Chapter 6 Present Procurement Rules and Regulations Procurement

Chapter 6 Present Procurement Rules and Regulations (Procurement of Works and Goods) 1

Bid document Definition • Documents required to be submitted in response to an Invitation to bid. These include the prescribed bid form, drawings, specifications, time lines, charts, price breakdowns etc. Also called bidding document. Importance • To minimize the confusion in decision making process during procurement proceedings including evaluation • To make procurement proceedings easy, quick and effective • To minimize the disputes during procurement 2 proceedings and contract execution

Bid document preparation • During bid document preparation standard bid document shall be used Frequently used standard bid documents in Nepal • Standard bid documents prepared by PPMO üThese documents are mostly used in procurement process especially when procurement is under the funding of government or procurement under donor funding when procurement is not so large. • Other standard bid documents üFIDIC documents üStandard bid documents of donor agencies § Used in large procurement; preferably ICB or when donor has condition to use their own documents. 3

Bid document preparation cont… Standard bid documents issued by PPMO till now 1. Procurement of goods (NCB) 2. Procurement of goods (ICB) 3. Procurement of Works ICB (Two Envelope) 4. Procurement of Works for 20 Million to 1 Billion (Two Envelope Procedure) (NCB) 4. Procurement of Works for 2 Million to 20 Million (Non Qualification) (NCB) 5. Procurement of Works for 2 Million to 20 Million (Qualification Procedure) (NCB) 6. Procurement of Works Single stage post qualification (ICB) 4

Bid document preparation cont… Standard bid documents issued by PPMO till now 7. Procurement of goods, direct purchase (up to 0. 15 Million) 8. Procurement of consulting service, direct purchase (For assignment of value up to 0. 15 Million) 9. Procurement of works sealed quotation (for works up to 2 million) 10. Procurement of goods, sealed quotation 11. Procurement of Works Prequalification Document 12. Procurement Document Prequalification of Bidders for ICB Works 5

Bid document preparation cont… Standard bid documents issued by PPMO till now 6. Procurement of goods, direct purchase (up to 0. 15 Million) 7. Procurement of consulting service, direct purchase (For assignment of value up to 0. 15 Million) 8. Procurement of works sealed quotation (for works up to 2 million) 9. Procurement of goods, sealed quotation 10. Procurement of Works Prequalification Document 11. Procurement Document Prequalification of Bidders for ICB Works 12. Catalogue Shopping Guidelines 6

Bid document preparation cont… Standard bid documents issued by PPMO till now For Consulting Services 12. Eo. I for short listing of consultants and consulting services 13. RFP selection of Consultants Lump-Sum 14. RFP Selection of Consultants Time Based 7

Bid document preparation cont… Contents of bidding documents • Broadly there are three different parts in bidding documents: üBidding Procedures : Contained in standard form in standard bidding documents üRequirements : Have to write (Not contained in SBD) üConditions of contract and contract forms : Contained in standard form in SBD 8

Bid document preparation cont… Contents of bidding documents cont… Part I Bidding procedures Section 1 - Instruction to Bidders (ITB) Section 2 - Bid Data Sheet (BDS) Section 3 - Evaluation and Qualification Criteria (EQC) Section 4 - Bidding Forms (BDF) Part II Requirements Section 5 - Work Requirements (WRQ) • Scope • Specification • Drawings Section 6 - Bill of quantities (BOQ) 9

Bid document preparation cont… Contents of bidding documents cont… Part III Conditions of contract and contract forms : Section 7 - General Condition of Contract (GCC) Section 8 - Special Condition of Contract (SCC) Section 9 - Contract Forms (COF) Part I : Bidding Procedures Section 1 - Instruction to bidders (ITB) • This section specifies the procedures to be followed by Bidders in the preparation and submission of their Bids. Information is also provided on the submission, opening, and evaluation of bids and on the award of Contract. 10

Bid document preparation cont… Contents of instruction to bidders (ITB) 1) General Scope of bid, Source of fund, Fraud and corruption, Eligible bidders, Eligible materials, equipments and services 2) Contents of bidding documents Sections of bidding documents, Clarification of bidding document, site visit, pre-bid meeting, Amendment of bidding documents 3) Preparation of bids Cost of bidding, Language of bid, Documents comprising the bids, Letter of bid and schedule, Alternative bids, Bid price and discounts, Currency of bid and payment, Documents comprising the technical proposal, Documents establishing the qualifications of the bidder, Period of validity of bids, Bid security, 11 Format and signing of bid

Bid document preparation cont… Contents of instruction to bidders (ITB) cont… 4) Submission and opening of bids Sealing and marking of bids, Deadline for submission of bids, Late bids, Withdrawal and modification of bids, Bid opening 5) Evaluation and comparison of bids Clarification of bids, Deviations, Reservations and Omissions, Determination of responsiveness, Nonconformities, errors, and omissions, Correction of Arithmetical Errors, Evaluation of bids, Comparison of bids, Qualification of the bidder, Employer’s right to accept any bid, and to reject any or all bids 6) Award of contract Award criteria, Letter of intent to award the contract/Notification of award, performance security, Signing of Contract, Complain and review, Provisions 12 of PPA and PPR

Bid document preparation cont… Contents of bidding documents cont… Section 2 - Bid data sheet (BDS) • This section consists of provisions that are specific to each procurement and supplement the information or requirements included in Section I - Instructions to Bidders. Section 3 - Evaluation and qualification criteria (EQC) • This section contains all the criteria that the employer shall use to evaluate bids and qualify Bidders if the bidding was preceded by post-qualification exercise. Go. N/DP requires bidders to be qualified by meeting predefined, precise minimum requirements. The method sets pass-fail criteria, which, if not met by the bidder, 13 results in disqualification.

Bid document preparation cont… Contents of evaluation and qualification criteria (EQC) 1) Evaluation Adequacy of technical proposal, Multiple contracts, Completion time, Alternative technical solutions, Quantifiable nonconformities, errors and omissions 2) Qualification Eligibility (Conflict of interest, Government-owned entity, UN eligibility, Other eligibility), Pending litigation, Financial situation (Historical financial performance, Average annual construction turnover, Financial resources), Experience (General construction experience, Specific construction experience Contracts of similar size and nature, Construction experience in 14 key activities), Personnel, Equipment

Bid document preparation cont… Section 4 - Bidding forms (BDF) • This Section contains the forms which are to be completed by the Bidder and submitted as part of his Bid. Contents of bidding forms (BDF) Letter of bid, Table of price adjustment data, Bid security, Technical proposal format (Personnel, Equipment, Site organization, Method statement, Mobilization schedule, Construction schedule, Others), Bidder’s qualification (Bidder’s information sheet, JV information sheet, Pending litigation, Financial situation, Average annual construction turnover, Financial resources, Current contract commitment/Work in progress, General construction experience, Specific 15 construction experience in key activities)

Bid document preparation cont… Part II : Requirements Section 5 - Work requirements (WRQ) • This Section contains the Specification, the Drawings, and supplementary information that describe the Works to be procured. Contents of work requirements (WRQ) Scope of works, Specifications, Drawings, Supplementary information Section 6 - Bill of quantities (BOQ) Objectives • To provide sufficient information on the quantities of Works to be performed to enable bids to be prepared 16 efficiently and accurately; and

Bid document preparation cont… Bill of quantities (BOQ) cont… Objectives cont… • When a Contract has been entered into, to provide a priced Bill of Quantities for use in the periodic valuation of Works executed. üIn order to attain these objectives, Works should be itemized in the Bill of Quantities in sufficient detail to distinguish between the different classes of Works, or between Works of the same nature carried out in different locations or in other circumstances which may give rise to different considerations of cost. üConsistent with these requirements, the layout and content of the Bill of Quantities should be as simple and 17 brief as possible.

Bid document preparation cont… Part III : Conditions of contract and contract forms Section 7 – General conditions of contract (GCC) • This Section includes the general clauses to be applied in all contracts. Contents of general conditions of contract (GCC) 1. General Definitions, Interpretation, Language and law, Project manager’s decisions, Delegation, Communications, Subcontracting, Other contractors, Personnel and equipment, Employer’s and contractor’s risks, Employer’s risks, Contractor’s risks, Insurance, Site investigation reports, Contractor to construct the works, The works to be completed within completion date, Approval by the project manager, Safety, Discoveries, 18

Bid document preparation cont… Contents of general conditions of contract (GCC) cont… 1. General cont… Possession of the site, Access to the site, Instructions, inspections and audits, Dispute settlements, Appointment of the adjudicator/ DRC members, Procedures for disputes 2. Time control Program, Extension of the intended completion date, Accelerations, Delays ordered by the project manager, Management meetings, Early warnings 3. Quality control Identifying defects, Tests, Correction of defects, Uncorrected defects 19

Bid document preparation cont… Contents of general conditions of contract (GCC) cont… 4. Cost control Contract price, Change in the contract price, Variations, Cash flow forecasts, Payment certificates, Payments, Compensation events, Tax, Currency, Price adjustment, Retention, Liquidated damages, Bonus, Advance payment, Securities, Dayworks, Cost of repairs 5. Finishing the contract Completion, Taking over, Final account, Operating and maintenance manuals, Termination, Fraud and corruptions, Blacklisting, Instructions, Inspections and audits, Payment upon termination, Property, Release from performance 20

Bid document preparation cont… Section 8 - Special conditions of contract (SCC) • Special Conditions of Contract shall supplement the GCC. Whenever there is a conflict, the provisions in SCC shall prevail over those in the GCC. Section 9 - Contract forms (COF) This Section contains forms which, once completed, will form part of the Contract. Contents contract forms (COF) Letter of intent, Letter of acceptance, Contract agreement, Performance security, Advanced payment security 21

Bid document preparation cont… Steps in preparation of bidding documents • Use appropriate standard bid documents • Write appropriate matters as per direction in SBD in open spaces of cover page e. g. name of public entity, issued date, bid no. etc. • Read carefully the directions to use SBD stated in the standard bidding documents. • No change should be made to the wording of the Section 1, Instructions to Bidders (ITB) • Any change if require to be made in ITB as per specific nature of procurement, change can be made in Bid Data Sheet (BDS) indicating specific clauses in ITB. Such type of changes can be incorporated simply by filling 22 the open spaces in BDS.

Bid document preparation cont… Steps in preparation of bidding documents cont… • Prepare evaluation and qualification criteria required for the procurement. • While preparing evaluation and qualification criteria adopt appropriate reference of standard bidding document. • The bids shall be evaluated as per criteria stated in standard bidding document. No criteria is allowed to develop during evaluation Qualification criteria • The purpose of qualification criteria is to inform the bidder how he/she will be qualified to participate in the particular procurement 23

Bid document preparation cont… Steps in preparation of bidding documents cont… Qualification criteria cont… • The purpose of qualification criteria is to inform the bidder how he/she will be qualified to participate in the particular procurement. • Qualification criteria depends on the type, size, nature and complexity of the procurement. • Qualification criteria shall be developed in such a way that it should not limit the competition. 1. Eligibility • Conflict of interest : A Bidder shall not have a conflict of interest. A Bidder found to have a conflict of interest 24 shall be disqualified.

Bid document preparation cont… Qualification criteria cont… 1. Eligibility cont… • A Bidder may be considered to be in a conflict of interest with one or more parties in this bidding process, if: üthey have controlling partners in common; or üthey receive or have received any direct or indirect subsidy from any of them; or üthey have the same legal representative for purposes of this bid; or üthey have a relationship with each other, directly or through common third parties, that puts them in a position to have access to information about or influence on the Bid of another Bidder; or 25

Bid document preparation cont… Qualification criteria cont… 1. Eligibility cont… üa Bidder participates in more than one bid in this bidding process. üa Bidder or any of its affiliates participated as a consultant in the preparation of the design or technical specifications of the Contract that is the subject of the Bid; or üa Bidder or any of its affiliates has been hired (or is proposed to be hired) by the Employer as Engineer for the Contract. 26

Bid document preparation cont… 1. Eligibility cont… • Government owned entity : Enterprises owned by Government shall be eligible only if they can establish that they are legally and financially autonomous and operate under commercial law, and that they are not a dependent agency of the government. • UN eligibility : Not having been declared ineligible based on a United Nations resolution or Employer’s country law. • Other eligibility : üCopy of Firm Registration Certificate üCopy of Business Registration Certificate üCopy of VAT and PAN Registration Certificate, 27

Bid document preparation cont… 1. Eligibility cont… üCopy of Tax Clearance Certificate/Tax return submission evidence for the F/Y…………. . üA written declaration made by the bidder with a statement that s/he is not ineligible to participate in the procurement proceedings; has no conflict of interest in the proposed procurement proceedings, and has not been punished for a profession or business related offense. 2. Pending litigation • All pending litigation shall be treated as resolved against the Applicant and so shall in total not represent more than [50 to 100 %] percent of the Applicant’s net worth. 28

Bid document preparation cont… 3. Financial situation • Historical financial performance : Submission of audited balance sheets and income statements, for the last [3 to 5 years depending upon nature of work] years to demonstrate the current soundness of the applicants financial position. As a minimum, a Bidder's net worth calculated as the difference between total assets and total liabilities should be positive. • Average annual construction turnover : Minimum average annual construction turnover of NRS [1. 5×V/T to 2×V/T depending upon nature and complexity of work; V estimated cost and T is contract duration in year] is , calculated as total certified payments received for construction contracts in progress or completed, within 29 best three years out of last ten years. .

Bid document preparation cont… 3. Financial situation cont… • Financial resource : The Bidder must demonstrate access to, or availability of, financial resources such as liquid assets, unencumbered real assets, lines of credit, and other financial means, other than any contractual advance payments to meet: üthe following cash-flow requirement, […. **…. ], and üthe overall cash flow requirements for this contract and its current works commitment. **Above the construction cash flow requirement for a number of months (to the nearest half-month), determined as the total time needed by the Employer to pay a contractor's invoice, allowing for : 30

Bid document preparation cont… 3. Financial situation cont… • Financial resource cont… (a) the actual time consumed for construction, from the beginning of the month invoiced, (b) the time needed by the Engineer to issue the monthly payment certificate, (c) the time needed by the Employer to pay the amount certified, and (d) a contingency period of one month to allow for unforeseen delays. • The total period should not exceed six months. 31

Bid document preparation cont… 3. Financial situation cont… • Financial resource cont… • The assessment of the monthly amount should be based on a straight-line projection of the estimated cash flow requirement over the particular contract period, neglecting the effect of any advance payment and retention monies, but including contingency allowances in the estimated contract cost. • The financial resources shall be adequate to cover his bid price and current work commitments, for example [(7) x Working Capital + Lines of Credit] – 40% (Current Contract Commitments) Bid Price]. Working capital = Current assets-Current liabilities Lines of credit = Loan facilities committed by bank 32

Bid document preparation cont… 3. Financial situation cont… • Financial resource cont… • Example, Suppose Estimated amount = Rs. 180 million Contract period = 18 month, Time required for first bill payment = 3 month (for construction) + 15 days (for issue of payment certificate) + 15 days (for payment) + 1 month (unforeseen delays) = 5 month < 6 months O. K Cash flow requirement = 180/18*5 = 50 million for 5 months • Financial resource : Assume Working capital = Rs. 10 million Bid price = Rs. 170 million and current contract commitment = Rs. 100 million (7*10+Line of credit) - 0. 4*100 170 million SO line of credit required Rs. 140 million 33

Bid document preparation cont… 4. Experience • General construction experience • Experience under construction contracts in the role of contractor, subcontractor, or management contractor for at least the last [usually 5 years or more but not less than 3] years prior to the applications submission deadline. • Specific construction experience Ø Contract of similar size and nature ü Participation as Prime contractor, management contractor, or subcontractor, in at least [1 to 3] contracts within the last ten (10) years, each with a value of at least [NRs. 80 % of estimated value] that have been successfully or are substantially completed 34 and that are similar to the proposed works.

Bid document preparation cont… • Specific construction experience cont… Ø Contract of similar size and nature cont… ü The similarity shall be based on the physical size, complexity, methods etc. [The amount calculated shall be without VAT and shall be adjusted according to updated price index of NRB] Ø Construction experience in key activities ü For specific experience stated above, a minimum construction experience in the following key activities: ü Specify production rates for key activities in the subject contract (generally 80 % of the estimated production rate as needed to meet the construction 35 schedule)

Bid document preparation cont… 5. Personnel • The managerial and technical competence of a contractor is largely related to the key personnel on site. • The extent to which the Bidder should demonstrate having staff with extensive experience should be limited to those requiring critical operational or technical skills. • The qualification criteria should therefore refer to a limited number of such key personnel, for instance, the project or contract manager and those superintendents working under the project manager who will be responsible for major components (e. g. , superintendents specialized in dredging, piling, tunneling, or earthworks, as required for each particular project). 36

Bid document preparation cont… 5. Personnel cont… • Bidders should normally be required to name a principal candidate and an alternate for each key position. Criteria of acceptability should be based on: üA minimum number of years of experience in a similar position; and üA minimum number of years of experience and/or number of comparable projects carried out in a specified number of preceding years. • The requirement of specified education and academic qualifications is normally unnecessary for such positions, as contractors often employ competent staff who have learned their profession "on the job" rather than through 37 academic training.

Bid document preparation cont… 5. Personnel cont… • It is appropriate to specify that certain positions are filled by individuals who have held posts of comparable authority for, say, three years with the Bidder, so that key staff in executive site positions have sufficient knowledge of the Bidder's management, policy, procedures, and practices to act with confidence and authority within that framework. 6. Equipment • An inventory of construction equipment represents a high capital cost overhead to a contractor. • Consequently, not all competent potential bidders will maintain an inventory of high-value items that are in 38 suitable condition for major contracts.

Bid document preparation cont… 6. Equipment cont… • In most cases Bidders can readily purchase, lease, or hire equipment; thus, it is usually unnecessary for the assessment of a contractor's qualification to depend on the contractor's owning readily available items of equipment. • The pass-fail criteria adopted should therefore be limited only to those bulky or specialized items that are critical for the type of project to be implemented, and that may be difficult for the contractor to obtain quickly. Examples may include items such as heavy lift cranes and piling barges, dredgers, tunnel boring machines, asphalt mixing plants, etc. 39

Bid document preparation cont… 6. Equipment cont… • Even in such cases, contractors may not own the specialized items of equipment, and may rely on specialist subcontractors or equipment-hire firms. • The availability of such subcontractors and of the specified equipment should be subject to verification prior to contract award. • The terms of any lease or hire agreement for equipment should preferably include provision that the equipment will remain on the site (or be vested in the Employer) in the event of default of the Contractor, thereby ensuring more timely continuity of work by a replacement contractor. 40

Bid document preparation cont… Specification preparation • A specification can be defined as a description of the physical or functional characteristics, or of the nature of a supply, service, or construction item; the requirements to be satisfied by a product, material, or process indicating, if appropriate, the procedures to determine whether the requirements are satisfied. • In essence a specification is a statement of the attributes of a product, process or service a user wishes to purchase, and consequently, which the supplier is expected to supply. • As far as practicable, it is desirable that the requirements be expressed numerically in terms of appropriate units 41 together with their limits.

Bid document preparation cont… Specification preparation cont… • A specification is statement of needs to be satisfied • It defines: ü What the purchaser wishes to buy ü What the supplier is expected to supply Specifications have two basic functions: 1) Communicate: When prepared by the purchaser, specifications inform the supplier what is required. When prepared by the supplier they provide a prospective purchaser with a description of the attributes of a product. 2) Compare : Specifications also provide criteria against which the products and services supplied or available can be compared. 42

Bid document preparation cont… There are basically 3 types of specifications: 1) Functional Specifications : • A functional specification is a clear indication of the purpose, function, application and performance expected of the supplied material or service, whereby the supplier is allowed or encouraged to provide an appropriate product. • These specifications describe the capabilities that the article where applicable, performance specifications are to be selected as they allow wider competition and enable suppliers to suggest new or improved ways of meeting the requirement. • Tests or criteria are developed to measure a product's 43 ability to perform and to last, as required.

Bid document preparation cont… Specification preparation cont… There are basically 3 types of specifications: 2) Technical / Design Specifications : • This specification details the characteristics of the product to be purchased, it is so detailed that it describes how the product is to be manufactured, detailing the physical dimensions of the product and materials to be used etc. (Most often used for building contracting and roads) 3) Combination : • These specifications include both design and functional features. Characteristics of both are used as prerequisites and as limiting factors in developing the 44 specification.

Bid document preparation cont… Specification preparation cont… • • A specification should be sufficiently detailed so that the product or service will fit the users requirements. It should not be so explicit that it prevents negotiation or discourages buyers or suppliers from using their expertise to propose alternative solutions that may offer better value for money. Preparation of a specification should involve close communication between the user and the Procurement and Supply Chain Manager and, if required, assistance from technical experts. Involvement of potential suppliers may also be helpful in developing a specification. 45

Bid document preparation cont… Specification preparation cont…. • If supplier input is required it must not result in adoption of a specification that favors one particular supplier. • When preparing a specification the following should be considered: üUse functional and performance criteria where possible. üAny technical specifications should be defined by reference to any International, National and quality assurance requirements, which are relevant. üReferences, which have the effect of favoring or eliminating particular suppliers, contractors, products or 46 services, should be avoided.

Bid document preparation cont… Specification preparation cont…. üIt is not normally permitted to use brand names, sources of supply, trade marks, patent types, origins or other means of production when writing product specifications. üIn abnormal case when other means are not known, the brand names etc. must be accompanied by the words "or equivalent". üShould serve the needs üShould not be over specified üShould be broad based üPreferably standard specification üSpecification should be the latest 47

Bid document preparation cont… Specification preparation cont…. • Don’t copy specification from a brochure or catalogue of a specific brand of vehicle or computer or other office equipment. Instead collect such brochures of many brands as possible, prepare comparative table and set own specification • Avoid too much details; put as minimum feature as possible to just meet your requirement • Avoid unique and unnecessary feature which may limit competition • Avoid other detail e. g. quantity, delivery schedule, evaluation criteria etc. • Specification shall include life cycle costing, 48 reliability, Maintainability, warranty etc.

Bid document preparation cont… How to prepare specification ? • It is essential that specifications are clear and concise and should accurately document a business unit’s expectations of a supplier. • Specification should reflect the needs of customer or user groups. • The content of specification must : ü Not restrict competition; ü Not act as a barrier to the introduction of alternative products or new advanced technologies; ü Encourage suppliers to offer innovative options or solutions which contribute to the department’s ability to carry out its business in a more cost – effective manner and; 49 ü Support the standardization and validation of product

Bid document preparation cont… How to prepare specification ? Cont… • A professional specification should also include : ü Clear and concise requirements ü Functional and performance terms only, unless specific technical requirements are needed ü Enough information to vendors to be able to appropriately determine and cost the goods or services that they will offer, and to what level of quality • What should not be included in specification? ü Conditions of tender; ü Conditions of contract; ü Questionnaires used by bidders to submit offers; ü Aspects which may lead to discrimination directly or indirectly to particular supplier; 50 ü Over specified requirements etc.

Bid document preparation cont… The importance of a clear specification • A specification must be clear and accurately define the expectation imposed on the supplier. • Ambiguity in the specification may result in appropriate or incomplete response from potential suppliers. • A poor description of requirement may mean that the product or service is not delivered as required. • Great care and consideration is required when writing the specification. Before preparation of specification • It may be necessary to undertake one or more of the following before writing a specification : ü Consult with the end users of the proposed goods or services to be purchased and ensure that their 51 requirements are incorporated into the specification

Bid document preparation cont… How to prepare specification ? Cont… Before preparation of specification cont… ü Research the market, to determine currently available solutions, likely costing and time scales. This can be achieved by making general enquires of suppliers, purchasers or industry associations, or by making formal advertisements of request of information. ü Determine the scope including the likely demands on a supplier and the range of good or services which will be required and ü Determine the evaluation criteria so that specification clearly indicates the relative importance of each requirement. 52

Bid document preparation cont… How to prepare specification ? Cont… Writing specification • Developing a specification means close involvement and continuous liaison between users of goods or services and other specialist or expert staff. • For complex procurement, staged approach to developing and refining the specification should be considered. ü Specifying the requirement broadly and generally in the first instance in order to ascertain market capabilities and opportunities. ü As the process moves toward tendering phase, the specification should be more detailed and specific. Evaluation criteria • Generally the evaluation criteria my address issues as : 53 ü Advantage of goods or services being offered;

Bid document preparation cont… How to prepare specification ? Cont… Evaluation criteria ü Ability of supplier to meet requirements, including technical and management competence, financial viability, risk and insurance requirements, relevant skills, expert and key personnel; ü Whole life cycle cost and; ü Assessment of risks or constraints associated with this offer. Mandatory and desirable requirements • The specification must clearly identify whether each requirement is mandatory or desirable. • Mandatory requirements are typically prefixed with words must or shall 54

Bid document preparation cont… How to prepare specification ? Cont… Mandatory and desirable requirements • Suppliers should not be considered if they have : ü Failed to meet a requirement identified in specification as mandatory and; ü Failed to demonstrate an alternative means of providing the outputs and outcomes. Vetting specification • It is useful to have the specification to have been vetted by someone other than the author. • The person vetting the specification should check that the specification : ü Is easy to read 55

Bid document preparation cont… How to prepare specification ? Cont… Vetting specification cont… ü Is easy to understand; ü Is clear; ü Is consistent with the specifications for the same or similar goods/ or services ü Has a logical structure; and ü Contains only essential information. Approval of specification After vetting has been completed, the specification should be endorsed by competent authority : • To certify that the requirement is valid to meet the need; • To indicate that the requirement is effectively defined; • To state that the specification is free from bias. 56

Bid document preparation cont… Structure of specification • Introduction • Scope ü Background ü Other documents ü Service conditions and environmental factor • Statement of requirements (Mandatory) • Technology, systems and management techniques • Quality requirements ü Occupational, health, safety and welfare • Whole life support ü Availability, reliability, maintainability ü Service history 57

Bid document preparation cont… Structure of specification cont… ü Security ü Training ü Documentation ü Transition requirements ü Implementation timetable ü Glossary ü Attachment Bidding forms • Bidding forms shall be put in the bidding documents same as in standard bidding document except price adjustment table where employer’s proposed weighting range (coefficient) shall be mentioned keeping in mind that the sum of coefficients shall be one. 58

Price adjustment table Index Code Description 1 2 Source of Index * 3 Base Value and Date 4 Non-adjustable (A) Employer’s Proposed Weighting Range (coefficient) 5 Bidder's Proposed Weighting (coefficient) 6 0. 15 -0. 2 E Labor (b) B B E B Materials (c) B B Equipment usage (d) B B E B Total 1. 00 59

Bid document preparation cont… • General conditions of contract shall not be changed in standard bidding document • Change in general conditions of contract according as specific contract shall be made in specific conditions of contract. • Put contract forms same as standard bidding document. Approval of cost estimate • Up to 10 million = Gazetted 3 rd class chief of office • Up to 50 million = Gazetted 2 nd class chief of office • Up to 100 million = Gazetted 1 st class chief of office • Above 100 million = Department head Approval of bidding document • Chief of public entity shall approve the bidding documents after preparation. 60

Already covered in chapter 3 : Topics Sale/issue of bid documents, pre-bid conference, Bid opening and award of contract contained in 6. 2 of chapter 6. Bid Evaluation Principles of bid evaluation • Evaluation of bids must be consistent with the terms and conditions stipulated in the bidding documents. • Fair, accurate and transparent evaluation of bids is one of the most important aspects of procurement. • PPA & PPR objectives of economy, efficiency and fairness among bidders should have been met. 61

Purpose of Bid Evaluation • To determine the lowest evaluated substantially responsive bid among the bids submitted on or before the bid closing date and time specified in the bidding documents. • The lowest evaluated substantially responsive bid may or may not necessarily be the lowest priced bid. • To determine accurately the lowest evaluated substantially responsive bid in accordance with the terms and conditions of the bidding documents, a logical systematic evaluation procedure designed to cover all aspects of the evaluation process should be followed. 62

Principles in Bid Evaluation • Confidentiality of Procedures • Clarifications and Alterations of Bids • Rejection of Bids • Extension of Bid Validity Period • Rejection of All Bids • Currency of Bid Evaluation • Provisional Sums for Contingencies • Provisional Sums for Day works • Other Provisional Sums 63

Bid Evaluation Procedure Four distinct stages in the bid evaluation process which should be followed in a logical sequence. Stage 1: Collection of information Stage 2: Determination of substantial responsiveness of bids Stage 3: Detailed evaluation of bids Stage 4: determination of the lowest evaluated substantially responsive bid 64

Collection of information 1) Basic Data • Project Title: • Loan Number (If any): • Bid or Contract Title: • Bid or Contract Number: • Estimated Value or Engineer’s Estimate: • Date Invitation For Bids Issued: • Method Of Procurement: 65

Collection of information cont. . . 1) Basic Data cont… • Bid Closing Date And Time: • Bid Opening Date And Time: • Number Of Bids Received: • Bid Validity Expires On: • Bid Security Validity Expires On: • Date For Determining Applicable Exchange Rates: • Exchange Rates For Evaluation: 66

Collection of information cont. . . 2. Record of Bid Opening • Shall be opened at the time, date and place specified in the bidding documents • Bidders that have submitted bids shall be invited • Those present at the bid opening shall be required to sign the attendance sheet • The bid prices including alternative bids if any, and the presence or absence of the requisite bid security read out. • Discounts offered, modifications, withdrawals & other information if any should also be recorded 67

Preliminary Examination 2. Table of Examination for Completeness of Bids • Documents regarding eligibility of bidder • Required copies of bid • Form of bid • Priced Bill of Quantities • Bid Security (amount and validity period) • Schedule of Particular Information • Drawings and Documents (to be submitted) • Joint Venture Agreement etc. • Power of Attorney submitted or not • Bid Form properly signed or not 68

Substantial responsiveness of bid • Considered substantially responsive if it does not contain any “Major Deviations” from the bidding documents or conditions • A major deviation is one which (a) has an effect on the validity of the bid; or (b) has been specified in the bidding documents as grounds for rejection of the bid; or (c) is a deviation from the commercial terms or the technical specifications in the bidding documents whose effect on the bid price is substantial but cannot be given a monetary value. 69

Substantial responsiveness of bid 1. Prepare table of bidders and bid Prices • Should be examined for arithmetical errors and the errors, if any, should be corrected as per the bidding documents. • The bidders must accept the corrections of arithmetical errors. • If a bidder refuses to accept the corrections of errors, its bid shall be rejected and its bid security shall be forfeited, • Convert all bid prices to the specified currency for bid comparison. Use the rates of exchange as per provisions of the bidding documents. • Arrange in the order of ascending price. 70

Substantial responsiveness of bid 2. Responsiveness to commercial terms and conditions • Failure to sign the bid form and price Schedules • Failure to submit a bid security • Failure to satisfy the bid validity period • Inability to meet the critical schedule • Failure to comply with minimum experience criteria • Conditional bids limiting the bidder’s responsibility • Inability to accept the price adjustment formulae • Failure to submit major supporting documents 71

Substantial responsiveness of bid 3. Substantial Responsiveness to Technical Requirements • Failure to bid for the required scope of work (e. g. , for the entire works or a complete package or a complete schedule) • Failure to quote for a major item in the package (A major item is approximately 10 percent or more of the total bid price) • Failure to meet major technical requirements • Failure to submit type-test reports for critical equipment, as clearly specified in the bidding documents. 72

Substantial responsiveness of bid 4. Preparation of Table of Substantive Responsiveness of Bids • Table of Commercial Terms and Technical Requirements • The responsiveness of each bid should be checked against major conditions for Commercial Technical Requirements • Bids that fail to conform to any of the major conditions should be considered non-responsive • Bidders may be requested to provide clarifications in writing, Not permitted to change the substance or price of their bids & record must be kept. 73

Detail evaluation of bid in practice 1. Number of Bids for Detailed Evaluation • Should include all substantially responsive bids which have a reasonable chance of becoming the lowest evaluated bid. • Where there is no cluster of lower priced bids, detailed evaluation of the three lowest priced substantially responsive bids is generally adequate. 2. Detail evaluation • To be evaluated in detail for commercial terms and for technical requirements • Compare each criteria against requirement and if deviation is large consider it as non responsive 74

Detail evaluation of bid Cont… 3. Financial Adjustment of Bid Prices The bid prices should be adjusted for the purpose of bid comparison for those deviations which are permissible and which can be “translated” fairly into monetary values. • Adjustment for Deviation from the Terms of Payment • Adjustment for Deviation from the Delivery Schedule or Completion • Adjustment for Cost of Inland Transportation to the Project Site etc. 75

Detail evaluation of bid Cont… The price adjustment should be based on a reasonable estimate; generally average quoted price by the other responsive bidders. Maximum adjustment = 15 % as per PPA & PPR 3. Detailed Evaluation of Bids for a Civil Works Contract a) Plans and Schedules • Submitted by bidders to show they propose to perform the contract. • Construction schedules, construction methods and approach, human resources and equipment schedules, contractor’s site organization etc. 76

Detail evaluation of bid Cont… (b) Analysis of Bill of Quantities and Unit Rates • to examine whether the unit rates of the bid are balanced • to verify whether the bid price is reasonable • to verify whether the bill of quantities is complete • to examine the completeness of unit rates (C) Unbalanced Bids • Higher unit prices for earlier works • Higher unit rates for underestimated work items 4. Determine lowest evaluated responsive bid 77

Detail evaluation of bid Cont… 5. Evaluate technical and financial capability ØMajor Qualification criteria • Pending litigation, Turn Over, Net Worth, Cash flow, Experience etc. ØPrepare a table and compare against requirement as pass/fail criteria 6. Award of contract Lowest evaluated responsive bid with qualification 7. Issuing of letter of intent (7 days for complain) 8. Letter of acceptance (15 days for performance bond) 9. Contract Agreement 78

Evaluation Report ØAfter evaluation of bids, the bids shall be submitted for approval along with bid evaluation report ØThe Evaluation Report should include the following in tabular and narrative form: • Basic Data Sheet; • A photocopy of the Invitation for Bids advertised • The Record of Bid Opening including the attendance sheet of the representatives of bidders; • Tables of Bidders including nationalities, and Bid Prices including discounts offered as submitted and as corrected for arithmetic errors; 79

Evaluation Report. . . • Table of Substantive Responsiveness to technical and commercial terms • Table on Qualifications • Adjustment of price with respect to technical and commercial requirement with relevant clause • Table of Bid Price Comparison with discount, correction and adjustment • Records of discussions and/or copies of correspondence with bidders relating to clarifications of their bids; • Recommendation for award of contract; 80

Evaluation. . . Authority to accept bid • Up to 30 million = Gazetted 3 rd class chief of office • Up to 70 million = Gazetted 2 nd class chief of office • Up to 150 million = Gazetted 1 st class chief of office • Above 150 million = Department head Bid evaluation committee • Chief of public entity or senior officer designated by him/her : Member • Chief of financial administration section : Member • Technical expert related in the field : Member • Law officer (if available) : Member 81

Nepal specific Contract management • • • Post bid conference Work plan & schedule Progress & quality monitoring Reporting Interim payment Variation Order Cost price adjustment Time extension Claim Conflict management Contract termination cont…. 82

Nepal specific Contract management • Liquidated damage (@ 0. 05 % per day but not more than 10 % of contract amount) • Prize (@ 0. 05 % per day but not more than 10 % of contract amount) • Taking over certificate • Defect liability period • Work completion report (As built drawing) • Final payment • Work completion certificate • Black listing 83

Any Question? 84