Procurement Training Reference Material for...

1

PARTICIPANTS’ HANDBOOK

OPERATIONS FOCUSED TRAINING

PROCUREMENT MANAGEMENT

April 2014

2

Disclaimer

This handbook was made possible with support from the American people through the U.S. Agency for

International Development (USAID). The contents are the sole responsibility of Trust for Democratic

Education and Accountability and do not necessarily reflect the opinion of USAID or the U.S. Government.

3

Table of Contents

Session #

Session title

Page no

1

Introduction to procurement---------------------------------------------------

6

2

Principles of procurement-------------------------------------------------------

12

3

Fundamental concepts of procurement-------------------------------------

15

4

Award and Monitoring -----------------------------------------------------------

35

5

USAID rules and regulation related to procurement-------------------

43

OFT MANUAL: PROCUREMENT

4

INTRODUCTION

Purpose of the Procurement Reference Material

This procurement Reference manual contains general guidelines and procedures for the procurement of commodities and knowledge of relevant USAID laws and regulations related to procurement. Guiding Principles of Procurement

Acquisition process should be based on the principles of integrity, accountability, fairness, and openness. To achieve these goals, all procurements must adhere to the following principles:

Integrity and transparency

Full and open (or adequate, at a minimum) competition

Fair and reasonable prices

Fair and objective evaluation of offers

Using responsible suppliers

Documentation of the acquisition process

Regulatory Framework Several important U.S. government regulations and policies direct the procurement process. Some of the relevant regulations are: Code of Federal Regulations (CFR). A codification of the general and permanent rules

published in the Federal Register by government executive departments and agencies. o Regulation 22 CFR 228 provides the fundamental regulations for procurement of

commodities and services funded by USAID. o Regulation 22 CFR 226 provides regulations for administration of assistance awards to

U.S. non-governmental organizations. (Relevant clauses are Procurement standards 226.40-49)

USAID Acquisition Regulation (AIDAR). USAID’s agency-specific regulations that

supplement. http://www.usaid.gov/policy/ads/300/aidar.pdf Automated Directives System (ADS). USAID’s policy guidelines that highlight

directives and required procedures. http://www.usaid.gov/policy/ads/ In addition to the primary sources listed above, USAID also issues Acquisition and Assistance

Policy Directives (AAPDs) and each USAID mission may have its own unique set of procurement policies, issued via contractor notices or mission-specific directives.

http://www.access.gpo.gov/nara/cfr/waisidx_08/22cfr228_08.html

http://www.access.gpo.gov/nara/cfr/waisidx_08/22cfr228_08.html

http://www.usaid.gov/policy/ads/300/aidar.pdf

http://www.usaid.gov/policy/ads/


5

Relevant USAID geographic codes. The U.S. Code of Federal Regulations (22 CFR

§228.03 ) and the USAID Acquisition Regulation (AIDAR, Section 725.70) detail and discuss USAID geographic codes. The USAID Geographic Code Book sets forth the official description of all geographic codes that USAID uses to designate authorized source countries or areas in authorizing or implementing documents. The following are summaries of the principal codes.

Geographic Code for the CVP project is 937

Code 000 — The United States. The United States of America, any state(s) of the

United States, the District of Columbia, and areas of U.S.-associated sovereignty, including commonwealths, territories, and possessions.

Code 935 — Special Free World. Any area or country including the cooperating

country, but excluding the foreign-policy-restricted countries (Cuba, Iran, Laos, Libya, North Korea, and Syria).

Code 110 means New Independent States (former USSR republics)

Code 937, for procurement of commodities and services unless otherwise specified in

the implementing instrument. Code 937 is defined as the United States. The cooperating & recipient country. And developing countries (see above complete list of developing countries, which excludes prohibited sources). USAID maintains a list of developing countries, advanced developing countries, and prohibited sources, which will be made available in USAIDs Automated Directives System, ADS 310.

Foreign-Policy-Restricted Countries. The foreign-policy-restricted countries are Cuba,

Iran, Laos, Libya, North Korea, and Syria. The Citizens’ Voice Project and its sub grantees

may not purchase commodities with components from these countries under any

circumstances.


6

SESSION 01:

INTRODUCTION TO

PROCUREMENT


7

What is procurement

Procurement is the acquisition of goods or services. It is favorable that the goods/services are

appropriate and that they are procured at the best possible cost to meet the needs of the

purchaser in terms of quality and quantity, time, and location) . Entities often define processes

intended to promote fair and open competition for their business while minimizing exposure to

fraud and collusion.

Examples of goods:

Computers, furniture, program / project Related goods, tents, food Items and non-food Items

Examples of Services:

Hire a firm to provide legal services, training & consultancy services and rent a car services

Examples of works:

Construction of building, roads and bridges

Procurement process

http://en.wikipedia.org/wiki/Total_cost_of_ownership


8

Needs assessment

The procurement cycle begins with a statement of need. On a regular basis, procurement unit

reviews requirement trends and identifies when the requisition must be placed, such that the

requirement arrives before the need for particular commodity. This is where the procurement

cycle begins. Competition is a cornerstone of federal government procurement.

After a statement of needs is defined and a purchase request is processed, the procurement

manager should determine the type of procurement method to be used based on monetary

threshold of procurement. Note that purchases may not be split artificially into smaller

transactions in order to fall under certain thresholds. The procurement manager will then

determine which of the following methods to employ in procuring the commodities. The various

types are listed in the below sections:

Budget and Funding

Buyer must review project proposal budgets and develop a procurement plan based on what is

budgeted and manage required or unexpected revisions to the projects’ proposal budget and

other changes that affect procurement e.g. budget reductions.

Invitation to Quotation and Proposal

Invitation to quotation (or pre-qualify) notices are published in order to attract the widest

possible competition and offer all potential bidders a fair opportunity to tender for government

funded contracts. Consult with the end-user, and technical specialists if required, and include the

final description in the schedule of requirements of the RFQ document.

Following aspects must be covered in solicitation document:

closing time/date

time when bids will be opened

address of bid submission

evaluation criteria

eligibility and qualification criteria


9

Receiving and storage of Bids/quotes:

This procedure is essential to the integrity of the bidding process for the following reasons:

1. It ensures that tendering is closed at the precise time of the deadline

2. It ensures that a record is kept of all tenders submitted on time

3. It ensures that submitted tenders are kept unopened until the time for the public tender

opening

Procurement Committee

In order to maintain proper control and ensure transparency in the procurement process. A

group of staff members are designated as the Procurement Committee:

The committee should have persons nominating program or technical department requesting

the procurement, Finance Department, and Human Resource department or as per requirement

of case.

A membership of three is usually sufficient but membership of five should be followed wherever

possible.

If a purchase has specialized technical requirements which are outside of the capacity of the

procurement committee, a technical expert shall also be invited to advise the committee. The

technical expert shall not have voting rights.

Evaluation of Bids and Proposal

The purpose of bid evaluation is to determine the cost in a manner that permits a comparison

on the basis of their evaluated cost. The bid with the lowest evaluated cost, but not necessarily

the lowest submitted price, shall be selected for the award of the contract.

Evaluation factors and significant sub-factors must represent the key areas of importance to be

considered in the source selection decision. They should also support meaningful comparison

and discrimination between and among competing proposals.

Evaluations varies for goods, works and routine services, but the evaluation methodology will

always consist of three step:

A preliminary screening, to eliminate tenders which do not comply with the basic requirements

and eligibility

A detailed evaluation, to determine whether tenders are substantially responsive to the technical

and commercial requirements


10

A financial evaluation to compare the costs of responsive tenders and recommend for award of

contract.

Selection and Award:

After the completion of bid evaluation, the competent authority announces a contract award

through a written or an electronic notice within the time for acceptance specified in the bid.

This document is released from the procurement department after being vetted by the

competent authority.

Purchase Order and Purchase Contract

Purchase order is used to form a contract by accepting the successful bidder’s quotation, where

no contract award notice or detailed contract document is required. It defines the goods, works

or services to be provided, the price to be paid for the goods, works or services and the delivery

period required.

Receive of goods and Inspection

Received goods should be inspected by the indenting officer and/or the person designated as

stores in-charge for quality checking.

Receipt of Goods/Good Receiving Notes:

All stores/goods from supplier or any other source shall be received by the person designated

as stores in charge, and documented

By raising two copies of Goods Receipt Note. One copy shall be retained for the stores files

and other shall be forwarded to the Administration Unit.

The Administration Unit / Warehouse manager shall record the receipt of goods in the

inventory register.

Best practices in procurement

Avoid purchasing unnecessary items/services

All solicitations should provide for: clear and accurate description, requirements that a bidder

must fulfill; description of technical requirements; specific features. Remember to compare

‘apples with apples’

Procurement made with responsible contractors

Based on best value to organization (if not the lowest price, the reason must be documented)

Make procurement documents available for the review of governing body, donors and auditors


11

Standard internal controls over procurement

Monitoring the performance of a subcontractor is critical to ensuring on-time delivery of

required commodities and services. Periodic interaction with the subcontractor is encouraged

to ensure that activities are being carried out to successfully complete an order.

Procurement documentation

A procurement file system should clearly trace all purchases from beginning to end and include

all relevant purchase-related documentation. An ideal procurement file system makes it easy for

an outsider (e.g., an auditor) to open the file for any specific purchase and be able to find any

document related to that procurement. It is recommended that a dual electronic and hard copy

system be used.

Prior approvals and waivers

Authorizations from governing body and donor agencies are essential for procurement of certain

commodities in order to maintain control environment and monitoring mechanism over

procurement system

Failure to comply with prior approval requirements generally causes disciplinary action and

purchase cost may constitute as disallowed under donor regulations


12

SESSION 02:

PRINCIPLES OF

PROCUREMENT


13

Principles of Public Procurement

Following are principles procurements which must be adhered to during day to day procurements:

Economy and efficiency,

Transparency,

Value for money

Fairness

Competition,


14

Economy and Efficiency

Procurement processes should be carried out as cost effective as possible and efficient.

Transparency

Transparency involves the clear and public documentation of procurement processes, openness and

clarity on procurement/tender requirements, evaluation criteria and decisions. Transparency must

be ensured in every procurement carried out by the organization

Best Value for Money

“Best value for money” means best returns for each rupee spent in terms of quality, timeliness,

reliability, after sales service, up-grade ability, price, source, and the combination of whole-life cost

and quality to meet the procuring agency’s requirements.

Fairness

Fairness is a concept that generally requires identical situations to be treated in the same way or

different situations not to be treated in the same way, and it requires the identical treatment of

identical people.

It implies that organizations will not take into account the different abilities or difficulties faced by

individual suppliers/contractors but will judge them purely on the results of their efforts

Competition

“Competition” is a procedure whereby allowing different suppliers to communicate the prices at

which goods and services are available on the market

Keeping competition fair (or maintaining a “level playing field”) is a key concern for achieving efficient

and economic procurement results


15

SESSION 03:

FUNDAMENTAL CONCEPTS

OF PROCUREMENT


16

Procurement Planning

Basic Requirements:

All entities are required to devise a mechanism for making annual procurement plans. This mechanism

should contain required step-by-step actions.

The annual Procurement Plan should be formulated at the same time as the annual budget forecast,

since the annual activities of individual procurement units necessarily depend on the money that is

made available for purchasing.

Planning for the next financial year should begin halfway through the previous financial year, that is

to say in January each year. Draft procurement plans should be available by the end of April. They

should be finalized in July, as soon as the anticipated final budget figures for the new financial year

have been notified.


17

Procurement plans should be reviewed on a quarterly basis and adjustments made, if required.

Steps in Preparation of Procurement Plan

Procurement plan should be prepared according to the following sequence:

i. Procurement planning will start towards the end of the current fiscal year and should be

completed before the start of the new fiscal year.

ii. In developing the procurement plan, inputs will be required from all those involved in various

stages of acquisitions in particular the staff of procurement and finance departments. In

process of developing a new procurement plan previous years’ procurement plans will be

reviewed and variances from the plans will be considered. A variance analysis is an important

tool as it provides a check on whether responsibilities, functions and estimates used in the

past have been reasonable.

iii. Collect requests from all concerned technical and non-technical departments. The

departments should avoid issuing requirements with unrealistic delivery times or

performance schedules, since such actions generally restrict competition and increase prices.

iv. Verify all requirements against approved specifications in consultation with requesting

departments. The specifications should be according to the approved Project Specifications

Guide.

v. Check the stores for:

a) Quantities on hand

b) Historic usage

c) Frequency of usage

Verifying stores is crucial in establishing economic order quantities and ensure that overstocking is

eliminated and dead stock is not maintained.

i. Estimate the time from bid advertisement to delivery and subsequent closure of the action

by conducting a historical analysis of procurement of similar goods, works and services. The

procurement team shall conduct market surveys, if required, early in the planning process,

to determine type, quality, quantity, current prices and delivery requirements of the planned

procurements. This survey is important to determine the availability and lead time required

to complete the actions in a satisfactory manner.

ii. Verify from finance availability of budget for all procurement actions in the plan.

iii. Procurement actions are then classified into methods of procurements. A decision is taken

on each planned action whether to conduct a competitive bidding procedure or to engage

into direct procurement.


18

iv. Prepare a draft version of Procurement Plan and distribute it to all requesting departments

to verify the accuracy of content.

v. Send the plan to competent authority personnel for necessary approvals.

Procurement policy and procedures

In developing Policies and procedures, the management should take the below as guidance:

Procurement should be effective and efficient to obtain the best overall outcome. This means that

it is important to select a procurement method on its merits which achieves the best overall

outcome, taking into account all the relevant costs and benefits. There is no single procurement

method that suits all situations.

Accordingly, the Policy contemplates that the entity should not be bound by a single procurement

method, but allows for different procurement options, depending on various factors.

There is a need for transparency and accountability.

Basic

requirements

Planning begins in previous

financial year

Finalized at the time of annual

budget

All departments develop the

planChanges to

annual planning allowed

Reviewed on quarterly basis


19

Transparency in dealings with suppliers and how procurement contracts are awarded is an essential

element of accountability, and should be an inherent characteristic of all processes and procedures,

plans, actions and decisions relating to the entity’s procurement.

In line with the principles above, the Policy contemplates ways to achieve the best overall outcome

for the entity. The Policy discusses when a tender process or quotations process should apply

(depending on procurement thresholds) and when procurement may take place using a panel of

vendors, service providers or consultants, and circumstances under which sole sourcing would be

appropriate. The Policy incorporates strong internal controls to mitigate potential reputational,

operational and financial risks

A stable and competitive vendor base can provide competitive advantage for the entity. Therefore,

the entity contemplates managing its vendors or service providers in a structured manner to achieve

the following:

(a) Ensure the quality and price competitiveness of goods and services to be Procured; and

(b) Establish a long term and secured supply of goods or services.

Procurement plan development

Make a list of commodities needed and anticipated costs

Research potential suppliers.

Make a schedule — allow time for preparing specifications and solicitation documents,

advertising if needed, receiving and evaluating offers, negotiating, issuing purchase orders or

contracts, arranging payment, and shipping. Also allow time for slippage.

Determine the source of funds and the payment method.

Determine the delivery requirements.

Determine if adequate competition is available.

Get any necessary waivers, approvals, and authorizations.

Market survey

Effective and efficient procurement policies, procedures and practices in an organization can have a

significant impact on obtaining value for money in the purchase of goods and services by the State.

Why do we survey markets?

There are a number of reasons for analyzing supplier markets:

Better knowledge of supplier strategy


20

Manage risk to the contracting authority

More informed contracting authority

Allows for the identification of opportunities to advance

Benefits of Market Survey:

Understanding how individual suppliers operate, their market position,

Why they want to deal with the contracting authority and understanding their longer term goals

helps obtain value for money. Analyzing supply markets may:

Provide valuable information about suppliers’ strengths and weaknesses. For example, the

contracting authority may discover that a particular supplier is keen to win a contract or a

supplier may have difficulty fulfilling orders.

Identify comparable substitute goods and services that may be available from more

competitive and less risky supply markets and could offer better value for money

Understand which suppliers are more technologically advanced in particular sectors to

Identify opportunities to better manage the supply chain 1 that will reduce the cost of

purchasing goods or services

Allow the contracting authority to become aware of all potential suppliers (in a market with

a limited number of suppliers, it is advantageous for the contracting authority to encourage

all suppliers to tender).

Provide a sound understanding of the contracting authority’s attractiveness as a customer for

the supplier. The more important the contracting authority is to the supplier in terms of

the business generated the more likely better service and price becomes available from that

supplier.

Maintenance of list of potential suppliers

Based on the nature of operations of organization and market survey, the procurement department

should prepare list of suitable potential suppliers. Potential suppliers should be enlisted on the basis

of suitable criteria such as legal status, market reputation, financial position, date of incorporation,

feedback from customers of supplier

Selection of suitable bidding method for acquisition

It applies to all methods of procurement. The method of procurement is selected as part of this

procedure and applies to goods, works, routine services and consultancy services. The procurement

unit is responsible for recommending the procurement method to be used and planning the


21

procurement. This should be done in conjunction with the end user, to ensure that it meets the end

user’s needs. The procurement unit is responsible for obtaining any necessary approvals from the

relevant authority, but will often need the assistance of the end user to obtain this.

Step by Step Instructions:

1. Review the information on the requisition and description of requirements.

2. Select the most appropriate procurement method, taking into account the estimated value,

when the items are required, the potential sources for the procurement and any other

relevant details.

3. Prepare a procurement plan, based on the recommended method of procurement

4. Check with the end users that the plan is acceptable and will enable them to meet the

objectives of the procurement. Adjust the plan or change the procurement procedure/

method.

5. Seek approval from the approval authority as per organization delegation of power matrix


22

ORGANIZATION THRESHOLDS (AN EXAMPLE)


23

Vendor selection or pre-qualification

Prior to the floating of tenders, invitation to proposals or offers in procurement proceedings, may

engage in pre-qualification of vendors. Such pre-qualification shall be based upon the ability of

interested parties to perform that particular work satisfactorily.

Therefore, while engaging in pre-qualification, the following factors may be taken into consideration:

i. Relevant experience and past performance;

ii. Capabilities with respect to personnel, equipment, and plant;

iii. Financial position;

iv. Appropriate managerial capability; and

v. Reference check on past performance of contracts with other organizations.

This also ensures that invitations to bid are extended only to those who have adequate capabilities

and resources.

Pre-qualification Process

A pre-qualification document will be prepared that shall present all information pertinent to pre-

qualification, including instructions for preparation and submission of the pre-qualification

documents, evaluation criteria, and list of documentary evidence required by suppliers or

contractors to demonstrate their qualifications. Invitations to pre-qualify or to bid, as the case

may be, shall be advertised in two national daily newspapers and website. Notification shall be

given to enable prospective bidders to obtain prequalification or bidding documents, prepare and

submit their responses. If desired, the cost of the document shall be kept nominal to attract more

applications.

The Prequalification Document

The prequalification document shall include the following sections

1. Instructions to Applicants

2. Prequalification Data Sheet

3. Qualification Criteria and Requirements

4. Application Forms

5. Eligible Countries List

6. Instructions to Applicants


24

Generally, the instructions provided to applicants shall contain the following information:

i. General

ii. Contents of the Prequalification Document

iii. Preparation of applications

iv. Submission of applications

v. Procedures for the evaluation of applications

vi. Prequalification of applicants

Prequalification Data Sheet: To assist applicants, by providing them with a prequalification data

sheet, which gives references to the relevant sections of ‘instructions to applicants’ and guides them

as to how various information must be filled out. Since the instructions are generic, Buyer provide

specific information such as last date of submission, pre-application meeting date and venue, the

person to be contacted in the order of the sections outlined in the ‘instructions to applicants’.

Expression of Interest

The EOI Procedure is used for consultancy services only.

1. Draft a notice for Expressions of Interest.

2. Submit EOI notice to the RA for approval.

3. Publish the notice

4. Receive EOIs up until the deadline.

5. Open the EOIs and record all applicants’ names. No public tender opening required.

6. Assess the EOIs for the key skills, experience or capabilities.

7. Prepare a shortlist of 3 to 6 best qualified bidders. Obtain approval of the (RA approval of

shortlist alongside RFP)

The entity should approve the notice calling for EOIs before publication and Shortlist of bidders

Documents/Records Required:

• A copy of the published EOI notice, with written approval

• The procurement file must also contain records of:

• the potential bidders submitting EOIs;

• the evaluation of the EOIs; and

• The shortlist of bidders.

• Copies of these forwarded to procurement unit for possible inclusion in a supplier database.


25

Preparing Tender Notice

Tender Notice means the notice issued by an entity through publication in the newspapers or through

electronic means for the purpose of inviting bids, or applications for pre-qualifications, or expression

of interests, which may include Tender Notice, Invitation for Bids, Notice for Pre-qualifications or

Request for Expression of Interests;

Method:

• Under the Open Tendering method, without pre-qualification.

• May also be used under the Two-Step Tendering method

• May also be used for guidance on preparation an invitation to pre-qualify notice

Type:

• For goods, works and routine services.

• Consultancy services are advertised through a notice requesting Expressions of Interest (EOI)

Step-by-Step Instructions:

• Complete all required information using the standard notice

• Submit to the RA for approval :

Summary of Procedure:

Procedure for developing a shortlist of bidders, where:

• Competition is restricted and

• No notice has been published.

Request for Quotation

An RFQ is a tender document that describes requirements quantitatively and qualitatively and

requests prices and commercial terms from vendors for lesser value of goods and services:

Drafting request for quotation

RFQ procurement method only and applies to goods, works and routine services,

Purpose:

Gives information about:

• precise description of the goods, works or services required;

• the rules for the procurement process;

• the evaluation criteria and methodology which will be applied

• any qualification criteria which will be applied; and

• The type and conditions of the proposed contract (purchase order).

• A well drafted RFQ document should result in a successful procurement process.


26


1. Select the appropriate RFQ for goods, works or routine services

1. Consult with the end-user, and technical specialists if required, and include the final

description in the Schedule of Requirements of the RFQ document.

2. Complete details of the procurement process e.g.:

• closing time/date

• time when bids will be opened

• address of bid submission

• evaluation criteria

• eligibility and qualification criteria

4. Complete the Conditions of contract and ensure that a shortlist has been prepared

5. Send the RFQ document to the suppliers selected to provide quotations.

6. request suppliers to send back their quotations on this standard

Requests for Proposal

For procurement of services, an invitation will be issued to firms/individuals to submit their

proposals. The RFP shall include:

1. A Transmittal letter/Letter of Invitation should list the documents included in the RFP and

should normally also include a brief description of project.

2. The intention of to hire services (brief description of services required).

3. An indication that separate sealed envelopes to be used for Technical / Financial Proposals, each

clearly marked on the outside of the envelopes with the date and time of opening, if Financial

Proposals are also requested.

4. The date, time, the address for the submission of proposals and the name / designation of the

person to whom to address it, should be clearly stated

Information to Consultants/Firms shall include all necessary information which will help the

prospective bidders in preparing a responsive proposal/offer that shall ensure maximum

transparency to the selection process by providing information on the evaluation criteria, salient

evaluation factors and their respective weights and the minimum score to qualify for the job. This

will include the procedure to handle questions or clarifications concerning the RFP and the points

addressed during the pre-proposal conference.

The method of technical, financial and combined evaluation of proposals

An alert notice should be sent out if a firm or its affiliates disqualifying them from providing services

under the project if such activities constitute a conflict of interest with the services provided under

the present assignment. For example, if a contract for design and supervision of a certain project is

likely to be awarded to a certain firm, it shall be mentioned in the RFP that this firm would not be

eligible to bid on another construction contract.


27

Receiving process of quotations / proposals from vendors

This procedure for the formal receipt of proposals, closing of bids and safe-keeping of proposals

is essential to the integrity of the tendering process for the following reasons:

It ensures that bidding is closed at the precise date and time of the deadline and that no late

proposals are accepted.

It ensures that a record is kept of all proposals submitted on time, to help avoid the opening

of any late proposals submitted at the opening.

It ensures that submitted proposals are kept unopened until the time for the day of bid

opening and evaluation, to promote fair competition.


28

Procurement committee

Bid Opening Committee

In order to maintain proper control and ensure transparency in the procurement process a group

of staff members is recommended as the Procurement Committee.

Role of Bid Procurement Committee

The role of the Procurement Committee is to:

• Ensure that the proposed procurement is in accordance with rules and regulations

• Review the procurement process to ensure that it is fair, competitive, transparent, and provides

the best value for money.

• Open and assess the quotes/tenders and recommend a supplier to the budget holder, as per

delegation of financial authority.

• Decisions on which supplier to recommend shall be through discussion that leads to consensus.

If there is dissent, the decision shall be made by majority rule. Hence the odd number of

members on the committee. In such cases, the discussion and dissent shall be fully documented

to assist the budget holder authorized to make the final decision.

• The authorized budget holder may only over-ride the committee’s recommendation with

written justification and approval from the person who has over him within the delegation of

financial authority and/or the donor, if applicable.

Bid Opening - Minutes & Attendance

The time for the bid opening shall be the same as for the deadline for receipt of bids or promptly

thereafter, and shall be announced, together in the invitation to bid with the place for bid opening

and shall open all bids at the stipulated time and place. Bids shall be opened in public; bidders or

their representatives shall be allowed to be present. The name of the bidder and total amount of

each bid, and of any alternative bids if they have been requested or permitted, shall be read aloud

and recorded when opened and a copy of this record shall be promptly sent to all bidders who

submitted bids in time. Bids received after the time stipulated, as well as those not opened and read

out at bid opening, shall not be considered.

A record of all proposals received against solicitations shall be maintained. All bid opening

committee meetings must be recorded through the minutes of the meeting.


29

All original copies of bids, proposals and quotations must also be signed by committee members

so that no alterations can be made.

Presence of Bidders at the Opening

Standard procurement procedures call for public opening of bids i.e. presence of bidders or their

representatives at the time of bid opening to ensure transparency

Conflict of Interest

Conflict of Interest is a situation in which an individual or is in a position to exploit a professional

or official capacity in some way for their personal or corporate benefit. Confidentiality is a vital

part of this process.

Confidentiality

The Bid Opening Committee keeps all information regarding bid opening confidential until the

announcement of the bid evaluation report. After the public opening of bids, information relating to

the examination, clarification, and evaluation of bids and recommendations concerning awards shall

not be disclosed to bidders or other persons not officially concerned with this process until the

publication of contract award.

Bid Committee must sign a confidentiality certification before receiving any commercially

confidential information. The certification must include:

Content includes:

Definition of “confidential” information

Obligation on the bidder not to disclose the information to anyone else (apart from their

Advisers) unless it has already been made public

Term of the agreement

Bid Analysis / Evaluation Criteria & Scoring Method

The evaluation results in the selection of the vendor for purchase order or contract award.

Depending on the nature of the procurement, the evaluation may be simple or complex — for

example, conducted in a few hours or a few weeks, or carried out by one person or by a large

committee. Regardless of complexity, the procedures involved must be transparent, well

documented, and in compliance with regulations. The evaluation process is perhaps the most

critically important part of any procurement, given that this stage can be the most controversial.


30

Problems with procurement integrity and objectivity can lead to vendor protests that derail the

entire procurement process. For this reason it is critical to draft clear and concise evaluation criteria

in the RFP to remove the possibility for vendors to protest based on unclear evaluation criteria.

Equally important is adherence to standard procedures for evaluating the proposals. All sound evaluations have a standardized set of procedures. These are: Establish an evaluation methodology

Conduct an administrative evaluation to ensure that the suppliers meet the minimum

requirements

Conduct a technical evaluation including evaluation of past performance

Conduct a price and delivery schedule evaluation

Obtain clarifications from vendors, if needed/applicable

Select the best value for award

Ensure that the evaluation is properly documented for the procurement files and any

debriefings

In addition, it is important to adhere to the following principles to ensure a successful evaluation:

Avoidance of conflicts of interest (actual or perceived)

Clear and transparent evaluation methodology

Fair, objective, ad rational assessments and ratings

Procurement integrity — no bribes, kickbacks, or unfair advantages

Confidentiality of data

Written narrative of offers/bids strengths, weaknesses, decisions, and procedure Set up the evaluation committee and determine the chairperson. Note: PU representatives may not take part in the evaluation process, other than to support administrative duties. Senior management will select the evaluation committee.

Technical Approach (10 points) based on the degree to which the vendor meets the technical

specifications

Cost (30 points) Based on the total cost presented in the proposal.

Delivery (40 points) – Based on the proposed delivery time

Past Performance (20 points) – Based on the vendor’s performance on similar projects, either

of similar size or similar scope.


31

Conduct the Initial (Administrative) Evaluation The preliminary examination of quotations/proposals serves to determine whether the offers meet the RFQ/RFP general procedural requirements. The purpose of this examination is to eliminate any offers from further and more complicated consideration if they do not meet the minimum standards as defined in the RFQ/RFP. In particular, the evaluation committee should examine each offer for compliance with the following requirements:

The offer contains all required documents as mandated by the RFQ/RFP, such as specifications sheets, pricing data, company or past performance information, letter of recommendation, etc. The vendor is not on the ―System Award Management (SAM) from Federal Procurement and Non- Procurement Programs, available at www.sam.gov. This is to ensure that the vendor is eligible to participate in U.S. government contracts. The terms and conditions of the RFQ/RFP have been accepted; note any exceptions and determine if exceptions will invalidate the offer (i.e., material deviations) or if they can be placed in the ―negotiable‖ category for later consideration.

Compliance with source, and nationality requirements

Evaluators should exercise reasonable judgment in reviewing offers. It is important to avoid rejecting offers on trivial procedural grounds. For example, if the RFP stipulates that each page of the offer should be signed or initialed and a vendor failed to initial one or more pages of supporting information, this should not be grounds for proposal disqualification. Furnishing one more or one less than the required number of proposal copies, or not using the form supplied in the RFP but providing the information on a similar form on the vendor’s own letterhead, would also be minor discrepancies. These issues can be rectified through the clarification process without giving any benefit to the vendor and without prejudice to the interests of other vendors.

Such discrepancies should be noted, however, and the evaluation report should record decisions about their acceptance or rejection.

The preliminary examination stage of proposal evaluation described above is aimed at making sure that the offers received are substantially responsive. A substantially responsive offer is one that conforms to all the terms, conditions, and specifications in the RFQ/RFP without material deviations, reservation, or omission.

Conduct the Technical Evaluation

Check for mandatory requirements. Review for compliance and assign points/adjectives as

appropriate after the preliminary evaluation stage, evaluators review offers via a more detailed

evaluation in order to analyze compliance with the technical requirements and evaluation criteria in

the RFQ/RFP as applicable.


32

The technical evaluation requires all evaluators to thoroughly read and analyze the contents of each

offer. Sometimes, this process can take several days or even weeks, particularly if the project

received numerous offers. Depending on the sensitivity of the materials and the abilities and time

constraints of the evaluators, there are different ways of allowing review of the offers. Evaluators

could be authorized to take the offers with them away from the meeting site, to review the

quotations/proposals at their leisure. In other instances, the materials may need to stay in a specified

room, where evaluators can spend time and review the quotations/proposals in a neutral, secure

environment. Regardless of the protocol used, the evaluation must adhere to two priorities:

Evaluators must have enough time to review and analyze all of the quotations/proposals fairly, and

quotations/proposal materials must remain confidential.

Conduct the Cost Evaluation Evaluators should be reviewing the cost proposals for clarity and completeness. They should check all mathematical calculations for accuracy — occasionally, there is a discrepancy or error in the cost volume that needs to be addressed. These arithmetic errors should be clarified with the vendor, if possible. In addition, evaluators should check cost proposals to ensure that the quantities of the quoted items match the requirements and quantities stated in the original RFQ/RFP and the technical approach of the vendor. Finally, evaluators must analyze cost proposals to confirm that the total cost reflects accurately the solicitation scope of work, including items such as technical approach, warranty, service, training, etc. The evaluation of overall price constitutes an important criterion for determining best value, and as such, evaluators must fuse it with the technical and other aspects of the evaluation. This should be accomplished via the predetermined evaluation methodology.

In some cases especially when an evaluation committee or number of people are reviewing sensitive proposal materials—it is recommended that evaluators open and review cost volumes after completing the technical evaluation. This is done in order to maintain the integrity of the evaluation process by allowing the committee to focus entirely on the technical merits of the quotations/proposals, without influence or knowledge of the costs involved.

Obtain Vendor Input where Needed and Appropriate:

Frequently, there will be aspects of a particular quote/proposal (both technical and cost-related)

that require clarification. In such cases, it is recommended that evaluators compile a written list of

clarification questions to send or e-mail to the vendor. In extreme cases, it may be necessary to

invite a vendor to a project office to answer questions from evaluators or an evaluation committee.

It is important to ensure that any vendor invited to appear before the committee understands

beforehand that the purpose of the meeting is strictly to allow members of the committee to ask

for and receive specific information that will assist in the evaluation process. The evaluation file

should retain detailed notes, including all questions and answers, of any such meeting. Under no


33

circumstances should any individual vendor be given an unfair advantage or the appearance of an

unfair advantage in the evaluation process.

Whenever possible, phrase questions in neutral terms. For example, if the amount of a commodity to be purchased may increase or decrease 10 percent between the time of the RFP issuance and the award, phrase the question as follows:

Please confirm your pricing based on a quantity of 10 percent more and 10 percent less than the quantity specified in the RFP, rather than asking. Please confirm if your price will increase if we do not order as much or if the price will decrease as a result of additional quantities ordered.

Decide Whether or Not to Discuss/Negotiate

Awards may be made with or without discussions/negotiations. If award is made without discussions/negotiations then the evaluation may be finalized after any clarifications. There is no revision of the quotation/proposals. If award is made with discussions/negotiations then the evaluation may include a ―competitive range‖ stage and then proceed to discussions/negotiations.

Set up a Competitive Range (if Appropriate)

The evaluation committee may establish a competitive range, composed of the most highly rated quotations/proposals. Setting up a competitive range often allows the evaluation committee to save time by eliminating proposals that are obviously not competitive after initial review. The committee then has more time to deliberate on only the most competitive proposals. To follow is a sample letter that the committee can send to vendors that are not within the competitive Range: Sample Refusal Letter Dear __________ The purpose of this letter is to inform you that the evaluation committee has completed its review of all quotations/proposals received in response to the above-referenced solicitation. I regret to inform you that the evaluation committee did not select your offer/proposal submitted in response to this RFQ/RFP for inclusion in the competitive range. Hence, the committee will no longer consider your offer for award. Once the project makes an award announcement, it will notify you of the winning vendor and the amount. If you wish to have a debrief on the strengths, deficiencies, or weaknesses of your proposal, you may ask for one at that time. The project will provide feedback within 10 days of award. We appreciate the time and the effort put into your quotation/proposal preparation. We look


34

forward to your participation in future procurements. Feel free to contact me if you have any questions. Sincerely,

Determine that the Selected Vendor is Responsible Once the project selects an organization for award, the project needs to determine whether the prospective vendor is responsible. A responsible vendor is an organization that has the financial, technical, administrative, and ethical resources to perform the required work. Before awarding a contract, the project must take steps to determine the responsibility of the vendor and record this verification process in the negotiation memorandum and procurement files. The vendor proposal will have included much of the information needed to evaluate responsibility, and the vendor’s responsibility may have been reviewed already as part of the past performance evaluation.

Document the Evaluation

It is very important to document the strengths and weaknesses of the quotations/proposals received. The evaluator or evaluation committee should prepare and provide final written document summarizing the results of the evaluation of each quotation/proposal, including narrative Justification of the evaluation results. The final evaluation memorandum should include details on, at a minimum:

The evaluation criteria

The eligible vendors whose quotations/proposals were reviewed

Vendors that were excluded and the reasons

The rankings and ranking rationale for all quotations/proposals

The rationale for the vendor selection


35

SESSION 04:

AWARD AND

MONITORING


36

Document of Award

Contract Award

The competent authority shall announce a contract award through a written or an electronic

notice within the time for acceptance specified in the bid. This document shall be released from

the procurement department after being vetted by the competent authority. An award shall not

be granted until all required approvals have been obtained. As a pre-condition of award, a bidder

shall not be required to undertake responsibilities for work not stipulated in the bidding

documents or to modify the bid as originally submitted.

Document the award for the files show that:

Offers were properly solicited and/or advertised.

Offers were properly submitted.

Necessary waivers, approvals, and authorizations were obtained.

Competition requirements were met or lack of competition was justified

Disputes, claims, disagreements or pending issues were settled.

Procurement negotiations

Negotiation of Contract

Negotiations with the bidder over prices quoted in the latest bid submitted by the selected

bidder are strictly prohibited. The price once quoted by the bidder shall not be inflated or

reduced without a corresponding increase or reduction in the scope of the contract. In all

circumstances, such modifications shall not be valid unless prior approval has been granted

by the competent authority. Negotiation is only permitted in case of procurement of an

individual consultant and only if the process of selection requires that negotiation be

conducted with the successful bidder.

Negotiation /Memorandum

The negotiation memorandum (neg memo) is the document that details the presence or absence of adequate price competition and the negotiation process between the project and the proposed vendor, relative to price.

Goods Receiving and Inspection

Inspection as ―examining and testing supplies or services (including, when appropriate, raw


37

materials, components, and intermediate assemblies) to determine whether they conform to contract requirements. A standard inspection for a commodity procurement involves at minimum a physical review of the item. It is important to check for:

The correct model/item

The correct quantity

The correct specifications

Correct packaging

No signs of damage

The correct source/nationality

A thorough inspection ensures that everything is received correctly and functioning properly.

Inspection leads to either acceptance or rejection of a deliverable. Rejection A rejection of a commodity must state clearly why the commodity did not conform to a requirement of a purchase order or subcontract. It is important to document how the item violates the contractual Agreement: The degree of nonconformance must then be assessed to determine what action to take. In cases of minor nonconformance, a determination may be made to accept the deliverable ―as-is in cases of major nonconformance; the vendor may be required to take corrective action, such as replacement of the item, correction of faulty aspects, provision of an equitable price adjustment, or other consideration. A subcontractor must be given the opportunity to correct or replace nonconforming supplies or services when this can be accomplished within the required delivery schedule. Occasionally, a contractual agreement may need to be modified to extend the period of performance or to allow for some other type of remedy.

Monitoring

Monitoring the performance of a vendor is critical to ensuring on-time delivery of required commodities and services. Periodic interaction with the subcontractor is encouraged to ensure that activities are being carried out to successfully complete an order. Vendors should be told at the start of the subcontract how project will be monitoring their performance. Such monitoring can be as simple as periodic teleconferences or written progress reports prepared by the vendor at specific milestones outlined in the subcontract. If written reports are to be submitted by the subcontractor, the specific dates for submission should be explicit in the subcontract. The post-award orientation is a good opportunity to discuss expectations for monitoring and reporting requirements contained in the subcontract


38


1. The procurement committee should select the most appropriate person or team to

administer the contract

2. Ensure that a signed copy of the contract or confirmation of the purchase order is

received from the supplier.

3. Ensure that any required performance security or advance payment security is received

from the supplier.

4. Ensure that the procuring agency meets any immediate obligations, such as payment of an

advance payment, opening of a letter of credit

5. Prepare a contract implementation plan, showing key milestones, such as dates for

mobilisation, deliveries or completion of certain deliverables or sections

6. Monitor the performance of both parties against the contract implementation plan. Take

action as required to address any problems or delays, whether actual or anticipated.

7. Ensure that all deliveries, targets or deliverables are completed by the supplier.

8. Check all payment documentation and authorise payments, using the procuring agency’s

normal accounting and disbursement procedures.

Inventory management

Administration should maintain inventory or fixed assets register for internal control purposes.

The inventory or fixed register contain following information

Date of acquisition

Source and nationality

Name of supplier

Description of asset

Cost

USER

LOCATION

CONDITION

Identification number

physical verification of inventory or fixed assets should be performed on periodic basis

Assets should be insured from reputable insurance company


39

Complaint handling mechanism

Organization should establish the compliant handling committee to resolve issues in amicable

manner. Committee should comprise of procurement manager, legal advisor and other suitable

personnel

The disputes / complaints between the entity and vendor should be resolved as per the duly

agreed terms and conditions of purchase contract

Arbitration / Dispute

Arbitration, a form of alternative dispute resolution, is a legal technique that is used to resolve

a dispute outside of courts. The parties disputing refer the issue to an impartial third party

(arbitrator) who reviews the evidence of the case and imposes a decision that is legally binding

on the disputing parties and is enforceable. If arbitration becomes necessary, all the clauses from

the Arbitration Act apply.

All contractual disputes and breaches for compensation should be settled through arbitration. Complaint handling committee should take lead role in resolving the legal disputes between the entity and vendor. The venue, date and name of arbitrator should be mutually agreed with the due consultation of both parties

Termination of contract

Terminating for default is a drastic measure and one in which the project should only take after

doing everything possible to correct failures. The termination process can be long and frustrating

for all parties involved. Depending on the extent of the termination, it can also be very costly

for both parties, especially the subcontractor. The reputation of the project could be severely

damaged; it can limit the project’s possibility of working with the subcontractor in the future.

Project may terminate a vendor for default in four instances: (1) failure to deliver or perform in a timely manner; (2) failure to make progress such that it endangers performance of the subcontract; (3) failure to perform any other provision of the contract, (4) misconduct, or (5) failure to act in the best interest of the project. The vendor’s failures must be clearly documented during implementation. It is vital that during implementation that the project senior management be fully informed of any problems, as well as any corrective measures taken. Before terminating a contract/purchase order for default, the entity should clearly communicate in writing the problematic issues (via a cure notice) and give the vendor an opportunity to fix the problems. For example, if the vendor is late on delivery, a cure notice should state exactly what are the required deliverables, when they were required for delivery, and any attempts the project has made to resolve the issues with the subcontractor and it should cite the appropriate default clause incorporated into the contract/purchase order. If the contract/purchase order does not cure in the agreed time, the project can then send a formal termination letter.


40

Legal ramifications of termination

Under the doctrine of private of contract; lawsuit can only be filed in the name of entity

against the supplier in the court of law

Legal action should be taken with the due consultation of legal council

Under law of contract, the aggrieved party can file petition against the supplier for legal

rights named as non-liquidated damages, quantum meruit, action for price, specific

performance, injunction and rescind of contract

Guidelines for managing the termination process of purchase contract

1. Identify the need to terminate the contract

2. Check the contract or purchase order document, to confirm the conditions relating to

termination

3. Obtain advice from legal adviser AND COMPLAINT HANDLING COMMITTEE

4. Estimate the amount of money, if any, which will be due to the supplier following THE

termination

5. PREPARE justification for termination OF CONTRACT

6. Prepare a formal TERMINATION notice and stating the grounds for termination

7. Obtain approval of the TERMINATION notice from the competent authority

8. Ensure that the competent authority is informed of the legal AND FINANCIAL

ramifications of terminating the contract

6. Issue the termination notice and ensure that it is received by the supplier

7. Take any follow-up action required, including making any payments due to the supplier

under the contract


41

Role of procurement department in project close-outs

1. Procurement team should develop project close-out plan

2. close out plan delineates the role of procurement department during the project closure

processes and activities

3. Procurement department usually performs following TASKS during the close-out phase

Project office close out

Inventory disposition

Close out of vendor contracts

Archiving of procurement records and documentation

Submission of report

Assign appropriate member of procurement to coordinate office closure

Procurement department should take following steps

Review lease terms and conditions (check security deposits)Renovations/repairs

outlined in the lease must be completed before the lease ends

Obtain release of security deposit from the landlord before end date

Finalize date for closure of office. Ideally, office should be closed 60-30 days before

the project end date .If necessary, open a temp office (work from home, hotel)

Dispatch Project closure notification to suppliers

Disconnect phone/fax/e-mail lines

Discontinue security and cleaning services

Closure of office facilities

Assign appropriate member of procurement to coordinate office closure

Procurement department should take following steps:

1. Review lease terms and conditions (check security deposits)Renovations/repairs

outlined in the lease must be completed before the lease ends

2. Obtain release of security deposit from the landlord before end date

3. Finalize date for closure of office.

Closure of vendor contracts

Determine way forward for vendor contracts (cancellation or amendment)

Inform vendors in advance of closure date

Provide vendors instructions for final invoices

Provide contact names and information for vendors for any problems after project close


42

Disposition of inventory items

All equipment, furniture & inventory supplies purchased with donor Funds should be

recorded properly

Final inventory list should be based on a physical inventory.

Any inventory purchased by sub-partners must be included as part of disposition.

New equipment should not be purchased in the final 6 months of the project.


43

SESSION 05:

USAID rules and regulations

related to procurement

Procurement Training Reference Material for...

Documents

Transcript of Procurement Training Reference Material for...