New Contract-Awarding Schemes

1. Introduction
2. An Outline of the Procedures
3. Standard Contract-Awarding Procedures
4. New Contract-Awarding Schemes

TEPCO has introduced four new contract-awarding schemes

1. Introduction of New Contract-Awarding Schemes

• TEPCO has adopted new contract-awarding schemes in order to make the contract-awarding process more easily understandable, as well as to encourage project cost reductions.
• New contract-awarding schemes are based primarily on the value engineering, or VE concept (see note), The four types of contract-awarding formulas are: the technical proposal invitation formula, the upon-pre-announcement VE formula, the at-estimating VE formula, and the post-contract VE formula.

Note: What is value engineering, or VE? VE refers to a strategy of applying alternative means to lower project costs without sacrificing function or quality. In the case of construction works, a construction company may take this approach to lower cost by modifying designs or specifications without sacrificing the quality or function of the project involved.

2. Technical Proposal Invitation Formula

(1) Model Flow

• (To be continued to Request for Estimates in the flow as described on page 1).

(2) Explanation of Flow

The technical proposal invitation is a scheme under which, before serving an advance notice, TEPCO will invite technical proposals from a wide variety of prospective contractors, and, upon completion of a comprehensive assessment of the submitted proposals, select those companies upon which it will serve advance notice.

Submitting Applications for Project Participation

Those wishing to participate in a project will be requested to fill out a prescribed application form for project participation and submit it to TEPCO.

Selection of Companies from Whom to Invite Technical Proposals and Request for Submitting Technical Proposals

With due consideration of the technical characteristics and other aspects of each project, TEPCO will select two or more companies from whom it invites technical proposals and then indicate points of special interest. TEPCO then requests these companies to prepare a technical proposal statement (or a document stating a plan of temporary facilities, a construction method, etc.).

Submitting Technical Proposals

Those companies wishing to answer the invitation for technical proposals will be required to submit technical proposal statements by a deadline specified by TEPCO.

Evaluation of Technical Proposals, Decision on Prospective Contractors on Whom to Serve Advance Notice, and Giving Advance Notice

TEPCO will evaluate technical proposals submitted thoroughly in terms of costs, technique, and safety records and give advance notice to one or more companies which are deemed to have submitted the best proposals.

Cooperation toward Realizing Technical Proposals

After pre-announcement, both contractors and TEPCO will work together to realize technical proposals.

Notification of Applicable Project

After applications for project participation have been submitted, TEPCO will notify those applicants of whether to apply this formula when requesting them to submit technical proposals.

3. Upon-pre-Announcement VE Formula

(1) Model Flow

(2) Explanation of Flow

The upon-pre-announcement VE formula is an approach whereby TEPCO will accept VE proposals submitted by those companies to which TEPCO has given an advance notice and granted a reward according to the amount of costs reduced.

Giving Advance Notice

TEPCO will select and give advance notice to prospective contractors from among those registered companies which have submitted applications for participation in a project to which this formula applies.

Submitting the VE Proposal form

those companies to which advance notice has been given will be requested to submit the VE Proposal form.

Screening VE Proposals

TEPCO will screen VE proposals to determine if they meet its quality, functional and performance requirements, and to determine whether or not to adopt the proposals before concluding contracts.

Reward According to Amount of Costs Reduced

TEPCO will grant a reward based on the amount of cast reductions that has been made possible through proposals. The recipient will be notified of the contents of the reward.

Notification of applicable Project

TEPCO will notify those applicants of whether to apply this formula when giving them advance notice.

4. At-Estimating VE Formula

(1) Model Flow

(2) Explanation of Flow

The at-estimating VE formula is a scheme under which, when inviting estimates from two or more qualified contractors, TEPCO will ask them to submit alternative estimates concerning their own design specifications, construction methods, etc., in addition to ordinary estimates.

Request for Estimates or Alternative Estimates

For a project to which this formula applies, TEPCO will inform participants whether or not to ask for alternative estimates when making a request for estimates.

Submitting Written Estimates or Alternative Estimates

When prospective contractors have any alternative proposals on their own design specifications, construction methods, etc., they will be requested to submit alternative estimates, apart from ordinary written estimates.

Evaluation of Alternative Estimates

TEPCO will examine alternative estimates to determine if these meet its quality, functional and performance requirements and whether or not to adopt such alternative estimates.

Determination of Top Priority Candidate

The qualified contractor who has submitted the lowest estimate (or lowest alternative estimate if it is approved) will be designated as a top priority candidate.

Price Negotiations and Concluding the Contract

TEPCO will conclude a contract with the top priority candidate upon completion of price negotiations.

Reward According to Amount of Casts Reduced

TEPCO will grant a reward based on the amount of cost reductions that has been made possible through alternative plans. The recipient will de notified of the contents of the reward.

5. Post-Contract VE Formula

(1) Model Flow

(2) Explanation of Flow

The post-contract VE formula is a scheme under which after concluding contracts with qualified companies, TEPCO will accept VE proposals from these contractors and grant them a reward based on the amount of cost reductions made possible through such proposals.

Request for VE Proposals

For a project to which this formula applies, TEPCO will request contractors to submit VE proposals when concluding contracts with them.

Submitting the VE Proposal Form

Those contractors who have any VE proposals to make will be requested to submit the VE Proposal Form.

Evaluation of VE Proposals

TEPCO will examine VE proposals to determine if they meet its quality, functional and performance requirements and whether or not to adopt such proposals.

Procedures for Contract Modification

Any change in design resulting from the approval of a VE proposal is subject to the procedures for contract modification.

Reward According to Amount of Costs Reduced

TEPCO will grant a reward based on the amount of cost reductions that has been made possible through proposals. The recipient will be notified of the contents of the reward.