Procurement Overview

Dec 2010
Introduction
Purchasing goods, services and works (procurement) is a
critical element of project implementation. . .

• Inefficient or ineffective procurement may have serious

consequences:
 expected project results & impact not achieved
 delays in project implementation
 higher cost of implementation

• Procurement is a sensitive activity:

can be conducive to corruption & fraud
 complexity of certain procurement actions
 combined use of national & IFAD regulations
/guidelines

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 Importance of Procurement – IFAD Guidelines

IFAD’s fiduciary responsibilities:

 Proper use of loan funds: IFAD must ensure financing proceeds

are used only for intended purpose: specifically CPM & support staff
oversight

 Economy & efficiency requirements in project implementation in

general & procurement in particular: IFAD must ensure contract
awards result from a competitive process

 IFAD must ensure equity, integrity, transparency & good

governance in procurement process

 Concept of “no objection”

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Responsibilities
Borrower/ Recipient

Implementation of project/ programme including award &

administration of contracts

IFAD

IFAD supervises the Borrower’s procurement actions in

order to ensure that funds are used for the purpose of the
Financing agreement with due attention to considerations of
economy, efficiency & social equity

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Role of Borrower/ PMU in Procurement
PMU has overall responsibility for Procurement

 Procurement planning (in line with project objectives & AWPB)

 Preparation & issuance of bidding documents & invitation to bid
 Opening & evaluation of offers
 Negotiation, award & signature of contract
 Monitoring of contract execution (technical & financial/
administrative)
 Delivery of goods/ works/ services
 Payment

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 Role of IFAD in Procurement
CPM must:
 Ensure coherence of procurement actions with project objectives,
AWPB & procurement plan, & timing within implementation period
 Ensure funds availability: cost of procurement must not exceed
funds allocated in Financing agreement & AWPB
 Ensure transparency & equity: procurement must be conducted in
compliance with applicable rules & procedures
 Ensure best value for money: procurement must be the result of a
competitive process
 Review procurement plan, prequalification of bidders, perform
procurement review – prior & ex-post

• IFAD staff must maintain neutrality & impartiality

• Flexibility is a must – but know rules & regulations
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Tendering Process
Formation of Bid Evaluation Committee;
Key N-O by IFAD

Prepare Specifications and tender

ITB – Invitation to Bid documents (Advertisement/ ITBs/ RFPs/
RFQs as applicable)

Bid Evaluation and draft contract

RFP – Request for
IFAD Prior Review & No-Objection
Proposal
(if required)

RFQ – Request for

Contract Award to best evaluated bid
Quotation

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Procurement Methods

Different methods (ranging from International Competitive Bidding to

Direct Contracting) are used for the different categories of
procurement depending on nature, amount & other criteria - guiding
principle being economy, efficiency & social equity

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 Common Procurement Methods
International Competitive Bidding (ICB): for high value requirements

• Advertise in widely circulated newspapers, local representatives,

Embassies, UN Development Forum
• Pre-qualification
• Public bid opening
• Bid evaluation based on point scoring system (technical & financial)

National Competitive Bidding (NCB): public procurement in Borrower’s country

• Advertise in local newspapers (note: foreign suppliers may bid)

• Pre-qualification
• Public bid opening
• Bid evaluation based on point scoring system (technical & financial)

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 Common Procurement Methods
International Shopping
• short-list at least 3 reputable suppliers in at least 2 member countries of IFAD
• issue ITB to the short-listed suppliers
• receive bids in original form (not faxed)
• bid evaluation based on lowest cost for compliant offers
• sign contract

Local Shopping

• prepare specifications and request for quotations

• short-list at least 3 reputable suppliers
• issue request for quotations to the short-listed suppliers
• receive bids in original form (not faxed)
• bid evaluation based on lowest cost for compliant offers
• sign contract

Direct Contracting
• Extension of/ addition to an existing contract
• Standardisation of goods with existing project assets
Note: Competitive process is not required. 10
Project Specific Principles

 Procurement is carried out in accordance with Financing Agreement &/or

Letter to the Borrower

 Procurement is now not limited to suppliers/ manufacturers from IFAD

Member States (since September 2010)

 Procurement is to be conducted within the project implementation period

 Procurement must not exceed availability of funds duly allocated by

Financing Agreement

 Procurement must be consistent with approved AWPB

 Procurement should provide best value for money

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 Regulatory Framework
Must adhere to regulatory framework . . .

 Procurement rules and procedures applicable to a particular project

come from different sources:

• national procurement rules & regulations

• IFAD Procurement Guidelines

• project design report

• financing agreement

 Applicable rules, methods & procedures are specified in Letter to the

Borrower, as well as IFAD procurement review requirements

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Compatibility with National Rules & IFAD’s Guidelines

NATIONAL RULES & REGULATIONS MAY BE ADOPTED IF

THEY ARE ASSESSED TO BE COMPATIBLE WITH IFAD’S
GUIDELINES

Compatible means that they respect the main basic principles of

IFAD’s guidelines

N.B. In the unlikely case that some provisions in Schedule 4 of the

Financing Agreement/ LTB are not in line with IFAD’s Procurement
guidelines, the provisions of Schedule 4 shall prevail

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IFAD Prior Review

Schedule 4 of the Financing Agreement/ LTB lists all major

procurement contracts to be awarded on the Project, their estimated
value, category (goods, works, services), the monetary threshold for
IFAD’s prior review

The thresholds may always be modified from time to time as notified

by the Fund to the Borrower/ Recipient (needs agreement by both
parties if the threshold is decreased)

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Mis-Procurement

 When procurement has not been conducted in accordance

with the procedures adopted (national and/or IFAD)

 When a contract has been awarded based on incomplete,

inaccurate or misleading information furnished by the
borrower, even in the case where a NO OBJECTION has been
granted

 When a contract has been modified without IFAD’s approval

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Review of Prequalification of Bidders

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 Review of Draft Prequalification Documents
The advertisement & invitation for prequalification should contain:
a) a brief description of the goods & works to be procured
b) the contract conditions
c) who is financing the project
d) eligibility requirements for potential bidders, suppliers & contractors
e) the time and place where prequalification documents can be obtained
Prequalification documents should contain further information:
a) the proposed procurement
b) the estimated value of the contract & major quantities of work
c) location of the work
d) procurement scheduling of goods or works to be procured
e) abbreviated specifications & conditions of contract
f) main quantities to be procured
g) delivery or implementation schedules
h) requirements for bid & performance securities
i) how the project is to be financed
j) payment terms, price adjustment provisions
k) the language & governing law of the contract
l) other information in sufficient detail to enable bidders, suppliers or contractors to assess
their interest & respond appropriately
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Procurement Process for Goods, Services & Works

Step 1 Procurement List And Bulk Purchase

Best use of competitive bidding

Step 2 Procurement Plan

Model of Procurement plan: proposed minimum contents and to be

updated periodically (See Procurement Handbook)

Annex 1

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 Procurement Process for Goods, Services & Works

Step 3 Preparation of Bidding Documents

GOODS SERVICES WORKS
Bidding documents or Request for Proposals from Bidding documents or
Request for quotations shortlisted firms Request for quotations
Letter of invitation & general and
Invitation to bid Invitation to bid
specific conditions
Instructions to bidders with: Instructions to Consultants with: Instructions to bidders with:
* Bid security (Lumpsum) * Proposal preparation info * Bid security (Lumpsum)
* Bid evaluation method and * Proposal evaluation method * Bid evaluation method and
process etc. and process etc. process etc.
Conditions of contract (general
and special)- International
Conditions of contract (general
Acceptable to IFAD Federation of Consulting
and special)
Engineers (FIDIC) for large
contracts above 10 million USD
Schedule of requirements and Scope of works, Bill of quantities
Terms of Reference (TORs)
technical specifications and drawings
Prices schedules Breakdown of costs Prices schedules
Contract form Contract form Contract form
Annexes for bid bonds and
No proposal or performance
performance security, tax
securities
clearance, etc..;
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Procurement Process for Goods, Services & Works

Crucial Steps

TECHNICAL SPECIFICATIONS (TS) FOR GOODS:

Inappropriate, irrelevant, too many details lead to a restriction of competition:
reference to an exclusive mark/ model (IT equipment), too many technical
details (computers/ laptops), project or country specifications (give
explanations), limit to essential criteria (adherence to TS evaluation),
warranty & upgraded equipment, check specialists, visit potential suppliers

70 – 80% OF THE PROBLEMS OF A BID EVALUATION COME FROM A

BAD DEFINITION OF TECHNICAL SPECIFICATIONS

TERMS OF REFERENCE (TORs) FOR CONSULTANCY SERVICES

To be done by the final user of the services and not by the procurement
officer or the financial controller

SCOPE OF WORKS, Bill of Quantities (BoQ), DRAWINGS: use the services of

an engineering expert or office
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 Review of Draft Bidding Documents
General
Is the procurement:
 In accordance with the loan agreement & any subsequent changes reflected in mission reports
 within the availability of funds?
 consistent with the approved AWPB (procurement plan)?

Adequacy and Quality of the Bidding Documents

Bidding documents should provide all the information necessary for a bidder to prepare its bid for the
goods or works to be provided. This includes:
Instruction to the bidders
proposed pricing (e.g. unit prices or lump sum), currency arrangements
qualification standards set out for bidder (where no prequalification)
Terms of Reference (TOR) or Statement of Work (SOW) describing contract requirements
evaluation criteria by which the award will be determined
clarity and propriety of the borrower’s use of preferences (e.g. the method by which domestic bidders
may be favoured)
insurance or bond requirements

Other Issues
 unusual provisions (e.g. large advance payments)
 proposed attachments to be included in the bidding documents
 borrowers’ list of proposed bidders to receive the invitation of bids
 draft contract to be awarded 21
 Review of Draft RFP
General
Is the procurement:
 in accordance with financing agreement & any subsequent changes reflected in mission reports
 within availability of funds (cost estimate by submitted by borrower)
 consistent with approved AWPB (& procurement plan)

Adequacy and Quality of the RFP

The RFP should provide all the information necessary for a consulting firm to prepare its proposal:
instruction to consultant (including applicable forms and data sheets)
requirements to specification of pricing (e.g. time-based, lump sum, reimbursable)
currency arrangements
terms of reference (TOR) describing contract requirements, overall as well as for individual personnel
selection method
evaluation criteria (technical & financial) by which the award will be determined
clarity and propriety of the Borrower’s use of preferences (e.g. the method by which domestic
consultants may be favoured)
insurance or bond requirements

Other Issues
 Unusual provisions
 Proposed attachments to be included in RFP
 Borrowers’ shortlist of consultants to receive RFP
 Draft contract to be awarded 22
Procurement Process for Goods, Services & Works

Contract Forms

 FOR GOODS: Standard forms OK but attention should be given to the

conditions of payment (avoid Letter of Credit & special commitment, direct
payment if possible, advance payment against bank or insurance
guarantee*)

 FOR SERVICES: depends on scope of services & duration of these

services

 FOR WORKS: Standard form but specific model for community

intervention

* Specific criteria are being developed for use of insurance guarantees, which are
acceptable only in specific circumstances including wording, whether World Bank
permits, regulatory framework, and depend on country context

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Procurement Process for Goods, Services & Works

Step 4 Prior Review and Approval

Each request of No Objection (NO) should be numbered in a continuous manner
with the name of project, country code and date, for example:
NO 08/RWA/PAPSTA/28022011 = 8th request of NO from PAPSTA project in
Rwanda dated 28th February 2011

o Procurement process approved in AWPB & in line with Procurement plan

o Open or limited tender or prequalification documentation
o Advert of publication & list of newspapers, magazines, etc.
o Letter of invitation
o List of pre selected bidders with justifications
o Instructions to bidders, rules of evaluation, conditions of payment
o TS or TORs or BoQ adequacy
o Contract form
o General & special conditions of contract
o Bid security & other bonds
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Procurement Process for Goods, Services & Works

Step 5 Open Tender Publication

Step 6 Opening Session of Bids

Recommended: a box for the deposit of bids

Step 7 Evaluation of Bids/ Request for Proposal

Crucial Steps
o Composition of the evaluation committee (procurement, financial, technical)
o The report should be structured as follows: Background, reference to NO,
publication, list of bidding documents purchased or sent, bids or proposals
received, minutes of opening session, technical & evaluation steps with
recommendation
o The evaluation process for goods should be conducted as follows:
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Procurement Process for Goods, Services & Works

First Step
o Before proceeding to the detailed evaluation, the evaluators appointed by
Project have to declare the bids received as acceptable & responsive.
o Acceptability: The bids are acceptable if:
1. submitted before the deadline
2. from a duly solicited supplier (in case of Selective bidding)
3. written in English (or in the requested language)
4. sealed in an envelope in conformity with Instructions to Bidders
o Responsiveness: The bids are responsive if:
1. they include a bid security (if requested)
2. the quoted prices are fixed not subject to variation if so stipulated in the
Bidding Docs; (v) the quoted prices are valid for the period requested
3. they are duly signed and initialed
4. the prices quoted are for one or several complete lot(s)

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Procurement Process for Goods, Services & Works

Second Step – Preliminary operations:

The Evaluators will proceed to:

o conversion to a single currency of all bids quoted in foreign currency by

using official selling rate of exchange of recipient country on closing date
of bids

o multiplication of unit price by quantity to verify total price quoted by item &
grand total for all items. In case of discrepancy between unit price & total,
unit price shall prevail

o verification of actual quantities of goods proposed & possible modification

as above in case of obvious arithmetical errors

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 Procurement Process for Goods, Services & Works

Third Step – Specific & detailed technical & financial evaluation:

The Annex attached to tendering & contracting procedures should include

some specific, detailed evaluation (technical & financial) of goods

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Procurement Process for Goods, Services & Works

EVALUATION OF RFP FOR SERVICES

A two-stage procedure is adopted in evaluating proposals. The technical

evaluation shall be carried out first, followed by financial evaluation

Technical Proposal

o The evaluation committee appointed by Project shall carry out evaluation,

applying evaluation criteria & point system specified in Data Sheet. Each
responsive proposal is attributed a technical score

o Proposals by other firms (scoring below quality threshold) shall be rejected

& financial proposals returned unopened

o Request for IFAD’s No-Objection for Technical Evaluation Report

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 Procurement Process for Goods, Services & Works

Financial Proposal
o Public Opening of Financial Proposals, disclosure of respective Technical Scores
o The evaluation committee, after determining whether the financial proposals are
complete and without arithmetic errors, shall convert prices in various currencies to
common currency specified in the Data Sheet
o The official selling rates used shall be provided by indicated source
o The financial proposals shall be ranked with lowest proposal ranked first
o The maximum of points is allocated to lowest price proposal
o All other financial proposals will receive points inversely proportional to those of
lowest price: e.g. [total financial component points] x [US$ lowest]/[US$ other] =
points for other financial proposal
o Negotiation: Prior to expiration of the validity of proposal, the Client shall notify the
Consultant who submitted the No. 1 ranking proposal in writing & invite them to
negotiate scope of contract, duration, reimbursables, etc.

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 Procurement Process for Goods, Services & Works

Step 8 Evaluation Review & Contract Approval

IFAD does not require a specific format of the evaluation report,

but the report should include as a minimum:

a) a listing of all applicants

b) their ratings keyed to specific criteria & items of information
requested
c) the list of rejected applicants with a detailed justification for
rejection
d) the resulting proposed list of prequalified applicants

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Procurement Process for Goods, Services & Works

There is no standard format for the bid evaluation report, but the report
should to the extent possible cover & reflect the logical sequence of a
standard bid evaluation process in the following manner:

• receipt & opening of bids (including minutes of the public bid opening)
• examination of bids
• substantially non-responsive bids
• correction of arithmetic errors & currency conversion
• adjustment for non-material deviations
• bids subject to detailed evaluation
• evaluation & comparison of bids
• lowest evaluated responsive bid
• post qualification
• award recommendation
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Procurement Process for Goods, Services & Works

Step 9 Contract Notification

Step 10 Contract Execution & Management

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 Procurement in Project Completion Process

 To ensure that all goods are delivered/ works completed/ services rendered
by project completion date

• Closely review & monitor the final procurement plan & progress
reports during last year of Project

• Take measures to facilitate completion of physical execution of

contracts

• Cancel contracts that cannot be executed within completion date

 Ensure that only contracts executed by project completion date are paid

 Ensure that procurement files are complete & obtain missing documents
from Project

 Report on lessons learned & make recommendations for future projects

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 Key Tools for Successful Procurement
 A complete financial & administrative procedures manual
(Implementation/ Operations Manual)
 A well-prepared start-up workshop with technical session
 The technical session should include discussions about importance of
quality submissions, frequent causes of delays, timing issues
 A ‘procurement plan’ summarising procurement methods, applicable
rules & prior review requirements as per Financing agreement
 Assessment of procurement capacity at national/ project level
 Training of relevant PMU & national partners
 Procurement expertise at national/ project level (complemented by
on-going capacity building)
 Procurement expertise at IFAD level (procurement specialist to
assist CPM)
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 How to avoid delays in procurement
 Lack of procurement plan or inadequate/incomplete procurement plan
 Poorly designed and/or unrealistic AWPB
 Imprecise and ambiguous terms or documents for bid evaluation method & selection
criteria
 Absence of confidentiality at various stages of bid evaluation process &/or selection
of winning bid
 Failure to justify rejection of bids or non-selection of a competitive bid
 Political interference in the procurement process
 Corruption, fraud, conflicts of interest & mis-procurement
 Poor qualification of evaluation committee members
 Lack of procurement capacity at borrower &/or project level
 Poor understanding of IFAD procedures at borrower &/or project level
 Confusion between national procedures & IFAD guidelines/ loan agreement
procedures
 Cumbersome procedures & bureaucracy for approval of procurement documents at
borrower level
 Long delays in issuance of no-objections by IFAD
 Long response time by IFAD to queries from PMU

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Thank you