Procurement Management: Xiangjun LI

Procurement Management
Xiangjun LI
Xiangjun_jinan@126.com
Reference
2
Method of procurement
• International competitive bidding
• Issue bids for advertisement in an acceptable
international language and award contracts to the
lowest acceptable bids, subject to certain
considerations for qualitative judgment.
• Provide all eligible bidders with timely and
adequate notification of a borrower’s
requirement and an equal opportunity to bid for
the required goods, works, and non-consulting
services. 3
• Limited international bidding
• Direct invitation , without open advertisement
• An appropriate method of procurement, only a
limited number of suppliers or other exceptional
reason
• Borrowers shall seek bids from a list of potential
suppliers broad enough to assure competitive
price
4
• National competitive bidding
• The most appropriated method
• Public procurement in the country of the
borrower
• Unlikely to attract foreign competition
5
• Shopping
• Based on comparing price quotations
obtained from several suppliers with a
minimum of three
• Procuring limited quantities of readily
available off-the-shelf goods or standard
specification commodities of small value,
or simple civil works of small value
6
• Framework agreement
• A long term agreement with suppliers, or
contractor, or service provider.
• Set the basic terms for business relationship,
serving as a prelude to a signed contract or a
shared approach to a specified objective.
• Formal agreement and provides the necessary
context to establish a relationship, but can be
modified with terms being added or deleted at a
later date. 7
• Direct contracting
• Contracting without competition
• Most appropriate in the case of single
source
• Other circumstances, include extend an
existing contract, or natural disaster, or
emergency situation.
8
International Competitive Bidding
• Type and size of contract

• Lump-sum contract
• Unit price contract
• Reimbursable cost plus fees contract
9
• A single responsible contract

• Large industrial and power plant and
facilities
• Discrete items of equipment and works are
grouped into a contract pages
• Trunkey contract, one entity assumes total
responsibility to provide an industrial plant
or facility fully-equipped and ready for
operation. 10
• Notification and advertising
• Timely notification of bidding
opportunities is essential
• Notification shall be given in sufficient
time to enable prospective bidders to
obtain prequalification or bidding
documents and prepare and submit their
response.
11
• Prequalification of bidders
• Necessary for large and complex works
• Ensure that invitation to bid are extended
only to those who have adequate
capabilities and resources.
• Prequalification shall be based on entirely
upon the capabilities and resources of
prospective eligible bidders to perform the
particular conditions satisfactorily. 12
• Prequalification documents including:
 General and specific experience
 Satisfactory past performance
 Successful completion of similar contract
over a given period

 Financial position
 Capability of construction
 Capability of Manufacturing facilities 13

• The scope of the contract and a clear
statement of requirement for
prequalification shall be send to those who
responded to the invitation.
• All such applicants shall that meet the
specified criteria shall be allowed to bid.
• If none or a few applicants are found to be
prequalified, the borrower may issue a
revised prequalification invitation. 14
• Bidding documents
• As soon as the prequalification is
completed, the bidding documents shall be
made available to the qualified prospective
bidders.
• The bidding documents shall furnish all
information necessary for a prospective
bidder to prepare a bid.
15
• Documents generally include:
 Invitation to bid
 Instruction to bidders and bid date sheet
 Form or letter of bid
 Form of contract
 Conditions of contract
 Specification and drawings
 Relevant technical data
 List of goods or bill of quantities
 Delivery time or schedule of completion

16
 Necessary appendix
• The basis for bid evaluation and selection
of lowest evaluated bid shall be clearly
outlined in the instruction to bidders and
/or specifications.
• If a fee is charged for bidding documents,
it shall be responsible and reflect only the
cost of their typing, printing and
publishing in an electronic format, and
delivery to prospective bidder. 17
• The bidding documents for works may
indicate the estimated total cost of the
contract, but shall not indicated the
borrower’s cost estimated such as priced
bill of quantities.
18
• Validity bid
• A period specified in the bidding
documents
• Shall be sufficient for the borrower to
complete the comparison and evaluation of
bids
• Contract can be awarded in the period.
19
• Bid security
• Borrower have the option of requiring a
bid security.
• The amount and form shall be specified in
the bidding documents.
• Remain valid for a period sufficient to
provide reasonable time for the borrower
to act if the security to be called.
20
• Bid security
• Bid security shall be released to
unsuccessful bidders once the contract has
been signed.
• Declaration can replace bid security.
21
• Clarity of bidding documents
• Bidding documents shall be so worded to
permit and encourage international
competition.
• Bidding documents shall set forth clearly
and precisely the work to be carried out.
• Bidding documents shall be specified any
factors .
22
• All prospective bidders shall be provided the
same information.
• A pre-bid conference may be arranged whereby
potential bidders may meet with borrower
representative to seek clarification.
• All modification of bidding documents, shall be
send to each recipient of the original bidding
documents and all bidders on record in sufficient
time before the deadline for receipt of bids. 23

• If necessary, the deadline shall be
extended.
24
• Pricing
• Bid for goods shall be invited on basis of
CIP for all goods manufactured abroad and
to be imported.
• Bid for goods manufactured in the
borrower’s country shall be invited on the
basis of EXW plus cost of island
transportation and insurance to the place of
destination. 25
• Price adjustment
• Bid price will be fixed or price adjustment
will be made to reflect any changes in
major price components of the contract.
• Price adjustment provisions are necessary
in contract which extend 18 months.
• Contract of shorter duration may also
include a similar provision for price
adjustment when future local or foreign
inflation is expected to be high. 26
• Price adjustment
• Price shall be adjusted by the use of
prescribed formula.
27
• Terms and method of payments

• Contract for supply of goods shall provide
for full payment on the delivery and
inspection.
• Contract for works shall provide, in a
appropriate case for mobilization advance,
advance on contractor’s equipment and
materials, regular progress payment, and
reasonable retention amount. 28
• Conditions of contract
• Clearly define the scope of the work
• The goods to be supplied
• The service to be provide
• The right and obligation
• The function and authority of engineer
• A balanced risk allocation and liabilities
29
• Performance security
• Security in an amount sufficient to protect the
borrower in case of breach of contract by the
contractor.
• The amount of security depend on the type of
security furnished and on the nature and
magnitude of the works or facilities.
• A portion of this security shall extend sufficiently
beyond the date of completion of the works or
facilities to cover the defect liability. 30
• Performance security
• In contract for supply of goods the need for
performance security depend on the market
conditions and commercial practice for the
particular kind of goods.
31
• Retention money
• Contract for works may provide for a
percentage of each periodic payment to be
held as retention money until final
acceptance.
• Contractor may be allowed to replace
retention money with an equivalent
security in the form of a bank security or
guarantee after provisional acceptance. 32
• Liquidated damage and bonus clauses

• An appropriate amount shall be included in
the conditions of contract
• Provision may also to be made a bonus to
supplier or contractor
33
• Force majeure
• Force majeure should defined in the
conditions of contract
• Not be considered a default
34
• Time for preparation of bids
• The time allowed for the preparation and
submission of bids shall be determined with due
consideration of the particular circumstance of
the project and magnitude and complexity of the
contract.
• Generally, not less than 6 weeks.
• Large work or complex item of equipment are
involved, period shall be not less than 12 weeks.
35
• Time for preparation of bids

• Bidders shall be permit to submit bids by
mail or in person.
• The deadline and place for receipt of bids
shall be specified in the invitation to bid.
36
• Bidding open procedure

• The time for the bid opening shall as the
same as the deadline for receipt of bids.
• Bids shall be opened in public.
• The name of bidder and total amount of
each bid, and any of alternative bid, shall
be read aloud.
37
• Clarifications and alterations of bids
• Bidders shall not to be requested or
permitted to alter their bids.
• The borrower shall ask the bidders for
clarification needed to evaluation their bids
but shall not ask or permit bidders to
change the substance or price of their bids
after the bid opening.
38
• Confidentiality
• Information relating to the examination,
clarification, and evaluation of bids and
recommendations concerning award shall
not be disclosed to bidders or other
persons.
39
• Examination of bids
• The bids shall meet the eligibility
requirement
• Have been properly signed
• Are accompanied by the require securities
or required declaration signed
• Are substantially responsive to the bidding
documents
• Are otherwise generally in order. 40
• Evaluation and comparison of bids

• The purpose of bid evaluation is determine
the cost to the borrower of each bid in a
manner that permits a comparison on the
basis of evaluated cost.
• Bidding documents shall also specify the
relevant factors in addition to price to be
considered in bid evaluation and the
manner. 41
• Evaluation and comparison of bids

• The borrower shall prepare a detailed
report on the evaluation and comparison of
bid forth the specific reason on which the
recommendation is based for the award of
contract.
42
• Extension of validity of bids
• Borrower shall complete the evaluation of
bid and the award of contract within the
initial period of bid validity.
• An extension of bid validity, shall be
requested in writing from all bidders
before the expiration date.
• Bidders shall not be requested or be
permitted to change the quoted price or
other conditions of their bid. 43
• Extension of validity of bids

• Bidders shall have right to refuse to grant
such an extension.
• Bidders who are willing to extend the
validity of their bid shall be required to
provide a suitable extension of bid
security.
44
• Postqualification of bidders
• If the bidders have not been prequalified,
borrower shall determine whether the
bidder whose bid has been determined to
offer the lowest evaluated cost has the
capability and resource to effective carry
out the contract as offered in the bid.
• The criteria to be meet shall be setting out
in the bidding documents. 45
• Award of contract
• Borrower shall award of contract, within
the period of validity of bid.
• Bid has been determined:
• To be substantially responsive to the
bidding documents
• To offer the lowest evaluated cost
46
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Procurement Management

• Type and size of contract

• A single responsible contract

 Satisfactory past performance

 Successful completion of similar contract

over a given period

 Capability of Manufacturing facilities 13

 Instruction to bidders and bid date sheet

 Form or letter of bid

 Specification and drawings

 Relevant technical data

 List of goods or bill of quantities

 Delivery time or schedule of completion

• Clarity of bidding documents

• Terms and method of payments

• Liquidated damage and bonus clauses

• Time for preparation of bids

• Bidding open procedure

• Evaluation and comparison of bids

• Evaluation and comparison of bids

• Extension of validity of bids

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