ACCT 210 Lecture Notes - Lecture 20: Chemical Industry, Contract Management, Project Management
6 Sep 2020
School
Department
Course
Professor
Tendering
- Tender documents usually issued by the Purchaser to define what has been agreed to.
- Vary depending on the industry, the type and size of contract and who has prepared them
o The ones prepared by civil engineers tend to concentrate on general specifications
and priced bills to allow “remeasurement” by quantity surveyors.
o In the chemical industry they are usually prepared by process engineers who are
more concerned with process performance and lump-sum prices.
o The ones prepared by consultants frequently contain large amounts of irrelevant
material designed to “pad out” the documents.
- Scope of work : defines the work to be executed under the contract and should provide background
details such as why the work is to be done and what impact other associated contracts might have on
the work.
- Particular specification : sets out specifications for processes and equipment to be used on the
project :
- Performance specification - eg guaranteed quantity and quality of product
- “Design and build” specification which details the process route to be used but not the detailed
design
- “Detailed specification” which gives all dimensions for structures and provides a shopping list of
equipment to be procured, installed and commissioned by the contractor, usually in the form of
“bills of materials”
- General specification : refers to any appropriate standards (ISO, BS…) and provides the
purchaser’s standard specifications for equipment, paint finishes, materials and so on.
- Nominated suppliers: a purchaser may nominate a particular supplier but then it's his responsibility
so often he will just issue a list of preferred vendors which is not mandatory
- Program : usually the contractor will be required to submit his proposed program for contract
execution but sometimes the purchaser will issue a program for the works and contractor should
establish if it is reasonable.
- Compliance : usually the contractor is required to submit a tender in complete compliance with the
specification or to provide a list of all areas in which he has deviated from the specification. Contractor
may offer alternative design (if he submits a bid for the specified plant).
- Project management : identifies how the project will be managed. Often contains ‘hidden’ costs
associated with progress meetings, reports, QA documentation and Health and Safety issues. It might
even stipulate what management software the contractor has to use.
- Validity : contractor normally holds his tender open for acceptance for a specified period of time
(although the tenderer may revoke it at any time before but not after acceptance).
The purchaser may issue a ‘letter of intent’ (which is legally binding) to allow the contractor to start
work before the final contract is signed.
A tender is an offer from the contractor meaning that acceptance of the tender by the purchaser
concludes the contract and is legally binding on the tenderer. It cannot be revoked. Acceptance must
be:
- Complete and unconditional – any variation constitutes a counteroffer which will nullify the offer
- Unequivocal and unambiguous
- Made within the validity period of the tender
- Made while the tender has not been revoked
- Accepted only by the addressee
- Communicated in writing (letter, fax or email with a secure signature)
Contract negotiations often constitute a series of offers and counter-offers until the final counter-offer
is unequivocally accepted.
