Project Procurement Management

PROJECT PROCUREMENT MANAGEMENT BY Engr. Dr. Attaullah Shah PhD (Civil Engg.), MSc ( Str Engg.), MBA, MA ( Eco), MSc Envir design BSc Civil Engg (Gold Medal), Post Grad Dip in computer ( Gold medal) Project Director Allama Iqbal Open University Islaamabad Pakisatn. Cell: Tel: Fax:

“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 “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 BabsonRoger BabsonRoger Babson “Men use care in purchasing a horse, and are neglectful in choosing friends” John Muir. “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 Purchasing power is a license to purchase power.” Raoul VaneigemRaoul VaneigemRaoul 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 “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 JohnsonSamuel JohnsonSamuel Johnson The friendship that can cease has never been real.” St. Jerome The friendship that can cease has never been real.” St. JeromeSt. JeromeSt. Jerome “Sell not virtue to purchase wealth, nor liberty to purchase power.” Benjamin Franklin “Sell not virtue to purchase wealth, nor liberty to purchase power.” Benjamin Franklin Benjamin Franklin Benjamin Franklin

Passion can never purchase what true love desires: true intimacy, self-giving, and commitment” 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 “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 BarryDave BarryDave Barry I saw a boy of the crew purchasing javelins of them with bits of platters and broken glass. Christopher Columbus I saw a boy of the crew purchasing javelins of them with bits of platters and broken glass. Christopher Columbus

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

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

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

Contract Administration – Contract Administration – Managing the contract and relationship between the buyer and seller. 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 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, Provide a basis for future relationships with the seller, Managing contract-related changes and, when appropriate, Managing contract-related changes and, when appropriate, Managing the contractual relationship with the outside buyer. Managing the contractual relationship with the outside buyer. Contract Agreement Contract Agreement Contract Closure – Contract Closure – completing and settling each contract, including the resolution of any open items, completing and settling each contract, including the resolution of any open items, Closing each contract applicable to the project or a project phase. Closing each contract applicable to the project or a project phase.

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

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

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

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

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

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;

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;

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

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

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

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

Public Procurement Rules, 2004 Main Features   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

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

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

Procedures of Open Competitive Bidding   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.

Alternative Methods of Procurement   Petty Purchases   Request for Quotations   Direct Contracting   Negotiated Tendering

Implementation   Information Dissemination   Advisory Services   Complaint Redressal   Preliminary Dispute Resolution Mechanism

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

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

Payment Regulations   On account payments   Closing of Contracts

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

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

PPRA Approach   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.

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

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

Two Stage Bidding Procedure First Stage (Tech Proposal ) i) The bidders shall submit, according to the required specifications, a technical proposal without price, i) 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.

Continued iii) After such discussions, all the bidders shall be permitted to revise their respective technical proposals to meet the requirements of the procuring agency; iii) 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.

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 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; 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;

Continued v) 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.

Second stage (Revised Tech Proposal) i) 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.

Continued ii) 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 iii) 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.

 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.

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

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

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. 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.

Two Stage Bidding Procedure First Stage (Tech Proposal) First Stage (Tech Proposal) The bidders shall submit, according to the required specifications, a technical proposal without price, 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, 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; 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 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. 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 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; 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. 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.

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 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 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. 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.

Best for Best for Best suited for Large Civil Works projects, heavy equipment and complex projects 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. 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. The feedback of the firm may provide some additional information on the procurement.

Procurement Policy Guidelines PAKISTANI SUPPLIERS ARE TO BE PREFERRED 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 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 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 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 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 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. 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.

WHERE THE PROCUREMENT OF GOODS AND SERVICES IS ALREADY PRE-APPROVED BY THE PLANNING COMMISSION AND LISTED PROCURING AGENCY’S PC-1, THERE IS NO FURTHER NEED TO OBTAIN CONCEPTUAL APPROVAL TO PROCURE. THE PA CONCERNED MAY PROCEED TO INITIATE THE PROCUREMENT. WHERE THE PROCUREMENT OF GOODS AND SERVICES IS ALREADY PRE-APPROVED BY THE PLANNING COMMISSION AND LISTED PROCURING AGENCY’S PC-1, THERE IS NO FURTHER NEED TO OBTAIN CONCEPTUAL APPROVAL TO PROCURE. THE PA CONCERNED MAY PROCEED TO INITIATE THE PROCUREMENT. PRODUCTS PURCHASED BY PAs PROGRAMMES SHOULD HAVE BEEN AVAILABLE IN THE MARKET FOR A MINIMUM PERIOD OF TWO YEARS. PRODUCTS PURCHASED BY PAs PROGRAMMES SHOULD HAVE BEEN AVAILABLE IN THE MARKET FOR A MINIMUM PERIOD OF TWO YEARS. RESPONSE TIMES ALLOWED TO BIDDERS SHOULD BE AS STATED IN THE PPR RESPONSE TIMES ALLOWED TO BIDDERS SHOULD BE AS STATED IN THE PPR THE AMOUNT OF SECURITY REQUIRED FOR BIDS SHOULD NOT EXCEED 5% OF THE BID PRICE IN SINGLE STAGE TENDERS. THE AMOUNT OF SECURITY REQUIRED FOR BIDS SHOULD NOT EXCEED 5% OF THE BID PRICE IN SINGLE STAGE TENDERS. WHEN TWO-ENVELOPE BIDDING IS EMPLOYED THE BID SECURITY SHALL BE SUBMITTED WITH THE FIRST (TECHNICAL PROPOSAL) ENVELOPE TO BE OPENED, SO THAT NON-RESPONSIVE BIDS MAY BE IMMEDIATELY REJECTED BEFORE TECHNICAL EVALUATION. WHEN TWO-ENVELOPE BIDDING IS EMPLOYED THE BID SECURITY SHALL BE SUBMITTED WITH THE FIRST (TECHNICAL PROPOSAL) ENVELOPE TO BE OPENED, SO THAT NON-RESPONSIVE BIDS MAY BE IMMEDIATELY REJECTED BEFORE TECHNICAL EVALUATION.

WHEN TWO-ENVELOPE BIDDING IS EMPLOYED THE AMOUNT OF BID SECURITY REQUIRED SHALL BE A FIXED AMOUNT COMMON TO ALL BIDDERS. THIS FIXED AMOUNT SHALL NOT EXCEED 5% OF THE PA’S BUDGET FOR THE PROCUREMENT CONCERNED. WHEN TWO-ENVELOPE BIDDING IS EMPLOYED THE AMOUNT OF BID SECURITY REQUIRED SHALL BE A FIXED AMOUNT COMMON TO ALL BIDDERS. THIS FIXED AMOUNT SHALL NOT EXCEED 5% OF THE PA’S BUDGET FOR THE PROCUREMENT CONCERNED. THE AMOUNT OF SECURITY REQUIRED FOR PERFORMANCE GUARANTEES SHALL BE STANDARDISED NOT EXCEEDING 10% OF CONTRACT VALUE THE AMOUNT OF SECURITY REQUIRED FOR PERFORMANCE GUARANTEES SHALL BE STANDARDISED NOT EXCEEDING 10% OF CONTRACT VALUE

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