Margin of Preference

7/29/2019 Margin of Preference

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Procurement Policy and procedures



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Table of Contents

1.0 Awareness session 1

2.0 New Measures 2

3.0 Procurement Methods 2

4.0 Margin of Preference 4

4.1 Example of how the margin of preference works 5

5.0 Format of Cost Structure document 5

6.0 Procurement Planning 6

7.0 Procurement legislations 6



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1. Awareness session

In June 2008 the Minister of Finance announced “that for its procurement, Government

will give a preference of 15 percent on price for small domestic enterprises with less than

Rs 50 million turnover and a 10 percent preference for small domestic building

contractors with less than Rs 50 million turnover. The same benefits will be extended on

a temporary basis until December 2010 to domestic manufacturing, regardless of turnover,

to assist them in the transition to global competitiveness.”

In this context, an awareness session was held by the Mauritius Chamber of Commerce

and Industry on the 14th

May 2009 at 10hrs00, at the Plantation House, Port Louis. The

presentation, which consisted of explanations on procedures by two public procurement

officers followed by a question time period, was favourably welcomed by the members of the Chamber.

The main condition for eligibility is a 30% value added* and suppliers have to submit a

cost structure document signed by the certified accountant and also a bank guarantee. (A

model of the cost structure document is provided in Section 5 of the present document)

The Public Procurement Act (2006) and its accompanying 2008 Regulations provide for

the simplification of procurement procedures and ensure that public funds are spent in a

transparent, efficient and fair manner. In that respect, three independent bodies have been

established under the abovementioned act: (1) the Public Procurement Office which is the

engine for effective procurement reform in Mauritius, (2) the Central Procurement Board

(replacing the Central Tender Board) which is now responsible for approving and

awarding major contracts entered into by public bodies and (3) the Independent Review

Panel whose purpose is to consider applications for review from unsatisfied bidders or

potential bidders.

Various suggestions to further improve the procurement process have been made to the

government officers attending the session. For instance, it was proposed that procurement

procedures be further simplified and that administrative costs relating to accountant fees

and bank charges be reduced. It was also suggested to extend the facility to services and,

in view of the fact that it has taken several months for theses schemes to become effective,

it was proposed to extend it beyond December 2010.

All these suggestions were favourably received by the representatives of the Public

Procurement Office.

The working session gave rise to much interest and interaction from the attending

audience, showing that there is a need for more communication and also training to help

suppliers to participate more effectively in government tenders.

* Local Value Added = Total Cost – Cost of imported inputs x 100

Total Cost



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2. New Measures

In the May 2009 Budget Speech, the Minister of Finance proposed the following

measures in order to speed up the procedures:

1. The threshold value of contracts that can be handled at the level of

Ministries/Departments is increased from Rs 15 M to Rs 50 M.

2. For all other public bodies, the threshold value is being raised from Rs15 M to Rs

50 M and from Rs 50 M to Rs 100 M.

3. Procurement Methods

1. Open Advertised Bidding This method is ideal to obtain value for money through increased

competition and should be used for high value procurements where there is

a large number of suppliers. It may also be used in situations where there isa limited number of unknown suppliers.

2. Restricted Bidding This procurement method is used where:

(a) the goods, works or services are available only from a limited number

of suppliers and all of them are known;

(b) suppliers of specialized goods and services have been pre-approved by

the public body, and are part of a supplier eligibility list (section 19 of the

Act);

c) the time and cost of considering a large number of bids is

disproportionate to the value of the procurement, provided the estimated

value of the contract does not exceed five million rupees, and at least 5

bidders are directl y solicited; or

(d) the evaluation of the financial proposal cannot be based solely on the

quoted price per item for small value procurement as other factors such asoperational costs, performance, reliability etc. have to be included to

determine the evaluated cost.

3. Two Stage Bidding

(section 29 of the Act)

In the case of large or complex contracts for goods or works, for which

open or restricted bidding is not suitable because of the difficulty indefining precisely the goods or works.

4. Request for Sealed Quotations


For the purchase of readily available goods or procurement of small works

or small other services for which there is an established market, so long asthe estimated value of the contract does not exceed five million rupees, and

where price is the only determining factor.

5. Direct Procurement


(1) For procurements not exceeding the following prescribed thresholds

(Regulation 44 as amended):

(a) in the case of procurement of goods, where the value does not exceed

500,000 rupees provided the total cost per single item does not exceed

100,000 rupees; and

(b) in the case of procurement of works, consultancy services or other



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services, where the value does not exceed 500,000 rupees.

(2) Where one supplier has the exclusive right to manufacture the goods,

carry out the works, or perform the services to be procured, and no suitablealternative is available;

(3) For additional deliveries by the original supplier which are intended

either as replacement parts for existing supplies, services, or installations,

or as the extension of existing supplies, services, or installations where a

change of supplier would compel the public body to procure equipment or

services not meeting requirements of interchangeability with already

existing equipment or services, provided that the value does not exceed

50 % of the initial contract value;

(4) Where additional works, which were not included in the initial contract

have, through unforeseeable circumstances, become necessary and the

separation of the additional works from the initial contract would be

difficult for technical or economic reasons, provided that the value does

not exceed 30 % of the initial contract value.

(5) Where the nature of the consultancy services requires that a particular

consultant be selected due to unique qualifications.

6. Emergency Procurement


1) A public body may procure goods, works or other services from a single

supplier without competition, in case of emergency or extreme urgency.

The scope of the emergency procurement shall, as far as possible, be

limited to the period of the emergency, so that appropriate competitive

procurement methods may be utilised at the conclusion of the emergency

period. "Extreme urgency" includes a situation wherein:

(a) the country is either seriously threatened by or actually confronted with

a disaster, catastrophe, war or Act of God;

(b) life or the quality of life or environment may be seriously

compromised.

(2) Where the condition or quality of goods, equipment, building or

publicly owned capital goods may seriously deteriorate unless action is

urgently and necessarily taken to maintain them in their actual value or

usefulness; and

(3) Where investment project may be seriously delayed for want of an item

of a minor value.

7. Community or end-user participation


Where:

(1) community or end-user participation may result in enhancing theeconomy, quality or sustainability of the service to be procured; and

(2) the objective of a project is to create employment and community

involvement.

8. Departmental Execution


Where:

(1) an activity is not likely to attract bidders or may impose unacceptable

risks on the contractor as the cost cannot be pre-determined; or

(2) the risk of unavoidable interruptions can be better borne by the public

body; or

(3) an activity requires practical method for construction, maintenance and

conservation under special conditions; or



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(4) in the case of a pilot project for the development of a technology,

where work cannot be carried out by a contractor; or

(5) works have to be carried out without disrupting existing operations; or

(6) there is an emergency such as a national disaster which calls for immediate action

9. Request for Proposals


When the public body seeks to obtain consulting services or other services

for which Open Advertised Bidding is not suitable because of the difficulty

in defining precisely the services.

4. Margin of Preference

Section 28(2) of the Public Procurement Act (2006) stipulates that in appropriate cases

and subject to regulations to that effect, a bidding document may provide an advantage or

preference to a bidder.

In that respect, margin of preferences will be granted in the following circumstances:

A. National Bidding

§ Goods: 10% margin of preference will be given for goods manufactured by

small and medium enterprises where the value of the local inputs in respect of

labour and/or materials account for at least 30%

§ Works: 7.5% margin of preference will be bestowed on domestic contractors ,

subject to performance by the foreign subcontractors or, in case of jointventure, performance by the foreign partner not exceeding 50 % of the works.

B. International Bidding

§ Goods: 15 % will be given for goods manufactured by domestic enterprises

where the value of the local inputs in respect of labour and/or materials

account for at least 30%; and

§ Works: 10 % to domestic contractors, subject to performance by the foreign

subcontractors or, in case of joint venture, performance by the foreign partner

not exceeding 50 % of the works.

Note: SMEs are defined as bidders (individuals or firms) having an annual turnover not

exceeding Rs 50 million.



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4.1 Example of how the margin of preference works

In the case of a national bidding on goods, the margin of preference provided to the SMEwill operate in such a way that 10% will be added on the bids made by the other non-

SME bidders. Thus, the bid of Rs 9,900,000 initially made by ‘Other Bidder A’ is

increased by Rs 990,000 (10% of Rs 9,900,000) to Rs 10,890,000.

While the SME bidder would have ranked fifth without the margin of preference, it

ranked first after the application of the margin of preference.

5. Format of the Cost structure document

COST STRUCTURE FOR VALUE ADDED CALCULATION PRODUCT

Rs Rs

Raw Materials, Accessories & Components

· Local (VAT & Excise Duty Free) ................ .................

Labour Cost

· Direct Labour ................. ..................

· Clerical Wages .................. ..................

· Salaries to Management .................. ..................

Utilities

· Electricity .................. ..................

· Water .................. ..................

· Telephone .................. ..................

Depreciation .................. ..................

Interest on Loans .................. ..................

Rent .................. ..................

Other (please specify)

· ........................................ .................. ..................

· ........................................ .................. ..................

TOTAL COST

SME Other Bidder A Other Bidder B Other Bidder C Other Bidder D

Bid 10,000,000 9,900,000 9,950,000 9,970,000 9,980,000

10% Preference 990,000 995,000 997,000 998,000

Total 10,000,000 10,890,000 10,945,000 10,967,000 10,978,000

Rank 1 2 3 4 5



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6. Procurement Planning

Members are informed that public bodies will publish on their website an annual procurement plan with periodical updates to inform suppliers of future projects.

The annual procurement plan, which will be prepared at the beginning of every financial

year, shall include –

§ the type and quantity of the goods, works or services to be procured;

§ the timing and implementation of the procurement;

§ an indication of possible packages of procurement, and their value;

§ an indication of possible pre-qualification proceedings and procurement

methods to be used;

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such other information as may be required in accordance with instructionsissued by the Policy Office.

7. Procurement Legislations

Acts § Public Procurement Act 2 006

§ Public Procurement R egulations 2008 Regulations

§ Public Procurement (Suspension and Debarment) Regulations 2008

Margin of Preference

Documents

Transcript of Margin of Preference