procurement overview

Procurement OverviewProcurement Overview

Dec 2010

IntroductionIntroduction

Purchasing goods, services and works (procurement) is a critical element of project implementation. . .

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• Inefficient or ineffective procurement may have serious consequences:

expected project results & impact not achieved delays in project implementation higher cost of implementation

• Procurement is a sensitive activity: can be conducive to corruption & fraud

complexity of certain procurement actions combined use of national & IFAD regulations

/guidelines

Importance of Procurement – IFAD GuidelinesImportance of Procurement – IFAD Guidelines

Proper use of loan funds: IFAD must ensure financing proceeds

are used only for intended purpose: specifically CPM & support staff

oversight

Economy & efficiency requirements in project implementation in

general & procurement in particular: IFAD must ensure contract

awards result from a competitive process

IFAD must ensure equity, integrity, transparency & good

governance in procurement process

Concept of “no objection”

IFAD’s fiduciary responsibilities:

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ResponsibilitiesResponsibilities

Implementation of project/ programme including award & administration of contracts

BorrowerBorrower/ / RecipientRecipient

IFAD supervises the Borrower’s procurement actions in order to ensure that funds are used for the purpose of the Financing agreement with due attention to considerations of economy, efficiency & social equity

IFADIFAD

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Role of Borrower/ PMU in Role of Borrower/ PMU in Procurement Procurement

Procurement planning (in line with project objectives & AWPB)

Preparation & issuance of bidding documents & invitation to bid

Opening & evaluation of offers

Negotiation, award & signature of contract

Monitoring of contract execution (technical & financial/ administrative)

Delivery of goods/ works/ services

Payment

PMU has overall responsibility for Procurement

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Role of IFAD in ProcurementRole of IFAD in Procurement

Ensure coherence of procurement actions with project objectives, AWPB & procurement plan, & timing within implementation period

Ensure funds availability: cost of procurement must not exceed funds allocated in Financing agreement & AWPB

Ensure transparency & equity: procurement must be conducted in compliance with applicable rules & procedures

Ensure best value for money: procurement must be the result of a competitive process

Review procurement plan, prequalification of bidders, perform procurement review – prior & ex-post

CPM must:CPM must:

• IFAD staff must maintain neutrality & impartiality

• Flexibility is a must – but know rules & regulations

• IFAD staff must maintain neutrality & impartiality

• Flexibility is a must – but know rules & regulations6

Formation of Bid Evaluation Committee; N-O by IFAD

Prepare Specifications and tender documents (Advertisement/ ITBs/ RFPs/

RFQs as applicable)

Bid Evaluation and draft contract IFAD Prior Review & No-Objection

(if required)

Contract Award to best evaluated bid

ITB – ITB – InvitationInvitation to to BidBid

RFP – Request for RFP – Request for Proposal Proposal

RFQ – RFQ – RequestRequest for for QuotationQuotation

KeyKey

Tendering ProcessTendering Process

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Procurement MethodsProcurement Methods

Different methods (ranging from International Competitive Bidding to Direct Contracting) are used for the different categories of procurement depending on nature, amount & other criteria - guiding principle being economy, efficiency & social equity

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Common Procurement MethodsCommon Procurement MethodsInternational Competitive Bidding (ICB): for high value requirementsInternational Competitive Bidding (ICB): for high value requirements

• Advertise in widely circulated newspapers, local representatives, Embassies, UN Development Forum

• Pre-qualification

• Public bid opening

• Bid evaluation based on point scoring system (technical & financial)

• Advertise in widely circulated newspapers, local representatives, Embassies, UN Development Forum




National Competitive Bidding (NCB): public procurement in Borrower’s countryNational Competitive Bidding (NCB): public procurement in Borrower’s country

• Advertise in local newspapers (note: foreign suppliers may bid)




• Advertise in local newspapers (note: foreign suppliers may bid)




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Common Procurement MethodsCommon Procurement Methods

International ShoppingInternational Shopping

• short-list at least 3 reputable suppliers in at least 2 member countries of IFAD• issue ITB to the short-listed suppliers• receive bids in original form (not faxed)• bid evaluation based on lowest cost for compliant offers• sign contract

• short-list at least 3 reputable suppliers in at least 2 member countries of IFAD• issue ITB to the short-listed suppliers• receive bids in original form (not faxed)• bid evaluation based on lowest cost for compliant offers• sign contract

Local ShoppingLocal Shopping

• prepare specifications and request for quotations• short-list at least 3 reputable suppliers• issue request for quotations to the short-listed suppliers• receive bids in original form (not faxed)• bid evaluation based on lowest cost for compliant offers• sign contract

Direct ContractingDirect Contracting

• Extension of/ addition to an existing contract• Standardisation of goods with existing project assets

Note: Competitive process is not required. 10

Project Specific PrinciplesProject Specific Principles

Procurement is carried out in accordance with Financing Agreement &/or Letter to the Borrower

Procurement is now not limited to suppliers/ manufacturers from IFAD Member States (since September 2010)

Procurement is to be conducted within the project implementation period

Procurement must not exceed availability of funds duly allocated by Financing Agreement

Procurement must be consistent with approved AWPB

Procurement should provide best value for money

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Regulatory FrameworkRegulatory Framework

Procurement rules and procedures applicable to a particular project come from different sources:

• national procurement rules & regulations

• IFAD Procurement Guidelines

• project design report

• financing agreement

Applicable rules, methods & procedures are specified in Letter to the Borrower, as well as IFAD procurement review requirements

Must adhere to regulatory framework . . .

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Compatibility with National Rules & IFAD’s Compatibility with National Rules & IFAD’s GuidelinesGuidelines

NATIONAL RULES & REGULATIONS MAY BE ADOPTED IF THEY ARE ASSESSED TO BE COMPATIBLE WITH IFAD’S GUIDELINES

Compatible means that they respect the main basic principles of IFAD’s guidelines

N.B. In the unlikely case that some provisions in Schedule 4 of the Financing Agreement/ LTB are not in line with IFAD’s Procurement guidelines, the provisions of Schedule 4 shall prevail

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IFAD Prior ReviewIFAD Prior Review

Schedule 4 of the Financing Agreement/ LTB lists all major

procurement contracts to be awarded on the Project, their estimated

value, category (goods, works, services), the monetary threshold for

IFAD’s prior review

The thresholds may always be modified from time to time as notified

by the Fund to the Borrower/ Recipient (needs agreement by both

parties if the threshold is decreased)

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Mis-ProcurementMis-Procurement

When procurement has not been conducted in accordance

with the procedures adopted (national and/or IFAD)

When a contract has been awarded based on incomplete,

inaccurate or misleading information furnished by the

borrower, even in the case where a NO OBJECTION has been

granted

When a contract has been modified without IFAD’s approval

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Review of Prequalification of Review of Prequalification of BiddersBidders

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Review of Draft Prequalification DocumentsReview of Draft Prequalification Documents

a) a brief description of the goods & works to be procuredb) the contract conditionsc) who is financing the projectd) eligibility requirements for potential bidders, suppliers & contractorse) the time and place where prequalification documents can be obtained

The advertisement & invitation for prequalification should contain:

Prequalification documents should contain further information:

a) the proposed procurementb) the estimated value of the contract & major quantities of workc) location of the workd) procurement scheduling of goods or works to be procurede) abbreviated specifications & conditions of contractf) main quantities to be procuredg) delivery or implementation schedulesh) requirements for bid & performance securitiesi) how the project is to be financedj) payment terms, price adjustment provisionsk) the language & governing law of the contractl) other information in sufficient detail to enable bidders, suppliers or contractors to assess

their interest & respond appropriately17

Procurement Process for Goods, Services & WorksProcurement Process for Goods, Services & Works

Best use of competitive bidding

Step 1Step 1

Step 2Step 2

Procurement List And Bulk PurchaseProcurement List And Bulk Purchase

Procurement PlanProcurement Plan

Model of Procurement plan: proposed minimum contents and to be updated periodically (See Procurement Handbook)

Annex 1

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Step 3Step 3 Preparation of Bidding DocumentsPreparation of Bidding Documents

Procurement Process for Goods, Services & Procurement Process for Goods, Services & WorksWorks

GOODS SERVICES WORKSBidding documents or Request for quotations

Request for Proposals from shortlisted firms

Bidding documents or Request for quotations

Invitation to bidLetter of invitation & general and specific conditions

Invitation to bid

Instructions to bidders with:* Bid security (Lumpsum)* Bid evaluation method and process etc.

Instructions to Consultants with:* Proposal preparation info* Proposal evaluation method and process etc.

Instructions to bidders with:* Bid security (Lumpsum)* Bid evaluation method and process etc.

Conditions of contract (general and special)

Acceptable to IFAD

Conditions of contract (general and special)- International Federation of Consulting Engineers (FIDIC) for large contracts above 10 million USD

Schedule of requirements and technical specifications

Terms of Reference (TORs)Scope of works, Bill of quantities and drawings

Prices schedules Breakdown of costs Prices schedulesContract form Contract form Contract formAnnexes for bid bonds and performance security, tax clearance, etc..;

No proposal or performance securities

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TECHNICAL SPECIFICATIONS (TS) FOR GOODS:

Inappropriate, irrelevant, too many details lead to a restriction of competition: reference to an exclusive mark/ model (IT equipment), too many technical details (computers/ laptops), project or country specifications (give explanations), limit to essential criteria (adherence to TS evaluation), warranty & upgraded equipment, check specialists, visit potential suppliers

Crucial StepsCrucial Steps

70 – 80% OF THE PROBLEMS OF A BID EVALUATION COME FROM A BAD DEFINITION OF TECHNICAL SPECIFICATIONS

TERMS OF REFERENCE (TORs) FOR CONSULTANCY SERVICESTo be done by the final user of the services and not by the procurement officer or the financial controller

SCOPE OF WORKS, Bill of Quantities (BoQ), DRAWINGS: use the services of an engineering expert or office

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Review of Draft Bidding DocumentsReview of Draft Bidding Documents

Is the procurement: In accordance with the loan agreement & any subsequent changes reflected in mission reports within the availability of funds? consistent with the approved AWPB (procurement plan)?

General

Adequacy and Quality of the Bidding Documents

Bidding documents should provide all the information necessary for a bidder to prepare its bid for the goods or works to be provided. This includes:Instruction to the biddersproposed pricing (e.g. unit prices or lump sum), currency arrangementsqualification standards set out for bidder (where no prequalification)Terms of Reference (TOR) or Statement of Work (SOW) describing contract requirementsevaluation criteria by which the award will be determinedclarity and propriety of the borrower’s use of preferences (e.g. the method by which domestic bidders may be favoured)insurance or bond requirements

unusual provisions (e.g. large advance payments) proposed attachments to be included in the bidding documents borrowers’ list of proposed bidders to receive the invitation of bids draft contract to be awarded

Other Issues

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Review of Draft RFPReview of Draft RFP

Is the procurement: in accordance with financing agreement & any subsequent changes reflected in mission reports within availability of funds (cost estimate by submitted by borrower) consistent with approved AWPB (& procurement plan)

General

Adequacy and Quality of the RFP

The RFP should provide all the information necessary for a consulting firm to prepare its proposal:instruction to consultant (including applicable forms and data sheets)requirements to specification of pricing (e.g. time-based, lump sum, reimbursable)currency arrangementsterms of reference (TOR) describing contract requirements, overall as well as for individual personnelselection methodevaluation criteria (technical & financial) by which the award will be determinedclarity and propriety of the Borrower’s use of preferences (e.g. the method by which domestic consultants may be favoured)insurance or bond requirements

Unusual provisions Proposed attachments to be included in RFP Borrowers’ shortlist of consultants to receive RFP Draft contract to be awarded

Other Issues

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Contract FormsContract Forms

FOR GOODS: Standard forms OK but attention should be given to the conditions of payment (avoid Letter of Credit & special commitment, direct payment if possible, advance payment against bank or insurance guarantee*)

FOR SERVICES: depends on scope of services & duration of these services

FOR WORKS: Standard form but specific model for community intervention

* Specific criteria are being developed for use of insurance guarantees, which are acceptable only in specific circumstances including wording, whether World Bank permits, regulatory framework, and depend on country context

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Each request of No Objection (NO) should be numbered in a continuous manner with the name of project, country code and date, for example: NO 08/RWA/PAPSTA/28022011 = 8th request of NO from PAPSTA project in Rwanda dated 28th February 2011

Step 4Step 4 Prior Review and ApprovalPrior Review and Approval

o Procurement process approved in AWPB & in line with Procurement plan

o Open or limited tender or prequalification documentation

o Advert of publication & list of newspapers, magazines, etc.

o Letter of invitation

o List of pre selected bidders with justifications

o Instructions to bidders, rules of evaluation, conditions of payment

o TS or TORs or BoQ adequacy

o Contract form

o General & special conditions of contract

o Bid security & other bonds24


Step 5Step 5

Step 6Step 6

Open Tender PublicationOpen Tender Publication

Opening Session of BidsOpening Session of Bids

Recommended: a box for the deposit of bids

Step 7Step 7 Evaluation of Bids/ Request for Evaluation of Bids/ Request for ProposalProposal

Crucial StepsCrucial Steps

o Composition of the evaluation committee (procurement, financial, technical)

o The report should be structured as follows: Background, reference to NO, publication, list of bidding documents purchased or sent, bids or proposals received, minutes of opening session, technical & evaluation steps with recommendation

o The evaluation process for goods should be conducted as follows:25

Procurement Process for Goods, Services & Procurement Process for Goods, Services & WorksWorksFirst StepFirst Step

o Before proceeding to the detailed evaluation, the evaluators appointed by Project have to declare the bids received as acceptable & responsive.

o Acceptability: The bids are acceptable if:

1. submitted before the deadline

2. from a duly solicited supplier (in case of Selective bidding)

3. written in English (or in the requested language)

4. sealed in an envelope in conformity with Instructions to Bidders

o Responsiveness: The bids are responsive if:

1. they include a bid security (if requested)

2. the quoted prices are fixed not subject to variation if so stipulated in the Bidding Docs; (v) the quoted prices are valid for the period requested

3. they are duly signed and initialed

4. the prices quoted are for one or several complete lot(s)

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Procurement Process for Goods, Services & Procurement Process for Goods, Services & WorksWorksSecond Step – Preliminary Second Step – Preliminary operations:operations:

The Evaluators will proceed to:

o conversion to a single currency of all bids quoted in foreign currency by

using official selling rate of exchange of recipient country on closing date

of bids

o multiplication of unit price by quantity to verify total price quoted by item &

grand total for all items. In case of discrepancy between unit price & total,

unit price shall prevail

o verification of actual quantities of goods proposed & possible modification

as above in case of obvious arithmetical errors

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Third Step – Third Step – Specific & detailed technical & financial Specific & detailed technical & financial evaluationevaluation::

The Annex attached to tendering & contracting procedures should include

some specific, detailed evaluation (technical & financial) of goods

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Procurement Process for Goods, Services & Procurement Process for Goods, Services & WorksWorksEVALUATION OF RFP FOR SERVICESEVALUATION OF RFP FOR SERVICES

Technical Technical ProposalProposal

A two-stage procedure is adopted in evaluating proposals. The technical

evaluation shall be carried out first, followed by financial evaluation

o The evaluation committee appointed by Project shall carry out evaluation,

applying evaluation criteria & point system specified in Data Sheet. Each

responsive proposal is attributed a technical score

o Proposals by other firms (scoring below quality threshold) shall be rejected

& financial proposals returned unopened

o Request for IFAD’s No-Objection for Technical Evaluation Report

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Financial Financial ProposalProposal

o Public Opening of Financial Proposals, disclosure of respective Technical Scores

o The evaluation committee, after determining whether the financial proposals are

complete and without arithmetic errors, shall convert prices in various currencies to

common currency specified in the Data Sheet

o The official selling rates used shall be provided by indicated source

o The financial proposals shall be ranked with lowest proposal ranked first

o The maximum of points is allocated to lowest price proposal

o All other financial proposals will receive points inversely proportional to those of

lowest price: e.g. [total financial component points] x [US$ lowest]/[US$ other] =

points for other financial proposal

o Negotiation: Prior to expiration of the validity of proposal, the Client shall notify the

Consultant who submitted the No. 1 ranking proposal in writing & invite them to

negotiate scope of contract, duration, reimbursables, etc.

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Step 8Step 8 Evaluation Review & Contract ApprovalEvaluation Review & Contract Approval


IFAD does not require a specific format of the evaluation report, but the report should include as a minimum:

a) a listing of all applicants

b) their ratings keyed to specific criteria & items of information requested

c) the list of rejected applicants with a detailed justification for rejection

d) the resulting proposed list of prequalified applicants

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• receipt & opening of bids (including minutes of the public bid opening)

• examination of bids

• substantially non-responsive bids

• correction of arithmetic errors & currency conversion

• adjustment for non-material deviations

• bids subject to detailed evaluation

• evaluation & comparison of bids

• lowest evaluated responsive bid

• post qualification

• award recommendation

There is no standard format for the bid evaluation report, but the report should to the extent possible cover & reflect the logical sequence of a standard bid evaluation process in the following manner:

There is no standard format for the bid evaluation report, but the report should to the extent possible cover & reflect the logical sequence of a standard bid evaluation process in the following manner:

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Step 9Step 9 Contract NotificationContract Notification

Step 10Step 10 Contract Execution & ManagementContract Execution & Management


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Procurement in Project Completion Procurement in Project Completion ProcessProcess

To ensure that all goods are delivered/ works completed/ services rendered

by project completion date

• Closely review & monitor the final procurement plan & progress

reports during last year of Project

• Take measures to facilitate completion of physical execution of

contracts

• Cancel contracts that cannot be executed within completion date

Ensure that only contracts executed by project completion date are paid

Ensure that procurement files are complete & obtain missing documents

from Project

Report on lessons learned & make recommendations for future projects

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Key Tools for Successful Key Tools for Successful ProcurementProcurement

A complete financial & administrative procedures manual (Implementation/ Operations Manual)

A well-prepared start-up workshop with technical session

The technical session should include discussions about importance of quality submissions, frequent causes of delays, timing issues

A ‘procurement plan’ summarising procurement methods, applicable rules & prior review requirements as per Financing agreement

Assessment of procurement capacity at national/ project level

Training of relevant PMU & national partners

Procurement expertise at national/ project level (complemented by on-going capacity building)

Procurement expertise at IFAD level (procurement specialist to assist CPM)

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How to avoid delays in procurementHow to avoid delays in procurement

Lack of procurement plan or inadequate/incomplete procurement plan Poorly designed and/or unrealistic AWPB Imprecise and ambiguous terms or documents for bid evaluation method & selection

criteria Absence of confidentiality at various stages of bid evaluation process &/or selection

of winning bid Failure to justify rejection of bids or non-selection of a competitive bid Political interference in the procurement process Corruption, fraud, conflicts of interest & mis-procurement Poor qualification of evaluation committee members Lack of procurement capacity at borrower &/or project level Poor understanding of IFAD procedures at borrower &/or project level Confusion between national procedures & IFAD guidelines/ loan agreement

procedures Cumbersome procedures & bureaucracy for approval of procurement documents at

borrower level Long delays in issuance of no-objections by IFAD Long response time by IFAD to queries from PMU

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Thank youThank you

procurement overview

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procurement overview

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