundation plan, and the framing plan. Finishing plan. An architect or a design team provide finishing plans to show what material will be laid atop the core structure. They include a reflected ceiling plan, which shows the ceiling as viewed from the floor, including any lighting fixtures. These plans also show us the location of power outlet and they make reference to what's known as a finishing schedule. Interior elevations are more detailed variations. These elevations might show furniture, light switches, and all finished types. Schedules in the construction industry the word scheduled referred to lists or spreadsheets of certain materials. For example, the sets feature of doors schedule that showing all the doors that appear on other sheets. And windows schedule which showing all the windows that appear on other sheets. Structural drawing, these building design drawings are the work of a structural engineer who has different rules than an architect. The structural engineers drawing shows a structural schematic of building, including concrete footing, wall-to-roof roof connections, joist layout, and any especially engineered pieces in the building frame. A complex project may require the greater levels of detail in these engineering drawings. Mechanical drawings. This type of drawing show mechanical systems in building, most notably an HVAC system, which controlled heating and air condition. And it is required in most new homes and office buildings. Plumbing drawings. The show the location of pipes, water tanks, and the plumbing fixtures. Plumbing system include vents that cut through the roof and allow sewar, gases to safely escape the building. Electrical drawings. These drawings show detailed information about buildings electrical plan, including power circuits and light current system, like public address and cctv system, BMS, and so on. Now, how is the tender drawings support the process of cost estimation? First, It's important to read and understand the drawing and the specification together. Actually the tender drawings and specification sets a framework to ensure everything is clearly defined and full compliance with building regulations requirements. Second, the tender drawings are the main source of activities quantity. Because a quantity take-off is important for any tender estimate to be accurate. This is really important in lump-sum projects as the contractor has to evaluate the cost for all activities in order to prepare his project proposal. If you miss out any construction activities which is essential for the project, you will also lose money on it. Therefore, be sure to include all construction activities and your BOQ. In order to estimate the accurate price. As a conclusion, it was clear that the drawings is an essential factor during the cost estimation process. So it's necessary for any estimator to take, to study that design drawings carefully and in conjunction with the specification to avoid or decrease any gap in the value between the initial estimate cost and the final cost of the project. 7. Schedules: The last document from the tender documents is schedules. In the construction industry the word "schedule" refer to lists or a spreadsheet of certain information. And schedules. Almost include the following data in the tender documents. First is the Bill of Quantity which refer to "BOQ". Second, preferred supplier list. The third one is the time schedule. Now let's clarify respectively the information included in such schedules. First, bill of quantity. A bill of quantity consists of a list of materials and services required to perform a project and the approximate quantity of each one. And these often prepared by the engineer or architect after project design is completed. Using a bill of quantity in construction to estimate our project improves the accuracy of the proposal and the ensures that all contractors are bidding the same work. This makes it easier for the project owner to select a contractor because they don't have to worry about comparing the scope of work. What's the structure and format of the Bill of Quantity, and how it can be prepared. We start to preparing a bill of quantity by breaking the work down into items that can be quantified or measured. when, this list of work items includes a short description, the quantity, and the unit of measure. This breakdown is often based on standard work breakdown structure like CSI codes. Where, the CSI code is an international list of titles with numbers prepared by the construction specification Institute to present all activities in the construction industry and declassified by 49 divisions. This is the list of titles and number of CSI codes which mostly used in the classification of the BOQ breakdown. As we notice, it's divided to 49 division based on the function of work. For example, Division Number "03", referred to the concrete work. Division number "04", refer to masonry work, while the subdivision under concrete work "031000" refer to concrete forming and accessories. Once prepared, the BOQ is given to contractor to provide pricing for the project. and from there, the contractor prices, the work listed on the bill of quantities based on the drawings and specifications they have been provided. After it's complete. The pricing is returned to the owner for review and the contractor selections. Finally, it's important in the estimation stage if an item is shown on the drawings and is missing from the bill of quantity, the contractor should bring this to the owner attention. A revised bill of quantities may need to be sent out. Second Schedule is the preferred supplier list. A preferred supplier list is a list of organizations preferred by a client, to undertake certain works, supplies or service. Such list almost attached with the tender documents and the contractor are restricted by the organization named in this list. As a supplier for the projects material or services. Last schedule is tender time schedule, Tender Time Schedule prepared by the contractor to the client. In the very beginning stage of the project, even before the project awarded to the contract. And usually it's a summary schedule clarifying. How is the contractor intended to execute the project, sequence and duration? At this time is scheduled, doesn't contain a lot of detail and issued as a part of the tender documents for future reference. But in some project is the owner may require the tender is scheduled to be in detailed manner to contain the budget cost of the project, which creates the project cash flow. And could also contain the manpower as well, which creates manpower histogram. How does it look like? Mainly the time scheduled template contains two main sections, Bar-chart and activity lists as per this figure. What are the method of creating a time schedule? The following are some common methods for creating a project schedule. First as a bar chart method. Second is the critical path method, which is called the CPM. And finally, the line of balance method, which is called LOB. Let's talk about each method respectively. First is a bar chart method. This is the simplest and the easiest way to generate construction schedule. Bar chart will have the project timeline showing at the top. And the each activity is represented by a bar showing as a start, date and time of completion. Listed in chronological order. As observed chart. Easier to understand. Project tasks are clearly visible, making it easier to conceptualize what needs to happen at every stage of the project. This also makes it's shareable between all the team, which facilitates the estimation process. Second method is the critical path method, which is called also CPM. Critical path method. Schedule is a much more detailed sheet. It will show all the various activities and their dependencies on. One other. Useful for projects that include some level of unpredictability is a CPM will take into account the best case and worst-case timeline for each activity and reflect that by assign the early and late start or finish for each task. This diagram will also identify which activities must be completed at a certain time as to not affect the overall project deadline. This is what's known as the critical path. Like the bar chart described before, the Critical Path Method is a relatively easy to implement. It's also does a great job of identifying important point of the project. The last method is the line of balance. LOB. The linear schedule method is ideal for repetitive construction projects. Since repetitive builds are predictable as far as timing is concerned, this method which is adopted from the manufacturing industry, specifically it help to allocate resources that must be shared among crews or team. So work can be performed on a parallel tracks. And unavailability of a particular resource like equipment won't keep the job from moving forward. These prevent, delayed by ensuring the right number of resources are available for each step. So the following ones are not delayed. So when work is less repetitive, using the LOB method doesn't make much sense because focusing on the sharing and maximizing of resources become less important if different groups are working on completely different tasks. Now, how the tender time scheduled support the estimation process actually the major area supported by the time schedule in the estimation process is the indirect cost analysis, especially for the project supervision team's estimated cost As the cost is dependent on their number and the expected time of their involvement to the project, which could be extracted clearly from the time schedule by knowing the start and the finish of the related task. For them. 8. Periority of Documents: As noticed in the previous sessions, construction contract include lots of different numbered documents like as Drawings, specifications, scheduled and so on. And such documents will often run into hundreds of pages. And it's easy to have inconsistencies. And to remove such inconsistency, we need to rank the tender documents according to their priorities and important. So many contracts include the priority of documents clause, which help you interpret which of these documents is most important? this clause, mostly clarified in the general condition, and already referred to for such meaning of documents priority in FIDIC 1999, The Red Book- Clause 1.5, which is wording the following. "The documents forming the contract are to be taken as mutually explanatory of one another. For the purpose of interpretation, the priority of the document shall be in accordance with the following sequence. First, the contract agreement. Second, letter of acceptance. Next, the letter of tender. The particular condition, the general condition, the specification, drawings, and finally, the schedules and any other documents forming part of the contract". Let me give you a working example to clarify how the discrepancy between documents may occur. Suppose that I am a subcontractor working on a contract which include both drawing documents and bill of quantities sheet included in the schedules document. The two documents say different things about the thickness of plain concrete under foundation. The main contractor is saying, I need to cast the plain concrete in a thickness 20 centimeters. As per the wording in the bill of quantity, which are followed in pricing is a project. Despite this, we see that the drawing sections clarifies that the thickness is 15 centimeters. We are currently not progressing on site and this is causing problems in terms of time and money. It's observed clearly. The two documents contradict each other. One simple way to solve this is to see which document is “Precedent”. Clause 1.5 of the contract condition deals with how interpret the contract and says, as we mentioned before, for the purpose of interpretation, the priority of the document shall be in accordance with the following sequence, which already clarified before. The drawings are clearly the priority documents and therefore, the wording in this document is more important than the schedules, which includes the BOQ. I can therefore confirm to the main contractors the following , "Further to your request for us to supply and cast the PC " Plain Concrete" in 20 centimeters. Please note that the drawing documents, which is precedent to bill of quantity, as per clause 1.5 confirms that. Please therefore ensure the thickness will be 15 centimeter to prevent any delay to the work". So the priority of document clause acts as a safeguard to allow you to understand which documents are most relevant if there is a dispute. And definitely the tender documents should be reviewed carefully according to such Priority of documents through the estimation process. Thank you and hope to see you soon in my next class, class number three, from the subject "Principles of Cost Estimation", which we'll talk about.