Works Procurement

October 2018
By Frew Bekele

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Contents
1. Procurement Methods
2. Procurement Types
3. Procurement Procedure
4. Basic Contract Types
5. Bidding Documents
6. Evaluation And Qualification Criteria Framework

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WORKS CONTRACTS

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 Nature and Complexity of Works
 Size and Duration of Contract
 Degree of Definition/Risk/Uncertainty
 Status of Design
 Technical/Supervisory Resources of
Employer
 Budgetary/Financing/Borrowing constraints
 Previous experiences of employer
 Standard Documents of Funding Agency
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 E. Types of Works Contract

Basic
 Lump Sum (all-inclusive Price)
 Unit Rate (paid against measured work)
 Cost plus (paid against constituent
inputs)
 Fixed fee
 Percentage fee
 Variable (incentive) fee

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 E. Types of Works Contract

Lump Sum
 Uses
 Small, well-defined works/ building of
short duration
 Large industrial process plants (Turnkey)

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 E. Types of Works Contract

Lump-sum(cont)
 ADVANTAGES
 Fixed sum for budgeting
 Easy to administer
 Little/No measurement
 Less documentation
 DISADVANTAGES
 Inflexible to changes/High Risk
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E. Types of Works Contract (cont..)

Unit Rate (Ad/Re-Measurement)

 Most common for infrastructure
construction of short or long duration
 Advantages
 Equitable basis for bidding
 Facilitates bid comparison and
evaluation
 Adaptable to changes

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 E. Types of Works Contract (cont..)

Unit Rate (Ad/Re-Measurement) cont..

 Periodic payments follow contractor’s cash
flow.
 Normally little difference between estimates,
bids and final cost
 Disadvantages
 Problems with unbalanced bids/unit rates
 Preparing and Monitoring Detailed BOQ.

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E. Types of Works Contract (cont..)

Cost Reimbursable Plus fee (Cost

Plus)
 Uses
 Open-ended emergency situations
(earthquakes, floods)
 High risk and Uncertainty (war,
tunnelling)
 High return projects (private sector)

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 E. Types of Works Contract (cont..)
Cost Reimbursable Plus fee (Cost
Plus) Cont…
 Advantages
 Early mobilization and rapid start
 Contractor assumes little or no risk
 Disadvantages
 Inappropriate (in basic form) for competitive
bidding (see target cost)
 With fixed fee, no incentive for quality or timely
work
 Additional employer staff needed to monitor costs.

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 F. Other Types of Works Contract

Supply and Erect/Install

 For pumping stations, transmission towers, pipelines,

etc.
 Part goods, part works
 Single responsibility for whole
 LS or Combination LS/UR

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F. Other Types of Works Contract (cont..)

Design and Build/Construct

 For major bridges, public buildings/ monuments, etc.

 Explores latest concepts in design and Construction
technology and management
 Complex Bid Evaluation
 Normally LS with Quantity/Price Variation

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F. Other Types of Works Contract (cont..)

Turnkey
 For complex industrial process plants, etc.
 Similar to design and Build. Contractor for the design,
as well as construction.
 Contractor delivers working package for specified end
product
 Normally LS with price adjustment for long duration

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F. Other Types of Works Contract (cont..)

BOT/Concessionary
 For revenue earning projects (toll roads, power, water,
etc.)
 Essentially concessionary Turnkey contract
 Useful when owner has limited budget or borrowing
capacity
 Costs and risks borne by BOT investors

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Some questions for preliminary
discussion

What is the difference between Bid & Bidding

Document?
How can one ensure the fundamental principles of
procurement during BDs preparation?
What would be the relation b/n BDs & the resulting
contract agreement?
How does the contents of the BD affects the
achievement of the objectives of subject matter

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 4. What are BDs and their
objectives;
• What are BD?
• How Bidding Documents are designed?

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3. Bidding Documents

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 A. Objectives of BDs

Bidding documents are prepared to:

 Inform bidder
 Instruct potential bidders, suppliers and contractors of
the requirement expected of them in particular
procurement opportunities.
 To define :
 The scope of works;
 Goods or services to be supplied;
 The rights and obligations of the Client/ and of supplier and
contractor;
 Conditions to be met;

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 A. Objectives of BDs Cont ..

Bidding documents are prepared to:

 Encourage eligible potential qualified firms to bid, by

making reasonable demand for information and form-
filling;
 not to discriminate against any potential bidder; and
 Provide a clear, objective means of evaluating the
bidders.

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 B. Parts of SBD

What are SBD?

 Are standardized documents;

 Used overtime and met tests of time
 Structured whereby ITB & GCC are to be used
unchanged and specific situations are Qualified under
BDS & SCC

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 B. Parts of SBD Cont…

In General SBD has 3 parts & 9 sections;

 Part 1- Bidding procedures;

 Part 2- Schedule of Requirements;
 Part 3- Contract

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 B. Parts of SBD Cont…

Part 1- Bidding procedures;

 Section 1 - ITB;
 Section 2 - BDS;
 Section 3 - EQC;
 Section 4 - Bidding forms;
 Section 5 – Eligible countries;

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 B. Parts of SBD Cont…

Part 2- Schedule of Requirements;

 Section 6- Schedule of Requirements;

Part 3 – Contract;
 Section 7 – GCC
 Section 8 – SCC
 Section 9 – Contract Forms;

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 C. Contents of Each Section of BD

Section 1 - ITB
Provides information to help bidders prepare their bids;
ITB contains provisions that are to be used without
modifications;
ITB will not be part of the final contract;
It is procedural & instructional information used during
bidding process.
Evaluation and comparison of Bids;
Award of contract

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 C. Contents of Each Section of BD

Section 2- BDS (PIT)

Supplements the ITB by specifying individual bidding
document;
All clauses refer to Section 1 and are prepared for each
specific contract;
The BDS will not be part of the resulting contract document;
Any change/qualification to be made to the standard ITB is
made here and it is wise to see it with care.
Any information in the BDS precedence over the one in ITB;

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 C. Contents of Each Section of BD

Section 3- EQC

This section contains all the criteria that the employer shall
use to evaluate bids & qualify bidders;
This is again to modify ITB and provide figures and details
for the qualification criteria to the particular contract.
Evaluation;

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 C. Contents of Each Section of BD

Section 4- Bidding Forms

This is again standardized forms to assist the bidders for
submission of responsive/complete bid;
This may include forms for:
 Letter of Bid/bid submission form;
 Bid security (Bank Guaranty/ Bid Bond);
 Technical proposal Form;
 Forms for Personnel;
 Forms for Equipment;

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 C. Contents of Each Section of BD

Section 4- Bidding Forms cont…

Bidder’s Qualification;
 Bidder information sheet;
 Party to JV information Sheet;
 Historical contract non – performance
 Current Contract Commitments
 Financial Situation
General Experience
Specific experience

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 C. Contents of Each Section of BD

Section 5: Eligible Countries/firms

In ICB contracts:

 Prohibitions of commercial relations;

 If a firm is declared ineligible;
 Conflict of interest
 Legal and commercial status

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 C. Contents of Each Section of BD

Section 6: Schedule of requirements

Specifications;
Drawings;
Supplementary information;
BoQ;

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 C. Contents of Each Section of BD
Section 7: GCC
GCCs are standard, that have been evolved over years;
The rights and obligations of the parties to the contract is
defined GCCs;
FIDIC Conditions of Contract is use for major engineering
contracts (different models available for different contract
modes);
PPA has also its own GCC
FDIIC conditions of contract is suitable for admeasurements
contracts;
GCCs are not modified

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 C. Contents of Each Section of BD

Section 8: COPA (SCC)

COPA complements GCC in a manner similar to BDS

complements ITB;
COPA provisions take precedence over those in GCC;
Legal or proffessional advices is recommended when
amending provisions;

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 C. Contents of Each Section of BD
Section 9: Contract Forms
This section contains forms which, once completed, will form
part of the contract.
This forms are:
 Letter of Acceptance;
 Contract agreement;
 Performance Security;
 Advance payment Security;
All these forms are not filled and submitted during bid
submission but used while drafting the contract

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 C. Contents of Each Section of BD

Common Mistakes in BD preparation

Change to ITB & GCC;
Considering issues which may contradict with the public
procurement proclamation and directive;
Restricting specifications;
Any of your experience as a problem…

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4. Evaluation and Qualification
Criteria Framework

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 A. Qualification Criteria
 General Qualification
 Legal Status
 Eligibility
 Technical Examination
 Major Equipment
 Key personnel
 Proposal of work methods and programs
 Historical Contract Non-Performance
 History of Non-Performing Contracts
 Pending Litigation

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 A. Qualification Criteria cont…
 Financial Situation
 Historical Financial Performance
 Current Contract Commitments
 Annual Construction Turnover

 Experience
 General Construction Experience
 Specific Construction Experience

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A. Qualification Criteria Cont…

Must Meet Criteria Has to Meet Criteria

General Qualification
Technical Examination
Historical Contract
• Major Equipment
Non-Performance
• Key personnel
• Proposal of work
Financial Situation methods and programs

Experience

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 B. Qualification criteria frameworks

 PPA
 First with 2006 standard bidding documents
(prepared as user guide)
 Current January 2016
 WB and other financers
B. Qualification criteria frameworks cont…
 Annual Construction Turnover
ACT= E.E xF
CPY
Average for foreign bidders
Peck for local Bidders
F=2 for Foreign Bidders
F=1.5 for Foreign and local JV bidder
F=0.8 for Local Bidders
Required Evidences
Audited report prepared by
independent auditor not accountant
• ACT= Annual Construction
Turnover
• E.E= Engineer’s Estimate
• F= multiplying factor
• CPY= Construction period in Years
Considerations
inflation of Birr is considered by
multiplying by Cn/Co factor
Lead partner should at least fulfill
40% and the other at least 25%
B. Qualification criteria frameworks cont…

 General Construction Experience

5 Years for foreign bidders

2 years for local bidders.

Required Evidences
Documents which confirm the
contractor is in the industry to
confirm the above
B. Qualification criteria frameworks cont…
 Specific Construction Experience
For Local Bidder Foreign
Bidders
1 projects 2 projects
70 % estimated Value. 100% by value
one standard below the Similar
tendered project
At least 70% completed 80 %completed
Required Evidences
Confirmation from the Client and
others documents like
 Payment Certificates
 Cash registered invoices for
collection of payment
 TAX payment receipt
Considerations
inflation of Birr is considered by
multiplying by Cn/Co factor
Two or three projects could be
considered to fulfill the requirement
Up to sum of 2 projects (each half
value) for projects value less than 1
billion birr
Up to sum of 3 projects (each one
third value) for projects value greater
than 1 billion birr
Any one or members of the JV
partners could fulfill this requirement
jointly and there is no requirement for
each party
B. Qualification criteria frameworks cont…

 Historical Contract Non-

Performance
 History of Non-Performing
Contracts
 Pending Litigation

 Historical Financial Performance

Required Evidences
Confirmation from the Client and
others
Audited report prepared by independent
auditor not accountant
 Summary Questions
1. Identify standard and particular parts
of the BD
2. Which sections of the BD will be part
of the resulting contract agreement?
3. Can technical specifications be
standardized?

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 Summary Questions
5. Do you agree?
 EQC will be part of the resulting

contract.
 BDS is can not be modified.

 Alternative Technical Proposals

should not be allowed always.

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 Summary Questions
6. An item not listed in the Price Schedule shall
be assumed to be not included in the bid,
and provided that the bid is substantially
responsive, the average price of the item
quoted by substantially responsive bidders
will be added to the bid price and the
equivalent total cost of the bid so
determined will be used for price
comparison. What risk would this provision
in the BD have?

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 Summary Questions
6. Discuss the advantages and disadvantages
of Prequalification
7. Discuss Common mistakes in BD
preparations

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