April 2012

Project Implementation: Procurement & Contract Management

Project Implementation: Procurement & Contract Management

We would like to acknowledge the contribution of the Programme Management Department in the preparation of this presentation that will introduce some concepts and guiding principles for Procurement & Contract Management

For more information on the topic please refer to the supervision training material of February 2012

Project Implementation: Procurement Learning Objectives

What are IFADs role and responsibility in procurement for projects? What are the tasks involved in procurement supervision?

How is procurement supervision conducted? How are contracts managed?

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Project Implementation: Procurement 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 and impacts not achieved delays in project implementation higher cost of implementation

Procurement is a sensitive activity:

can be conducive to corruption and fraud

complexity of certain procurement actions combined use of national & IFAD regulations / guidelines

Project Implementation: Procurement Procurement Methods

Different methods (ranging from International Competitive Bidding to Direct Contracting) are used for the different categories of procurement depending on nature, amount and other criteria guiding principle being economy and efficiency

Project Implementation: Procurement Tendering Process

Formation of Bid Evaluation Committee; N-O by IFAD

Key ITB Invitation to Bid RFP Request for Proposal RFQ Request for Quotation
Bid Evaluation and draft contract IFAD Prior Review and No-Objection (if required)

Prepare Specifications and tender documents (Advertisement/ ITBs/ RFPs/ RFQs as applicable) and NoObjection (if required)

Contract Award to best evaluated bid

Project Implementation: Procurement Common Procurement Methods

International Competitive Bidding (ICB): for high value requirements (1) National Competitive Bidding (NCB): for public procurement in Borrowers country (2)

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)

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

Same
Same Same

Project Implementation: Procurement Common Procurement Methods

International Shopping (3):
short-list at least three reputable suppliers in at least two member countries of IFAD

Local Shopping (4):

prepare specifications and request for quotations short-list at least three reputable suppliers

issue ITB to the short-listed suppliers

issue request for quotations to the short-listed suppliers Same

receive bids in original form (not faxed)

bid evaluation based on lowest cost for compliant offers sign contract

Same

Same

Project Implementation: Procurement Common Procurement Methods

Direct Contracting (5):
Extension of/ addition to an existing contract Standardisation of goods with existing project assets Note: Competitive process is not required

Project Implementation: Procurement Goods & Works vs. Consulting Services

Difference Between Procuring Goods and Works Consulting Services . . .
GOODS, WORKS AND TECHNICAL SERVICES
Product based Open competition

and Selecting

CONSULTING SERVICES

Knowledge based Selective competition

Public bid opening

Price is a major factor Detailed specification

Non-public bid opening of technical offers Public opening of financial proposals

Quality is a major factor Terms of Reference (general work program)

Single-stage procedure
Negotiations rarely

Two-stage procedure
Negotiations usual

Project Implementation: Procurement Regulatory Framework

Must adhere to regulatory framework . . . Procurement rules and procedures applicable to a particular project come from different sources: national procurement rules and regulations IFAD Procurement Guidelines project appraisal report loan agreement

Applicable rules, methods and procedures are specified in the Letter to the Borrower, as well as IFAD procurement review requirements

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Project Implementation: Procurement Role of Borrower/PMU in Procurement

PMU has overall responsibility for Procurement

Procurement planning (in line with project objectives and AWPB) Preparation and issuance of bidding documents and invitation to bid Opening and evaluation of offers Negotiation, award and signature of contract Monitoring of contract execution (technical and financial/administrative) Delivery of goods/works/services Payment
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Project Implementation: Procurement Importance of Procurement IFAD Guidelines

IFADs Fiduciary responsibility:

Proper use of loan funds: IFAD must ensure loan proceeds are used only for intended purpose: while FM responsibilities lie with CFS-Finance Officers, procurement related activities are in PMD, specifically CPM and Support Staff Economy and efficiency requirements in project implementation in general and procurement in particular: IFAD must ensure contract awards result from a competitive process IFAD must ensure equity, integrity, transparency and good governance in procurement process Concept of no objection

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Project Implementation: Procurement Role of IFAD in Procurement

CPM must ensure: coherence of procurement actions with project objectives, AWPB and procurement plan, and timing within project implementation period

funds availability: cost of procurement must not exceed funds allocated in loan agreement and annual budget
transparency and equity: procurement must be conducted in compliance with applicable rules and procedures best value for money: procurement must be the result of a competitive process

- IFAD staff must maintain neutrality and impartiality - Flexibility is a must but know rules and regulations

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Project Implementation: Procurement Key Tools for Successful Procurement (1)

A complete financial and administrative procedures manual (Implementation/ Operations Manual) A well-prepared start-up workshop with a technical session The technical session should include discussions about the importance of quality submissions, frequent causes of delays, timing issues A procurement plan summarizing procurement methods, applicable rules and prior review requirements as provided in the financing agreement

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Project Implementation: Procurement Key Tools for Successful Procurement (2)

Assessment of procurement capacity at the national/project level Training of relevant PMU and national partners in all aspects of procurement Procurement expertise at national/project level (complemented by on-going capacity building) Procurement expertise at IFAD level (procurement specialist to assist CPM in supervision)

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Project Implementation: Procurement Different Levels of Procurement

Under the responsibility of the CPM

(assisted by a procurement expert)

Prior review procedures: HQ supervision reviews:

Procurement plans Pre-qualification of bidders Bidding documents Procurement progress reports No objection as required

Ex-post review procedures: - As part of the review of WAs - Field supervision (during supervision missions)
Review of procurement progress and processes (technical, financial/administrative) Identification of issues and constraints Coaching of national and/or PMU staff Issuance of recommendations for improvement

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Project Implementation: Procurement Prior Review Procedures (1) (refer to workflow 1 & checklists)
I. Review of pre-qualification of bidders (for large/complex works or expected significant time/cost savings => need advanced procurement skills) Prior to issuance of invitations to pre-qualify, IFAD reviews: draft advertisement and invitation to pre-qualify draft pre-qualification documents, including pre-qualification questionnaire and evaluation criteria and methodology After borrowers evaluation of bidders submissions, IFAD reviews: draft evaluation report list of pre-qualified bidders and statement of their qualifications reasons for excluding any applicant from pre-qualification

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Project Implementation: Procurement Prior Review Procedures (2) II. Review of procurement of goods and works
Prior to issuance of invitations to bid, IFAD reviews: conformity of procurement with applicable rules/procedures, approved AWPB/procurement plan and funds availability draft bidding documents, including invitation to bid, instructions to bidders, technical specifications, evaluation criteria, contractual conditions proposed composition of the bid evaluation committee (for comments) After borrowers evaluation of bidders submissions, IFAD reviews: minutes of public bid opening bid evaluation report, including evaluation and comparison of bids and award recommendation evidence of individual evaluations by each committee member draft contract

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Project Implementation: Procurement Prior Review Procedures (3)

III. Review of procurement of consulting services
Prior to issuance of request for proposal (RFP), IFAD reviews: conformity of procurement with applicable rules/procedures, approved AWPB/procurement plan and funds availability draft RFP, including instructions to consultants, terms of reference, selection method and evaluation criteria, shortlist of consultants, cost estimate, contractual conditions

After borrowers evaluation of technical proposals, IFAD reviews: technical evaluation report, including description of the process, summary of scores and award recommendation
technical scores/ranking given to each consultant on each evaluation criterion scores given by each evaluation committee member

copy of proposals, if requested by IFAD

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Project Implementation: Procurement Prior Review Procedures (4)

III. Review of procurement of consulting services using the following methods:

Quality and cost-based selection Selection under a fixed budget Least-cost selection

After borrowers evaluation of financial proposals, IFAD reviews: minutes of public bid opening account of adjustments made to prices of the proposals and determination of the evaluated price final evaluation report and award recommendation
(The above review step is not applicable for quality-based selection, selection based on consultants qualifications, single source selection or individual consultant selection)

In all cases, IFAD reviews and provides No-Objection to the negotiated draft contract

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Project Implementation: Procurement Example of Weights for Consultant Evaluation Criterion

EVALUATION CRITERION: POINTS

Consultants / firms specific experience Methodology Key personnel (general qualifications adequacy for the assignment) Transfer of knowledge Participation by nationals
TOTAL

5 - 10 20 - 50 30 - 60 0 - 10 0 - 10
100

Could be divided into sub-criteria, but should be kept to the essential For training - high points on key Personnel Points may be adjusted for specific circumstances

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Project Implementation: Procurement Ex-Post Review Procedures (1)

At HQ
Post-award review of procurement actions as part of the withdrawal applications approval process
Documents submitted by PMU must include bidding documents, evaluation reports, award recommendations, signed contracts and updated contract record IFAD reviews conformity of procurement with applicable rules/procedures, project objectives, approved AWPB/procurement plan and funds availability

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Project Implementation: Procurement Ex-Post Review Procedures (2)

During IFAD supervision/Implementation support missions Post-award review of procurement actions based on selection of a sample of transactions
PMU makes available to the supervision review team all procurement and payments files, updated contract record and individual contract monitoring forms
Focus of supervision mission review is conformity of procurement with applicable rules/procedures, project objectives, approved AWPB/procurement plan, and funds availability

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Project Implementation: Procurement Ex-Post Review Procedures (3) The IFAD supervision/Implementation mission team also:
assesses the physical and financial progress of procurement actions and the quality of final products (through site visits for works, review of consultants reports, review of the contract monitoring forms, etc.)
identifies procurement issues and constraints briefs/coaches borrower and/or PMU staff on procurement issues issues recommendations for improvement (e.g. training of staff, fielding of implementation support missions, streamlining of workflows, )

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Project Implementation: Procurement How to avoid delays in procurement (1)

Lack of procurement plan or inadequate/incomplete procurement plan Poorly designed and/or unrealistic AWPB Imprecise and ambiguous terms or documents for the bid evaluation method and selection criteria Absence of confidentiality at various stages of the bid evaluation process and/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 and miss-procurement

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Project Implementation: Procurement How to avoid delays in procurement (2)

Poor qualification of evaluation committee members Lack of procurement capacity at borrower and/or project level Poor understanding of IFAD procedures at borrower and/or project level Confusion between national procedures and IFAD guidelines/loan agreement procedures Cumbersome procedures and 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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Project Implementation: Procurement Monitoring of Procurement at HQ

Several source documents for monitoring procurement . . .

AWPB and updated procurement plan Results of prior reviews and ex-post reviews at HQ

Supervision mission reports

Progress reports
Based on monitoring results, follow-up on issues and problems identified

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Project Implementation: Procurement Procurement in Project Completion Process

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

Closely review and monitor the final procurement plan and progress reports during the last year of the project Take measures to facilitate completion of physical execution of contracts Cancel contracts that cannot be executed within the completion date

Ensure that only contracts executed by project completion date are paid
Ensure that procurement files are complete and obtain missing documents from project Report on lessons learned and make recommendations for future projects

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Project implementation: Contract Management Introduction

Contract contents all pertinent deliverables, timing, deadlines, results-oriented reporting & expected outcomes, with measurable indicators

Contract management monitoring & supervision is crucial Contract execution procurement is complete only when contracted product of satisfactory

quality is delivered at appointed time

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Project implementation: Contract Management Five Stages of Contract Management Monitoring & Control of performance Change Management Dispute Resolution Financial Management & Payment

Contract Administration

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Project implementation: Contract Management Monitoring & Control of Contract Performance (1)

Establishment of Contracts Register Establishment of Contract Monitoring Register Establishment of Individual Contract Monitoring Sheet Establishment of Contract Monitoring Form

Key tip Contract management Guidelines- Service provider

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Project implementation: Contract Management Monitoring & Control of Contract Performance

Key Indicators
Consulting Services
Timely delivery of key outputs Responsiveness to reasonable requests The quality services of services provided

Goods

The timeliness of delivery Quantity delivered Compliance with specifications

Works

Timeliness of each stage of the works Compliance with the bill of works The quality of the works

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Project implementation: Contract Management Monitoring & Control of Contract Performance

Tips

indicate actual delivery date of goods/ works/ services (or agreed milestones) written reminders to contractors/ consultants where there is a default (including penalties) file response from contractors/ consultants record agreed changes in delivery dates & penalties exacted Inspection
As necessary, especially for works, it is necessary to ensure that qualified independent oversight is provided to ensure that works are constructed according to industry standards

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Project implementation: Contract Management Acceptance

Service

written confirmation that the required services have been delivered on time & of an acceptable quality completion of the Receipt and Inspection Report (RIR). It may be necessary for the supply of goods to ensure that suitably qualified staff or consultants are involved in the RIR

Goods

engineers report that timely construction of acceptable standard has been completed

Works

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Project implementation: Contract Management Change Management

Includes avoiding unnecessary changes as well as incorporating necessary changes into contract

It is important is ensure necessary prior approval is

obtained including a no objection from IFAD if the value of cumulative change exceeds 15% of contract value
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Project implementation: Contract Management Remedies

seek legal advice determine if liquidated damages should apply in accordance with contract

Termination

negotiation arbitration
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Dispute resolution

Project implementation: Contract Management Financial Management and Payments

Payments need to be made in line with the contract terms (normally

within 30 days of submission of a valid invoice)

It is important to maintain an expected payment schedule as part

milestone of the Contract Monitoring Register to ensure that there is sufficient liquidity in the Special Designated Account or to promptly process request for direct payment

Delayed payments negatively affect the cost of future contracts where

delayed payments are a regular feature, suppliers & contractors build in margins to cover anticipated delays in payment or refuse to tender

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Project implementation: Contract Management Performance Securities

Where required these should be provided by the supplier/contractor in a timely manner. These should be returned within 30 days of final acceptance (contract completion as per contract terms), including any warranty or maintenance period
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Project implementation: Contract Management Contract Completion

Procurement Staff with necessary technical support should verify:

All products/ services have been provided Documentation in the contract file shows receipt & formal acceptance of all contract terms There are no claims or investigations pending Any property provided by the Project is returned & discrepancies resolved All actions regarding contract amendments have been attended to All sub-contracting issues have been attended to Warranty matters are resolved and defect period elapsed

Any necessary audit has been satisfactorily finalised

The final invoice has been submitted & paid
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