Download - Training Workshop on Procurement

7/28/2019 Training Workshop on Procurement

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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: [email protected]

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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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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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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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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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 accounts, systems, valuation

Technical review technology, operations, permits, infras

Information collected here will be used in the Tend Helps to set the scope of the tender what do you

to provide?

Identify problems and fix them, or adjust the tende

Collect information to give to Bidders


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MarketingHot Topics:

To inform potential bidders of the opportunity

take part in the tender

TV and

Ministe

Roadscountri

are ba

Person

contact

Iraqi Em

Foreign

Advertise in specialist/trade press

Advertise in local newspapers

Advertise in the international press(The Economist, Financial Times,

International Herald Tribune)

Ministry and Government websites

(download the RFP)

Specialist websites

Issue a press release


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Exercise 2:

You are running a tender for the construction

electricity substations:

1. What information would you include in the advertis

2. Where would you advertise?


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The Tender Process

FIDIC Section Tasks

2.3 Issue and submission ofprequalification documents

Issue the RFP. Bidders subm Organisation and structure Experience in the project w

and in the region Resources available*

(technical, managerial, labo

plant) Financial statements Current contract commitme Litigation history*Acknowledge receipt

At this stage the objective is to see whether th

capable of doing the work do not ask for the

specifications or prices

* These are more relevant to con


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Request for ProposalsHot Topics:

This is a marketing document make the tend

attractive opportunity to potential bidders

Contents include:

Background to the tender why are you doing it?

Objectives what do you expect to achieve

Invitation explicit request for Expressions of Interest Scope describe what you are buying (construction, equ

The tender describe the process, indication of timing

Qualification criteria

Qualification process number of copies, language of sutime for submissions, address to send them to

If you are using a standard form for submissio

included


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The Tender Process

FIDIC Section Tasks

2.4 Analysis ofprequalification submissions

Review submissions against tqualification criteria:

Company/consortium struc Experience Resources Financial capability

General suitability

The aim is to qualify as many bidders as possible to mpressure but also to eliminate time-wasters

Do not rely entirely on their submissions you may ne

checks to verify the qualifications of potential bidders


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The Tender Process

FIDIC Section Tasks

2.5 Select bidders Prepare a shortlist of bidders

Depending on the type of project a shortlist of 3 - 7 comcompetition

More than this risks putting off potential bidders


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Day 2: Running a Compet


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The Tender Process

FIDIC Section Tasks

3.1 Prepare TenderDocuments (or Bid Pack)

Company/consortium structur Letter of invitation to tende Instructions to bidders

(Tender Rules) Conditions of contract (or d

contracts) Form of tender and

appendices Drawings* Bills of quantities* Additional information

(Information Memorandum

Information data (DataRoom)

You should aim to provide all the information

the contractor to prepare their bid

*These are more relevant to constructio


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The Tender Process

FIDIC Section Tasks

3.2 Issue Tender Documents(or Bid Pack)

Issue Documents to qualifiedbidders

If the information in the Bid Pack is sensitive bidders shAgreement before receiving it

Bidders must accept the Tender Rules (either implicitlygiven the information or being allowed to proceed with


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Confidentiality AgreemHot Topics:

Must be signed before bidders can receive an

confidential information

Contents include:

Definition of confidentialinformation

Obligation on the bidder not to disclose the information toadvisers) unless it has already been made public

Term of the agreement normally extends 2-5 years afte

Some bidders will insist on negotiating the Ag

bidders must sign the same document any cha

to a minimum


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Information MemoranHot Topics:

The Information Memorandum must include a

the issuer from future legal action For examWhilst the [issuer] has taken all reasonable steps to ensure tthis document, no reliance whatsoever should be placed upothird parties). The [issuer] accepts no liability for damage sufarising out of, or any reliance placed on any part or parts of tinvestors should conduct their own due diligence investigatio

matter of this document prior to taking any action on the basherein. The [issuer] expressly disavows any obligation or duotherwise) to any Bidder. No Bidder is entitled to rely on the [preparation of this Information Memorandum or in the solicitbidding on or developing the project.

In submitting a proposal in response to the RFP, each Biddeaccepts and agrees to the disclaimers on this page; and agreany other provision of the RFP or any statements made orallparty will have the effect of negating or superseding any of thpage.


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The Tender Process

FIDIC Section Tasks

3.3 Site visits Arrange date and time for visi

Site visits: employer mu

For some types of tender (eg consultancy services or phave:

Individual visits, including presentations from relevant peopportunity to ask questions

A Bidder Conference, where all bidders attend together

Bidders often feel more comfortable with individual visi

Transcripts of all questions and answers should be pro


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The Tender Process

FIDIC Section Tasks

3.5 Addenda to TenderDocuments

Issue any addenda and repliequestions to all bidders

When changing the Tender Rules it can be more flexib

rather than addenda

You can also take comments on draft contracts and isshelp to reduce time spent in negotiations


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The Tender Process

FIDIC Section Tasks

3.6 Submission and receiptof Tenders

Record date and time of rece

Acknowledge receipt

Return unopened any bidsreceived late

Avoid the temptation to accept bids that are delivered leven if it was not the bidders fault (eg late delivery by

Bidders can hand deliver their bids


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Bid Bonds & GuarantHot Topics:

Large projects often demand a Bid Bond or Guarantee

The aim is to make the tender less attractive for time wpreferred Bidder an incentive to agree and sign the con

The Bond (usually a bank guarantee) will pay a fixed sMinistry) if the Bidder fails to meet certain commitment

Bid complies with the Tender Rules

Commitment to negotiate in good faith if selected as the

Commitment to keep to the terms of their proposal

No bribery, corruption or collusion

The winning Bidder may be required to replace the BidBond, which pays out if they fail to start the project

The FIDIC Tendering Procedure document includes a


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The Tender Process

FIDIC Section Tasks

4.1 Open tenders Public or restricted opening: Announce and record nam

of bidders and prices Announce and record

disqualified bidders

For most tenders a restricted opening (bidders only) is

A press release can be used to inform the public of thenames of bidders


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The Tender Process

FIDIC Section Tasks

5.1 Review tenders(compliance)

Check that bids meet therequirements of the Tender R

Reject bids that do not comply

Reject bids that do not include all the necessary docuare not correctly sealed or labelled


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Bid StructureHot Topics:

Proposals are usually in two parts:

Financial Proposal: price, payment schedule and relate

Technical Proposal: approach to implementing the pro

business plan (where relevant), experience of key staff p

The format for proposals should be included in the Ten

easier to evaluate and compare bids

If technical aspects are important it is best to set a hurd

proposal only bids that pass the technical evaluation

evaluation. In that case you should not open the finantechnical evaluation is completed

The aim is to avoid being forced to choose a c


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Evaluating Financial Hot Topics:

Allocate marks for the Financial Bid (normally score ou

Lowest (or highest if selling something) price gets full m

Other bids are scored relative to the best price using th

Buying: Scorei = Priceb x 100Pricei Sc

PrPrSelling: Scorei = Pricei x 100Priceb

Keep it simple: bidders will play the numbers game if tcomplex

Payment timing is relevant a lower bid that requires umore. Either:

Set the payment schedule yourself

Discount the phased payments to get a single figure at to


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The Tender Process

FIDIC Section Tasks

6.1 Issue Letter ofAcceptance

Issue acceptance to the winnbidder

A template Letter of Acceptance may be included in th


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The Tender Process

FIDIC Section Tasks

6.3 Prepare ContractAgreement(Closing)

Prepare contract documents

Sign contract(s)

Negotiate final contracts (if necessary)

Complete final contracts (name, address, p Sign final contracts

Transfer funds (if necessary)

Issue shares/permits/concession, etc, (if ne

Hand over to the winning Bidder (if necessa

Final Press Release

The aim is to complete the tender as quickly a

possible and hand over to the winning bidder


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Summary of Key Documents

InvitationTo Qualify

Parties Government Government, a

Term N/A 2 5 years aft

Purpose Marketing document to stimulate initialinterest from Bidders

To maintain seinformation

Contents The opportunity

Background (sector, economy, company)

Qualification criteria

Indicative timetable

Submission requirements forExpressions of Interest

Definition of

Non-disclos

Term of vali


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Common Practical Problems

Problem Op

Reject the non-compliant

Improve the conditions a

offers

Cancel the tender and ru

conditions

Non-compliant bids

It may be beneficial agree

on the reason for request

You may wish to consult

Reject the request, contin

1 bidder requests

an extension to the

timetable

A bid is delivered late Reject it

Allow it (depends how lat


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Common Practical Problems

The appropriate response to these problems depends

Major breaches of the Tender Rules cannot be accepteyour discretion)

If you have a number of good bids it is easier to reject

Bidders may have to get Board permission to commit tthis often causes delays as Board meetings may be inf


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TimetableAct iv ity Time* Months

(weeks) 1 2 3 4 5 6 7 8 9

Draft terms of Reference for Adviser 3

Prequalify Advisers 6

Select and appoint Adviser 12

nternal Due Diligence 4

Prepare Invitation to Qualify 4

Marketing to investors 6

Expressions of interest submitted 0

Prepare Information Memorandum 4

Prepare Tender Rules 4

Draft Power Purchase Agreement 10

Draft Fuel Supply Agreement 10

Draft other contracts/guarantees 10

Shortlist bidders 3

Sign Confidentiality Agreement 2

ssue Bid Pack 0

Bidder Due Diligence 12

Bidder Conference 2

Bids submitted 0

Bid evaluation 4

Appoint winning Bidder 0

Negotiations^ 0-6-?

Closing 4

*Given the current situation in ^Depends on how much is pre


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USAID-Funded Economic Governance II Project

Procurement Training Workshop

Exercise 1

Choosing a procurement option

Which option would you use for the following purchases (tick the box)?

InternationalCompetitiveTender

NationalCompetitiveTender

Shopping DirectContract

FrameworContract

1. One years supply ofphotocopying paper and

pens

2. Catering (food anddrink) for a conference

3. 100,000 solid stateelectricity meters

4. Construction of a 800MW Combined Cycle

Gas Turbine generating

station

5. IT training for 1,000Ministry staff to be

provided over a 1 year

period

6. Urgent repairs to a lowvoltage substation

7. Painting a Ministryoffice building

8. Providing furniture for10 offices

9. Purchase and installationof 150 km of high

voltage transmission line

10.Cleaning services for anoffice building for 1 year


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Exercise 3

Bid Criteria

You are running a tender for a contract to provide transport services (vehicles,

servicing and repairs).

What Qualification Criteria and Bid Evaluation Criteria would you use?

Qualification Criteria

1

2

3

4

Evaluation Criteria

1

2

3

4


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Contents

Course OutlineDay 1: What is Procurement?/ Running a Competitive Tender Part 1

Day 2: Running a Competitive Tender Part 2

Exercises

FIDIC Tendering Procedure

Outline for Billing and Collections Request for Proposals

Examples of Advertisements (English)

Confidentiality Agreement

Tender Rules Contents

Government of Lesotho: Information Memorandum Concerning the Privatisation of theLesotho Electricity Corporation contents

Three Bids, New Tender for TPP Plevlja (article)