Risk Procurement Assignment - 090164

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University of Technology of Mauritius

May 5 2011

Assignment: Risk Assessment for

Procurement Routes At Your

Organisation

Ramdowar Sarvesh (090164)



Contents

Contents ............................................................................................................................... 2

1.0 Organization ...................................................................................................................3

1.1 Projects / Works Undertaken ..................................................................................... 3

2.0 Procurement Routes ....................................................................................................... 3

2.1 Maintenance Contract (MC) ...................................................................................... 3

2.2 Open Advertised Bidding (OAB) .............................................................................. 4

3.0 Qualitative Assessment .................................................................................................. 4

3.1 Risk Matrix ................................................................................................................ 6

3.2 Probability Impact Matrix for Maintenance Contract ................................................7

3.3 Probability Impact Matrix for Open Advertised Bidding ..........................................8

4.0 Quantitative Analysis ...................................................................................................10

5.0 Conclusion ...................................................................................................................11

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1.0 Organization

The Ministry of Public Infrastructure, National Development Unit, Land Transport &

Shipping is one of the 25 Ministries of the Government of Mauritius. It has several

Divisions namely the Public Infrastructure Division, Land Transport Division and

Shipping Division .

The Public Infrastructure Division is responsible for the implementation of building

projects for all Ministries in Mauritius and Rodrigues and the other outer islands.

1.1 Projects / Works Undertaken

The main works undertaken by this Ministry are mentioned hereunder:

1) Maintenance of most Government buildings

2) Construction of new buildings for the various ministries

2.0 Procurement Routes

The two main procurement routes are the Maintenance Contract and through Open

Advertised Bidding.

2.1 Maintenance Contract (MC)

The Maintenance Contract is a two year contract which has been awarded to 10 different

contractors, two for each grouping of Districts – Port-Louis, Pamplemousses & Riviere

du Rempart, Moka & Flacq, Grand Port & Savannes and Plaines Wilhems & Black

River. The Ministry has in fact invited eligible contractors, that is those registered with

the Ministry to bid for these contracts for the respective regions. The Bid document is as

per stipulated by the Procurement Policy Office.

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The particularity of this Contract is that all major maintenance / rehabilitation /

renovation / upgrading works within a particular grouping, provided that the cost

estimates does not exceed Rs 5 millions have been pre-awarded to the selected contractor.

The Ministry has reserved the right to go for open bidding and not to directly award to

them works estimated at above the value.

The Maintenance Contract is an Item Rate Contract, also called a Schedule Contract type.

In this, the Contractor undertakes the execution of the works on an item rate basis. The

amount to be received by the contractor depends upon the quantities of various items of

work actually executed. The payment to the contractor is made on the basis of detailed

items of work actually done by him.

2.2 Open Advertised Bidding (OAB)

When the cost estimate of projects exceed Rs 5 million or when items in the project do

not figure in the Bill of Quantities in the Maintenance contract, the Ministry resorts to

open advertised bidding for procurement of works. This type of procurement is mostly

for the construction of new buildings or extensions for the Government.

The Contract is mainly of Lump Sum and Scheduled Contract type. In this the Contractor

offers to do a particular work at a fixed sum within a specified time as per drawings and

detailed specifications. The schedule of rates for various items is provided which

regulates the extra amount to be paid or deducted for any additions or omissions made

during the progress of the work.

3.0 Qualitative Assessment

Both types of procurement routes entail some risks. The table below illustrates the risks.

Table 1: Risk Register

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Risk No. Description

1 Lowest bidder is awarded the contract and cannot deliver as per

specifications

2 Contractor refuses to carry out the work after award

3 Collusion between Contractor and Engineer

4 Rates quoted by other bidders revealed to competitors before closing date

of Bid submission

5 Cost of total work uncertain till the end of the project

Assumptions:

1) Lowest bidder is awarded the contract and cannot deliver as per

specifications

M.C – Faulty or low quality accessories are used for renovation works, example low

quality taps that become unusable after one month.

OAB – Contractor is not able to make profit and using sub standard material to

compensate for his losses.

2) Contractor refuses to carry out the work after award

M.C – Contractor states he is not being allowed to work during normal working hours

and is regarded as a disturbance, in the case of schools, colleges and hospitals.

OAB – Even the risk of the Bid Bond being seized, the Contractor does not accept theoffer. Time is lost.

3) Collusion between Contractor and Engineer

M.C – Since the engineer prepares scope of works, prepares bill of quantities and

issues works order, bribery or corruption takes place.

OAB – Engineer provides more information to one particular Bidder or favours one

during Bid Evaluation.

4) Rates quoted by other bidders revealed to competitors before closing date

of Bid submission

M.C –Rates are found to be too low compared to cost estimate

OAB - Rates are found to be too low compared to cost estimate

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5) Cost of total work uncertain till the end of the project

M.C – Unscheduled works to be carried out

OAB – Omissions in the order of 5 % of the contract value

3.1 Risk Matrix

The following scales have been used for the likelihood of risk and risk impact.

Likelihood of Risk

Extremely

Improbable

Extremely Remote Remote Reasonably Probable Frequent

1 2 3 4 5

Impact of Risk

Catastrophic Hazardous Extremely Major Major Minor

5 4 3 2 1

Table 2: Risk Matrix for Maintenance Contract

Risk

No.

Risk Description Likelihood (A)

Scale 1-5

Impact (B)

Scale 1-5

Risk

Level

(AxB)

Risk

Priority

1 Lowest b idder i s awarded the contract and cannot

deliver as per specifications

5 4 20 1

2 Contractor refuses to carry out the work after award 1 5 5 3

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3 Collusion between Contractor and Engineer 2 5 10 2

4 Rates quoted by other bidders revealed to competitors

before closing date of bid submission

1 5 5 3

5 Cost of total work uncertain till the end of the project 1 2 2 4

3.2 Probability Impact Matrix for Maintenance Contract

I m p a c t

5 2,4 3

4 1

3

2 5

1

1 2 3 4 5

Likelihood

Table 3: Risk Response & Monitoring for Maintenance Contract

Risk No. Description Risk Response Risk Monitoring

1 Lowest bidder is awarded the contract and cannot


Eligibility criteria and past

experience thoroughly

checked

Compliance certificate of

materials to be submitted by

contractor for approval by

engineer

2 Contractor refuses to carry out the work after

award

Bid Bond mandatory

3 Collusion between Contractor and Engineer Contractor to inform the

Chief Engineer or the

Audit unit performs routine

checks

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converse

4 Rates quoted by other bidders revealed to

competitors before closing date of bid submission

No access to the Bids Bids s ubmitted t o be s afely

sealed and secured

5 Cost of total work uncertain till the end of the

project

Do not carry works

instructed only verbally by

engineer

Check Works Order

Table 4: Risk Matrix for Open Advertised Bidding

Risk

No.

Risk Description Likelihood (A)

Scale 1-5

Impact (B)

Scale 1-5

Risk

Level

(AxB)

Risk

Priority

1 Lowest b idder i s awarded the contract and cannot


4 4 16 1

2 Contractor refuses to carry out the work after award 1 3 3 5

3 Collusion between Contractor and Engineer 2 3 9 3

4 Rates quoted by other bidders revealed to competitors

before closing date of bid submission

1 5 5 4

5 Cost of total work uncertain till the end of the project 2 5 10 2

3.3 Probability Impact Matrix for Open Advertised Bidding

I m p a c t

5 4 5

4 1

3 2 3

2

1

1 2 3 4 5

Likelihood

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Risk

No.

Description Risk Response Risk Monitoring

1 Lowest bidder is awarded the contract and cannot deliver as

per specifications

Change all

unacceptable

accessories

Regular supervision and

inspection

2 Contractor refuses to carry out the work after award Bid Bond seized Bid Bond submitted

3 Collusion between Contractor and Engineer Internal Audit Claims for payment,

compliance certificates and

approval of works checked

by principal engineer

4 Rates quoted by other bidders revealed to competitors before

closing date of bid submission

Annul any

award of bid

Bids are well sealed and

secured

5 Cost of total work uncertain til l the end of the project Contingency

provided

Continual assessment of

cost of project value

Table 6: Risk Response and Monitoring for OAB

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4.0 Quantitative Analysis

From the Probability Impact Matrix, the risks found in the red zone are defined as extremely high

probability-impact risk and those in the blue ones have been defined as high probability-impact

risk.

In this respect, a qualitative analysis of these risks should be done. It is observed that for both

types of procurement methods, risk scenario number 1, that is, ‘Lowest bidder is awarded the

contract and cannot deliver as per specifications’ is the most critical risk. No risk is observed on

the blue cells.

The table below illustrates some criteria assessed during procurement. The criteria being unequal

in importance have been assigned weights. In the next column the likelihood how far these

criteria are met is shown by assigning values between 1 and 10. 1 means response is low and 10

means response is high.

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Table 6: Weighted Score for MC & OAB

Criteria for

assessing quality of

works

Weightage

(0-1)

MC

(1-10)

Likelihoodcriteria is met

Weighted Score

(MC)

(Weightage x

likelihood)

OAB

(1-10)

Likelihood criteriais met

Weighted Score

(OAB)

(Weightage xlikelihood)

Technical Proposal +

Plant & Equipment

+Compliance

certificates

0.8 8 6.4 9 7.2

Foreman full time on

site0.6 2 1.2 7 4.2

No. of skilled labour 0.7 6 4.2 5 3.5

Past Experience in

similar Works 0.9 8 7.2 7 6.3

Average Turnover at

least 5 times cost

estimate

0.5 6 3.0 8 4.0

Profit for past 3 years 0.5 6 3.0 5 2.5

Sum of weighted

Score25.0 27.7

It is observed that MC having the lowest score is at a higher risk than OAB.

5.0 Conclusion

Maintenance Contract is good as works can be started at a much earlier time than procurement

through Open Advertised Bidding. However, risks of getting works done with inferior quality are

higher, as depicted by a lower score. Hence, procurement via OAB is preferred.

Supervision and Quality Control for Contractors under the Maintenance Contract should be more

stringent.

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Risk Procurement Assignment - 090164

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