MODULE VI IFI PROCUREMENT DAY 2 -...

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University of Rome Tor Vergata

International Master in Public Procurement Management

May 2014

© European Bank for Reconstruction and Development 2010 | www.ebrd.com

MODULE VI – IFI PROCUREMENT

DAY 2

Veljko Sikirica, professor

Senior Procurement Specialist, EBRD


International Master in Public Procurement Management

May 2014


Part 5

THE PROCUREMENT CYCLE

Veljko Sikirica, professor


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OBJECTIVES

By the end of this module, you will be able to:

identify the various stages in a typical procurement cycle;

understand the activities required at each stage of the process;

appreciate the need for proper planning before undertaking procurement.

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Procurement process

Works and goods

Preparation • Identification of needs

Prequalification • Advertisement

Tendering • Invitation to tender

Execution • Signing of contract

Warranty period • Last day

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Public tender process

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A Typical Procurement Cycle

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1. Procurement Planning and 2. Notification

Good procurement planning is essential to determine:

– what goods, works and services are needed for the project;

– when they are needed;

– estimated costs;

– which procurement and contracting procedure is most suitable;

– the key dates and milestones which need to be met;

Planning allows for better monitoring, greater transparency and more predictability;

The Client completes the overall project procurement plan and obtain ‘no objection’ from the Bank before commencing any procurement activity;

It is needed for the Notification phase. Notification is made through a GPN to inform potential suppliers and the general community of the project and its components.

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3. Sourcing

There are two aspects – prequalification (PQ) and shortlisting.

PQ is separate from the tender exercise and is generally an open invitation to qualified suppliers/contractors who would be able to undertake a particular contract

PQ is used when undertaking procurement through the following methods where either very specialised or complex procurement is involved or where competition is limited by the market:

– Open tendering (complex procurement)

– selective tendering;

Shortlisting requires a combination of research and existing market knowledge and is used to identify candidates for

– Direct Contracting and selection of consultants

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4. Tendering

This phase includes:

Drafting the appropriate tender document, including the evaluation criteria;

Launching the tender;

Appointing the evaluation committee;

Responding to tender clarifications;

Issuing any necessary tender amendments;

The tender opening process;

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5. Evaluation and Award

Often the most contentious and time consuming and difficult part of the process which attracts the most complaints;

Evaluation consists of technical issues and price/commercial aspects;

The Client shall prepare a tender evaluation report and recommendation for contract award to the Bank for ‘no objection’ .

Client will sign the contract with the selected supplier;

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6. Contract Management

The contract management process includes:

– monitoring or supervision of performance;

– ensuring Client and contractor responsibilities are undertaken;

– approving payments;

– providing reports to the Bank;

– handling variations;

– Acceptance and completion

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RECAP

In this module we have discussed:

the various stages in a typical procurement cycle;

the activities required at each stage of the process;

why planning is so critical to the procurement cycle;

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International Masters in Public Procurement Management

Rome – May 2014


Part 6

PROCUREMENT METHODS (GOODS & WORKS)

Veljko Sikirica, Professor


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MODULE OBJECTIVES

By the end of the presentation, the participants should be able to:

1. Explain the different procurement methods available and when to use each one

2. Understand the procurement methods and associated project thresholds

3. Apply a decision process to selecting the appropriate method

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IFI PROCUREMENT METHODS

Open Tendering (may be a two-stage tendering process)/ICB

Selective Tendering

Direct Contracting

Shopping

Local Competitive Tendering/NCB

Force account

5/4/2014 IFI Procurement Methods 16

Procurement Methods

Estimated Contract Cost

Level of competition desired/expected

•NCT

• ICT

Threshold

•LIT

•Shopping

•Direct Contracting

•Force Account

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IFI PROCUREMENT METHODS

Open Tendering / ICT

Selective Tendering

Direct Contracting

Shopping

Local Competitive Tendering/NCT

Force account

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CHOICE OF PROCUREMENT METHOD

The choice of procurement method will be driven by:

– Financial thresholds (EBRD ≥ € 250,000 for goods & ≥ € 7.5 million for works).

– Special circumstances

Special circumstances will be determined by nature and value of the goods/works, required completion time or other considerations;

All procurement methods, other than open tendering shall be clearly justified and agreed by the Board of the Bank prior to project legal documentation.

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METHODS

Open Tendering

• Open to all eligible firms irrespective of nationality (EBRD – other IFIs may have restrictions)

• Adequate notification of opportunity

• It may single or two-stage tendering procedure

• Can be used with or without prequalification

Selective Tendering

• Tenders are invited from qualified firms selected in a non-discriminatory manner

• N.B. This is not as a result of prequalification – prequalification is used with open tendering only

Direct Contracting

• Extension of an existing contract / standardisation with existing equipment

• Failure of an open / selective process

• Requirement only available from a single source

• Extreme urgency

Shopping

• Low-value, off-the-shelf item

• A competitive procedure with at least three quotations

• Foreign firms to be included, if possible

Local Competitive Tendering

• Use of national procedure

• Requirement available locally at competitive prices

• Requirement unlikely to attract international competition

• National procedures are acceptable to Bank

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EXERCISE

To consider the appropriate procurement method for the attached list of requirements. If Open Tendering is not recommended, what is the justification?

Working in groups – 20 minutes

Nominate one member to give feedback

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RECAP

In this module we have discussed:

the different procurement methods available;

when to use each one;

how to apply a decision process to selecting the most appropriate method;


International Masters in Public Procurement Management

Rome – May 2014


Part 7

SELECTION OF CONSULTANTS

Veljko Sikirica, Professor


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PART 7: SELECTION OF

CONSULTANTS

Selection and Contracting of Consultants by the Client

CONSULTING SERVICES

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Selection Process - Consulting Services

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Consulting Services

The Participant with the best evaluated proposal in accordance with the selection method used.

Six selection methods:

• Quality and Cost Based Selection (QCBS)

• Quality Based Selection (QBS)

• Least Cost Based Selection (LCBS)

• Fixed Budget Selection (FBS)

• Consultants Qualifications Selection (QCS)

• Single Source Selection (SSS)

Who is Awarded the Contract

Tenderers may participate as

Independent Firm

Voluntarily constituted JVCA

Mandatory Association is not acceptable

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Consulting firm that prepares / implement project is disqualified for:

Supplying Goods

Constructing Works

Supplying Services (does not apply to turn-key contracts)

Eligibility - Conflict of Interest

The importance and necessity of the

Consultancy Services

Assist the Bank’s client with:

• Project Preparation e.g. feasibility studies, design, environmental impact assessment

Project Implementation:

• capacity building, institutional development, eg. project implementation units – role of a partner

• project supervision: Independent Engineer – very clearly defined contractual role

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The importance and necessity of the

Consultancy Services CONTINUATION

Assist the Bank with:

• due diligence

• project monitoring, lenders technical supervisor

Overview of Procedures for Consultant

Selection

Direct Selection (below EUR 75,000)

Selection from

Shortlist (EUR 75,000 – EUR 300,000)

Proposals

(EUR 300,000 and over)

Select consultant

Negotiations

Contract

Calls for expressions of

interest (not obligatory)

Long list

Shortlist

Select consultant

Negotiations

Contract

Calls for expressions of

interest

Long list

Shortlist

Proposal

Select consultant

Negotiations

Contract

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Consultant Selection Methods

Quality Based Selection (QBS)

• Most important criteria technical qualification / relevant experience

Price as a factor:

Quality Cost Based Selection (QCBS)

• 2 Envelope System. The norms are:

• Technical proposals: weight of 80% and only when technical thresholds are met

• Financial proposal: weight 20% (similar to the EU)

Quality-and-Cost Based Selection

(QCBS)

Main Features

• Competition among short-listed firms only

• Combined quality and cost evaluation

• Relative weighs of quality and cost depend on nature of assignment

• Cost as evaluation factor used judiciously

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QCBS Steps

Preparation of TOR

Preparation of cost estimate and budget

Advertising

Preparation of short list

Preparation-Issuing RFP

Receipt of Proposals

Technical Proposal evaluation

Price Proposal public opening

Price Proposal evaluation

Combined Quality-Cost evaluation

Contract Negotiation and award

QCBS

TOR

• Responsibility: Client

• Preparation: Specialist in area of assignment

• - Contents: not too detailed

• - Specify Objectives

• Compatible with budget

• List of surveys and services

• List and chronogram of Outputs

• Specify Training and Knowledge Transfer

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QCBS

Cost Estimate and Budget

• Client’s reliable assessment is essential

• Staff time

• Logistical support

• Physical inputs

• Categories:

• Fees (remuneration)

• Reimbursable expenses

• Components

• local - foreign

QCBS

Advertising

• General Procurement Notice (GPN)

• - Lists expected procurements and EA’s contact information

• - Client prepares and sends to Bank

Bank arranges publication

• Bank’s Internet website (www.ebrd.com) Specific Procurement Notice (SPN)

http://www.ebrd.com/

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Request for Proposals (RFP)

Contents

• All necessary information for proposal preparation

Clarity

• Complete, clear, precise description

• preparation/opening/evaluation/award procedures

• Scope of Consulting Services

• Completion schedules

• Clear sound evaluation criteria

Letter of Invitation

Instructions to Consultants

Data Sheet

Technical Proposal-Standard Forms

Price Proposal- Standard Forms

Terms of Reference

Standard Contract

General Conditions of Contract

Special Conditions of Contract

Eligible Countries

Appendices

RFP Typical structure

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Proposal Procedures

Only One Proposal

• Short-listed Consultants may submit only one Proposal

• A Sub-consultant or individual expert may participate in more than one Proposal

Proposal Validity

• Specified in RFP

• Sufficient to

• Evaluate Proposals

• Negotiate Contract

• Obtain all no objections and approvals

• Award contract

Pricing

• Remuneration Adjustment

Provision needed if contract duration exceeds 18 months

Provision may be included for contract duration shorter than 18 months, if local or foreign inflation expected to exceed 5% per annum

Proposal Procedures

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Currency Provisions

• Currency of Price Proposal

Consultants may express price in • Any single, fully convertible currency, or

• No more than three freely convertible foreign currencies

Client may require

• Consultants to quote local portion of price in local currency

Proposal Procedures

Proposal Preparation

• Time allowed depends on assignment circumstances and complexity

Generally, at least 4 weeks

For large complex assignments:

• no more than 3 months

Proposal Procedures

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Proposal Submission

• Place/deadline clearly specified in RFP

• By mail, by hand or electronically if Bank satisfied that system is secure

• Technical & Price proposals

• in separate envelopes

• submitted at same time (except in case of QBS where there is an option to request a Price Proposal only from the firm who submitted the best Technical Proposal).

Proposal Procedures

Proposal Opening

• Technical Proposal envelopes opened immediately by ad-hoc committee

• Evaluation of Quality takes place

• Price Proposal envelopes remain sealed

• under custody of reputable Public Auditor / Authority

• until publicly opened on completion of Evaluation of Quality

• Late proposals returned unopened

Proposal Procedures

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Price Proposal Opening CONTINUATION

• Client reads aloud and records

• Name of Consultant

• Technical score

• Proposal price

• Copy of record promptly sent to Bank and all who submitted proposals

• Client prepares minutes of public opening and sends it to all who submitted proposals and to the Bank

Proposal Procedures

Confidentiality

• From proposals opening, until publication of contract award:

Information on examination, clarification and evaluation of proposals and award recommendations shall not to be disclosed to consultants who submitted proposals or to any person not officially concerned, except as specified in RFP

Proposal Procedures

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Proposal Evaluation

• Purpose

Determine highest-ranked proposal based on combined evaluation of cost and quality and select it for negotiations and award

• Procedure

Evaluation of Quality

Evaluation of Cost

Combined evaluation of Quality and Cost

Proposal Procedures

Proposal Evaluation CONTINUATION

• Evaluation Committee evaluates Technical Proposal

• Rejects Proposals Not responsive to TOR

• Determines Technical score using evaluation criteria, subcriteria and weight specified in RFP

• Rejects proposal if

• Fails to achieve minimum Technical Score specified in RFP

• Prepares Technical Evaluation Report

• Obtains Bank’s no objection

Proposal Procedures

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Evaluation of Quality CONTINUATION

• Client

• Informs those who submitted proposals the Technical score obtained

• Notifies those whose Proposals did not meet minimum marks or were found nonresponsive that their Price Proposals are being returned unopened

• Notifies those whose proposals met minimum qualifying marks the date, time and place of public opening of Price Proposal

Proposal Procedures

Proposal Procedures

Evaluation of Quality Example

Quality evaluation criteria Weight %

Mark* Score

– Relevant experience 5 80 4

– Quality of methodology 30 100 30

– Staff qualifications 50 80 40

– Knowledge transfer 5 100 5

– Participation of nationals 10 50 5

– Totals for Evaluator #1 100 84

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Evaluation of Cost

• Price Evaluation

• Correction of arithmetical errors

• For Evaluation, cost excludes

• Local indirect taxes

• Income tax payable in Client’s country on remuneration for services by non resident staff in Client’s country

• For Evaluation, cost includes

• Remuneration

• Reimbursable expenses e.g. travel, communications

Proposal Procedures

Evaluation of Cost CONTINUATION

• Cost score

• Lowest-cost proposal gets score of 100 points

• Other proposals get score inversely proportional to their cost

• Other methodology may be used (describe in RFP)

Proposal Procedures

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Evaluation of Cost CONTINUATION

– Example

– Proposal Evaluated Cost Price Score

– A 4500 100

– B 5000 90

– C 6000 75

Proposal Procedures

Combined Quality and Cost Evaluation CONTINUATION

– Example:

– Proposal Technical Price

score* weight QWS score weight PWS Total

– A 84 80 67.2 100 20 20.0 87.2

– B 87 80 69.6 90 20 18.0 87.6

– C 90 80 72.0 75 20 15.0 87.0

– Proposal B gets highest score and is invited to negotiate contract

– ------------------------------------------

– * Average of scores of Evaluators or similar procedure

Proposal Procedures

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Contract Negotiation

• Technical Negotiation

• Should cover

• TOR

• Methodology

• Staffing – Key staff changes not allowed unless required to meet objectives and new staff should have equivalent/better qualifications

• Client’s input

Proposal Procedures


• Technical Negotiation (cont)

• Should not substantially alter

• TOR

• Contract Terms

• Quality of final product

• Relevance of initial evaluation

• Should not substantially reduce

• Scope of assignment to meet budget

Proposal Procedures

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Contract Negotiation (cont)

• Price Negotiation

• In all contracts

• Should not cover reimbursables

• When price is evaluation factor

• In Lump-sum contracts

• should not cover Contract Price

• In Time-based contracts

• Should not cover staff-rates, except if

• Rates offered are much higher than for similar assignments

Proposal Procedures


• Outcome of Negotiation (cont)

• If negotiations fail, Client

• Terminates negotiations

• Informs firm of reasons for termination

• Invites next highest-ranked firm, only after consultation with the Bank

Proposal Procedures

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Contract Negotiation (cont)

• Outcome of Negotiation

• On completion

• All agreements to be reflected in negotiated Contract

• Negotiated Contract subject to Bank’s no objection

• Award Contract after Bank’s no objection

• Notify all other consultants

Proposal Procedures

Debriefing

• Contract Award

• Consultant has the right to request that Client explain why its proposal was not selected

• At Client’s option, debriefing

• At meeting (Consultant bears costs to attend), or

• In writing

Proposal Procedures

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Rejection of all Proposals

• By the Client w/Bank prior approval

• No substantially-responsive proposals

• Prices substantially higher than original estimate

• After investigating in consultation with the Bank feasibility of increasing budget or reducing scope

• Reinvitation

• To obtain lower prices

• Before inviting, Client to review and consider revising

• Short list

• RFP Document/Conditions of Contract

• Design/specification/scope of assignment

Proposal Procedures

Types of

contracts

Consulting Services

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Main types

• Lump-sum

• Time-based

• Retainer and / or Success Fee

• Percentage of construction or goods cost

• Indefinite Delivery (Price agreement)

Type of contracts

Description

• Contents, duration and output can be clearly defined

• Easy to administer

• Widely used, i.e.:

• Simple planning and feasibility studies

• Environmental Studies

• Detailed design of standard/common structures

• Software design for data processing system, etc

Lump sum contract

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Procedures

• Payments due, linked to specified output, i.e.:

• Reports,

• Drawings

• Bill of quantities

• Tender documents

• Software programs, etc.

Lump sum contract

Description

• Contents, duration and output cannot be to precisely defined

• Services depend on activities by others

• Consultants input to attain objectives cannot be assessed in detail

• Widely used, i.e.:

• Complex studies

• Supervision of construction

• Advisory services

• Training assignments, etc.

Time based contract

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Procedures

• Payments due base on:

• Staff time spent in specific activities

• Agreed hourly, daily, weekly, monthly rates

• Rates comprise salary, social costs, overhead, fee (profit)

• Reimbursement of expenses on agreed categories

• Total price not to exceed ceiling that includes contingency allowance

• Requires close monitoring by Client

Time based contract

Consulting Services

Important

considerations

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Purpose / Contents

• Balanced allocation of risks and liabilities

• Rights and obligations of Parties

• Functions and authority in contract execution, supervision and administration

• Clear definition of scope of works, supply and services

• Definition/specification of project/sites locations, particular conditions

Contract

Important Provisions

• Currency Provisions

• Price Adjustment*

• Payment Terms and Methods

• Tender and Performance Securities

• Client contribution

• Conflict of interest*

• Professional Liability

• Applicable law. Settlement of disputes

• Force Majeure

Contract provisions

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Payment Terms and Methods

• Agreed at negotiations, specified in Contract

• Amounts, Schedule, procedures

• Depending on kind of Contract

• Regular intervals, or

• Based on output

• Advance payment against Bank guarantee if higher than 10% of contract price

Contract provisions

Payment Terms and Methods (cont)

• Payment Procedures

• By the Client against invoices, or

• Directly by the Bank, at Client’s request, or

• Exceptionally through letter of credit

• Only disputed amounts withheld

• Finance charges apply for delayed payments as specified in contract

Contract provisions

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Staff substitution

• May be needed due to

• Health reasons or death

• Staff not suitable

• Requires consultant to:

• Provide substitute staff of at least same qualifications

• Obtain Client’s approval to proposed staff

Contract provisions

Description

• Hired when

• No team is required for assignment

• No home office support required

• Experience and qualifications of individual are paramount to achieve objectives

• A firm is preferable to large number of individuals if

• Coordination, administration, collective responsibility become difficult

Individual consultants

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Procedures

• Selection:based on qualifications

• Advertisement: not required

• Submission of proposals: not needed

• Single source selection acceptable exceptionally if:

• Continuation of tasks

• Initial assignment awarded competitively

• Emergency situations from natural disasters

• Individual is only qualified candidate for assignment


Procedures (cont)

• Evaluation

• At least three CVs from

• Those who expressed interest, or

• Were approached by Client

• Select best qualified individual based on:

• Academic background

• Experience

• Knowledge of local conditions, i.e. language, culture, etc

• If candidate is permanent staff or associate of consulting company

• Verify conflict of interest


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Grazie

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