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CPM/U3 Topic 1 Awarding Works Contracts

Contract awarding is the method used during a procurement in order to evaluate the proposals (tender offers) taking part and award the relevant contract. Usually at this stage the eligibility of the proposals have been concluded. So it remains to choose the most preferable among the proposed. There are several different methods for this, which are obviously related to the proposition method asked by the procurement management.

The method by which contracts are awarded is ordinarily regulated by statute or constitutional provision, and the prescribed method must be followed. For significant expenditures of public funds, government bodies usually must use a bidding process. In the awarding or letting of public contracts, the public body invites bids or makes “requests for proposals” so that it can award the contract to the bidder who qualifies under the terms of the governing statute. The submission of a bid in response to an invitation is considered an offer, and although it may not be freely withdrawn prior to acceptance, it does not become a contract unless and until such time as it is accepted by the proper public authority. A bid that does not respond to the terms contained in the invitation to bid is not within statutory requirements but is considered to be a new proposition or a counterproposal.

Methods:

(i) Least price

This method is the simplest and oldest of all. Under this the procurement contract is awarded to the best price. Some relevant methods are these of examining the overall or in parts and in total discount in a given price list or on a given budget. One of the proposed for Public tenders by the EC.

(ii) Most economically advantageous

This is applicable to proposals of different quality within the limits set. Under this the proposals are graded according to their price for value and the contract is awarded to the one with the best grade. Similar to this is the grading of the proposals according to time, making the proposals needing less time of implementation seem more valuable. One of the proposed for Public tenders by the EC.

(iii) Mean value

The contract is awarded to a bid closer to the mean value of the proposals. This may apply to procurements where numerous proposals are expected and there is a need for a market-representing value.

(iv) Exclusion of the extremes

Under this method the proposals that are deviating the most from the mass of the proposals are excluded and then the procedure continues with one of the above methods.

Contract Award Procedure

Once the successful tenderer has been selected a period of negotiation will begin. A reserve tenderer may be retained in the event that negotiations with the preferred tenderer are unsuccessful.

A tender report may then be prepared providing a brief history of the tendering process and an analysis of each tender submission and any subsequent negotiations and concluding with a recommendation.

All tenderers should be informed of the decision to award the contract to a particular tenderer.

If OJEU procedures are being followed, it may be necessary to publish a formal contract award notice once the successful tenderer has been selected. A ‘standstill period’ may then be required. This is a pause of at least 10 calendar days between the decision being notified to all tenderers and the final contract conclusion. This allows for suppliers to challenge the decision.

The contract administrator (or sometimes the cost consultant) then collates the contract documents and arranges for the printing (engrossment) and execution of two copies, one for the client and one for the supplier. Alternatively, the client might retain one executed contract, with certified copies being issued to the supplier, this can avoid potential errors in preparing two contracts for execution. The supplier may be required to provide a performance bond, warranties, evidence of insurance cover, and so on.

Contract award and contract execution may not necessarily happen at the same time. In fact it is relatively common (although not advisable) for contracts to remain unsigned until well after work has begun.

Contracts may be executed under seal (signed by the parties, witnessed and most importantly made clear that they are executed as a deed) or under hand (a ‘simple contract’ that is just signed by the parties).

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