procurement management workbook for national institute of
TRANSCRIPT
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Procurement Management Workbook
For
National Institute of Management
Dr. Irfan Ahmad
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Module I: Procurement Planning The foremost objective of every procurement is to attain value for money. Value for money is a blend of quality and cost effectiveness. A comprehensive procurement planning process is developed to accomplish the right balance between quality and cost. The six rights of procurement planning described below are the basic steps to achieve value for money. The word RIGHT implies ‘optimal balance’ here. 1. Right Quality
Quality is logically understood as the non-inferiority or superiority of something. It is also defined as fit for purpose or being suitable for anticipated use while satisfying procuring agency’s expectations. Quality can be conditional, and somewhat subjective aspect and may have different meaning for different people. In public procurement right quality means conformance to applicable standards. The quality must fulfill the expectations and requirements set forth in the standards. To achieve the right quality, standards are required to be defined properly during Procurement planning. 2. Right Quantity
To achieve value for money it is expected that a procuring agency shall procure the right quantity of goods or services. More or less than the required quantity may result in higher costs or unfulfilled needs. This being pertinent, there are more features to quantity that the procuring agency needs to anticipate. It is not just the goods or services that need be of the right quantity. While considering the right quantity the following points may also be taken into account, namely: a) Quantity of procurement throughout the financial year b) Quantity of required Staff for procurement team c) Quantity of Suppliers in the market 3. Right Price
While considering the price the quality should not be compromised, instead, the price should be just right for the quality. Cutting the price must not lead to poor performance or noncompliance. The concept of right price cannot be accomplished without the calculation of whole life cost. Along with the initial price for the requirement (fixed cost), other costs like maintenance and operational costs should also be taken into account.
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4. Right Time
Calculation of the delivery time or completion schedule is one of the main objectives of procurement planning. However, the time of delivery or completion schedule is not the only aspect of time that needs to be considered. Time and money are often interlinked and in public procurement this is no exception. Time spent on planning is never wasted. The procuring agency while planning needs, should consider other areas of time including the response time, bid validity period, defect liability period and maintenance period along with the delivery time or completion schedule. 5. Right Place
‘Last mile’ is the terminology adopted in supply chain and logistic planning to define the transportation of goods and services to the final destination. This last portion of transportation is often most expensive, involving up to 25% of the total cost of moving goods. It is being referred as the "last mile problem." This highlights the importance of the right place in procurement planning. If the services or materials are required to be delivered in some remote area, then additional cost and time are required for logistics. 6. Right Source
The acquisition of goods, works and services from the right source with right financial and technical capability is important for an efficient procurement process. For instance, a wholesale dealer will not be interested in suppling a few reams of printing papers. In the same way, a retailer will not be able to manage the procurement of printing papers on large scale.
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Activity I: Prepare Procurement Plan Please prepare annual procurement plan for your department keeping in view PP Rule 8 which is reproduced as under: “All procuring agencies shall devise a mechanism, for planning in detail for all proposed procurements with the object of realistically determining the requirements of the procuring agency, within its available resources, delivery time or completion date and benefits that are likely to accrue to the procuring agency in future.” The following points should be considered while preparing the plan;
1. The plan should be realistic and achievable. 2. It should be within available resources and estimates. 3. Describe the delivery period or completion schedule. 4. Which procurement method and procedure will be adopted and why? 5. Justification and benefits of procurement.
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Form I: Annual Procurement Plan
Sr. No. Name of Procurement
Justification/ Benefits
Procurement Method
Estimated Cost
Completion Schedule
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Module II: Procurement Methods The decision of selection of a procurement method is often regarded as the key decision in the procurement planning process and is one of the mandatory requirement in the annual procurement plan.
There are many methods which can be adopted and certain circumstances are particularly appropriate to each procurement method for procurement of goods, services and works. The precise selection of procurement method at the beginning of the procurement activity is therefore a significant aspect in the success of the procurement process as incorrect choice of procurement method may have an adverse effect on the bidding process.
1. Types of Procurement Methods
There are a number of different methods and processes and differing terminology in use between individual countries and different provinces. Notwithstanding, there are general features that are evident in the methods adopted or preferred by most countries/provinces. The most common methods of procurement for goods, works and non-consulting services are:
a) Open competitive bidding;
b) Prequalification;
c) Petty purchases;
d) Request for quotation;
e) Direct contracting;
f) Negotiated tendering;
g) Force account
h) Direct Contracting with State Owned Entities
2. Types of Procurement Methods for Consultancy
For consultancy services, the emphasis is put more on the methods of selection of the consultants. The most common selection methods for consultancy services are:
a) Quality based selection;
b) Quality and cost based selection;
c) Least cost selection;
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d) Fixed budget selection;
e) Direct contracting;
f) Single source selection;
g) Design contest;
h) Consultant’s qualifications selection method;
i) Individual consultant’s selection method.
The procurement processes that can be followed for procurement of consultancy services are expression of interest, and/or request for proposals.
3. Elements for Selection of Procurement Methods
The selection of suitable method of procurement depends on a number of factors including:
a) The size, type, complexity, nature, and availability of the goods, services and works;
b) The importance of procurement;
c) Availability in the local market;
d) Accessibility of reliable bidders;
e) Convenience of in-house manpower;
f) Level of urgency
g) Delivery time and completion period;
h) Arrangement with the funding organization; and
i) Transparency and competitiveness of the procedures proposed.
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Activity II: Selection of Procurement Method Please select procurement method for construction of Diamer-Bhasha Dam. Keeping in view the points discussed in Module II, Procurement Methods.
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Form II: Steps involved in procurement of works for Diamer-Bhasha Dam
Sr. No. Steps
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Module III: Specifications Well-written specifications allow potential bidders to easily read and understand the requirements. Well-written specifications encourage bidders to make offers, thereby maximizing competition and increasing the likelihood of receiving a commodity that achieves the objectives of the procurement. The following points should be considered while writing specifications; a) Language • Use language that is consistent, concise, plain, and precise. • Avoid ambiguous language. • Choose simple words over complex ones. • Avoid use of acronyms. • Use proper grammar and punctuation. • Use consistent style and formatting. b) Grouping • Categorize or group similar items for ease of readability. • Organize specification content with a consistent numbering system. c) Widest possible competition • Specifications shall allow the widest possible competition. • Specifications shall not favor single contractor or supplier nor put others at disadvantage. • Specifications shall be generic. • Specifications shall not include references to brand names, model numbers, catalogue numbers or similar classifications. d) Range • Provide allowable variation in measurement or other characteristics of the commodity • Avoid obsolete specifications • Ensure specifications are current and relevant. e) Detailed description • Identify physical, • functional, • performance,
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• environmental, and • quality characteristics of the commodity (e.g., design, size, weight, power capacity, output, grade). f) Optional requirements. • State the optional requirements if needed. g) Identify acceptable standards • Write down details of standards that are to be used in assessing the quality of goods, works or services specified; e.g., International Organization for Standardization (ISO), British Pharmacopoeia (BPUK), United States Pharmacopoeia (USP). h) Tests/Performance criteria • Include acceptance criteria. • Detail how the product will be tested or evaluated for conformance. • Provide reliable test methods. • Include performance metrics for assessing the achievement of performance outcomes.
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Activity III: Preparing Specifications Please prepare specifications of a 500 KV Generator using have the following structure.
1. Title 2. Introduction 3. Scope 4. Functional characteristics 5. Performance characteristics 6. Technical characteristics 7. Other aspects. 8. Standards 9. Storage and operating conditions which may include. Noise, temperatures limits,
pressure, humidity, altitude, shock, atmosphere, radiation, vibration, dust, terrain, electrical interference and chemical etc.
10. Installation requirements for equipment including the physical space available and dimensions etc.
11. The impact on the environment during operation and maintenance of products and services
12. Site preparation 13. Compatibility and interchangeability with existing equipment, systems, etc. – the reason
for and nature of compatibility must be stated to provide the bidders an opportunity to adjust products accordingly
14. Energy requirements 15. Expected users of the product and their ergonomic requirements (e.g. Suitability for use
by disabled persons) 16. Safety aspects for staff 17. Necessities needed for unskilled staff or special people (e.g. The need for signs/labels in
various languages) 18. Maintenance and servicing requirements. 19. Security aspects 20. Drawings 21. Trainings 22. Maintenance services 23. Reports and other documentation 24. (e.g. Operating manuals, handbooks and software etc.). 25. Testing 26. Preservation and packaging 27. Marking and Labelling 28. Whole-of-life support
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Form III: Specifications of 500 KV Generator
Components Description
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Module IV: Invitation to Bid Where the open competitive bidding method is selected, the procuring agency is required to publicize the invitation in the press and on the website of the public procurement authority. Where a prequalification exercise has been conducted, only prequalified bidders are eligible to participate and under no circumstances should bidding documents be issued to bidders who were not prequalified. Moreover, where bidding documents are issued to pre-qualified or short listed bidders, the procuring agency should issue them to all the bidders at the same time. A procuring agency is required to keep a record of all bidders to whom a bidding documents are issued. Where other methods are used, procuring agency should ensure that the conditions for use of such procurement methods are fully met and the selected bidders are eligible and are capable of delivering the items being procured. In setting deadlines for submission of bids, a procuring agency should: a) allow adequate time for bidders to acquire bidding documents, prepare responsive and complete bids, and submit bids on time; and b) observe with the minimum response time as specified in the relevant legal framework. Content of the Invitation to Bid Invitation to bid should contain sufficient information required for the prospective bidders to make a decision in participation of bidding or not. The following may be such useful information: a) Scope of work and description of major components; b) Source of funds in the case of foreign funded contract; c) Name and address of the procuring agency; d) Main eligibility requirements; e) Method of procurement; f) Applicability of any domestic preference; g) How to inspect bidding documents; h) Dates, place/s and manner of collecting bidding documents; i) Amount of bid document fee and method of payment; j) How to obtain further clarification (include name and designation of the officer, postal address, telephone number, fax number and e-mail address; k) Bid security requirements; and l) Deadline and place of submission of bids. The invitation to bid should become a part of the bidding documents.
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Activity IV: Invitation to Bid Please prepare an Invitation to Bid (ITB) for construction of a four hundred bedded hospital.
Please prepare the ITB keeping in view the following points.
1. The components which are required to be included in the ITB. 2. What will be the eligibility criteria? 3. Should the qualification criteria be included in the ITB? 4. What will be the price of bidding documents? 5. What does a deadline means in ITB?
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Form IV: Invitation to Bid
Components Description
1. Introduction
2. Description
3. Eligibility
4. Bidding Documents
5. Deadline
6. Address
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Module V: Pre-qualification To enable prospective bidders to be prequalified, it is obligatory to pursue only such information as is essential for the procuring agency to determine the applicant's capabilities to perform the task satisfactorily. The principal capabilities required for prequalification are experience, human resources, technical resources, financial position, and litigation history. 1. Experience
a) General Experience
The general capabilities of an applicant should be associated with the value of general work carried out by the applicant for a given period of time. For instance, for construction of a five hundred bed hospital, the general experience may be the construction of five-star hotel or a mall of the same volume within a specified time i.e., three years. The value of relevant work carried out should be presented as the annual turnover, in terms of invoices to clients for work carried out during the year, expressed in its equivalent in a convertible currency. The standard for qualification should be set at a level to ensure that the prospective contractor will not be astounded by the size of the new contract. The annual turnover of the applicant should normally be not less than 2.5 times the expected annual cash flow of the planned contract. The multiplies may be reduced for very large contracts or very small, or in special circumstances, but should not be normally less than 1.5 times. The major issue in assessing the certificates and testimonials are that they may be of doubtful value and are not always available. If the applicants are required to submit such documents as a condition of prequalification, these documents should be verified with due diligence. b) Particular Experience
The applicants should be able to determine that they have carried out work of similar value, size, nature, and complexity required for the project in question. There are two basic criteria for prequalification. • Similar Magnitude The applicant should be able to demonstrate that he has carried out work of similar magnitude of the package of work for which prequalification is sought. Depending on the nature of the works to be bided, the criterion should be related to the applicant having carried out one or more projects of a certain value referred to that of the proposed project over a specified period, usually the last five years (or less, in special circumstances). The individual value of these previous
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contracts should represent around 80% of the estimated cost, including the contingencies, of the contract to be concluded. • Similar Quality The applicant should be able to demonstrate that he has performed tasks of a quality similar to those required for the project. For example, where construction of a dam is involved, the applicant should demonstrate experience in such task, having performed them at the quality required according to international standards. Applicants should not be disqualified because they have not had direct experience in the procuring agency’s country or region. In some projects, specific environmental conditions may require applicants to have particular relevant experience. Applicants should not be disqualified solely because they have not completed the exact type of project proposed if their experience is comparable. For example, a contractor who has not done so before may be capable of constructing motorway if the contractor has adequate comparable national highway construction experience. 2. Personnel Capabilities
The technical and managerial competency of a contractor is principally associated with its key personnel on site. Therefor the demonstration of personnel capabilities of a contractor should be limited to those staff trained in critical operational or technical skills. The prequalification criteria should therefore require the credentials of a limited number of these key personnel, i.e., the project manager and those supervisors working under the project manager who will be responsible for execution of major components of the project. Prequalification should require the credentials of a principal applicant and an alternate for each key position. Criteria of satisfactoriness should be based on: a) a minimum number of years of experience in a similar position; and b) a minimum number of comparable projects carried out in a specified number of preceding years. The requirement of specified education and academic qualifications is normally not necessary for these positions, as companies often employ competent staff who have learned their profession "on the job" and who have no formal qualifications. Certain positions may require key staff, in executive site positions who have sufficient knowledge of the applicant's policy, management, practices and procedures, to act with confidence and authority within that framework. The minimum experience of such executives should be normally three years.
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3. Equipment Capacities
When prequalifying for the acquisition of works, an inventory of construction equipment represents a high investment cost for a contractor. Therefore, not all qualified potential bidders will maintain an inventory of high value items that are in good condition for large contracts. In most cases, applicants can easily buy, lease, or rent equipment. It is therefore generally not necessary for the pre-qualification to depend on the fact that the contractor has the availability of the required equipment. The criteria adopted should therefore only be limited to bulky or specialized elements which are essential for the type of project to be implemented and which may be difficult to obtain quickly by the contractor. Even in such cases, prime contractors may not own the equipment; rather, they can rely on specialized subcontractors or equipment rental companies. The availability of the subcontractor and the specified equipment must be checked (at the time of pre-qualification or at the time of the invitation to bid) in such cases. Particular care is necessary when defining the pass/fail criteria for the equipment due to the different skills and technical levels of the contractors being required for construction projects. For example, heavy lifting capacity can be linked to the need to place specified machinery or build components in position, and not simply to specify a crane rated at as many tones at its minimum operating radius. Thus, performance-based criteria may be more relevant. 4. Financial Position
a) General Information
Because of differing international accounting practices and tax laws, published information on the financial position of companies, and financial ratios derived therefrom do not provide an equitable international basis for evaluating the financial standing of companies for prequalification purposes. However, audited financial statements or balance sheets should be sought as a general guide to the applicant's financial health. For example, the financial results for the past five years and the projection for the next two years should be positive. Constant losses or a risk of insolvency appearing in the accounts can be the reason for the rejection of the applicant. Certain companies, in particular those whose shares are traded on the stock exchange, can rightly oppose the provision of confidential financial projections. In such cases, the omission of information should not be a reason for the rejection of an applicant, provided that other financial indicators are satisfactory. The procuring agency should normally require applicants to provide the following basic information to support submission on application forms: • audited annual financial statements for the past three to five years supported by audit statements or tax returns. Businesses owned by individuals and partnerships may not be required
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to maintain audited accounts in accordance with the laws of their country of origin. In such cases, their balance sheets must be certified by a chartered accountant and accompanied by tax returns. • the names and addresses of the applicant's bankers, as well as the names and addresses of people who know their financial position. b) Cash Flow Capability Requirement
The procuring agency must be satisfied that the bidders will, at the time of award, have the financial resources to implement the project satisfactorily. Prequalification followed by updating the information with the bid and pre-award verification of the contract are necessary to determine the financial capabilities of the potential contractor. 5. Litigation History
The procuring agencies should be on their guard against contractors who resort to excessive claims and litigation as a means to increase income after an award of contract. However, in some countries, resorting to claims is an established business practice. Applicants with a consistent and significant history of excessive contractual arbitration and litigation resulting in awards or decisions against them should not be qualified to submit offers. In order for litigation history to be assessed, applicants must be required to list all contracts for a specified number of years (typically the last five years) that resulted in litigation or arbitration proceedings, with an indication of the issues in dispute, the parties involved, the amounts in dispute and the outcome of the dispute. The rejection criterion must be one of the numerous arbitration awards or judicial decisions against the applicant; for example, the occurrence of one or two cases over five years, for a contractor who handles, on average, ten construction jobs simultaneously should not be cause for rejection. Under the best of circumstances, some projects “go sour” for causes such as clash of personalities or incompetent management by the procuring agency. On the other hand, if litigation is found relatively frequently in the business of the applicant, it may indicate an attitude of the management of the firm which could be unacceptably risky for the procuring agency if the applicant were awarded the contract.
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Activity V: Develop Pre-qualification Criteria Please develop prequalification criteria for contractors for the construction of M6 motorway project between Sukkur to Hyderabad Keeping in view PP Rule 15 which is reproduced as under; “ (1) A procuring agency, prior to the floating of tenders, invitation to proposals or offers in procurement proceedings, may engage in pre-qualification of bidders in case of services, civil works, turnkey projects and in case of procurement of expensive and technically complex equipment to ensure that only technically and financially capable firms having adequate managerial capability are invited to submit bids. Such pre-qualification shall solely be based upon the ability of the interested parties to perform that particular work satisfactorily. (2) A procuring agency while engaging in pre-qualification may take into consideration the following factors, namely:- (a) relevant experience and past performance; (b) capabilities with respect to personnel, equipment, and plant; (c) financial position; (d) appropriate managerial capability; and (e) any other factor that a procuring agency may deem relevant, not inconsistent with these rules.
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Form V: Pre-qualification Criteria for M6 Motorway Project
1. Relevant Experience
2. Past Performance
3. Human Resources
4. Technical Resources
5. Financial Resources
6. Managerial Capability
7. Any Other
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Module VI: Submission of Bids
1. Method of Submission
The bidding documents should provide for the manner in which the bids should be submitted. Most legal frameworks provide for the procuring agencies to require bidders to submit bids in a sealed package or packages in such manner that the contents are fully enclosed and cannot be known until duly opened.
The method for bid submission should be as specified in an unambiguous and clear manner in the bidding document taking into account the method of procurement, the complexity of the procurement and the evaluation methodology to be used.
2. Receipt of Bids
Receipt of bids is normally performed by an individual not directly involved in the procurement function. In some organizations it is the same authority that is in charge of opening the bids. For quotations, it is usually the procurement officer in charge who receives them. As specified in the bidding documents, bids should be received:
a) at the correct place, date and time;
b) in writing;
c) via mail, courier service, hand delivery or any other medium as specified in the bidding documents.
The procedure for the formal receipt of bids and safekeeping of bids is essential to the integrity of the bidding process for the following reasons:
a) it ensures that submitted bids are kept unopened until the time for the bid opening, to promote fair competition;
b) it ensures that submission of bids is closed at the precise date and time of the deadline and that no late bids are accepted; and
c) it ensures that a record is kept of all bids submitted on time, to help avoid the opening of any late bids at the opening.
It is the responsibility of the procuring agency to make arrangements for the receipt and secure storage of bids until the designated bid opening time.
The preferred method of storage is through the use of a locked tender box. However, this may not be appropriate for complex assignments where the documents are voluminous.
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In this situation, it is necessary to adopt a formal receipt method of bid receipt and will be necessary to arrange for a secure room to be allocated to retain the bids.
In any event, the decisions regarding methods and arrangements for receiving bids should have been made as part of the preparation of the bidding document and included in the bidding document as an instruction to bidders.
3. Where A Tender Box Is Used
The following points should be noted when using a tender box:
a) where a tender box is to be the method of receiving bids, make a lockable box available during the bidding period, to allow bidders to deposit their bids in the box;
b) the tender box must have an opening that is sufficiently large to allow the deposit of most bids, but not so large that a person could reach inside the tender box and remove a bid;
c) bids, or samples, that are too large for placing in a tender box should be handed to the procurement agency in exchange for a signed receipt showing the time and date of submission and the name of the officer receiving the bid. the receiver would be responsible for storing the bid in a secure room or manner until bid opening and must place a copy of the receipt in the tender box to ensure that the bid is taken into account during bid opening;
d) ensure that staff have been nominated to manage the bid closing and that they know the date, time and location of the closing;
e) the tender box opening must be sealed and closed at the precise date and time of deadline for submission. the sealing or the closing of the tender box should be in such a manner to prevent anyone depositing a late tender;
f) any bids received late to be immediately marked with the time and date of receipt and stamped or marked ‘received late – not to be opened’;
g) it is recommended that the chairman of the bid opening committee should be present at the precise time of closing to verify the time and ensure that no late bids are accepted. equally, it is important that the official closing the tender box, closes it at the correct time - not early and not late; and
h) the sealed tender box, along with any bids or other items that were too large for the tender box, should be taken to the location for the bid opening and should be delivered into the custody of the bid opening committee for the opening. the tender box must not be opened or left unsupervised between the deadline for submission of bids and the bid opening.
4. Where There Is No Tender Box
The following points should be noted when bids are submitted without tender box:
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a) the bidders deliver their bids to the location stated in the bidding documents. an official or officials should be selected to be responsible for receiving and securely holding the sealed bids until the bid opening;
b) the responsible official(s) should issue a receipt to the bidders confirming the date and time of delivery as proof of delivery prior to the deadline for submission;
c) a copy of the receipt should be retained by the procuring agency and the details should be entered onto a record of receipts. the record of receipts should be handed to the chairman of the bid opening committee when the bids are handed over for the bid opening so as to verify all bids have been accounted for. it can also be used as an annex to the evaluation report;
d) the nominated official(s) should manage the closing of bid submission and must be at the location for bid receipt before the time of the closing of bid submission. for practical purposes, all staff involved in the closing should be at the location to assist at least 60 minutes prior to the closing, as many bids would be submitted within the closing hour of the bid submission period and it is not unusual for a queue to develop over the final fifteen minutes prior to the deadline for closing of bid submission; and
e) all bids must be transferred to the bid opening venue in time for opening.
5. Safeguarding of Submissions
It is the responsibility of the bidders to ensure that bids are submitted to the procuring agency in accordance with the instructions provided in the bidding documents.
The bidding documents should clearly indicate the chosen method of delivery and time of receipt. Bids may be received by hand delivery, courier service, mail, facsimile, e-mail, or e-tendering system, as specified in the bidding documents. Bids that are not received in strict accordance with instructions as specified in the bidding documents may be rejected.
Upon receipt of a bid, the procurement officer must record time of receipt and ensure that satisfactory evidence of the time of receipt is secured (e.g., hand delivery receipt signed by both parties, courier tracking information, facsimile/e-tendering log files). All hard copies of bids should be recorded with a date and time stamp.
Immediately upon receipt, bids must be secured in a restricted area, where they should remain sealed until the formal opening time. From the time of receipt until the time of their formal opening, only the designated individuals should have access to the restricted area where the bids are stored.
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Activity VI: Prepare a Checklist for Submission Please prepare a checklist for submission of bids keeping in view PP Rule 22 which states that;
“(1) The bids shall be submitted in a sealed package or packages in such manner that the contents are fully enclosed and cannot be known until duly opened.
(2) A procuring agency shall specify the manner and method of submission and receipt of bids in an unambiguous and clear manner in the bidding documents.”
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Form VI: Checklist for Submission of Bids
Sr. No.
Requirement Compliance Non Compliance
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Module VII: Opening of Bids Bids that have been received on time are opened publicly in the presence of bidders or their representatives who choose to attend. This is an important step in the bidding process as:
a) opening bids publicly helps to demonstrate that the bidding processes is transparent and increase bidders’ confidence in the fairness of the system;
b) reading out technical scores and prices at the financial opening should avoid any disputes regarding changes of price or the evaluation results at a later date; and
c) the formal procedure, which coincides with the bid closing, should prevent late bids from being included in the evaluation.
The bidding documents should state that there will be a public bid opening, including details of the full location of the bid opening along with the date and time of the bid opening.
Preparations for Opening
It is necessary to prepare the room prior to the bid opening time. Staff must ensure that appropriate resources, both physical and human, are available to manage the bid opening efficiently. Physical resources for an efficient bid opening include:
a) a room that is accessible to bidders, arranged so that bidders’ representatives are seated at a short distance from the table where the opening is to be conducted. It is important that bidders witness, rather than participate in, the bid opening procedure;
b) office materials (i.e. scissors, marker pens) for opening and marking of bids; c) a copy of the bidding documents, in case there is a need to refer to the invitation
instructions or other details; d) blank forms for recording bid details; e) blank attendance records and pens, for all bidders and other attendees to sign their
attendance; and f) access to photocopying facilities for distributing copies of the bid opening record will also
be required.
Bid Opening Procedure
All bidders’ representatives wishing to be present must sign a register, detailing their name and the name and address of the company they represent. In some instances, bidders’ representatives may be required to provide a power of attorney confirming their status as the bidder’s representative before they are admitted.
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The committee chairperson should formally open proceedings, introducing the members of the committee and their role in proceedings along with details of how the opening will be conducted. Bidders’ representatives should be reminded that they are not to interrupt proceedings. Step by Step Bid Opening Procedure
a) The committee should check that the bids are marked for the correct bid opening. b) They should check for any withdrawals and confirm that such withdrawal is authentic. c) The committee should also confirm that bid packaging shows no sign of tampering. If
there is damage, then this must be stated and included in the minutes. d) The committee should open each bid one by one. The following details for each bid should
be read out: • name of the bidder, including the names of all parties to a joint venture,
consortium or association; and • confirmation that the bid is or appears to be complete.
e) Any initial observations regarding the responsiveness of the bid should be recorded. This would include: • Was the bid delivered late? • Was the bid sealed? • Was the bid signed correctly? • Were the correct number of copies included? • If required, was a correct bid security included? • If required, were any required samples included with the bid? • If using a two-envelope system, is there a sealed envelope containing the financial proposal (note that the financial envelope must remain unopened). When using a single-envelope process, the currency of the bid and total bid price should be noted. No additional information should normally be read out unless expressly provided for in the bidding document.
f) The committee should then assign a unique reference number to each bid and write it on each copy of the bid document.
g) All copies of the bid are signed by all members of the bid opening committee. h) The chairperson of the bid opening committee may open the meeting to questions from
bidders but this is not compulsory. If this is done, responses given should normally be restricted to information which is included in the bidding document. The committee must take care not to answer questions regarding the acceptance or rejection of proposals, or to discuss the specific details of any proposal or price. A standard response of ‘that will be decided by the evaluation committee’ may be given to such questions.
i) The chairperson should close the bid opening meeting, reminding bidders that they must not seek to influence the evaluation process and that the evaluation report will be published in due course.
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j) Copies of the bid opening record should be distributed to bidders. The original record should be added to the procurement file.
k) All bids should be immediately taken to a place of safekeeping until the evaluation committee is ready to meet and commence its work.
l) Where bid openings for more than one procurement process are conducted at the same time, they must be conducted sequentially, with one opening completed, recorded and bids and proposals removed before the next opening commences.
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Activity VII: Prepare Checklist Prepare a checklist for opening of bids in accordance with PP Rule 28; “(1) The date for opening of bids and the last date for the submission of bids shall be the same. Bids shall be opened at the time specified in the bidding documents. The bids shall be opened at least thirty minutes after the deadline for submission of bids. (2) All bids shall be opened publicly in the presence of the bidders or their representatives who may choose to be present, at the time and place announced prior to the bidding. The procuring agency shall read aloud the unit price as well as the bid amount and shall record the minutes of the bid opening. All bidders in attendance shall sign an attendance sheet. All bids submitted after the time prescribed shall be rejected and returned without being opened.”
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Form VII: Checklist for Opening of Bids
Sr. No. Steps Compliance
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Module VIII: Procedures of Competitive Bidding There are four competitive bidding procedures which may be chosen by the procuring agency depending upon the nature of a specific procurement. These are; 1. Single stage one envelope, 2. Single stage two envelope, 3. Two stage bidding procedure, 4. Two stage two envelope. 1. Single Stage One Envelope
Single stage one envelope bidding procedure is generally the preferred competitive bidding procedure used for the procurement of routine works or goods with standard specifications. In this procedure, the bidders submit in a single envelop, separately, a technical proposal or technical details as per the requirements of legal framework and a financial proposal. The bids are opened in the presence of bidders at a date and time specified in the bidding documents. The bids are then evaluated and the bidder who is eligible and qualified and whose bid has been evaluated as the best evaluated bid is awarded the contract. In some instance the technical bid may not be required, as in case of procurement of routine works where the bidders have already been pre-qualified. In such case the lowest price may be the sole evaluation criteria. 2. Single Stage Two Envelope
Single stage two envelope bidding procedure is used where the bids have to be evaluated first on technical grounds and financial bid is considered only after technical evaluation. In this procedure, the bids are submitted in two separately sealed envelopes, the first envelope includes the technical proposal and the second envelope comprises the financial proposal, both envelopes are properly sealed and enclosed together in a third outer sealed envelope. The technical proposals are opened initially at the date and time specified in the bidding documents. The financial proposals are retained sealed and are saved in custody of the procuring agency. The procuring agency evaluates the technical proposals in accordance with the evaluation criteria describe in the bidding documents. No modifications and alterations are permitted in the technical proposals during evaluation. This procedure allows the procuring agency to evaluate the technical proposals without reference to price. The bids which do not fulfil the eligibility and qualification criteria or the technical proposals which do not conform to the required evaluation criteria and specifications are rejected as non-responsive or technical deficient bids. After technical evaluation, the financial proposals of the bidders whose technical proposals has been declared as substantially responsive, are opened at a date and time intimated by the
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procuring agency. The financial proposals of the technically responsive bids are then evaluated and the bidder whose bid is declared as the most advantageous bid is awarded the contract. 3. Two Stage Bidding Procedure
Two stage bidding procedure is adopted in complex and mega projects where, either technically imbalanced proposals are likely to be submitted by the bidders or else the procuring agency is acquainted with the options in the market but, there are two or more likewise acceptable technical solutions available for a given set of performance requirements. In this procedure, the technical proposals are invited from the bidders against performance specifications or conceptual designs to provide a basic idea or theme of the work to be carried out. Bidders are required to provide the manner and specification in their technical proposal as to how the work with basic idea to be carried out exactly. Bidders submit technical proposals alone, without any financial proposal. The technical proposals are opened at the date and time specified in the bidding documents. The first stage bids with technical proposals are evaluated by the procuring agency and discussions are held with the bidders regarding any unsatisfactory technical features or deficiencies that are pointed out by the bidders whose clarifications and comments are carefully assessed. The eligible and qualified bidders who are willing to participate in the second stage and whose bids have been declared responsive in the first stage are allowed to adjust or revise their technical proposals in the second stage to meet the revised specifications of the procuring agency. The purpose of the procedure is to confirm that all technical proposals to be considered in the second stage are in conformance to the similar acceptable technical standard and meet the revised specifications of the procuring agency. The technical bids of the bidders who are not willing to amend their technical proposals in conformance to the revised specifications of the procuring agency are rejected as non-responsive or deficient bids without forfeiture of their bid security. Once the evaluation of technical proposals of first stage has been completed, the bidders who have been declared responsive and are willing to participate in the second stage are invited to submit revised technical proposals in compliance with the agreed technical specifications and financial proposals. The invitation documents for second stage should also include required changes to the revised technical bid to comply with the final requirements of the procuring agency, together with any amendments to the bidding document. The revised technical proposals and the financial proposals are opened in the presence of successful bidders of the first stage, at a date and time determined by the procuring agency. In determining the date of opening, the procuring agency should allow adequate time for the bidders to prepare their technical proposals and financial proposals in compliance with the final requirements. The revised technical proposals and the financial proposals are assessed and the bidder whose bid has been evaluated as the most advantageous bid is awarded the contract.
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4. Two Stage Two Envelope
Two stage two envelope bidding procedure is used for the procurement of specific types of manufacturing plant, equipment or machinery where many alternate technical proposals are expected to be submitted by the bidders. In this procedure, the bids are submitted in two separate sealed envelopes, one comprising of the technical proposal and the other comprising of the financial proposal, these two envelops are then enclosed and sealed in an outer package as the first stage bid. At the date and time specified in the bidding document the technical proposals are opened initially. The financial proposals remain sealed and are kept in custody of the procuring agency. The technical proposals are evaluated by the procuring agency in accordance with the evaluation criteria defined in the bidding documents. If the procuring agency necessitates any alterations or modifications to the technical proposals such alterations or modifications are discussed with the bidders. The aim of this procedure is to confirm that all eligible and qualified bidders who meet requirements of first stage, are willing to participate and meet the final technical requirements of the procuring agency in the second stage. The bidders who are unwilling or unable to alter their technical proposals in conformance to the final technical requirements of the procuring agency may be rejected after first stage without forfeiture of their bid security. Subsequent to the first stage evaluation of technical proposals, including the required alterations or modifications to the technical proposals if appropriate, the bidders are invited to submit bids for the second stage. The modified bid should consist of supplementary financial proposal and revised technical proposal based on the revised technical requirements as agreed by the bidders and the procuring agency. The supplementary financial proposals should reflect the changes in financial impact as a result of the required changes in the technical proposals. Supplementary financial proposals which contain deviations from the discussed changes during technical evaluation may amount to rejection of the bids. The revised technical proposals, the original financial proposals and the supplementary financial proposals are all opened in the presence of bidders qualified for the second stage, at a time and date specified by the procuring agency. In deciding the date of opening of second stage bid, the procuring agency should allow sufficient time for bidders to prepare the revised bid in accordance with the changes required in their technical proposals and prepare the supplementary financial proposals to accommodate these changes. The financial proposals and the supplementary financial proposals are evaluated and the bidder whose bid has been assessed as the most advantageous bid is awarded the contract. These bidding procedure may be used in conjunction with prequalification or post-qualification methods. Usually, post-qualification method is adopted. Prequalification may become necessary in large or complex projects, or where the high costs of preparation of comprehensive bids may discourage potential bidders. If prequalification method is adopted, the bidders are shortlisted and qualified before the start of the bidding process.
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Activity VIII: Single Stage Two Envelope Mockup Simulation of Single Stage Two Envelope procedure will be performed according to PP Rule 36 (b)
i. “The bid shall comprise a single package containing two separate envelopes. Each envelope shall contain separately the financial proposal and the technical proposal;
ii. the envelopes shall be marked as "FINANCIAL PROPOSAL" and "TECHNICAL PROPOSAL" in bold and legible letters to avoid confusion;
iii. initially, only the envelope marked "TECHNICAL PROPOSAL" shall be opened; iv. the envelope marked as "FINANCIAL PROPOSAL" shall be retained in the custody of the
procuring agency without being opened; v. the procuring agency shall evaluate the technical proposal in a manner prescribed in
advance, without reference to the price and reject any proposal which does not conform to the specified requirements;
vi. during the technical evaluation no amendments in the technical proposal shall be permitted;
vii. the financial proposals of bids shall be opened publicly at a time, date and venue announced and communicated to the bidders in advance;
viii. after the evaluation and approval of the technical proposal the procuring agency, shall at a time within the bid validity period, publicly open the financial proposals of the technically accepted bids only. The financial proposal of bids found technically non-responsive shall be returned un-opened to the respective bidders; and
ix. the bid found to be the most advantageous bid shall be accepted.
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Form VIII: Procedure of Single Stage Two Envelope
Sr. No.
1.
2.
3.
4.
5.
6.
7.
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Module IX: Steps in Evaluation Process
The following are the steps in an Evaluation Process
Sr. No.
Evaluation Steps
1.
Eligibility of Bidders (Conformance to Mandatory Criteria)
2.
Completeness of Bids (Presence of all required Documents)
3.
Substantial Responsiveness of Bids (Conformance to Terms & Conditions)
4.
Qualification of Bidders (Capabilities of Bidders)
5.
Conformance to Specifications (Compulsory Requirements)
6.
Technical Evaluation (Quality, Reliability, After Sale Service etc.)
7.
Financial Evaluation (Mandatory Financial Requirements i.e., Price, Taxes)
8.
Whole Life Cost (Fixed Cost-Plus Operational Cost)
9.
Combined Weight (If Applicable i.e., Quality & Cost Based Method)
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A- Eligibility
A bid will not be entertained if any mandatory eligibility criteria
mentioned in the bidding documents is not fulfilled.
Eligibility Mandatory If Necessary
Legal • National Tax No. • Sales Tax No. • Active Tax Payer
• Provincial Sales Tax • Licenses i.e., Import,
Export
Business & Trade • PEC (In case of Works) • SECP • Registrar of Firms
Authority (PPRA) • Only qualified bidders after prequalification
• Only National Bidders in case of NCB
• Any other when notified
Procuring Agency • Undertaking for Non Blacklisting
• Principal’s Authorization • JV agreement • ISO Certification • Security Clearance • Conflict of Interest
Certificate
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B- Responsiveness of Bids
A bid will be considered non-responsive and will be rejected
in the following cases;
Sr. No. Requirements Compliance Yes
1. Bidder has submitted more than one Bid in same package.
2. Received after the time and date fixed for its receipt.
3. Not accompanied with Bid Security.
4. Unsigned.
5. Validity is less than specified.
6. Submitted for incomplete Scope of Work.
7. Indicates completion date later than specified.
8. Prices quoted are not firm (Single stage one envelope)
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9. Bid Prices do not include the amount of taxes & duties. (Unless exempted)
10. Bidder refuses to accept the arithmetic corrections.
11. Materially and substantially different from the Conditions/Specifications of Bidding Documents.
12. Bid not submitted on the bidding documents provided by procuring Agency
13. More than one country of origin, brand, model offered for the same item
14 Any conditional bid
15. Warranty/Guarantee offered less then specified in the bidding documents or conditional or not in the format required by Procuring agency
16. Violation of any other condition specified in the bidding document
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C- Qualification Qualification of the bidder should be assessed during evaluation, if it has not already
been assessed in Pre-qualification keeping in view the following parameters;
Sr. No Parameter Division
1.
Relevant Experience
• General • Specific
2.
Past Performance
• Completed task • Task in Hand
3.
Human Resource
• Technical Staff • Non-Technical Staff
4.
Financial Resource
• Audited Report for Last Three Years • Bank Statement
5.
Technical Resource
• Workshop Facilities • Equipment / Machinery / Plant
6.
Managerial Capability
• Timely Completion of Past Projects
D-Specifications Conformance to Specifications is essential and is a knock out criteria.
Any material deviation from Specifications is not acceptable.
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E- Technical Evaluation Technical evaluation Shall be conducted according to the evaluation criteria specified
in the bidding documents which may contain the following parameters;
Sr. No Parameter
Remarks
1.
Conformance with Standards
To assess the quality of the products / equipment
2.
Samples / Tests
To assess the reliability of the products / equipment
3.
Inspections
Where required
4.
Warranties
To ensure after sale service
5.
Availability / Price reasonability of spare parts
To ensure after sale service
6.
Workshop facilities
To ensure after sale service
7.
Any other
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F- Whole Life Cost Whole Life Cost should be calculated when the operational cost is significant and
must be evaluated with reference to fixed cost (capital cost).
The following parameters may be considered whichever is applicable;
Sr. No.
Cost
1.
Packing Charges
2.
Transportation Cost i.e., Fright Charges, Loading, Unloading, Handling etc.
3.
Insurance Cost
4.
Commissioning Cost i.e., Installation, Erection, Foundation etc.
Sr. No.
Cost
1.
Capital Cost (Fixed Cost) i.e., Cost of Product
2.
Running Cost (Operational Cost)
3.
Maintenance Cost
4.
Disposal Cost
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Quality and Cost Based Method (Example) Technical Weight 80 + Financial Weight 20 = Total Weight 100
Step 1 – Calculation of Technical Score
Marks obtained by each bidder as per technical evaluation criteria.
Sr. No.
Bidder
Technical Score out of 100
1.
Bidder A
75
2.
Bidder B
83
3.
Bidder C
79
4.
Bidder D
87
Step 2– Calculation of Technical Weight
Technical score of each bidder multiplied by technical weight (80) divided by 100.
Sr. No.
Bidder
Total Weight out of 80
1.
Bidder A
75 x 80 / 100 = 60
2.
Bidder B
83 x 80 / 100 = 66.4
3.
Bidder C
79 x 80 / 100 = 63.2
4.
Bidder D
87 x 80 / 100 = 69.6
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Quality and Cost Based Method (Example) Technical Weight 80 Financial Weight 20 = Total Weight 100
Step 3 – Calculation of Financial Score
Lowest offered cost divided by cost under consideration multiplied by 100.
Sr. No.
Bidder
Financial Score out of 100
1.
Bidder A = 12,000,000/-
12,000,000 / 12,000,000 x 100 = 100
2.
Bidder B = 13,400,000/-
12,000,000 / 13,400,000x 100 = 89.55
3.
Bidder C = 12,700,000/-
12,000,000 / 12,700,000x 100 = 94.48
4.
Bidder D = 13,100,000/-
12,000,000 / 13,100,000x 100 = 91.60
Step 4 – Calculation of Financial Weight = 20
Financial score of each bidder multiplied by financial weight (20) divided by 100.
Sr. No.
Bidder
Financial Weight out of 20
1.
Bidder A
100 x 20 / 100 = 20.00
2.
Bidder B
89.55 x 20 / 100 = 17.91
3.
Bidder C
94.48 x 20 / 100 = 18.89
4.
Bidder D
91.60 x 20 / 100 = 18.38
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Quality and Cost Based Method (Example) Technical Weight 80 Financial Weight 20 = Total Weight 100
Step 5 – Calculation of Combined Weight
The bidder securing the highest combined technical and financial weight will be declared as the highest ranked bidder and will be awarded the contract.
Sr. No.
Bidder
Technical Weight
Financial Weight
Combined Weight
1.
Bidder A
60
20
80
2.
Bidder B
66.4
17.91
84.31
3.
Bidder C
63.2
18.89
82.09
4.
Bidder D
69.6
18.38
87.98 (Highest)
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Activity IX: Procurement Solution for Printing NADRA wants to procure 200 printers for its offices. The monthly requirement is 10,000 copies per printer per month. Three companies have submitted their bid as under.
Sr. No. Company’ Name Price of Printer Price of Toner No. of Copies per Toner
1. A Rs. 40,000/- Rs. 22,000/- 10,000 2. B Rs. 65,000/- Rs. 20,000/- 8,000 3. C Rs. 80,000/- Rs. 14,000/- 9,000
Please calculate per page (per copy) printing cost of each bidder for one year and for five years.
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Form IX: Evaluation Sheet for Printing Solution Sr. No.
Company’ Name Cost per page for one year
Ranking Cost per page for five years
Ranking
1. A
2. B
3. C