Procurement Management

Procurement Management
Procurement of Works Keshav Thapa

Public Procurement in Nepal
Procurement by public entities(PE) is governed by the Public Procurement Act (PPA) 2063 and the Public Procurement Regulation (PPR) 2064, which is based on the Act. PE’s should follow the procurement provisions/ processes referred in the PPA and PPR , unless Government decides it as inappropriate in view of national security/defense or when procurement is mandated to be made in accordance with the procurement guidelines of a Donor Partner as per the agreement with the DP.

Procurement Management
Prepare Specifications TOR and Scope of Works Choose a Procurement Method Identify Needs Seek, Clarify and Close Offers Award Contract Prepare Procurement Documents, invite offers Evaluate Offers Manage the Contract Negotiate the Contract Evaluate the Procurement

PPA and PPR Provisions Initiating Procurement
Preparation and Approval Budget : Budget allocation and site for construction in case of procurement for Works is prerequisite to initiate any public procurement However, procurement may be initiated irrespective of budget allocation for a multiyear contract procurement after allocation of the budget for the first year procurement, and For necessary preliminary procurement works such PQ, EOI, issue of RFP .

Initiating Procurement
(ii) Master & Annual Procurement Plans a) Master Procurement Plan for projects that operate for more than a year or the yearly procurements are valued in excess of Rs100 million. The plan should be updated in each financial year. b) Annual Procurement Plan to be prepared while preparing estimated annual program and budget for next financial year if, a public entity is required to make procurement exceeding Rs.1 million. Should be based on Master procurement plan (if any)

PPA and PPR Provisions Initiating Procurement
Master Procurement Plan (Format)

PPA and PPR Provisions Annual Procurement Plan for Goods and Works (Format)

Master & Annual Procurement Plans c) Contract Packaging ideally to be decided by dividing the procurement requirements to manageable number of appropriate size packages that is expected to provide maximum competitive response from bidders. no procurement shall be done to limit competition by increasing the contract packages into slices

c) Contract Packaging Factor for Packaging decision: Separation of need of procurement of goods, works and services in different categories, Combination of similar or related items into a single package under each category, capability of bidders/Suppliers to qualify to bid or to implement the contract, For ICB whether the size of the package will attract interest from the foreign contractors, the timing of requirement of goods & services, Based on the method of procurement time required for processing and award of Contract.

d) Procurement Methods i) Choice of Procurement Method: the nature of the goods, works and services to be procured; the value of the planned procurement; local availability and cost of goods & services; duration required for the procurement process and planned dates for delivery agreement with the funding agency; and transparency of the procedures proposed.

d) Procurement Methods By Inviting Open Bids at International Level, By Inviting Open Bids at National Level, (Rs.2 to Rs million) Inviting Sealed Quotations up to Rs.2 mil Direct Procurement up to Rs.500,000; Through Participation of Users' Committee or Beneficiary Group, up to Rs.10 mil Through Force Account . Lump Sum Rate (Rs.20mil); national advertisement with estimate for single year contract only Limited Tendering

(iii) Preparation of Standing List Standing lists of contractors, to be prepared for direct procurement works, and procurement of works to be carried out through NGO’s. (iv) Description of Construction Work Procurement details such as specifications, plans, designs and drawings, descriptions and special requirements necessary for the procurement the construction works to be prepared and approved by the authority authorized to approve the cost estimate.

(iv) Cost Estimates: a) To be prepared as per standard format and based on: Existing norms, if new norms is required norms to be approved by Council of Ministry. Availability of material at site Contract duration required Rate of material , equipment and labor to be as determined by the rate fixation committee. If rates are not available then rates fixed by GoN or GoN owned corporation or fixed by Chambers of Commerce and Industry or as determined by department Chief

(iv) Cost Estimates: a) Basis Contd. Requires a single contract or multiple contracts Alternatives (if available) to the procurement, then what are these alternatives? Cost estimate, design and drawings to be checked by one level higher ranked authority than the technician who prepared it. Departmental head to arrange for the check if higher authority for checking is not available in the entity

b) Approval of Cost estimates If the chief of PE is not entitled to approve the cost estimate as detailed above then s/he should get it approved from one level higher authority. Secretary /administrative chief of a constitutional organ or body, ministry, secretariat and other offices of similar nature may approve estimate of any value for their office Cost estimate of one fiscal year should be updated before initiating procurement in the next fiscal year. Estimated Cost Approving Authority Up to Rs. 10 million Office Chief (Gazetted Third Class) Up to Rs. 50 million Office Chief (Gazetted Second Class) Up to Rs. 100 million Office Chief (Gazetted First Class) Above Rs. 100 million Head of the Department

Procurement Documents
1.Prequalifcation of Bidders General Ensures that only technically and financially sound firms having adequate managerial capability are invited to participate in bidding process, avoids evaluation of large number of bids hence saves time and resources, generally recommended for large complex projects

Prequalifcation Contd. Procedure Document based on SPQD prepared by PPMO or other appropriate standard document, Approval of prequalification criteria by head of the Department Notice to be published in national daily or also international media in case of ICB with submission period of at least 30 days for NCB and 45 days for ICB

Prequalifcation Procedure Contd. Document Cost: Document should be signed by Chief of PE or designated person Evaluation committee to evaluate based on the document and criteria given in the document PQ Report to be prepared within 15 days after starting the evaluation. Bid Estimate Document Cost > Rs. 20 to Rs.100 million Rs. 5,000 > Rs. 100 to Rs.250 million Rs. 10,000 > Rs. 250 million Rs. 15,000

2. Preparation of Bidding Documents The quality of Bidding Documents plays a vital role both in the procurement stage and contract management stage of the projects. documents should provide information to the potential bidders, suppliers and contractors of the public entity’s expected requirements, should facilitate the potential bidders to prepare and submit responsive bids by clearly defining the scope of works, goods or services to be supplied,

2. Preparation of Bidding Documents Contd. The criteria set out for evaluation and selection of winning bid should be fair and non-discriminatory Should detail the rights and obligations of the Employer and of suppliers and contractors, and the conditions to be met. The Bid Documents should be approved by the Chief of the concerned PE. Should be based on Standard Bidding Documents issued by PPMO or other SBD’s, if PPMO document is not applicable for the particular procurement.

3. Misc. Provisions of Bid Documents Bid Security: should be a fixed amount (2% to 3%) of approved estimate in the form of cash or unconditional bank guarantee and should be valid 30 days beyond the bid validity period. Validity Period for Bids :90 days for estimate up to NRs Million;120 days for estimated cost beyond NRs Million Performance Security: 5% of Bid Price if it is up to 15% below estimate; additional 50% of the amount by which the bid price is lower than 15% below the cost estimates

3. Misc. Provisions of Bid Documents Advance Payment:up to 20% of the contract amount against bank guarantee to be paid in two installment through a separate account for advance payment, Liquidated damages: to be paid by the contractor for non-completion within the contract period shall be % of contract amount for each day of delay and should be limited to 10% of the contract amount. Bonus Payment : for early completion shall be % of contract amount for each day of early completion limited to 10% of the contract amount

Bidding Process Invitation of Bids Advertisement
should be published in a daily newspaper of national circulation and, in the case of an international bidding, it may also be published in any international communication media. shall also be placed in the website of the entity or that of PPMO. minimum period allowed for preparation and submission of bids and prequalification proposal shall be 30 days in case NCB and 45 days in case of ICB.

Bidding Process Invitation of Bids Contents: Entity’s name and address
Nature of Works and duration Bid security (if required) amount and validity Bid validity period if bid security is frequired Document cost, Address and procedure for obtaining the bid documents/prequalification document Place, date & time for submission & opening of bids invitation to bidder / authorized representative to attend the bid opening Information regarding ICB or NCB

Bidding Process Invitation of Bids Contents:
Information as to weather bid is for prequalified bidders, with qualification or without qualification Procurement method Electronic bid submission procedure Estimate amount (as required by PPR) Information when only national bidders are to participate Preference to JV with national bidders(if applicable) Bid cannot be submitted by blacklisted forms

Bidding Process 2) Pre-bid Meeting If provided, to be held at least 10 days prior to the deadline for the submission of bid for NCB and 15 days for ICB for briefing and receiving queries from bidders on bid matters. 3) Site Visit May be permitted or arranged by the PE for the bidders/representatives for collection of bid information. The cost and the risk of the site visits shall be borne by the bidders

Bidding Process 4) Clarifications / Amendments / Extension of Bid Submission Deadline 5) Withdrawal or Modification of Bids medium of withdrawal or modification of bids should be same as the submitted bid withdrawal or modification can be given only once bidder cannot withdraw his bid once the submitted bid is modified. Once a bid is withdrawn, the Bidder cannot submit another bid response for the same procurement

Bidding Process 6) Submission and Opening of Bids/Proposals
Bids, PQ documents to be received and recorded at the time, date and place specified in the documents, After the expiry of the time for submission of the bids, the chief of the PE or authorized officer should sign and close the register recording the bid receipt. 2 - member Bid Opening Committee (BOC) under Coordination of Procurement Officer to be formed Bids should be opened publicly by the BOC in the presence of the bidders /representatives Only originals to be opened

Bids not to be rejected at bid opening If withdrawal letter are satisfactory, then the Bidder’s original Bid should not be opened. In case of doubt the bid should be opened with other bids. Envelopes marked “modification” should be opened with the original bid. procedure specified in the bid documents to be followed while (i) opening of the bids and reading out the bid details, and then (ii) preparing and signing of the record of the bid opening. Incase of two envelope procedure only technical proposal to be opened and Financial proposal to be securely kept without opening

Information to be readout, recorded and signed: Bidder’s name , address and bid amount Discount offered (if any) Bid amount for proposed alternate specifications if any Presence/absence of bid security Details of differences in figures and words if any Presence /absence of signature in Letter of Bid and Price schedule

Biding Process 6) Submission and Opening of Bids/Proposals
Information to be readout, recorded and signed: Details of corrections made and the corrected amount and whether the corrections are initialled or not Remarks made in Bid Form if any and information on details of requested rate analysis (if any) Other matters as determined appropriate by the Public Entity.

Bid Evaluation Basics: to determine lowest evaluated substantially responsive bid using pre- determined procedures and criteria specified in the bidding documents, Time Frame for Bid Evaluation: at the earliest by BEC to enable award of the Contract within the Bid Validity period, Only the Bids marked “Original” shall be evaluated by the BEC. Late bids, as well as those not opened and read out at bid opening shall not be considered for evaluation

Bid Evaluation Clarifications from Bidders: BEC may seek clarifications from bidders to ensure proper and fair evaluation of bids. Clarifications should be in writing and should not permit any substantive change in the bid Confidentiality: During evaluation process, information relating to evaluation of bids and recommendation for contract award, should not be disclosed to Bidders or to other persons not officially concerned with the process until

Bid Evaluation Procedure
i) Examination of Completeness Whether document to establish the bidder qualified under law is submitted or not? Whether the bid is complete as per the requirement of the bid document and signed Bid security as required by bidding document is submitted or not Whether the bid is substantially responsive to the technical specifications and the terms of conditions of the contract in the bid document.

i) Examination of Completeness (contd.) Presence /absence of Power of Attorney Joint venture if necessary is submitted or not Documents to establish eligibility, qualification of bidder iif required)is submitted or not Rate analysis if required is submitted or not Whether the bidder as a sole bidder or as Joint venture has participated in more than one bid Whether the bidder is declared ineligible to participate

ii) General if bid prices may be expressed in different currencies in ICB then the evaluation and comparison of bids shall be made after conversion to single currency and exchange rate as specified in bid documents, Evaluation to be based on bid price excluding VAT, Information on evaluation shall not be disclosed to bidder or other persons not involved in evaluation, Evolution to be based on procedures and qualification criteria given in the bid documents

ii) General (contd.) Technical , commercial and financial aspects of the bid to be evaluated, A bid may be considered substantially responsive if it contains minor deviations with regards to bid document requirements acceptable to PE. In case of any effect on cost such effect shall be added to bid price for comparison purpose only, If the cost effect is more than 15% of bid price then the bid shall be considered non responsive, Information given in original bid copy to prevail in case of discrepancy between Original and Copy, BEC to prepare evaluation report detailing basis of the lowest evaluated substantially bid and procedures

iii) Technical Aspects Scope of Works Specifications, Qualifications iv) Commercial Aspects Works completion period Payment terms , liquidated damages, Bonus, Guarantee obligations Obligations to be fulfilled by bidders Any other conditions added to the Contract Evalution to be done as specified in the bid doc.

iii) Financial Aspects Domestic preference iv) Special Evaluation Consistency of proposed Work Plan, schedule and duration with bid provision, Reliability of the quoted unit rates in the Bill of Quantities. Unbalanced bid price due to high rates for works to be performed at early stage or for items bidder believes were underestimated in Bill of Quantities If the bidder has signed Contract and initiated other works then whether the bidder has technical capacity to complete the work

iv) Special Evaluation (contd.) In case of bids with front loading or unrealistic low bids to complete the work satisfactorily or high rates for early stage works then BEC shall seek explanation with rate analysis from such bidders, If explanation is satisfactory BEC to recommend acceptance of the bid with additional Performance Security up to 8% of the bid price and if the explanation unsatisfactory then it may recommend the PE to reject such bid, Additional guarantee to be released after payment of the final bill.

Summary Bid Evaluation Sequence
A- Single Stage – Post Qualification Procedure Preparation Basic Data Sheet, Preliminary examination for completeness of the bids Determination of Bid responsiveness, Preparation of Table of Bid Prices and identification of Bids for detail evaluation Application of evaluation criteria and financial adjustments Determination of lowest evaluated substantially responsive Bid Examination of adequacy of technical proposal Evaluation of qualification criteria and determination of lowest evaluated bid for award of Contract. Preparation Bid Evaluation Report

B- Single Stage – Two Envelope Bidding Procedure Preparation Basic Data Sheet, Preliminary examination for completeness of the Technical Bids Determination of Technical Bid responsiveness, Examination of adequacy of technical proposal, Evaluation of qualification criteria and determination of substantially responsive qualified bids for opening of Price Bids,

B- Single Stage – Two Envelope Bidding Procedure Opening of Price Bids and preparation of opening record. Examination for completeness of the Price Bids Examine Price bids for responsiveness, Preparation of Table of Bid Prices and identification of Bids for detail evaluation, Application of evaluation criteria and financial adjustments Determination of lowest evaluated, qualified substantially responsive Bid for award of Contract Preparation of Combined Evaluation Report.

Bid Evaluation Report BEC to prepare bid evaluation report and submit it within the period fixed by the PE Chief so as to issue the Intention to Award letter to the bidder within the Bid validity period. Report should detail: Bidders name address, Bid amount and payment currency Arithmetic corrections and corrections rate differences in words and figures adjustment due to offered discount amount due to single currency connversion

Bid Evaluation Report Information regarding the examination of completeness, responsiveness and clarification sought from the bidders (if any) In case of bid from prequalified bidders checking qualification compliance as per the prequalification Basis of the evaluation and procedure to determine lowest evaluated qualified bidder.

Approval of Bid Lowest evaluated substantially responsive bid to be selected for acceptance, Notice of the intent of acceptance to be served to the concerned bidder within 7 days of selection of the winning bid, Information regarding the name, address and the price of the winning bid to be communicated to other participating bidders, If no application for review is received within 7 days then the bid is accepted and the bidder is asked to furnish applicable performance security to conclude the Contract within 15 days,

Approval of Bid If the selected bidder fails to sign the Contract within the period then the bid security should be forfeited and the next evaluated substantially responsive bid should be accepted and contract to be signed, Bid approval and signing of the Contract should be concluded within the bid validity period, If any bidder requests within 30 days of issue of letter of acceptance for information regarding why his bid is not accepted , then the PE should give information to the bidder.

Review of procurement Procedures and Decisions
Bidder may apply for review of the proceedings stating the grounds to Chief of PE within (7) days of issue of the notice of intention to accept by the PE. The Chief to review the matter raised in and convey its decision with reasons in writing, within five (5) days The PE may suspend the procurement proceedings and mention the procedure to be adopted for continuation of the procurement process or may reject the review application The decision of the Chief of the PE shall be final for the procurement amount up to the value of NRs.20 million

Review of procurement Procedures and Decisions
Bidder may file an application for review of procurement proceedings / decisions before the Review Committee if, PE, Chief does not make a decision within the time limit or is dissatisfied with the decision made for the procurement above NRs.20 million then within seven (7) days of receipt of such decision, the Bidder may file an application to the Review Committee stating the reasons of its disagreement on the decision of the PE. Bidder to furnish a cash or bank guarantee equal to 0.15% of its quoted bid amount with the validity period of at least ninety (90) days from the date of review application.

Procurement Contract The Contract shall include the terms and conditions as referred to in the Bidding document .The terms and condition may include the following: Name and address and contact persons of the parties to the Contract, Scope of Work, Contract amount Details of included documents and their prioroty, Work Schedule, Contract duration and extension provision, Terms and conditions for acceptance of the Works Force majeure;

Procurement Contract Price adjustment procedure if applicable,
Amendment and variation to the contract ,if applicable, Insurance if applicable Required Performance Security, Liquidated damages provision for delay in completion, Bonus for early completion, Contract termination provisions, Subcontract related provision, Dispute resolution procedure Applicable law for the Contract, Other matters as specified.

Procurement Contract Shall include Budget symbol,
Required Performance Guarantee ( 5% of contract price) to be provided as per format given in the Bid documents within prescribed time , Validity period of the Performance guarantee shall extend at least on month beyond the completion of the defect liability period, If the Guarantee is issued by foreign bank it should be counter guaranteed by bank established in Nepal

Contract Implementation
Public Entity (PE) is responsible Contract implementation as per the provisions and in conformance with the technical requirements /specifications for completion of the work within the agreed time schedule and the contract price. 1. The PE shall perform the following activities as required: hold post bid conference if necessary with the Contractor, prepare an action plan and work schedule for contract implementation, form a contract implementation team, if necessary,

1.Implementation Activities Contd. arrange handing over the construction site to the construction entrepreneur and access to the site; monitor progress as per contract work schedule and inspect and examine quality aspects; manage contract modifications, variation orders, price adjustment, suspension or termination of contract, certification of work completion and payment; in case of dispute adopt dispute, settlement procedures provided in the contract

1. Implementation Activities Contd. manage financial aspects of contract implementation including budgetary and cost accounting aspects, maintain documents related with contract implementation in a sequential and systematic manner, accept the work performed, and submit periodic reports on the contract implementation to one level higher authority. Contract should be implemented as per the drawings, specifications and Conditions of Contract.

2. Insurance: Unless other wise mentioned in the Contract ,Contractor needs to provide insurence as specified in the Contract for Works valued more than 10 lakhs 3. Advance : May be made as provided in the Contract. Details of bank account for advance payment and monthly expenditures should be provided regularly by the Contractor. Advance payment guarantee issued by foreign banks should be counter guaranteed by bank in Nepal, Guarantee should be valid 1 month beyond the period for repayment as provided in the Contract. Advance to be deducted from monthly payments

4. Work Acceptance Report: On completion of the Work , PE to prepare work completion report with the following information: Number of the Contract, Description of completed Works, Date of Completion, Date of acceptance of completed works

5. Contract Variations: Variation should detail the following and should be certified by authorized chief of the PE: Whether the design/drawings of the construction works needs to be changed and if yes, then whether the basic nature and the area of the works require changes; Technical justification and reasoning for the variation quantity If the cost estimated is affected as per the provision of PPA 5 (ka) then it’s percentage; and Whether it is included in approved budget and program.

5. Contract Variations Contd.: Approval Variation Percentage Approving Authority Up to 5% Gazetted Second Class PE Chief or equivalent Up to 10% Gazetted First Class PE Chief or equivalent Up to 15 % Department Chief 15% to 25 % Secretary of the Ministry or equivalent Above 25 % Council of Ministers Note: 1.However variation should not be issued by official who is below the level of official who has approved the estimate. 2. Variation above 15% may be issued by Department Chief for contract amount up to 60 lakhs

6. Price Adjustment : Prices shall be adjusted for fluctuations in the cost of inputs if provided for in the SCC/PCC for Contracts of duration exceeding 12 months as per the price index formula included in the Contract. Price shall be adjusted for unexpected increase / decrease of price of constructional material as prescribed by deducting 10% in amount increased/decreased for contract concluded following invitation of national level bidding,

6. Price Adjustment : In general the adjustment amount shall be limited to 25% of initial contract amount. If the price adjustment exceeds the amount the PE may: terminate the Contract , Negotiate with the Contractor to reduce cost to keep the Contract price within the approved budget, or Adopt other measures to minimize cost ,or Arrange additional budget.

7. Time extension : Extension contract duration shall be as per provision provided in the Contract, However, in force majeure situation and failure to provide the material to be supplied by the PE or other reasonable causes , competent authority may extend the contract period on receiving application from the Contractor Contractor should submit application for extension with reasons at least 7 days before the end of the contract period.

7. Time extension : Received application should be examined on the following grounds: whether the Contractor had applied his best efforts to complete the work or not, whether delay in work resulted due to force majeure situation, if the reason given in the application is satisfactory then the authority approving the bid may extend the Contract up to 6 months and Department Chief may extend period exceeding 6 months.

8. Liquidated Damages: To be applied for delay in work at the rate of O.05 % per each day of delay up to maximum of 10% of the Contract amount. 9. Payment : The payment of bills to be made as per the provision of the Contract. 10. Dispute Resolution Procedure: to be amicably resolved, if not resolved amicably then through Arbitration as per prevailing Arbitration Act.

11.Work Completion Report : Contractor to submit as built drawing within 30 days of completion of the work, After expiry of the defect liability period following completion of the Works , the Chief of the PE shall through technical employee examine the work as to whether it complies with design ,drawings and specification and prepare the work completion report. The PE to submit the as built drawing and work completion report to the bid approving authority for approval.

Procurement Management

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