What are the difference between Tender and Contract Documents?
Can we mention tender documents as contract document while issuing LOA to the Contractor. if no then what is the difference?
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What are the difference between Tender and Contract Documents?
Can we mention tender documents as contract document while issuing LOA to the Contractor. if no then what is the difference?
Gopal Mishra
To understand the difference between tender documents and contract documents, first we have to understand what these documents contain.
Tender Documents:
A tender is an offer in writing to contractors to execute the some specified works or to supply specified materials within a fixed time frame and as per conditions of contract and agreement between the contractor and the owner or the department or the party.
The tender documents contains the bill of quantities (BOQ), specifications of the works to be carried out, time frame for the completion of the work, conditions of the contract and plans and drawings. These documents are provided to the contractor on the payment of certain fees. The contractor who quotes the lowest rates for the overall works are offer the contract to execute the work.
Contract Documents:
Contract documents are the agreement between the owner or the party or the department and the contractor to execute the works as specified in the tender documents as per conditions of contract on the rates quoted by the contractor.
The difference between Tender and Contract Documents:
The difference here to be noted is that tender documents are offered to as many contractors as possible to get the lowest quotes for the work specified, while the contract documents are signed only with the contractor with lowest tender or rates.
While the tender documents contains the conditions of contract and all the details for the specified work, there is not much difference between the two in terms of contents. But tender documents can not be submitted as Letter of Acceptance (LOA) as these are two different types of documents. While a tender document can not bind the contractor to do the work, a contract document binds the contractor to complete the work as per the agreement.
Simple Example to understand the difference between tender and contract documents:
When you are selected for a job in a company you are offered offer letter to join the company. But getting selected in a company does not mean that you join the same company, you may have other offer letters as well. But when you sign the letter of acceptance (LOA) for the job, you are bound to join the company. So, here offer letter from the company is a tender document and LOA is the contract document.
Thank you Gopal for your clarification. The final price of the contractor is based on tender documents hence can we include tender document in LOA if not then why. Also the documents that were provided to contractor during tender stage can the same documents be mentioned as as contract document in LOA.
Gopal Mishra
Hi ikhlaq,
In a tendering process, the prices are submitted by the contractors in a sealed tender. The contractor with lowest price called as L1 and others L2, L3 for next higher rates.
The next step after decalring L1, L2 and L3 is call them for negotiation for further reducing the rates. If a contractor with L2 or L3 reduces rates below L1, L2 or L3 can also be offered the contract.
Thus, the rates quoted by contractors in a tender document is not final and can change during the negotiation stage. Thus, the tender document can not be included in the contract document. After the negotiation is completed, the LOA is signed between the L1 and the owner / party and the contractor to accept the terms and conditions and the rates quoted.
The LOA documents contain all the documents in tender documents as well as revised rates quoted by the contractor. But the tender documents are not the acceptance of the contractor do complete the work as per conditions mentioned in it. But when a contract document i.e. LOA is agreed and signed by both parties, the contractor has to complete the work as specified and as per the terms and conditions in the document.
The point here is to understand that the tender and contract documents may not have much difference in their contents, but they differ by their title, their importance and their legal validity. So, tender documents can not be issued as LOA.
Basically, tender documents and contract documents refers to the same set of documents. But the major distinction is that the former is the appropriate title for the document before signing the contract and it is being used to select a suitable contractor to execute the works. While the latter is the appropriate title for the documents after signing the contract and it is used to execute the works. In other words, before the awarding the contract, the set of documents issued are called tender documents and after award of the contract the documents issued becomes contract documents. If you agree with me, indicate and if you differ, let’s have your opinion. Thank you.
Thanks guys for all these awesome explaination its very useful.thanks.
Mr Gopal mishra, is award of contract only limited to the bidder with the lowest rates? I think it is based on best financial and technical offer. Am i right?
Hii
Gopal
Thanks for clarification about tender and contract documents with good example
What proucture can be adopted while preparing tender inviting docucments by an artitect
This article is quite useful for knowing more about tender and contract documents. Thanks so much!
Tender is one type of invitation and contract is invitation card. Tender is invited in ppp model or when government have not sufficient money and man power at that time government or any agency is publish or open a tender and for taking that work different contractors submit their own rates to government or agency and whom of have lower price rate, that contractor have going that tender and that contractor can work on that tender but for to do work some conditions have signed to contractors and that conditions like you have to finished work in specific time period, specific qualities, and money despotism like EMD, SD, etc etc and these conditions are the contract documents.
Gopal Mishra excellent Example Thanx.
Tender Document:
It is a Pre-Bidding document. This document mainly describes about four matters, they are 1.Eligibility criteria of the contractor, 2. Time line of the project 3. Working Procedure of the contract and 4. Specification of materials with quantities(BOQ).
There are also some restrictions to get tender documents. In some cases, The contractor who is eligible only can get the tender document.
Bidding:
Once the rate is quoted by contractor in BOQ, it is sealed in cover and submitted to Tender Inviting Authority Panel. At the date of tender opening , the panel will unsealed the cover and start to name L1, L2 & L3 respectively to the contractor, who quoted lowest value of three members. Then negotiation process will take place, the contractor who comes for the lower price to him the tender will be awarded.
Eg: At the time of Tender Opening : L1 – 10.25 Cr; L2 – 10.30 Cr; L3 – 10.32
After negotiation : L1- 10.18 Cr; L2 – 10.23 & L3 – 10.15,
Now the contract will be awarded to L3
Contract Document:
It is a Post – Bidding Document. This document is totally of agreement. Once the bidding is over the contractor and client will undergo an agreement that the Project will be completed in scheduled time, with the same specification and working procedure as mentioned in Tender document. If the project is delayed due to contractor, then the penalty will cover some percent in the total project cost. This agreement is documented as contract Document.