Project Procurement Management

2. Project Procurement Management

3. PROJECT PROCUREMENT MANAGEMENT BY Engr. Dr. Attaullah Shah PhD (Civil Engg.) , MSc ( StrEngg.) , MBA , MA ( Eco) , MScEnvir design BSc Civil Engg (Gold Medal) , Post Grad Dip in computer ( Gold medal) Project Director AllamaIqbal Open University IslaamabadPakisatn. pdaiou@yahoo.com pd@aiou.edu.pk Cell: +92-333-5729809 Tel:+92-51-9057212 Fax:+92-51-9250100

4. “Property may be destroyed and money may lose its purchasing power; but character, health, knowledge and good judgment will always be in demand under all conditions.”  Roger Babson • “Men use care in purchasing a horse, and are neglectful in choosing friends”  John Muir. • Purchasing power is a license to purchase power.”  Raoul Vaneigem • “Excellence in any department can be attained only by the labor of a lifetime; it is not to be purchased at a lesser price.”  Samuel Johnson • The friendship that can cease has never been real.”  St. Jerome • “Sell not virtue to purchase wealth, nor liberty to purchase power.”  Benjamin Franklin

5. Passion can never purchase what true love desires: true intimacy, self-giving, and commitment” • “Experts agree that the best type of computer for your individual needs is one that comes on the market about two days after you actually purchase some other computer.”  Dave Barry • I saw a boy of the crew purchasing javelins of them with bits of platters and broken glass. Christopher Columbus

6. Procurement Management • Procurement is acquisition of goods and services. • Project Procurement Management includes the contract management and change control processes required to administer contracts or purchase orders issued by authorized project team members.

7. Procurement Cycle • Plan Purchases and Acquisitions. Determining what to purchase or acquire and determining when and how. • Purchase of equipment • Procurement of works • Procurement of supplies etc • Plan Contracting – documenting products, services, and results requirements and identifying potential sellers. • Developing the requisite documents • Specification • No and make etc.

8. Request Seller Responses. • obtaining information, quotations, bids, offers ,or proposals, as appropriate. • Inviting bids • Inviting quotations • Request for Proposals ( RPFs) • Expression of Interest ( EOI) etc. • Select Sellers. • Reviewing offers, choosing among potential sellers, and negotiating a written contract with each seller. • Tender/bids opening • Evaluation and Assessment of bids • Negotiation if required and allowed • Selection of the seller/contractor

9. Contract Administration – • Managing the contract and relationship between the buyer and seller. • Reviewing and documenting how a seller is performing or has performed to establish required corrective actions • Provide a basis for future relationships with the seller, • Managing contract-related changes and, when appropriate, • Managing the contractual relationship with the outside buyer. • Contract Agreement • Contract Closure – • completing and settling each contract, including the resolution of any open items, • Closing each contract applicable to the project or a project phase.

10. Definition of Government Procurement Procurement by government agencies Public Sector Organizations With major Govt. Equity With minor Govt. Equity Under control of Govt. (No Govt. Equity) Orgs with other forms of Govt. funding

11. Objectives of Procurement Reforms Economy (Value for money) Efficiency Transparency Accountability Competitiveness Fairness

12. Past Regulatory Environment Procurement under GFR Procurements by Corporate Sector Procurements by Statutory Bodies Classified Procurements

13. Present Regulatory Framework Enabling Legislation PPRA Ordinance 2002 Subsidiary Legislation Public Procurement Rules, 2004 Public Procurement Regulations

14. Composition of PPRA Board • Secretary, Finance Division: Chairman • Secretary, MoI &P: Member • Secretary, D P Division: Member • Secretary, MoW & P: Member • Secretary, Mo H & W: Member • Secretary, M o C: Member • Syed Nizam Shah: Private Member • Mr. Javed Hussain: Private Member • Mr. Munawar Hameed: Private Member • Managing Director (PPRA): Member

15. Functions of PPRA • Monitor application of the procurement laws, rules, regulations, policies and procedures; • Monitor the implementation of and evaluate laws, rules, regulations, policies and procedures, inspections and quality of goods, services and works and recommend reformulation thereof; • Recommend to the Federal Government revisions in or formulation of new procurement laws, rules and policies;

16. Functions (Contd.) • Make regulations and lay down code of ethics and procedures for public procurement; • Monitor public procurement practices and make recommendations to improve governance, transparency, accountability and quality of public procurement; • Monitor overall performance of procuring agencies and make recommendations for improvements;

17. Functions (Contd.) • Provide and coordinate assistance to procuring agencies for developing their institutional framework; • Call any functionary of procuring agencies to provide assistance.

18. Steps Involved in Redesigning New Procedures Study of Existing Procedures Identification of Redundant & Non Transparent Procedures Redesigning New Procedures Emergency Procedures

19. Procurement Cycle Contract Administration Planning/Designing specifications Payments Pre-qualification Grievance Redressal Solicitation of Bids Contract Award Bids opening and Evaluation

20. Public Procurement Rules, 2004 Main Features Protection to Intergovernmental commitments & International Agencies Integrity Pacts. Rs 10 million and above Procurement Planning Limitation on Splitting of Tenders Promotion of stipulating generic specifications Bid Evaluation Criteria to be stated in Invitation to Bids Methods of Advertisement

21. Limitation on Negotiations • Date of Exchange Rates to be prescribed in the bidding documents • Grounds for rejection of bids to be intimated to unsuccessful Bidders Public Procurement Rules, 2004 Main Features

22. Prequalification/Qualification & Disqualification of Contracts • Relevant Experience • Capabilities – Personnel/Equipment • Financial Position • Managerial capabilities of the contractor • Disqualification & Blacklisting of consultants and contractors

23. Solicitation of Proposals • Selection of Appropriate bidding process • Wide advertisement for competitive bids • Evaluation criteria declared in advance • Selection of Appropriate Bidding Documents

24. Open Competitive Bidding, Principal Method • Single Stage. Two Envelope Procedure. • Two Stage Bidding Process. • Technical proposal without price for uniform specifications. • Price proposals on the basis of uniform technical specifications. • Two Stage Two Envelope Bidding • First stage technical proposal & financial proposal • Second Stage – Revised Technical Proposal – Supplementary Financial Proposal. Procedures of Open Competitive Bidding

25. Alternative Methods of Procurement • Petty Purchases • Request for Quotations • Direct Contracting • Negotiated Tendering

26. Implementation • Information Dissemination • Advisory Services • Complaint Redressal • Preliminary Dispute Resolution Mechanism

27. Monitoring • Internal Pre/Post Audit Procedures • Audit by the Auditor General • Procurement Audits by Private Sector Auditors

28. Grievance Redressal • Committees within procuring entity • 2nd tier grievance redressal • Mohtasib’s office • Judicial Remedy

29. Payment Regulations • On account payments • Closing of Contracts

30. Closing of Contracts • Resolution of Contractor’s Claims • Completion of Project Reports • Historical Files to Retain: Requirements of Auditor General • Post Completion Evaluation

31. Contract Administration • Execution & Management of Contracts • Appropriate Funds Availability • Payments to Contractors • Tracking Supply Schedules • Management of changes/variations to Procurements

32. Two Step Regulations • General Regulations applicable on all Public Sector Procuring Agencies • Advertisement of Requirements, Time for submission of bids, Bid evaluation criteria and its publicity, level of advertisement, etc • Organization Specific Regulations • Specific circumstances of PSE’s Delegation of Powers, Declaration of Emergency and Emergent Procurement Procedures, Payment Procedures etc. PPRA Approach

33. One Envelope Procedure Procedures of Open competitive Bidding under PPRA Rules 2004. • Each bid shall comprise one single envelopes containing, separately, financial proposal and technical proposal (if any) • Open competitive bidding procedure used for most of the procurement. • where the scope and technical specification of the procurements are very clear and unambiguous. • For projects of repetitive nature and where a pool of registered contractors with the departments is available sometimes. • In this procurement mode, the financially lowest bid is generally selected. • Such procurements become victim of low bidder dilemma as the bidding firms. • Poor history of successful procurements by this method. • Preferred for small and clear procurements.

34. Two Envelops Procedure • The bid shall comprise a single package containing two separate envelopes. Each envelope shall contain separately the financial proposal and the technical proposal: • The envelopes shall be marked as “FINANCIAL PROPOSAL” and “TECHNICLA PROPOSAL” in bold and legible letters to avoid confusion.

35. Two Stage Bidding Procedure First Stage (Tech Proposal ) • The bidders shall submit, according to the required specifications, a technical proposal without price, • The technical proposal shall be evaluated in accordance with the specified evaluation criteria and may be discussed with the bidders regarding any deficiencies and unsatisfactory technical features.

36. Continued • After such discussions, all the bidders shall be permitted to revise their respective technical proposals to meet the requirements of the procuring agency; • The procuring agency may delete, modify or add any aspect of the technical requirements or evaluation criteria, or it may add new requirements or criteria not inconsistent with these rules.

37. Continued • Such revisions, deletions, modifications or additions are communicated to all the bidders equally at the time of invitation to submit final bids, and that sufficient time is allowed to the bidders to prepare their revised bids: • Such allowance of time shall not be less than fifteen days in the case of national competitive bidding and thirty days in the case of international competitive bidding;

38. Continued • Those bidders not willing to conform their respective bids to the procuring agency’s technical requirements may be allowed to withdraw from the bidding without forfeiture of their bid security.

39. Second stage (Revised Tech Proposal) • The bidders, whose technical proposals or bids have not been rejected and who are willing, to conform their bids to the revised technical requirements shall be invited to submit a revised technical proposal along with the financial proposal.

40. Continued • The revised technical proposal and the financial proposal shall be opened at a time date and venue announced and communicated to the bidders in advance; and • The revised technical proposal and the financial proposal shall be evaluated in the manner prescribed above. The bid found to be the lowest evaluated bid shall be accepted.

41. Best for projects of technical nature. • Where the firm’s capacity to deal with the complexity of the project is critical to the successful implementation of the project • The scaling of technical and financial score depends on the nature of the project and relevant importance of the of each major criteria • Typical range from 50:50 to 70:30 for technical: financial respectively. • For mega IT projects, where the technical expertise, global partnership and relevant experience of the firm are of paramount importance, the technical part can be given a score of 70 or even 80.

43. One Stage Two envelope bidding procedure:- • The bid shall comprise a single package containing two separate envelopes containing separately the financial proposal and the technical proposal; • The envelopes shall be marked as “FINANCIAL PROPOSAL” and TECHNICAL PROPOSAL” in bold and legible letters to avoid confusion;

44. Continued • initially, only the envelope marked “TECHNICAL PROPOSAL” shall be opened; • The envelope marked as “FINANCIAL PROPOSAL” shall be retained in the custody of the procuring agency without being opened. • The technical proposal shall be evaluated on the laid down criteria. • The financial bids of the firm fulfilling the criteria are opened and remaining are returned un-opened. • The lowest evaluated bid based on the technical and financial bids is approved.

45. Performance Guarantee • Where needed and clearly expressed in the bidding documents, the procuring agency shall require the successful bidder to furnish a performance guarantee which shall not exceed ten per cent of the contract amount.

46. Two Stage Bidding Procedure • First Stage (Tech Proposal) • The bidders shall submit, according to the required specifications, a technical proposal without price, • The technical proposal shall be evaluated in accordance with the specified evaluation criteria and may be discussed with the bidders regarding any deficiencies and unsatisfactory technical features, • After such discussions, all the bidders shall be permitted to revise their respective technical proposals to meet the requirements of the procuring agency; • The procuring agency may delete, modify or add any aspect of the

47. technical requirements or evaluation criteria, or it may add new requirements or criteria not inconsistent with these rules. • Such revisions, deletions, modifications or additions are communicated to all the bidders equally at the time of invitation to submit final bids, and that sufficient time is allowed to the bidders to prepare their revised bids: • Such allowance of time shall not be less than fifteen days in the case of national competitive bidding and thirty days in the case of international competitive bidding; • Those bidders not willing to conform their respective bids to the procuring agency’s technical requirements may be allowed to withdraw from the bidding without forfeiture of their bid security.

48. Second Stage: • The bidders, whose technical proposals or bids have not been rejected and who are willing, to conform their bids to the revised technical requirements shall be invited to submit a revised technical proposal along with the financial proposal. • The revised technical proposal and the financial proposal shall be opened at a time date and venue announced and communicated to the bidders in advance; and • The revised technical proposal and the financial proposal shall be evaluated in the manner prescribed above. The bid found to be the lowest evaluated bid shall be accepted.

49. Best for • Best suited for Large Civil Works projects, heavy equipment and complex projects • Where the available information and in-house expertise of the procuring agency is not enough to deal with. • The feedback of the firm may provide some additional information on the procurement.

50. Procurement Policy Guidelines • PAKISTANI SUPPLIERS ARE TO BE PREFERRED • A DOMESTIC WEIGHTING OF 15% IS TO BE GIVEN TO ANY PAKISTANI SUPPLIER IN COMPETITION WITH A FOREIGN SUPPLIER •  GOODS SHALL BE SOURCED DIRECT FROM MANUFACTURERS WHENEVER POSSIBLE •  BIDS SHOULD BE EVALUATED ON THE BASIS OF BEST VALUE FOR MONEY RATHER THAN LOWEST PRICE •  WHEN PURCHASING GOODS, SERVICES ESPECIALLY IN CASE OF EXPENSIVE & TECHNICALLY COMPLEX EQUIPMENT PROCURING AGENCIES SHOULD PRE-QUALIFY BIDDERS •  WHEN PURCHASING GOODS & SERVICES PROCURING AGENCIES SHOULD EVALUATE TENDERS ON THE BASIS OF APPROPRIATE QUALITY RATHER THAN LOWEST PRICE •  WHEN THE SAME KIND OF GOODS IS REQUIRED ON A REGULAR BASIS, PROCURING AGENCIES SHOULD NEGOTIATE FRAMEWORK CONTRACTS ALLOWING REGULAR CALL-OFF OF FRESH STOCK.