“WORKS” PROCUREMENT AND CONTRACT PROVISIONS · 1 5 Compilation of the contract documents Best...
Transcript of “WORKS” PROCUREMENT AND CONTRACT PROVISIONS · 1 5 Compilation of the contract documents Best...
Salih. K. KalyoncuCountry Team Leader
Solutions and Innovations in Procurement
June 18, 2019
“WORKS” PROCUREMENT AND CONTRACT PROVISIONS
WORLD BANK’S PROCUREMENT FRAMEWORK
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Procurement Vision & Core Principles
VISION“Procurement in Investment Project Financing supports Borrowers to achieve value for money with integrity in delivering sustainable development”
Procurement Regulations for Borrowers
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August 2018
Procurement Regulations for Borrowers
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CONTENTS:
o Sections I & II: Introduction and General Considerations
o Section III: Governance
o Section IV: PPSD & Procurement Plan
o Section V: Procurement Provisions
o Section VI: Approved selection methods (Goods, works, non-consulting services)
o Section VII Approved selection methods (Consulting services)
o Annexes (15 no.)
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New Procurement Framework
Limited options, very prescriptive
Fraud and Corruption seen as primary challenge
Mixed capacity - clients, suppliers and Bank
Arms-length approach to markets
Primary focus on selection phase
Key focus on results
BEFORE AFTER
Fit for purpose approach as enabler of value for money
Flexible, risk-based decision-making
Early, proactive market engagement
Capacity building
Dynamic risk management, enhanced integrity, fairness and transparency
Increased focus on contract management
One size fits all
Benefits of new Procurement Framework
Modernizes how the Bank engages in procurement and project activities with its partners
Modern01
Introduces choice in the design of procurement processes to ensure fit-for-purpose
Flexible02Ensures that procurement approaches and methods are efficient through being proportional
Efficient03
Allows the market to propose innovative solutions, where appropriateInnovation04
Promotes integrity and enhances good governance Integrity05
Delivers better development results on the groundResults06
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Link to more information
https://www.worldbank.org/procure
Projects after July 1, 2016
World Bank website
TYPICAL TIMELINE FOR WORKS CONTRACT
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Typical project timeline
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Typical project timeline (continued)
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Typical basic mistakes
► Late selection of Consultant / Engineer
► Wrong choice of contract form
► Unclear design responsibilities
► Employer’s excessive interference
► Ineffective management / late decisions
► Onerous interpretation of Contract Conditions
► Lack of co-operative attitude
PROCUREMENT & WORKS CONTRACT
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Essential procurement considerations
Selection method
Market approach
Contract type
Employer
Supervision consultant
Scope of works
Timeline
Budget
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Compilation of the contract documentsBad practice:
Lawyer Designerprepares preparescontract technicaldocuments documents
Employerputs
togetherDocuments
without checking the consistencyof the Documents as a whole
Result: discrepancies remain in the Documents, which later causes additional costs, delay in performance,
variations, Contractor’s claims, debates and a lot of headaches
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Compilation of the contract documentsBest practice:
Contract expert Designerprepares preparescontract technical
documents documentsin cooperation with in cooperation
lawyers and designers with Contract expert
Contract expert compileContract Documents with checkingthe consistency of the Documents as a whole with the supervisionof the Employer
Result: Documents will be consistent, no discrepancies, less headache, Works can be completed within the
Time for Completion without major debates
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Priority of the contract documents (sample WB contract)
(a) the Contract Agreement (if any),(b) the Letter of Acceptance,(c) the Letter of Tender,(d) the Particular Conditions – Part A (Contract Data),(e) the Particular Conditions – Part B (Specific Provisions), (f) the General Conditions ,(g) the Specification,(h) the Drawings, and(i) the Schedules and any other documents forming
part of the Contract.
In case of any discrepancy the higher priority document prevails.In case there is a contradiction within one of the above documents it is the Engineer’s role to issue clarification or instruction
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Essential contract conditions
Performance security
Defaults
Force Majeure
Liquidated damages
Value engineering
Contract change management
Payments
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Essential contract conditions (continued)
Taxes, duties and levies
Price adjustments
Insurance
Copyright and patent indemnity
Applicable law
Settlement of disputes
Fraud and Corruption
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Specific contract conditions for works
Commencement, delays and suspension
Sub-contractors
Retention money
Provisional sum
Daywork
Tests on completion
Employer’s taking over
Defects liability
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Specific contract conditions for works (continued)
Measurement and evaluation
Safety
Staff and labour
“Notice” to correct
HIGHLIGHTS
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Highlights –Contractor’s program
► Contractor shall submit to the Engineer a detailed time programme within 28 days after receiving the notice to commence.The Programme:- detail and comprehensiveness will be the first
demonstration of the Contractor’s ability;- is the basis for monitoring the Contractor’s progress
and planning Employer/Engineer activities and obligations;
- becomes a base reference for the Engineer’sdetermination of Contractor’s claims for extension of Time for Completion arising from alleged disruption or delay.
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Highlights –Contractor’s program (continued)
► The programme shall indicate:- order of execution of the Works, Contractor's
Documents, procurement, off-site manufacture and fabrication, delivery, construction, erection, and testing;
- sequencing of the Works, taking into account the lead time of procedures for obtaining any approvals;
- detail of works performed by Nominated Subcontractors;
- general description of the methods to be adopted; - estimates of Contractor’s Personnel and Equipment;- that the Works will be completed within the Time for
Completion.
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Highlights –Contractor’s program (continued)► Typical Gantt Chart
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Highlights –Breakdowns of lump-sums
► It is advised that the Engineer requires the Contractorto submit a breakdown of lump sums within 28 days after the Commencement Date.
► Unit rates and prices for new or varied works should, wherever possible, be derived from Contract unit rates and prices for similar works.
► Having the Contractor’s breakdowns of Contract rates and prices provides a valuable tool for establishing rates and prices for new or varied works.
HOWEVER “The Engineer may take account of the breakdown when preparing Payment Certificates, but shall not be bound by it.”
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Highlights- Variations
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Highlights –Contractor’s cashflow
► The Cash Flow is a crucial issue for the Tenderers when calculating the Tender Price.
► A negative Cash Flow may have significant price increaseeffect, as the Contractor shall bear high financial risks.
► A positive Cash Flow may have Tender Price reducing effect, thus, desirable also for the Employer.
IMPORTANT: the major source for financing the Works is theEmployer’s payments!Typical mistake: in lack of administrative resources Employerraises monthly payment period to two or three months, resulting Cash Flow problems to the Contractor
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Highlights- Price Adjustment
SAMPLE PRICE ADJUSTMENT CLAUSE
Pn = a + b Ln/ Lo + c Fn/Fo + d Mn/Mo
Base index
Current index Increase
Fixed (a) 100 100 1.00
Labor (monthly salary) $325.00 $355.00 1.09
Fuel (price per liter) $1.50 $2.25 1.50
Construction materials (index) 128 176 1.38
PRICE ADJUSTMENT FACTOR
Fixed Labor (L) Fuel (F) Materials (M)
Weighting (a)
Index increase
Weighting (b)
Index increase
Weighting (c)
Index increase
Weighting (d)
Index increase
Price $50,000 15% 1.00 35% 1.09 20% 1.50 30% 1.38
Increase 0.15 0.38 0.30 0.41
Total adjustment factor (Pn) 1.24
Adjusted price $62,000
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Highlights – Formal amendment of the contract
► Except as may be specifically provided by PCs, the following Contract documents cannot be amended without formal Contract Addenda and Amendments signed by the Parties to the Contract:
- Contract Agreement and Appendix to Tender
- Conditions of Contract
- Specifications
- Employer’s Requirements (design/build contract)
- Unit rates and lump sum prices.
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Highlights – Extension of time
► If completion of the Works is delayed by certain causes outside the Contractor’s control, the Contractor is entitled to extensions of the Time for Completion [S-C 8.4].
► Engineer must, subject to the Contractor’s compliance with claim procedures, determine the amount of such extensions.
► Care must be exercised when assessing and awarding EoT- once awarded, it cannot be withdrawn.
► Unreasonable delay by the Engineer in responding to a claim for an EoT can release the Contractor from his obligation to complete within the Time for Completion.
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Highlights – Suspension, termination
Contractor’s entitlements:- Reducing the rate of work- Suspension of work- Termination of the Contract
(for contractual reason)
Employer’s entitlements:
- Termination of the Contract(for contractual reason)
- Termination for convenience
Both Party is entitled to terminate the Contract, provided the actual conditions enable this termination
There is no opportunity for termination of the Contract by mutual will of the Parties!
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Highlights – Taking over certificate
► The date indicated in the TOC as the date of completion/ Taking-Over for the whole of the Works is the date from which:– responsibility for care & maintenance transfers to the
Employer;– Effectiveness of insurance ceases;– part of the Retention Money is paid to the Contractor;– time begins to run for the Contractor’s submission of a
Statement at Completion.► The date of completion stated in the Certificate is the date from
which the Employer’s entitlement to Delay Damages ends, and the Defects Notification Period starts to run.
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Highlights – Compliance with local law
► Engineer to ascertain at an early stage, with the Employer’s assistance, if there are local laws, regulations or ordinances governing the administration of the Contract and taking‐over the Works on completion.
► Problems might arise where requirements of the applicable law contradict the Contract provisions.
► If provisions of the Contract and local law are not in conflict, then provisions of both references should be satisfied in tandem.
QUESTIONS
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Questions – Abnormally low bid
Regulations
An Abnormally Low Bid/Proposal is one in which the Bid/Proposal price, in combination with other elements of the Bid/Proposal, appears so low that it raises material concerns with the Borrower as to the capability of the Bidder/Proposer to perform the contract for the offered price.
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Questions – Abnormally low bid (continued)
Guidance Note
Where fewer than five Substantially Responsive Bids have been received, the “absolute” approach identifies an ALB based on a comparison of the evaluated Bid price, and its constituent parts, with the Borrower’s own cost estimate. If the Bid price is 20% or more below the Borrower’s cost estimate when fewer than five Substantially Responsive Bids are received then the Borrower should clarify the Bid price with the Bidder to determine whether the Bid is Abnormally Low.
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Questions – Abnormally low bid (continued)
Guidance Note
The ‘relative’ approach uses a statistical calculation using at least five Substantially Responsive prices. A potential ALB is identified where the low Bid is more than one standard deviation below the average of the Substantially Responsive Bids received.
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Questions – Project Procurement Strategy
The Project Procurement Strategy for Development (PPSD) is a methodology that is used to determine the optimum procurement approach to deliver the right procurement result. The PPSD asks the Contracting Authority to consider, among other things:
The market situation The Operational context Previous experience The risks present
Then from this, determine the right procurement approach that will yield the right type of response from the market.
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Questions – Project Procurement Strategy (Continued)
What does a PPSD contain?
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Questions – Project Procurement Strategy (Continued)
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Questions – Project Procurement Strategy (Continued)
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Questions – Project Procurement Strategy (Continued)
PPSD generates the below outputs:
Procurement plan (the PPSD provides adequate justification for the selection methods in this output)
Wherever needed, the following outputs may also be generated:
Activity procurement strategyProcurement risk management planContact management plan
THANK YOU