Art cl f i e rom Law Update (ht p://new sw eaver. e/al am i i t i t m /e_000356310000103166. m ?

x= b11, w ) cf 0, Apri 6, 2009 l

Tendering Tips and Traps

by Eric Teo - Dubai Office Thi art cl w ilt s i e l ouch on som e of t f he undam ent l al egal aspect s of t t he enderi process rel i t const ng at ng o ruct on and engi i neeri ng proj s and of er som e gui ect f dance on how best t avoi probl s o d em duri t s cruci st ng hi al age of cont ract f orm at on. i Tenderi f l ng or arge and com pl const ex ruct on or engi i neeri ng proj s can be a very expensi exerci f em pl ect ve se or oyers and t enderers alke. H ow ever, i w oul be m oney w el spent i t i t d l f he obj i ect ves of t enderi w ere achi ng eved. M ost i ndust pl ry ayers w ilagree t l hat t m ai obj i he n ect ves of t enderi i t o f d: frst y, t t ng s w ol i l he enderi process enabl t ng es he em pl oyer t secure a sui abl cont o t e ract t carry out t i ended w orks at a com pet t ve pri or o he nt ii ce; secondl y, t process provi he des a l evelpl f at orm f part ci i t or i pat ng enderers t underst o and t requi he rem ent of t s he i ended w orks and t vari nt he ous ri sks i nvol ved i carryi out t w orks bef n ng he ore deci ng on t r bi pri di hei d ce. In a heat const ed ruct on m arket such as D ubai w as recent y, part es do not of en appreci e t l i l i t at he egal aspect of t t s he enderi process. D uri t previ ng ng he ous f renzi m arket condi i ed t ons, st akehol ders of t he const ruct on i i ndust w ere t engrossed i negot at ng and cl ng deal as qui y as t ry oo n i i osi s ckl hey w oul af er t d t he t ender cl ng dat osi es. From our experi ence t here have been i ances w here part es have com prom i nst i sed on t l he egal i ssues duri t t ng he ender process f f or ear of m i ng t set m iest ssi he l ones of a part cul proj . i ar ect The tender process The t enderi process i t const ng n he ruct on and engi i neeri i ng ndust has devel ry oped i o a very nt com prehensi and com pl procurem ent process. It of en i ve ex t nvol ves m any st eps and procedures w hi ch t enderers m ust undert ake and num erous condi i t ons t hat m ust be sat sfed bef i i ore t hey are elgi e t m ove i bl o t t next st o he age of t process. he The f l i provi olow ng des t di f he f erent phases of a t enderi process. ng These phases w ere ext ract f ed rom a gui i prepared by t Int delne he ernat onalFederat on of C onsul i Engi i i t ng neers (FID IC ) (see The FID IC Cont ract s G ui Fi Edi i 2000). Thi out i of phases al il rat a t cal t de rst t on s lne so lust es ypi enderi process f a ng or const ruct on proj i ect i t U AE: n he Pre-qualification phase At t s phase t em pl hi he oyer w ilset i s sel i cri eri (f exam pl cont l t ect on t a or e, ract ors w ho are experi enced i a n specii t f c ype of engi neeri w orks) and i t prospect ve t ng nvi es i enderers w ho sat sf t sai cri eri t subm i i y he d t a o t t r det l and capabii i hei ais lt es. The obj i of t s phase i t enabl t em pl ect ve hi s o e he oyer t sel o ect sui abl t e cont ract ors t proceed t t next phase. o o he The tender invitation phase The em pl oyer i ssues an i t i t t short i ed cont nvi at on o he lst ract ors (t hose w ho w ere sel ed f ect rom t prehe qualfcat on phase) or t t publc at l ii i o he i arge (i no pre-qualf cat on phase w as carri out t part ci e i f ii i ed ) o i pat n t t he ender process. The tender clarifications and addenda phase D uri t s phase, each of t t ng hi he enderers i expect t rai any queri i rel i t t t s ed o se es n at on o he ender docum ent s or t requi he rem ent of t em pl s he oyer t enabl t o e hem t pri t r of er or bi In responce, t em pl o ce hei f d. he oyer w ili l ssue w ri t cl fcat on t t queri t en arii i o he es. The em pl oyer m ay al i so ssue t ender addendum s am endi any ng part of t t he ender docum ent Tender si e vi t are usualy carri out duri t s phase. s. t si s l ed ng hi The tender offer or bid submission phase Tenderers subm i t r of ers or bi bef t hei f ds ore t st pul ed deadlne al he i at i ong w i h t requi t he red t ender securi y. t The tender opening and post tender clarification phase The em pl oyer opens and eval es t of ers or bi and seeks cl fcat ons f uat he f ds arii i rom t t he enderers regardi ng t r of ers or bi (i necessary). hei f ds f The award phase

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The em pl oyer i ssues a l t of accept et er ance t t successf t o he ul enderer. The formalisation of contract phase The successf t ul enderer si gns a f orm al agreem ent w i h t em pl t he oyer f t execut on of t proj . or he i he ect W i h regards t publc procurem ent i t U AE, t t o i n he here are l s w hi govern publc procurem ent processes. aw ch i In t Em i e of D ubai Law N o. of 1997 regul es cont he rat , 6 at ract w i h t governm ent depart ent of D ubai s t he m s . Law N o. set out t vari 6 s he ous m et hods of procuri cont ng ract ors by t G overnm ent of D ubaiw hi i ude he ch ncl publc and cl i osed t ender processes. Thi l al prescri s aw so bes t procedures by w hi t he ch enders are t be o conduct ed. The prescri bed t ender procedures are generaly i accord w i h t phases set out above. l n t he The two-stage contract From a l egalperspect ve, an i t i t t i nvi at on o ender or a request f t or ender (RFT) docum ent shoul be f d ram ed i such a w ay t n hat i does not creat any l t e egalrel i at onshi bet een t i t (t em pl p w he nvi or he oyer) and any prospect ve t i enderers at l arge. U nl ess and unt lt prospect ve t i he i enderers have part ci ed i t t i pat n he ender process, t here shoul not be any l d egal rel i at onshi bet een t i t and each of t prospect ve p w he nvi or he i t enderers. The com m on underst andi i t ng s hat a cont ract w ilcom e i o exi ence i and w hen t i t or t l nt st f he nvi or he em pl oyer i ssues a l t of accept et er ance or l t of aw ard i response t t t et er n o he ender. H ow ever due t t o he com pl t of t const exi y he ruct on t i ender process, each of t part es part ci i i t process, i udi t he i i pat ng n he ncl ng he i t nvi or, w il be bound by a set of oblgat ons t l i i hroughout t process. The f he act t hat t enderers are requi red t o f urni t sh ender securi i or t t es ender bonds i an i cat on t s ndi i hat t here i a cont s ract i pl n ace. The t cal ypi t enderi process f a const ng or ruct on or engi i neeri proj ng ect i i ef ect f s n f , rom a l egal perspect ve, a t o-st i w age cont ract . The first stage contract The f rst st i age begi w hen t em pl ns he oyer i ssues an i t i t t nvi at on o ender or RFT. By i ssui t i t i ng he nvi at on, t he em pl oyer i m aki an of er t each of t prospect ve t s ng f o he i enderers t ent i o t f rst st o er nt he i age cont ract or t he t enderi cont ng ract The underl ng oblgat on of t em pl . yi i i he oyer under t s cont hi ract i i s prom i t consi s t se o der each of t bi t he ds hat t t he enderers subm i i accordance w i h t t t n t he erm s of t t he ender i t i nvi at on. In consi derat on of t em pl i he oyer prom i s se, each t enderer w il depl i s resource t part ci e i t t l oy t o i pat n he ender process and i t n urn prom i ses t execut t proj o e he ect i accordance w i h i s bi shoul t em pl n t t d d he oyer accept s i . Theref t ore, i can be argued t t hat i vi ndi dualt enderi cont ng ract com m ences w hen each t enderer begi t ns o part ci e i t t i pat n he ender process. It i com m on i s ndust pract ce f em pl ry i or oyers t i ude i t t o ncl n he ender i t i a docum ent usualy l nvi at on l abeled l as t he Inst ruct ons t Tenderersor t ondi i i o he C t ons of Tenderi . These docum ent w il set out t ng s l he oblgat ons of t part es duri t t i i he i ng he ender process f a fxed peri of t m e or unt l a specii event or i od i i f ed occurs (t condi i he t ons of t enderi ng). It i cruci f al part es t underst s al or l i o and and appreci e t r oblgat ons duri t t at hei i i ng he ender process. D ependi on t t ng he erm s of t condi i he t ons of t enderi ng, a t enderer m ay be di squalfed f ii rom t t he ender process i i f l t com pl w i h t condi i f t ais o y t he t ons. O n t ot he her hand any breach on t part of t em pl he he oyer m ay ent t e t aggri i l he eved t enderer t recover dam ages. Theref o ore, i i not surpri ng t f nd i t t s si o i n he condi i t ons of t enderi a host of ri s t ng ght hat f avour t em pl he oyers. Som e of t hese ri s are di ght scussed bel . ow Employers overriding rights As m ent oned earler, i i t prom i of t em pl i i t s he se he oyers t hat t hey w il eval e and consi l uat der t i vi he ndi dual bi subm i t by each of t t d t ed he enderers. Theref ore i t absence of any express t n he erm s t t cont o he rary t he em pl oyers are oblged t eval e t bi and aw ard t proj i o uat he ds he ect t t successf t o he ul enderers. O t herw i se, t em pl he oyers m ay be labl t t t i e o he enderers f t w ast cost and expenses i or he ed s ncurred i part ci i i n i pat ng n t t he ender process. H ow ever, i i not uncom m on t fnd a term i t condi i t s o i n he t ons of t enderi w hi provi ng ch des t hat t em pl he oyer w ilnot be bound t accept t l est pri l o he ow ced bi G i d. ven t current econom i clm at em pl he c i e, oyers m ay al so i ude i t condi i ncl n he t ons of t enderi an absol e ri ng ut ght f t or hem t suspend or cancelt t o he ender process at any t m e. W i h such di i t scret onary ri s, t em pl i ght he oyers w oul be abl t reconsi d e o der t t m i or f he i ng easi lt bii y of t r proj s shoul t hei ect d hey need m ore t m e t secure t necessary f i o he undi ng, or i t m arket t f he urns f t or he w orse.

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Ot her addi i t onal ri s t ght hat em pl oyers m i ght set out i t condi i n he t ons of t enderi i ude t ri ng ncl he ght t vary o t procedure and t m i of t t he i ng he ender process and t ri he ght t w ai any i o ve rregul t i t bi ari y n he ds. At t m es, i t hese ri s seem t have gone beyond w hat i necessary and reasonabl at t expense of t ght o s e he ransparency and f rness t t t ai o he enderers. U l i at y, em pl t m el oyers need t be m i ulof t overri ng requi o ndf he di rem ent of good f t under U AE l s ai h aw w henever t hey exerci t r ri s pursuant t t condi i se hei ght o he t ons of t enderi ng. They m ust bear i m i t n nd hat one of t m ai obj i he n ect ves of t enderi i t provi an equalpl f ng s o de at orm f al t or l enderers t com pet f rl In o e ai y. t s cont , al t hi ext l enderers m ust be t reat equaly and f rl by t em pl ed l ai y he oyer t hroughout t t he ender process. For exam pl each of t t e, he enderers shoul be gi d ven t sam e i orm at on and cl f cat on w i hi he nf i arii i t n t sam e t m e as any ot he i her t enderers duri t process. O t ng he herw i t t se he ender process m ay be seen as a sham and t event he ualexerci of t em pl se he oyer ri s ght i t n urni dow n unsuccessf bi coul be ng ul ds d const rued as an exerci of bad f t se ai h. To avoi any alegat on of unf rness and bad f t em pl d l i ai ai h, oyers, (i udi t r consul ant especi l t ncl ng hei t s aly hose w ho are responsi e f conduct ng t t bl or i he ender process), m ust ensure t hat each of t t he enderers recei ves equalt reat ent and opport t as any ot m uni y her t enderer. If t here i any addi i s t onali orm at on w hi has nf i ch ari sen ei her i response t a query of one of t t t n o he enderers or l e i orm at on t at nf i hat has not been i uded i ncl n t t he ender i t i nvi at on, t hen t em pl he oyer m ust ensure t hat such i orm at on i di nf i s ssem i ed t al t nat o l enderers i a t m el m anner (unl n i y ess t i orm at on i onl rel he nf i s y evant t a speci i t o fc enderer w ho needs i i order t be t n o abl t subm i an al ernat ve of er as alow ed under t condi i e o t t i f l he t ons of t enderi ng). The procedure f di or ssem i i i orm at on t al t nat ng nf i o l enderers i of en set out i t condi i s t n he t ons of t enderi ng and i usualy done by w ay of conduct ng si e vi t conveni t s l i t si s, ng ender cl f cat on m eet ngs and i ari i i i ssui ng vari ous t ender docum ent such as addendum s, cl fcat ons and a colect on of quest ons and answ ers. s arii i l i i In t cont he ext of di ssem i i i orm at on, w e consi nat ng nf i der t hat t pract ce of i eract ve t he i nt i enderi shoul be ng d encouraged, w hereby i eract ve sessi nt i ons are buit i o t t l nt he ender process gi ng each of t t vi he enderers t he opport t t di uni y o scuss and cl f t requi ari y he rem ent of t em pl s he oyers and perhaps t f her devel t o urt op he specii i f cat ons or proj ect bri cont ned i t t ef ai n he ender docum ent Such sessi s. ons can al be i pl ent so m em ed af er t t t he ender cl ng dat as l osi e ong as each of t t he enderers i gi s ven an equalopport t t revi i s of er uni y o se t f or bi af er t ng i o consi d t aki nt derat on any i orm at on ari ng f i nf i si rom t hese sessi ons. W hist t i eract ve sessi l he nt i ons m ust be conduct i st ct confdence i order t prot ed n ri i n o ect t know -how of he t t he enderers, t ransparency and f rness m ust prevai such t ai l hat any m at ali orm at on or errors eri nf i di scovered duri t sessi ng he ons are shared am ongst t t he enderers by w ay of i ssui f her t ng urt ender cl fcat ons or addenda. Caref pl arii i ul anni and st ng of such sessi ng agi ons w ilprom ot a t y com pet t ve and l e rul ii ef ect ve t f i enderi process. ng Tenderers risks In m ost condi i t ons of t enderi t ng here are dif f erent t ypes of di ai ers t scl m hat prot ect t em pl he oyers. Em pl oyers w il usualy di ai any responsi lt es f t accuracy or correct l l scl m bii i or he ness of i orm at on provi nf i ded i n t ender docum ent D ependi on t t m e and budget const nt of t part cul em pl s. ng he i rai s he i ar oyer and t scope he and nat ure of t i ended w orks, i i al ays advi he nt t s w sabl f em pl e or oyers t i ude i t r t o ncl n hei ender docum ent t am ount and det l of i orm at on t he ais nf i hat are reasonabl suf i ent f t y fci or enderers t appreci e t ri o at he sks t hat t hey w ilbe undert ng i t l aki f hey are successf . Thi w ilcert nl prom ot and encourage t ul s l ai y e enderers t o put i t r m ost com pet t ve pri n hei ii ces. Conversel i t t y, f he enderers are t carry t burden of m aki t r ow n i o he ng hei nvest gat ons and enqui es as t i i ri o t accuracy and correct he ness of t i orm at on cont ned i t t he nf i ai n he ender docum ent t s, hen subj ect t t ri o he sk appet t of t i vi ie he ndi dualt enderer, m ost t enderers w oul lkel add on a prem i d i y um t t r bi or of er pri o hei d f ces t cover t ri o he sks of any i naccurat or i e ncorrect t ender i orm at on al nf i ong w i h ot t her associ ed ri at sks. It i al a com m on requi s so rem ent f t or enderers t assum e t ri o he sks of any m i nt si erpret i at on, error or m i ake st on t r part i const ng t i orm at on gi hei n rui he nf i ven i t t n he ender docum ent and i pri ng t r bi s n ci hei ds. In t s hi respect i i hi y advi , t s ghl sabl f t e or enderers t ensure t o hat t hey cl earl and accurat y record t y el he assum pt ons and i erpret i i nt at ons t hat t hey have adopt i pri ng or f ed n ci orm ul i t r bi at ng hei ds. These assum pt ons and i erpret i i nt at ons shoul t d hen be di scussed w i h t em pl t he oyer duri t ng ender cl f cat on arii i m eet ngs. If t em pl i he oyer fnds i necessary, t appropri e addendum or cl fcat on m ay be i i t he at ari i i ssued t al o l t enderers i order t rem ove or m i m i any am bi t i t t n o ni se gui y n he ender docum ent s. The second stage contract The second st age set i w hen t em pl s n he oyer, af er due consi t derat on of t t i he ender bi ds, i ssues i s t

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accept ance of t successf bi D ependi on t condi i he ul d. ng he t ons of t enderi ng, i i usualy upon t i t s l he ssuance of t sai accept he d ance t hat a const ruct on cont i ract bet een t em pl w he oyer and t successf t he ul enderer i s creat ed. The condi i t ons of t enderi w oul usualy speciy t event upon w hi t second st ng d l f he ch he age cont ract i e. t , . he const ruct on cont i ract i deem ed t have com e i o exi ence. For exam pl i m ay be provi s o nt st e, t ded t hat t he const ruct on cont i ract w il deem ed t have com m enced on t day t successf t l o he he ul enderer recei ves t he em pl oyer l t of accept s et er ance. And i i usualy provi t s l ded t hat unt l a f i orm al agreem ent i execut s ed bet een t part es t l t of accept w he i he et er ance shal f l orm a bi ng cont ndi ract bet een t w hem . H ow ever, f t em pl or he oyer accept s ance t be bi ng on t successf t o ndi he ul enderer, t t he erm s of t he accept ance m ust i subst n ance correspond w i h t essent alt t he i erm s of t t he enderer bi O t s d. herw i t se here cannot be a m eet ng of m i i nds bet een t em pl w he oyer and t t he enderer i order t f n o orm a cont ract W hat . coul be an essent alt d i erm t a cont o ract i dependent on t nat s he ure of t t he ransact on i sel . In rel i t i t f at on o const ruct on cont i ract t cont s, he ract pri and t m e f com pl i w oul be t o obvi ce i or et on d w ous t erm s t hat are essent al t t t i o he ransact on. i A l t of accept et er ance t hat does not correspond w i h t successf t t he ul enderer of er w il am ount t a s f l o count er-of er. The t f enderer w oul t d hen be i t posi i t ei her accept or rej n he t on o t ect t em pl he oyer s accept ance. H ow ever, bef ore t t he enderer rej s t em pl ect he oyer purport accept s ed ance i m ust be caref i t ul n det erm i ng w het ni her t em pl he oyer t s erm s of accept ance are, i subst n ance, di f f erent f rom i s ow n of er or t f bi ot d, herw i t em pl se he oyer m ay encash t t he ender securi y or bond on t basi t t he s hat t t he enderer has f l t com pl w i h i s oblgat on under t t aied o y t t i i he enderi cont ng ract . The t enderers al need t be aw are t so o hat t here w oul be no oblgat ons on t r part t proceed w i h t d i i hei o t he const ruct on cont i ract i t f hey do not agree w i h t new t t he erm s i roduced i t em pl nt n he oyer l t of s et er accept ance. In t s si uat on t hi t i hey m ust ref n f rai rom conduct ng or act ng i such a w ay as i a cont i i n f ract has been f orm ed ot herw i t se hey m ay be deem ed t have accept t new t o ed he erm s. Conclusion As hi i ed above, i i very i port ghlght t s m ant f part es t be aw are of t r respect ve l or i o hei i egaloblgat ons duri i i ng t t he ender process. Any i nadvert ent def t on t r part m ay gi t ot aul hei ve he her part t ri y he ght t cl m o ai com pensat on. To t i ake an ext rem e vi , a def t ng em pl ew aul i oyer m ay be labl t a di i e o sgrunt ed t l enderer f or t l he oss of chance of proft t i s hat t t he enderer m ay have earned but f t em pl or he oyer breach of i s t s t ender oblgat ons. O n t ot i i he her hand, a t enderer w ho ref uses t be bound by i s bi m ay be labl t t em pl o t d i e o he oyer f t di f or he f erence bet een i s t w t ender pri and t hi ce he gher cont ract pri of anot ce her t enderer w ho t he em pl oyer event l engages. Theref ualy ore t st he akes are hi f bot t em pl gh or h he oyers and t t he enderers i f t hey choose t i o gnore t l he egalaspect of t t s he enderi process. ng As t gl he obalf nanci cri s gri hol of t U AE const i al si ps d he ruct on m arket part es shoul t i , i d ake t opport t he uni y t revi t t r pract ces ei her i t r i pl ent i of t t o si hei i t n hei m em at on he ender process or i t r respond t t n hei o ender i t i nvi at ons. Even t hough i seem s t t hat t const he ruct on m arket i t U AE i current y i a depressed st i n he s l n age, i i cert nl an opport t s ai y une t m e f em pl i or oyers t capi alse on t l er const o t i he ow ruct on cost and f i s or i rast nf ruct ure proj s t cat ect o ch-up w i h t buidi i t he l ng ndust ry.
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