CONTRACTOR SELECTION: THE OPTIONS & CHECKLIST!!!

Many persons and institutions wishing to undertake building construction works generally find themselves in the dilemma of what methods to use to procure a competent Tender from Contractors. The term contractor loosely means “one who enters into a contract to provide work, services, or goods”.

For the case of public institutions, there is a clear case of the methods and process since the Public Procurement Oversight Authority has done a tremendous job in provision of standard tender documents, average price lists, Procurement Regulations and oversees the sound practice in applying the Public Procurement and Disposal Act, 2005.

In the case of a private client, making the correct choice of contractor for his project can be an uphill task. I wish to consider briefly two approaches:

1.       By Competition- (Part 1 of the post)

2.       By Negotiation- (Part 2 of the post)

PART 1: CONTRACT AWARD USING COMPETITION

A Tender is the final price or “offer” which is submitted to the client by the contractor and is the sum of money for which the contractor is prepared to carry out the work. It comprises his “estimates for the work” plus a margin for overheads and profits.

To be able to award a competitive tender three main paths can be used:

a)      Price- based Competition– Different contractors submit bids and award is solely done on the competitive prices they offer. All other possible factors are stated clearly in the tender documents for compliance but primarily the job is given to the most responsive affordable contractor.

b)      Time- based Competition– In cases where there is an emergency; the job is awarded on the basis of delivery within the shortest time possible. Time is a controlling factor.

c)       Term Contracts– When the scope of works cannot be reasonably determined, a client may opt to award tenders extending over a period of time or ‘term’.  The contractor is given a schedule of basic prices and he quotes a percentage increase over those prices from time to time to cover preliminaries, overheads and profits. A term contract is a type of continuity contract which suits situations where a continuous programme of work is required. When tendering, contractors are aware of the nature and approximate value of the work but the extent of the work is unknown. Upon expiry of the term (say 2 years), renewal of the contract can be done.

After deciding to use Competition as a basis for award of the tender, the Client may opt to use “Open Tendering” or “selective Tendering” as a means of obtaining the tenders. Open tendering is where the client seeks to obtain bids from the market at large. Selective Tendering is where the client deals only with a select few from the large pool of contractors in the market.

In selective tendering, a list of firms who are suitable to undertake the works is prepared and used to obtain bids. Alternatively, an Expression of Interest is placed and any contractor applies for the opportunity of tendering. However, only certain competent contractors will be invited to submit a tender.

FACTORS TO CONSIDER IN SELECTING A CONTRACTOR

When selecting the contractors for the short list, the following should be considered:

I.            The firm’s financial standing and record

II.            The firm’s recent experience of completing similar work within the specified time

III.            The structure of the firm: technical and managerial staff, workforce and back-up facilities

IV.            The firm’s capability of accepting the work at the required time

Under the Public Procurement and Disposal Act, 2005 and the Standard Tender Documents, the following is a brief summary of the main requirements:

a)      Valid Tax Compliance Certificate from Kenya Revenue Authority
b)      Company Registration Certificate/ Business Name Registration Certificate
c)       Valid Bid Bond in the amount specified( if requested)
d)      Completed and Signed Business Questionnaire
e)      Ministry of Public Works Registration as a Contractor
f)       Annual Volume of Construction Works ( Year, Client, Value, Status, Description)
g)      Experience as main contractor in similar works
h)      Equipment ( Lease, Value, Hire etc)
i)        Contract Manager with at least Y years of experience
j)        Letter of credit/ Evidence of Liquid Assets
k)      Adequacy of Access to line of credit/ Working Capital
l)        Audited Valid Signed Company Accounts last Z years
m)    Authority to seek reference from Bank
n)      Power of Attorney (where if Directors are not Signing the Form of Bid)
o)      Duly Filled and Completed Form of Bid

Most Contractors have a Company Profile which may readily provide this information. However, its good practice to include a Business Questionnaire as part of the tender documentation to be able to appreciate these factors.

Notice that we are drawing a distinction between Award of Tender and Selection of/Obtaining of Tenders.

Reference: Smith, R. C. (1986) “Estimating and Tendering for Building Work” , Pearson Longman

Kindest regards

David Nahinga| For #Ujenzibora

Disclaimer of Professional Advice:

The information provided through this website is not a substitute for legal and other professional advice where the facts and circumstances warrant. If any user/reader requires legal advice or other professional assistance, each such user/reader should always consult his or her own legal or other professional advisors and discuss the facts and circumstances that apply to the user.

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~ by ujenzibora on May 31, 2010.

One Response to “CONTRACTOR SELECTION: THE OPTIONS & CHECKLIST!!!”

  1. Great stuff. Opening the local mwananchi to what really happens.

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