4 jorge iraq procurement laws presentation 2012-11-27

7/27/2019 4 Jorge Iraq Procurement Laws Presentation 2012-11-27

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Understanding Iraqs

Procurement RegulationsJorge E. Restrepo, Esq.

Managing Partner

November 28, 2012

2012 New Frontiers Business Consulting LLC. All rights reserved.


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Disclaimer

This presentation contains general information only and is based on the experiences and research

of the author. The author is not, by means of this presentation, rendering business, legal advice,or other professional advice or services. This presentation is not a substitute for such legal advice

or services, nor should it be used as a basis for any decision or action that may affect your

business. Before making any decision or taking any action that may affect your business, you

should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be

responsible for any loss sustained by any person or entity that relies on this presentation. The

Author gives his permission to link, post, distribute, or reference this presentation for any lawful

purpose, provided attribution is made to the author.

2012 New Frontiers Business Consulting LLC. All rights reserved. This material may not be

reproduced, displayed, modified or distributed without the express prior written permission of the

copyright holder. For permission, contact [email protected].


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NEW FRONTIERS

Local Firm with on-the-ground International professionals, and reputable local attorneys tooffer reliable and effective advice and assistance to clients in Iraqs new frontiers;

Experienced professionals with unparalleled track records with both Government andPrivate Sectors throughout Iraq;

Members participated in major projects such as the $5.6 B GOI-Boeing/Bombardier aircraftacquisition; establishment of IOC in Iraq; oil and gas JV and procurement transactionsbetween the GOI and international companies; developed GOI Standard Bidding Documents

and procurement regulations; established international legal and contracts section at theEIA; and negotiations on multi-million dollar airport contracts EIA, BIAP.

We represent clients in corporate establishment, post-SOFA Iraqi corporate, tax, and legalcompliance matters; due diligence for FCPA compliance; risk assessments; Iraqi/Kurdishtendering and investment matters; dispute resolution; contracts negotiations; labormatters; and more.


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Table of Contents

1. Principal Legal Authorities

2. Applicability

3. Government Procurement Planning and Preparation

4. Tendering Methods Available

5. Tender Preparation Requirements

6. Tender Evaluation and Award

7. Contract Execution

8. Claims and Dispute Resolution

9. Contracting Issues

10. Questions



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1. Principal Legal Authorities

Law of Public Contracts (CPAOrder) 87 of 2004;

Implementing Procurement Regulation No. 1 of 2008 as amended;

Kurdistan Regional Government Ministry of Finance Order 1111, 24JAN10

(adopts CPA 87);

Kurdistan Regional Government Govt. Contracts Execution Instruction No. 1

of 2011 (implements CPA 87)



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2. Applicability


CPA Order 87 applies to the federal and regional governments, governorates,

municipal and local governments;

IR No 1 of 2008 applies to all federal, regional, governorates, and municipalgovernments (*KRG does not implement this one);

KRG Instruction 1 of 2011 applies to all KRG government entities and private

companies doing business with the KRG entities, except for any oil and gasrelated contracts (MNR is contracting authority);

All of the above exclude projects funded by international donor organizations orother donor governments, concession contracts, PPP contracts, and certainstrategic projects.


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3. Government Procurement Planning andPreparation

One of the most troublesome stages in Iraqs public procurement system due to lack

of capacity and inability to conduct market research;

Government entities are required to have a feasibility study for the project or

purchase in mind, to include specifications, plans, drawings, bills of quantities,

cleared source of funding and allocation amount identified; all needed approvals

from relevant ministries and governmental entities; nature of contract required;

advertisement in at least 3 local newspapers (and DG Market, UN Website, orconsulates/embassies;

Federal Govt allows Government entity to adjust up to 20% variation of proposed

contract value; KRG only allows up to 7% adjustment from proposed contract value.



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4. Tendering Methods Available

Public Tender: Open to all interested bidders and issued publicly; bidders pay for tender and

winning bidder pays for tender advertising costs incurred by Govt; bid and performance bondusually required.

Limited Advertising Two-Stage Tender: 1) request for Expression of Interest (EOI) and

prequalification Request for Information (RFI) to sector-specific companies only; 2) invitation

and Request For Proposal (RFP) only to companies that submitted EOIs and were prequalified

(min. 2).

General Two-Stage Tender: 1) Open publishing of request for EOI and RFI for complex projects

where more information is needed; Govt. may request general pricing based on BOQs and

technical specifications; 2) RFP only to prequalified candidates that submitted EOIs and

response to RFI.



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4. Tendering Methods Available (cont.)


Direct Invitation: Govt entities may submit a non-public RFP to prequalified companies (GOI: min. 3

companies if no previous bids or consulting contracts; KRG: Minimum 5 companies); invitation RFP free for

bidders, and no bid bond/performance bond required; this method can only be used in specific cases (i.e.

requirements are specialized and highly technical in nature, emergency situations, consulting contracts,

medical supplies, national security-related contracts.).

Sole Source: For contracts that are monopolized or specialized in nature; for import contracts, maintenance

contracts; for supply or execution of works or consulting services or manufacturing or contracts which the

govt. entity can justify; company pays no bid or performance bond.

Purchasing Committee: Contracts and tenders usually for smaller purchases within the thresholds imposed

by relevant authorities (usually IQD 50 Million in the GOI); however, this method may be applied for larger

purchases as well.


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5. Tender Preparation Requirements

IR No. 1, 2008: RFP should allow for a minimum of 10-60 days for standard

contracts; but not applicable to tenders for food and medicines;

The time duration for submission of bids for direct invitation and single sourceor solebid is left to the discretion of the contracting entitys head.

KRG Instruction No. 1, 2011: 14 days between the date of RFP publishing and

proposal submission date.

RFP should be detailed enough to provide synopsis, requirements, requiredamounts of bid and performance bonds, defined deadline for submission ofproposal, method of payment, desired INCOTERMS and other requirements.



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6. Tender Evaluation and Award

Govt. entity must have an opening committee and a separate evaluation committee for

the tenders in accordance with the regulations.

Opening Committee responsible for opening and recording data of sealed proposals infront of bidders.

Opening Committee is authorized to accept bids with proposed costs above the originalfixed contract cost as follows:

IR No. 1, 2008: entity may accept and analyze a bid that does not exceed the cost estimate by 25%for contracting purposes, provided the availability of funds allocation and that the price is withinthe projects total cost. The Ministry of Planning & Development Cooperation shall be notifiedabout this matter accordingly;

KRG Inst. No. 1, 2011: entity may accept and analyze a bid that does not exceed the cost estimateby 7-10% for contracting purposes. The KRG Council of Ministers shall approve this in advance.



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6. Tender Evaluation and Award (cont.)

Evaluation Committee takes over once Opening Committee submits the proposals

and recorded information.

Evaluation Committee is authorized to utilize outside consultants and experts to

perform its technical evaluation duties, with certain restrictions.

Upon full review, the Evaluation Committee recommends a winner in its report and

sends it to its contracting authority for approval and official award.

Once the Govt. entity notifies winner of award, winner has 14 days to sign contract;

the winner also has 28 days to submit all required certifications and performance

bonds/guarantees.



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7. Contract Execution

Contractor is authorized to use sub contractors as described in its proposal,

but for no more than 30% of the project.

Contracts should be drafted in English and Arabic or Kurdish, depending onthe location of the contract; contract should also specify governing languageversion.

Advance payments are authorized for contractors (usually from 5-20% withbacked bank guarantee from contractor).

Contract period extensions without penalties are authorized under certaincircumstances.



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8. Claims and Dispute Resolution

Pre-Contract Execution Claims:

IR No. 1, 2008: Govt. Entity uses a Claims Central Committee established by the

relevant minister or governor of Contracting entity to review contractual claims

and objections;

Central Claims Committee must issue response within 7 days of the contract

award notification date; No response means refusal to the objections;

Bidders may also submit claims to the Special Administrative Court (SAC) at theMoPDC if their issues were not resolved at the contracting govt. entitys Claims

Central Committee; contract cannot be awarded until SAC makes a decision;

SAC must issue its decision within 120 days from the date claimant paid its

court dues;



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8. Claims and Dispute Resolution (cont.)

SAC decision is final and binding unless claimant motions for appeal at

relevant court of appeals within 30 days of the SACs notification of itsdecision to claimant.

KRG Inst. No. 1, 2011: Govt. Entity uses a committee within its Legal

Department to review all contractual claims and objections (pre and post

contract) under the same time requirements as the SAC;

The KRGs MOP shall form a committee to offer review of all claims

raised by contractors within 60 days of the Legal Department

Committees decision.



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8. Claims and Dispute Resolution (cont.)

Post-Contract Execution Claims:

All post-contract execution disputes are solved through one of the

following:

Conciliation between the parties;

Arbitration (local or international as agreed in the contract and if the

contractor is international); and

Transfer of disputes to specialized courts.

Choice of governing law is acceptable as long as it is mutually agreed.



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9. Contracting Issues

Major Roadblocks to more effective contract execution in Iraq:

Poor procurement planning by govt. entities due to lack of capacity and

inexperience with laws and regulations;

Overly burdensome LoC process for performance bonds;

Difficult (but not impossible) environment for FCPA Compliance program

requirements;

Advertising requirements burdensome and inefficient, especially for international

goods and services;

Delays in tendering/awarding/signing supply contracts causing problems with

quotes over 90 days for commodities and goods.



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10. QUESTIONS?

Jorge E. Restrepo, Esq.Managing Partner

New Frontiers Business Consulting, LLCErbil, IraqBaghdad, IraqIstanbul, TurkeyDubai, UAE

Iraq Cell: (+ 964)(0) 750 736 6443Other Outside Iraq: (+1)(202) 559-4677Email: [email protected]; [email protected]

2012 New Frontiers Business Consulting LLC. All rights reserved. This material may not be reproduced, displayed, modified or distributed without the express prior

written permission of the copyright holder. For permission, contact [email protected]
mailto:[email protected]:[email protected]