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USAID-Funded Economic Governa

Training Worksho

on

Procurement

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Authors

This document was prepared by:

Richard Kupisz

Electricity Sector Lead

BearingPointBaghdadIraqTel: +1.703.994.4674GSM: +964.(0)790.191.9596E-mail: richard.kupisz@ipaenergy.co.uk

This document is protected under the copyright laws of the United States and other countries: it has been preparedand/or contractors working directly for BearingPoint under the auspices of the U.S. Agency for International DeveloThis document and all accompanying pages are strictly for the use of USAID in support of their own consideration where explicitly stated otherwise, the following information was prepared on the basis of data that is publicly availa

independently verified or otherwise examined to determine its accuracy, completeness or financial feasibility (wheracting on behalf of either assumes any liabilities, expenses (including attorneys fees and legal expenses) fines, penresulting from the use of any information contained in this document.

2005 BearingPoint, Inc. All rights reserved.

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Day 1: What is Procu

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Contents

z Objectives for the Workshop

z What is Procurement?

z Setting Your Objectives

z

Fairness and Transparencyz Procurement Options

z The Tender Process (Part 1)

z Hot Topics

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Objectives for the Workshop

This Workshop will:

z Describe the main methods of procurement

z Describe how you would carry out a competitive tender

z Discuss how to deal with some of the typical problems

The FIDIC Tendering Procedure is used as an

competit ive tender process

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What is Procurement

Procurement: the act of getting or obtain

(Blacks Law Dictionary)

For the purposes of this Workshop it means the purcha

z Goods or equipment

z Services

z Construction

By a public sector organisation

The competitive tender process can also be usinvestment for example in tenders for Indepe

Producers or privatisations of State-owned as

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Setting Your Objectives

It is important to set your objectives at the be

What kind of objectives would you suggest?

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Setting Your Objectives

Price is not the only option

Quality

Timing

After sales service

You may also have project-specific objectives:

Improve revenue collections by 50

Adopt hand-held meter reading tec

Install baseload or peak generating

Paint the Ministry building pink

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Setting Your Objectives

Objectives must be prioritised to avoid conflic

Potential conflicts

Pricevs

Quality

Delivery timevs

Quality W

You should adopt a limited number (normally

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Fairness and Transparency

A transparent, competitive tender is essential

Pressure from other bidders encourages com

Purchaser sets the rules of the game

Strengthens Iraqs international reputation

Less likely to be questioned later

And to rebuild confidence in Iraq

But sometimes achieving this is harder than it

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Fairness and Transparency

How do you achieve it?

Fairness

Open tender ay qualified bid

Treat all bidders the same:

Same information

at the same time

Same opportunities for sit

Same criteria to evaluate

Actively discourage corruption

There must be a level playing field any qua

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Fairness and Transparency

Transparency

Clear tender process, well communic

Same information

at the same time

Answers to one bidders questions ar

Advertise the tender widely

Clear, objective evaluation criteria, co

Allow bidders to comment on the Ten

Bidders/public can attend the bid ope

Press release/public relations to pub

Provide as much information as poss

Keep bidders informed throughout th Stick to the Tender Rules

Avoid changing your mind or reversin

Consult other bidders if making chan

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Procurement Options

There are various options available

International

Competitive

Tender

International

Competitive

Tender

ShoppingShopping

Invited BidInvited Bid

The one you choose depends on the specific s

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National

Competitive

Tender

National

Competitive

TenderProcurement Options

What A formal tender process, limited to locally-bas

When If the good or service is only available locally,contract size is small or the advantages of an outweighed by its disadvantages

Advantages 9 Can be quicker, with less administrative bu

9 Can hold the tender in Arabic

9 Can get a better price for some goods and

9 Can be used to promote local businesses

9 International firms can still bid if they have

Dis-

advantages

8 Artificially reduces competition - may get a

8Time and cost savings may not be great tender

8 Potential lack of transparency (perception/

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ShoppingShopping

Procurement Options

What Informal process, written quotations should be

suppliersWhen For readily available, off the shelf goods, stan

or simple works

Advantages 9 Quick to implement

9 Low administrative burden

9 Low cost to the Ministry and bidders

Dis-

advantages

8 Does not work for large or complex or non-

8 Does not work for most types of services

8 Potential perception of lack of transparency

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Direct

Contract

Direct

ContractProcurement Options

What Invite one or (preferably) a number of compan

without advertising or prequalificationWhen If there are few companies that supply the pro

suppliers are known to you or if the project is run a full tender

Advantages 9 Quicker than a full tender

9 Low administrative burden9 Low cost to the Ministry and bidders

Dis-

advantages

8 Less competition means a worse deal

8 Risk of missing out qualified suppliers

8 Risk of including suppliers that are not qua

8 Lack of transparency suppliers that are le

8 Risk to Iraqs reputation

Unless time is important it is best to avoid this

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Procurement Options

Choice of option depends on the specific situa

Com-

plexity of

project

Cost Timing Available

locally?

International

Competitive Tender

High High Long Notnecessary

National

Competitive Tender

Medium-high

Medium-high

Long Yes

Shopping Low-medium

Low-medium

Short Yes

Direct Contract Any Medium Medium

Notnecessary

Framework

Contract

Low Low Short Yes

objectives

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Exercise 1

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The Tender Process

The main stages of the tender

Internal Due

DiligenceMarketing

Pre-

qualificati

Bidder DueDiligence

Final

Transaction

Documents

BidSubmissi

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The Tender Process

FIDIC Section Tasks

1.0 Establish ProjectStrategy

Agree: Procurement methodTimetable

At this stage the objectives for the project must be set o

Internal due diligence will need to be carried outAdministrative arrangements must be established:

Hiring advisers

Steering Committee and/or Working Group

Who implements the Tender and who do they report to

Timetable is indicative at this stage delays a

tenders, timing for negotiations is unpredictab

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Internal Due DiligenceHot Topics:

Legal review laws, regulations, court cases

Financial review accou