Counter offer

Shared Documents Joined: May 02, 2005 No. of Replies: 1237

As per para 4.5.2 of Sudhir Chandra committee report approved by the Railway Board, in cases where the overall value of L1 is not unreasonably high, but rates for certain items in the schedule or the total value for a schedule happen to be higher than those quoted by the other tenderers in the same tender or higher than the last accepted rates, the method of counter offering the lower rate/s obtained in the same tenderer or if all these are higher, any other rate/s considered reasonable by the tender committee may be adopted while finalizing the tender

Taking cognizance of the above instructions, some tender committee members suggest

(a)Acceptance of the lowest rates received in the same tender (amongst all the offers received) in the items where the rates received from the lowest tender are higher, though these lowest rates are unworkable..

(b)Giving counter offer against the rates of the lowest tenderer in which rates are higher without taking into cognizance the fact that the lowest tenderer has quoted unworkable rates in the other items in the tender resulting into the offer becoming unworkable as a whole.

I feel that the workability of rates proposed for counter offer as well as the offer as a whole considering the rates of the counter offer is to be seen before giving any counter offer..

For example if there are two items in a tender of same weightage and the lowest tender has quoted a rate in one of the two items which is 30% below the rates which was considered as workable by the TC and in the other item he has quoted a rate which is 30% higher than the rate considered workable by the tender committee, then by giving a counter offer for the item with higher rate to an extant of the rate considered reasonable or workable by the tender committee, the overall offer gets 30% below the workable value of the tender as a whole.

The present system being followed in many divisions when the offer as a whole is reasonable but the rate of an item is abnormally high is to limit the quantity of the item to the tendered quantity and declare that the rates should not be taken for comparison. In such a situation it will be a good idea to give counter offer with a workable rate (provided it does not affect the workability of offer as a whole) instead of limiting the tendered quantity which may be vital for execution of the work.

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whether such counter offers are accepted by the tenderer or it is resulting in discharge of tenders?

The purpose of tender is to fix agency for doing the work .If an agency fixed does not deliver on accounts of some flaws in tender document or rates ,it is failure of railways also for which TC as well as acceptance authority are responsible.

Basically tender committe with their knowledge ,experience & documents on record need to asses what are workable rate & if tenderer rated are in near vicinity ,then recommend acceptance ,if slightlly high thenc ounter offer ,very high or low then discharge or any problem in particular items/condition then negotiation

above action are for general guidence .basically each tender is to be dealt as per circumstances & ground conditions .This is mainly the reasons why diff level of TC is fixed for diff value of works .

Basic fact should be clear that success of engieer is in getting the work done & not in fixing the agency

Shared Documents Joined: May 02, 2005 No. of Replies: 1237

Sometimes the counter offers are accepted by the tenderer and if they are not accepted by them, the tender stands discharged and their EMD have to be released.

In this case there is no flaw in the tender documents or rates. The problem is that sometimes the contractor quotes unreasonably high rates in some items and unreasonably low rates in the other and offer is justified on overall basis and some restrictions in the quantity is imposed by the TC so that the contractor does not get favour by executing more works in the items which are favourable to him and the chances of vitiation are also reduced.

However some TC members have no problems in accepting the low & unworkable rates in some items quoted by the tenderer but they propose to give counter offer in the items where rates are higher and making the offer unworkable as a whole.

Further when TC mentions that the higher rates accepted should not be taken for comparison in future, but sometimes they fail to point out that the lower and unworkable rates should also not be taken for comparison in future as a result unworkable rates also creep into the LARs. I have seen that in working out average LAR, the range of rates accepted is too large. For example the lowest rates considered will be Rs.100/Sqm and highest rate will be Rs.800/Sqm and the average has no meaning if the rates adopted are not in a smaller range and close to the workable rate.

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the offer need to be considered as a whole

It is not correct to send counter offer on the basis of unworkablle rate quoted by somebody else .Before sending counter offers TC should satisfy itself EITHER BY RATE ANALYSIS OR OTHERWISE that rates offered are workable.That is why experienced officers are nominated in TC

If TC is blindly making counter offer without any analysis ,It will result in refusal of such counter offers & Eventually will lead to retender which will neither be cost effective nor time effective

Shared Documents Joined: May 02, 2005 No. of Replies: 1237

Even if counter offer is given with a workable rate then what about the rates in other items where contractor has quoted unworkable rates which can make the offer as a whole unworkable. Contractor had quoted a lesser rate in one item on the anticipation that he will get more in the other and if we curtail the rate of one item where rates are more and when we are not enhancing the rates in the other items (we have no authority to do so) where he has quoted unworkable rates, the offer as a whole can become unworkable.

Sometimes contractors who understand the scope of work better, knows the anticipated quantity and items of work. Suppose he anticipates considerable saving in one item, he quotes a very low rate in that item and when he anticipates that the quantity in the schedule is too less and actual quantity will be much more , he quotes a higher rate. THe contractor can have his own estimation of quantities based on the approved or available plans and that he uses for manipulation to his advantage.

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counter offer is to be given to the lowest acceptable tenderer. if part of his rates are unworkable & if TC feels that works can not be executed at those rates ,question of counter offer does not arise

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CVC's office order no. 68/10/05 dated 25.10.2005 on the subject "Tendering process - Negotiation with L-1" may kindly be referred to before giving counter offer. It instruct that counter offers tantamount to negotiations and should be treated at par with negotiation. It also mention that, there should not be any negotiations. Negotiations if at all shall be an exception and only in the case of properietary items or in the case of items with limited source of supply.

Shared Documents Joined: May 02, 2005 No. of Replies: 1237

These instructions of CVC are well known to every one who are dealing with tenders. What we are taking about is the case of exceptional cases where instead of negotiations counter offer is resorted to that too at the lowest rate among all the tenderers for those items where rates are seen exceptionally higher without examining workability of the offer as a whole as some unreasonably low rates have also been quoted in some items.