staff college sept 2011
TRANSCRIPT
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Public Procurement
Satya Narayan Shah. c . n e c a nca ngnee r ng (n a )
MS in M anufacturing Engineering & Management (UK)
1
Procurementcycle,methods,
andtypesofprocurementof
goodsandworks
What is Public Procurement?
It is the acquisition of goods, public worksand consultancy services by procuringen es governmen m n s r es anagencies, local bodies, municipalities, stateenterprises and private utilities holdingmonopoly as well as any other entity towhom public funds have been allocated foruse in public procurement
Why is it important?
Very large portion of national budget formaintenance and investment is spent for
,through the procurement.
Public Procurement covers 15 to 30 % of the Gross Domestic Product
15 to 70 % of the budget
Includes very large contracts for infrastructure,
energy, communication, defense , education
What do the Stakeholders expect?
Tax Payers and general public look for:
Value for money i.e. economy
Trans arenc of rocessand decisions
Non-discrimination in treatment of vendors
Accountability of public officials
Quality of works/goods/services
Responsiveness, efficiency
Integrity in use of public money
Support to public policies e.g. protection of environment,social equality, minimum wages, balanced development, etc
What do the Stakeholders expect?
Domestic private sector looks for:
development of local industr --manufacturing, construction and services (professional and non-professional)
reasonable protection against foreigncompetition
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Growing importance is due to
International development institutions such as theWorld Bank, ADB etc.
Trade Agreements such as: EC (European Commission) common market
WTO GPA (Government Procurement Agreement)
NAFTA (North American Free Trade Agreement)
APEC (Asia Pacific Economic Cooperation)
All the above, require a set of transparent, non-discriminatory public procurement regime open to allmembers
Important component of Governance
Public procurement is one important activity ofgovernance with high potential for corruption
Public look for integrity and honesty
The IMAGE of any government, particularly inthe developing world, is largely influenced bythe quality and integrity of public procurement
Procurement Procedure Formation procuring Unit -PPA -7(3)
Formation Evaluation Committee-PPA -71
Preparation of procurement Plan/strategy PPA -6
Preparation of Estimate (> Rs. 25000.00)-PPA (5)
Preparation of Bid document
Opening of Bids
Evaluation of bids
Award of the contract
Completion/Termination of the contract
9Er. Satya Narayan Shah
Procurement Cyclerocurement CycleProcurement is conceived as aProcurement is conceived as aseries of stages and thoseseries of stages and thosestages in logical sequence isstages in logical sequence isknown as the procurementknown as the procurement
1010
cyc ecyc e
The sequences of activitiesThe sequences of activities(cycle) can be presented in a(cycle) can be presented in anumber of waysnumber of ways
GeneralProcurementProcess
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PROCUREMENT STEPS
GOODS WORKS SERVICES
Prepare Procurement
Plan with goods list and
cost estimates
Prepare procurement
Plan with design and
cost estimate
Develop TA
program for
consultant services
Prepare final equipment
list and cost estimates
Prepare final design
and cost estimate
Finalize consultant
program and
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budget
Prepare bidding
documents
Request
prequalification
information & Pre
qualify
Develop short list
TOR and RFP got
approved
Advertise (Specific
Procurement Notice)
Prepare bidding
documents
Send out request
for proposals.
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GOODS WORKS SERVICES
Issue bidding documents Select qualified firms and
issue SBDs
Select best proposal
Receive and evaluate bids
and select the Lowest
Evaluated Bidder
Evaluate bids and select
lowest evaluated bidder
Negotiate with the
selected consultant firm
Award contract Award contract Issue contract
Delivery at port or at site
s ecified inbiddin
Give access to site Give access to site
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document
Install and Commission Begin construction and
complete the work
Begin assignment and
complete the
assignment
Training at site in O&M Conduct Project
evaluation of work after
completion
Assessment after
completion
Conduct project evaluation
of goods and acceptance
Acceptance
Procurement Methods and Practices Types of Procurement Method {PPA;
Procurement Method to be Selected: 8-
(a)}
International Competitive Bidding (ICB)
National Competitive Bidding (NCB)
Sealed Quotation
Direct Purchase/Negotiation
Through Consumers Society/Stakeholders participation
Force account
14Er. Satya Narayan Shah
InternationalCompetitiveBidding(ICB)
InternationalLevelBidding:PPA 15
Sizeandscopeofcontractusuallycostinglargeamountforwhichdomesticcontractors,manufacturersandsuppliersdont ossessesade uateca abilit andresources
Thegoodsarenotproducedlocally
Thegoodsareofcomplicatednature
The
job
is
highly
technicalNoticeperiod(45daysminimum) PPA14(4)(1)
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National Competitive Bidding
(NCB)
Mediumsizecontract
Localproduction,reasonablecost,promptdelivery
Availabilityoflocalresources
Noticeperiod(30daysminimum) PPA14(4)(1)
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SealedQuotationProvisionsConcerningSealedQuotation: PPR 84
SmallcontractsAmountupto10Lakh (forgoodsor
services)andupto20Lakh (forworks
Procedure
of
NCB to
followNoticeperiodissmall(15days)Usedforurgentlyrequiredgoods/smalljobsMinimum3Quotationsrequiredonthe
firstnotification,nominimumnumberrequiredforrenotice.
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DirectPurchaseProvisionConcerningDirectProcurement: PPR,85. IT IS JUSTIFIED WHEN:
WORK INVOLVED CANNOTBE DEFINED IN ADVANCE
W OR KS A RE SMA LL A ND SCA TTERED OR IN R EM OTE P LA CESFOR WHICH QUALIFIED CONTRACTORS ARE NOT INTERESTEDOR LIKELY TOASK UNREASONABLEPRICE
CRISISSITUATION NEEDING PROMPT ATTENTION
rec urc ase rom oca s ops
Upto3Lakh(Goods/Services)
Upto5Lakh(works)
Upto15LakhsfromDomesticManufacturer.
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ContracttypesPPR Schedule3,(RelatingtoSubrule(1)ofRule21)
Contractforsupplyofspecificgoods.
FrameworkContract
(unit
rate
contract
).
Multiyearcontract.
Contractfordesign,supplyanderect.
Turnkeycontracts.
(design,procurementofallinputs,erectionatsite,commissioning,testingandevenoperationforaninitialperiod)
19Er. Satya Narayan Shah
OtherMethodsofProcurement
TwoStageBidding:Wherethepreparationofcompletetechnicalspecificationsinadvanceisundesirableorimpractical.
First
stage unpriced technicalproposalonthebasisofaconceptual
designorperformancespecificationsareinvited
subjecttotechnicalaswellascommercialclarifications andadjustmentstobefollowedbyamendedbiddingdocuments
SecondStage
submissionoffinaltechnicalproposalandpricedbids
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OtherMethodsofProcurement (contd..)
Limitedbidding.Whengoods/worksareavailableonlyfromlimitednumbersofbidders
Directinvitationwithoutopenadvertisement Solicitbidsfromaminimumof6 (minimum3)bidders
fromthelistofbidderstoassuredcompetitiveprice
Canbeusedstandinglist
Shopping.Shoppingisaprocurementmethodbasedoncomparingpricequotations obtainedfromseveralsuppliers/contractors:minimum3toensurepricecompetition.Appropriateforreadilyavailablegoodsorstandard
specification
commodities
of
small
value
or
simple
civil
worksofsmallvalue.
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OtherMethodsofProcurement.(contd..) BOO(BuildOwnOperate):InaBOOproject
ownershipoftheprojectremainsusuallywiththeProjectCompany
BOT(buildoperatetransfer),BOOT(Buildownoperatetransfer):aformofprojectfinancing,
whereinaprivateentityreceivesaconcession fromt epr vateorpu csector to nance, es gn,construct,andoperateafacilitystatedintheconcessioncontract.
Performanceoroutputbasedprocurement:
paymentonthebasisofoutputnotinputsconsideringquality,time,etc
involves:provisionofservices,design..facilities,22
DOCUMENTS
Procurement Planning
Procurement PlanA Public Entity shall have toprepare a Master Procurement Planin procuring for a planning or
ro ect to be o erated for a eriodof more than one year or in makinga procurement of an amountexceeding one hundred million
Rupees annually. -PPR (clause 7)
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Procurement Plan Establishment of the need for Sustainable
Procurement.
Fix the procurement policy/strategy basedon the best purchasing option consideringre uirements, risk, cost and othermanagement issues.
The Australian Procurement and Construction Councils (APCC)
defines sustainable procurement as a process wherebyorganizations meet their needs for goods, services, works and utilities
in a way that achieves value for money on a whole of life basis in termsof generating benefits not only for the organisation, but also to society
and the economy, whilst minimizing damage to the environment.
Procurement Planning: Need and
Importance Timely completion of the project
Cost saving
Identification of critical and non-criticalactivities
26
,
Evaluation
Resource management: organize people andresource Resource scheduling
Theft, damage, loss, out dated, etc
Assignments and responsibilities
Other issues
Procurement Plan(need analysis)
The following questions should be answered Do we really need to purchase, or can the need be met in
another way?
Can the quantity or scale of the goods, works or service bereduced whilst achieving the same service delivery?
Can alternative goods or service be used to meet this need?
Can the works, goods, service be specified to have improvedsustainability outcomes, including being able to serve auseful purpose after its initial use?
What information is available regarding sustainably-preferableoptions for this purchasing requirement? Where can moreinformation be obtained about suitable alternatives?
Specification
The act of specifying, a detailed,
,
especially a statement prescribing
materials, dimensions, and quality
of work for something to be built,
installed, or manufactured.
SpecificationSpecifications are a part of contract documents
It is the document where the level of intendedquality is specified.
It is clear and concise description of materialsan wor mans p.
If required the specifications are attached withproper drawings and other related documents
They should be non-discriminatory.
29Er. Satya Narayan Shah
SpecificationPurposes
Specifications help to avoid lengthy description inthe Bill of Quantities.
They guide Bidders about the clients intendedquality requirements and to arrive them at fair price.
the risks and responsibilities.
Formation of contractual obligations as to whatexactly the clients want.
Help the supervisors and commissioning and testingteam.
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SpecificationPurposes
It guides to achieve the required total quality andperformance of the end product,
It helps the Contractor/Supplier to understand what isthe requirement of the Employer,
t e ps t e ontractor/ upp er to wor out t e ratesand prices for bidding the contract,
It helps the Engineer/ Employer to monitor and controlthe quality of end product,
It provides basis for dialogue between the Contractorand the Engineer to agree or disagree for quality ofmaterials and works.
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SpecificationPurposes
It is basis for the Engineer to approve or rejectmaterials or works
Clear specifications will result in less Claims,Disputes and Litigation problems
Thats why, the specificationsare to be written by anexperienced professional.
32Er. Satya Narayan Shah
SpecificationTypes
There are three main types of specifications:
functional specifications which outline outcomes tobe achieved;
- the performance but not the methods used toachieve them; and
technical specifications which detail physicalcharacteristics, such as size, capacity and type ofmaterials required.
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Preparation of SpecificationBefore writing the specification the requirements
should be clearly worked out.
Requirements are often classified as;
'Mandatory' - essential requirements that suppliersmust meet
'Desirable' - requirements that whilst bringingbenefits are not essential
'Information' - requirements that requestinformation from the supplier typically for evaluation
purposesEr. Satya Narayan Shah 34
SpecificationsUse of standard specifications reduces thechances of ambiguity and also makes easier for
preparation of contract documents.
-
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-published by the organization. They aregenerally prepared on the basis of reference,
e.g. ISI, BSI, NS etc.
Standard Specification needs to be approved bythe Cabinet level.
Er. Satya Narayan Shah
Preparation of Specification Language: Simple and clear, same tense
Brief: as brief as possible. Standard articles codebooks specified by references, no need ofexplanation.
Fairness: fair to all parties, proper sharing of risk. Clear Requirement: Express requirement clearly
No repetition: Repetition of information should beavoided.
Unnecessary text: Inapplicable text should not beincluded.
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Preparation of Specification (contd) Inclusions: Inclusion of proper paragraphs for
specification of materials, Major Components,Installations, Tests and Commissioning, After sales
service, Guarantee/Warranty. Standard Size: Commercial sizes should be
.
Brand/Model: Any particular brand or model shouldnot be specified as far as possible. If it is quoted,options and choice should be given.
37Er. Satya Narayan Shah
Specifications and Drawings Specifications and Drawings are the 2 integral
parts of contract, which shows the requirements(needs and expectations) of the Employer.
Specifications are referred more in cases ofconflict and dis utes whereas the drawin s aredealt in day-to-day work execution.
Notes mentioned in the drawings are also treatedas specifications and are effective.
38Er. Satya Narayan Shah
Specifications and Drawings
Thats why the Notes written in the drawings arealso to be clear, specific, complete, and carefullyworded as in the Specification.
To minimize the discrepancy it is important to take.
It is advised to include clauses stating in case ofdiscrepancy in Drawings and Specifications, theEngineer will decide .
Such authority to the Engineer may avoid disputesand litigations arising from some small mistakes.
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Preparation of Specification
Example VehicleType Sedan, Hatchback,
General - Seating capacity,Engine Power, C.C etc. Spec,
Transmission 4 speed, 5 speed
Steering Manual, power
Options AC, Non AC,
Warranty - Period to be covered
Tech
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Spec,
Perfor
mance
Conclusion
Specification to be requiredto describe the desired
performance, and not to
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reduce competition.
Er. Satya Narayan Shah
BID DOCUMENTS
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Contract and Bid documents
Contract is an offer & an acceptance
Contract is an agreement between 2or more parties to o or not to osomething that is enforceable bylaw .(Contract Act, 1999)
43Er. Satya Narayan Shah
Contract and Bid documentsBid Documents provide a Bidder to make anresponsiv e cost effective offer to theEmployer considering;
Scope and Quality of works,
Conditions (liability and risks of Employer andBidder),
Time for completion,
Payment modes etc.
44
Proper Bid Documents helps an Employer toassess al l the Bidders Bid in equal footingand provides a basis for acceptance ofRespons ive, Qualified and Cost effective bid.
Er. Satya Narayan Shah
Lay down Rules of the Competition
How to prepare and submit bids What w ill be the selection criteria What w ill be the qualification criteria How to pr ice
Purpose of Bidding documentsin Public Procurement
Specify Scope of Works & Obligations
Technical Specifications Bill of Quantities Delivery/Completion Time Warranty/ Service Obligations
Specify Clearly the Conditions of Contract
General, Time, Cost, and Quality Control45Er. Satya Narayan Shah
Content of Bid Document:
Invitation for Bids (IFB)
Section I. Instructions to Bidders (ITB)
Section II. Bid Data Sheet (BDS)
Section III. Evaluation and Qualification Criteria
ec on . ng orms
Section V. Schedule of Requirements
Section VI. General Conditions of Contract (GCC)
Section VII. Special Conditions of Contract (SCC)
Section VIII. Contract Forms
46Er. Satya Narayan Shah
PREPARATION OF BIDDOCUMENTS TO BE DONE IN
CLOSE CONSULTATION WITH THE
IMPORTANT NOTES
.
USE OF APPROPRIATE STANDARDBIDDING DOCUMENTS ISSUED BYPPMO.
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Bid Security andPerformance Security
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Bid SecurityMain objective is to seek Reasonable
Protection for the Employer,
Failure of successful Bidder to sign theContract would result delay, which isUnacceptable for the Employer,
BIDDERS IN STITUTION OUTSIDEEMPLOYERS COUNTRY, IT SHOULD HAVE ACORRESPONDING FINANCI AL INSTITUTIONLOCATED IN EM PLOYERS COUNTRY TO MAKEIT ENFORCEABLE
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Bid Securities
Recommended Amount for Bid
Security is 2 to 3 % of the
.
Recommended to use Fixed
Amount such as NRs. 100,000
irrespective of Bid Amount.
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Bid SecuritiesTo be valid for 30 days beyond Bid Validity, in
general (Bid validity to be sufficient to complete evaluationand approval process)
Request for extension of Bid Validity could bemade to all Bidders before expiry date. (also needsextension of Bid Security period, in WB/ADB funded projectsit needs prior approval from them),
Bid Security not to be very high amount so as toDiscourage Bidders
Bid Security should be promptly released toUnsuccessful Bidders
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Bid Security To be applicable to all Bidders,
May be Forfeited, if the Bidder;
Modifies/ Withdraws Bid after Deadline foru m ss on n a y er o ,
Refuses to confirm/agree ArithmeticalCorrections,
Fails to furnish Performance Security & SignContract after issuance of the Letter ofAcceptance (within bid validity period)
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Performance Security In procurement, it is difficult for an Employer to
assess Ability & Financial position of a Bidder toperform the contractual job. Hence, the Employerdemands that the Bidders ability for performance to
be secured.
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Purpose of Performance Security is to ensure theBuyer/ Employer/ Client that the Contracted Jobcompletes within the time specified in the Contract.
Er. Satya Narayan Shah
Performance SecurityMajor instrument of Performance Security is
Bank Guarantee 5 to 10%During Defect Liability Period , PS amount
, .
Alternative Instruments for PS are:
Security Deposit (cash)
Certified checks
Standby letter of credit
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Bank Guarantee BG is Obligation of Bank towards the
Purchaser/ Employer to pay a Fixed Sum ofMoney in the event of Non-Performance ofContractual job by Contractor/ Supplier.
BG is usually Irrevocable, Unconditional, andPayable on First Demand.
BG are, as a rule, subject to Laws of Countryof the issuing Bank.
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Unconditional Bank Guarantee Bank promises UNCONDITIONALLY to pay specified
amount to Purchaser/ Employer upon;
First Written Demand, Without any Argument, Without Employer needing to prove any reasons for
eman , Without Employer needing to notify the Contractor/
Supplier.
Contractors / Suppliers Dislike Unconditional BankGuarantee,
Employers/ Purchasers Like Unconditional BankGuarantee.
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CONTRACTOR-BANK-
EMPLOYERRELATIONSHIP
CONTRACTOR-FOREIGN BANK-
LOCAL BANK-
RELATIONSHIP
BID EVALUATION
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BID EVALUATION PROCESS
Examinat ionof Lega l
Requirements
Complet ion
of B id
Examinat ion on
Substant ia l lyresponsiveness
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Bid ComparisonTechnica l , Commerc ia l , F inanc ia l ,
and Error correc t ion
Determinat ion o f
Lowest Eva luatedBi dPost Qual i f ica t ion
Reports &
Recommendat ions
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Bid Eva luat ion
Examinat ion of Legal Requirement s
Proper issued B id docum ent
Proper Sea l and s ignature o f au thor izedperson
Bid secur i ty , o ther requ i rement s e tc
Complet ion o f B idSubmiss ion o f a l l the requ i red documents
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Bid Evaluat ionExaminat ion on Substant ia l ly respons iveness (PPR-23, Gha)
Bidsshallbeconsiderednonresponsive,if;
Thebidisnotsubmittedinthebiddocumentissuedbythedepartment.
ThebidisnotsubmittedinthecompleteBidDocumentissuedinthenameofthe
Bidderhimself.
Thebid
is
not
sealed.
ThebidisnotsubmittedwiththeBidFormdulyfilledandsignedinthecomplete
document.
e sno su m e w n espec e a e me orsu m ss ono s.
ThebidisnotsubmittedalongwiththeBidsecurityasspecifiedinITB19.1.
ThebidissubmittedwithouttheinformationasspecifiedinITB17.1(c).
ThebiddoesnotcomplywiththeinstructionsasspecifiedintheInvitationforbid.
TermsofpaymentandDestinationofDeliveryoftheEquipmentsuppliedare
differentformthosespecifiedintheBidDocument.
Allpricesquotedarenoteitherfirm(notestimatedone)orconditionalorvalid
fortheperiodspecifiedintheBidDocument.
Thereisamajordeviationinspecificationoftheequipmentproposedbythe
bidderfromthatspecifiedinthetechnicalspecifications. 62
Bid Eva luat ion (Techn ic a l )
Comparison of Technical Specifications asstated in the Bid Document.
Operation and Maintenance Cost (Life CycleCost)
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Warranty
If there is any deviation, the evaluationcommittee shall state in the report.
The Evaluation committee shall state if there isany minor/major deviation with justification.
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Bid Evaluat ion (Commerc ia l )
Date of Complet ion
Payment te rm s
Any dev iat ion in L iqu idated damages
B on us i f t h e c o m l et i o n i s b ef or e
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t im e( s ta t ed in the Bid)
Other respons ibi l i t ies t o be born bythe Bidder
Any addi t ional condi t ions im posed bythe b idder
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CorrectionofErrors
ifthereisadiscrepancybetweentheunit
priceandthetotalpricethatisobtainedby
multiplyingtheunitpriceandquantity,the
becorrected,unlessintheopinionofthe
Employerthereisanobviousmisplacementof
thedecimalpointintheunitprice,inwhich
casethetotalpriceasquotedshallgovernand
theunitpriceshallbecorrected;
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CorrectionofErrors
ifthereisanerrorinatotalcorrespondingtotheadditionorsubtractionofsubtotals, thesubtotals
shallprevail andthetotalshallbecorrected;and
figures,theamountinwordsshallprevail,unless
theamountexpressedinwordsisrelatedtoan
arithmeticerror,inwhichcasetheamountin
figuresshallprevailsubjectto(a)and(b)above.
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EvaluationCriteria
Deliveryschedule:
GoodstobedeliveredwithintheacceptabletimerangeasspecifiedinDeliverySchedule.Nocreditwillbegivento
deliveriesbeforetheearliestdate,andbidsofferingdeliverya terthe nal ateshallbetreate asnonrespons ve.
Withinthisacceptableperiod,anadjustmentwillbeadded,forevaluationpurposesonly,tothebidpriceofbidsofferingdeliverieslaterthantheEarliestDeliveryDatespecifiedinDeliverySchedule
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EvaluationCriteria..
Deviationinpaymentschedule:
Ifabiddeviatesfromthescheduleandifsuchdeviationisconsideredacceptabletothe
,calculatinginterestearnedforanyearlier
paymentsinvolvedinthetermsoutlinedinthebidascomparedwiththosestipulatedintheSCC,attherateperannumspecifiedinBDS.
68
EvaluationCriteria..
Costofmajorreplacementcomponents,
mandatoryspareparts,andservice:
Forthelistofitemsandquantitiesofmajor, ,
parts,Anadjustmentequaltothetotalcostoftheseitems,attheunitpricesquotedineachbid,shallbeaddedtothebidprice,forevaluationpurposesonly.
69
EvaluationCriteria..
Operatingandmaintenancecosts:
Anadjustmenttotakeintoaccountthe o eratin and maintenance costs
oftheGoodswillbeaddedtothebid
price,forevaluationpurposesonly,if
specifiedinBDS
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DomesticPreference
IfthepriceofgoodsmanufacturedinNepal,
arehigheruptotenpercentthanthatof
foreigngoods,amarginofpreferenceupto
Nepal shallbeprovidedintheevaluationof
theBids.
(ThisClauseshallbeapplicableonlyforGoNfundedprocurement.)
71
PostqualificationRequirements
FinancialCapability
ExperienceandTechnical
Goods offeredmeetstheusagerequirement
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Lowest Evaluated Substantially Responsive andqualified to perform the Contract
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BidEvaluationStandardForms,WB
Table1. Identification
Table2. BiddingProcess
Table3.
Bid
Submission
and
Opening
Table4. BidPrices(asReadOut)
Table5. PreliminaryExamination
.
Table7. ExchangeRates
Table8. CurrencyConversion(MultipleCurrencies)
Table9. CurrencyConversion(SingleCurrency)
Table10. Additions, Adjustments, andPricedDeviations
Table11. DomesticPreferenceforGoods
Table12. DomesticPreferenceforWorks
Table13. ProposedContractAward
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AwardCriteriaTheEmployershallawardtheContracttothe
Bidderwhoseofferhasbeendeterminedtobe
substantiallyresponsive
to
the
Bidding
Document
andthe lowestevaluatedbid is,providedfurther
performtheContract satisfactorily.
OnrecommendationofEvaluationCommitteeas
perthesubclause8of clause147PPR
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Contract form. Main Agreement document signed by
both parties and witness.
Contractor/Suppliers commitment tocomplete the job and remedy thedefects in conformity with the provisionof contract.
Employers commitment to pay thesupplier as per the conditions ofcontract.
List of documents to form and be readand construed as part of the agreement.75
Completion of theContract
Er. Satya Narayan Shah76
Inspection & CommissioningInspection & Commissioning
Inspection Committee
Verification & validation of
performances
Inspection Report77Er. Satya Narayan Shah
Employers most contractual obligation Principal source of funds for supplier to discharge
his dutyDelay or default in release in payment has a
negative impact on discharge of obligation by the
Release of excessive payment or advancing ofpayments may dilute the motivation level ofcontractor/ supplier in discharging his duty
A balance is therefore necessary to be maintainedso that the supplier is suitably compensated forworks completed and adequately motivated forcompletion of work
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Final payment:Final payment:
Acceptance of Goods
Extension of the performance
period.
Close LC
79Er. Satya Narayan Shah