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UNIT III

NEW TRENDS IN PROJECT FORMULATION AND EXECUTION

Turn key offer


Expression of interest
Request for Proposal Document,

Conditions for inviting turn key offer,


Finalisation of the bidder

Current practices in Project execution


Build operate and Transfer (BOT),
Build Operate Lease and Transfer (BOLT) and
Build Operate and Own (BOO) and others
case studies.

TURNKEY PROJECT - intro


A turnkey project refers to a project in which clients pay contractors to design and
construct new facilities and some times to train personnel as well.

Example: industrial companies that specialize in complex production technologies


normally use turnkey projects as an entry strategy.

In projects "turnkey" a contractor agrees to deliver every detail of the project to a


client, some times including the training of operating personnel. Upon completion

of the contract, the client receives the "key" to a project ready for its overall
performance.

DESIGN OF THE ENTIRE PROJECT TO ITS LAST DETAIL

THE SUPPLY OF MATERIALS AND MACHINERY TRANSPORT THEREOF.

THE COMPLETION OF CIVIL, FAADE, INTERIOR WORKS.

INSTALLATION AND ASSEMBLY, AND THE SET-UP AND OPERATION


OF THE PROPOSED WORK.

IN CERTAIN INSTANCES, IT IS ALSO POSSIBLE TO INCLUDE STAFF


TRAINING AND TECHNICAL ASSISTANCE.

TURN KEY OFFER

Turnkey refers to something that is ready for immediate use


Turnkey is often used to describe a home built on the developer's land with the
developer's financing ready for the customer to move in.
"Turnkey" is commonly used in the construction industry, for instance, in which it refers to
the bundling of materials and labour by sub-contractors.

A turn key contract is a business arrangement in which a project is delivered in a


completed state.

Rather than contracting with an owner to develop a project in stages, the developer is
hired to finish the entire project without owner input.

The builder or developer is separate from the final owner or operator, and the project is
turned over only once it is fully operational.

In effect, the developer is finishing the project and turning the key over to the new
owner.

This type of arrangement is commonly used for construction projects


ranging from single buildings to large-scale developments.

Under a traditional lump-sum contract, the owner agrees to pay the


developer to complete a project that is built to the owner's specifications.
The owner is given many opportunities to make decisions throughout the project,
and to make changes as needed.
In a turnkey contract, the owner is generally left out of the building process entirely
as the developer handles all decisions and problems related to construction.
A contract of this kind may also be used in the residential home building industry.
With a turnkey agreement, a builder or developer completes both the construction
and the finishes in the home before turning it over to the homeowner.
The homeowner is often offered a chance to select finishes, including curtains, paint
colors and carpeting.
If a contractor builds a "turnkey home" they frame the structure and finish the
interior. Everything is completed down to the cabinets and carpet.

TURN KEY PROJECT CHARACTERISTICS


The two essential features of the contracts "turnkey

1. The merger of the missions of conception and execution of the work in one

person.
2. The overall obligation assumed by the contractor to the client to deliver a work
fully equipped and in perfect working order.

TURN KEY CONTRACT CHARACTERISTICS

The contractor assumes the design and execution of the work since it involves
holding one single contract made between the client and the contractor.

Gives the contractor the right to make changes in their plans, at their own cost and
risk.

SPECIAL CLAUSES (REQUIREMENTS) FOR TURNKEY OFFERS

Indeterminacy of the object of the contract at the time of awarding the contract,
which is to meet standards throughout the completion of project request for
proposal .
Rights granted to the contractor to modify the project provided that it is informed,
review or approve such changes, and provided that such amendments do not alter
the technical guarantees and good work.
The contractor shall be responsible for any possible gaps and omissions that may
vitiate the project and the client's rights.

EXPRESSION OF INTEREST (EOI)

Expression of Interest is the process of seeking an indication of interest from potential


service providers who are capable of undertaking specific work.
An expression of interest (EOI) is an informal offer made by a strategic or financial buyer
for the purchase of a business.
The primary purpose is to suggest a valuation range that a buyer is willing to pay for
a company.
The difference between an EOI and a letter of intent (LOI), is how formal and binding
the two letters are.
An EOI is delivered in a less detailed letter after the buyer reviews the Confidential
Information Memorandum (CIM), but prior to initial due diligence and management
meetings.
While an LOI is not binding, it is more formal and is issued once some due diligence
has been completed, and the buyer has fully vetted the valuation and terms of the
deal being offered.
An EOI can also be referred to as an indication of interest or IOI.

REQUEST FOR PROPOSAL DOCUMENT (RFP)


A type of bidding solicitation in which a company or organization announces that funding is
available for a particular project or program, and companies can place bids for the project's
completion.
The Request For Proposal (RFP) outlines the bidding process and contract terms, and provides
guidance on how the bid should be formatted and presented.
A RFP is typically open to a wide range of bidders, creating open competition between
companies looking for work.

A Request For Proposal for a specific program may require the company to review the bids not
only examine their feasibility , but also the health of the bidding company and the ability of the
bidder to actually do what is proposed.
The RFP may provide detailed information on the project or program, but can leave leeway for
the bidder to fill in the blanks with how the project would be completed or program run.
A request for proposal (RFP) is a document issued by a business or an organization to request
vendor bids for products, solutions and services.
The RFP provides a procurement framework to streamline the initial stages of contractor
solicitation. RFP also may refer to a request for pricing.

What is the difference between an Expression of Interest and a Request for Proposal?
An Expression of Interest (EOI) is a multi-staged process.
An EOI is used to shortlist potential suppliers before then seeking detailed bids from
the shortlisted tenderers.
An EOI is generally used when the information required from tenderers is specific but
the agency is unsure of the capability of suppliers to provide the required goods and
services.
A Request for Proposal, on the other hand, can be a single or a multi-staged process
and is usually used when the project or requirement has been defined, but where an
innovative or flexible solution is sought.

FINALISATION OF THE BIDDER


Bid Evaluation
Evaluation of bids are often painstaking as offers are diverse with
different realisation approach,
different price-tags, and

terms & conditions,


different delivery schedules etc.
An objective evaluation of bids may require attention at the following levels:
selection of bidders
quality of specifications material
pre-bid discussions
preparation of bid-evaluation plan

Pre-bid discussions are important and are carried out after release of NIT(Notice inviting tender)/RFQ
(request for quotation) and before submission of bids,
Pre-bid discussions with prospective bidders can be arranged in different groups to explain bidding
procedure and to clarify any possible ambiguities in the specification faced by the bidder(s).

Bid evaluation plan must form the part of bid document.

It should include all important functions/ equipment efficiency/ performance particulars data
specified in specification so as to analyse cost/performance index of each function. Evaluation plan
requires identification of items and their score-points.

The items can be segregated and grouped together as follows :


Technical
Management
Financial including timely delivery
Manufacturing
Quality Control
The Bidding process shall be a twostage process.

Prior to the detailed evaluation of the Technical Bids, The Department shall determine whether each bid
a. Is complete
b. Is accompanied by the required information and documents and
c. Is substantially responsive to the requirements set forth in the tender document.

A substantially responsive Bid is one, which conforms to the requirements, terms,


conditions and specifications of the Tender without any deviation.

The Departments evaluation in this regard shall be final and binding on all Bidders.

The qualified short listed bidders would be required to make presentations to a

technical committee.

The technical presentation will broadly cover the criteria for evaluation:

Technical presentations scoring not less than 70 % of the total points will only be able to

submit the financial bids.

If deemed necessary, the Department in its sole discretion to make required variations in
the cut off points for technical evaluation including criteria for technical evaluation.

Based on the results of the Technical evaluation, the Department shall then proceed to
call and evaluate the Financial Bid of those bidders who qualify in the Technical
evaluation.

The score of technical and financial evaluation have weightage in proportion of


60:40 to select successful bidder.

Turnkey contracts offer many ADVANTAGES over traditional building contracts.


Because the developer still owns the building until the project is complete, he has financial motivation
to complete the job as quickly and efficiently as possible.

A turnkey contract also provides more time for an owner to seek financing and investors before he is
required to pay for a completed project.
These agreements also save inexperienced owners from making difficult construction decisions, leaving
these decisions in the hands of the developer or builder.

Before choosing a turnkey contract for your project, it's important to understand the potential DRAWBACKS
of this type of agreement.

The primary drawback is the lack of control the owner maintains over design and construction
decisions.

For some owners, this may mean the project is not perfectly suited to their needs once it is complete.

For others, this drawback may be canceled out by the potential for cost savings and shorter construction
schedules.
Some owners may choose a turnkey-plus contract, which leaves the developer with some financial longterm interest in the project.

TYPES OF TURN KEY OFFERS


BOT BUILD OPERATE & TRANSFER
BOOT BUILD OPERATE OWN & TRANSFER
BOLT BUILD OPERATE LEASE & TRANSFER
BOTT BUILD OPERATE TRAIN & TRANSFER
BOO BUILD OPERATE & OWN

Current practices in Project execution


Build operate and Transfer (BOT),
Build Operate Lease and Transfer (BOLT) and
Build Operate and Own (BOO) and others

Alternative project delivery schemes, illustrating the risks for the concessionaire

BOT BUILD OPERATE & TRANSFER


1. Private partner to design, finance, Build & operate for the contract period

2. The other partner (the public sector) will either pay rent during this period or allow the
private partner to earn revenue through the facility
3. Highway projects are mostly executed through this model

LOT LEASE OPERATE & TRANSFER


Mostly used for operating in existing facility for a contract period at the end of
which the asset will be transferred back to the owner

BOOT BUILD OPERATE OWN & TRANSFER


1. Similar to BOT excepting the ownership of the facility will be with the private sector
during the contract period.
2. On expiry of the contract period the ownership is transferred at residual/ book value

PPP - PUBLIC PRIVATE PARTCICPATION

PPP - PUBLIC PRIVATE PARTCICPATION

BRIEF IDEA OF THE POSSIBLE USAGE OF VARIOUS MODELS


1. BOT and BOOT models cannot be used efficiently for social infrastructure as all the commercial risks
pertain to private sector.
2.

BOO can also be incorporated in social infrastructure but 2/3rd investment is to be barred by
government. But governments of developing nations are incapable of investing such high amounts.

3.

BOLT is best suitable for such projects as risks are shared by both the parties (private and public) and
also government does not have to finance the project.

4. In BOT, BOOT, BOO; operation and maintenance is of private sector whereas in BOLT it is of government.

Hence, for social infrastructure such as public hospitals, schools, etc.; government is required to operate
and maintain in order to serve the people economically.
5.

In BOO model, the asset ownership is with government during and after concession period, hence there
can be financial risk to the private party.

6.

BOT, BOOT, BOO cannot be effectively used as there is no or less revenue generation, which will not give
sufficient rate of return to the private bodies.

7.

In BOT Annuity model, the maintenance of the project has to be done by the private body during the

concession period so it cannot be beneficial in such projects.


8.

PPP models are generally concentrated in transportation sector but BOLT excels in both
transportation and social infrastructure.

CONDITIONS FOR INVITING TURN KEY OFFER


The following minimum requirements (CONDITIONS) are being specified BEFORE INVITING for potential

bidders to prepare their bids


Generic primary requirements
The company must have expertise and knowledge in construction to be able to provide
construction services, internally and externally.

The company must be able to provide furniture design and supply services.

The company must have project management expertise and develop a project management framework.
The company must ensure that macro and micro office relocation and execution of the

interior design project plans


The company must ensure that the relocation and execution of the interior design project plans and
progress reports are provided regularly to the client.
The company must offer physical move services to relocate all the relevant SANAS goods and furniture.
The company must offer all turnkey services related to this project.
Onsite activities
The company must monitor onsite activities and report to the client on agreed time lines and provide

written reports.
The company must ensure that no construction work takes place post the relocation process.

Interior design and dcor

The company must ensure that all the relevant and critical aspects of office interior design and decor is done
according to the space planning, design and decor specifications

Procurement

The company must place all orders and coordinate deliveries with various contractors and suppliers during the
project.

Physical move

The company must provide door to door office relocation services

The company must ensure that all goods are labelled , for easy reference, and placed in the appropriate
workstations as well as ensuring that all administrative issues are performed prior to and on the day(s) of the
relocation.

The company must ensure that all electrical appliances and gadgets are installed and that, all equipment are
functional prior to the physical relocation taking place.

The company must assist to maximize and ensure public visibility through the second accommodation and
adequate branding.

Budget

The company must provide a preliminary budget for the entire project which includes finishes (items, price,
finishes) Services (items, price, finishes), Workstations and training furniture (items, price, finishes), Special
areas furniture (items, price, finishes), Other (items, price, finishes).

A turnkey project could involve the following elements depending on its complexity:
Project administration
Licensing-in of process
Design and engineering services
Subcontracting
Management control
Procurement and expediting of equipment;
Materials control
Inspection of equipment prior to delivery
Shipment, transportation
Control of schedule and quality
Pre-commissioning and completion

Performance-guarantee testing
Inventorying spare-parts
Training of owner's/plant sub-system operating and maintenance personnel

Advanced loop schemes (primary used in the electric utility industry

The turnkey-contractor furnishes a wide variety of warranties and guarantees and accepts

several liabilities.
These include :
1. Warranties for the timeliness of deliveries of equipment, of erection and of

completion times of civil and mechanical works;


2. Warranties for workmanship in construction and erection of the works, according to
specifications, and warranties guarantees that proper standards will be used
3. Liability for property or equipment under the control of the engineering company
who contracts out the agreement to the turnkey-company
4. Proper safety standards being implemented
5. Civil and mechanical engineering warranties; in the latter case the turnkeycontractor undertakes to assure that mechanical performance will be maintained for
a definite period
6. Training warranties of operating personnel in charge of specific operations, and
7. The very important process warranties and guarantees.