Chapter 6

Project Implementation
 Outline

Tenders
Contract and Negotiation
Procurement and Inspection
Construction and Erection
Commissioning
Evaluation
 Introduction

Project is ready for execution when the required

funds are arranged and necessary statutory
approvals are obtained

Project implementation is one of the most critical

components of a project and more specifically the
overall management

For project management there area number of

tools available that will help you to plan and
schedule activities but the these tools are only as
good as the implementer.
 Contd
Project implementation phase ensures that any tool
or aid used in the planning process is properly
managed and the inputs are accurate and realistic

The first part of Project implementation will cover

activities related to tender advertising, selection and
award procedures
 Tenders

Tender is an offer in writing by the tenderer (the

person who offers the tender) to execute some
specified work or to some specified good at certain
rates within a fixed time frame under certain
conditions of agreement
 Tender Notice

It is a notice inviting tenderers form interested

parties (contractors)

The tender notice is a public notice and is

published in leading newspapers to give wide
publicity

The notice must identify clearly, precisely, and

completely the contracting authority and the
subject of the contract
 Contd
The tender notice contains the following information:

Name of the organization

The nature of the work
Cost of tender document and drawings
Last date and time of receipt of tenders, place
and availability of tender forms
Type of specifications and time of completion
Amount of earnest money deposit (EMD)
Amount of security deposit to be deposited by
the successful tenderer
Date, time and place of opening tenders
 Tender Document

Tender documents are meant to keep the tenderers

informed about the general and specific conditions
applicable for tender

Tender documents must be carefully drafted for

the sound functioning of the award procedure and
for the proper execution of the contract

These documents must contain all the provisions and

information that tenderers need to present their
tenders.
 Contd

Tender documents usually consists of the following:

A letter of invitation to the tenderers

Specimen tender form
General instruction to the tenderers
Details of civil/structural work along with complete set of
civil/structural drawings
Details and specifications of machinery/equipment to be
supplied, if any
Draft contract agreement
Arbitration authority who will decide in case of dispute
Time schedule for completion of work
Amount of earnest money to be deposited and the form in
which it is to be deposited
 Earnest Money Deposit (EMD)
It is the amount to be deposited by all the
tenders when they submit their tender.

Once the contract is finalized, the EMD remitted

by all the unsuccessful tenders are returned back.

The EMD of the successful tender is retained as a

measure of caution so that he/she will not
withdraw his/her offer.

The EMD is payable normally in the form of pay-

order/demand draft from a nationalized scheduled
bank.
 Additional Information During the
Procedure
The tender document should be clear enough to
prevent contractors from having to request
additional information during the procedure

If the contracting authority to provide additional

information, it must send such information in writing
to all tenderers at the same time

Tenderers may submit questions in writing up to 21

days before the deadline for submission of tenders.

The contracting authority must reply to all

tenderers' questions at least 11 days before the
deadline for receipt of tenders.
 Deadline for the Submission of
Tenders
Tenders must reach the contracting authority at
the address and, at the very latest, the date and
time indicated in the tender document

The minimum period between the date of

publication of the procurement notice and the
deadline for receipt of tenders is 60 days. In
exceptional cases, and with the prior authorization
of the Commission, periods may be shorter
 Submission of Tenders

Technical and financial offers must be placed in

separate sealed envelopes within a package or
outer envelope including:

a) the address for submission of tenders indicated in the

tender document;
b) the reference of the tender procedure to which the
tenderer is responding;
c) where applicable, the numbers of the lots tendered for;
d) the words "not to be opened before the tender-opening
session" written in the language of the tender document
 Opening of Tenders
On receiving tenders, the contracting authority
must register them and provide a receipt for those
delivered by hand.

Envelopes must remain sealed and be kept in a safe

place until they are opened.

Tenders are opened and evaluated by a committee

made up of an odd number of members (at least
three) possessing the technical and administrative
capacities necessary to give an informed opinion on
tenders.
The members must sign a declaration of
impartiality.
 Contd
Minutes are taken of the tender-opening session.
They are signed by all members of the evaluation
committee and state:

The date, time and place of the session

The persons present
The names of the tenderers who have replied within the deadline
Whether tenders have been submitted in sealed envelopes
Whether tenders have been duly signed and the requisite number
of copies sent
The tender prices
The names of tenderers whose tenders were found to be non-
compliant at the opening session
The names of any tenderers who withdrew their tenders
Any declarations made by the tenderers
 Tender Evaluation or
Selection Criteria
Before accepting one among the tenders received,
the following aspects are to be given consideration:

The financial capacity of the tenderer

The technical infrastructure available with the tenderer
Past performance of the tenderer in executing similar
works

The lowest tender is usually accepted provided the

tenderer who has quoted the lost amount satisfies
the above criteria. For valid reasons, a tender
other than the lowest can be accepted
Example
INVITATION TO BID for Toyota Vehicles
Announcement No: 14/2011
Date: Jan 26,2011
Pathfinder International/Ethiopia (PI/E) is a non-profit organization decided
to support the provision of high quality reproductive health and family
planning services that improve the lives of women and their families in
Ethiopia.
For integrated family health program jointly implemented with John Snow
Incorporated, Pathfinder International Ethiopia intends to purchase Toyota
brand vehicles for the project activities service.
All interested suppliers who have renewed business licenses are invited to
submit a formal detailed quotation (Performa Invoice), the list of items and
quantity for the bid can be collected from Monday to Friday during office
hour.

The reception
IFHP/Pathfinder International
Old Airport area, behind south Africa Embassy
Tel.011-320-3501
Closing date for bid Submission February 5,2011 4:00pm
Pathfinder is authorized for the cancellation of any or all bid.
 Example of Tekeze

After EEPCOs advertisement of the tender, more

than 30 companies purchased the tender document
8 companies returned the tender document
 Evaluation Criteria and Methodology
The applicant shall have a minimum average turnover
over the last five years of US$ 100 million
Successful experience as a prime contractor in the
execution of at least one project of a similar nature
within the last fifteen (15) years.
The following quantities of work shall have been
completed on one project during a twelve (12) month
period:
150,000 cubic metres of open excavation in rock
70,000 cubic metres of underground excavation
250,000 cubic metres of concrete in a large dam
40,000 cubic metres of concrete in other large
structures
 Successful experience as prime contractor in the
execution of an arch dam at least 120 metres high.
Access to, or availability of liquid assets,
unencumbered real assets, lines of credit, and other
financial means sufficient to meet the construction
cash flow for a period of four (4) months, estimated
as US$ 9 million, or equivalent, net of the applicants
commitments for other contracts.
Audited balance sheets and profit and loss accounts
for the last five (5) years must demonstrate the
soundness of the applicants financial position,
showing long-term profitability.
Details of any litigation or arbitration resulting from
contracts completed or under execution by the
applicant.
Details of safety records and any disqualification due
to poor safety performance.
 Three company were short listed
Kajima Enka Joint Venture (KEJV)-Japan
CWGS Joint Venture, China National Water
Resources and Hydropower China and Sur
Construction Share Company-Ethiopia
Joint Venture Strabag Salini (SSJV)-Germany
 the contents of the tenders suggests that the
proposals of both KEJV and SSJV are significantly
superior technically to that delivered by CWGS.
Of the three tenderers, it is the Consultants
opinion that, while the SSJV tender is probably
technically the best of the three tenders received.
the combination of price and technical content could
permit a sound contract to be negotiated with
KEJV.
the Consultant and the prequalification committee
determined that CWGS was not qualified to tender.
However, all qualifications of its tender would have
to be removed and the tender documents accepted
without condition or reservation.
Moreover, all clarifications requested would have to
be provided to the complete satisfaction of EEPCO.
 CWGS is the only joint venture that includes an
Ethiopian partner.
It adjusts foreign currency purchase and
telegraphic transfer costs 53% of total costs.
It has also offered two loans, which, for the
purposes of this evaluation from china government
as such the actual cost to EEPCO may not be
affected by such loans
Therefore, the lowest evaluated tender was
selected to be first depending on EEPCO
satisfaction
 Discussion Topics

1. Identify the main problems of tendering in our

country?

What should be done to solve these problems?

Discuss

2. Can you suggest any method that can substitute

tendering?
 Research Idea

1. Evaluating the tendering procedure in manufacturing

and service giving organizations in Ethiopia.
2. Tendering and Quality in selected manufacturing
industries
3. Tendering and Time management
4. Tendering and Corruption
 Contract

A contract is a legal agreement. It is an exchange

of promises by two or more parties.

Contract is necessarily an agreement, all

agreements are not contracts. Only those
agreements that are enforceable by law are
contracts.

Contracts can be oral or they can be written

The contractor is a person a firm or a company

who undertakes contract.
 Elements of Contract

There are four essential elements for a binding

contract to be formed between two companies:

Offer
Acceptance
The intention to be legally bound
Consideration
 Contract Elements
1.Offer one party must clearly make an offer of
something, usually a service or a good, to another
party in exchange for consideration
2.Acceptance one party must clearly accept the
offer, usually done in writing and by payment
3.Consideration the exchange of value in the contract
(i.e., services in exchange for cash payment as
opposed to a gift)
4.Legally Bound: In the case of the offer and
acceptance, both parties must have legal
competence to enter the contract (be of sound
mind, not a minor and have authority to contract)
 Oral Contracts
Avoid oral handshake contracts

Oral contracts can be binding but terms are

difficult to prove

Common in small businesses

Excuses for Oral Contracts:

I, Too busy
II, Trust the other party
III,Too complicated
IV, Other party will not agree to written
contract
 Practical Considerations

When entering into a contract, consider the

following:

i. Does the contract clearly describe your obligations?

ii. Does the contract clearly describe the other partys
obligations?
iii.Does the contract clearly establish payment terms?
iv.Does the contract clearly establish time frames and
default provisions?
v. Does the contract limit liability, discuss dispute
resolution, choice of law, etc.
vi.Can you live with this contract?
 Contract Negotiation

Understand what it is you want to accomplish with

the contract and what the other party wants to
accomplish

Identify your position and the other partys

position (strengths vs. weaknesses)

Be prepared and provide room for negotiation

Bring solutions to the table

 Types of Contract
Broadly contracts can be divided into two types:

1.Turnkey contracts the entire responsibility of

project execution is entrusted to the contractor.
It is as if the owner comes into the picture only
when the project is completed and he turns the
key of the plant to start production.

2.Non-turnkey contracts are preferred when the

projects are small sized, the know-how for the
project is available with the promoters and when
there is strong, competent and capable project
team available with the organization.
 Contd

The following are some of the non-turnkey

contracts:

1.Piece work contract

2.Lumpsum contract
3.Cost plus percentage contract
4.Labour contract
 Types of Contract

There are five main contract types:

Fixed price,
Time and materials,
Royalty based partnership
Partnership Contracts and
Cost plus fixed rewards.

Each has a place with in the project. Often a

combination of contract vehicle will be used.
 Selection of Contract

There are three essential requirements considered

for a contract to be selected:

1. Incentive: - The aim is to provide an adequate

incentive for efficient performance from the
contractor

This must be reflected by an incentive for

the client to provide appropriate information
and support in a timely manner.
 Contd

2. Flexibility: - The aim is to provide the client with

sufficient flexibility to introduce change, which
can be anticipated but not defined at the tender
stage.

An important and relevant requirement is that

the contract should provide for systematic
and equitable evaluation of such changes.
 Contd

3. Risk Sharing: - The aim should be to allocate all

risk between client and contractor.

This must take account of the management

and control of the effects of risk, which
materialize.

The contractor will include a risk

contingencies sum in his tender as protection
against the risk he has been asked to carry.
 Security Deposit

Security deposit is the amount to be deposited by

the successful tenderer after the contract
finalized

It is about 15%of the total value of the contact

The amount is collected as safety measure so that

the contractors (successful tenderer) fulfils all the
terms and conditions of the contract
 Common Contract Provisions
Contracts include numerous common provisions including but
not limited to:

1. Term of Contract
2. Payment
3. Description of goods or services
4. Warranty and Disclaimers
5. Dispute Resolution
6. Default Provisions and Damages
7. Attorneys Fees
8. Choice of Law
9. Assignment
10.Modification
11.Regulatory Matters
12.Exhibits Unique to Transaction
 Discussion Topics

What are the main problems in contract agreement

and its implementation in our country?
 Research Ideas

Assess the contract agreement and its

implementation in Ethiopian Road Authority
projects or in Ethiopian manufacturing industries.

Contract Agreement and Time Management in

selected project
 Procurement and Inspection
The purpose of procurement definition is to
describe, what items will be bought and under
what conditions.

Under project procurement

1. Items must be listed, justified, and the conditions
must be set.
2. Any important technical information should also be
included.
3. Individuals may also be listed with authority to
approve purchases in addition to or in the absence
of the project manager.
 Methods of procurement

open tendering;
two-stage tendering;
request for proposals;
restricted tendering;
request for quotations;
single source procurement.
 Commissioning

Project commissioning is the process of assuring

that all systems and components of a building or
industrial plant are designed, installed, tested,
operated, and maintained according to the
operational requirements of the owner or final
client.

A commissioning process may be applied not only to

new projects but also to existing units and systems
subject to expansion, renovation or revamping.
 Contd

Commissioning activities, in the broader sense, are

applicable to all phases of the project, from the
basic and detailed design, procurement,
construction and assembly, until the final handover
of the unit to the owner, including sometimes an
assisted operation phase.
 Example of Tekeze

Commissioning of this hydropower project started

in June 2008 and continude untile the inauguration
of the project. The task is accomplished by the
consultants
HARZA
ENERGOPROJECT and
EEPCO staffs
 Two techniques were applied for this purpose
1. Simulation especially to commission the system
in the power house
2. Operating to compare the parameters of each
system against the standard. It is applied the
dam system components like the intake and
outlet valves
 Discussion Topics

Discuss the need for project evaluation and

factors to evaluate.
 Project evaluation

As the project draws to a conclusion, the project

manager must ensure that all work is formally
closed out, commitments are met or compensated
for, and all remaining loose ends are tide up.

Two kinds of evaluation in a project

1. Formative evaluation
2. Summary evaluation
3. Post installation
 Summary evaluation

Frequently over looked task

But it is an essential and valuable learning
component of a project.
 Evaluation should include

Review initial project objectives in terms of

technical performance, schedule, and cost; and
review the soundness of the objectives in view of
the problem that the system was to solve.
Review the evolution of objectives through the end
to determine how well the project team performed
with respect to them; and review the reasons for
changes, nothing which changes were avoidable and
which were not.
 Review the activities and relationships of project
team throughout the project life cycle, including
review of the interfaces, performances, and
effectiveness of project management; the
relationships among top management, the project
team, the functional organization, and the client; the
cause and process of termination; customer reactions
and satisfaction.
Review the involvement and performance of all
stakeholders, including sub-contracters and venders,
the client, and outside support groups
Review expenditures, sources of costs, and
profitability; identify organizational benefits, project
extensions, and marketable innovations
 Identify areas of the project where performance
was particularly good, noting reasons for success
and identifying processes that worked well
Identify problems, mistakes, oversights, and areas
of poor performance and the causes
Summarize the lessons learned from the project
and give recommendations for incorporating them in
to future projects.
End of class

Thank you