staff college sept 2011

8/3/2019 Staff College Sept 2011

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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

Er. Satya Narayan Shah 11

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


InternationalCompetitiveBidding(ICB)

InternationalLevelBidding:PPA 15

Sizeandscopeofcontractusuallycostinglargeamountforwhichdomesticcontractors,manufacturersandsuppliersdont ossessesade uateca abilit andresources

Thegoodsarenotproducedlocally

Thegoodsareofcomplicatednature

The

job

is

highly

technicalNoticeperiod(45daysminimum) PPA14(4)(1)

15

National Competitive Bidding

(NCB)

Mediumsizecontract

Localproduction,reasonablecost,promptdelivery

Availabilityoflocalresources

Noticeperiod(30daysminimum) PPA14(4)(1)


SealedQuotationProvisionsConcerningSealedQuotation: PPR 84

SmallcontractsAmountupto10Lakh (forgoodsor

services)andupto20Lakh (forworks

Procedure

of

NCB to

followNoticeperiodissmall(15days)Usedforurgentlyrequiredgoods/smalljobsMinimum3Quotationsrequiredonthe

firstnotification,nominimumnumberrequiredforrenotice.


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)


OtherMethodsofProcurement

TwoStageBidding:Wherethepreparationofcompletetechnicalspecificationsinadvanceisundesirableorimpractical.

First

stage unpriced technicalproposalonthebasisofaconceptual

designorperformancespecificationsareinvited

subjecttotechnicalaswellascommercialclarifications andadjustmentstobefollowedbyamendedbiddingdocuments

SecondStage

submissionoffinaltechnicalproposalandpricedbids


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.


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

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,

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.


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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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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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.


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.


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.

-

35

-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.


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.


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.


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


Spec,

Perfor

mance

Conclusion

Specification to be requiredto describe the desired

performance, and not to

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reduce competition.


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)


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.

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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.


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


PREPARATION OF BIDDOCUMENTS TO BE DONE IN

CLOSE CONSULTATION WITH THE

IMPORTANT NOTES

.

USE OF APPROPRIATE STANDARDBIDDING DOCUMENTS ISSUED BYPPMO.


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


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.


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


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)


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.

53

Purpose of Performance Security is to ensure theBuyer/ Employer/ Client that the Contracted Jobcompletes within the time specified in the Contract.


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.


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.


CONTRACTOR-BANK-

EMPLOYERRELATIONSHIP

CONTRACTOR-FOREIGN BANK-

LOCAL BANK-

RELATIONSHIP

BID EVALUATION

Er. Satya Narayan Shah59

BID EVALUATION PROCESS

Examinat ionof Lega l

Requirements

Complet ion

of B id

Examinat ion on

Substant ia l lyresponsiveness

60

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

61

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)

63

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.

63

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;

65

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

67

EvaluationCriteria..

Deviationinpaymentschedule:

Ifabiddeviatesfromthescheduleandifsuchdeviationisconsideredacceptabletothe

,calculatinginterestearnedforanyearlier

paymentsinvolvedinthetermsoutlinedinthebidascomparedwiththosestipulatedintheSCC,attherateperannumspecifiedinBDS.

68


Costofmajorreplacementcomponents,

mandatoryspareparts,andservice:

Forthelistofitemsandquantitiesofmajor, ,

parts,Anadjustmentequaltothetotalcostoftheseitems,attheunitpricesquotedineachbid,shallbeaddedtothebidprice,forevaluationpurposesonly.

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Operatingandmaintenancecosts:

Anadjustmenttotakeintoaccountthe o eratin and maintenance costs

oftheGoodswillbeaddedtothebid

price,forevaluationpurposesonly,if

specifiedinBDS

70

DomesticPreference

IfthepriceofgoodsmanufacturedinNepal,

arehigheruptotenpercentthanthatof

foreigngoods,amarginofpreferenceupto

Nepal shallbeprovidedintheevaluationof

theBids.

(ThisClauseshallbeapplicableonlyforGoNfundedprocurement.)

71

PostqualificationRequirements

FinancialCapability

ExperienceandTechnical

Goods offeredmeetstheusagerequirement

72

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

73

AwardCriteriaTheEmployershallawardtheContracttothe

Bidderwhoseofferhasbeendeterminedtobe

substantiallyresponsive

to

the

Bidding

Document

andthe lowestevaluatedbid is,providedfurther

performtheContract satisfactorily.

OnrecommendationofEvaluationCommitteeas

perthesubclause8of clause147PPR

74

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
