1 PROCUREMENT OF GOODS, WORKS SPECIALIZED SERVICES WORLD BANK Seminar on Procurement of Goods, Works and Consultancy Contracts financed from World Bank Loans and IDA Credits, February 27 - March 3, 2006, Zagreb, Croatia.

2 PROCUREMENT CATEGORIES §GOODS l COMMODITIES, RAW MATERIALS l MACHINERY, EQUIPMENT l INDUSTRIAL PLANT §WORKS l CONSTRUCTION l INFRASTRUCTURE §SERVICES (CONTRACTUAL) l TRANSPORTATION, INSURANCE l INSTALLATION, COMMISSIONING l TRAINING AND MAINTENANCE l OPERATION AND MANAGEMENT l MAPPING, DRILLING, ETC.

3 PROCUREMENT PROCESS FOR GOODS, WORKS AND SPECIALIZED SERVICES INTERNATIONAL COMPETITIVE BIDDING (ICB) §ADEQUATE ADVANCE NOTIFICATION l GENERAL PROCUREMENT NOTICE (REQUIRED) ANNOUNCES ICB PROCUREMENT OPPORTUNITIES PUBLISHED IN “UN DEVELOPMENT BUSINESS” PUBLISH MINIMUM 8 WEEKS BEFORE RELEASE OF BIDDING OR PRE-QUALIFICATION DOCUMENTS §NOTIFICATION BEFORE PREQUALIFICATION/BIDDING l SPECIFIC PROCUREMENT NOTICE REQUEST FOR PRE-QUALIFICATION OR BIDS FOR SPECIFIC CONTRACTS PUBLISHED IN: –ONE NATIONAL NEWSPAPER (REQUIRED) –OFFICIAL GAZETTE (IF ANY) –DIRECT NOTICE TO FIRMS RESPONDING TO GPN (REQUIRED)

4 §NOTIFICATION (CONTD) SPECIFIC UN DEVELOPMENT BUSINESS (OPTIONAL) SPECIFIC PROCUREMENT NOTICE UNDB (REQUIRED FOR CONTRACTS MORE THAN $10 MILLION) INTERNATIONAL PRESS/JOURNALS (OPTIONAL) FOR LARGE SPECIALIZED OR IMPORTANT CONTRACTS NOTICE TO BE ADVERTISED IN UNDB, AND/OR WELL KNOWN TECHNICAL MAGAZINES, NEWSPAPERS AND TRADE PUBLICATIONS INFORM EMBASSIES OF BANK MEMBERS (ENCOURAGED) PROCUREMENT PROCESS FOR GOODS, WORKS AND SPECIALIZED SERVICES

5 §EQUAL OPPORTUNITY TIME FOR BID SUBMISSION -- GENERALLY 8 TO 12 WEEKS FOR LARGE CONTRACTS BUT NOT LESS THAN 6 WEEKS FAIR CONDITIONS OF CONTRACT -- USE OF BANK’S STANDARD BIDDING DOCUMENTS MANDATORY BROAD SPECIFICATIONS (IDENTIFY MANDATORY AND DESIRABLE) §EQUAL TREATMENT OF BIDDERS DISCLOSE EVALUATION CRITERIA APPLY WITHOUT DISCRIMINATION §AWARD TO LOWEST EVALUATED BID PROCUREMENT PROCESS FOR GOODS, WORKS AND SPECIALIZED SERVICES

6 ICB STEPS §1) NOTIFICATION/ADVERTISING §2) (PREQUALIFICATION) WHERE SPECIFIED IN LN/CR §3) ISSUE BIDDING DOCUMENTS §4) SUBMISSION OF BIDS §5) PUBLIC BID OPENING §6) SEND MINUTES OF BID OPENING TO BANK §7) EVALUATE AND PREPARE REPORT SELECTION OF THE LOWEST EVALUATED BID POSTQUALIFICATION (WHEN NO-PREQUALIFICATION) POST BID VERIFICATION (WHEN PREQUALIFICATION) §8) CONTRACT AWARD §9) CONTRACT PERFORMANCE §10) BANK CLEARANCE REQUIRED BEFORE TAKING ACTIONS ON 1, 2, 3, AND 8 PROCUREMENT PROCESS FOR GOODS, WORKS AND SPECIALIZED SERVICES

7 OTHER METHODS OF PROCUREMENT §ONLY WHEN ICB IS NOT APPROPRIATE OR PRACTICAL §MUST SATISFY ECONOMY AND EFFICIENCY REQUIREMENTS §PROVIDES COMPETITION TO THE EXTENT POSSIBLE §GETS THE BEST VALUE FOR MONEY (REASONABLENESS OF PRICE) §PROVIDES TRANSPARENCY

8 OTHER PROCUREMENT METHODS §ADOPT ONLY THAT METHOD WHICH IS SPECIFIED IN LN/CR AGREEMENT §MAINTAIN RECORDS OF ALL NON-ICB METHODS §AGGREGATE AMOUNTS SPECIFIED FOR EACH NON-ICB METHOD AS PER LOAN/CREDIT AGREEMENT SHOULD NOT BE EXCEEDED

9 §LIMITED INTERNATIONAL BIDDING §NATIONAL COMPETITIVE BIDDING §SHOPPING §FORCE ACCOUNT §DIRECT CONTRACTING §MINOR WORKS §UN AGENCIES (UNICEF/ILO/WHO) §FINANCIAL INTERMEDIARIES (COMMERCIAL PRACTICES) §BOO-BOT-BOOT §LOAN GUARANTEED BY BANK §COMMUNITY PARTICIPATION OTHER METHODS OF PROCUREMENT

10 LIMITED INTERNATIONAL BIDDING §APPROPRIATE WHEN l THERE ARE ONLY LIMITED NUMBER OF SUPPLIERS l CONTRACT AMOUNTS ARE VERY SMALL l OTHER EXCEPTIONAL REASONS MAY JUSTIFY DEPARTURE FROM ICB OTHER PROCUREMENT METHODS

11 LIMITED INTERNATIONAL BIDDING §NO PUBLIC ADVERTISEMENT BUT LIST OF SUPPLIERS TO BE INVITED TO BID AND BIDDING DOCUMENTS SHOULD BE CLEARED WITH BANK §LIST OF SUPPLIERS SHOULD BE BROAD BASED §ALL KNOWN SUPPLIERS SHOULD BE INVITED WHEN THERE ARE ONLY LIMITED NUMBERS §BIDDING DOCUMENTS WILL BE SAME AS FOR ICB EXCEPT THAT THERE WILL BE NO DOMESTIC PREFERENCE CLAUSE §MINIMUM BIDDING TIME 4 TO 6 WEEKS §PUBLIC BID OPENING REQUIRED (SEND MINUTES TO BANK) §EVALUATE BIDS -- PREPARE EVALUATION REPORT §SEND TO BANK FOR CLEARANCE §AWARD SHOULD BE MADE TO THE LOWEST EVALUATED BID OTHER PROCUREMENT METHODS

12 NATIONAL COMPETITIVE BIDDING (NCB) §APPROPRIATE WHEN l FOREIGN BIDDERS ARE NOT INTERESTED l NATURE OF GOODS AND WORKS ARE DISPERSED l COST OF ICB DISPROPORTIONATELY HIGH l GOODS & WORKS OF ACCEPTABLE QUALITY ARE AVAILABLE NATIONALLY AT PRICES BELOW INTERNATIONAL PRICES §ACCEPTABLE IF l PROVIDE ADEQUATE COMPETITION l NATIONAL PROCEDURES ARE REASONABLE l DOCUMENTATION ADEQUATE l DOES NOT EXCLUDE ELIGIBLE FOREIGN FIRMS l ASSURE AWARD TO LOWEST EVALUATED BID OTHER PROCUREMENT METHODS

13 NATIONAL COMPETITIVE BIDDING (CONTD) §NATIONAL PROCEDURES ACCEPTABLE ONLY WHEN CPAR/SIDE LETTER/MINUTES OF NEGOTIATIONS OR ANY OTHER DOCUMENTS IDENTIFY UNACCEPTABLE FEATURES IN NATIONAL PROCUREMENT PROCESS, IF ANY, AND BORROWER AGREES TO REMOVE THEM §NATIONAL PRESS PUBLICATION IS REQUIRED §BIDDING TIME SHOULD NOT BE LESS THAN 4 WEEKS §NCB DOCUMENT SHOULD BE PREPARED AND CLEARED WITH BANK (USE REGIONAL DOCUMENT, IF REQUIRED) §PAYMENT IN LOCAL CURRENCY, NATIONAL LANGUAGE ACCEPTABLE §BID EVALUATION CRITERIA MUST BE SPECIFIED -- TOTAL COST WILL BE COMPARED INCLUDING IMPORT DUTY, TAXES, ETC. §NO DOMESTIC PREFERENCE CLAUSE IS ALLOWED §FOREIGN BIDDERS IF INTERESTED SHOULD BE ALLOWED TO BID ON SAME TERMS AND CONDITIONS AS IN NCB DOCUMENT §AWARD SHOULD BE MADE TO THE LOWEST EVALUATED BID §BANK’S PRIOR REVIEW REQUIRED IF SPECIFIED AS PER LN/CR OTHER PROCUREMENT METHODS

14 SHOPPING §APPROPRIATE WHEN OFF THE SHELF GOODS VALUES ARE SMALL l NO FORMAL BIDDING DOCUMENT REQUIRED l NO PUBLIC BID OPENING REQUIRED OTHER PROCUREMENT METHODS

15 SHOPPING (CONTD) l OBTAIN QUOTATIONS (PROFORMA INVOICE) IN WRITING FROM AT LEAST 3 SUPPLIERS REQUEST FOR QUOTE TO INDICATE DESCRIPTION OF GOODS STANDARD SPECIFICATIONS DESIRED TIME & PLACE OF DELIVERY--ALLOW ADEQUATE TIME, BUT NOT LESS THAN 3 WEEKS. NO PUBLIC BID OPENING REQUIRED QUOTATIONS MAY BE SUBMITTED BY TELEX/FAX l AWARD SHOULD BE MADE TO THE LOWEST EVALUATED OFFER (RETAIN EVALUATION REPORT) l PURCHASE ORDER WILL INDICATE TERMS OF ACCEPTED OFFER OTHER PROCUREMENT METHODS

16 DIRECT CONTRACTING §INCLUDES: l EXTENSION OF EXISTING CONTRACT §RATIONALE: l STANDARDIZATION l PROPRIETARY ITEMS l PROCESS DESIGN REQUIRES CRITICAL ITEMS FROM SPECIFIC SUPPLIER AS CONDITION OF CONTRACTOR PROVIDING PERFORMANCE GUARANTEE l IN EXCEPTIONAL CASES SUCH AS RESPONSE TO NATURAL DISASTER OTHER PROCUREMENT METHODS

17 DIRECT CONTRACTING (CONTD) §ENSURE REASONABLENESS OF PRICE AND SEEK ADDITIONAL INFORMATION AS REQUIRED SUCH THAT THE PRICES COMPARE FAVORABLY WITH OTHER SIMILAR TRANSACTIONS §FOR LARGE CONTRACTS VERIFICATION OF PRICE AND QUALITY MAY BE REQUIRED FROM INDEPENDENT SURVEILLANCE COMPANY §ENSURE CONTRACT CONDITIONS ARE SATISFACTORY AND INTEREST OF THE PURCHASER/EMPLOYER ARE PROTECTED §BANK’S NO-OBJECTION PRIOR TO CONTRACT AWARD REQUIRED OTHER PROCUREMENT METHODS

18 MINOR WORKS (shopping) §SMALL CONTRACTS §WORKS MAY BE DISPERSED §OBTAIN AT LEAST 3 QUOTATIONS ON LUMP-SUM FIXED PRICE BASIS OR FIXED UNIT RATES §AWARD TO THE LOWEST EVALUATED BID §RETAIN EVALUATION REPORT §USE SAMPLE DOCUMENT OTHER PROCUREMENT METHODS

19 §NO SPECIAL PREFERENCE TO BE ALLOWED §SHOULD COMPETE WITH PRIVATE SECTOR §ANY SPECIAL PROCEDURES, SUCH AS PAYMENT, TO BE TAKEN INTO ACCOUNT IN EVALUATION §STANDARD CONTRACT CONDITIONS NEGOTIATED WITH UN AGENCIES TO BE USED §ANY SOLE SOURCING REQUIRES JUSTIFICATION UN Agency

20 FORCE ACCOUNT §APPROPRIATE WHEN l QUANTITIES CANNOT BE DEFINED IN ADVANCE l WORKS SMALL AND SCATTERED IN REMOTE AREAS AND QUALIFIED BIDDERS ARE UNLIKELY TO BID l WORK TO BE CARRIED OUT WITHOUT DISRUPTING ONGOING OPERATION l RISKS OF UNAVOIDABLE WORK INTERRUPTIONS BETTER BORNE BY BORROWER THAN CONTRACTOR l EMERGENCY NEEDING PROMPT ATTENTION OTHER PROCUREMENT METHODS

21 FORCE ACCOUNT §APPLICABLE FOR WORKS AND NOT GOODS §IDENTIFICATION OF WORKS BY FORCE ACCOUNT AS PER PROCUREMENT PLAN §EXECUTION ONLY BY DEPT OF IMPLEMENTING AGENCY §COST CONTROL AND EFFICIENCY ARE REQUIRED IN EXECUTING WORK §PROPER SUPERVISION OF QUALITY IS REQUIRED §STANDARDS REQUIRED FOR THE WORK §PROPER DOCUMENTATION OF EXPENDITURES ON LABOR, MATERIALS, USE OF EQUIPMENT, OVERHEADS, ETC. TO BE MAINTAINED FOR PAYMENTS AND INSPECTION PURPOSES OTHER PROCUREMENT METHODS

22 COMMUNITY PARTICIPATION §PARTICIPATION OF LOCAL COMMUNITIES §PARTICIPATION OF NON-GOVERNMENTAL ORGANIZATIONS §INCREASED UTILIZATION OF LOCAL KNOW-HOW AND MATERIALS §EMPLOY LABOR-INTENSIVE OR OTHER TECHNOLOGIES §PROCUREMENT PROCEDURES, SPECIFICATIONS AND CONTRACT PACKAGING ADAPTED TO REFLECT THESE CONSIDERATIONS §PAD/IMPLEMENTATION MANUAL/PROJECT IMPLEMENTATION PLAN TO DESCRIBE APPLICABLE PROCEDURES OTHER PROCUREMENT METHODS

23 PRIVATE SECTOR APPROACHES (BOO-BOT-BOOT) TWO ALTERNATIVE APPROACHES §BOO-BOT-BOOT ENTREPRENEUR SELECTED BY ACCEPTABLE ICB/LIB PROCEDURES l BIDDING RESTRICED TO THOSE WHO COULD MOBILIZE FINANCING l BID EVALUATION CONSIDERS FINANCING AMOUNT AND TERMS IN ADDITION TO BID PRICE AND TECHNICAL CRITERIA l ENTREPRENEUR TO PROCURE GOODS/WORKS/SERVICES UNDER OWN PROCEDURES §IF ENTREPRENEUR IS NOT SELECTED BY ICB/LIB PROCEDURE THEN: l GOODS & WORKS FINANCED BY BANK SHOULD BE PROCURED BY ICB OR LIB PROCEDURES OTHER PROCUREMENT METHODS

24 COMMERCIAL PRACTICE (PRIVATE SECTOR) §BIDDING l SMALL VALUE DIRECT: SPARES, PROPRIETARY GOODS, TECHNOLOGY TRANSFER COMPETITION: STANDARD GOODS l LARGE VALUE ICB l PROFORMA INVOICES l QUOTATIONS: AT LEAST 3 FROM 2 DIFFERENT COUNTRY SOURCES OTHER PROCUREMENT METHODS

25 GUARANTEE LOANS –PROCUREMENT FINANCED BY COMMERCIAL LOANS GUARANTEED BY BANK TO FOLLOW: PROCEDURES WHICH ASSURE PROJECT TO BE CARRIED OUT DILIGENTLY AND EFFICIENTLY –GOODS AND WORKS TO BE PROCURED: BE OF SATISFACTORY QUALITY COMPATIBLE WITH BALANCE OF PROJECT DELIVERED/COMPLETED IN TIMELY MANNER PRICE DOES NOT AFFECT ECONOMIC AND FINANCIAL VIABILITY OTHER PROCUREMENT METHODS

26 Annex H - Checklist comparing National Competitive Bidding Procedures and World Bank Policy 1. Are there eligibility restrictions based on nationality of bidder and/or origin of goods (other than primary boycotts)? 2. Are there primary boycotts which are established by law? 3. Are bidding opportunities advertised in the local press? 4. Are prospective bidders allowed at least 30 days for bid preparation (except for commodities/small goods contracts)? 5. Are contractors/suppliers pre-qualified for large/specialized contracts? 6. Are minimum experience, technical and financial requirements (for pre- or post-qualification) explicitly stated in the documents? 7. Is an invitation to pre-qualify advertised for each procurement involving large or complex potential contracts? 8. Are joint ventures with local firms required for foreign firms’ eligibility? 9. Are joint venture partners jointly and severally liable? Yes NoBank Policy Not allowed Only primary boycotts are acceptable Required Not allowed Required

Are there set limitations to the number of firms who can bid for a contract? 11. Are parastatals allowed to bid? 12. Are bidders required to register with a local or federal authority as a prior condition for bidding? 13. Are extensions to bid validity allowed? Yes NoBank Policy Not allowed Acceptable only if they (i) are financially autonomous, (ii) operate under commercial law and (iii) are independent from borrower and its purchasing/contracting authority Should be discouraged. Acceptable only if registration criteria, process and cost reasonable/efficient and qualified foreign firms not precluded from competing Acceptable only if justified by exceptional circumstances

Are there restrictions on the means of delivery of bids? 15. Is preference given to suppliers or contractors based on region or locality of registration, small size, ethnic ownership, etc.? 16. Are there restrictions on sources of labor and material? 17. Is public bid opening required? Does it occur immediately or closely following the bid submission deadline? 18. Is a “two envelope” bid opening procedure permitted for procurement of goods or works?* 19. Is automatic rebidding required if too few bids are received? Yes NoBank Policy Not allowed, except when bidders have to submit physical samples. Then they can be required to deliver bids by mail, by courier, by hand, etc. Not allowed Not allowed, except for unskilled labor, if available locally Required Not allowed Acceptable, provided all responsive bidders are allowed to bid, the process is efficient and no serious delays result * All technical envelopes are opened first and, after review, price envelopes of all or only qualified/responsive bids are opened in the second round

Is “bracketing” used in bid evaluations?** 21. Is award made to lowest evaluated qualified and responsive bidder? 22. Are price negotiations conducted with “winning” bidders prior to contract signature? 23. Are price adjustment provisions generally used? Yes NoBank Policy Not allowed Required Not allowed, except where the bid price is substantially above market or budget levels and then only if negotiations are carried out to try to reach a satisfactory contract through reduction in scope and/or reallocation of risk and responsibility which can be reflected in a reduction in Contract Price. (See Guidelines para 2.60) Not required, but recommended for works contracts of 1 year or more in duration when domestic inflation rate is high ** Rejection of bids outside a range or “bracket of bid values.

Are the terms and conditions used in goods and works procurement generally appropriate for the size and nature of contract intended? 25. Are contract scope/conditions modified during implementation? Yes NoBank Policy Required (to be acceptable they should be balanced, reasonable and clearly address the most important issues that lead to problems during performance, e.g. risk allocation, payment, inspection, completion/acceptance, insurance, warrantees, changes, contract remedies, force majeure, governing law, termination, etc.) Acceptable, but advance Bank approval of changes subject to prior review needed if required under the Loan Agreement.

31 SBD Procurement of Goods §Section I. Instructions to BiddersSection I. Instructions to Bidders §Section II. Bidding Data Sheet (BDS)Section II. Bidding Data Sheet (BDS) §Section III. Evaluation and Qualification CriteriaSection III. Evaluation and Qualification Criteria §Section IV. Bidding FormsSection IV. Bidding Forms §Section VI. Schedule of RequirementsSection VI. Schedule of Requirements

32 SBD Procurement of Goods (CONTD) §Section VII. General Conditions of ContractSection VII. General Conditions of Contract §Section VIII. Special Conditions of ContractSection VIII. Special Conditions of Contract §Section IX. Contract FormsSection IX. Contract Forms