Procurement of Works

1. Procurement of Works Krishna Raj Panta

2. Topics of discussion Procurement Principles Procurement Methods Bidding Procedure Bid Document Preparation Bid Evaluation

3. What is Procurement ? • Types • Private Procurement • Public Procurement Simply buying some thing expending money Means the acquisition of goods, consultancy services or other services, procurement or causing procurement of an construction work

4. Public Procurement Public Entity • Constitutional organs or bodies • Ministries • Secretariats • Commissions • Department of the government of Nepal • Any other governmental entities • Corporations, companies, bank or board fully or in majority owned or controlled by the government A procurement made with Public Money is called Public Procurement.

5. Public Procurement… Public Entity… • Commissions, corporations, authorities, academies, boards, centers, councils or other corporate bodies of a similar nature which are formed by government. • Universities, colleges, research centers and other academic and educational institutes of similar nature which are operated by government or receive grant fully or in majority from government. • Local bodies • Development boards formed under development board act. • Bodies operated with loan or grant of government • Such other bodies as declared by government as public entity

6. Public Procurement cont… • Procurement of Goods, Procurement of Works & Procurement of Consultancy and other Services • More than 60 % of public money is expended in public procurement • The world bank estimates that about 90- 95% expenditure on a project is incurred through procurement • Public procurement is important part of Public Financial Management System

7. Public Procurement cont… • Public procurement does not permit subjective or unrestrained buying. • This may be with regard to, • Item • Quality • Quantity • Methodology • All procurements have to undergo scrutiny, and there are well laid norms.

8. Public Procurement cont… • Mistakes and lapses in Public Buying can cause grief to the organization or individuals • Audit /Vigilance reviews • Penalty and punishments Why Public Procurement important ? • It influences economic growth • Efficiency in public procurement releases funds for development • It is a tool to meet social and economic objectives • It affects quality of life of the citizens • The public servant is accountable

9. Principles in Public Procurement Accountability Ethics Reliability Impartiality Transparency Open competition Efficient and effectiveness Professionalism Service Justice Environmental friendly

10. Sound Principles of Public Procurement

11. Objectives of Public Procurement Special Objectives of Public Procurement • Equal access and non-discrimination • Transparency of process and decisions • Accountability of process and officials • Social Objectives • 3 R’s. • Right item, • Right price • Right time • Efficiency • Value for money

12. Methods of Procurement Open competitive bidding Limited bidding Sealed quotation Direct Procurement Community Participation Force account Emergency procurement Lump sum rate method Catalog Shopping Limited Bidding Buy Back Method

13. Open competitive bidding • International Competitive Bidding (ICB) • An international competitive bidding shall be invited on any of the following conditions : • Where the goods or construction works as requisitioned by a public entity are not available under competitive price from more than one construction entrepreneur or supplier within country. • In making invitation to national tender for the procurement of goods, construction works or other services, no tender is submitted and same has to be procured aboard.

14. Open competitive bidding… • International Competitive Bidding (ICB) cont… • Where foreign goods or construction works have to be procured from foreign assistance under an agreement enter into with a donor party. • Where the public entity certifies the goods or construction works, being of complex and special type, have to be procured by means of an international tender. • Notice on invitation to tender shall be published in English language an all tender or prequalification documents shall be published in English.

15. Open competitive bidding… • International Competitive Bidding (ICB) cont… • In publishing a notice a period of at least 45 days shall be given • Notice shall be published in daily newspaper of national circulation and it may also be published in any international communication media. • Notice shall be placed in website of concerned entity or that of the Public procurement Monitoring Office (PPMO)

16. Open competitive bidding… • National Competitive Bidding (NCB) • For any procurement having cost estimate more than 20 Lakh except medicine and medical equipments (for procurement more than 50 lakhs) for which ICB is not required, NCB shall be preferred. • In publishing a notice a period of at least 30 days shall be given • Notice shall be published in daily newspaper of national circulation. • Notice shall be placed in website of concerned entity or that of the Public procurement Monitoring Office (PPMO)

17. Open competitive bidding… • Duration of Bid Invitation in case of re-bidding • If procurement process is required to be cancelled and re-invitation of bidding is required, in publishing bid invitation notice for second time, a period of at least 15 days for NCB and 21 days for ICB shall be given, provided that no change is made in bid document. • If procurement process is required to be cancelled in second time of bid invitation also, then bid invitation notice can be published third time with a period of at least 7 days for NCB after sufficient justification and with approval from pertinent higher level. • If procurement process is failed in third time also and if procurement is emergency, procurement process can be completed using other procurement methods as per PPA.

18. Open competitive bidding… • Qualification • Two forms of qualification (for procurement > 20 million in case of works except in exceptional situation) – prequalification and post-qualification – are used to ensure that bidders have adequate capability and resources to perform the particular contract satisfactorily taking into account their (1) experience record on works of similar nature and complexity, (2) financial capability, (3) personnel capability, (4) equipment capability and (5) litigation history • Post qualification is carried out after bids are received as part of the bid evaluation process and it has the advantage of reducing the total procurement time by cutting out prequalification steps.

19. Open competitive bidding… • Prequalification • Prequalification is carried out in advance of bidding to establish a list of capable firms to be invited to tender while ensuring that a proper level of competition is safeguard. • In order to procure such construction work as determined to be large and complex by the PPMO from time to time or procure goods of high value such as industrial plants or identify qualified bidders, a public entity shall, prior to making invitation to tender, prepare prequalification documents and public invite to proposals for determination of prequalification.

20. Open competitive bidding… • Prequalification cont… • Where a public entity considers appropriate may also determine prequalification for other procurement as well. • Steps: • Prepare prequalification documents. The documents shall set forth such qualification criteria required for prequalification and the method for preparation of offers and the manner for the submission of offers. • Get the qualification criteria approved by department head • The documents shall bear signature of chief of public entity or the employee designated by him and seal of office

21. Open competitive bidding… • Prequalification cont… • Publish notice for offer on national newspaper and website of concerned entity or PPMO giving duration of submission at least 30 days for NCB and 45 days for ICB. • Provide the prequalification documents to interested firms, person, organization or company by collecting a fee as follows: • For procurement of 20-100 million Nrs. 5000 • For procurement of 100-250 Million Nrs. 10000 • For procurement of greater than 250 Million Nrs. 15000 • Open the proposal and evaluate against evaluation criteria. • Prepare a list of selected applicants and send to all applicants • Provide reason of rejection to applicant who request to provide reason within 30 days after the notice.

22. Open competitive bidding… • One stage bidding (NCB or ICB) • The Single-Stage, One-Envelope bidding procedure is the default or main bidding procedure and is used in most of the procurement. • Bidding Procedure • Preparation of Bidding Document • Invitation of Bid • Sale of Bid documents • Registration of Bids • Opening of Bids • Evaluation of bids • Letter of intent • Letter of Acceptance • Contract agreement

23. Bidding Procedure… Bid invitation For NCB or PQ proposal : Minimum 30 days For ICB or PQ Proposal : Minimum 45 days To be published in Web Site; For central level public entity, website of public entity or of Website PPMO For district level public entity website of public entity or website of PPMO www.ppmo.gov.np

24. Bidding Procedure… Sale and registration of Bid Shall issue the bidding documents only to qualified bidders where prequalification is used. Where post qualification is used, bidding documents shall be issued only to eligible bidders Bidding documents shall not be transferable to other firm and shall be submitted along with bid. Sale from two or more public entities Registration in one pubic entity E-Bidding also possible

25. Bidding Procedure… Price of Bidding Documents 2 million to 20 million Rupees : Rs 3000 > 20 million to 100 million Rupees : Rs 5000 > 100 million to 250 million Rupees : Rs 10000 > 250 million Rupees : Rs 20000

26. Bidding Procedure… Withdrawal and Modification of Bid Within last submission date of bid in sealed envelop in case of bidder who submits bid electronically Within 24 hour before the last submission date for other bidders Withdrawal or modification can be done at one time only. Pre-bid meeting For NCB at least 10 days before of last submission date For ICB at least 15 days before of last submission date To be informed to bidders if any amendment within 5 days pre bid meeting

27. Bidding Procedure… Bid Security 2 to 3 % of estimated amount Validity of bid security 30 days more than bid validity period Validity period of bid security to be extended if bid validity is extended Needs counter guarantee of commercial bank in Nepal for bid security of foreign bank Bid security will be forfeited if If requested for withdrawal or modification within the period of last bid submission date and last date of bid validity

28. Bidding Procedure… Bid Security cont… If the bidder does not accept the correction of arithmetic error If the selected bidder rejects for agreement If the selected bidder fail to submit performance bond within due date of contract agreement If clarification submitted by bidder makes substantial change to the bid If the bidder violates the code of conduct as per clause 62 of PPA.

29. Bidding Procedure… Bid validity Period Bid validity period is a period within which bidder’s rate are valid Contract agreement is done within bid validity period For bid having estimated cost within 100 million : 90 days For bid having estimated cost above 100 million : 120 days Period to be counted from last date of bid submission Can be increased with justified reasons Who agrees to extend bid validity shall extend validity of bid security also Bid bond amount shall be returned to bidder if he disagrees to extend bid validity

30. Bidding Procedure… Bid Opening Immediately after last date and time of bid submission in presence of bidders as far as possible (Absence of bidders does not disturb the opening process) Then bid submitted electronically are opened first and then other bids are opened Before opening bid, envelop of letter of withdrawn or modified bid shall be opened and read Then remaining bids shall be opened and matters like bid security, discount if any etc. shall be read, noted and signed No bid shall be rejected at the time of opening

31. Bidding Procedure… Bid Evaluation Bid Evaluation Report Selection for Award of Contract Does LEB meet each criterion; If not proceed to next Recommend bid for award. Selected bidder is the lowest technically responsive qualified bid. Performance security To be taken to ensure due performance of contract 5% Of Contract Value

32. Bidding Procedure… Performance security … If bid price of the bidder selected for acceptance is up to 15 (fifteen) percent less than the approved cost estimate, the performance security amount shall be 5 (five) percent of the bid price. For the bid price less than 15 percent of the cost estimate, the performance security amount shall be determined as follows: Performance Security Amount = (0.85 × Cost Estimate –Bid Price) × 0.5 + 5% of Bid Price. The Bid Price and Cost Estimate shall be inclusive of Value Added Tax

33. Bidding Procedure… Contract award Letter of intent is issued within seven days of bid selection & information should be given to other bidders also. If there is no complaint from other bidders within seven days, letter of acceptance is issued to notify the successful bidder to come with performance security for contract agreement within 15 days. If successful bidder fails to furnish the performance guarantee and to sign contract within 15 days, then his bid security shall be forfeited and bid of next lowest responsive bidder is accepted and called for agreement

34. Bidding Procedure… Contract award… If lowest evaluated bidder does not sign the agreement, in addition to forfeiture of bid bond PPMO on the recommendation of PE blacklist the bidder. If any bidder requests for information on the reason for rejection of within 30 days of issuing of letter of intent, the public entity shall communicate such information to the bidder.

35. Bidding Procedure… Rejection of tender or cancellation of procurement proceedings Where non of the tenders is substantial responsive Where the bid price of the lowest evaluated substantially responsive bid is substantially higher than cost estimate Where the goods, construction works, consultancy service or other services as required are no longer required. No tender shall be rejected or re tendering shall be invited only by the reason that only a few tenders or only one tender is substantial responsive. A public entity shall communicate a notice along with the reason for the rejection of tenders or the cancellation of procurement proceedings to all bidders.

36. Two Envelop System For procurement of construction work costing above 20 million. The bidders submit simultaneously two sealed envelopes, one containing the technical proposal and the other the price proposal. Initially, only the technical proposals are opened at the date and time advised in the bidding documents. The price proposals remain sealed and are held in custody by the Executing Agency. The technical proposals are evaluated by the Executing Agency. No amendments or changes to the technical proposals are permitted.

37. Two Envelop System The objective of the exercise is to allow the Executing Agency to evaluate the technical proposals without reference to price. Bids of bidders who do not conform to the specified requirements is rejected. Following approval of the technical evaluation, and at a date and time advised by the Executing Agency (7 days duration to be given after notice), the price proposals are opened in public. The price proposals of the technically responsivebidders are evaluated and, the award ofcontract is made to the lowest evaluated substantially responsive bidder. Financial proposal of bidders who fail in technical proposal shall be returned to concerned bidder without opening

38. Sealed Quotation Procurement of works up to 2 million except medicine and medical equipments (5 million) can be carried out adopting sealed quotation. Procedure Preparation of Sealed Quotation Document Invitation Notice in national or local newspaper with minimum period of 15 days Sale and registration of Bid :Same as open bidding Bid validity period : 45 day

39. Sealed Quotation Bid security : same as open bidding (validity 75 days) Withdrawal and Modification of Bid Not allowed Sale and registration of Bid Same as open bidding Bid Evaluation & Bid Evaluation Report Same as open bidding except if less than three sealed quotations are submitted, it shall be cancelled and re-notice is published. However for the second time less than three sealed quotations can be evaluated. Selection for Award of Contract Same as open bidding

40. Sealed Quotation Price of Bidding Documents: Rs. 1000 Performance security Same as open bidding Contract award The public entity shall accept the sealed quotation within 15 days of opening. Notice is issued to selected bidder within seven days of acceptance of the sealed quotation. Notice is issued to other bidders also. The sealed quotation bidder who receives the notice shall enter into the procurement contract by furnishing the performance guarantee within seven days of date of receipt of such notice.

41. Direct Procurement Goods or Consultancy Services or Other services or construction work may be procured by means of direct procurement in the following circumstances: The value of miscellaneous procurement does not exceed the prescribed threshold. Medicine and medical equipments : Up to 20 Lakh Other procurement : Up to 5 Lakh In this situation quotation shall be demanded with at least three firms which are registered in the standing list of office. Only one supplier or construction entrepreneur or consultant or service provider has technical capacity or capability to fulfill the procurement requirement. (public notice to be published)

42. Direct Procurement cont… Only one supplier has the exclusive right to supply the goods to be procured and there is no other suitable alternative . (to be purchased with authorized supplier and public notice to be published) Additional goods or services of proprietary nature within the prescribed threshold are to be procured from original supplier or consultant or service provider after it is established that if there is a change of supplier or consultant or service provider so as to replace or extend the existing goods or services or spare parts of installations, it will be difficult to replace or extend the existing goods or services in the public entity. Up to 30 % of the existing contract price Approval of one level higher authority for making procurement in this way. (Public notice to be published)

43. Direct Procurement cont… It is necessary to procure essential construction works, goods, consultancy services within the threshold as prescribed, which were not included in the initial contract because of unforeseeable reasons and have become necessary since the separation of such works, goods or services from the initial contract would be difficult for the technical or economic reason. The service of a particular consultant with any unique qualification is immediately required for the concerned task or it is indispensible to obtain service from the then consultant. (public notice to be published) Except miscellaneous procurement or procurement of proprietary nature, direct procurement is made according as the decision made by council of ministers.

44. Direct Procurement cont… Council of ministers decide according to the recommendation made by following committee. Chief secretary : Coordinator Secretary, ministry of finance : Member Secretary, concerned ministry : Member Financial Comptroller General : Member This provision is applicable only for pure governmental entity Except Pure governmental organization direct procurement is made according to decision made by highest executive body of concerned entity.

45. Direct Procurement cont… Approval of one level higher shall be obtained for making procurement of goods or service of proprietary nature. Goods manufactured in Nepal can be purchased directly up to 15 lakhs in published price Medical equipments can be purchased with manufacturer directly up to 20 lakhs in published price Goods produced in domestic industry can be purchased directly up to 25 lakh Hotel expenditure of VIP guests invited by Nepal government up to 50 lakh can be procured directly. Building maintenance of embassy situated in foreign countries can be procured directly up to 25 thousand US$.

46. Direct Procurement cont… If manufacturer of goods to be procured is only one in Nepal and there is not another alternative, chief of public entity can procure directly under following conditions: The manufacturer shall publish list of retail and dealer price in national newspaper The manufacturer shall give discount same as he gives to local dealer. PPMO can make inspection to such manufacturer regarding manufacturing cost. If PPMO founds abnormal manufacturing cost, it may blacklist the manufacturer. Procurement by one public entity with other public entity Procurement with international inter Government organization Medicine procurement with medicine manufacturer pre qualified by WHO if the pre qualified manufacturer is only one

47. Community Participation This method is used for executing small labor intensive works where the objective is to: Provide employment and income directly to persons living in the project area. Increase the utilization of local know how, appropriate technologies and materials Hand over the completed works for operation and maintenance directly by persons living in the project area. When objective of project is to create employment which enhances the economy, quality or substantiality of beneficiary community then this method is used. Works up to 10 million (including VAT, contingencies & portion of community) may be carried out by community participation.

48. Force Account Procurement execution by force account means execution of public works using the resources of a public agency of the government, without recourse to competitive bidding. Use of force account may apply in the following situation: The size, nature and location of the works make it unsuitable to adopt competitive bidding, e.g. maintenance and repairs works and where the cost is difficult to estimate accurately. Work must be carried out without disrupting existing operation, by crews familiar with those operations. The risks of unavoidable work interruption are better borne by the than by a contractor. No contractor is interested in carrying out the work at a reasonable price.

49. Force Account cont… Emergencies needing prompt attention. Institutional development e.g. training of maintenance crews. The implementing agency is responsible for management of the works and must assign sufficient staff for supervision. A public entity shall obtain prior approval of one level higher authority in order to procure a work through force account. While doing work through force account, the public entity shall procure the technical service and construction materials required for that work in accordance with the procedures of procurement of goods and services.

50. Emergency Procurement • In special circumstances, emergency procurement is carried out. • Special Circumstances means a circumstance resulted from natural or divine calamity and sudden or unexpected special circumstance such as • Draught • No rainfall • Deluge • Earthquake • Flood • Landslide • Firing • War or internal conflict