Prepared by
Evans & Peck Pty Limited
11 August 2006
Guidelines for
Tendering
1. INTRODUCTION …………………………………………………..……
2. ETHICAL PRINCIPLES ……………………………………………….
3. TRADE PRACTICES PRINCIPLES …………………………………
4. TENDER PROCESS ……………………………………………………
5. PROJECT DELIVERY METHODS ……………………………………
6. TENDER PREPARATION ………………………………………………
6.1 Project Definition & Scoping ……………………………………
6.2 Selection Process for Tenderers ………………………………
6.3 Tender Documentation ………………………………………….
6.4 Criteria for Selection ……………………………………………..
7. TENDERING………………………………………………………………
7.1 Call for Tenders …………………………………………………..
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Table of Contents
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5
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10
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26
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7.2 Responding to Invitations to Tender &
Developing the Commercial Offer …………………………….
7.3 Tender Meetings & Enquiries …………………………………..
7.4 Amendments to Tender Documents ………………………….
7.5 Submission & Closing of Tenders ……………………………
8. TENDER EVALUATION ………………………………………………….
8.1 Tender Analysis ………………………………………………….
8.2 Tender Clarifications ……………………………………………
8.3 Tender Selection and Award …………………………………
9. RELATONSHIP CONTRACTING ……………………………………..
9.1 General Criteria ………………………………………………….
9.2 Principles of an Alliance ……………………………………………
9.3 Compensation Framework ……………………………………..
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9.4 Alliance Procurement Process
10. DIRECT NEGOTIATIONS …………………………………………….
10.1 General Criteria …………………………………………………..
10.2 Negotiation Process …………………………………………….
APPENDIX – Project Delivery Method Selection ……………………….
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Australian Constructors Association
Guidelines for Tendering – 10/8/2006
1
The purpose of these Guidelines for Tendering is to provide a framework for the
effective, consistent and efficient management of tendering practices throughout
the Australian construction industry and associated industries (such as the
information technology and telecommunications industries). The principles set
out in this document can be equally applied to any industry involving the
delivery of a new product or service.
Inherent in these Guidelines is the adoption of ethical principles that underpin
best practice tendering procedures. .
Successful projects have generally started with the use of best practice
tendering processes, and the benefits of such tendering practice include:
• A clear understanding of the rights and obligations of both
parties.
• An increase in the likelihood of procuring a project to meet the
required scope, time, cost and quality parameters.
• A reduction in the likelihood of misunderstandings and disputes.
In the application of these Guidelines, a “Client” is defined as a party inviting
and receiving tenders, therefore a “Client” may include a contractor or
subcontractor. A “Tenderer” is defined as a party submitting a tender.
Expectations of responsible behaviour by both the Client and Tenderer are
defined in this document.
These Guidelines have been developed so that they are generally consistent
with the procedures and ethical principles of:
1. INTRODUCTION
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• Australian Standard (AS 4120 – 1994) Code of Tendering.
• New South Wales Government, Code of Tendering for the
Construction Industry (July 1996).
• Victorian Government, Office of Building & Development,
Department of Infrastructure, Tendering for Public Construction
and Related Consultancy Services (January 1997).
• Queensland Government, State Purchasing Policy (Rev. No. 10;
May 1997).
• West Australian Government, Code of Practice for the WA
Building & Construction Industry (August 1996).
The ACA and its’ members are committed to complying with their obligations
under the Trade Practices Act 1974 (Cth) and the corresponding State Acts.
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The ethical principles, including those contained in the NSW Government Code
of Tendering for the Construction Industry, which are appropriate as the guiding
ethical principles are:
a) all aspects of the tendering process must be conducted with honesty
and fairness at all levels of the industry
b) parties must conform to all legal obligations
c) parties must clearly identify ownership of intellectual property used
or created in the tender process and ensure that those rights are not
infringed
d) parties must not seek or submit tenders without a firm intention to
proceed
e) parties must not engage in any practice which gives one party an
improper advantage over another
f) tenderers must not engage in any form of collusive practice and
must be prepared to attest to their probity
g) conditions of tendering must be the same for each tenderer on any
particular project
h) clients must clearly specify their requirements in the tender
documents and indicate criteria for evaluation
2. ETHICAL PRINCIPLES
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i) evaluation of tenders must be based on the conditions of tendering
and selection criteria defined in the tender documents
j) the confidentiality of all information provided in the course of
tendering must be preserved
k) any party with a conflict of interest must declare that interest as
soon as the conflict is known to that party.
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All Tenderers must comply with the Trade Practices Act 1974 (Cth) (‘TPA’).
Among other things, the TPA prohibits contracts, arrangements or undertakings:
1. that have the effect or likely effect of substantially lessening
competition in a market;
2. between competitors for the purpose of restricting the supply or
acquisition of goods or services to or from particular persons or
classes of persons, e.g. primary boycotts, bid rigging and market
sharing; or
3. that have the effect or likely effect of fixing, controlling or
maintaining prices (including discounts, allowances, rebates or
credits), to price fixing.
Contracts, arrangements or understandings that fall within paragraphs 2 and 3
above are prohibited, even if they do not actually lessen competition.
Anti-competitive conduct in breach of the TPA has significant legal and financial
consequences. It can result in the imposition of fines of up to $10million per
breach for corporations. It may also result in the contravener being ordered to
pay compensation to persons who have suffered loss or damage by reason of
the contravention. Fines and compensation orders may also be imposed upon
any individual such as an employee (Director or officer) who is involved in a
company’s contravention. It is expected that the Government will soon pass
legislation that makes cartel conduct an offence punishable by imprisonment.
An ‘arrangement’ or ‘understanding’ does not require a binding agreement and
can consist of no more than ‘a nod and a wink’. An agreement or understanding
3. TRADE PRACTICES PRINCIPLES
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can be inferred from circumstantial evidence such as parallel conduct, joint
action, collusion or the existence of opportunities to form an arrangement or
understanding, such as meetings with competitors. In a Federal Court decision
regarding price fixing of petrol, an understanding was inferred from various
meetings and telephone conversations. The Court held that there was ‘a
consensus as to what was to be done’ that aroused expectations as to how
others would act.
Tenderers and potential Tenderers must not talk to other Tenderers or potential
tenderers (or allow other Tenderers or potential Tenderers to talk to them)
about:
1. the price (including any discount, rebate or credit) at which they
will supply their services or offer to supply their services in
general or in relation to a particular project or class of project;
2. the other terms (eg risk allocation, warranties, performance
bonds, tender and bidding procedures etc) on which they will
supply their services or offer to supply their services in general or
in relation to particular project or class of project;
3. whether they will or will not supply their services to particular
persons;
4. the number of Tenderers that will participate in a bid;
5. which tenders they will or will not participate in;
6. the composition of their respective customer bases; or
7. the terms of the bid(s) which any (or all) of them will make in a
tender.
This applies to current, future and prospective tenders.
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Additionally, Tenderers must not:
• agree as to whom shall be the successful Tenderer or pay each
other ‘unsuccessful tender’ fees;
• provide to any third party any money, incentives or other
concessions contingent upon the success of the tender which do
not relate to the provision of bona fide services relevant to the
object of the tender;
• accept or provide secret commissions;
• submit cover tenders (i.e. tenders submitted as genuine but
which have been deliberately priced and structured in order not to
win the contract or commission)
• enter into any improper commercial arrangement with any other
contractors, subcontractors, suppliers, agents or any other party;
• seek to influence contract decisions by improper means; or
• accept incentives to provide contracts or services to other
contractors, subcontractors or suppliers that financially
disadvantage Clients.
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Prior to the commencement of the Tender Process, the Client should choose
the most suitable delivery method for the project. The various delivery methods
are discussed in Section 5.
Typically, the Tender Process involves three distinct phases:
These phases and component activities are shown in Figure 1.
Further details including the obligations of Clients and/or Tenderers in each of
the component activities are set out in Sections 6 – 8 of these Guidelines.
Often large, public sector projects, have an Expression of Interest (EOI) process
before formal tenders are called in order to select suitably qualified tenderers.
TENDER
PREPARATION
TENDERING
TENDER
EVALUATION
4. TENDER PROCESS
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Figure 1 – The Tender Process
Project Definition and Scoping
Selection Process for Tenderers
Tender Documentation
Criteria for Selection
Call for Tenders
Responding to Invitations to Tender &
Developing the Commercial Offer
Tender Meetings & Enquiries
Amendments to Tender Documents
Submission & Closing of Tenders
Tender Analysis
Tender Clarifications
Tender Selection & Award
TENDER
PREPARATION
TENDERING
TENDER
EVALUATION
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There are a number of methods of delivery of projects, for the purposes of these
Guidelines they have been conveniently grouped within six main categories.
These categories do not capture all delivery methods such as specific
performance type contracts and they are provided as a guide to the types of
delivery methods commonly in use.
Table 1 provides a brief description and examples of each of these methods.
5. PROJECT DELIVERY METHODS
TRADITIONAL
DESIGN &
CONSTRUCT
MANAGEMENT
PATCH
TYPE
RELATIONSHIP
FINANCED
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A brief introduction to the selection of project delivery methods is provided in the
Appendix.
Table 1 – Project Delivery Methods
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The key components of the Tender preparation are
These are dealt with in Sections 6.1 to 6.4
Project Definition & Scoping
6. TENDER PREPARATION
Selection Process for Tenderers
Tender Documentation
Criteria for Selection
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The commencement of the tender process is the development of the project
definition and scope which will set the scene for the success of the entire
process.
In the best interests of the project, it is recommended that the Client ensures
that:
• A Project Brief is prepared that clearly defines the scope of the
project for which Tender Documents are to be prepared. This
document must define all project stakeholder requirements
(including envisaged functional goals, performance, technical
criteria, completion dates or term date requirements) for the
project. Any known constraints associated with the delivery of
the contract should be identified upfront, e.g. public access
requirements, availability of land, limits to work etc. Failure to
include all scoping requirements will most likely result in
stakeholder expectations not being met, and could result in
disputes at a later date.
• Intellectual property may be an essential component of a Project
design or Project delivery system. Therefore the parties should –
o identify any intellectual property components of its preliminary
proposals, and
o manage any intellectual property issues that arise during
Project discussions
• Relevant initial investigations (eg. market research, feasibility
studies etc.) are undertaken. These investigations should also
insofar as is practical identify the significant (high level) and
relevant risks to successful delivery of the project.
6.1 Project Definition & Scoping
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• A cost estimate is established based on the scope defined in the
Project Brief, which should include the risk allocation. Costs need
to be estimated for all resources associated with the project
(including, labour, materials and supplies). In this way, the
proposed scope may be adjusted in line with budget.
• A time estimate is established based on the scope defined in the
Project Brief. This involves the definition, sequencing and
duration estimation of individual project activities.
• A cost/benefit exercise is carried out taking into account the initial
cost estimate, time estimate and expected costs/revenues over
the life of the project. In this way, the financial viability of the
proposed project is tested. It is noted that in some cases (eg.
some government projects), there may be non-financial benefits
that will also support the procurement of the project.
• An appropriate budget is allocated and finance arranged to
develop the project.
• Appropriate time is allowed to undertake the above mentioned
activities.
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There are five main processes for the selection of Tenderers.
Table 2 provides a brief description of each of these processes.
6.2 Selection Process for Tenderers
OPEN OR
PUBLIC
SELECTED OR
APPROVED
PREQUALIFIED
INVITED
DIRECT
NEGOTIATION
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In the case of all Tender Selection Processes, it is recommended that the Client
ensures that:
A competitive tender field is established (except, of course, in the case of Direct
Negotiation).
Table 2 – Selection Processes
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• Prospective Tenderers who decline an Invitation to Tender are
not discriminated against.
• In the case of Direct Negotiation, the criteria set down by the
NSW Government, and in particular the elements listed in
Section 8 should be taken into consideration.
• In the case of invitations to submit Expressions of Interest for
Pre-qualification, the client should include in the invitation
document a set of objective criteria against which the applicant
will be assessed.
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The content of the Tender Documentation will vary for particular projects
according to factors such as project size, complexity and delivery method.
Nevertheless, the following key documents will generally be required as a
minimum.
6.3 Tender Documentation
CONDITIONS OF
TENDERING
NOTICE TO
TENDERERS
TENDER FORMS
& SCHEDULES
CONDITIONS OF
CONTRACT
SPECIFICATION
DRAWINGS
MAY BE
COMBINED
IN SIMPLE
PROJECTS
ADDITIONAL
INFORMATION
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Table 3 provides a brief description of each of these documents.

Table 3 – Tender Documents
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With respect to the procedural issues, it is recommended that:
• Due regard is given to the costs of tendering to both the industry
and the community. The use of pre-qualification and/or EOI
processes are methods for ensuring this occurs. The time
allowed for Tenderers to prepare tenders and for the Client to
evaluate and select tenders is reasonable. The following table
should be used as a general guide only as to the recommended
periods for these activities in order that they can be professionally
and competently carried out. Times will of course vary depending
on factors such as project size, complexity and political
sensitivity.

• The time allowed for construction (or implementation) is
reasonable.
• In the preparation of the Tender Documents, it is recommended
that the Client ensures that:The level of Tender Documentation is
commensurate with the chosen Delivery Method.
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• The Tender Documents provide full details of all work to be
covered by the tender and all known information for the
Tenderers to assess the project risks.
• The Tender Documents are drafted in a clear and concise
manner without unnecessary repetition and terms and phrases
used throughout the documents should have consistent
meanings.
• The Tender Documents should include copies of any Client
procedures, standards or guidelines that the Tenderer is required
to comply with.
• The Tender Documents do not contain any poorly worded or
ambiguous statements that may lead to prolonged disputes
during construction (or implementation).
• The Tender Documents state whether the Client will be providing
an “in house” tender price as part of the tender process. In
particular, public companies need to have regard to the
requirements of the Corporations Law in relation to this practice.
• The Tender Documents clearly state the communication
protocols such as the documents which should or may be
submitted in electronic form. They should also state the Client
Contact person responsible for dealing with issues arising from
the tender and for arranging site visits and inspections. This
person needs to be fully familiar with all tender documentation
and readily available for answering enquiries during the tender
period. It is recommended that this person is also experienced in
contractual matters and probity requirements.
• The Tender Documents clearly state the number of copies of the
tenders required.
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• The Tender Documents clearly state the method and time of
lodgement of tenders, acknowledgement of Tenderer
submissions and the tender validity period.
• The Tender Documents clearly state the Criteria for Selection,
including reference to certain criteria that the Client considers are
most important, the Evaluation Process and Selection Process.
• The Tender Documents contain a returnable covering sheet
highlighting all main sections of the documents so that Tenderers
can formally acknowledge its receipt in writing. These covering
sheets should be returned by the Tenderers within 3 business
days of receipt.
• The Tender Documents clearly specify the contractual obligations
of the parties with appropriate allocation of risks. For guidance it
is suggested that risk be generally allocated to the party where
that risk is within the party’s control to manage.
• The Tender Documents clearly identify Special Conditions of
Contract that are unique to the Client or project. This is
particularly important if these conditions depart from a Client’s
normal practice.
• Any special Conditions of Contract stipulated by third parties as
part of an environmental approval process should be specified
(i.e. or part of an environmental impact approval or development
application process).
• The Tender Documents clearly specify any arrangement for the
novation of agreements from the client and include the relevant
agreements, subject to normal confidentiality requirements, in the
Tender Documentation.
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• The Tender Documents should also clearly specify that
documents are required to be completed and lodged as the
Tender, and these should normally be described as the Tender
Form & Schedules as indicated in Table 3.
While not a prerequisite, it may be appropriate that the Tender Documents
provide an opportunity for Tenderers to offer alternate tenders, provided that a
conforming Tender is also provided. The conditions under which alternative
proposals are to be submitted are to be clearly stated. The alternative may
involve some innovation and may result in better “value for money” for the
Client.
In regard to confidentiality obligations described in the Tender Documents,
these should not be such that they unreasonably constrain the Tenderer from
taking the steps required to prepare its tender, such as consulting with third
party legal, financial and technical advisers and with prospective partners and
subcontractors.
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The Criteria for Selection must be clearly stated in the Tender Documents. Such
criteria need to cover the critical factors on which the success of the project is
based. Typical Criteria for Selection include:
• Previous Experience on similar works
• Financial resources
• Managerial and Personnel resources
• Technical resources
• Current workload
• Dispute Resolution record
• Quality Assurance System
• Environmental Compliance record
• Industrial Relations record
• Occupational, Health Safety & Rehabilitation record
Hence, the Criteria for Selection involve both a “Price” and “Non-Price”
components. Depending on the nature of the Client and project, each of the
above factors will have a varying weighting or priority. It is recommended that
the Client ensures that the Criteria for Selection weightings are determined prior
to the opening and evaluation of tenders. It is preferable that the weightings are
not disclosed to Tenderers.
6.4 Criteria for Selection
CONFORMITY
CAPABILITY
PRICE
(may include ‘Whole
of Life” as well as
Capital Cost
INNOVATION
CONSTRUCTION
PERIOD
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The key components of Tendering are:
7. TENDERING
Call for Tenders
Responding to Invitations to Tender &
Developing the Commercial Offer
Tender Meetings & Enquiries
Amendments to Tender Documents
Submission & Closing of Tenders
These are dealt with in Sections 7.1 to 7.5
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In the case of tenders called by public advertisement, advertisements shall be
placed in appropriate newspapers or publications at appropriate times so as to
attract suitable applicants. Some newspapers select particular days to highlight
public tenders and this practice shall be supported.
In cases where tenders are advertised, it is recommended that the
advertisement includes the following:
• An appropriate summary description of the work required.
• Details of when and where Tender Documents may be obtained.
• Details of when and where tenders shall close.
• Details of any Tender Documentation purchase price or deposit
and, if applicable, the method of obtaining a refund of that cost.
• The name, address, telephone number, facsimile number and
email address of the Client’s Contact person.
With respect to procedural issues, it is recommended that the Client ensures that:
• A written record is kept of all persons to whom the Tender
Documents are issued. It is also recommended that each tender set
be numbered for identification and tracking purposes.
• In the case of Selected, Pre-Qualified and Invited Tenders, the
Tenderers are informed of the number of tenders being invited
where that number exceeds 3.
7.1 Call for Tenders
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It is recommended that Tenderers ensure that:
• Tenders are only submitted if Tenderers genuinely believe that
they have the capability and resources to undertake the work
being tendered.
• Tenderers that may have a conflict of interest (at a personal or
company level) must declare that interest as soon as the conflict
is known to allow appropriate assessment and resolution by the
Client and it’s Probity Auditor (if appointed).
• In the case of Selected or Invited Tenders in which a Tenderer
decides not to proceed with the Tender, the Tenderer promptly
advises the Client. It is noted that in the case of Pre-Qualified
Tenders, Tenderers should be required to provide an undertaking
to tender if selected.
With respect to procedural issues, it is recommended that Tenderers ensure
that:
• The returnable covering sheet highlighting all main sections of
the documents is completed and returned to the Client within 3
business days of receipt of the Tender Documents. In this way,
Tenderers formally acknowledge its receipt in writing.
• They promptly advise the Client of errors, omissions, ambiguities
or discrepancies in the Tender Documents of which they become
aware.
7.2 Responding to Invitations to Tender &
Developing the Commercial Offer
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• If they are in doubt about any issue, the Tenderers obtain
clarification from the Client, so that a full understanding of the
project is obtained.
• The tenders conform to all aspects of the requirements defined in
the Tender Documents.
Finally, it is mandatory that Tenderers do not engage in any uncompetitive
behaviour including, but not limited to the following:
• Agreement between Tenderers as to whom shall be the
successful Tenderer and the payment of unsuccessful tender
fees.
• Payment to any third party of moneys, incentives or other
concessions contingent upon the success of the tender, which do
not relate to the provision of bona fide services relevant to the
object of the tender.
• Acceptance or provision of secret commissions.
• Submission of cover tenders (ie., tenders submitted as genuine
but which have been deliberately priced and structured in order
not to win the contract or commission).
• Entering of any improper commercial arrangements with any
other contractors, subcontractors, suppliers, agents or any other
party.
• Seeking to influence contract decisions by improper means.
• Acceptance of incentives to provide contracts or services to other
contractors, subcontractors or suppliers that financially
disadvantage the Client.
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It is recommended that all information provided between the parties is treated
as confidential and commercial in confidence. In addition, the Client should
ensure that:
• All Briefing Meetings held for Tenderers are minuted. Minutes are
then forwarded to all Tenderers and are included as part of the
Tender Documentation.
• The Client Contact person, responsible for dealing with enquiries
from Tenderers, is to document all such inquiries, noting the time,
the date and the issue discussed.
• Information provided to one Tenderer is also promptly given to all
other Tenderers. It is however noted that in the case of certain
tenders (eg. Design & Construct, BOO, BOOT Schemes etc.),
particular issues arise where Tenderers may request information
that relates to their specific design solution. These issues need to
be carefully addressed with respect to probity. Resolution of
matters specific to any particular Tenderer’s scheme should be
by one to one written communication.
• In the case where an enquiry reveals a significant error,
omission, ambiguity or discrepancy in the Tender Documents, the
information provided to resolve the issue is promptly forwarded in
writing to all Tenderers.
• In the case of large, complex and politically sensitive projects, it
may be appropriate to appoint an independent Probity Auditor to
7.3 Tender Meetings & Enquiries
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warrant that the tender process is fair and equitable. The Probity
Auditor carries out this role by:
o Monitoring communications between the “Call for Tenders”
and the “Tender Selection”.
o Attending Tender Meetings and Tender Evaluation Team
Meetings (as appropriate).
o Providing advice with respect to the handling of particular
probity issues.
With respect to amendments to Tender Documents, the Client should ensure
that:
• Such amendments are avoided or minimised. A proper structured
review of the Tender Documents prior to issue will support this
outcome. It is preferable to delay the Call for Tenders than to
issue documentation that has not been thoroughly checked and
will need to be amended.
• However, where significant issues arise that make it necessary to
amend the Tender Documents during the tender period, the
amendments are to be advised as an Addendum forwarded to all
Tenderers.
• Each Addendum is issued in sufficient time for all Tenderers to
consider the amendments properly and fully before tenders close.
It may be appropriate to extend the tender period, particularly if
the Addendum is issued late in the tender period.
• Each Addendum contains a returnable covering sheet so that
Tenderers can acknowledge its receipt in writing. A statement of
7.4 Amendments to Tender Documents
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confirmation that allowance has been made for each Addendum
is required in the submission of the tenders.
Tenderers should ensure that:
• The receipt of each Addendum is acknowledged in writing.
• A statement of confirmation is included in their tenders that
allowance has been made for each Addendum.
It is recommended that the Client ensures that:
• The security and confidentiality of all tenders is achieved
following the closing of tenders. Procedures for the security of
documents, access to documents and the availability of price
sensitive information are to be developed in advance of the
closing of tenders.
• Tenders are generally received in a secure Tender Box and
opened in the presence of specially qualified team (not less than
2 people). Alternative arrangements may be required in the case
of large projects which involve extensive documentation. In the
case of minor works, if a secure Tender Box is not used, security
stickers should be placed on the envelope seals. Some
organisations are encouraging electronic transfer of tender
documents and tenders.
• Each document is registered and it is good practice to summarise
the key information from each tender as soon as possible. One
copy of each of the tenders (the Original) needs to be separately
7.5 Submission & Closing of Tenders
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stored in a secure location from working copies for reference
purposes.
• The timing of the closing of tenders is:
o Not earlier than 2.00 pm.
o Not on a Monday or day following a Public Holiday.
o At least one week after the recognised industry Christmas
close down.
• Each Tenderer is informed in writing that its tender has been
received.
• No information provided in a tender by a Tenderer is disclosed by
the Client to another Tenderer at any stage during the tender
process or after it has concluded. However, it is acceptable to
have public openings of tenders and disclosure of tender prices,
or the rank order of tenders provided it is advised in advance in
the Tender Documents.
• For large public sector projects, particularly PPP’s, contract
documents for the winning bid or contract summaries may be
tabled in Parliament. Tender documents should outline any
potential public disclosure of the tender bids or contracts.
• In the event that the client is prepared to consider late tenders
and non conforming offers, then the condition of the tender
should describe how the client will treat late tenders and nonconforming or alternative offers.
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The key components of the Tender evaluation are:
These are dealt with in Sections 8.1 to 8.3
8. TENDER EVALUATION
Tender Analysis
Tender Clarifications
Tender Selection & Award
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The importance of assembling an experienced and competent Tender
Evaluation Team is critical to the success of the tender process. Above all, a
consistent approach to the evaluation of all tenders is required.
The Team Leader or Chairperson should possess leadership, communication
and negotiating skills as well as technical and commercial capabilities. One of
the most important skills is the ability to maintain critical objectivity during the
tender process. Each member of the team must be free of any conflict of
interest that might undermine the objectivity of the assessment. The
appointment of such a team will ensure that the most appropriate Tenderer is
chosen with respect to the defined Criteria of Selection.
In most cases, the creation of a Tender Evaluation Spreadsheet which
compares each Tenderer’s relative compliance is recommended. This
spreadsheet should list both the mandatory and desirable requirements under
the Criteria for Selection, and provide a clear comparison of the conformities
and deficiencies of each tender. The Spreadsheet should also be set up for
ranking (with pre-set weightings) by the Evaluation Team.
In major projects (particularly those which involve design and “Whole of Life”
assessment, eg. Design, Construct & Maintain and BOOT Projects), each
tender is likely to contain differences in the areas of design, timing, capital cost,
impact, service and durability, and operating cost. Hence, a rigorous tender
analysis process is required to obtain a fair comparison between individual
tenders.
The use of Risk Analysis techniques in the tender analysis process is
encouraged. In addition, the inclusion of a “Non-Price” Assessment is another
method of ensuring that all factors (and not simply cost) are taken into account.
8.1 Tender Analysis
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In such cases, segregation of the Tender Evaluation Team needs to be
considered. Segregation will help ensure that design solutions from one
Tenderer are not transferred to another. If appropriate, the Client may appoint
an independent Probity Auditor to oversee and advise on such issues.
It is recommended that the Client ensures that:
• Tenders are analysed against the Criteria for Selection defined in
the Tender Documents.
• A tender that does not comply with the Tender Documents is
rejected. If a tender is rejected, the reasons for such action are to
be clearly documented and communicated to the tenderer.
• In the case of the submission of an alternative proposal by a
Tenderer, The intellectual property of the Tenderer offering the
alternate proposal must be protected. However, tenderers need
to be made aware that some jurisdictions (e.g NSW) Parliament
has the power to access and in some cases publicly display
tender documents which may contain intellectual property or
other commercially in-confidence material.
The tender clarifications need to be very carefully managed to ensure that
confidentiality is maintained and Tenderers are treated equitably and ethically.
Hence, an essential component of the evaluation process for the Client is to
identify:
8.2 Tender Clarifications
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• stated and implied conditions in the tenders; and
• elements of the proposals that are unclear or subject to
misinterpretation.
Clarification from the Tenderers for such elements will be required so that
tenders are well defined and can be properly evaluated.
It is recommended that the Client ensures that:
• Tender clarification requests and responses to such requests are
in writing.
• All meetings with individual Tenderers are minuted. In the case of
large and complex tenders, the use of a tape-recorder or video
camera may be required.
• If the Tender Evaluation Team decides not to accept any tender
and to re-call tenders, the original Tenderers are to be advised of
the reasons for re-calling and, as a general principle where
appropriate, invited to submit a new tender.
• If a previous tender condition which prevented a Tenderer from
submitting a tender is removed, that Tenderer is allowed to
submit a new tender when re-called.
It may be possible to stage the tender clarification process so that the field is
reduced to 2 Tenderers.
Tenderers should ensure that:
• When requested to submit responses to clarifications by the
Client, such information is provided in a complete form and
lodged by the time and date nominated. If the Tenderer
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anticipates a problem with producing a response by the time and
date nominated, it will inform the Client promptly.
• Appropriate personnel are available to attend meetings with the
Client following reasonable notice.
It is recommended that the Client ensures that:
• The Tender Evaluation Team produces a Tender Evaluation Report
which summaries the methodology undertaken and final
recommendations. The reasons for selection should be clearly
stated and well substantiated. This report is produced for the
Client’s internal approval process.
• Unsuccessful Tenderers are advised in writing that their tenders
have been unsuccessful. In such cases, it is also appropriate that a
debriefing be held. The debriefing is to examine how the tender
performed against the Criteria for Selection with the objective of
enhancing future performance.
• Unsuccessful Tenderers return their Tender Documents, provided
Tenderers are informed of this requirement prior to receiving the
documents.
In the finalisation of the Contract Documentation, the Client and Successful
Tenderer shall ensure that the Contract incorporates the tender submission of
the Successful Tenderer and any qualifications during the tender process. It is
noted that this phase of the process is to settle all outstanding technical,
commercial and/or legal issues necessary for finalisation of the contract. It is not
an opportunity for either party to vary the final contract price or to materially alter
the proposal.
8.3 Tender Selection & Award
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The key components of Relationship or Alliance Contracting are:
General Criteria
Principles of an Alliance
Compensation Framework
These are dealt with in Sections 9.1 to 9.4.
9. RELATIONSHIP CONTRACTING
Alliance Procurement Process
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9. Relationship Contracting
An alternative form of procurement of traditional contracts through a tender
process is relationship contracting, often referred to as alliance contracting.
An alliance brings the owner, designer and constructor together into a single
entity – an alliance – for the purposes of delivering a major capital works
project, usually characterised by complexity and high risk. Project alliances are
best suited to those projects where the traditional risk transfer strategies are not
appropriate.
The main purpose of an alliance contract is to:
• Promote innovation
• Increase co-operation between the parties
• Reduce disputation
• Share the benefits or costs that might affect any of the parties
during the project
• Pool significant risk
Project alliances were first used in Australia to deliver oil and gas projects in
Western Australia in the early 1990’s. Since that time their application in the
public sector has increased in most jurisdictions, for example: Sydney Water’s
Northside Storage Tunnel, RTA’s Lawrence Hargrave Drive (Sea Cliff Bridge),
9.1 General Criteria
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the National Museum in Canberra, and various road projects in Queensland.
Alliance contracts also have been used to deliver: wastewater infrastructure;
electricity generation and distribution; water supply and port infrastructure.
Alliance contracts are an appropriate procurement method when:
• The project risks are difficult to quantify, e.g. project involves
extensive utility adjustments which are poorly documented or
ground conditions/geo-technical risks are not adequately
quantified at the start of the project
• Project design requires innovation, is complex and evolves as the
project is developed
• The number of interfaces with other parties is significant and
cannot be sufficiently scoped at the commencement of the
project
• Time is of the essence with critical time milestones to be met that
do not permit the project to be sufficiently specified prior to the
commencement of the project.
Project alliances are based on a set of generic principles for which all participants must be
fully committed. The key principles are:
• Performance obligations are collective not individual
• Risks are shared and managed collectively rather than allocated to
individual parties considered best able to manage them
9.2 Principles of an Alliance
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• A commitment to resolve issues within the alliance without recourse to
litigation except in the case of “wilful default”
• All transactions by all parties are open book and subject to audit
• Project is governed by a leadership team with representatives from all
parties who carry full authority to bind the party they represent, with all
decisions by the team unanimous
• Project is managed by an integrated project management team, where
members are assigned to the team on a “best for project” basis
• Participants are committed to developing a culture that promotes innovation
and a no blame/fault ethos
• Reimbursement to the alliance partners (apart from the owner) is a 3-part
compensation model.
The owner and the non-owner participants (NOP) develop and scope the project jointly
and agree a commercial framework which includes a target cost and a suitable fee for
performance targets.
The commercial framework should be designed so as to align the commercial interests of
the parties and encourage collaborative behaviour.
Once the target cost and performance targets are locked in, reimbursement to the NOP’s
is via a 3-part compensation model as follows:
1. all direct actual costs incurred on the project, including project-specific
overheads
9.3 Compensation Framework
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2. a fee to cover corporate overheads and normal profit
3. a performance based gain/pain sharing arrangement depending on how
actual outcomes compare with pre-agreed targets (in both cost and noncost performance areas)
The downside risk for the NOP’s is generally capped so that each NOP can lose its fee
which is equivalent to its margin for corporate overheads and normal profit but no more.
The pain/gain arrangements should be designed to ensure that the NOP’s assume an
equitable share of the pain/gain, along with the owner.
The process for procuring suitable Alliance partners will vary for particular projects
and clients according to a variety of factors such as client objectives, market
conditions, complexity of scope and program requirements.
Notwithstanding the above, the following steps are generally required during the
procurement process for suitable alliance partners.
9.4 Alliance Procurement Process
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Call for
Expression of
Interest (EOI)
Developed by the Client
Outlines Project Objectives
Describes expected procurement process
and timetable
May request specific commercial information
Response to EOI
from Market
Generally short response time (4 weeks)
By Alliance Teams (proponents)
Describes their approach to the Alliance and
meeting project objectives
Describes proponents expertise, track record
and proposed staffing
Responds to all requests in EOI
Selection of Short
Listed Alliance
Proponents
Generally based on written submissions and
interviews (1/2 day)
Client uses Selection Panel, Probity Advisor
retained in some cases.
Conduct
Selection
Workshops with
short Listed
Proponents
Generally 2 day workshops
Discuss approach to principles and
objectives of Alliance
Discuss commercial principles
Commitment to outstanding performance
and alignment of goals
Select Preferred
Proponent(s)
Generally by use of a Selection Panel
Develop and
Agree
Commercial
Framework
Can take a reasonable period of time
Confirm Scope of Work to be performed
by the Alliance
Develop & agree Target Cost Estimate
and Fee
Develop KRA/KPI Arrangements
Agree on Commercial Framework
Agree on Program goals
Execute Project
Alliance
Agreement
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The key components of Direct Negotiation are:
These are dealt with in Sections 10.1 and 10.2
10. DIRECT NEGOTIATION
General Criteria
Negotiation Process
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In general terms, a Government client may consider undertaking direct
negotiations in the following circumstances:
• When the value of the goods or services is low relative to the cost
of conducting a competitive process;
• When an appropriate competitive process has not produced a
good enough offer and the better option in the circumstances is
to negotiate with the party who made the best offer or any party
who has expressed serious interest if no best offer was made;
• When it is clear beyond doubt that there is only one supplier or
buyer who can meet the organisations well defined and justified
needs;
• Where there is an unforeseen need to alter the scope of the
Project in a minor way and the cost of re-tendering will outweigh
the potential benefits; or
• When the disposal of property assets leads to significant
economic development for the State or Local Government, where
‘because of extenuating circumstances, remoteness or locality or
unavailability of competitive or reliable tenderers, that a
satisfactory result would not be achieved by inviting tenders’ –
NSW Local Gov. Act Section 55(3).
10.1 General Criteria
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If circumstances described in 10.1 arise, then direct negotiations may be
appropriate. In this event the parties should –
• Ensure that the parties involved in the direct negotiation process
have the required levels of authority, training and experience;
• Seek advice from the appropriate agency on whether direct
negotiations are an appropriate course of action;
• Ensure that the decision of the Government client to negotiate
directly ahs been approved by the relevant regulatory authority or
Government client CEO;
• If the negotiations relate to a large contract, ascertain if
Ministerial approval is required and, if so, obtain it;
• Ensure that all decisions and reasons for decisions are clearly
documented;
• Ensure, where possible, that the Government Client’s reasons for
not proceeding with a competitive tender process be documented
so as to enable the Government client or the appropriate Minister
to explain why private negotiations were entered into in favour of
a tender process;
• Ensure that potential conflicts of interest are disclosed early in
the negotiation process and, in any event, immediately they are
identified;
• In complex negotiations a formal negotiating protocol should be
adopted and accepted by the parties to the negotiations. The
protocol should cover
10.2 Negotiation Process
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ƒ such issues as regular meetings, written exchanges, document
exchanges, dealing with urgent issues, ‘critical’ issues meetings,
recording meetings, and roles and responsibilities of members of
the respective negotiating teams; and
• Involve expert technical advisers and legal advisers at the
appropriate times.
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APPENDIX –
PROJECT DELIVERY METHOD
SELECTION
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Further to the discussion on the various project delivery methods, this Appendix
provides a brief introduction to the selection of particular methods.
Risk Profile
Each project will have its own specific risk profile. Major risk areas are usually
described in accordance with the following headings which can be used in
assisting the selection of the most appropriate delivery method:
• Completion Risk – the risk that the project will not be completed,
or will be completed sufficiently late to affect the viability of the
project.
• Construction Cost Risk – the risk that the project budget will be
exceeded.
• Environmental Risk – the risk that the project will be sensitive to
environmental and/or heritage issues, and/or environmental
conditions of approval.
• Industrial Relations Risk – the risk that the project will be affected
by industrial relations concerns.
• Technological Risk – the risk that the project will be sensitive to
the application of new technologies.
• Operational Risk – the risk that the facility will not operate within
the design specification.
PROJECT DELIVERY METHOD SELECTION
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• Market Risk – the risk that sufficient cashflow will not be
generated by the completed facility.
• Political Risk – the risk that a change in government or in taxation
legislation will affect the return on investment.
Suitability Matrix – Project Delivery Methods
Clients and Tenderers are best served when the project delivery method best
suits the overall project requirements.
As an initial step to assist the Client in the selection of the most appropriate
project delivery method, the risk profile should be examined for the particular
project which is intended to be put to the market to tender.
A typical worked example of such an analysis using the risk headings previously
identified is indicated below. This methodology has been derived from the ACA
“Relationship Contracting” Publication (1999).
The Weighting is a measure (as a percentage) of the importance placed on a
particular risk by the Client.
The Rating is an assessment of the Likely Risk Outcome, in terms of both
Likelihood of Occurrence and Expected Consequence. In this example, there
are 5 levels of Rating – from 1 (Low) to 5 (High).
The Score is the product (multiplication) of the Weighting of each particular type
of risk and the Rating of that same risk.
[ For instance, in this example, the Completion risk is considered to have a
Weighting of 15% and a Rating of 4, resulting in a Score of 0.15 x 4 = 0.60 ].
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The total Score is the addition of the individual Scores for each type of risk
considered.
It is noted that this methodology should be used as a general guide only. Each
project will have particular characteristics that will play a role in the approach
taken with respect to risk sharing and the final determination of the most
applicable delivery method.

* Sum of Individual (Weighting x Rating)
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As a guide to the Client in the initial selection of an appropriate project delivery
method, the total score should be considered by reference to the “Suitability
Matrix” as indicated below:
5

Worked
Example
4
3
2
1
0
Selection
SELECTION BAROMETER

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