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Tendering, evaluation and acceptance

Tendering is a critical activity in a capital works project and is normally the accepted means of obtaining a fair price and best value for undertaking construction works.

Tendering falls under the oversight of a governance group. All members of a governance group such as the project control group (PCG) or a designated selection panel (SP) involved in tendering should be familiar with the requirements of the act, ministerial directions and the code. Reference should be made to the documents to ensure compliance with current requirements.

The ministerial directions pursuant to the Project Development and Construction Management Act (1994) (PDCMA) and The Code of Practice for the Building and Construction Industry (the Code) set out specific requirements covering all aspects of tendering. The Ministerial Directions and code are available from this website

The Ministerial Directions set out the methods to be used for tendering that are acceptable for government departments and public bodies in Victoria and the methods are set in accordance with financial levels. The code sets out specific principles and standards of behaviour that underpin best industry practice. It applies to all parties involved in public construction, including new building, maintenance, rehabilitation, alteration, extension or demolition of any improvements on land by or on behalf of departments or public bodies.

The whole of government procurement principles that apply to the building and construction industry sector is contained in the Financial Management Act (FMA) and associated regulations.

The code applies to all stages of construction including design, documentation, project delivery through construction and contract administration. There are specific sections dealing with tendering activities and behaviour of principals (to the contract), contractors and consultants. The party's covered include but are not limited to:

  • clients (including parties responsible for managing hospitals, aged care, psychiatric and community health service facilities)
  • contractors
  • subcontractors
  • suppliers
  • consultants including employees
  • employees and union members
  • industry associations while undertaking a representative role.

The code stipulates that compliance requirements must be included in invitation documents and must be implemented.

The tender process involves a principal, e.g. health service / agency or department seeking competitive bids for works and / or services that are set out in tender documents typically including contract conditions, specifications and drawings or a documented brief. Offers are made by a variety of bidders (e.g. contractors, consortia and/or consultants) who set out their offer in a submission in accordance with the tendering requirements. The completion of the process occurs when one offer is accepted following the evaluation of all offers.

Notes on the scope of this guideline:

  • Although the principles contained within this planning and development guideline are generally applicable to tendering for both contracting and consultancy services, the guideline is primarily focused on contracting and tendering for construction of buildings.
  • The Department of Health and Human Services has a separate Consultant Engagement Process (CEP) system which it uses for the engagement of consultants.
  • Reference should be made to CEP for the engagement of consultants.

Procurement principles

The following general principles are involved in calling tenders:

High level government procurement principles

  • Value for money: Procurement is to represent a balanced judgement of relevant financial and non financial factors. This principle applies for the estimated life of the facility.
  • Accountability: Authority and responsibility are matched with appropriate levels of accountability
  • Probity: The application of integrity and ethical behaviour in the conduct of procurement processes
  • Scalability : The procurement governance and process arrangements applied are aligned with the complexity and significance of the procurement undertaken
  • Capability: The application of resources, skills and experience are appropriate to the specific procurement process undertaken
  • Risk management: The application of the principle where the risks are assigned to the party best able to manage it following the application to remove or mitigate risks where possible.

Supplementary guidance principles which support or elaborate on the high level government principles

  • Conduct tendering honestly, transparently and fairly to all parties by treating all parties in the same manner to avoid any practice which gives one party an improper advantage over another.
  • Comply with all statutory obligations, including trade practices and consumer affairs legislation.
  • Refrain from seeking or submitting tenders without an intention to proceed.
  • Establish and maintain confidentiality throughout the tender process.
  • Have regard to the cost of bidding and seek to constrain such cost.
  • Be prepared to attest to the probity of the process, including that related to issues concerning collusive practices and conflict of interest, by statutory declaration.
  • Tender documents must specify the principal's requirements clearly to allow tenderers to accurately price the works.

Specific obligations and behaviour of contractors, clients and consultants are listed in the code.

Note that the tender process used in the building and construction industry sector requires that:

  • the best value tender be sought
  • that the tenderers providing the lowest conforming tender be dealt with before passing to the next lowest conforming tender and there is no provision for seeking best-and-final-offers or similar review of tender submission
  • all negotiations only take place with the recommended tenderer following identification of best value
  • the provisions of the FMA do not apply to this process.

The tendering method most commonly used is a two stage process where a short list is selected to submit detailed tenders for the department's capital works projects. Other tender methods complying with Ministerial Direction No 1: Tendering provisions for Public Construction (MD1) are identified in following sections and may be suitable for specific projects. Approval of the department's project manager should be sought on the suitability of the preferred method.

The standard form of construction contract for building is Australian Standard Lump Sum AS 2124-1992 General Condition of Contract (AS 2124) with government approved special conditions.

As set out in the code, state government policy requires any pecuniary interest in a project, by any person involved in tendering, evaluation or award processes, to be declared immediately. For projects >$10m, high risk or high complexity projects, a probity plan is required and engagement of a probity advisor is advisable to provide independent oversight of the tender process. Any queries on this matter should be referred to a probity advisor or auditor.

Prior to tendering a project, tender documents must be complete and signed off by the consultants and endorsed by the PCG or other governance body. Approval must be given by the department prior to going to tender.

Tender documents sign-off 

The consultant team are to sign off the tender documents to confirm that:

  • The scope as reflected in the tender documents is adequate to ensure delivery of the required works and / or services and that they will be fit for purpose.
  • The quantity surveyor is to confirm in writing that the pre-tender estimate (cost plan D) is within the approved construction budget.
  • The tender documents include:
    • eligibility to tender details
    • compliance requirements, such as completion of all tender forms, schedules, statutory declarations
    • confirmation of agreement to enter into unamended contract
    • requirement to include a list of building trades to be engaged and whether by direct labour or sub-contract and the respective costs (i.e. tender trade breakdown)
    • requirement for provision of the estimated time in working days proposed by the tenderer to complete the project
    • conditions of tender - standard government conditions to be used
    • tender close details
    • nomination of a contact person for queries
    • the proposed contract or sub-contract
    • meet all essential services requirements
    • selection criteria, which will be used by the SP to differentiate between tenders and determine the best value for money
  • The tender documents may include a bill of quantities if agreed by the PCG, depending on the size and complexity of the project.
  • The tender documents may include allowances and or provisional sums to be included for mechanical, electrical, lifts and / or other service or equipment.
  • The tender documents include government requirements such as:
    • reference to the code
    • Victorian Government approved contract and special conditions
    • reference to the Victorian Industry Participation Policy (VIPP) and requirements for a VIPP Statement or certified VIPP plan as required
    • Victorian Managed Insurance Agency (VMIA)requirements
    • security of payments act requirements
    • probity and disclosure requirements
    • Australia - USA Free Trade Agreement (AUSFTA) requirements
    • requirements of the National Code of Practice for the Construction Industry for projects jointly funded by state and commonwealth governments where the commonwealth contribution is $10M or more. This requires tenderers to include in their tender submission a declaration of compliance with the national code.
    • the advertisement and tender documents must include the condition that ‘The lowest or any tender will not necessarily be accepted.'
    • each tenderer should be advised that in submitting its tender, the tenderer accepts that the Department of Health and Human Services will publish certain information in respect to the successful tenderer, including the tender value in accordance with the Victorian government's probity and disclosure policy.
  • The tender documents shall identify any matters that are material to the preparation of tender submissions such as stages, items to be separately costed, allowances and or provisional sums and/or other services, e.g. construction of prototypes.