Transcript Mission Paper, EFA (Dec. 4

Training:
Public Procurement Management
Session: International Practice in
Procurement
Shambhu Prasad Uprety
Procurement Specialist
The World Bank
1
Session Content
1
Loan Agreement & Legal Aspect
9
ICB Contracts
2
Procurement Guidelines
Followed in Nepal
10
Letter of Intent & Letter of
acceptance
3
Comparison Between
Procurement Guidelines
11
Foreign Currency Aspect in
Contracts – Benefits of payment in
different currencies
4
Procurement Principles
12
Cash Flow Forecasts
5
Reference Documents for
Procurement
13
Letter of Credit (LC)
6
Procurement Planning – Benefits
of slicing & Packaging
14
Final/ Interim Bill payment
7
Project negotiation & Contract
Negotiation
15,
16
Consultancy Services
Methods of Procurement
8
Prior Review & Post Review
17
Record Keeping
2
Session Content
18 Final Tips for Successful
Procurement
19 Procurement Cycle
3
1. Loan Agreement & Legal Aspect
Hierarchy of legal documents
1. Constitution of the borrower’s country (BC) – It is above the
loan agreement (LA). Therefore, while making loan agreement), a
legal opinion is taken so that the LA does not contradict the
Constitution.
1.
Loan Agreement – It is equivalent to international treaty. It
should be rectified by the legal system of the BC. Then this LA
becomes BC’s law. Sometimes implementation manual also
becomes the part of the LA.
2.
Other Laws of the BC
4
2. Procurement Guidelines Followed in Nepal
Applicable Proc. GLs is stated in the LA. For purely GoN
funded projects, applicable Proc. GLs is of the GoN. 4
main Proc. GLs are in practice in Nepal:
1. GoN – Public procurement Act, 2063; Public procurement
Regulations, 2064 & SBDs issued by the PPMO.
2. World Bank (WB) – Procurement Guidelines & Consultant
Guidelines.
3. Asian Development Bank (ADB) – Same
4. JICA: Very different than ADB/WB - rebidding time = only
15 minutes, 80% evaluation done during bid opening,
total bid price counts not item rates, item rates are
negotiated.
5
3. Comparison Between Procurement Guidelines
1. Negotiation for a reduction of bid price, if it exceeds the pre-bid
estimate:




ADB permits (GL-2.49)
WB does not permit (GL-2.61)
GoN Proc.Act/Reg. do not permit
JICA permits
2. Bid Security




ADB – more than 2% of the estimate - amount to be mentioned
in the notice
WB – not less than 2.5% of the estimate - amount to be
mentioned in the notice
GoN – 2 to 3 % of cost estimate
JICA – no need – high level of trust on the part of bidders?
6
4. Procurement Principles
There are 4 main principles:
1. Economy: Value for money - Finance Ministry’s concern
2. Efficiency: quick procurement - Project’s concern, but
against the Fairness
3. Fairness: No discrimination – Bidders’ concern
4. Transparency: Bidders’ concern, Auditor’s concern
All of these 4 parameters should be met 100%, but in practice it is
not possible. Attempt should be to be in the nearest of this,
while meeting
the project’s objectives.
Procurement should not be done for the pleasure of the
procurement. (Story of a new couple – wife asks ques. to her
husband …)
7
5. Reference Documents for Procurement
We can’t expect good procurement if you don’t have
following documents on your table:
1.
2.
3.
4.
Financing Agreement: …, PAD, Proj. Operational Manual
Procurement Guidelines: WB, ADB, JICA, GoN,
Annual Program & Budget (AWPB)
Procurement Plans:
• Master Procurement Plan
• Annual Procurement Plan (PP)
Note: PP to be prepared with full details based on the
PROPOSED Budget. Example of CDC case
8
6. Procurement Planning
“Failing to plan
is Planning to fail”
- Peter Drucker, Famous Management Guru, USA
9
6. Procurement Planning – benefits of slicing & Packaging
For large or multi-year projects, both of master & annual proc.
plans are prepared. Annual proc. plans are prepared as per
annual program & budget, but within the framework of master
proc. Plan.
Slicing & Packaging arrangement
–
–
Slicing: Large project is sliced into smaller ones. Benefits are (1)
high competition as small contractors can participate, (2) chances for
small local contractors to grow, (3) short project duration. Examples –
long road projects, multi-dimensional projects like Melamchi.
Packaging: Small jobs can be joined in appropriate package to
attract big contractors to achieve economy.
Slicing & Packaging principle seems contradictory, but it is not so.
Why? Take case by case decision.
Note: Market study or knowledge of market is the key to successful
10
procurement.
7. Project Negotiation & Contract Negotiation
7.1 Project Negotiation – Example of some Past Projects
Issues
– Reimbursement procedure – time consuming
– Effectiveness conditions
– Tax provisions (Trust Fund)
– Use of contingencies amount: Quite different in GoN &
WB.
Examples – Education projects-SWAp, SESP, EFA, JICA, PforR
Bridge Project, PPCR/DHM/MOAD
11
7. Project Negotiation & Contract Negotiation …
7.2 Contract Negotiation
•Negotiation for a reduction of bid price, if it exceeds
the pre-bid estimate is different under different GLs.
•Other points for negotiation are minor deviations,
omissions & errors in the bid & any other matters
requiring clarification:
Reference price indices for local & foreign bidders
(if omitted by foreign bidder)
Finalizing name of Adjudicator to be acceptable
for both parties
12
7. Project Negotiation & Contract Negotiation …
7.2 Contract Negotiation …
Work schedule adjustment
Omitted rates for some items
Site office set up – location if rented, construction
of temporary shade, etc
•Upon reaching an agreement on such points, Employer/
Engineer should prepare a memorandum of
understanding (MOU) giving details of agreements
made & get signed by the successful bidder. This MOU
becomes a part of the Contract.
13
8. Prior Review & Post Review
Procurement plan is prepared based on the Prior Review & Post
Review threshold as per the Loan Agreement.
Even if the estimate of the procurement is near to the threshold
amount but still below go as in the case of prior review.
Because, while bidding or contract execution it may cross the
threshold.
In case of need, it is always possible to amend the Loan
Agreement. The leading factor is to meet the project
objectives.
Example of education project – SESP. LA was largely amended
during Mid Term Review Mission.
14
9. ICB Contracts
Challenges/Risks Associated:
• Large Contracts > Big amounts involved > Contractors, Lawyers,
Politicians, Media & General Public are over concerned >
Procuring Entity gets easily feared
• More legal oriented than development or procurement
• Requires in-depth knowledge of procurement documents &
experience
• Time consuming procurement procedure
• Contractors tend to claim more > searching for loopholes
• Procuring entity needs always to be aware
15
10. Letter of Intent & Letter of Acceptance
10.1 Letter of Intent (LOA)
• Generally issued in case of large/complex contract when issuing of
letter of acceptance may take longer time due to procedural formalities
(Bank Review, budget adjustment, higher authority approval etc).
• It is conditional & preliminary acceptance of the bid.
• Through this letter employer may permit the contractor to commence
any part of the work (e.g. mobilization, materials ordering, letting subcontract) , if employer’s conditions are acceptable to the Contractor.
• Successful bidder should acknowledge the receipt of this letter &
acceptance of the conditions.
• If contract is not awarded, employer has to pay reasonable costs to the
contractor.
16
10. Letter of Intent & Letter of Acceptance
10.2 Letter of Acceptance (LOA)
• Immediately issued to the successful bidder (L1), if there is no
need for clarification of the bid.
• It should clearly mention:
 the Contract Price
the dead line date for the submission of Performance
Security (PS)
• Issuing of Letter of Acceptance will constitute the formation of
the Contract
17
10. Letter of Intent & Letter of Acceptance
10.2 Letter of Acceptance (LOA) contd…
• Upon the submission of PS/Domestic Preference Security by
the successful bidder, employer should promptly notify the other
bidders that their bids have been unsuccessful.
• If the L1 bidder & subsequent L2 & L3 bidders fail to submit the
PS or conclude the agreement, their bid security will be forfeited
& re-bidding is done.
Case: A successful bidder, after furnishing a PS, does not sign
the agreement. What are the employer’s options, if any, & what
would be his appropriate action?
18
11. Foreign Currency Aspect in Contracts
11.1 Components
• Contract Amount = X% of Foreign Currency (FCR)+ (100-X)% of Local
Currency (LCR).
• FCR => For imported goods/construction materials + Salary for foreign
personnel.
• LCR => For local construction materials +Local transportation + Payment to
local labors.
• Bid amount with lower portion of FCR is encouraged (How?)
11.2 Benefits
• Less bid amount - Materials or services are procured in the currency of
primary seller – saving in currency exchange commission – bidders quote
competitive bid price.
• Saving in foreign currency for the borrower country as payment for local
materials & labors is made in local currency.
19
12. Cash Flow Forecast
1.
General
•
•
2.
Cash flow forecast is the way of cost planning.
This is the process of allocation of funds for different stages of a
project or for different projects to be drawn from the total allocated
annual budget.
Benefits of cash flow forecasts
•
•
•
3.
Constant flow of fund is maintained. The progress of work is not
hampered. Ensures timely completion of the project.
Ensures cost control & assists thereby to complete the project within
the target cost.
Provides project expenditure in regular intervals thereby provides
feedback for planning new projects
How to prepare?
•
•
•
Based on procurement plan (activities vs time)
Based on work schedule (activities & quantities vs time)
Based on trimester breakdown of budget
20
13. Letter of Credit (LC)
• LC=Authorization to Pay
Meaning of P:
• Letter of Credit
• Confirmed Letter of Credit
• Confirmed Irrevocable Letter of Credit
21
13. Letter of Credit (LC)…
1. Contract
12. Goods
BUYER
2
C
r
e
d
i
t
10.
D
o
c
u
m
e
n
t
s
Delivered
CIF
SELLER
5. Goods On
Board
11
6.
M
o
n
e
y
Doc.s
7
4. Advice
L/C
Issued
3. Letter of Credit
8. Documents
9. Money
ISSUING BANK
ADVISING /CONFIRMING
BANK
14. Interim/Final Bill Payment (PPR-142, 143)
14.1 Interim Bill Payment - Points to be considered:
•
•
•
•
•
•
Receipt of bills & other associated documents as per the
contract
Approval of such bills by competent authority
Deduction for discounts, if any
Deduction for prevailing taxes
Deduction for retention money @ 5% of the bill amount
(PPR123.4)
Deduction for advance payment
Notes:
•
•
Any errors found in past payments (over or under payment)
shall be corrected in coming bills
Procuring entity may deduct or even may not make payment
for the work or part thereof having fault or not done
23
14. Interim/Final Bill Payment (PPR-142, 143)
14.2 Final Bill Payment - Points to be considered :
1. Final payment only after whole work acceptance
2. All requirements as in interim bill payment are also valid
for this payment
3. Release of performance Security (PS) (PPR-110)
•
100% of PS released to the contractor after defect
liability period expiration
4. Release of Retention Money (RM)(PPR-123.4)
• 50% of RM released to the contractor after defect
liability period expiration
• Remaining 50% is released to the contractor after s/he
submits tax description to the Tax Office & reports this
to the Procuring Entity
24
15. Consultancy Services
13.1 Hiring Methods
– Quality-and Cost-Based Selection (QCBS) Method (GL:2.1-2.35)>
widely used > short listing + RFP with TP & FP+ Evaluation of Technical
Proposal (TP) + Eval. of Financial Proposal (FP) + Calculation of Combined
Score (TP@80% & FP@20%)+ Negotiation with highest-score-proposal +
Contract sign.
• Negotiation (N-1): reducing/increasing scope, revising
schedule, confirming taxes, etc. But NO change in
remuneration rates.
– Quality-Based Selection (QBS) Method (GL:3.2)> used for
complex/highly specialized assignments > short listing + RFP with TP &
FP + Eval. Of TP + Negotiation with highest-scored TP + Contract sign.
• Negotiation(N-2): N-1 plus negotiations on any type of costs
including remuneration.
25
15. Consultancy Services
13.1 Hiring Methods
– Selection under a Fixed Budget (FBS) Method (GL:3.5)> used for
simple & precisely defined assignments > as QCBS > proposal with
highest Tech. Score & Price within the pre-disclosed fixed budget selected +
Contract sign.
• Negotiation: as in QCBS
– Least-Cost Selection (LCS) Method(GL:3.6) > used for
standard/routine type assignments (audits, Engineering design of
noncomplex works, etc) > as QCBS > proposal securing required minimum
qualifying marks & quoting lowest price selected + Contract sign.
• Negotiation: as in QCBS
26
15. Consultancy Services
13.1 Hiring Methods
– Selection Based on the Consultants’ Qualification (CQS) Method
(GL: 3.7) > used for small assignments/ emergency situations > Selection of
the best consultant (only one) + RFP with TP & FP + Eval. Of TP + Negotiation
on contract price + Contract sign.
• Negotiation: As in QBS.
– Single-Source Selection (SSS) Method (GL:3.8) > used in
exceptional cases (natural continuation of the job/ in disaster/ if only
one qualified/ small value > used for both consulting firm and
individual consultants > appropriate consultant identified in the market
+ RFP (brief proposal) with TP & FP + Negotiation on contract price
+ Contract sign.
• Negotiation: As in QBS.
27
15. Consultancy Services …
13.2 Training or Transfer of Knowledge/Skills
– TOR should contain this provision > objective, nature, scope,
time frame, details of trainers and trainees etc
– Cost shall be included in the consultant’s contract
– Training or transfer of knowledge to employer’s staff or national
consultants
– Very essential and important for capacity building > benefits:
improved design, low construction cost or improved performance
28
15. Consultancy Services …
13.3 Responsibility/ Liability of Consultants
– Professional liability (PL) > insurance on PL not available in
Nepal, but available internationally
– They are more trusted than doubted
– No bid & performance securities are demanded. They are trusted
for their job
– In case of loss/damage due to design defect, they may be
charged not more than their consultancy fee
– However, in south Asian countries, consultants, in most cases,
have not been able to prove themselves of expected qualities
– Sometimes they become burden to the employer rather than
assisting
– Nevertheless, without their services development works cannot
be run. Simply, we need to manage them wisely & skillfully.
29
15. Consultancy Services …
13.4 Donor Agencies’ Requirement
– Donors do not impose, but suggest for or expect better outcome
from their support
– Conditions they put are not with their bad intention, but are
based on their experiences
– Borrower is the one responsible for scrutinising all aspects
before signing the agreement
13.5 Trend of Dependency on Consultants / Cost-benefit Ratio
of Outsourcing
– For large contracts there is no way out without consultants
– If sufficient manpower with required expertise is managed for inhouse design, cost may go further high
– International experience shows that govt authority should be
involved in monitoring & evaluation of the services for
effectiveness
30
16. Table : Methods of Procurement Under Different Guidelines
S
N
1
2
Descri
ption
WB
GoN - Proc Act/Reg
Works
1.ICB (GL 2.1-2.65)
2.NCB (GL 3.3-3.4)
3.Shopping (GL 3.5)
4.Direct Contracting (GL 3.6- 3.7)
5.Force Account (GL 3.8)
1.ICB (GL 2.01-2.50)
2.International Shopping (GL 3.023.03)
3.LCB (GL 3.04)
4.Direct Purchase/ Negotiation or
Single Tender (GL 3.05)
5.Force Account (GL 3.07)
1.ICB
2.NCB
3.Sealed Quotation (A40/R-84)
4.Direct Contracting (A41/R-85)
5.Force Account (R-98)
6. Through I/NGOs
7.Through Users’ Committee
8.Design through Competition (R-87)
1.
2.
ICB (GL 2.1-2.65)
Modified ICB (GL 2.66-2.68) for
large value contracts
Limited International Bidding (GL
3.2)
NCB (GL 3.3-3.4)
Shopping (GL 3.5)
Direct Contracting (GL 3.6-3.7)
Procurement from UN Agencies (GL
3.9)
1.ICB (GL 2.01-2.50)
2.International Shopping (GL 3.023.03)
3.LCB (GL 3.04)
4.Direct Purchase/ Negotiation (GL
3.05)
5.Limited Tendering and Repeat
Order (GL 3.06)
1.ICB
2.NCB
3.Sealed Quotation ((R-84)
4.Direct Contracting (R-85)
1.QCBS (GL 2.1-2.31)
2.QBS (GL 3.2-3.4)
3.Selection Under a Fixed Budget (GL 3.5)
4.Least Cost Selection (LCS)(GL 3.6)
5.Selection Based on the Consultant’s
Qualification (CQS) (GL 3.7-3.8)
6.Single Source Selection(SSS) (3.9-3.13)
7.Selection of Particular Types of Consultants
(GL 3.15-3.21)
1.QCBS (GL 6.04-6.12)
2.QBS (GL 6.01)
3.Individual Consultants (GL 8.018.07)
4.Special Selection Procedure (GL
6.13)
1.QCBS (R-70)
2.QBS (R-70)
Goods
3.
4.
5.
6.
7.
3
ADB
Services
3.QCBS from Standing List (R-72)
4.Direct Selection (R-82)
5.Other Methods (R-83)
31
17. Record Keeping
Procuring Entity should keep Record of payments & different
securities as follows:
1. Record of LC (PPR/Annex-2)
• Name of supplier
• Name of issuing bank & address, LC No. & date, LC
amount
• Subject
• LC duration, LC closing date, date of LC extension (if
any), LC closed date
• Advance recording register - page No.
• Goods – country of origin, date of manufacture, brand &
model No.
32
17. Record Keeping …
2.
Record of Performance Security (PS) (R-110)
• Name & address of contractor/ supplier
• Description of contract
• Name of issuing bank & address, PS No. & date, PS
amount
• PS duration, PS validity date, date of PS extension (if
any), PS released date
Note: In case of front loaded bid, an additional PS of 8% (R65.3) is demanded to cover the unbalance cost. Thus, PS
may be >5% & go up to 13%. If, unrealistically front loaded
contract is not awarded.
33
17. Record Keeping ...
3.
Record of Advance payment Security
• As in 2 above
• Rate/Formula of repayment – for up to certain amount
(30% of the contract amount) no repayment, beyond
that amount it is repaid @ of 40% of the interim bill till it
is fully repaid.
4. Record of Domestic Preference Security
• Applicable in case of ICB contracts & Foreign
contractor/supplier.
• As in 2 above
• @7.5% & 5%
• GoN’s 92-point Instruction = 10%
--------------------------------------------------------------------
34
18. Final Tips for Successful Procurement:
1. General & Most Important
– Practice Yoga/ Pranayam/ Exercise & build a “Can Do
Attitude”.
– Merely signing of contract is not procurement. Its success
depends upon complete execution of the contract &
continuation of life time benefit/service.
2. Team work:
– Dedicated project director, Proc./FM staff & others.
– Mutual Trust - Inside the Project team & between Borrower’s
& WB staff
– Close interactions between Borrower and Bank specialists Face to face meetings, audio/tel. calls, email, video
conferences, SMS, & etc. effective communication
35
18. Final Tips for Successful Procurement…
3. Project Documents on the Table
– Financing Agreement, PAD, PP, Project Implementation
Manual, Proc. Manual, etc.
4. Market Study
– Goods: Availability of goods in local/international market and
availability of suppliers. Trading practice in the market,
suppliers’ interest, etc. Only one manufacturer or only one
supplier (medicine) or very few or many – to be identified.
– Works: Availability of contractors, their qualifications and
their interests.
– Consultants: Availability of consultants, their qualifications
and their interests.
– Analysis of market & Supply Chain
36
18. Final Tips for Successful Procurement…
5. Program/budget (AWPB) & Procurement Plan (PP)
– AWPB & PP should be prepared together – 6 months earlier
than coming FY
– PP should be detailed – ritual PP doesn’t work
– PP should be prepared based on PROPOSED AWPB &
revised after Budget Speech
– AWPB should have right budget head & source. Errors to be
corrected immediately.
– Check for matching fund, tax, etc.
37
18. Final Tips for Successful Procurement…
6. Capacity Building
– Training for staff, auditors & consultants involved in
procurement processing (Proc.), reviewing (FM,
Program) & decision making (project chiefs &
deputies) – different training modules needed –
include it in PP.
– Workshops, interactions, talk programs, sharing of
experience, key note speeches,
– Online learning programs by WB (MOOC <
www.procurementlearning.org> - The knowledge &
learning portal for public procurement.
38
18. Final Tips for Successful Procurement…
7. Expert Advice
– For preparing specs, TOR, cost estimate,
evaluation/qualification criteria. Access to
appropriate technical experts is important
– Proc./FM consultants – They are experts, extended
working hands, play vital role for project success,
more trusted than doubted (not enemies)
– Technical consultants as per need
– For small job – experts from other GoN offices
39
18. Final Tips for Successful Procurement…
8. Project Implementation/ Contract Execution
– Project launch workshop - orientation to all project
staff - risk mitigation action plans
– Effective Supervision: closely identify
issues/bottlenecks and seek effective means to
address bottlenecks in time.
– GP/ e-procurement/ e-bidding
– Data Management System: The web based
contractors’ data management system initiated
(DOR)
40
19. Procurement Cycle
1.
2.
3.
4.
5.
Planning, budgeting & market study: Including preparation of
procurement plan
Bidding process: (i) Design, drawing, specifications 7 cost
estimate; (ii) bidding documents; (iii) publication of notice
(invitation for bidding=IFB); (iv) Bid evaluation and award
decision; (v) Contract signing or contract agreement.
Contract Execution:
Defect Liability Period or Warranty Period:
Long Term (designed life time) Benefit from the procured
item (W, G, S, NS) = Strategic Procurement
41
Thank You
42