Asian Development Bank Business Opportunities Procurement of Goods and Works

Asian Development Bank Procurement System – Principles Key Principles Source of Procurement Economy and Efficiency Fairness Transparency Promotion of Domestic Industries

Asian Development Bank Procurement System - Guidelines ADB Charter Commercial Practices Other MDBs ADB Board Policy ADB Experience

Asian Development Bank Procurement System - Eligibility Goods must be produced in a member country Bidders must be nationals of eligible source countries must not have a conflict of interest must not be under declaration of ineligibility by ADB must not be ineligible due to an UN Security Counsel resolution must be, in case of a GOE, legally and financially autonomous, operate under commercial law and be independent of the Employer

Asian Development Bank Procurement System - Responsibilities The Borrower (Executing Agency) is responsible for all procurement activities ADB will review the procurement activities to ensure that the ADB’s Guidelines for Procurement are followed

Asian Development Bank Procurement System - Anticorruption Definitions Corrupt Practice offering, giving, receiving, or soliciting, directly or indirectly, anything of value to influence improperly the actions of another party Fraudulent Practice any act or omission, including a misrepresentation, that knowingly or recklessly misleads, or attempts to mislead, a party to obtain a financial or other benefit or to avoid an obligation Coercive Practices impairing or harming, or threatening to impair or harm, directly or indirectly, any party or the property of the party to influence improperly the actions of a party Collusive Practice an arrangement between two or more parties designed to achieve an improper purpose, including influencing improperly the actions of another party

Asian Development Bank Procurement System – Anticorruption Actions ADB will if it determines at any time that any party has engaged in corrupt, fraudulent, coercive, or collusive practices reject a proposal to award contract cancel the portion of a loan declare a firm ineligible either indefinitely or for a stated period of time inspect accounts and records of suppliers and contractors and have them audited by auditors appointed by the Bank

Asian Development Bank Procurement System – Procurement Methods International Competitive Bidding Limited International Bidding National Competitive Bidding Shopping Direct Contracting Force Account Procurement from Specialized Agencies Procurement Agents Inspection Agents Procurement in Loans to Financial Intermediaries Procurement under BOO / BOT / BOOT, Concessions and Similar Private Sector Arrangements Performance Based Procurement Procurement under Loans Guaranteed by ADB Community Participation in Procurement Procurement under Disaster and Emergency Assistance

Asian Development Bank Procurement System – Procurement Methods International Competitive Bidding (ICB) For supply contracts valued at US$1.0 million or more For works contracts valued at US$10.0 million or more Value for money Provides for adequate, fair and equal opportunities

Asian Development Bank Procurement System – Procurement Methods Prequalification ICB Activities Preparation of Bids Bid Opening Bid Evaluation Award of Contract

Asian Development Bank Procurement System – Procurement Methods Key Provisions of ICB Source of Procurement Use of SBDs Reference to ADB Bid Validity & Bid Security Language Clarity Standards Use of Brand Names Pricing Price Adjustment Transportation and Insurance Currency of Bid Currency of Bid Comparison Currency of Payment Terms of Payments Alternative Bids Conditions of Contract Performance Security Liquidated Damages & Bonus Force Majeure Settlement of Dispute

Asian Development Bank Procurement System – Procurement Methods Key Provisions of ICB Time for Preparation of Bids Bid Opening Procedures Clarification or Alteration of Bids Confidentiality Examination of Bids Evaluation and Comparison of Bids Domestic Preference Extension of Bid Validity Postqualification of Bidders Award of Contract Publication of the Award of Contract Rejection of all Bids Debriefing

Asian Development Bank Procurement System – Procurement Methods Limited International Bidding ICB by Invitation Appropriate for . . . if there is only a limited number of suppliers . . . other exceptional reasons

Asian Development Bank Procurement System – Procurement Methods National Competitive Bidding Procurement is done domestically, within the borrowing DMC Allowed when : Domestic production or construction facilities are available Foreign contractors and suppliers are unlikely to be interested Procedures for domestic procurement are acceptable to ADB Borrower has requested for NCB

Asian Development Bank Procurement System – Bidding Procedures Single-Stage: One-Envelope Single-Stage: Two-Envelope Two-Stage: Two-Envelope Two Stage

Bidding Procedures Single-Stage: One-Envelope ADB Approval Deadline STOP Technical Proposal Technical Proposal Financial Technical Financial Financial Proposal Preparation Evaluation

Bidding Procedures Single-Stage: Two-Envelope ADB Approval ADB Approval Deadline Technical Proposal STOP Financial Proposal Technical Proposal Technical Financial Proposal Financial Financial Preparation Evaluation 1 Evaluation 2

Bidding Procedures Two-Stage: Two-Envelope ADB Approval ADB Approval Deadline Deadline Technical Proposal Technical Proposal Revised Technical Suppl. Financial Revised Techn. Proposal Revised Techn. Proposal Suppl. Financial STOP STOP Financial Proposal Financial Proposal Financial Financial Preparation 1 Evaluation 1 Preparation 2 Evaluation 2

Bidding Procedures Two-Stage ADB Approval ADB Approval Deadline Deadline STOP STOP Technical Proposal Technical Proposal Revised Technical Financial Revised Technical Proposal Proposal Revised Technical Proposal Financial Proposal Preparation 1 Evaluation 1 Preparation 2 Evaluation 2

Asian Development Bank Procurement System – ADB Prior Review Procurement Plan Contracts (Goods, Works, Services) Procurement Mode Procurement Timing ADB review (post/prior) Prequalification Advertisement and Invitation to Prequalify Evaluation Criteria Evaluation of Applications Preparation of Bid Documents Invitation to Bid Advertisement Bid Documents EA Bid Evaluation Evaluation Report Proposal of Award Award of Contract Certified Contract

Asian Development Bank Procurement System – ADB Prior Review Additional ADB Approval Requirements Extension of bid validity Complaints from bidders after contract award Change in contract award recommendation Change in the terms and conditions of contract Time extensions, modifications of conditions, change orders increasing in aggregate the original contract amount by more than 15%

Asian Development Bank Procurement System – ADB Post Review Prerequisite - EA capacity assessment Procedure - Prior review of 1st set of procurement documents in project only - Advertisement provided after posting - ADB reviews contract award decisions post facto Timing - BER and contract documents to be submitted as soon as completed - ADB must respond in 6 months - EA required to keep files for 2 years Risk - Misprocurement  cancellation of funds

Asian Development Bank Procurement System – ADB Review Award of contracts for values of $10.0mill. and above must be approved by the Bank’s — Procurement Committee — Chairman : Principal Director, COSO Members : Assistant General Counsel Director, Sector Division Secretary : Senior Procurement Specialist (Non-Voting)

Asian Development Bank Procurement System – ADB Review Matters for Consideration For contracts estimated at $10.0 million or more Prequalification Evaluation Technical Evaluation (2-stage/2-envelope bidding) Bid Evaluation  Award Proposal for Rebidding Proposal for Cancellation Actions in conflict with the ADB requirements Proposal to vary previous PC decisions Any matters designated by management

Asian Development Bank Procurement System – Prequalification Purpose to ensure that bids are submitted only by firms that have the necessary qualifications in terms of Eligibility Experience Financial Capacity Pending Litigation to undertake the work for which bids are to be invited.

Asian Development Bank Procurement System – Prequalification Used for Large complex works contracts Turnkey contracts Contracts for fabrication of custom designed plant and equipment Specialized service contracts Complex IT contracts

Asian Development Bank Business Opportunities Preparing responsive bids Avoiding common pitfalls

Asian Development Bank Preparing Responsive Bids Joint Venture Requirements All partners must be eligible J.V. agreement must contain provision for joint and several liability One of the partners must be authorized to be in charge Copy of Joint Venture agreement must be included in the bid

Asian Development Bank Preparing Responsive Bids Be compliant ! Submit a basic offer that complies with all terms and conditions of the bidding document, even if some of these conditions appear irrelevant Don’t qualify ! Do not add any conditions. Conditionalities or qualifications will lead to rejection Get official clarification ! Submit an official inquiry to the EA if any provisions of the bidding document are unclear or unacceptable before the bid closing date or such date as may be specified. A copy may also be submitted to the bank if appropriate

Asian Development Bank Preparing Responsive Bids Be aware of bid evaluation criteria ! Check if other factors besides price, such as delivery periods, efficiency, operating & maintenance costs, will be considered in the bid evaluation. These factors must be specified in the bidding document to be applied. Be clear with alternatives ! Submit alternatives only if explicitly allowed in the bidding document. Alternative proposal, if allowed, should be submitted in addition to the compliant proposal. The proposed alternatives and corresponding changes in bid price should be clearly indicated. Only the alternative proposal submitted by the bidder with the lowest evaluated and substantially responsive compliant bid can be considered, unless otherwise provided in the bidding documents.

Asian Development Bank Preparing Responsive Bids Ensure bid is complete ! Check if the bid complies with all the requirements of the bidding document such as bid security, power of attorney, additional documents such as test certificates and technical brochures. Incomplete Bids may be rejected. Make final check of bid ! Amount, validity and text of Bid Security Signatures and power of attorney Joint venture agreement enclosed References enclosed Discounts in covering letter or appropraiate place as specified in the bidding document Marking of envelopes

Asian Development Bank Preparing Responsive Bids Be on time ! Submit bid within the stipulated deadline. Late bids will not be accepted. During opening ensure ! All relevant prices are read out All discounts are read out Presence and amount of bid security is read out No envelope remains unopened All the above is recorded correctly The record is signed by all bidders present and by the buyer Be Aware of Possible Extension ! There may be a request to extend the bid validity period by several months, as in certain cases the evaluation of bids requires more time than originally expected.

Asian Development Bank Business Opportunities How your bid is evaluated Determining the winning bid

Asian Development Bank Bid Evaluation – Purpose Determination of the lowest evaluated and substantially responsive bid

Asian Development Bank Opening of Bids Public Opening of Bids Bids received are opened publicly by the EA at the time and place indicated in the bidding documents Required for the sake of Fairness and Transparency Gives bidders assurance that all bids will be treated fairly and impartially Bidders’ attendance is encouraged Record of the items read out is to be kept by the EA Record is initialed by the representatives of bidders present

Asian Development Bank Opening of Bids Information read out Bidder’s name Total bid price Price of alternative bids, if any Amount or percentage of any discounts offered and the conditions under which the discounts are applicable Bid security - amount and validity Any other information which is deemed necessary to be announced by the Tender Committee.

Asian Development Bank Bid Evaluation – Typical Sequence Complete Basic Data Sheet Prepare Record of Bid Opening Prepare Table of Bid Prices Examine Bids for Responsiveness Identify Bids for Detailed Evaluation Evaluate Bids in Detail Adjust Bid Prices Apply Other Adjustments

Asian Development Bank Bid Evaluation – Basics Time Frame The bid evaluation of bids and the award of contract should be completed before the expiration of the bid validity as stipulated in the bid documents Confidentiality of Procedure After opening of bids no information to non-authorized persons on : Substance of bid Preliminary examination results and status Evaluation results and status Recommendation of award 10

Asian Development Bank Bid Evaluation – Basics Clarification and Alteration of Bids Only clarifications not changing the substance or the price of the bid may be requested or accepted by the Borrower Arithmetical Errors No cause for bid rejection. Can be corrected : Discrepancy between Unit Price and Total Price Unit Price will prevail Discrepancy between Total Bid Amount and Sum of Total Prices Total Prices will prevail 10

Asian Development Bank Bid Evaluation – Basics Postqualification Purpose Identifies qualified bidders during initial examination of opened bids Spares borrowers/EA from detailed evaluation of bids of unqualified bidders Typical Criteria Experience Financial position Staff Qualifications Technical capability After sales service Past performance 58

Asian Development Bank Bid Evaluation – Basics Major Deviations Has an effect on the validity of the bid; or Has been specified in the bid documents as grounds for rejection of the bid; or Is a deviation from the provisions of the bidding documents with effect on the bid price, but cannot be given a monetary value; or Is a deviation from the minimum experience qualifications specified in the bidding documents; or Is an unacceptable deviation from the specifications Conditional bid

Asian Development Bank Bid Evaluation – Basics Minor Deviations Has no effect on the validity of the bid; or Has no effect on the price, quality or delivery of the goods or services offered; or Has such effect, but the difference from commercial terms and technical specifications can be given a monetary value; or Has not been specified in the bid documents as grounds for rejection, provided total amount of deviations does not exceed a previous determined percentage of the bid price (usually 15 per cent)

Asian Development Bank Bid Evaluation – Basics Extension of Bid Validity Considered in exceptional cases When considered, all bidders should be asked Bidders willing to extend bid validity cannot modify substance of bid must extend validity of bid security Commercial Aspects Exercise flexibility in evaluating commercial aspects such as : Delivery Schedule Terms of Payment Mode of Payments 10

Asian Development Bank Bid Evaluation – Basics Price Adjustment Provision In evaluating bids do not take into account price adjustment provisions. Use base price for comparison. All bids are subject to same degree of adjustment. Alternative Bids When acceptable, specify Conditions in Invitation to Bid and Instructions to Bidders Method of evaluation and comparison 10

Asian Development Bank Bid Evaluation – Basics Basis for Price Comparison Goods for Goods from outside Includes cost of insurance and freight (CIF or CIP) Excludes custom duties or other taxes levied on goods for Goods from inside Includes ex-factory price (EXW) Excludes any sales or similar taxes levied on goods Related Services including all taxes and duties Works Includes all taxes, duties and other levies 10

Asian Development Bank Bid Evaluation – Basics Exchange Rates For bid comparison use single currency as specified in bid documents (usually local currency or US$) The rates to be used are the selling rates quoted by an official source (central bank, commercial bank, or internationally circulated newspaper) Date of exchange rate to be specified in bidding documents shall be : Not earlier than 28 days prior to the deadline for submission of bids Not later than the original date for the expiry of bid validity 10

Asian Development Bank Bid Evaluation – Basics Factors to be considered payment schedule delivery time operating costs efficiency and compatibility of the equipment availability of service and spare parts, and related training safety, and environmental benefits The factors other than price to be used for determining the lowest evaluated bid shall, to the extent practicable, be expressed in monetary terms 10

Asian Development Bank Bid Evaluation – Domestic Preference Supply Contracts Example BIDDER A BIDDER B 33,973,305 1. Bid Price (arithmatically corrected) 31,403,725 240,000 2 Adjustment for Scope 2,053,000 A. Bid Price (adjusted for Scope) 33,456,725 34,213,305 3. Technical Compliance 477,000 723,017 4. Performance 2,488,614 232,000 105,000 340,000 5. Terms of Payment 6. Delivery 1,023,000 123,000 B. Evaluated Bid Price 37,785,339 35,396,322

Asian Development Bank Bid Evaluation – Domestic Preference Purpose To provide margin of preference to domestically manufactured goods or domestic contractors for ADB-financed projects To allow domestic firms to compete with foreign firms on more equal footing Conditions Granting of preference subject to conditions Applies only to ICB Needs to be applied for by Borrower To be specified in Loan Agreement if scheme is applied

Asian Development Bank Bid Evaluation – Domestic Preference Supply Contracts Responsive bids are to be classified into three groups: Group A: Goods manufactured locally with more than 30% domestic value added Group B: Goods manufactured locally with less than 30% domestic value added Group C: Imported goods

Asian Development Bank Bid Evaluation – Domestic Preference Supply Contracts Procedure Determine lowest bid in each group Compare lowest evaluated bids among the groups If lowest is from group A or B, select it for contract award If lowest is in Category III, compare: 1.15 x CIF price of Group C against EXW price of Group A

Asian Development Bank Bid Evaluation – Domestic Preference BIDDER X BIDDER Y Group A Bid Group C Bid Example Supply Contract 33,973,305 1. Bid Price (arithmetically corrected) 31,403,725 240,000 2. Adjustment for Scope 2,053,000 A. Bid Price (adjusted for Scope) 33,456,725 34,213,305 3. Technical Compliance 477,000 723,017 4. Performance 2,488,614 232,000 105,000 340,000 5. Terms of Payment 6. Delivery 1,023,000 123,000 B. Evaluated Bid Price 37,785,339 35,396,322 5,131,996 --------- 7. Domestic Preference (15% of A.) C. Evaluated Bid Price (w. Dom .Pref.) 37,785,339 40,528,318

Asian Development Bank Bid Evaluation – Domestic Preference Examples Group A Group B Group C Supply Contracts 9,900 BID PRICE COMPARE 10,000 9,000 AWARD 9,000 BID PRICE COMPARE 10,000 9,900 AWARD 9,900 BID PRICE COMPARE 9,000 9,000 x 1.15 =10,350 10,000 AWARD

Asian Development Bank Bid Evaluation – Domestic Preference Turnkey / Supply & Installation Procedure Goods offered from outside the Borrower’s country are quoted CIF Locally manufactured goods are quoted EXW Other components such as design, installation, commissioning, testing and supervision are quoted separately For comparison of local goods with imported goods, add to the offered CIF price of the imported goods the lesser of either 15% , or applicable duties and taxes to be paid for each item

Asian Development Bank Bid Evaluation – Domestic Preference Example Turnkey / Supply & Installation BID PRICE Bidder A Bidder B Design 2,000 2,500 Civil works 23,000 27,500 Equipment EXW 10,000 60,000 Equipment CIF 100,000 50,000 Total 135,000 140,000 Domestic Preference loading 15% of CIF: 15,000 7,500 COMPARE: 150,000 147,500 SERVICES WORKS SUPPLY AWARD

Asian Development Bank Bid Evaluation – Domestic Preference Civil Works Responsive bids are to be classified into two categories Category I Bids offered by Domestic Contractors and Joint Ventures eligible for the Preference Category II Bids offered by other Contractors

Asian Development Bank Bid Evaluation – Domestic Preference Civil Works Eligibility Criteria for Domestic Contractors Incorporated in the borrower’s country Majority ownership by nationals of borrowing country Will not subcontract to foreign contractors more than 50% of the total value of their work

Asian Development Bank Bid Evaluation – Domestic Preference Civil Works Eligibility Criteria for Joint Ventures between Domestic and Foreign Firms The domestic partner is individually eligible according to the criteria stated previously The domestic partner would not qualify for the works without the participation of the foreign partner The domestic partner will carry out at least 50% of the works in terms of value

Asian Development Bank Bid Evaluation – Domestic Preference Civil Works Procedure Determine lowest evaluated bid from each category Compare lowest bids from each category If lowest bid is from category I, award contract If lowest bid is from category II add 7.5% and compare it with lowest bid from Category I, award contract to lowest

Asian Development Bank Bid Evaluation – Domestic Preference Example Civil Works Category I Category II BID PRICE 10,000 9,900 COMPARE 10,000 9,900 AWARD BID PRICE 9,000 9,500 COMPARE 9,000 x 1.075 = 9,675 9,500 AWARD

Asian Development Bank Business Opportunities Getting Paid ADB Disbursement Procedures

Asian Development Bank Disbursement Procedures Direct Payment Procedure used for payment of large civil works progress payments, consultant’s fees, and importation of goods where not practical to open a letter of credit Reimbursement Procedure used for payment of local currency costs, petty purchases and small civil works payments Commitment Procedure used extensively for financing import of goods Imprest Fund Procedure used for payment of contractors’ bills and suppliers’ invoices in small amounts or numerous items of operating expenses

Asian Development Bank Disbursement Procedures 2 2 - LC Opened Supplier’s Bank Executing Agency Borrower’s 1 - Application for LC 1 5 5 - Issue of CL 3 3 - Application for CL 4 4 - CL Approval

Asian Development Bank Business Opportunities Questions, Clarifications, Debriefing, etc