Part I:

Section 1.
1.1.

Public Procurement
Policy and Principle of the Procurement.

General a). Procurement functions include all actions necessary for acquisition, purchase or lease of goods, equipments, works and/or services. b). Policy on Procurement of the Government of Lao PDR. The Government of Lao PDR has issued the Decree 03/PM dated 9 January 2004 on government procurement of goods, works, maintenance and services and the Implementing Rules and Regulations of the Decree 063/MOF dated 12 March 2004 on government procurement of goods, works, maintenance and services. The purpose is to: 1. Ensure the transparency of public procurement through procedures set out in the Decree on government procurement of goods, works, maintenance and services and these Implementing Rules and Regulations; 2. Achieve regularity and uniformity of procurement procedures of government entities and state enterprises; 3. Achieve efficiency and economy in the government procurement of goods, works, maintenance and services; 4. Guarantee all economic sectors fair and equal treatment in competitive bidding for the supply of goods, works and services to government entities and state enterprises in accordance with the methods specified in the Decree on government procurement of goods, works, maintenance and services and the Implementing Rules and Regulations. c). The Government of Lao PDR has given attention on the management of the procurement to ensure the correct procedure and used the Public Fund in subject to efficiency and economic. Principle of the Procurement. The Fundamental principal hallmarks of proficient public procurement are: a) b) c) d) e) Economy; Efficiency; Fairness; Transparency; and Accountability and Ethical Standards.

1.2.

a). Economy: Procurement is a purchasing activity whose purpose is to give the procuring entity or project owner best value for money. For complex purchases, value may imply more than just price, for example, since quality issues also need to be addressed. Moreover, lowest initial price may not equate to lowest cost over the operating life of the item procured. But the basic point is the same: the ultimate purpose of sound procurement is to obtain maximum value for money. b). Efficiency: The best public procurement is simple and swift, producing positive results without protracted delays. In addition, efficiency implies practicality,

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especially in terms of compatibility with the administrative resources and professional capabilities of the procuring entity or project owner and its procurement personnel. c). Fairness: Good procurement is impartial, consistent, and therefore reliable. It offers all interested contractors, suppliers and consultants a level playing field on which to compete and thereby, directly expands the procuring entitys or project owners options and opportunities. d). Transparency: Good procurement establishes and then maintains rules and procedures that are accessible and unambiguous. It is not only fair, but should be seen to be fair. e). Accountability and Ethical Standards: Good procurement holds its practitioners responsible for enforcing and obeying the rules. It makes them subject to challenge and to sanction, if appropriate, for neglecting or bending those rules. Accountability is at once a key inducement to individual and institutional probity, a key deterrent to collusion and corruption, and a key prerequisite for procurement credibility. A sound procurement system is one that combines all the above elements. The desired impact is to inspire the confidence and willingness-to-compete of well-qualified contractors, suppliers and consultants. This directly and concretely benefits the procuring entity or project owner and its constituents, responsive contractors and suppliers or consultants, and the donor agency providing the project finance. Conversely, a procurement system that takes the above elements stimulates hesitation to compete, submission of inflated bids containing risk premium, or submission of deflated bids followed by delayed or defective performance. Other direct results include collusion in bribery by frustrated or unscrupulous contractors, suppliers and consultants and procuring entity or project owner, bad value for those entities and their constituents, and betrayal and abuse of the public trust for personal gain. In sum, proficient public procurement is not difficult to describe in principle or to distinguish from its antithesis in practice. But it does require varied professional and technical know-how to establish, as well as discipline and determination to administer. 1.3. Public Procurement

Public procurement is the process by the government buys the inputs for vital public-sector investments. Those investments, both in physical infrastructure and in strengthened institutional and human capacities, lay foundations for national development. In procurement terms, those inputs are generally grouped into three categories: civil works - for example, bridges and buildings, harbors and highways; goods - typically equipment, materiel and supplies, commodities, textbooks, medical supplies; and services - expert advice and training, conventionally labeled Technical Assistance, as well as such things as building maintenance, computer programming, etc.

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The quality, timeliness, local appropriateness and affordability of those procured inputs can largely determine whether the public investments will succeed or fail. So the beneficial impact and contribution of the input, particularly in the case of technical assistance services, can exceed their direct costs, by several orders of magnitude. Yet procurement costs can be substantial, consuming scarce resources of tightly constrained government budgets. Often the required funding must be borrowed. Moreover, the process also consumes scarce skilled public-sector human resources. It takes time, not merely for procurement planning and contracting but also for contract supervision and execution. And much of this process is highly visible, as well as controversial, exposing ministers and civil servants to scrutiny and second-guessing for procurement choices they made, deferred or discarded. 1.4. Fraud and Corruption

1.4.1. Definitions Ministry of Finance defines, for the purposes of this provision, the terms set forth below as follows: a) corrupt practice means offering, giving, or promising to give, directly or indirectly, to any officer or employee of a procuring entity or other governmental/private authority or individual, a gratuity in any form, an employment, or any other thing or service of value, as an inducement with respect to an act or decision of, or method followed by, a procuring entity or project owner in connection with the procurement proceeding; fraudulent practice means a misrepresentation or omission of facts in order to influence a procurement proceeding or the execution of a contract to the detriment of the procuring entity or project owner; collusive practice means a scheme or arrangement among two or more Bidders, with or without the knowledge of the procuring entity or project owner (prior to or after Bid submission), designed to establish Bid prices at artificial, non-competitive levels and to deprive the procuring entity or project owner of the benefits of free, open and genuine competition; and coercive practice means harming or threatening to harm, directly or indirectly, persons or their property to influence the procurement proceedings, or affect the execution of a contract.

b)

c)

d)

1.4.2. Sanctions The Ministry of Finance requires that the procuring entitys or project owners personnel have an equal obligation not to solicit, ask for and/or use coercive methods to obtain personal benefits in connection with the said proceedings. Ministry of Finance requires that procuring entity or project owner, as well as contractors, suppliers and consultants shall observe the highest standard of ethics during the implementation of procurement proceedings and the execution of contracts under Public funds. a) Should any corrupt, fraudulent, collusive or coercive practice of any kind come to the knowledge of the procuring entity or project owner, it shall, in the first place, allow the Bidder to provide an explanation and shall, take actions only when a satisfactory explanation is not received. Such exclusion and the reasons thereof, shall be recorded in the record of the procurement proceedings and promptly Page 9 of 150

communicated to the Bidder concerned. Any communications between the Bidder and the procuring entity or project owner related to matters of alleged fraud or corruption shall be in writing. If it, at any time, determines that the Bidder has engaged in corrupt, fraudulent, collusive or coercive practices in competing for, or in executing, a contract under Public funds. The procuring entity or project owner may declare such a Bidder ineligible and shall declare to the Ministry of Finance, Procurement Monitoring Office (PrMO). The PrMO may declare such a Bidder ineligible, either indefinitely or for a stated period of time, from participation in future public procurement proceedings. b) If it, at any time, determines that the Bidding Committee, officers or organization, who responsible of the procurement has engaged in corrupt, fraudulent, collusive or coercive practices will be subject to warnings, administrative and disciplinary measures provided under the civil service rules and as provided by law depending on the seriousness of such acts. Any breach of the provisions of Decree 03/PM dated 9 January 2004 and these Implementing Rules and Regulations which constitutes a criminal offense, such as falsification of documents, abuse of authority, negligence in the performance of duties will entail criminal proceedings. In case of firms or individuals colluding in the design and costing of works or in manipulation of the award of contracts for joint or personal interest, thereby causing loss to national or collective property, court proceedings and punishments will be carried out as provided by law. Contracts for the procurement of goods, works and services that are entered into not in full compliance with the bidding procedures described under Part II of these Implementing Rules and Regulations, and contracts entered on the basis of bidding procedures lacking transparency, are considered as null and void. Any bidder offering or promising material or other rewards either directly or indirectly to the Bidding Committee or an individual involved in procurement decision making for the purpose of obtaining a contract through non-transparent bidding and improper bidding procedures may be disqualified by the procuring entity or project owner and court proceedings may be instituted. Inspection, Monitoring and Report on Procurement

c)

d)

e)

f)

1.5.

The procuring entity or project owner and officer responsible for procurement work shall maintain all documents relating to procurement for monitoring and reporting regularly to the Ministry of Finance or annual inspection of the fiscal year. 1.6. Life Cycle of Procurement Procurement life cycle covers 7 main phase as follows: 1. 2. 3. 4. Procurement planning and categorize into groups of procurement; Pre-qualification; Bid preparation; Bid opening;

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5. 6. 7.

Bid evaluation; Award of Contract; Contract Implementation.

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Section 2. Procurement Planning

2.1. General

Procurement planning means the process by which the efforts of all personnel responsible for procurement are coordinated and integrated through a comprehensive plan for fulfilling the Procuring Entities need in a timely manner and at a reasonable cost. 2.2. Annual Procurement Planning

After the approval of the National Assembly on national budget for the fiscal year, the procuring entity or the project owner has received expenditure plan of fiscal year budget. The procuring entity or project owner shall establish procurement plan for goods, works and services for that fiscal year budget in accordance with (Table 1 and 2) to submit for approval from the authorized person. 2.3. Detail Procurement Planning

Based on the approval of annual procurement plan, the officers responsible for procurement shall establish detailed procurement plan for each procurement (Table 3 and 4), summarized as follows: a) Summary the list of goods, works and services to be procured based on annual procurement plan, specifications, quantities required and cost estimated to be approved for procurement; b) Identification of the procurement methods based on cost estimated; c) Establishment of Bidding Committee; d) Preparation of bidding documents; e) Issuance of invitation and advertisement; f) Opening of Bid; g) Evaluation of Bid and proposed for Award of Contract; h) Award of Contract; i) Notification Award of Contract; j) Beginning and completion of negotiations and signing of contract; k) Contract implementation; l) Date, time of contract completion or delivery The procuring entity or project owner shall submit annual procurement plan and monthly detailed procurement plan to the Ministry of Finance, Procurement Monitoring Office (PrMO) to announce on the public procurement website.

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Table 1.
Name of Procuring Entity or Project Owner: Fiscal Year:

Annual Procurement Plan for Goods and Works

Pre-qualification Invitation for Bid Invitation Submission Notification Bid Bid Evaluate Notification Negotiation Date Deadline of Award Invitation Submission Bids and of Award and and Date Deadline Bid Contract Opening and Evaluation Signing Date Opening Report Date 7 8 9 10 11 12 13 14

Estimated Value (Kip)

Procurement Package No.

Description

Tender No.

No.

Method of Procurement

Sign and stamp

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Table 2.
Name of Procuring Entity or Project Owner: Fiscal Year: No. 1 2 3 4 5 6 Description Tender No. Estimated Value Selection Methods Types of Contract Request for Proposals Notification to submit proposals Submission Deadline Evaluate and Select Approval of Shortlist Preparation Request for Proposals (RFP) Preparation of RFP Approval of RFP Invitation of RFP Submission

Annual Procurement Plan for Consultants Services

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9 10

11

12

Deadline and Opening Evaluate Proposals Evaluate and Technical Evaluation Report Approval of Technical Evaluation Opening of Financial Proposal Award of Contract Notification of Award Contract Negotiation Contract Signing

Sign and stamp

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Table 3.
Name of Procuring Entity or Project Owner: Fiscal Year: No. 1 Description Approval for procurement and detailed description Methods of procurement Estimated value Assignment of Bidding Committee No. of package/lot Bid preparation Approval of bidding documents Advertise or invitation for bid Bid submission deadline and bid opening date Evaluate bids and bid evaluation report Date of Contract Award Date of Notification of Award Negotiation and Signing Contract

Detail Procurement Plan for Goods and Works

2 3 4 5 6 7 8 9

10 11 12 13

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14 15

Contract Price Date of Completion/Delivery

Sign and stamp

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Table 4.
Name of Procuring Entity or Project Owner: Fiscal Year:

Procurement Plan for Consultants Services

No. 1 2 3 4 5

Description Proposed for approval Identify selection method Estimated value Type of Contract Assignment of Bidding Committee Request for Proposals Notification to submit proposals Submission Deadline Evaluate and Select into shortlist Approval of shortlist Preparation Request for Proposals (RFP) Preparation of

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8 9

10

11 12 13 14 15

RFP Approval of RFP Invitation of RFP Submission Deadline and Opening Date Evaluate Proposals Evaluate and Technical Evaluation Report Approval of Technical Evaluation Opening of Financial Proposal Evaluate Financial Proposal Award of Contract Notification of Award Contract Negotiation Contract Signing Contract Price Completion Period

Sign and stamp

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Part II.
Section 1.
1.1.

Procurement of Goods and Works

Method of Procurement and Threshold Values

Method of Procurement and Threshold Values specified in the IRR as follows:

IRR references: PART II: Procurement Procedures Article 4: Public Bidding Article 5: Limited Bidding Article 6: Price Comparison Price comparison comprise of national or international shopping procedures. (1) National Shopping (2) International Shopping Article 7: Direct Contracting Article 8: Conditions for Use of Procedures Article 9: International Competitive Bidding Domestic Preference: Article 10: Pre-qualification of the Bidders Article 11: Two-Stage Bidding Article 12: Procurement Financed by Foreign Grant or Loan/Credit Article 13: Threshold Values 1.2. Introduction

The method of procurement that the procuring entity or project owner chooses to use for a particular project depends on the nature and size of a project and its procurement element and the urgency with which the goods or services to be procured are required. Commonly used methods of procurement include for International Competitive Bidding (ICB), National Competitive Bidding (NCB). Procurement procedures outlined in the IRR. Experience has shown that in many cases International Competitive Bidding (ICB) open to all eligible and qualified bidders, with an optional element of domestic preference, achieves the principal objectives of public procurement most effectively. The MOF/PrMO thus considers ICB Public Bidding the preferred method for procurement. However, in circumstances in which it can be demonstrated that ICB is not appropriate, the procuring entity or project owner may with the necessary approvals use the other methods of procurement. In such cases the MOF/PrMO requires the procuring entity or project owner to ensure that the method used is the most economic and efficient method. The procuring entity or project owner also has to show that by using such a method it will get the best value for money. The method other than ICB, must also be open and fair to all the interested bidders to the extent possible. 1.3. International Competitive Bidding (ICB)

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The purpose of International Competitive Bidding (ICB) is to give all eligible and qualified prospective bidders adequate and timely notification of a procuring entitys or project owners requirements and to give them equal access and a fair opportunity to compete for contracts for required goods and services. Bidding opportunities must therefore be advertised widely and all eligible bidders given reasonable possibilities to participate. ICB requires formal bidding documents which are fair, non-restrictive, clear and comprehensive. The bidding documents and technical specifications relating to the project should clearly describe the criteria and methodology for evaluation of bids and selection of the successful bidder. The MOF/PrMO requires the procuring entity or project owner to use MOF/PrMO Standard Bidding Documents (SBD) whenever these have been prepared for procurement of particular types of goods and services. When an SBD does not exist, the procuring entity or project owner may use other bidding documents provided that they contain internationally recognized standard conditions of contract and contract forms acceptable to the MOF/PrMO. As part of the bidding documents, the procuring entity or project owner under ICB also provides technical specifications and wherever available international standards and specifications are used. 1.4. National Competitive Bidding (NCB)

National Competitive Bidding (NCB) is acceptable when: the nature or scope of the goods or works being procured; when the advantages of ICB are clearly outweighed by the administrative or financial burden involved; contract values are small; works are geographically scattered; or the goods or works are available locally at prices below the international market. An acceptable NCB system generally incorporates the basic principles of ICB including inter alia, timely notification through advertising in local newspapers, adequate competition, clarity of procedures, fair treatment for all bidders and award to the lowest evaluated bidder in accordance with the criteria set out in the bidding documents. Eligible foreign firms are also allowed to participate in procurement under NCB procedures. The essential differences include the use of national advertising and local language in bidding documents. The currency of the bid and payment are also in the local currency. 1.5. Procurement Procedures
This is the basic method of public procurement used unless there are circumstances that justify the use of other specific procedures. Under this procedure, individuals, companies, enterprises, joint venture or international enterprises which are legally constituted and are capable of supplying goods or works sought shall be given an equal opportunity of submitting bids in accordance with Article 17 of the Implementing Rules and Regulations. Public bidding involves the detailed procedures outlined in Article 4. This procedure is applied in case of low contract value as specified in Article 13 or where there are a limited number of suppliers and contractors. Procuring entities and project owners shall invite bids from a list of potential suppliers or contractors broad enough to assure

Article 4: Public Bidding

Article 5: Limited Bidding

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Article 6: Price Comparison (1) National Shopping

(2) International Shopping

competitive prices and with sufficient capacity in accordance with provisions of Article 14. Limited bidding procedure follows the procedure outlined in Article 4(a) to (c) and (e) to (n) except (d), that is, in all respects other than advertisement Public Bidding procedures shall apply. The tender documents shall be sent to the bidders with the notification. Price comparison comprise of national or international shopping procedures. Under this procedure the procuring entity or project owner compares the prices obtained from at least 3 qualified domestic companies or individuals and awards the contract to one of those suppliers. National shopping procedure comprises the following steps: (a) Quotations are invited from at least 3 domestic suppliers or contractors indicating the required quantities, specifications and contract conditions; and (b) The offers are evaluated, compared and the contract is awarded on the basis of the lowest evaluated responsive bid. Under this procedure the procuring entity or project owner compares the prices obtained from at least 3 qualified companies or individuals from at least 2 countries and awards the contract to the lowest evaluated responsive bid. International shopping includes the following steps: (a) Quotations are invited from at least 3 qualified suppliers or contractors in at least 2 countries. The required quantities, specifications and contract terms and conditions are included with the invitation; (b) Quotations submitted by other suppliers or contractors who were not invited may also be considered; and (c) The offers will be evaluated and compared and the contract will be awarded on the basis of Article 29. Subject to the requirements of Article 8 (4) IRR, this procedure allows the procuring entity or project owner to negotiate the terms and conditions of procurement directly with one supplier or contractor. Direct contracting is carried out as follows: (a) For goods, works and services below the specified thresholds in Article 13, the procuring entity or project owner may purchase directly with one supplier or contractor. The invitation will include the required quantities, technical specifications, contract terms and conditions; (b) The quotations received will be reviewed for conformity with the specifications and contract terms and conditions contained in the invitation; (c) The offers complying with the above will be reviewed by the procuring entity or project owner to determine whether the price is fair and competitive. If the prices offered exceed the allocated budget, the procuring entity or project owner may negotiate a price reduction. (d) The contract will be awarded on the basis of conditions provided under Article 29.

Article 7: Direct Contracting

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Article 10: Prequalification of the Bidders

In the case of large-scale, technically complex and high value projects, the suitability of bidders shall be assessed by the Tender Committee. The Prequalification process shall be carried out as a potential public bidding procedure with the pre-qualification documents indication the criteria and conditions to all companies who are interested in bidding. Such companies are required to submit documents for pre-qualification to the Tender Committee. Companies meeting the criterion and conditions set out in the pre-qualification documents will then be invited to submit bids. In two-stage bidding, suppliers or contractors submit initial offers in first stage without specifying the price. The procuring entity or project owner may request suppliers or contractors to define the parameters of the subject matter of the procurement. The second stage is a limited bidding for selected bidders and may be preceded by negotiations between the procuring entity or project owner and potential bidders. Two-stage bidding may be used when one of the following circumstances occurs: it is not possible to determine in advance the specific technical characteristics and quality features of the deliveries, services or construction being procured; negotiations with suppliers or contractors are necessary because of the special nature of the deliveries, services or construction; the subject matter of the procurement is research, experiment, preparation of a scientific opinion or performance of other specialized services; the procurement concerns complex construction design and works; The procuring entity or project owner may negotiate with each supplier or contractor the content of the submitted initial offer, keeping confidential the content of conducted negotiations. For the final offer, the procuring entity or project owner may modify the technical and quality requirements set forth in the initial specifications, as well as modify the criteria for evaluating the offers. In the invitation to submit final offers, the procuring entity or project owner shall inform suppliers or contractors about any modifications made in the initial specifications. For the second stage of the bidding, the procuring entity or project owner selects suppliers or contractors whose initial offer satisfies the requirements of initial specification. The qualified suppliers or contractors are requested to submit bids. The place, time period and deadline for submission of final bids shall be specified in the invitation. Suppliers or contractors shall provide bid security when entering the second stage of bidding.

Article 11: TwoStage Bidding Process

Article 12: Procurement Financed by Foreign Grant or Loan/Credit

In the case of foreign grants, loans or credits, when a treaty or other form of an agreement is entered into by the Lao PDR with the concerned donor, where such an agreement does not require adherence to separate procurement procedures, these Implementing Rules and Regulations will apply. Otherwise, the procurement procedure of the donor take precedence over any conflicting provision in Decree No. 03/PM dated 9 January 2004 or these Implementing Rules and Regulations.

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1.6.

Methods of Procurement and Thresholds

1.6.1. Direct Purchase/Direct Contracting a) Direct Purchase or Direct Contracting (amount not more than or equivalent 3.000.000 Kip). The procuring entity or project owner may conduct of the Direct Purchase at a shop with the receipt invoiced. The purchasing price should be market price. This method is used for day to day expenses only. b) Direct Purchase or Direct Contracting (amount more than 3.000.000 Kip). The procuring entity or project owner shall be approved on a case by case basis and consistent with the following cases: a) For reasons connected with the protection of industrial or intellectual property rights and in the absence of an agent, the contract must be awarded to a single supplier or contractor; b) Goods are required to replace parts of an existing equipment or repair such equipment; c) In case additional works of similar nature are required to existing works under an ongoing contract, previously procured, and where it is unlikely to obtain lower prices through a further procurement procedure. The value of the additional works shall not exceed 20% of the original contracts value; d) For emergency operations such as natural disasters, epidemics or for unforeseeable events or due to delay not caused by procuring entity or project owner, the time limitation does not allow to follow the public or limited bidding procedure; e) The project and site is remote/isolated area, has local features or poor access. Direct Purchase which complies with the above conditions shall be approved on a case by case basis as follows:
Threshold Ministry or Value equivalent estimated agency (Kip) Amount more Chief of than 3.000.000 Cabinet (if the to 50.000.000 budget is managed by the Ministry) or relevant Head of the Department (if the budget is managed by the Department) or authorized person to approve and appoint ad hoc Bidding Committee which Provinces Embassy or Governmental office abroad Ambassador or Chief of Office or authorized person to approve and appoint ad hoc Bidding Committee, which composed of 3-5 members. Loan or Grant Project State-Owned Enterprises

Head of Provincial Administrative Office (if the budget is managed by the province) or Head of Division (if the budget is managed by Division) or authorized person to approve and appoint ad hoc Bidding Committee; Head of District (if the budget is managed by District) or Chief of District Office (if the

Based on agreement and contract of Loan/Grant and shall be approved by the donor.

Managing Director and appoint ad hoc Committee, which composed of 35 members.

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composed of budget is managed 3-5 members. by District Office) or authorized person to approve and appoint ad hoc Bidding Committee which composed of 3-5 members. Amount more Minister or Head of Provincial than authorized Administrative 50.000.000 to person to Office or 500.000.000 approve and authorized person appoint ad to approve and hoc Bidding appoint ad hoc Committee, Bidding which Committee, which composed of: composed of 3-5 3-5 members. members.

Ambassador or Chief of Office or authorized person to approve and appoint ad hoc Bidding Committee, which composed of 3-5 members.

Based on agreement and contract of Loan/Grant and shall be approved by the donor.

Managing Director and authorized person to approve and appoint ad hoc Committee.

Amount more than 500.000.000 to 50.000.000.00 0

Minister or authorized person to approve and appoint ad hoc Bidding Committee.

Provincial Governor or authorized person to approve and appoint ad hoc Bidding Committee.

Amount more than 50.000.000.00 0

Minister or authorized person to approve and appoint ad hoc Bidding Committee.

Coordinate with the relevant ministry, by which the Minister of the Ministry concerned or authorized person to approve and appoint ad hoc Bidding Committee.

Minister of Foreign Affairs or Minister which has representative office to approve and appoint ad hoc Bidding Committee. Minister of Foreign Affairs or Minister which has representative office or authorized person to approve and appoint ad hoc Bidding Committee.

Based on agreement and contract of Loan/Grant and shall be approved by the donor.

Board of Directors to approve and appoint ad hoc Bidding Committee.

Based on agreement and contract of Loan/Grant and shall be approved by the donor.

Board of Directors to approve and appoint ad hoc Bidding Committee.

After the approval of the authorized person specified above, the procuring entity or project owner shall assign the ad hoc Bidding Committee to implement direct purchase with one qualified contractor or supplier, the invitation will include the quantities or work required, specifications, contract terms and conditions. The quotations received will be reviewed for conformity with the specifications and contract terms and conditions contained in the

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invitation. If the offers complying with the above will be reviewed by the ad hoc Bidding Committee to determine whether the price is fair and competitive. If the prices offered exceed the allocated budget, the ad hoc Bidding Committee may negotiate a price reduction. 1.6.2. Request for Quotation (RFQ) Request for Quotation is a method generally used for the procurement of goods, works with low value, for the convenience of implementation the procuring entity or project owner may be used as follows: 1.6.2.1. a). Request for Quotation (National Shopping) Request for Quotation by simple way Amount more than 3.000.000 to not more than 50.000.000Kip. The procuring entity or project owner shall invite from at least 3 potential bidders to supply goods, works, maintenance and/or services. RFQ (by simple way) consists of: Letter of Invitation, RFQ form, description of goods, works, maintenance and/or services required, specifications and date of completion/delivery (adapted from standard RFQ for goods and small works of the Ministry of Finance). Report of RFQ is to use by simple way (adapted from standard bid evaluation form for goods and works). The evaluation, comparison and awarding contract is based on lowest evaluated price. Notification of contract award is replace by Purchasing Order. Request for Quotation Amount more than 50.000.000 to not more than 500.000.000Kip. The procuring entity or project owner shall invite from at least 3 potential bidders to supply goods, works and advertise through the mass media and public procurement website. The RFQ for goods should be used of the standard Form of RFQ and for small works should be used of the standard Form of RFQ of the Ministry of Finance. The procuring entity or project owner may adapt to conform to its requirements. Report of RFQ is to use by simple way (adapted from standard bid evaluation form for goods and works). The evaluation, comparison and awarding contract is based on lowest evaluated price. 1.6.2.2. International Shopping International Shopping is used only for goods and shall not apply for works amount less than or equivalent to 500.000.000Kip. For goods required, the supplier or domestic manufacturer is limited and domestic market can not supply adequately. Quotations are invited from at least 3 qualified suppliers or contractors in at least 2 countries and announce in public procurement website. The RFQ for goods should be used of the standard Form of RFQ of the Ministry of Finance issued in two languages (Lao and English). The procuring entity or project owner may adapt to conform to its requirements. Report of RFQ is to use by simple way (adapted from b).

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standard bid evaluation form for goods and works). The evaluation, comparison and awarding contract is based on lowest evaluated price. 1.6.3. Limited Bidding Limited Bidding is applied for value more than 50.000.000 up to 500.000.000Kip and where there are a limited number of suppliers or contractors. The procuring entity or project owner shall invite bids from a list of potential suppliers or contractors broad enough to assure competitive prices and with sufficient capacity. The RFQ for goods should be used of the standard Form of RFQ and for small works should be used of the standard Form of RFQ of the Ministry of Finance, which may be adapted to conform to its requirements. The evaluation and award of contract shall implement in accordance with standard bid evaluation form for goods and works. 1.6.4. Public Bidding (National Competitive Bidding) National Competitive Bidding is applied for amount more than 500.000.000 up to 5.000.000.000Kip (For Goods) and more than 500.000.000 up to 25.000.000.000Kip (For Works). The standard of bidding document of Public Bidding for Goods and Works issued by the Ministry of Finance shall be applied, which the project may specify suitable conditions to conform to its requirements. The evaluation and award of contract shall implement in accordance with standard bid evaluation form for goods and works. Award of Contract is based on the lowest evaluated price. Depend on characteristic and some special goods and works to be procured, the procuring entity or project owner may use pre-qualification method to select qualified and experienced suppliers or contractors to submit bid for public bidding. The pre-qualification procedure is to use the same standard bidding document of public bidding; the difference is no financial proposal section. The evaluation of pre-qualification may use pass or fail or point system, which shall specify detailed methods in the pre-qualification documents. 1.6.5. International Competitive Bidding (ICB) International Competitive Bidding is applied for amount more than 5.000.000.000Kip (For Goods) and more than 25.000.000.000Kip (For Works). The standard of bidding document of ICB for Goods and Works issued by the Ministry of Finance shall be applied, which issued in two languages (Lao and English). To promote domestic manufacturers, suppliers or contractors a margin of preference may be provided by the procuring entity or project owner (specified in the IRR Article 9: International Competitive Bidding). The procuring entity or project owner may specify suitable conditions to conform to its requirements. Bidding documents, evaluation and award of contract shall implement in accordance with the standard bid evaluation form issued by the Ministry of Finance. Award of Contract is based on the lowest evaluated price. Depend on characteristic and some special goods and works to be procured, the procuring entity or project owner may use pre-qualification method or bid submission at the same time. Therefore, it should be separated into two envelopes: 1. qualification and technical proposals and 2. financial proposal. Qualification and technical proposals will be opened first if the bidder is qualified then financial proposal shall be opened. Unqualified bidders financial proposal shall be returned unopened.

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1.6.6. Two-Stage Bidding Two-Stage Bidding is a specific method of procurement specified in the IRR and applied for complex project using high technologies (applying at present and future) such as plant with complete machinery which the procuring entity or project owner has no design experience and specification or high design value and specification and large size project which apply huge budget. Implementing procedures are separated into two stages as follows: Stage 1: Invite potential bidder to express interest. Public bidding document is applied but the difference is no financial proposal. The procuring entity or project owner will specify important scope of goods and works to be procured. Therefore, the bidders may offer method and technical proposal. The evaluation at this stage is to select qualified firm and offer method and technical proposal which are approved by the procuring entity or project owner. At this stage, the procuring entity or project owner may request for clarification or negotiate on the method and technical proposal submitted by bidders. Then the procuring entity or project owner will summarize as the method and technical proposal of the project to contain in the bidding documents. Stage 2: For bidders whose method and technical proposal are approved by the procuring entity or project owner should submit financial proposal to implement in accordance with the public bidding procedures. 1.6.7. Procurement Financed by Foreign Grant or Loan/Credit In the case of foreign grants, loans or credits, when a treaty or other form of an agreement is entered into by the Lao PDR with the concerned donor, where such an agreement does not require adherence to separate procurement procedures, these Implementing Rules and Regulations will apply. Otherwise, the procurement procedure of the donor take precedence over any conflicting provision in Decree No. 03/PM dated 9 January 2004 or these Implementing Rules and Regulations. 1.7. Threshold Values for each Method. Method of Procurement Direct Purchase Direct Purchase (approval on a case by case basis item 1.6.1.) Request for Quotation (RFQ) 1. RFQ (National Shopping) a). RFQ by simple way b). RFQ 2. International Shopping Limited Bidding National Competitive Bidding (NCB) Threshold Value (Kip)
3.000.000 > 3.000.000

> 3.000.000 to 50.000.000 > 3.000.000 to 50.000.000 > 50.000.000 to 500.000.000 500.000.000 (Goods) not allow for Works > 50.000.000 to 500.000.000 > 500.000.000 to 5.000.000.000 (Goods) > 500.000.000 to 25.000.000.000 (Works)

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International Competitive Bidding (ICB)

> 5.000.000.000 (Goods) > 25.000.000.000 (Works)

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Section 2.

Assignment of Bidding Committee, Mandatory of the Bidding Committee, Approval of Bidding Evaluation and Signing of Contract.

2.1.

General

All procurement procedures require the appointment of a Bidding Committee which shall comply with the Implementing Rules and Regulations Part V: Organization and Mandate of the Bidding Committee. The selection of experts or consultants which comply with Part III: Consultants or Experts Services of this Manual. The procuring entity or project owner shall appoint Selection Committee for experts or consultants, which shall be similar to the appointment of the Bidding Committee for the procurement of goods, works and maintenance. The members of Committee depend on the selection methods and the value (budget) estimated. 2.2. Assignment of Bidding Committee

After the approval of detail procurement plan, the procuring entity or project owner shall appoint Bidding Committee for each method of procurement. The Bidding Committee should be appointed at the time of preparation of bidding documents. The members invited as the Bidding Committee shall not be the person whose interest is related to the existing procurement. The Bidding Committee shall examine and evaluate bids. However, it should be composed of at least 3 qualified members, preferably persons who participated in the preparation of bidding documents. In appointing the members of the Bidding Committee. For example, where procurement is for textbooks, the Committee should consist of a representative of the Ministry of Education and a representative of teachers who are familiar with the curriculum for which the textbooks are being procured. For health sector projects such as pharmaceuticals, there should be a pharmacist and a doctor present, in order to ensure that the drugs have the required chemical composition and that they are suitable for the purpose for which they are being procured. In the case of large works such as construction of a major road, the Committee should consist of the independent consulting engineer, a second engineer and a technically capable representative of the procuring entitys implementing agency. Where the contract involves the construction of buildings an architect should be part of the committee. In the case of goods, the members will vary depending on whether procurement is for simple goods such as pencils or whether it is for complex goods such as heavy machinery. The committee should include persons who are qualified and familiar with the technical capacity and capability of the required machinery. 2.3. Bidding Committee Composition

Bidding Committee for each method of the procurement composes of:

Method of Procurement and Threshold Value estimated (Kip) Ministry or equivalent agency Vientiane Capital/Provinces/ Districts Embassy or Governmental office abroad Loan or Grant Project State-Owned Enterprises

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National Shopping (by simple way), for amount more than 3.000.000 to 50.000.000

Chief of Cabinet (if the budget is managed by the Ministry) or relevant Head of Department (if the budget is managed by the Department) or authorized person to appoint Bidding Committee. The Bidding Committee shall be composed of 3-5 members of relevant sector.

National Shopping for amount more than 50.000.000 to 500.000.000

Minister or authorized person to appoint Bidding Committee. The Bidding Committee composed of: 1. Chief of Cabinet and/or relevant Head of Department. 2. Representativ e of Department or Finance Division. 3. Representativ e of Administrativ e Division

Head of Provincial Administrative Office (if the budget is managed by the province) or Head of Division (if the budget is managed by Division) or authorized person to appoint the Bidding Committee; Head of District (if the budget is managed by District) or Chief of District Office (if the budget is managed by District Office) or authorized person to appoint Bidding Committee. The Bidding Committee shall be composed of 3-5 members of relevant sector. Provincial Governor or authorized person to appoint Bidding Committee. The Bidding Committee composed of: 1. Provincial Head of Division concerned. 2. Representative of provincial Finance Division. 3. Representative of provincial Planning and Investment Division. 4. Experienced Technical Officer related to such procurement.

Ambassador or Chief of Office or authorized person to appoint Bidding Committee. The Bidding Committee shall be composed of 3-5 members of relevant sector.

Chief of Cabinet, Head of Division of Province/Dist rict implementing the project or authorized person to appoint the Bidding Committee and shall based on agreement and contract of Loan/Grant. The Bidding Committee shall be composed of 3-5 members of the relevant sector.

Managing Director or authorized person to appoint Bidding Committee. The Bidding Committee shall be composed of 35 members of the relevant sector.

Ambassador or Minister or Chief of Office authorized or authorized person to person to appoint the appoint Bidding Bidding Committee. Committee. The Bidding The Bidding Committee Committee composed of: shall be 1. Chief of composed of Cabinet 3-5 members and/or Head of relevant of sector and Department experienced concerned Technical and/or Project Officer related Manager. to such 2. procurement. Representativ e of the MOF. 3. Representativ e of the Ministry of Planning and Investment.

Managing Director or authorized person to appoint Bidding Committee. The Bidding Committee shall be composed of 35 members of the relevant sector and experienced technical officer related to such procurement.

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4. Experienced Technical Officer related to such procurement.

4. Representativ e of Financial Department or Division. 5. Representativ e of Administrativ e Division. 6. Experienced Technical Officer related to such procurement. Provincial Governor or authorized person to appoint Bidding Committee. The Bidding Committee composed of: 1. Provincial Deputy Governor and/or provincial Head of Division concerned. 2. Representative of provincial Finance Division. 3. Representative of provincial Planning and Investment Division. 4. Experienced Technical Officer related to such procurement. Minister which has representative office or authorized person to appoint Bidding Committee. The Bidding Committee shall be composed of 3-5 members of relevant sector and experienced Technical Officer related to such procurement. Minister or authorized person to appoint the Bidding Committee. The Bidding Committee composed of: 1. ViceMinister and/or Chief of Cabinet or Head of Department concerned. 2. Representativ e of MOF. 3. Representativ e of the Ministry of Planning and Investment. 4. Representativ e of Financial Department or Division. 5. Representativ e of Planning Department or Division. 6. Experienced President of Board of Directors or authorized person to approve and Managing Director or authorized person to sign contract. The Bidding Committee shall be composed of 35 members of the relevant sector and experienced technical officer related to such procurement. If the contract will be financed by a Sub-loan from the Government, there shall be representative of the MOF, Ministry of Planning and Investment.

Public Bidding or International Comparison or International Competitive Bidding

Minister or authorized person to appoint the Bidding Committee. The Bidding Committee composed of: 1. ViceMinister and/or Chief of Cabinet or relevant Head of Department. 2. Representativ e of the MOF 3. Representativ e of the Ministry of Planning and Investment. 4. Representativ e of Department or Finance Division. 5. Representativ e of Department or Planning Division.

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6. Experienced Technical Officer related to such procurement.

Technical Officer related to such procurement.

The members of Bidding Committee may exceed the number specified depending on the complexity of goods, works, maintenance and services and related to various sectors which carry out the procurement. 2.4. Rights and Duties of the Bidding Committee The Bidding Committee has the rights and duties as follow: 1. Prepare bidding documents which conform to each method, identify the conditions and specifications required. 2. Responsible for evaluation and comparison of bids received and prepare bid evaluation report to submit the authorized person for approval and award of contract and signing of contract. 3. Carry out and evaluate bids in according with the rules and regulations to ensure that is fair, competitive, and transparent. The evaluation process of non detailed specifications and not complex shall be completed within 15 days. 4. Organize a meeting to consider issues relating to the concern procurement. Each meeting shall have record of minutes of meeting or if convenience, video shall be recorded. 5. All members of Bidding Committee shall have equal rights in giving comments for bid evaluation of the concerned procurement. 2.5. Approval of Award Contract and Signing of Contract

After the Bidding Committee has approved of the bid evaluation report which shall submit to the authorized persons for approval of award of contract in according with the method of procurement and threshold value as follow:
Method of Procurement and Threshold Value estimated (Kip) National Shopping (by simple way), for amount more than 3.000.000 to 50.000.000 Ministry or equivalent agency Provinces Embassy or Governmental Office abroad Loan or Grant Project State-Owned Enterprises

Chief of Cabinet or relevant Head of Department or authorized person to approve and sign the contract.

Head of Provincial Administrative Office or Head of Division which implements the project or authorized person to approve and sign the contract; Deputy of District

Ambassador or Chief of Office or authorized person to approve and sign the contract.

Head of Department which implement the project; Head of Division of Province/Dist rict implementing

Manager or authorized person to approve and sign the contract.

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or Chief of District Office or authorized person to approve and sign the contract.

the project to approve the project manager to sign the contract and shall based on agreement and contract of Loan/Grant. Ambassador or Chief of Office or authorized person to approve and sign the contract. Minister or authorized person to approve and Head of Department which implement the project or Project Manager to sign the contract and shall based on agreement and contract of Loan/Grant. Managing Director or authorized person to approve and sign the contract.

National Shopping for amount more than 50.000.000 to 500.000.000

Minister or authorized person to approve and Chief of Cabinet or relevant Head of Department to sign the contract.

Provincial Governor or authorized person to approve and sign the contract or Provincial Head of Division to sign the contract. Head of District or authorized person to approve and Deputy of District or authorized person to sign the contract.

Public Bidding or International Comparison amount more than 500.000.000 to 50.000.000.00 0

Minister or authorized person to approve and sign the contract.

International Competitive Bidding amount more than 50.000.000.00 0

Minister or authorized person to approve and sign the contract

Provincial Governor or authorized person to approve and sign the contract. Head of District or authorized person to approve and Deputy of District or authorized person to sign the contract. Provincial Governor or authorized person to approve and sign the contract.

Minister of Minister or Foreign authorized Affairs or person to Minister which approve and have sign the representative contract and office to shall based on approve and the agreement Ambassador or and contract Chief of Office of to sign the Loan/Grant. contract. Minister of Minister or Foreign authorized Affairs or person to Minister which approve and have sign the representative contract and office to shall based on approve and the agreement Ambassador or and contract Chief of Office of

President of Board of Directors or authorized person to approve and Managing Director or authorized person to sign the contract. President of Board of Directors or authorized person to approve and Managing Director or authorized person to sign

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to sign the contract.

Loan/Grant.

the contract.

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Section 3.
3.1.

Bidding Documents

General

Bidding documents is documents issued by the procuring entity or project owner or officer, who responsible for the Procurement, Bidding documents must contain all the information necessary to enable a bidder to prepare complete and proper documents and to make an informed decision on whether or not to participate in the procurement procedure. The Bidding documents must be written in terms that are clear and precise. Generally, tender documents include: invitation to submit proposals; instructions to bidders; bid evaluation and selection criteria; bid forms; contract sample; general and specific conditions of contract; specifications and drawings; list of goods or bill of quantities; time of delivery or of completion and other necessary attachments, such as samples of required bid security. The basic principle in evaluating and selecting the lowest evaluated and qualified bid shall be clearly described in the general instructions and/or specific instructions to bidders. Bidding documents shall be sold at a reasonable price covering the costs of printing, delivering and other necessary expenses. The preparation of the bidding documents for each proposed purchase involving international and national competitive bidding, both to inform and instruct potential bidders, suppliers and contractors of the requirements expected of them in particular procurement opportunities. The bidding documents to be drafted so as to permit bidders to submit responsive bids. Bidding documents should clearly define the scope of works, goods or services to be supplied, the rights and obligations of the procuring entity or project owner and of suppliers and contractors, and the conditions to be met in order for a bid to be declared valid and responsive. They should also set out fair and non discriminatory criteria for selecting the winning bid. Bidding documents should thus; encourage eligible potentially qualified firms to bid, by making reasonable demands for information and form-filling; not discriminate against any potential bidder; and provide a clear, objective means of evaluating the bidders. The detail and complexity of bidding documents vary according to the nature and size of the contract but they generally include the following: a) Invitation for Bid; the IFB is normally used by the procuring entity or project owner to invite potential bidders to present their bids for the project at hand, and it describes the procuring entity or project owner and source of financing and indicates the goods, works or services to be procured. An IFB is issued prior to the preparation of the bidding documents. b) Instructions to Bidders; providing information to bidders regarding the form, procedure and timing of bidding. ITB is the general principles which the procuring entity or project owner should not modify. c) The Bid Data Sheet; which specifies the parameters of the Instructions to Bidders for the particular procurement including source of funds, eligibility requirements, procedure for clarification, bid preparation form, number of copies to be submitted, language of the bids, pricing and currencies and currency conversion mechanism, instructions on modification and withdrawal of bids, bid submission procedures, closing date, bid validity period, bid opening, evaluation and award of contract procedures, procedure for correction of mathematical discrepancies in bids, procuring entitys or project owners right to accept any bid and reject any or all bids; award criteria; notification of award and procedures for signing of contract.

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d) Evaluation and Qualification Criteria; this section specifies the criteria that the procuring entity or project owner will use to evaluate the Bids post qualify the lowest evaluated Bidder. e) The General Conditions of Contract; setting out the general provisions of the contract between the procuring entity or project owner and the contractor or supplier awarded the contract. GCC is the general principles which the procuring entity or project owner should not modify. f) Special Conditions of Contract; which modify the General Conditions of Contract for the particular procurement. The procuring entity or project owner may specify to conform to such procurement. g) Schedule of Supply; which specifies the quantities, delivery locations and dates for the items required by the procuring entity or project owner. For works contract is the Bill of Quantities. h) The Technical Specifications and drawings; which detail the characteristics of the technologies and technical services required (as well as specify the common format which bidders must present their materials, including a technical responsiveness cross reference form). i) Bidding Forms; which include the Bid Submission Sheet and Price Schedules, the Bid Security Forms, the Contract Form, the Performance Security Form, the Bank Guarantee Form for Advanced Payment and the Manufacturers Authorization Form. 3.2. Technical Specification

3.2.1. Technical Specification (For goods and works) Specifications are used normally for procuring goods and civil works. Specifications must fully and completely state the requirements. It should be generic (not Patent) in nature to maximize competition. The Specifications may be stated as a hybrid or combination of one or more of the following types: a) Functional: which defines the function(s) or duty to be performed. This concentrates on what a product is to do. Performance: This concentrates on the performance required of an item. To assure the quality, a reference to the concerned product standards (International i.e. ISO or National) and environmental requirements such as energy Star rating, recycles materials etc should be made. Design Requirements: these requirements calls for providing exact dimensions, materials or characteristics. It should be noted that there are many situations where design specifications can restrict competition unnecessarily because of differences in engineering practices. For Dimension, the metric system shall be used. b) In the case of procurement of Goods or the Supply and Installation of Plant and Equipment, reference to brand names, catalogue numbers or other details that limit any materials or items to a specific manufacturer should be avoided as far as possible. Where unavoidable, such item description should always be followed by the words substantially equivalent. 3.3. Contract Provisions

3.3.1. General Conditions of Contract (GCC)

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The GCC in the bidding documents establish an accepted basis for similar procurement contracts under the project. MOF/PrMO policy is that the GCC should not be changed by the procuring entity without the approval of the MOF/PRMO. The GCC contains: Operational Clauses: These establish the relationship between the procuring entity or project owner and the suppliers/contractors they contain information regarding: Definitions; Rights and obligations of both parties; Procedures for shipment and documentation; Delivery and transfer of risk; Terms and currencies of payment; Mode and form dispute settlement; Governing language; and Applicable law. Protective Clauses: They establish protection against various risks and allocate them between the parties. They include instructions on: Performance security; Retention of payments; Insurance; Inspection and tests; Warranty; Protection against third party infringement suits; and Force Majeure. Variations: Unforeseen or planned changes during the life of the contract are identified and provided for under these parts of the GCC. They cover the following: Quantity changes; Adverse physical conditions; Price adjustments; and Changes in delivery requirements.

Remedies: This deal with the breach of contract by one of the parties. They include provisions on: Forfeiture of performance security; Procedure for damages, penalties for delay; Procedure for suspension and termination; and Nonpayment or failure to provide required approvals and information.

3.3.2. Special Conditions of Contract (SCC) Special Conditions of Contract contains provisions that should be drafted specifically by the procuring entity or project owner for each procurement. SCC is meant to assist the procuring entity or project owner in providing contract-specific information relating to corresponding clauses in the GCC. The procuring entity or project owner shall specify all information relating to GCC which need to be added to SCC when preparing bidding

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documents. In preparing SCC, clauses which need to be specified shall have the same number as GCC clause, which SCC have summarized all information needed to be added as specific provision of the bid. 3.4 Contract Securities

Contract securities are used to ensure that suppliers/contractors will perform their contractual obligations when an award is made after the procurement process is carried out. Securities include: bid and performance securities, retention money and advance payment securities. These may be provided in the form of a bank guarantee or irrevocable Letter of Credit, cash, cashiers check or certified check or an insurance certificate. Retention money on the other hand is a portion of the payments due under the contract, which is retained to ensure performance by the supplier/contractor. When used as a guarantee, it should not exceed 10% of the contract value. Instead of the procuring entity or project owner retaining part of the due payments, the supplier/contractor may also provide a money retention bond in form of a bank guarantee or irrevocable Letter of Credit. 3.4.1. Bid Securities Bid securities are required as a condition of contract for the bid. It assures compensation to the Contracting Agency for the time and money lost if the successful bidder fails to honor his bid and enter the contract. Bid securities may not be required in small contracts and should not be too high. About 2% of the contract price is acceptable. It is recommended that the amount of the bid security be fixed and should remain valid beyond the bid validity period. A sample form establishing the acceptable wording should be included in the bidding documents. The bid security should be released upon: the end of the bid validity period, unless extended; notice to the successful bidder of contract award; and receipt of the successful bidders signed contract and performance security.

3.4.2. Performance Securities Performance securities are required as a condition of contract validity. They guarantee the contractors obligations under the contract and should always be required where the contract value is large. However, the amount of the security should not exceed 10% of the contract price. Where a performance security is required in addition to retention money, the amount should be reduced to less than 10%. The contract should define clearly the kind of defaults that would lead to the surrender of the performance security e.g. the contract may provide that the performance security be payable only once default has been established by an arbitral award. Where there is no default, the performance security must be discharged after completion of the contract and expiration of the warranty period. 3.4.3. Advance Securities Another form of security is the advance payment security which guarantees advance payment made by the contracting agency against the contractors default. They are in the form of a bank guarantee or irrevocable letter of credit for an amount equal to the advance

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payment and are normally callable on demand. Securities must be denominated in the currency of the bid or another freely convertible currency. 3.4.4. Liquidity Damage Securities This is the security after contract completion but the contractors or suppliers shall have responsibility against loss or damage as specified in the SCC. The amount of liquidity damage securities after contract completion shall not exceed 10% of contract price. The security may be cash or bank guarantee. 3.5. Transportation and Insurance Issues in Procurement

3.5.1. Transportation Freight or cost of transportation services, is a substantial element in the delivered price of most imported goods and this incidence is particularly high. This may range up to 15% of the cost of the goods. During transportation and storage, cargo may be exposed to various, such as damage, pilferage and theft, breakage, non-receipt of parts or entire consignments. Cargo insurance provides protection against financial losses resulting from these risks. To protect the interest of the procuring entity or project owner, follow the guidelines provided below: Goods shall be covered for all risks, including war, strikes, riots and civil commotions (SRCC). Duration of the insurance coverage it should be sufficient to cover the period of transportation from warehouse to warehouse and include minimum 30 days, in store at destination. Goods shall be insured in an amount equal to 110% of CIF or CIP value. 3.5.2. Mode of Transportation Mode of transportation has many modes, but an important decision for the procuring entity or project owner is to decide the mode or modes of transportation, the procuring entity or project owner should use so as to minimize the sum of visible and not so visible transportation cost. To ensure timely and economical deliveries, it is preferable to select conference liner. 3.5.3. Insurance Procuring entity or project owner should take out and maintain with responsible insurers, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Insurance issues arise in various forms during the procurement aspect of the project. Instances where the procuring entity or project owner may have to deal with insurance include inter alia cargo insurance during transportation of goods, installation all risks insurance, third party liability insurance, automobile liability insurance, workers compensation and employers liability. As all of these issues are subject to the final agreement between the procuring entity or project owner and the supplier or contractor, this section merely gives a brief description of what is covered under these types of insurance.

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a) Transportation Insurance Adequate provisions for the insurance of, imported goods should be arranged, against hazards incidental to the acquisition, transportation and delivery of such goods to the place of use or installation. Indemnification should be in the contract amount or in a freely convertible currency. Suppliers should be allowed to arrange insurance from any eligible source. Depending on the transport provisions in bidding documents, the procuring entity or the Supplier makes arrangements for transportation, and must obtain insurance against loss or damage for internal transit and storage. In the cases of CIF and CIP for example, the supplier has to insure the goods up to the port or other destination where delivery is to be made. The SBD for the Supply and Installation of Plant and Equipment (SBDPE) for instance, requires the contractor to take out cargo insurance to cover loss and damage to: equipment, including spare parts from the suppliers or manufacturers works or stores until arrival at the project site; and construction equipment to be provided by the contractor or its subcontractors. If, on the other hand, procurement of goods is on FOB terms, once the goods are on board, it is up to the procuring entity or project owner to arrange for the necessary insurance to cover the goods to their destination. b) Contractors Insurance Bidding documents usually require all contractors to take a Contractors All Risk Insurance (CAR). CAR is generally used as the main protection against physical loss, damage, or injury to the project works and property of third parties. The amount of insurance coverage should be commensurate with the liability that the insured third party may incur. In case of a physical asset, for example, this means the replacement cost, payable in a freely convertible currency, or in currencies in which replacement costs would be incurred. c) Designer Liability Consulting engineers or architects may be engaged by the procuring entity or project owner to provide preliminary designs, technical specifications, detailed designs, working drawings, construction inspection and approvals for the project. Loss or damage due to defective design in these instances is usually covered under a professional liability insurance cover taken by the service provider. The procuring entity or project owner should ensure that the hired party is insured under such coverage or other similar coverage which will cover any defects in the design of procured items that may arise due to the contractors negligence. d) Third Party Liability Insurance This covers bodily injury or death suffered by third parties, including the procuring entitys or project owners personnel and loss or damage to property occurring in connection to the supply and installation of procurement related facilities. Third - party liability insurance is governed by the laws in the procuring entity or project owner country.

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e) Workers Compensation and Employers Liability These cover bodily injury or death suffered by the procuring entitys or project owners or Contractors employees and are usually governed by the statutory requirements applicable in the procuring entity or project owner country. f) Evaluation of Insurance Needs The TTL/PS is responsible for assuring that the procuring entity or project owner undertakes a comprehensive analysis of risk and insurance needs before the procurement process begins, so that project costs are optimized to include insurance coverage. This analysis provides an informed basis upon which the procuring entity or project owner will decide which risks it should take on itself and which should be covered by insurance. The obligation to analyze insurance needs extends to the duration of the procurement and not merely to the implementation period, and includes all risks which a prudent investor would insure against. g) Effect of Transport and Insurance Issues in Bid Evaluation All INCOTERMS are free of taxes including value added taxes (VAT), in the procuring entitys country. In most situations where only imported goods are involved, evaluation is generally straight forward, provided only one port or point of destination is specified. However, if imports can be received in a number of points or by different modes, the cost of different methods of further handling and transportation should be taken into account in bid evaluation. 3.6. INCOTERMS 2000

It is International Commercial Terms 2000 (INCOTERMS 2000) defining the obligations of Procuring Entity and Supplier relating to shipment of goods. Summarized some terms of INCOTERM 2000 which are approved by the International Chamber of Commerce, 38 Cours Albert 1er, 75008 Paris, France. Commonly used terms in procurement are listed in the table below: Term Meaning

Cost and Freight (CFR) The seller delivers when the goods pass the ships rail in the port (.named port of of shipment. The seller must pay the costs and freight necessary destination) to bring the goods to the named port of destination BUT the risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time the goods have been delivered on board the vessel, is transferred from the seller to the buyer when the goods pass the ships rail in the port of shipment. The CFR term requires the seller to clear the goods for export. Used for sea or inland waterway transportation. Cost Insurance Freight The seller delivers when the goods pass the ships rail in the port (CIF) (named port of of shipment. The seller must pay the costs and freight necessary destination) to bring the goods to the named port of destination BUT the risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time of delivery, are transferred from the seller to the buyer. However, in CIF the seller also has to

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Term

Meaning procure marine insurance against the buyers risk of loss of or damage to the goods during the carriage. Consequently, the seller contracts for insurance and pays the insurance premium. The buyer should note that under CIF term the seller is required to obtain insurance only on minimum cover (110%(the price specified in the contract adding 10%)). Should the buyer wish to have the protection of greater cover, he would either need to agree as much expressly with the seller or to make his own extra insurance arrangements. The CIF term requires the seller to clear the goods for export. This term can be used only for sea and inland waterway transport. The buyer is obligated to pay the contract price of goods as provided in the sales contract, and arrange and pay for all import licenses and formalities and take delivery at the port of entry. The seller must deliver the goods to the carrier nominated by him/her, but the seller must in addition pay the cost of carriage needed to bring the goods to the named destination. The buyer bears all the risk and any additional costs occurring after the goods have been so delivered. However the seller must also procure insurance against the buyers risk of loss or damage to the goods during the carriage. The buyer should note that under the CIP term the seller is required to obtain insurance only on minimum cover (110%(the price specified in the contract adding 10%)). Should the buyer wish to have the protection of greater cover, he would either need to agree as much expressly with the seller or to make his own extra insurance arrangement. Carrier means any person who, in a contract of carriage, undertakes to perform or to procure the performance of transport, by rail, road, air, sea, inland waterway or by a combination of such modes. If subsequent carriers are used for the carriage to the agreed destination, the risk passes when the goods have been delivered to the first carrier. The CIP term requires the seller to clear the goods for export. This term may be used irrespective of the mode of transport including multimodal transport. The seller delivers the goods to the named point and place at the frontier. The seller must pay the costs and freight necessary to bring the goods to the place at frontier BUT the risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time of delivery, are transferred from the seller to the buyer. However, in DAF term the seller is responsible against the risk of loss of or damage to the goods during the carriage which the seller does not have to contract for insurance. The DAF term requires the seller to clear the goods for export. This term is used for a landlocked country. The buyer is obligated to pay the contract price of goods as provided in the sales contract, and arrange and pay for all import licenses and formalities and take delivery at the port of entry. The seller delivers the goods to the buyer, not cleared for import,

Carriage and Insurance Paid to (CIP) (named place of destination)

Delivered at Frontier (DAF) (named place of destination)

Delivered

Duty

Unpaid

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Term

Meaning

(DDU) (..named place of and not unloaded from any arriving means of transport at the destination) named place of destination. The seller has to bear the costs and risks involved in bringing the goods thereto including where applicable, any duty (which term includes the responsibility for and the risks of the carrying out of customs formalities, and the payment of formalities, customs duties, taxes and other charges) for import in the country of destination. However, if the parties wish the seller to carry out customs formalities and bear the costs and risks resulting thereform as well as some of the costs payable upon import of the goods, this should be made clear by adding explicit wording to this effect in the contract of sale. This term may be used irrespective of the mode of transport but when delivery is to take place in the port of destination. Delivered Duty Paid (DDP) The seller delivers the goods to the buyer, cleared for import, and (.named place of not unloaded from any arriving means of transport at the named destination) place of destination. The seller has to bear all the costs and risks involved in bringing goods thereto including where applicable, any duty (which term includes the responsibility for and the risk of the carrying out of customs formalities and the payment of formalities, customs duties, taxes and other charges) for import in the country destination. DDP represents the maximum obligation of the seller. This term should not be used if the seller is unable directly or indirectly to obtain the import license. This term may be used irrespective of the mode of transport but when delivery is to take place in the port of destination. Ex Works (EXW) The seller delivers when he places the goods at the disposal of the (.named place) buyer at the sellers premises or another named place (i.e. factory warehouse, etc) not cleared for export and not loaded on any collecting vehicle. This term represents the minimum obligation for the seller, and the buyer has to bear all costs and risks involved in taking the goods from the sellers premises. Free on Board (FOB) (.named port of shipment) The seller delivers when the goods pass the ships rail at the named port of shipment within the period stipulated. The risk of loss of or damage to the goods is transferred to the buyer when the goods pass the ships rail (i.e., off the dock and placed on the ship). The seller pays the cost of loading the goods and clears the goods for export. The seller delivers the goods, cleared for export, to the carrier nominated by the buyer at the named place on the date or within the period stipulated. If delivery occurs at the sellers premises, the seller is responsible for loading. If delivery occurs at any other place, the seller is not responsible for unloading.

Free Carrier (FCA) (.named place)

Carriage Paid To (CPT) This term means the seller delivers goods to the carrier nominated (named place of by him, but the seller must additionally pay the cost of carriage destination) necessary to bring the goods to the named destination. The risk of

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Term

Meaning loss or damage to the goods and any cost are borne by the buyer after the goods have been delivered to such destination. Carrier means any person who, in a contract of carriage, undertakes to perform or to procure the performance of transport, by rail, road, air, sea, inland waterway or by a combination of such modes. The seller is required to clear the goods for export. When the seller is required to furnish a bill of lading, way bill, or carrier receipt, the seller duly fulfills its obligation by presenting such a document issued by the person contracted with for carriage to the main destination.

The most widely used term by the Government is Cost Insurance Freight (CIF). Where road, rail or air transport is used, procuring entity countries may use Cost Insurance Paid (CIP), Delivered at Frontier (DAF), or Delivered Duty Paid (DDP) terms, rather than CIF terms. The Governments Standard Bidding Documents for Goods, in the Instructions to Bidders, require bidders to indicate separately on the Price Schedule inter alia: For goods offered within the procuring entitys or project owners country, the price for inland transportation, insurance, and other local costs incidental to delivery of the goods to their final destination, if specified in the Bid Data Sheet. For goods offered from abroad: the price of goods shall be quoted CIF or DAF named port of destination, or CIP border point, or CIP named place of destination, in the procuring entitys or project owners country, as specified in the Bid Data Sheet. In quoting the price the bidder is free to use transportation through carriers registered in any eligible countries. 3.7. Considerations in preparation of the Bidding Documents

To facilitate in preparation of the Bidding Documents. The Ministry of Finance has established Standard Bidding Documents (SBDs) for guidance of implementation for the procuring entity or project owner. While drafting the bidding documents, the procuring entity or project owner shall consider the following factors in cooperation with the requisitioner and user: a) Lump-sum price: is used for civil works and consultancy services. The lump-sum contract is used mainly for assignments in which the content and the duration of the services and the required output of the consultants are clearly defined. b). Fixed price. c). Price subject to adjustment. d). Grouping of similar items for Goods. Similar items should always be grouped, whether or not bid on a group basic are requested. In cases where items are dissimilar, it may be advisable to spit the items in separate groups or invitation. e). Change in quantities: Where the exact quantity required is not known in advance, a definite quantity may be indicated on a provision that the procuring entity or project owner reserves right to increase or decrease the indicated quantity by 15% (Maximum).

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f).

g).

h).

i).

Alternative proposal: Suppliers should be informed of whether alternative proposals will be considered or not. If so, the alternative proposal should include full details of specifications, environmental specifications (if, any) and cost in order to allow a fair technical and financial evaluation of alternative proposal. Currencies and payments: Specific instructions should be provided concerning the currencies to be used in the preparation of bid. The Suppliers/Contractors should also be advised in which currency/currencies that payment will be effected. For National procurement, Suppliers/Contractors can proposal the price in Lao Kip and the payment will be pay in Lao Kip. Duties, taxes: The procurement financing from the state budget should include duties and taxes. Therefore price proposes by Contractors or Suppliers should include the amount of duties and taxes. Bidders queries: Bidders queries should be handled by correspondences or by Pre-bid meeting. a). Correspondence Method. Any bidder requiring clarification of the bid documents should submit the queries to the designated procurement officer in writing (at least 10 days, before bid submission deadline). The designated procurement officer should prepare and dispatch written replies to queries. These replies, together with the text of the queries should be sent to all bidders (at least 5 days, before bid submission deadline). b). Pre-bid meeting. With the meeting method, queries from the bidders to the procuring entity or project owner are dealt with at a pre-bid meeting. During the meeting as far as possible verbal answers should be provided by the procuring entity or project owner. Within a reasonable time after the meeting (at least 5 days, before bid submission deadline), the procurement officer should send to all bidders, whether present at the meeting or not, a full set of minutes recorded during the meeting for both queries and formal replies.

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Section 4.

Advertisement, Bid Submission, Bid Opening, Bid Evaluation, Contract Award and Contract Negotiation.

4.1.

Advertisement.

Advertisement of bid is to invite interested and potential contractors or supplier to participate in bidding procedure which depends on method of procurement. Advertisement shall be implemented as follows: For direct contracting is not necessary to advertise. For request for quotation by simple way shall issue invitation to the potential bidders of at least 3 shops or firms. For request for quotation shall issue Invitation to the potential bidders of at least 3 or more shops and advertising in public procurement website, Ministry of Finance or advertising in local mass media (local newspaper, TV and etc.) For National Competitive Bidding shall be advertised in local newspaper in Lao or English language and advertised in public procurement website, Ministry of Finance. For request for quotation (International Shopping) shall issue invitation to potential bidders of at least 3 firms from at least 2 countries and also advertised in the public procurement website, Ministry of Finance. For International Competitive Bidding shall be advertised in local newspaper in Lao or English language and advertised in public procurement website, Ministry of Finance and advertised in UN Publication Development Business and the notices are sent to foreign diplomatic missions in Lao PDR. Time limits for Advertisement

4.2.

Time limits used in advertisement for each procurement method shall follow the table below: From date of notification Normal procedure Public Bidding or International Competitive Bidding 45 days Limited Bidding and Price Comparison Domestic and International: 30 days Domestic: 10 days International: 20 days Direct Contracting 20 days

Accelerated procedure

20 days

05 days

4.3.

Must be justified on a case by case basis Or by mutual agreement in cases falling within Article 8 (4) (d).

Notification Notification shall comprise the following:

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 4.4.

The identity of the procuring entity or project owner; A summary of works, goods or services; Address to obtain bidding documents and further information related to the submission of bids; Bid security, if required; Cost of bidding documents; Procedural requirements; Final date and address for submission of bids.

Submission of Bid a). It is the responsibility of bidders to ensure that the bids are delivered to the procuring entity or project owner before the closing date and time of delivery and signed by the authorized person. Bids shall be contain in an envelope or package then close firmly and write/ type written on envelope as specified in the bidding document. If bids are delivered by hand or courier bidders should obtain a receipt from the procuring entity or project owner recording the date and time of delivery. Bids received after the closing time/date should be immediately returned, unopened, accompanied by an explanatory letter indicating the time and date of receipt.

b). c) d).

4.5.

Receipt of Bid a). The Place and address of the receipt of bids should be the same place specified in the bidding document. The procuring entity or project owner shall be nominated the officers to receive the bids until the closing date and time. b). In the case of change place and address of the receipt of bid, the procuring entity or project owner shall be writing to all bidders before the closing date and time. The notification shall be within a reasonable time and ensure that bidders received such notification. c). The place and address of the bid opening and receipt of bids should be made advertisement to facilitate bidders in attending the correct place.

4.6.

Bid Opening a). All bids should be opened in public at the time and place specified in the Invitation to bid. It is recommended that bid opening shall be held on the same time and day of the closing of the bids. b). The procuring entity or project owner and the bidding committee will open all bids in the present of bidders representatives who choose to attend, at the time, on the date, and place specified in the invitation to bid. The bidders representatives who are present shall sign a register evidencing their presence. No bid shall be rejected at the bid opening, except for late bids or bids which fail to implement in accordance with ITB such as: fail to submit bid security, bid envelopes are broken or opened before receipt of bid which shall be returned unopened to the bidder. After the bids have been opened, read, abstracted, date and signed by the bid opening officials/bid opening committee. The original bids shall be initialed on all pages by at least 3 opening committee. Page 48 of 150

The following information shall be recorded in a suitable form signed by the bid opening committee and the bidders representatives attended: - Project reference/Bid No. - Date and time of opening - Suppliers/contractors name - Business Certificate and Tax Payment Certificate - Modification or withdrawal of bid - Bid Price - Any discounts - Price of alternative bids, if approval - Bid security amount, if requested. At the time of bid opening, the Bidding Committee shall record information on bid opening. The content of bid inspection comprise as follows: a) b) c) d) e) f) g) h) i) j) k) l) Is the outer envelope seal and stamp? and label as specified in the ITB. Number of copies: Original............... Copy................ Is the bid document complete or sign? Date of bid validity Is the bid sign by authorized person? Amount of Bid Security (if requested): (currency) Is there SUBTITUTE WITHDRAWAL or MODIFICATION in bid submission? Any alternative bid Discount Additional comments Name of bidders or representatives. Total bid price: (detail of currency or percentage), if the bid is divided into lots, the price of each lot shall be read out.

4.7.

Evaluation and Comparison of Bids for Goods and Works

Bid Evaluation is to achieve the basic aim of procurement i.e. best value for money. It should ensure the following: Maximize competition; Minimize the complexity of the bid, evaluation and the selection decision; Fairness, transparency and completeness of bid evaluation; The selection of successful bidder (Award of Contract) shall be whose bid has the highest degree of realism and responsive experience of highest standard as specified in the bidding documents. Lowest evaluated price.

Bid evaluation should be carry out by the procuring entity or project owner and Bidding Committee as specified in the standard of the bid evaluation for goods or works and comply with each method of procurement. For the procurement which does not required detailed specification or not complex should be completed within 15 days.

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Regardless of how well the other steps in the procurement process are conducted, if bids are not evaluated correctly and fairly, the process has failed. Unfortunately, bid evaluation is the step that is most easily manipulated if one wants to favor a particular bidder. The basic sequence for bid evaluation is the same for all goods and works. Bid evaluation for the procurement of goods and works shall be followed the standard of bid evaluation form and writing bid evaluation report of the Ministry of Finance and consists of the following steps: Preliminary examination; Determination of bid responsiveness; Application of evaluation criteria; Notification award of contract criteria (Award of Contract); Preparation of evaluation report.

4.7.1. Preliminary Examination The bid examination phase begins during the public bid opening with a preliminary examination of the bids. Except for decisions about rejecting bids received after the closing time, which is mandatory for all late bids, other decisions about whether a bid is compliant with bid document requirements should not be made during the bid opening. Errors may be made based on an incomplete reading or wrong interpretation of a bid, and a mistaken decision taken hastily in the presence of the bidders is awkward to correct later. Instead, after the bid opening has been completed, as its first step in the evaluation, the committee should make a thorough examination of all bids received before the deadline for submission. The preliminary examination of bids determines whether the bids meet the general procedural requirements of the bidding documents. In particular, the Committee should examine bids for compliance with the following requirements, using the bidding documents as the reference point: The Bid should be signed properly by an authorized party, including the Power of Attorney if stipulated and are generally in order; Bid securities should be in acceptable format, for suitable amount and duration; Bid packages should contain all required documents including supporting evidence of bidder eligibility and qualifications; Changes should be initialed; The mathematical calculations should be properly computed - if not, corrections should be made; and Bids should be complete and quote prices for all items in the lot or package if so stipulated in the bidding document.

The purpose of this examination is to eliminate any bids from further and more complicated consideration if they do not meet the minimum standards of acceptability as set out in the bidding documents and are therefore not substantially responsive. However, the procuring entity should exercise reasonable judgment in applying these tests and should avoid rejecting bids on trivial procedural grounds. For example, if the bidding documents

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stipulate that each page of the bid should be signed or initialed and a bidder failed to initial one or more pages of supporting information, this should not be a ground for bid disqualification. Furnishing one more or one less than the required number of bid copies, or not using the form supplied in the bid document, but providing bid prices on a similar form on the bidders own letterhead would also be minor discrepancies. These can be rectified through the clarification process without giving any benefit to the bidder and without prejudice to the interests of other bidders and need not be causes for rejection. Such discrepancies should be noted, however, and decisions about their acceptance or rejection should be recorded in the bid evaluation report. 4.7.2. Application of Evaluation Criteria The preliminary examination stage of bid evaluation described above is aimed at making sure that the bids received are substantially responsive. A substantially responsive bid is one that conforms to all the terms, conditions and specifications in the bidding documents without material deviations, reservation or omission. After the preliminary bid evaluation stage, the bids are taken through a detailed evaluation in order to select the bidder whose bid not only complies with the technical requirements in bidding documents, but also offers the procuring entity the lowest price for the goods, works and/or services to be procured. During the bid evaluation period the procuring entity or project owner and the bidding committee shall strictly adhere to the following principles: Ensure that the bid evaluation process is strictly confidential; Reject any attempts or pressure to distort the outcome of the evaluation; Reject any proposed action likely to lead to fraud and corruption; Strictly apply only the evaluation and qualification criteria specified in the bidding documents.

4.7.3. Correction of Arithmetic Errors Bids should be checked carefully by the evaluation committee for arithmetic errors in the bid form to ensure that stated quantities and prices are consistent. The quantities should be the same as stated in the bidding document. The total bid price for each item should be the product of the quantity and the quoted unit price. If there is a discrepancy, the quoted unit price shall govern in the recalculation. Prices spelled out in words shall take precedence over numeric quotations in case of differences. The procuring entity should correct all arithmetic errors and notify each bidder of the detailed changes. The Bidder must accept such arithmetic corrections or its bid will be rejected. If arithmetic errors of each item cover more than 30% of the total item, bid will also be rejected. 4.7.4. Conversion to Common Currency In order to minimize the foreign exchange risk for bidders in ICB, the best practice is to allow every bidder to express its bid price in the currency or currencies of any member country (up to a maximum of three currencies in most cases). This provision effectively causes the procuring entity or project owner to carry the exchange risk rather than bidders and eliminates disadvantages some bidders would otherwise experience because of

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differences in strengths of bidders currencies. However, it results in bids being presented in a wide variety of currencies which must be converted to a single common currency before they can be compared. In order to compare bids for goods contracts, the most common practice is to convert all bid prices in the procuring entity countrys currency or any currency specified in the bidding document at the selling rate established for similar transactions by the Bank of Lao PDR or a commercial bank in the country. The procuring entity is allowed under IRR to convert the bid prices into a currency widely used in international trade such as the US dollar, at the selling rate of exchange established by the Bank of Lao PDR or a commercial bank in the country. For works contracts, procuring entities often specify that the entire bid must be priced in the procuring entitys national currency, even though specified percentages of the total payment may be made in several other foreign currencies. In those cases, it will be more convenient to convert everything into national currency units for comparison purposes. The process and results are the same in either case. The Bid Data Sheet in the bidding document will specify a calendar date which may be anywhere from 30 days before bid submission until the final date of the bid submission deadline as the reference date for currency conversions. Normally using the exchange rate on the bid opening date. It will also indicate the source to be used for obtaining exchange rate information for that date, usually the Bank of Lao PDR official rates. These published rates for each currency of bid are applied to the quoted prices of each bidder to calculate the equivalent common currency figures for bid comparison purposes. 4.7.5. Evaluation of Bids on the Basis of Price Only In the procurement of simple commodities, semi-finished raw materials and goods, where all offers are of identical and comparable material, price alone is an appropriate deciding factor. For purposes of comparing local and foreign bids for goods contracts, the Bid Evaluation Committee compares the EXW price of goods offered from within the procuring entitys country with the CIF (named port of destination) price of goods offered from outside the procuring entitys country. The bidder with the lowest priced bid is then awarded the contract. The EXW price of local bids and the CIF price of foreign bids are calculated in the following way: Foreign Bids or Imported Goods Where bidders offer goods procured from abroad, the price for their bids shall be on cost, insurance and freight (CIF), Port of Entry. The CIF price includes all costs, taxes, duties etc., in the procuring entity country. If CIF liner terms are specified, the freight shall also include the cost of unloading the goods on the wharf at the port of discharge. In the case of procurement of bulk commodities such as fertilizer, iron ore, etc., bids may be invited and compared on CIF (Free Out) Port of Entry, in which case, the unloading from the vessel at the Port of Entry shall be carried out by the procuring entity at its expense. In case of land locked countries such as Lao PDR, foreign bidders are required to quote Delivered at Frontier (DAF) Border Station instead of Port of Entry. Local Bids or Domestic Goods

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 Bidders offering goods manufactured or assembled within the procuring entity country are quoted EXW (ex-factory, ex-works, ex-showroom, or of-the-shelf, as applicable). The EXW price should include all costs, taxes, duties, custom duties and other levies incurred in the acquisition of components and raw materials, domestic and foreign which go into the manufacture of the goods. If there is a sales tax or similar tax which is payable only if the sale of the finished goods offered in the bid takes place, such sales tax and other similar taxes are excluded from the ex-factory price and quoted separately. Where local bidders offer goods which are imported, the ex-warehouse price or off-theshelf price shall include the customs duties paid on the imported goods by the importer, stockist or agent. The price shall thus represent the total price payable by the purchaser except for any sales tax. Where there is no provision for the application of domestic preference margins, the procuring entity or project owner should evaluate bids offering goods manufactured abroad on a CIF or CIP basis. However, if the procuring entity or project owner wishes to use national shipping lines for transportation, these goods will be evaluated on an FOB basis. On the other hand bids offering goods manufactured in the procuring entitys own country are evaluated on an EXW basis. 4.7.6. Evaluation on the Basis of Price and other Factors a) Inland Transportation Cost and Insurance The IRR permit comparison of bids on the basis of the total cost of goods until they are delivered to the project site. The procuring entity or project owner in its evaluation of foreign bids, can take into consideration the cost of inland freight and other expenditures incidental to the handling transportation and delivery of goods to the place of their use or installation if they are not already included in the Incoterms selected. This is in addition to the price of the bid. This cost will be from the place of entry to the project site and may include: port handling cost: inland transportation from the place of entry to the project site; and insurance from the port of entry to the project site.

Similarly in evaluating local bids, the procuring entity or project owner can consider in addition to the price of the bids, the cost of transportation, handling and insurance costs from the factory to the project site. b) Price Adjustment

If the procuring entity or project owner invites bids on prices subject to price adjustment, the procuring entity should specify the price adjustment formula which will apply to all bidders uniformly, in the bidding document. The procuring entity should compare the bids only on the basis of the base price, excluding the price adjustment during performance of the contract, since any computation of probable increase or decrease in labor and material cost would be speculative. If in response to an invitation for bids subject to price adjustment, a bidder chooses to quote a fixed price, no special consideration will be given, and the price adjustment factor will be considered as zero. Page 53 of 150

c)

Delivery Schedules

For purposes of bid evaluation, the estimated time of arrival of goods should be calculated for each bid after allowing for reasonable international and inland transportation time. The Evaluation Committee will then treat the Bid resulting in such arrival time as the base and a delivery adjustment will be calculated for other bids by applying a percentage, specified in the bidding documents of the EXW/CIF/CIP price for each week of delay beyond the base, and the Committee, will add this to the bid price for evaluation. Whenever possible, the procuring entity should initiate procurement sufficiently early so that delivery schedules normally available in the market are acceptable and no premium has to be paid for urgent deliveries. The bidding documents should indicate the latest delivery schedule acceptable to the procuring entity, and a bid offering delivery beyond this time would be clearly non-responsive. No advantage should be given for early delivery unless this will produce real benefits for the purchaser. Where bidding documents require delivery of goods is in partial shipments, bids offering delivery earlier or later than the specified dates should be adjusted by adding to the bid a factor equal to the percentage to be specified in the documents, of the EXW/CIF/CIP price per week of variations from the specified delivery schedule. d) Cost of Spare Parts

In the procurement of simple durable goods such as engines, pumps, vehicles, tractors, etc., the cost of initial and subsequent spare parts is very important as it adds up to a substantial part of the maintenance costs. Bidders should be required to include in the bid the price of spare parts over a specified period of time. These prices are added to the bid price when evaluating the bids. Bidders should also be asked to include the costs of maintenance and the supply of spare-parts. After the lowest evaluated bidder is determined the procuring entity and such bidder could enter into an appropriate arrangement for both the supply of spare-parts and maintenance as may be required in the specific circumstances. 4.7.7. Evaluation on the Basis of Life Cycle Cost Life cycle cost is the assessment of the initial acquisition cost plus the follow-on ownership cost to determine the total cost during the life of a works plant or equipment. In the procurement of works or equipment in which the follow-on cost of operation and maintenance are substantial, a minor difference in the initial purchase price between two competing bids can easily be overcome by the difference in follow-on cost. In these cases, it is most appropriate for the Procuring Entity or Project Owner to evaluate bids on the basis of life cycle cost. The following elements would comprise a typical life cycle assessment in the procurement of highway transport trucks: initial purchase price; adjustment for extras, options, delivery, variations in payment terms, etc.; estimated fuel cost during the life of the truck;

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estimated cost of spare parts and labor for maintenance during the life of the truck; and estimated residual scrap value at the end of its economically useful life (e.g. six years)

The follow on costs such as fuel, spare parts, maintenance and residual value should be discounted to net present value to make the proper comparison. In some situations such as the procurement of a major thermal plant, the relative life cycle cost can be evaluated by capitalizing the differences in efficiency in the boiler, turbine, generator and transformer. In an industrial plant, in addition to the total life cycle cost of the plant itself, the procuring entity or project owner may also include the factor of the productivity of the plant and determine the total life cost per unit output. For example, in the procurement of a fertilizer plant or a steel bar mill or oil palm mill, the total cost will be divided by the rated output to arrive at per tonne of output cost which will become the basis of comparison. 4.8. Deviations from the Requirements of Bidding Documents

Bidding documents generally outline numerous procedures, conditions and requirements some of which are mandatory and some which are not. In some instances, bidders submit bids that deviate from the specifications required by the procuring entity or project owner. Deviations include exceptions, exclusions, qualifications, conditions, stated assumptions, alternative proposals and changes to stated requirements. Deviations may either be material or non-material. Material deviations are: those which affect the scope and quality or performance of a contract; limits the procuring entitys or project owners rights or bidders obligations; and affects unfairly the competitive position of other bidders.

A bid which has complied with all the mandatory requirements of the bidding documents, but has minor or insubstantial deviations in respect of terms or conditions on the technical specifications, should be retained for more detailed evaluation and should not be rejected. On the other hand, one which is not substantially responsive because as it contains material deviations or reservations to the terms, conditions and specifications in the bidding documents should not be considered further. In determining whether a bid is substantially responsive the procuring entity or project owner, apart from taking into consideration the general procedural issues, also considers the bidders compliance with the required technical specifications and the commercial aspects of the bid. Deviations may be clarified by bidders but not withdrawn. The following examples are considered to be non-material deviations and would be permissible in a substantially-responsive bid: a) Commercial Aspects a bid offering delivery at a date slightly different from that indicated in the bid invitation, unless it is later than an absolute cut-off date that is clearly stated as such in the bidding documents; a bid with a fixed price in response to bidding documents calling for bidders to submit prices subject to price adjustment (the reverse situation, i.e., a submitted

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price subject to adjustment when a fixed price is called for, would normally not be permissible); a bid requesting changes in the coefficient of the price adjustment formula specified in the bidding document or seeking a ceiling for the price adjustment; a bid having minor deviations in payment terms;

b) Technical Aspects a bid offering alternative goods that are equal or superior in specifications and performance, unless the bid documents explicitly prohibit consideration of any alternatives; a bid which meets all performance criteria of a works plant, but not dimensional provisions that do not affect performance or the utility for the purpose intended; a bid which offers goods with minor deviations from the technical specifications which do not affect the suitability of the goods for the intended use, e.g. an agricultural tractor with a diesel engine developing 80 hp at 2600 rpm in response to bid specifications for agricultural tractors developing 80 hp at 3000 rpm, (deviations which affect the efficiency or performance should be evaluated for purposes of comparison); and a bid which offers the equipment specified but has omitted minor attachments and components, e.g. a tool kit in motor vehicle. However, the procuring entity must quantify this deviation in monetary terms during the detailed evaluation process prior to comparing such bid with the other bids. Quantification of Omissions and Deviations

4.9.

The procedures described above for correcting arithmetic errors and converting to a single currency are simply mechanical calculations and are not related to the substance of the bids. In many cases, bidders will present bids that deviate from bidding document requirements, either accidentally or deliberately because they believe they gain a competitive edge as a result. Regardless of the reason, such omissions and deviations should be quantified in money terms whenever possible, to permit direct comparison with other bids. In the case of omission of one or a few essential items from a bid, rather than rejecting the bid in its entirety, a surrogate price for these items may be obtained from printed parts and price lists, if available, or from the quoted prices of other bidders. In the latter case, a price representing the average of several other bidders for the corresponding item should be used rather than the lowest or highest figure. The most common deviations in bids are proposals for different commercial terms; i.e., for amounts of advance payments, changes in payment schedules, etc. and for changes in the schedule of delivery of goods or completed works. These can usually be adjusted by applying an appropriate discount rate and converting them to their equivalent present worth to equalize them with non-deviating bids. As already indicated, no advantage should be given to a bid offering an earlier delivery date than is specified in the bid document unless there is a real benefit to the procuring entity or project owner. Any bid offering a delivery date that goes beyond a final acceptable cutoff date specified in the bidding document should be rejected as a non-responsive bid, irrespective of the offered price. Page 56 of 150

Another form of bid deviation is to offer a higher capacity or standard of performance than is required by the bidding document: a larger engine size, greater carrying capacity, etc. No additional bonus or advantage should be given to such offers unless the bid document specifically provides for this and sets out how the differences will be evaluated. In the case of power generating equipment, medical equipment, process plants, etc., bid documents should always include evaluation criteria and procedures which take into consideration the value of additional capacity, higher efficiency, lower production costs, etc. The bid document is the authoritative source for determining whether various kinds of deviations are acceptable in a particular case. If it does not specifically rule out or set limits on commercial deviations, these can be evaluated on present value calculations. Specifications and Bid Data Sheets should indicate if technical deviations are acceptable and, if so, what criteria and procedures should be used for their evaluation. 4.10. Evaluation of Bids for Works Contracts Evaluation of bids for works contracts is more complex than the evaluation of bids for goods. To make the evaluation process easier and transparent, it is essential for the procuring entity or project owner set out in bidding documents, well defined evaluation criteria and carry out the evaluation process in a transparent manner. If the evaluation criteria are not well defined, Bidders may be reluctant to submit bids. The evaluation of works contracts involves price and non-price factors, depending on the form of works contract being procured. The selection of bids for a works contract involves two steps after the preliminary examination to determine responsiveness. The first being the selection to determine whether Bidders demonstrate relevant experience in the undertaking the works being procured and the second step is based on price. As in the case of evaluation of bids for procurement of goods, evaluation of works contracts begins with a determination of the following basic issues: was the bid received by the due date required in the bidding documents; is the bidding documents purchased from the procuring entity or project owner and accompanied by the bid security; is it submitted in the required form, where necessary; and does it comply with all the specific mandatory requirements of the bidding documents.

Once a bid has been determined as responsive, the Bid Evaluation Committee assesses the technical feasibility of the bids and compliance of such bids with specifications required in bidding documents. Evaluation also involves the examination of the Bidders key staff in order to make a determination of whether they possess the qualifications and experience to undertake the works contract. The procuring entity or project owner also takes into consideration similar works procurements that the Bidder has engaged in within the last five or so years, and whether they have been successful. Apart from these the Bid Evaluation Committee also evaluates the Bidders financial capabilities using the documentary evidence of the Bidders financial viability to carry out the contract. Bidders should submit with their bids financial statements for a number of years specified in the bidding documents. These fall under the non-price factors that need to be evaluated.

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After evaluating the non-price factors, the Bid Evaluation Committee, proceeds to evaluate the prices offered for the contract. Depending on the kind of works contract being procured, the lowest evaluated bidder is determined and awarded the contract. In a contract for the building of a major road or power plant, the lowest evaluated bidder is the one offering the lowest price to the procuring entity or project owner to build the road or power plant. 4.11. Evaluation of Deviations in Bids for Works Contracts. Bidders for works contracts often qualify or condition their bids in some way, creating problems for procuring entity staff who must decide whether a bid is substantially responsive to the bidding documents and, if so, how deviations from the bidding conditions should be handled in the evaluation of bids. Clear unambiguous bidding documents prepared by experienced staff of the procuring entity result in fewer qualifications by bidders. Pre-bid conferences during the bidding period should also be convened to clarify any serious ambiguities and discrepancies in the documents. Deviations may include exceptions, exclusions, qualifications, conditions, stated assumptions, alternative proposals (when not specifically solicited) and other changes to the requirements of bidding documents. Their degree of acceptability and impact on bid comparison will vary; some may be clearly unacceptable; some that are acceptable may be quantifiable in monetary terms; others may not be quantifiable but may still affect the competitive position of other bidders. The first stage in evaluation is to decide whether the deviations in a bid are so material as to be unacceptable, and therefore are grounds for rejecting the bid. Fairness to the other bidders is a prime consideration. A bidders deviation which, in itself or by its withdrawal or rectification, would seriously affect the competitive position of other bidders unless they were given the same opportunity would normally constitute grounds for rejection of the entire bid. The following deviations (or some combination thereof) may result in rejection of bids in Government financed contracts: bid submission by a legal entity or joint venture different from that which was prequalified (excepting when all members of the new joint venture were prequalified initially); the submission of a base bid subject to price adjustment when fixed price bids were called for; the submission of a bid based on an entirely different alternative design where such had not been requested nor expressly permitted; an inflexible time phasing of contract construction or performance not conforming to prescribed critical key dates or milestones in a broader construction program; and sub-contracting in a substantially different amount and manner than specified.

Deviations from the bidding requirements which do not appear at first sight not serious as to provide immediate grounds for bid rejection maybe considered further in the evaluation process. The following are examples of such deviations in Government-financed contracts:

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an amount of advance payment and other payment terms (including retention money, guarantees, the details of price adjustment provision) differing from the prescribed conditions; non-compliance with local regulations relating to labor, imports taxes, duties, notarization, etc.; changes in specified methods of construction or execution (temporary works, shift work by labor, etc.); subcontractors not meeting pre-specified requirements; omission (deliberate or unintentional) of minor works or items included in the scope of work; non-acceptance of full liabilities (e.g. risks to third parties, nearby structures, etc.); modification of, or a limit to the amount specified for liquidated damages; and proposed changes in standards or codes relating to materials, workmanship or design.

The details and implications of any deviations which are not explicit should be clarified by the Engineer or Project Owner in discussion with respective bidders without change in the substance or price of the bids. (After clarification the implication of a deviation may be such as to justify rejection of the bid as non-responsive.) Each deviation having financial or economic implications should be quantified independently by the Engineer and expressed in its expected monetary cost to the Project Owner. In this respect, the submissions by bidders during clarification and pricing of similar items from the next lowest (and other) responsive bidders may prove useful. The current monetary costs of deviations with timing implications (e.g., modification payment terms, amortization of advances, limits on liquidated damages, varied construction or delivery periods, etc.) should be discounted to present values for evaluation purposes. To facilitate evaluation (and partly to discourage bidders from making frivolous or ambiguous deviations), it is recommended that bidding documents include a requirement that any deviation must be presented as an alternative offer and carry a price tag with breakdown if it is to be considered in the evaluation process; otherwise the bid may be rejected as non-responsive. Deviations or offers which are better than the requirements of the bid specifications (e.g. higher quality materials and workmanship, modified designs, shorter construction periods, etc.) should only be regarded as benefits to the Project Owner and included in the evaluation if specifically solicited in the bidding documents. Deviations which are minor or non-quantifiable (e.g., changes in subcontractors, access to site, land acquisition, sources of materials, etc.) should be assessed in terms of their reasonableness for acceptance or rejection taking into account fairness to other bidders and their impact on the implementation of the contract. The ranking order of bids should be determined using the most probable monetary costs (or benefits) to the Project Owner of all quantifiable deviations. The contract should be proposed for award to the bidder submitting the lowest ranked evaluated bid. After selecting the lowest ranked evaluated bidder in the manner described above, the Project Owner may accept the qualified bid or negotiate with the bidder for the complete or partial withdrawal of individual deviations. Non-quantifiable deviations may be accepted or rejected according to their reasonableness. The Project Owner shall consider the Page 59 of 150

outcome of the negotiations and of any consequent changes in bid price, prior to award of contract. Local bidding regulations or custom may preclude a procuring entity or project owner from considering bids which deviate substantially from prescribed conditions. In such cases, if a procuring entity or project owner insists on rejecting a heavily qualified bid (i.e., one with numerous material deviations) without further consideration regardless of the bid price, particularly if other bids have few or no deviations and the prices are reasonable in relation to the cost estimate. If the majority of low bids are heavily unqualified, the reasons for the deviations should be determined by the Engineer/Project Owner (Bid Evaluation Committee) in discussions with bidders, and consideration should be given to re-bidding amongst the same group of bidders with conditions and specifications amended to remover the probable causes. A series of addenda to the original bidding documents may suffice for this purpose and a relatively short period (30 days) may be sufficient for re-bidding under such circumstances. 4.12. Application of Domestic Preferences in the Evaluation of Bids 4.12.1 Application of Domestic Preference for Goods The Governments policy is to encourage the development of a procuring entitys domestic manufacturing industry. The procuring entity or project owner is permitted to apply a margin of preference in bid evaluation in favor of domestically manufactured goods and certain categories of works contracts, (See Article 9 - IRR) when competing with bids offering imported goods. A domestic preference margin is applied by first classifying bids according to whether the goods offered are locally manufactured or imported. After a determination of the lowest priced bid in all the classes of bids is made, an amount of 15% is then added to the CIF or CIP prices of bids offering imported goods. The procuring entity or project owner should be guided by the following general principles when applying domestic preference margins in the evaluation for goods: The application of a preference margin is permissible only as specified in the IRR and the bidding documents specifically outline the procedure for its application. The goods being procured are manufactured goods involving assembly, fabrication, processing etc., where a commercially-recognized final product is substantially different in basic characteristics of its components and raw materials. The goods offered by foreign and domestic bidders are identical or compatible in respect of quality, size, capacity and performance. There is a qualified domestic bid which, irrespective of the nationality of the bidder, has offered goods assembled or manufactured in the country of the procuring entity, which has domestic value in the manufacturing cost not less than 30 percent of the ex-factory price of the product offered. The margin of preference is added to the CIF price of foreign bids and not subtracted from the domestic bid.

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The preference is applicable even when the goods are imported by the government or a public authority exempt from paying import duties on imported raw materials or components used in the manufacture of the offered finished product. The nationality of the bidder is immaterial, but the domestic manufactured goods offered in the bid must meet the minimum domestic value added criterion. Domestic value added comprises domestic labor, the domestic content of material, domestic overheads and profits, from mining until final assembly. 4.12.2 Application of Domestic Preference in Works Contracts Procuring entity or project owner may grant a margin of preference of 7.5% to domestic bidders in ICB for works contracts as specified in the IRR. For this preference to apply, the bidding documents should outline the necessary procedures. To determine eligibility of this preference, domestic firms include purely local firms in the procuring entity country, or joint ventures of domestic firms with no more than 10% subcontracting to foreign firms. Joint ventures between foreign and domestic firms do not qualify for the application of preference. The procuring entity may apply preference margins in the procurement of works such as civil engineering and building construction, land clearing and leveling, field drainage, well exploratory drilling, site clearing for urban projects and similar activities. The applicable formulae for application of the margins are contained in Article 9. The preference is applied by adding 7.5% to the price quoted by a foreign bidder for comparison with a qualified domestic bid. 4.13. Extension of Bid Validity In ICB, bidders are required to keep their offers valid for a specified period to allow the procuring entity or project owner to examine and evaluate offers, select the lowest evaluated bid, obtain the necessary approvals from the competent authorities for the proposed award of the contract. Bids should thus remain valid for the period stated in bidding documents, usually until the final award of the contract to the lowest evaluated bidder is made. A bid that is valid for a shorter period than required by the bidding documents should be rejected by the procuring entity or project owner as non-responsive. Bid validity bidders shall be required to submit bids valid for a period specified in the tender documents, which shall be sufficient to enable the comparison and evaluation of bids and obtain the necessary approvals so that the contract can be awarded within that period. An extension of bid validity, if justified by exceptional circumstances, shall be requested and approved by the Ministry of Finance, Procurement Monitoring Office. Any such request shall be made in writing, from all bidders before the expiration date of the bid validity. The extension shall be for the minimum period required to complete the evaluation, obtain the necessary approvals, and award the contract. In the case of fixed price contracts, request for second and subsequent extensions will be permissible only if the request for extension provides for an appropriate adjustment mechanism of the quoted price to reflect changes in the cost of inputs for the contract over the period of extension. Whenever an extension of bid validity period is requested, bidders shall not be requested or permitted to change the quoted price or other conditions of the bid. Bidder shall have the right to refuse to grant such as extension without forfeiting their bid security, but those who

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are willing to extend the validity of their bid shall be required to provide a suitable extension of bid security. The adjustment provision is aimed at protecting bidders from the risk of change (usually increases) in the price of the goods offered if implementing agency takes longer than the original bid validity period to award the contract. In the case of fixed-price bids, however, bidders have to choose between: refusing to grant any extension of validity of their bids; and absorbing any cost increases that might occur during such extensions (bidders are not allowed to increase their prices as a condition of extending the validity of their bids).

If bidders who submitted low bids do not extend their bid validity, procuring entity or project owner may argue in favor of re-bidding, this results in delaying the procurement process. Procuring entity or project owner should avoid chronic delays in bid evaluation and award as competition may suffer since bidders may include a speculative cushion in their bid prices to absorb potential costs of delay. Price adjustment provisions provide an incentive for the procuring entity or project owner to award the contract within bid validity period. Bid evaluation and the selection of the lowest evaluated bid are based on the prices quoted, disregarding the adjustments, which will eventually affect only the contract price. 4.14. Confidentiality The IRRs stress the confidential nature of the evaluation process. After suppliers, contractors and consultants have submitted their bids to the procuring entity or project owner by the required deadline, the bid evaluation process outlined above begins on the date indicated in the bidding documents for bid opening. It is important for procurement staff to note that after the deadline for receipt of bids for goods or works, confidentiality is imposed and is maintained throughout the evaluation process until announcement of the award of contract. The Bid evaluation process is carried out by the procuring entity or project owner (bidding committee and official related to the procurement), and while the process is going on information relating to the examination, clarification and evaluation of bids and recommendations concerning award should not be disclosed to any person not officially concerned with the process. The text of the communication in respect to the evaluation process should not be made available to any other party. Any response, beyond a simple acknowledgment to questions concerning the propriety of an award, whatever the source of the query, should be made only after decision on the recommendation for award. This restriction also applies during the prequalification evaluation process. Accordingly, if procuring entity or project owner or bidding committee staff is approached by firms or individuals during the evaluation period to the date of final award of the contract to the lowest evaluated bidder, they should limit their response to acknowledging the query and the points made and advise the inquirer that the bidding process is confidential.

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4.15. Rejection of All Bids In some situations the procuring entity or project owner is permitted by the IRR to reject all bids submitted in response to an invitation for bids. However, this has to be provided for in the bidding documents and the approval of the MOF/PRMO must be obtained by the procuring entity. The procuring entity may reject all bids under the following circumstances: Where the price in the lowest evaluated bid exceeds the procuring entitys or project owners bid cost estimates by a substantial margin; When all the bids received are not responsive to the requirements in the bid documents; and Where the procuring entity or project owner after receiving bids reasonably concludes that there is lack of competition.

Where all the bids are rejected, the procuring entity or project owner should review the bidding documents and make any appropriate revisions. If substantial changes are made to the bidding documents, the procuring entity or project owner should then invite new bids on the basis of the new bidding documents. 4.16. The Standard Bid Evaluation Report After the completion of the evaluation process for the specified thresholds in IRR Article 22 the procuring entity or project owner (bidding committee shall prepare Bid Evaluation Report in according with Standard Bid Evaluation Report format prepared by the MOF/PrMO. This report covers among other things: key dates and steps in the bidding process; examination and preliminary evaluation on the completion of bidding documents submitted; experience evaluation; detail evaluation of the bidding documents; bid prices, corrections, discounts and currency conversions; additions, adjustments and price deviations; domestic preference if any; postqualification results; names of bidders rejected and reasons for rejection of bids; and the proposed contract award.

4.17. Contract Award and Contract Negotiation The basis of awarding the contract, bid shall be responsive to the requirements in the bid documents and lowest evaluated price and obtain approvals from the competent authorities for the approval of bid evaluation specified in item 4.5 of this Manual. The procuring entity or project owner shall implement as follows: send notification of the award, a contract form, and a performance security form (indicating the amount of security) to the successful Bidder in a manner and within the time specified in the bidding documents;

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request the supplier to return the signed contract together with the required performance security within the time specified in the bidding documents; and notify unsuccessful Bidders as soon as possible after receiving the signed contract and the performance security.

If the successful Bidder fails to return the signed contract or provide the required performance security, the procuring entity may: require forfeiture of the Bidders Bid Security; and proceed to offer the contract to the second lowest evaluated Bidder, provided that he is capable of performing satisfactorily.

4.18. Contract Negotiation Since price is the key to the selection of the supplier/contractor, it is not recommended to negotiate price. However, negotiations may be conducted with the selected supplier/contractor to finalize payment terms, special terms and conditions, delivery etc. It is of the utmost importance that the negotiations should result in the clear understanding of both parties on their responsibilities under contract. 4.19. Signing Contract After drafting the contract which is discussed and approved by the parties, the contract shall be signed by full authorized person of each parties or may have the witnesses of each parties signed the contract. A contract signing ceremony may be organized or send to each party to sign. The signed contract shall be registered by the suppliers or contractors responsibility. 4.20. Inspection and Contract Administration Inspection and contract administration are one of important stage of the procurement. The important point shall be considered as following: - Completion/delivery time; - Quality meets with the technical specification requirement; - Quantity; - Warranties; - Maintenance period; - Close Out. All contracts shall assign Inspectional Committee, to inspect and approve the goods and works. The Inspectional Committee may be the same members of the Bidding Committee or a separate Committee. Inspection and delivery certificate of goods is to recheck of the delivery. Quantities of them are completed and technical specifications meet as proposal. The conditions of goods are checked for damage or not damage. If they are damage, the Inspectional Committee shall report to the procuring entity or project owner and suppliers for information. If Supplier does not take action as specify in the contract after delivery, the procuring entity or project owner shall take measure to find out reason and suppliers responsibility. Inspection and Certificate of Acceptance of works and maintenance are to examine the progress of works

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as specify in the construction plan and the quality meeting with the provision of the contract.

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Section 5.
5.1.

Method of Payment

General

The procuring entity or project owner may determine suitable method of payment in the Special Conditions of Contract, method of payment commonly used for procurement are as follow: a). Advance Payment. Advance payment payable to the contractor or supplier will not exceed 20% of the contract value against an irrevocable bank guarantee to be provided by the contractor or supplier for equal value. The bank guarantee shall be valid for duration of the contract. Advance payment may be paid only if the contractor or supplier requested or specified in the bidding document (Special Conditions of Contract). b). Payment based on work progress (interim) or based on the quantity of goods delivered in such period. Payment based on work progress is used for works contract which the project owner shall specify in the bidding document. In other case, payment based on the quantity of goods delivered in such period is used for the procurement of goods. Payment will be made based on the quantity of goods inspected and certificate of delivery until the goods is completely received according to the contract and shall specify in the bidding document (SCC). c). Payment after work completion or delivery is payment made at once when work is completed and inspected to be completed as specified in the contract. For goods, payment shall relate to delivery and acceptance report by the procuring entity or user. 5.2. Necessary documents for Payment a). In case of goods: To facilitate payment, supplier shall prepare and submit the following documents: 1. Invoice indicating description of goods, quantity, unit price and total price; 2. Packaging list 3. Certificate of acceptance and delivery of goods from the procuring entity or user; 4. Insurance and transport certificate; 5. Any other documents specified in the contract. For example: if the goods is medicine, the supplier shall have the manufacturers warranty certificate/quality certificate/product research report, expiry date; b). In case of works, payment will be made by phase and related to work completion certificate. The contractor shall prepare and submit the following documents: 1. Certificate of Completion from the Consultant monitoring the work or Inspectional Committee; 2. Progress report; 3. Any other documents specified in the contract.

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Section 6: Prequalification of Bidders

6.1. General

Prequalification is common for large works, civil works, turnkey plants, BOT, some special goods and complex information technology systems. However, prequalification is not generally needed for vehicles, PC supply and ordinary goods. In initiating the procurement process, whether or not there is prequalification of bidders. The procuring entity or project owner need to carry out the following processes, to initiate and manage the bidding process: appoint the prequalification evaluation committee, the committee is appointed similar to the public bidding evaluation committee; distribute the Invitation for Prequalification to potential suppliers/contractors; distribute any necessary addendum to the prequalification documents within the allotted time specified in the Particular Instructions to Applicants (PITA); distribute all amendments to the prequalification documents to all firms which have expressed interest in the prequalification process after receiving the Invitation for Prequalification;

The time allowed for these activities are specified in the Particular Instructions to Applicants (PITA) and must allow time for potential suppliers to prepare responsive their prequalification applications for the specific procurement. 6.2. Use of Prequalification

Prequalification is aimed at ensuring that only contractors and suppliers who have the required experience, technical and financial resources bid for a contract. Prequalification screens potential bidders and is designed to provide the following benefits: Unqualified bidders save the cost of bid preparation which results in lower overhead costs to them and, therefore presumably lower bid prices in the long run, to the benefit of the procuring entity or project owner. Leading contractors and suppliers, particularly the international ones, are more likely to bid knowing that competition is confined to only those qualified. This is also to the benefit of the procuring entity or project owner. The scale of interest by potential bidders can be measured, affording the opportunity to revise bidding conditions as necessary to develop adequate competition. The evaluation of only bids from qualified bidders may result in time and cost savings to the procuring entity or project owner, as well as a reduction (or elimination) of the threat of pressure being applied by marginally or unqualified bidders for their low prices to be considered. An early indication of the procuring entitys or project owners procurement capability is provided, allowing necessary improvements to be made at the initial stages of procurement. A preliminary indication of a contractors eligibility for domestic preference in civil works/goods contracts is given, where this is allowed. The creation of appropriate joint ventures is encouraged. and

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Providing assistance in locating financing.

However, prequalification has some potential disadvantages: It may increase procurement lead time, although this can be minimized by good procurement scheduling, e.g. undertaking the process while bid documents are in preparation; The procuring entity or project owner is required to review all prequalification applications whereas with postqualification, the procuring entity or project owner would only review qualifications of one bidder; Names of all prequalified bidders are known in advance of bid submission, making it easier for bidder collusion and price fixing to occur; and Prequalification shall not apply for the bid which is known to have limited contractors or suppliers.

Where government agencies or civil works contractors are likely bidders, prequalification may be used to determine that they are not only capable of supplying the items to be procured, but also that they are commercially-oriented and do not enjoy direct or hidden subsidies from the government. This ensures that a fair competitive bidding situation exists and thus, eligible private sector domestic and foreign suppliers and contractors do not refrain from bidding. Prequalification should not be used to limit competition to a predetermined number of potential bidders. All applicants who have the qualifications to perform the proposed contract should be prequalified and bidding documents made available to all those who prequalified. No upper limit should be imposed on the number of prequalified potential bidders, but, if the prequalified applicants are too few to ensure competition, a reassessment of the situation can be carried out. This includes: further advertising for prequalification submission; extension of the deadline for applications; review of the proposed contract conditions to reduce contractors risks; and improvement of advance mobilization payments.

The procuring entity or project owner may also review prequalification requirements but should not lower them merely to increase competition. Setting of standards/requirements at different well defined levels may be justified when a contract is divided into several smaller, less complex contracts, and bidding is on a slice or package basis. After prequalification, prequalified bidders are invited to submit bids which are eventually evaluated. The procuring entity or project owner is required to award the contract to the bidder offering the lowest evaluated responsive bid. The procuring entity or project owner should ask bidders to confirm and update essential prequalification information at the time of bid submission. The lowest apparent evaluated responsive bidder may be denied the contract if evaluation of the updated information indicates that the bidder, no longer possesses the necessary capabilities. This could occur because of changed financial situation, loss of equipment or key personnel, or lack of capacity because of new contract commitments on the bidders part. 6.3. Advertising for Prequalification Page 68 of 150

Advertisements and invitations for prequalification should conform to the provisions of the IRR and have the following information: a brief description of the goods and works to be procured; the contract conditions; who is financing the project; eligibility requirements for potential bidders, suppliers and contractors; and the time and place where prequalification documents can be obtained.

Prequalification documents should enlarge on the information provided in the notification advertisement and contain a description of: the proposed procurement; the estimated value of the contract and major quantities of work; location of the work; eligibility requirements including, eligibility requirements for domestic preference; procurement scheduling of goods or works to be procured; abbreviated specifications and conditions of contract; main quantities to be procured; delivery or implementation schedules; requirements for bid and performance securities; how the project is to be financed; payment terms; price adjustment provisions; the language and governing law of the contract; other information in sufficient detail to enable bidders, suppliers or contractors to assess their interest and respond appropriately; and the name and address of the procuring entity and of the procuring entitys official in charge of the procurement with a statement of their roles.

For purposes of evaluating the applicants, the prequalification documents should include a questionnaire, requiring applicants to respond to direct questions as well as to complete a series of forms. The information solicited and the number of forms to be filled should be the minimum essential required to make an objective decision as to the bidders capabilities. The procuring entity or project owner should avoid requesting excessive formfilling, testimonials, affidavits from bidders former or current clients, notarized documents and any other non-essential documents and information which will deter some of the qualified firms from applying. Properly designed and completed, the questionnaire should provide the procuring entity or project owner with a good framework for evaluation, while encouraging applicants to provide full pertinent details on their capabilities. 6.4. Prequalification for Multiple Contracts

Prequalification can also be used for a package of contracts essentially similar in type and size. Under these circumstances, applicants can be prequalified for a specific or single contract, combinations of contracts or the entire package. The prequalification document should thus describe the package and the slices, and the criteria required for bidders to meet the qualification requirements for slices, groups of slices or the whole package. The

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applicant should be asked in the prequalification documents to indicate the contracts for which it wishes to be considered. 6.5. Basis of Prequalification

Prequalification should be based entirely upon the technical, managerial and financial capabilities of prospective bidders to perform the particular contract satisfactorily, their past performance and litigation history. The procuring entity or project owner should evaluate bids from suppliers and contractors in a manner that takes into consideration the period over which the contract will be executed and known commitments of the bidder over that period. Where the prime contractor proposes to use the services of major specialist subcontractors, their names and experience should also be solicited. However, the procuring entity or project owner should not require applicants to furnish particulars of suppliers of minor subcontractors, particularly if their incorporation in the procurement of, for example, a works or industrial plant will take place many months into the contract. The procuring entity or project owner should avoid rigid statements in the prequalification documents to the effect that applicants who do not answer all questions or submit all required information shall be disqualified. The expression may be disqualified is preferable, as it provides flexibility. It is also not in the procuring entitys or project owners interest to reject applications of qualified applicants on the basis of trivial or narrow interpretations of prequalification submissions. However, the procuring entity or project owner should reject incomplete applications. 6.6. Prequalification of Joint Ventures

Special conditions apply when the applicant for prequalification is a joint venture formed by two or more firms. It is essential that the prequalification documents state clearly the conditions applying to joint ventures, and to any change in its membership after prequalification and to subsequent bidding by the joint venture. The MOF/PrMO recommends the following conditions for this purpose: (a) No firm or individual partner of the joint venture is allowed to submit or to participate in more than one bid and the procuring entity or project owner should reject any bid submitted in violation of this rule. Applications submitted by a joint venture must meet the following requirements: each partner in the joint venture must submit the complete documentation required of a firm applying for individual prequalification; the prequalification application must confirm that if after prequalification the applicant should submit a bid, then: that bid as well as (in case of an award) the resulting contract would be signed so as to be legally binding on all partners jointly and severally, and, a joint venture agreement providing that joint and several liability of all partners in respect to the contract would be submitted together with the bid; the application must include a description of the proposed participation and responsibilities of each partner of the joint venture;

(b)

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the application must include a statement of proposed capital contribution of each partner, and the sharing out of profits and losses among the parties; the percentage participation in the joint venture of each of its members (in terms of the corresponding value of the contract) must not exceed each members capacity in terms of each of the qualifying criteria; and the application must designate one of the partners, as the partner in charge through whom any correspondence between the applicant and the procuring entity or project owner will be channeled.

(c) The procuring entity or project owner must approve in writing any formal agreement for a proposed joint at the time of prequalification and any changes to a prequalified joint venture. After prequalification there should be no new joint ventures formed. The procuring entity or project owner should not approve any changes in prequalified joint ventures if they would in the procuring entitys or project owners opinion result in: a substantial reduction of competition; the inclusion of a firm which had not previously been prequalified (either individually or as a part of another joint venture); or acceptance of the joint ventures qualifications below the minimum requirements stated as acceptable in the prequalification documents.

6.7.

Procedural Requirements for Prequalification

The procuring entity or project owner may issue prequalification documents free of charge or for a reasonable fee. All prequalification documents should be in the language to be used in the bid documents, i.e. Lao or English and other language. Supporting materials such as financial reports should be submitted in their original language along with a certified translation of all relevant portions into the stipulated language for bidding. Prequalification documents should specify the submissions required, such as completed questionnaire forms and supporting documents and their number and the deadline for their submission. They should also contain a clear statement on the criteria for evaluation of prequalification applications. The anticipated period for evaluation, usually 30 to 60, days and the method of notification to all applicants of the results should be indicated in the documents. The procuring entity or project owner should not consider prequalification applications received after the time stipulated. The procuring entity or project owner should also make a formal acknowledgment of receipt of the prequalification proposals. Public opening of prequalification applications is not necessary and evaluation of the applications should be conducted confidentially by the procuring entitys Prequalification Evaluation Committee. A full report should be submitted to the MOF/PRMO describing the application of the evaluation criteria, with tables as necessary stating the reasons for disqualifying applicants. After review and approval by the MOF/PRMO, the procuring entity or project owner should provide all the applicants with a list of the prequalified firms. Bids should be invited as soon as possible after completion of prequalification. For very large projects, the MOF/PrMO encourages the procuring entity or project owner to hold a prequalification conference, including a site visit, in order that potential bidders assess conditions first hand. Page 71 of 150

6.8.

Evaluation of Prequalification Applications

The MOF/PrMO recommends that evaluation of prequalification application should be based on compliance with quantifiable clearly identified minimum thresholds, which establish the capability of an applicant to carry out the contract satisfactorily. Applicants are prequalified if they meet all the required criteria on a pass/fail basis or point system. The criteria should also be objective; ambiguous requirements such as general reputation, or co-cooperativeness or irrelevant ones are not acceptable and thus should not be used. Likewise the criteria should not be unfairly discriminatory. Examples of the type of essential criteria for prequalification of civil works contractors that procuring entity or project owner may require include: Experience: Having carried out a specific volume of work, comparable to that required for the critical items of the contract (for instance X million cubic meters of earth-moving plus laying Z kilometers of steel pipeline of given minimum diameter, for a pipe laying project), measured annually, in at least two of the last five years. Experience in the procuring entity or project owner country is not usually a relevant criterion; however, experience in countries with similar climatic, hydrographic, topographic or cultural conditions may be relevant in some cases. Financial Resources: Demonstrating availability of the financial means to fully finance the estimated contract cash flow for a specified period of N months, net of requirements for other known commitments over the period of construction. N is determined as the time, from the end of the month being invoiced, required by the procuring entity or project owner to pay the applicant/contractor, including the time needed by the Engineer to issue the interim/monthly certificate, plus two months. (A straight line cash flow is assumed, neglecting any advance payments and retentions.) Personnel Resources: Having a pool of experienced staff capable of performing the key functions required for the project, from which contract personnel will be drawn. The prequalification document should list the essential functions, and the number of years of relevant experience of the personnel to be detailed in the submission. At least two staff members for each essential position should be available. The procuring entity or project owner should avoid using words such as qualified or licensed as well as university degrees, unless they are essential for a specific function. Equipment Resources: Having available specialized equipment essential for the execution of the contract. This could include a dredger, pile driver, slurry trencher and an extra heavy face shovel. The list should be limited to highly specialized or heavy equipment which would be critical to the execution of the contract, and cannot easily be purchased, hired or leased in the market, or readily manufactured for the task. Normal construction equipment (scrapers, bulldozers, loaders, tip trucks and pavers) which can normally be bought leased or hired off-the-shelf should not be listed, unless there are particular circumstances which would make access to them difficult. Particular attention should be paid to the setting of requirements for the presentation of financial information. For instance applicants may present their financial statements with the intention of minimizing taxes and thus, the extent of true resources may not be

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reflected, but severely understated. Accounting procedures also vary from country to country and financial strength based exclusively on standard financial ratios can be meaningless when applied to results accounted for under different rules and methods. For these reasons, evaluation of financial capability should place the onus of demonstrating adequate means on the applicant. Thus, the procuring entity or project owner should give the applicant a certain amount of latitude with respect to the information and documents to be supplied. These include: cash and convertible documents in hand, a line of credit from a reputable bank, overdraft facilities, other bank loans, suppliers credit and any other evidence that the applicant complies with the financial criterion for prequalification. An applicant can be prequalified subject to certain conditions that must be fulfilled before such applicant is allowed to bid or to be awarded the contract. Typical conditions might require: submission of additional information; a revision of a joint venture agreement; hiring of experts in specialized areas; or changing the proposed foreign source of bid performance securities to one that is acceptable to the procuring entity or project owner.

Conditional prequalification is also appropriate where a potential increase in the work-load of the applicant could significantly alter its ability to undertake the prospective contract. If the procuring entity or project owner doubts the accuracy or completeness of a prequalification application, the applicant should be requested to provide verification or supplement earlier provided information. Procuring entity or project owner may also contact references cited in the applications for information required. Applicants for prequalification are required to provide the procuring entity or project owner with authorization to do so, in their prequalification applications. The procuring entity or project owner should also check the litigation and arbitration history of prequalification applicants, in order to ensure that there are no judgments or decisions that create liabilities that affect the applicants ability to perform the contract. Prequalification Evaluation Report After the procuring entity or project owner has conducted prequalification process, a Prequalification Evaluation Report is prepared by the procuring entity or project owner for review by the MOF/PrMO. The report contains the following information: 6.9. A list of all prequalified applicants and their qualifications; A list of disqualified applicants and an explanation for their disqualification; and A list of conditionally prequalified applicants if any.

Postqualification of Bidders

In the absence of prequalification, postqualification of bidders who tender for procurement contracts is necessary. Postqualification involves determination by the procuring entity or project owner that the bidder, supplier or contractor submitting the lowest responsive evaluated bid, has the capability and the capacity to perform the contract. If this bidder fails Page 73 of 150

to demonstrate the necessary experience and capability to carry out the contract, the bid is rejected and the next lowest evaluated bidder is subject to postqualification. Post qualification is suitable for use in the procurement of goods of small value and small works contracts. Postqualification requirements are in principle similar to those for prequalification, but bear mainly on the technical and financial resources available for fulfilling the contract. Qualifications of the lowest evaluated bidder are scrutinized using data submitted by the bidder as well as information gathered by the procuring entity or project owner. To ease evaluation during the process of postqualification, the bid documents should contain a questionnaire on qualifications similar to that which the procuring entity or project owner would use in a prequalification document. The criteria for postqualification should be clearly set out in the bid documents. When practical and appropriate, the minimum qualification requirements should be listed in the Invitation for Bids, to provide guidance to potential bidders as to whether in their own judgment they are qualified to submit bids. It should also indicate the pertinent factors that will be analyzed by the procuring entity or project owner in arriving at the determination whether or not the bidder is qualified. Financial data that bidders should provide with their bids may include: a bankers statement; statements of business accounts; and statement of overall business turnover in three previous financial years. Performance data for goods may include: information on similar deliveries in the last three years; description of competence of the bidders technical personnel; and certification by official quality control institutes. For works contracts, performance data may include information on similar works undertaken in the last five years; whether the bidder has the necessary equipment or access to the equipment needed for the works contract; whether he has the personnel and manpower to undertake the works and if he is aware of the testing procedures to endure that the works can perform the purpose for which they were procured. After postqualification the procuring entity or project owner prepares a detailed Standard Bid Evaluation report, indicating how the recommendation for award was arrived at.

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Annex 1: CHECKLIST FOR PREQUALIFICATION SUBMISSION 1. Applicants should be required to submit the following in respect of their organization and legal status: (a) (b) (c) name, postal and street addresses, telephone, fax and telex numbers; for corporations, copies of original documents defining legal status, place of incorporation and principal place of business; for partnerships and individually owned firms, copies of original documents defining legal status, place of registration, principal place of business and nationality of owners; designation of the individual(s) authorized to act for the organization; information on the nature and results (where applicable) of any litigation in which the applicant was involved in the last five years, including any current litigation; authorization for the procuring entity or project owner to seek detailed references with regard to financial standing or experience; and if a joint venture or other form of association, a document of intent to form a joint venture or association should be submitted. The document should define the capital contributions of the partners and sharing of profit and losses among them; the participation of the firms in the contract and the division of work, including the responsibility for overall management and coordination and the representation of the joint venture for purposed of prequalification, bidding and contract. Each member firm should respond individually and fully to all prequalification questions.

(d) (e)

(f) (g)

2.

The following financial information should be required from the applicants: (a) annual financial statements for the last five years, including an interim statement not over six months old. These should be supported by audit statements or tax returns; financial projections for the next two years, including the effect of known commitments; name and address of the applicants banker, identification of individuals familiar with the applicants standing, names and addresses of the applicants insurers, identification of individuals familiar with the applicants standing and a statement from the applicants insurer that it is prepared to insure the applicant as described in the prequalification document; statement from the applicants bank, insurer or other surety that it is prepared to issue bid guarantee or bond (as required by the prospective bid documents); and documents to demonstrate availability of lines of credit, overdraft facilities, suppliers credit, unencumbered assets, or other proof of capability to comply with the financial requirements of the prequalification document.

(b) (c) (d)

(e)

(f)

3.

The following technical information should be required from the applicants:

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(a)

Details of the experience and past performance of the applicant on works of similar nature within the past five years, including projects under way and contracts awarded but not started. These details should include: name of project and location; owner of sponsoring organization; brief description of contract, cost, details of the principal quantities involved, methods and type of equipment used (where relevant to the project for which the contractor is applying for prequalification), whether liquidated damages were applied and the dates of commencement and (initial planned and effective) completion. For contracts recently awarded, the dates will be those estimated or written into the relevant contract; extent of the applicants participation in the contract, degree of responsibility and the names of associated companies and/or main subcontractors (if any); and names and addresses of responsible officials, entities and consultants familiar with the project undertaken.

(b)

For contracts where specialized or major equipment which cannot easily be purchased, hired or leased is necessary: availability of items of construction equipment (and fabrication facilities, if appropriate) essential for carrying out the prospective contract. Descriptions should include type, capacity, age, condition and ownership status (presently owned, leased, to be purchased, liens thereon, etc.); Types and amounts of work of the contract likely to be subcontracted, with names and addresses of major subcontractors to be used, if known. For those proposed to undertake more than 10 % of the contract value, it is recommended that the subcontractor(s) reply individually and fully to all prequalification questions; and Applicants staff from whom the proposed key personnel will be drawn, including their role in contract implementation, their present positions, years of experience with the applicant and in construction in general, major previous responsibilities including the type and value of contracts worked on, and pertinent language abilities and experience in the region.

(c)

(d)

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Annex 2: TYPICAL PARAMETERS FOR PREQUALIFICATION EVALUATION 1. Experience

The prequalification document should specify the minimum experience in key elements of the work, necessary for an applicant to prequalify. For instance For an industrial project, having constructed and commissioned at least one plant producing the same final product, with a given minimum annual production capacity. For an earthfill dam, having placed X million cubic meters of earthfill in dams of comparable complexity (core, filter layers, etc.), per annum.

Where the qualifying parameter is an annual volume of construction or production, the applicant should have carried that out in at least two of the last five years; where it refers to an industrial plant, thermal power plant, and similar facilities, the applicant should have completed at least one in the last five years. 2. Financial Resources

The prequalification document should specify a certain monetary amount that the applicant must demonstrate he can finance, to cover cash flows for the contract over a given period. Cash requirements for other known commitments over the same period should also be added to this amount. The period of time should be calculated by adding the time realistically necessary for the procuring entity or project owner to pay the contractor, from the time of presentation of monthly statements. The time necessary for the Engineer to issue a certificate, and the time taken by the procuring entitys or project owners Treasury to issue payment, after obtaining all the necessary approvals is taken into account in this regard. Two months are then added as a safety measure. Cash requirements for the project itself should be calculated from the Engineers estimate of the total cost and completion time, on a straight line basis, neglecting the effect of any advance payments and retentions. The working capital necessary for other known commitments can be determined for each applicant from his submission of information on current commitments. (Refer to Annex 1) Applicants should present evidence of having available the necessary working capital, from sources available to them including, lines of credit, overdraft facilities, cash in hand, unencumbered assets, shares and bonds, etc. They are also required to produce evidence to this effect. All other financial information such as balance sheets, letters from insurers and sureties, should confirm all the above submissions, by way of demonstrating the general financial capability of the applicant. Lack of any of the documents in paragraph (d) above, should not be a cause for automatic disqualification, but rather, for making further inquiries form the applicant.

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3.

Personal Resources

The prequalification document should specify key positions for which the applicant must demonstrate having sufficient staff resources available. For instance, for a highway construction project: Project manager, with a minimum of 15 years experience of which at least 10 in similar works, and no less than 4 as a project manager; Equipment manager, minimum 15 years experience; Asphalt Plant Operator, minimum 10 years experience; Site manager, minimum 10 years experience, at least 5 in similar works; Pavement Works Superintendent (or Senior Foreman) with no less than 15 years experience.

Applicants should not be bound to appoint specific staff to the Contract, but should demonstrate having in their own staff sufficient experienced personnel for the contract and for other known commitments. Experience and not academic qualifications should be the key requirement. 4. Equipment Resources

The applicant should demonstrate having available (or access to) highly specialized, large or complex equipment, or equipment which is not otherwise easily available. For instance, in a highway contract, the following characteristics of equipment could be specified: heavy machineries; pavement machine; the minimum hourly production volume, to suit estimated rate of progress of the work and etc.

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Annex 3: FLOW DIAGRAM FOR PROCURING OF GOODS OR SMALL WORKS UNDER IRR
Plan the Procurement Process and Prepare List of Goods or Works to be procured

Select Procurement Procedure in accordance with IRR and Prepare Tender Documents

Advertise or Issue Invitations for Bid

Submission and Opening of Tenders

Evaluate Bids and Propose Award by Evaluation Committee

Tender Committee submits recommendations of award of contract to the Procuring Entity in writing

Award of contract by the Procuring Entity

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Annex 4: FLOW DIAGRAM FOR PROCURING OF LARGE CIVIL WORKS AND TECHNICALLY COMPLEX SUPPLY CONTRACTS UNDER IRR (WITH PREQUALIFICATION PROCEDURE)
Plan the Procurement Process and Prepare the List of Works or Goods to be procured

Prepare Pre-qualification Documents

Prepare Tender Documents

Invite and Receive Prequalification Proposals

Evaluate Pre-qualification Proposals Formulate List of Pre-qualified Firms

Approval by Tender Committee

Issue Invitations to Bid

Notify Firms considered not qualified

Submission and Opening of Bid in public

Evaluate Bids and Propose Award By Evaluation Committee

Tender Committee submits recommendations of award of contract to the Procuring Entity in writing

Award of contract by the Procuring Entity

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PART III: Consultants or Experts Services

IRR references: Article 15: Use of Consultants or Experts Article 16: Other Methods of Consultants and Experts Selection

Section 1: Selection Methods

1.1. Background

The expression consulting services defines services of an intellectual and advisory nature provided by consultants using their professional skills to study, design, and organize specific projects, advise clients, conduct training, and transfer knowledge. Procuring Entity or Project Owner engage consultants principally for the following reasons: Consultants offer Procuring Entity or Project Owner a more efficient allocation of resources by providing specialized services for limited amounts of time without any obligation of permanent employment on the part of the Procuring Entity or Project Owner. Consultants, engaged for their superior knowledge, transfer skills and upgrade the knowledge base of their client while executing the assignment. Knowledge transfer from consultants to the Procuring Entity or Project Owner often forms an important part of the assignment. Consultants can offer independent advice to their client on the most suitable approaches, methodologies, and solutions for their projects.

Consulting services in government projects encompass multiple activities and disciplines, including the drafting of sector policies; institutional reform, management, and financial advisory services; and the provision of engineering and architectural design services. Consultants also provide project supervision, social and environmental studies, technical assistance, and training. Consulting services may vary from routine tasks to highly specialized and complex assignments. Consulting services in government-funded projects should satisfy the following requirements: meet the highest standards of quality and efficiency; be unbiased, that is, delivered by a consultant acting independently from any affiliation, economic or otherwise, which may cause conflicts between the consultants interests and those of the client; and be proposed, awarded, and executed according to the ethical principles of the consulting professions.

Independence may be the most important asset offered by consultants. It allows consultants to choose technologies and products from a range of contractors and suppliers to satisfy the needs of the Procuring Entity or Project Owner and to protect its interests.

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1.2.

Types of Consulting Services

Current consulting services used in government projects may be grouped as follows: Project services Implementation services Tender documents Procurement assistance Construction supervision Project management Quality management Commissioning

Preparation services Sector studies Master plans Feasibility studies Design studies

Advisory services Policy and strategy Reorganization/privatization Institution building Training/knowledge transfer Management advice Technical/operating advice

For the purposes of this Manual, it is important to distinguish between consulting services and other types of services in which the physical component of the activity is crucial, although the boundary between them is becoming more and more blurred. These other types of services often involve equipment-intensive assignments using established technologies and methodologies that have measurable physical outputsfor example, field investigations and surveys such as cartography, aerial surveys, satellite mapping, drilling, computer services and installation of information systems, and plant operation and maintenance. 1.3. Main Consuderations

In this Manual the term consultant or consultants refers to any organization or person that provides consulting services to a Procuring Entity or Project Owner, or client, under a contract in government-financed projects. This chapter describes the main characteristics of the most common types of consultants engaged in government projects. When hiring consultants competitively, Procuring Entity or Project Owner should be aware of the distinction between organizations whose core business is exclusively the provision of consulting services, that is, consulting firms, and those organizations with a different mission and cost structure that only occasionally provide consulting services and may enjoy subsidies and other privileges. This distinction can affect fairness of competition, especially when price is a factor of selection. These other organizations may include financial intermediaries, universities, research institutions, United Nations (U.N.) agencies, and nongovernmental organizations (NGOs). 1.4. Selection Methods

Seven methods for the selection of consultants are provided under the IRR procedures. They include the following: Quality and Cost Based Selection (QCBS); Quality Based Selection (QBS); Selection under a Fixed Budget (SFB); Least Cost Selection (LCS); Selection Based on Consultants Qualifications (SBCQ); Single Source Selection (SSS); and

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Commercial Practices (CP).

The choice of the appropriate method of selection is related to the nature, size, complexity, likely impact of the assignment, technical and financial considerations, and the particular circumstances of the Procuring Entity or Project Owner. It is therefore necessary to carefully define the assignment, particularly the objective and the scope of the services, before deciding on the selection method. 1.4.1. QUALITY AND COST BASED SELECTION (QCBS) Quality and Cost Based Selection (QCBS) is a method based on the quality of the proposals and the cost of the services to be provided. It is the method most frequently used to select consultants under government-funded assignments. Since under QCBS the cost of the proposed services is a factor of selection, this method is appropriate when the scope of work of the assignment can be precisely defined and the TOR are well specified and clear, and the Procuring Entity or Project Owner and the consultants can estimate with reasonable precision the staff time as well as the other inputs and costs required of the consultants.

QCBS is appropriate for assignments such as: feasibility studies and designs where the nature of the investment is clear and well defined, known technical solutions are being considered, and the evaluation of the impacts from the project are not uncertain or too difficult to estimate; preparation of bidding documents and detailed designs; supervision of construction of works and installation of equipment; technical assistance services and institutional development of Procuring Entity or Project Owner agencies; and procurement and inspection services.

To increase the likelihood of receiving responsive proposals, the RFP under QCBS indicates the expected staff time estimated by the Procuring Entity or Project Owner to carry out the assignment. However, this estimate does not bind the consultants, and they should propose the level of inputs that they consider appropriate. Under QCBS the technical and financial proposals are submitted simultaneously in separate sealed envelopes (two-envelope system). Proposals received after the submission deadline should be rejected. Evaluation of proposals is carried out in two stages: (1) quality and (2) cost. The technical envelopes are opened by a committee of officials of the Procuring Entity or Project Owner immediately after the closing time for submission of proposals; the financial proposals remain sealed and shall be deposited with a reputable public auditor until the technical evaluation and the evaluation report are completed and approved by the government and the technical scores are disclosed publicly. The financial envelopes of those consultants who submitted responsive technical proposals meeting the minimum qualifying mark are opened in the presence of the consultants or their representatives. The proposals are then evaluated. Once the financial proposals are evaluated, a combined evaluation of the technical and financial proposals is carried out by weighting and adding

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the quality and the cost scores, and the consultant obtaining the highest combined score is invited for negotiations. Since price is a factor of selection, staff rates and other unit rates shall not be negotiated. QCBS permits the Procuring Entity or Project Owner to select a preferred trade-off between cost and quality and to benefit from price competition, even if only to a limited extent. Transparency is increased under QCBS with public opening of the financial proposals. Another advantage is the possibility that contract negotiations will be easier because of the limited scope for financial negotiations. The main disadvantage of QCBS is its rigidity. Since with QCBS consultants are required to compete on the basis of price besides quality, barring exceptional reasons discussion of the proposed remuneration rates for staff months and for reimbursable expenses during contract negotiations is not permitted, even if those costs turn out to be above the Procuring Entitys or Project Owners expectations. QCBS may be inappropriately used for complex or specialized assignments in which the scope of work is not precisely defined and staff months are difficult to estimate. Since price is a factor of selection under QCBS, when this occurs competitors will tend to propose more conventional approaches and tested methodologies to keep the cost of services low, rather than making full use of their capabilities to propose the most effective or innovative way to carry out the assignment. This may ultimately affect the quality of the project, especially where the downstream impacts are complex, large, or unknown. 1.4.2. QUALITY BASED SELECTION (QBS) Quality Based Selection (QBS) is based on an evaluation of the quality of the proposals and the subsequent negotiation of the financial proposal and the contract with the consultant who submitted the highest ranked technical proposal. QBS is appropriate if: the downstream impact of the assignment is so large that the quality of the services becomes of overriding importance for the outcome of the project; the scope of work of the assignment and TOR are difficult to define because of the novelty or complexity of the assignment, or the need to select among innovative solutions, or due to particular physical, social, or political conditions; the assignment can be carried out in substantially different ways such that cost proposals may not easily be comparable; and the introduction of cost as a factor of selection renders competition unfair.

QBS should be adopted for assignments such as: complex country sector and multidisciplinary investment studies; strategic studies in new fields of policy and reforms; master plans, complex prefeasibility and feasibility studies, and design of complex projects; and assignments in which traditional consultants, nongovernmental organizations (NGOs), and/or U.N. agencies compete.

In some cases the choice between QBS and QCBS may be difficult. In situations of strong uncertainty and/or risk for the project, QBS should be adopted because quality is the key element.

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A possibility under QBS is for the Procuring Entity or Project Owner to request submission of the technical proposals only. After receiving the government no-objection to the technical evaluation report, the consultant with the highest-ranking technical proposal is invited to present its financial proposal. However, the Procuring Entity or Project Owner may wish the financial proposals to be submitted at the same time as the technical proposals but in separate envelopes (two-envelope system). In that case, the financial proposals should be kept safely until the governments no-objection to the technical evaluation is received. Only the financial proposal of the winning consultant is opened; the others are returned unopened after negotiations with the winning firm are successfully concluded. The RFP generally provides the staff months only as an estimate by the Procuring Entity or Project Owner. The staff effort indicated by the consultants may differ considerably from such estimate, depending on the particular methodology adopted by the consultant. Since the TOR of assignments under QBS are generally less defined and relatively more complex than under QCBS, contract negotiations with the winning consultants may be lengthy and complicated. In this case, the Procuring Entity or Project Owner with no experience should propose to the PrMO or may decide to hire individual advisers to assist in the most critical aspects of the technical evaluation, for instance, discussion of the plan of work, staff rates and reimbursable expenses, and the definition of the consultants staff months. Occasionally the government funds projects, such as hospitals, schools and colleges, and research centers that have an esthetic component that has to be taken into account at the moment the consultant or architect is selected. Design Contest (DC) is a selection procedure very similar to QBS under which a Procuring Entity or Project Owner invites consultants to present a plan or design for a project on the basis of a concept provided by the Procuring Entity or Project Owner. The winner is selected on the basis of quality, with or without prize award, by an Evaluation Committee. DC procedures are a tool for selecting the best available architects, engineers, and planners for specific projects with important esthetic contents. Consulting assignments for major projects that can be implemented through DC are: railway stations and terminals of airports; public buildings such as hospitals, theaters, concert halls, university campuses, art and sport centers, exposition and fair complexes, and government buildings; and rehabilitation of large obsolete structures, to create multipurpose centers for public use.

1.4.3. Selection under a Fixed Budget (SFB) Selection under a Fixed Budget (SFB) is based on disclosing the available budget to invited consultants in the RFP and selecting the consultant with the highest-ranking technical proposal within the budget. Because consultants are subject to a cost constraint, they will adapt the scope and quality of their services to that budget. The Procuring Entity or Project Owner must therefore ensure that the budget is compatible with the TOR and that consultants will be able to perform the tasks within the budget. SBF is appropriate only when the budget is fixed and cannot be exceeded, the TOR are precisely defined, and

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the time and staff-month effort required from the consultants can be assessed with precision.

To reduce the financial risk for consultants and avoid receiving unacceptable technical proposals or no technical proposals at all, SFB must only be used for well-defined and simple assignments with a low financial risk for the consultants. SFB is frequently used by government Procuring Entities when there is lack of flexibility in funds allocation and by the government itself when funding is available only in fixed amounts from donor grants and from trust funds. Typical assignments awarded under SFB are: sector studies, market studies, and surveys of limited scope; simple prefeasibility studies and review of existing feasibility studies; review of existing technical designs and bidding documents; and project identification for which the level of detail can be matched with the available funds.

Under SFB, consultants are requested to submit their technical and financial proposals in separate envelopes(two-envelope system). Technical proposals are evaluated first, using the same procedure followed for QCBS and QBS, then the financial envelopes are opened in public. In case a proposal does not cover minor technical aspects included in the TOR, the Procuring Entity or Project Owner calculates the evaluated price of that proposal by adding to the offered price the estimated cost of the missing activities or items. Proposals that exceed the indicated budget after adjustments and corrections are discarded. The consultant who has submitted the highest ranked technical proposal among the remaining proposals is selected. Since the budget is predetermined, the consultants TOR cannot change substantially, and technical negotiations shall cover minor aspects. Financial negotiations will not include discussion of remuneration rates and of other unit rates, but only minor rearrangements of activities and staff for compatibility with the plan of work and clarification of any tax liability. SFB allows Procuring Entity or Project Owner to plan a budget early on rather than waiting for the uncertain outcome of negotiations. Furthermore, it allows Procuring Entity or Project Owner to receive better quality proposals than under QCBS because it is easier for consultants to maximize quality under a fixed budget. SFB also requires a shorter time for negotiations than QBS. SFB is also convenient for consultants because the preestablished budget allows them to determine in advance whether they are interested in competing for the proposed assignment, and to develop the best proposal consistent with that budget. More than with QBS and QCBS, the SFB method requires the TOR to be consistent with the established budget and to contain a well-specified scope of work in order for consultants to present clear and responsive proposals. One risk of using the SFB is underbudgeting the TOR and by doing so discourage good consultants from participating, and receive poor performances from the awarded consultants.
1.4.4.

Least Cost Selection (LCS)

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Under Least Cost Selection (LCS) a minimum qualifying mark for quality is established and indicated in the RFP. Shortlisted consultants have to submit their proposals in two envelopes. The technical proposals are opened first and evaluated. Proposals scoring less than the minimum technical qualifying mark are rejected, and the financial envelopes of the rest are opened in public. The consultant with the lowest evaluated price is selected. The LCS method is more appropriate for small assignments of a standard or routine nature where well-established practices and standards exist and from which a specific and welldefined outcome is expected, which can be executed at different costs, for example standard accounting audits, engineering designs and/or supervision of simple projects, repetitive operations and maintenance work and routine inspections, and simple surveys.

Procuring Entity or Project Owner may adopt this selection method when they wish to capture cost benefits from mature technologies or new methods for which quality risks for the final output are considered negligible. For example, modern broadband telecommunications and the Internet allow accountants, at geographically remote locations, to compete for standard accounting audits to be produced at low cost. Since quality is set as the minimum qualifying mark, the Procuring Entity or Project Owner should set such a mark higher than is usual (say at 75 or 80 percent) to ensure quality and avoid the risk of selecting low-cost proposals of poor or marginally acceptable quality. This method may be abused by tampering with the technical evaluation to select a specific consultant by pushing all proposals above the minimum mark and by actually selecting on the basis of cost only. 1.4.5. SELECTION BASED ON CONSULTANTS QUALIFICATIONS (SBCQ) The Selection Based on Consultants Qualifications (SBCQ) method applies to very small assignments for which the cost of a full-fledged selection process would not be justified. Under SBCQ the Procuring Entity first prepares the TOR, then requests expressions of interest and qualification information on the consultants experience and competence relevant to the assignment. The Procuring Entity or Project Owner establishes a shortlist and selects the firm with the best qualifications and references. The selected firm is asked to submit a combined technical and financial proposal and is then invited to negotiate the contract if the technical proposal proves acceptable. The SBCQ method aims at reducing the cost and time needed to hire a consultant. This approach does not, however, disregard quality, since some very small assignments are very important (highly specialized advisory services with a limited scope and duration or assignments that, although small, require consultants with the best possible qualifications). SBCQ maybe considered for assignments such as: brief evaluation studies at critical decision points of projects (review of alternative solutions with large downstream effects); executive assessment of strategic plans; high level, short-term, legal expertise; and participation in project review expert panels.

1.4.6. Single Source Selection (SSS) Page 87 of 150

Under Single Source Selection (SSS) the Procuring Entity or Project Owner asks a specific consultant to prepare technical and financial proposals, which are then negotiated. Since there is no competition, this method is acceptable to the government only in exceptional cases and made on the basis of strong and convincing justifications where it offers clear advantages over the competition. This is because the assignment represents a natural or direct continuation of a previous one awarded competitively, and the performance of the incumbent consultant has been satisfactory; or a quick selection of the consultant is essential, for instance, in emergency operations such as natural disasters and financial crisis; or the contract is very small in value; or only one consulting organization has the qualifications or experience of exceptional worth to carry out the assignment.

If continuity of downstream work by retaining an incumbent consultant for a downstream assignment is essential to the project and is in the interest of the Procuring Entity or Project Owner, the RFP for the original assignment should indicate this likelihood. Satisfactory performance in the first assignment has to be a precondition for continuation. In these cases, the Procuring Entity or Project Owner should balance the importance of continuing with the same technical approach, the experience acquired, and the continued professional liability of the incumbent against the benefits of renewed competition such as fresh technical approaches and competitive remuneration rates. Once the government agrees to an SSS on a continuation, the Procuring Entity or Project Owner should ask the consultant to prepare technical and financial proposals on the basis of the TOR prepared by the Procuring Entity or Project Owner, or by an independent adviser with no relation to the incumbent. This is the basis for negotiating a continuation contract. Normally the government will not agree to award a continuation contract on a SSS basis if the initial assignment was not awarded competitively, or was awarded under tied financing or reserved procurement, or the downstream assignment is substantially larger in value. In these cases, a competitive process acceptable to the government should be adopted, and normally the incumbent should not be excluded from consideration if he or she expresses interest. The government makes exceptions to this rule only in special cases and if a new competitive process is not practicable. Annex 2 provides the form used by government staff to request management approval on the adoption of SSS. 1.4.7. COMMERCIAL PRACTICES In some cases, the government provides a loan to a financial intermediary that finances private enterprises or autonomous commercial enterprises in the private sector. Such enterprises (Sub-Procuring Entities) may follow established private sector commercial practices to hire consultants. These practices should follow government principles for the selection of consultants and be acceptable to the government. However the government recommends consideration be given to using one of the competitive methods described above, particularly for large assignments.

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Section 2: Developing the Terms of Reference

2.1. Main Considerations

The Terms of Reference (TOR) is the key document in the RFP. It explains the objectives, scope of work, activities, tasks to be performed, respective responsibilities of the Procuring Entity or Project Owner and the consultant, and expected results and deliverables of the assignment. Adequate and clear TOR are important for the understanding of the assignment and its correct execution. They help reduce the risk of unnecessary extra work, delays, and additional expenses for the Procuring Entity or Project Owner. In addition, they help reduce the risk of ambiguities during the preparation of consultant proposals, contract negotiation, and execution of services. Drafting the TOR requires expertise with the type of assignment and the needed resources as well as familiarity with the project background, and knowledge of the terrain, country, and Procuring Entitys or Project Owners organization. If the needed qualifications to produce the TOR are not available in-house, the Procuring Entity or Project Owner should propose to the PrMO or hire a specialized independent consultant. TOR have to be written by experts who have only the interest of the client in mind. Often Procuring Entity or Project Owner ask government staff to assist with information and ideas in drafting the TOR. When assisting Procuring Entity or Project Owner, government staff may consult the TOR database available in the government intranet and with caution adapt existing TOR to the specific requirements of the assignment being considered, keeping in mind that those TOR may have had very different staff time estimates or budgets. The Procuring Entity or Project Owner reviews the TOR proposed by the Consultant as part of the RFP and, if satisfied, provides its no-objection. Consultants employed by the Procuring Entity or Project Owner to prepare TOR should not be allowed to present themselves as consultants in the resulting assignments. 2.2. Drafting Terms of Reference

The following considerations must guide preparation of the TOR: TOR should contain sufficient background information on the project to enable consultants to present responsive proposals. The scope of work in particular should be consistent with the available budget. TOR should take into account the organization of the Procuring Entity and its level of technical expertise and institutional strength.

The level of detail and quality of information that can be contained in the TOR influence the selection method to be adopted. For example, if the TOR cannot be defined with adequate precision and detail, QBS may be more appropriate than QCBS, whereas the latter is preferable when a defined scope of work and a reliable cost estimate are available.

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The authors of the TOR should be familiar with local natural and social conditions such as climate, topography, institutions, people, customs, holidays, remuneration levels, and transportation systems. Seasonal variations, together with the peculiarities of the region where the assignment will take place, should be considered if they can affect the execution of fieldwork. Aspects related to the logistics of the project should be researched. If a field visit by the consultants is necessary but not feasible, an aerial trip may be arranged to enable them to form an overall impression of the area. If transfer of knowledge and training are required as part of the assignment, the Procuring Entity or Project Owner should decide whether to include a training program in the TOR. If a training program is included, additional time and budget should be allocated. The TOR should clearly define the output and deliverables required of the consultants, such as reports, maps, drawings, or software, and should list information that the Procuring Entity or Project Owner will furnish to the consultants. This information may include past studies, aerial photographs, maps, or records of surveys carried out in the assignment area. The TOR also should identify the Procuring Entitys or Project Owners executing agency and clarify institutional arrangements for the supervision of consulting work. Additionally, the TOR should specify the facilities and counterpart staff to be provided or designated by the Procuring Entity or Project Owner. 2.3. Outline of the Terms of Reference

The TOR normally consist of: 2.3.1. background of the project; objectives of the assignment; scope of work; transfer of knowledge; list of reports, schedule of deliveries, period of performance; data, local services, personnel, and facilities to be provided by the Procuring Entity or Project Owner; and institutional arrangements. BACKGROUND OF THE PROJECT

The background summarizes the main features of the project and describes the assignments objectives and general purpose. In particular, it should include name of the Procuring Entity; project location; rationale of the project; project history (what has been done so far and by whom); list of relevant studies and basic data; need for consultants in the project and issues to be resolved; activities to be carried out by the consultants; source of financing for the assignment; and supervision arrangements.

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2.3.2.

OBJECTIVES OF THE CONSULTING ASSIGNMENT

To avoid misleading consultants, the TOR should precisely describe the objectives and expected results of the assignment. Typical objectives of an assignment in governmentfinanced projects may include 2.3.3. preparation of development programs; determination of project feasibility before an investment is made; design of projects; preparation of bidding documents; supervision of works; provision of training; collection and analysis of data; and evaluation of Procuring Entity assets for sale, such as in privatization projects. SCOPE OF WORK

This section of the TOR details all main activities (or tasks)1 to be conducted by consultants and the expected results. The TOR should describe only the activities, not the approach or methodology by which the results are to be achieved, since these are the task of the proponents. Nevertheless, the TOR may provide suggestions on the approach or the methodology that consultants could or should use to execute the assignment and, under certain selection methods, can indicate the estimated staff months required. Often the project may require phased consultant assignments. In such cases, the TOR should be more detailed for the first phase and less detailed for the following ones. The TOR details for the subsequent phases will be refined as needed on the basis of the outcomes of earlier phases. In a TOR, the scope of work of the assignment is usually defined by addressing the following issues: definition, scope, limits, and criteria of acceptance of the assignment; desired level of detail (level of design, accuracy, composition of cost estimates, and so forth); span of projections (time horizon, life span of project components, and so forth); necessary comparison of the assignment with similar projects; main issues to be addressed; alternatives to be considered; necessary surveys, special analyses, and models; special equipment requirements; institutional and legal framework of the project; transfer of knowledge, objectives, and scope; language requirements; units of measurement to be used; need for continuity, such as data gathering; and quality management requirements (if needed).

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Phased assignments are likely to require that the scope of work be modified depending on intermediate results. For instance, the scope of work for a feasibility study originally covering a number of alternatives will be reduced if, during execution of the assignment, some alternatives prove not viable. Similarly, the scope of work can be expanded if more accurate studies than initially anticipated become necessary. In such cases, the TOR should clearly indicate the circumstances under which a decision will be made by the Procuring Entity or Project Owner to modify the scope of work. 2.3.4. TRANSFER OF KNOWLEDGE

If transfer of knowledge is an objective of the assignment, the TOR should provide specific details on the characteristics of the required services and ask consultants to propose training approaches and methods. 2.3.5. REPORTS AND SCHEDULE OF DELIVERIES

The TOR should indicate the estimated duration of the assignment, from the date of commencement2 to the date the Procuring Entity or Project Owner receives and accepts the consultants final report or a specified completion date. Other dates may be considered for example, the date of effectiveness of the contract. The assignments reporting requirements should be clearly specified. In particular, for inception and progress reports, there should be a balance between keeping the Procuring Entity or Project Owner well informed and not forcing consultants to spend an excessive amount of time preparing minor reports. The TOR should indicate the format, frequency, and content of reports as well as the number of copies, the language, and the names of the prospective recipients of the reports. For all major reports, an executive summary is recommended as a separate volume. Depending on the assignment, the following reports are usually required: (a) Inception Report. This report should be submitted about six weeks after the commencement date. Any major inconsistency in the TOR, staffing problems, or deficiency in Procuring Entity or Project Owner assistance that have become apparent during this period should be included. The inception report is designed to give the Procuring Entity or Project Owner confidence that the assignment can be carried out as planned and as agreed upon in the contract, and should bring to its attention major problems that might affect the direction and progress of the work.

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(b) Progress Reports. These reports keep the Procuring Entity or Project Owner and government regularly informed about the progress of the assignment. They may also provide warnings of anticipated problems or serve as a reminder for payment of invoices due. Depending on the assignment, progress reports may be delivered monthly or bimonthly. For feasibility studies and design assignments, delivery of progress reports at two-month intervals is satisfactory. For technical assistance and implementation supervision, for instance, construction, progress reports are best submitted monthly. Progress reports may include a bar chart showing details of progress and any changes in the assignment schedule. Photographs are a quick and easy way of conveying the status of a project, and their use in progress reports is encouraged. For technical assistance services, progress reports also serve as a means of setting out the work program for the following months. Each team member usually contributes to the preparation of the monthly report. (c) Interim Reports. If the assignment is phased, interim reports are required to inform the Procuring Entity or Project Owner of preliminary results, alternative solutions, and major decisions that need to be made. Since the recommendations of an interim report may affect later phases of the assignment and even influence the results of the project, both the government and the Procuring Entity or Project Owner should discuss the draft interim reports with consultants in the field. The Procuring Entity or Project Owner should not take more than 15 days to review and approve draft interim reports. (d) Final Report. The final report is due at the completion of the assignment. The Procuring Entity or Project Owner, government, and consultants should discuss the report while it is still in draft form. The consultants alone are responsible for their findings; although changes may be suggested in the course of the discussions, consultants should not be forced to make such changes. If the consultants do not accept comments or recommendations from the Procuring Entity or Project Owner, these should be noted in the report. The consultants should include in the report the reasons for not accepting such changes.

2.3.6. DATA, LOCAL SERVICES, PERSONNEL, AND FACILITIES TO BE PROVIDED BY THE PROCURING ENTITY The RFP indicates the inputs provided by the Procuring Entity or Project Owner to the consultants in Section 2, Information to Consultants (ITC). The TOR should complement the ITC by listing in detail all the information and services that will be made available by the Procuring Entity or Project Owner. The TOR also should describe the Procuring Entitys or Project Owners available software and computer models to be used by the consultants. Facilities to be provided by the Procuring Entity or Project Owner may include office space, vehicles, survey equipment, office and computer equipment, and telecommunication systems.

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When possible, the Procuring Entity or Project Owner may provide vehicles for use by consultants during the course of their assignment. Otherwise, these should be provided for under the consultants contract and turned over to the Procuring Entity or Project Owner at completion. The same can apply to items such as office and computer equipment. The Procuring Entity or Project Owner should request compatibility with its own equipment. To avoid difficulties caused by delays in allocating Procuring Entity counterpart staff to the project, the TOR should provide for such staff to be assigned to the consultants before the assignment begins. During the initial drafting of the TOR, the Procuring Entity or Project Owner, with assistance from government staff, should determine which of the Procuring Entitys or Project Owners staff can act as counterpart. If the Procuring Entity or Project Owner provides support staff who will work under the consultants responsibility, the TOR should clearly indicate that said staff will work the same hours as consultants, will be under the consultants supervision, and will be not remunerated under the consultants contract. The Procuring Entitys or Project Owners inputs, if not well defined in advance, are often a matter of contention for the duration of the assignment. Consultants tend to overestimate the Procuring Entitys or Project Owners contribution to reduce their proposal price, particularly if the method of selection takes price into account, and clients tend to promise more than they can actually deliver. It is therefore important that Procuring Entitys or Project Owners inputs are defined in the TOR as precisely and realistically as possible. 2.3.7. INSTITUTIONAL ARRANGEMENTS The TOR should define the institutional setup surrounding the assignment; indicate the role and responsibilities of everybody involved; and specify the type, timing, and relevance of everyones participation, including the Procuring Entitys or Project Owners. The TOR should define the hierarchy and level of authority of counterpart personnel as well as the requested level of experience of the Procuring Entitys or Project Owners personnel who will be integrated into the consultants team. Notes: 1. In TORs covering self-contained assignments such as feasibility studies and project designs, consultants are generally required to describe the activities that they propose to carry out. In TORs of assignments consisting mainly of the provision of specialized staff to assist the Procuring Entity or Project Owner in certain functions, consultants are required to describe the tasks for which they will be responsible. 2. Date on which the consultants are expected to start the services.

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Section 3:
3.1.

Estimating Cost and Budget

MAIN CONSIDERATIONS

The cost estimate of an assignment is prepared by adding the remuneration of consultant staff and the direct expenses to be incurred by consultants during the execution of their duties. Those figures are based on an estimate of the staff time (expert per unit of time, hour, month) required to carry out the services and an estimate of each of the related cost components. Since the estimate of the needed staff time is derived from the TOR, the more exhaustive and detailed the TOR, the more precise the estimate. When the scope of services is vague, government staff should assist the Procuring Entity or Project Owner in developing a prudent estimate, particularly when estimates are prepared long before the submission of proposals. A mismatch between the cost estimate and the TOR is likely to mislead consultants on the desired scope and detail of the proposed assignment. Preparing a cost estimate is an interactive process necessary to clarify to the Procuring Entity or Project Owner and the government that the assignment will be carried out in a manner compatible with the project objectives and the resources available. The preparation of the cost estimate can lead to the revision of the TOR. In general, a cost estimate includes expenses relating to consultant staff remuneration; travel and transport; mobilization and demobilization; staff allowances; communications; office rent, supplies, equipment, shipping, and insurance; surveys and training programs; report translation and printing; taxes and duties; and contingencies.

The cost estimate is based on an estimate of the personnel (expert per month) required for carrying out the services, taking into account the time required by each expert needed, and then making estimates for each of the related cost components. It is important to define these inputs as accurately as possible. When preparing cost estimates, it is useful to draft bar charts indicating the time needed to carry out each main activity (activity schedule) and the time to be spent by the consultant staff (staffing schedule). Examples of such schedules are given in Annexes 3 and 4, and examples of detailed cost estimates are given in Annex 5. When part or all of the consultant services are to be carried out by expatriates, the cost estimate should identify those portions to be paid in foreign currency such as monthly rates for professional staff, imported equipment, international travel, and backstopping. Under government rules the Procuring Entity or Project Owner can require consultants to accept reimbursement of local expenses in local currency. Cost estimates include a breakdown of

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the total costs of the assignment in foreign and local currency. Figure 11.1 shows a flow chart for preparing a budget. 3.2. 3.2.1. ESTIMATING COST COMPONENTS CONSULTANT STAFF REMUNERATION

Staff remuneration is generally broken down into foreign and local staff, which may be further subdivided into professional or high-level specialists and support staff. Foreign personnel may be split into field and home office personnel. Remuneration rates for staff vary according to sector and depend on the experience, qualifications, and nationality of the consultants. Adopting realistic rates for estimation purposes is difficult when proposals from different nationalities are expected. The estimated staff months should not be priced on the basis of the highest international rates, but rather using rates that allow for quality work at reasonable prices. To encourage global competition and flexibility in the type and nationality of consultants, the government does not accept ceilings on remuneration rates. Rates of NGOs and nonprofit organizations are generally lower than those of private consulting organizations. Rates charged by international consultants may vary from case to case depending on factors such as country risk, technical difficulty of the assignment, and location (either in the field or the home office). In general, staff remuneration rates include different proportions of the following components, depending on company- and industry-specific factors and country laws: basic salary; social charges; overhead; fees or profit; and allowances.

Knowledge of the breakdown of staff remuneration rates is relevant during the evaluation of financial proposals and during negotiations of time-based contracts when price has not been a factor of selection, if proposed consultant rates appear to differ substantially from those of the market. 3.2.2. TRAVEL AND TRANSPORT

To estimate travel and transportation expenses, assume that all foreign personnel will originate from the farthest eligible country. For assignments expected to last more than six months, a good rule is to assume that two-thirds of the team members have dependents, and to allow three round-trip economy class airfares per year for each of the families and one such trip for the remaining one-third of team members. Local travel and transport costs should be based on local tariffs. Number and type of vehicles and their operation and maintenance costs should also be estimated. 3.2.3. MOBILIZATION AND DEMOBILIZATION

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Each staff member is allowed reasonable travel time, a medical checkup, hotel costs, local transportation, and miscellaneous items. Costs for shipping personal effects should also be estimated. For more details, government staff may consult the staff relocation policies of the U.N. Development Program (UNDP) or the government itself.1 3.2.4. STAFF ALLOWANCES Expatriate staff normally receive overseas and subsistence allowances. The overseas allowance is part of the monthly rate and is meant to represent an incentive for consultant personnel to accept work overseas. The subsistence allowance is paid separately and generally in local currency to cover out-of-pocket expenses such as hotel and living expenses. Staff allowances also cover the costs of childrens education and are normally paid on a monthly basis for long-term assignments and on a calendar-day basis for shortterm assignments. 3.2.5. COMMUNICATIONS

Reasonable monthly allocations for international and local telecommunications should be included. Modern telecommunications such as teleconferencing and the Internet may represent a cost-effective substitute for travel. 3.2.6. OFFICE RENT, SUPPLIES, EQUIPMENT, SHIPPING, AND INSURANCE

Depending on the assignment, local costs for office rent and supply of local equipment (including hardware) should be estimated separately according to local rates. Foreign costs for supplies and equipment (including specific software when needed) should also be estimated, together with related shipping and insurance costs. 3.2.7. SURVEYS AND TRAINING PROGRAMS

The cost of surveys (such as topography, cartography, subsurface investigations, and satellite imaging) and training programs related to the assignment, and any other services to be subcontracted, should be estimated. 3.2.8. REPORT TRANSLATION AND PRINTING

The cost of printing or translating reports is substantial and should be included in the cost estimate. 3.2.9. TAXES AND DUTIES

When preparing cost estimates, it is important to be aware of the local taxes (value-added tax or sales tax), levies, and duties on the contract that foreign and domestic consultants may have to pay and be reimbursed (or not reimbursed) for by the executing agency in the Procuring Entitys or Project Owners country. Local tax items are transfers that are not to be taken into account in the evaluation of financial proposals. Nevertheless, local taxes and duties may represent a substantial cash-flow burden for the executing agency, especially if reimbursements from the central administration of the Procuring Entity are delayed. Taxation of consulting services is discussed in more detail in Section 9 of this Manual. 3.2.10. CONTINGENCIES

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The contingency amount, which completes the cost estimate, should cover physical and price items. Physical contingencies provide for unforeseen work that is needed, while price contingencies account for monetary inflation. Physical contingencies usually consist of 10 to 15 percent of the estimated cost of the assignment. A higher percentage may be appropriate for assignments in which the amount of work required is highly uncertain, such as technical assistance assignments in which the Procuring Entitys or Project Owners actual needs are not fully identified from the beginning. Price contingencies for foreign and local costs should be considered only when the impact of inflation is expected to be substantial. These contingencies should apply not only to the period of the assignment, but also to the period between the time of the estimate and the start of the assignment.

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Section 4: Setting the Evaluation Criteria

4.1. Main Considerations

The project objectives and the underlying TOR determine the qualifications and experience required from the consultants who will carry out the assignment. In adopting evaluation criteria, the Procuring Entity or Project Owner seeks to ensure that the proposal selected will offer the best quality for the services required. The following criteria shall be used as a basis for evaluation of technical proposals: specific experience of the consultants relevant to the assignment; adequacy of the proposed methodology and work plan in responding to the TOR; and key staffs qualifications and competence for the assignment.

Depending on the particular objectives of the assignment, two additional criteria may be required: suitability of the transfer of knowledge program (training); and participation by nationals among proposed key staff.

When the transfer of knowledge is important and the nature of the assignment allows (see Chapter 6), the next to last of the above criteria should be included, and the desired characteristics of the transfer should be specified in the TOR. The next to last criterion should be included when Procuring Entity or Project Owner want to encourage the participation of nationals among key staff proposed by consultants. The Data Sheet contained in the ITC of the RFP discloses the points allocated to each of the evaluation criteria and subcriteria. Table 12.1 shows a range of points that may be allocated to each criterion on a scale of 1 to 100. The weights may be adjusted for specific Table 4.1 Point Distribution of Evaluation Criteria for Technical Proposals Evaluation criteria 1 2 3 4 5 Specific experience of the consultants Adequacy of the proposed methodology and work plan Qualifications and competence of key staff Suitability of the transfer of knowledge program (training) optional National participation (nationals among key staff) - optional Total Points (weights) 5 to 10 20 to 50 30 to 60 Normally not to exceed 10 Not to exceed 10 100

circumstances. The actual distribution should depend on the type of assignment and the relative importance of each criterion for the success of the assignment. A good practice is to have those who prepared the TOR advise in the selection of subcriteria and relative weights. The criterion qualifications and competence of key staff is divided into the following three subcriteria:

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general qualifications; adequacy for the assignment; and experience in region.

The other four evaluation criteria may also be divided into subcriteria, although excessive detail should be avoided. However, given their relatively small assigned weight (in most cases maximum of 10 points out of 100), it may not be practical to adopt subcriteria for the following three evaluation criteria: specific experience of the consultants relevant to the assignment; suitability of the transfer of knowledge program (training); and participation by nationals among proposed key staff.

The recommended approach for evaluating a technical proposal under these three criteria is to assess the overall responsiveness of the proposal to the aspects listed for each of the three criteria in Chapter 17. When transfer of knowledge is a particularly important component of the assignment, more than 10 points may be allocated to this criterion; in such a case, subcriteria may be provided. When subcriteria are provided, which is always the case for adequacy of the proposed methodology and work plan and qualifications and competence of key staff (see Table 12.1), for practical reasons the number of subcriteria should be kept to a minimum (typically no more than three for each criterion). Since subcriteria and their weighting determine the outcome of the evaluation, they should be chosen considering the aspects that are critical to the success of the assignment. Evaluation criteria and subcriteria, associated points, and the rating system form an arithmetic model to assess the technical merit of the proposals. The more reliable the model, the more accurate the evaluation and the greater the possibility that the Procuring Entity or Project Owner will select the proposal of the consultants who are best suited for the assignment. All adopted subcriteria should be specified in the RFP. The points allocated to each of the subcriteria under qualifications and competence of key staff must be indicated in the Data Sheet in the RFP. It is also recommended to disclose in the RFP the points allocated to the subcriteria of adequacy of the proposed methodology and work plan and suitability of the transfer of knowledge program (when more than 10 points are allocated to the latter), since it increases the transparency of the evaluation. If points allocated to these subcriteria are not disclosed in the RFP, the Evaluation Committee should allocate them before proposal submission to reduce the risk of manipulations during the evaluation process. The weight of each subcriterion will vary according to its relative importance to the specific assignment. To avoid overdetailed lists of subcriteria, it is recommended that no fewer than three points be allocated to each subcriterion. Allocation of fewer than three points would imply that the subcriterion is of only minor importance to the overall evaluation.

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In defining the weights there is an initial issue as to whether the methodology and work plan, or quality of staff, is more important. The answer depends on the nature of the assignment. Since methodology and work plan are usually less important in the final stages of the project (such as construction supervision) and deserve less points, key staff weight may be higher. On the other hand, since methodology and work plan are more important in the initial stages (such as master plans and feasibility studies) and deserve more points, less points are left to key staff (see Table 12.4). When cost is a factor of selection, the RFP has to indicate the relative weight assigned to the technical and financial proposals. For standard assignments, the weight for quality is normally 80 percent with 20 percent given to cost. More than 20 percent weight to the cost of the services is justified only in relatively routine and straightforward assignments (such as design of very simple structures), whereas in no cases should it exceed 30 percent. For assignments in which quality considerations are relatively important, a minimum weight of 10 percent should be given to cost, and when considerations of quality are of primary importance, QBS is preferable to QCBS. Government policy is that the weight of price should not be less than 10 percent, or benefits of price competition would be minimal for the Procuring Entity or Project Owner compared with the disadvantage of not being allowed negotiation of remuneration rates. It is not mandatory to apply a pass or fail threshold when evaluating technical proposals. However, if cost is a factor of selection, a minimum technical qualifying mark may be provided in the RFP to minimize the risk of accepting low-quality proposals at a very low cost. A qualifying mark in the range of 70 and 80 percent is typical. Any technical proposal with a score below this threshold is rejected, and the financial envelope is returned unopened. Setting the threshold too high increases the risk of rejection of a majority of proposals. A nonresponsive technical proposal shall be rejected regardless of whether there is a pass or fail threshold. The following paragraphs recommend best practices for selecting subcriteria and allocating points (weights) to both criteria and subcriteria for quality evaluation. 4.2. Specific Experience

In the government SRFP, a maximum of 10 points is assigned to the specific experience of consultants in the field of the assignment because the Procuring Entity or Project Owner has already shortlisted them on the basis of their capabilities, that is, relevant qualifications and experience in projects of a similar nature. Ideally, there should be little difference in the level of quality between shortlisted competitors from the point of view of their specific experience. However, the experience of shortlisted consultants must be evaluated to identify more specific aspects of their qualifications that make them suitable candidates for the assignment. Depending on the importance of such specific aspects, the Procuring Entity or Project Owner will decide how many points (between 5 and 10) to allocate to this criterion. 4.3. Methodology and Work Plan

The methodology and work plan is a key component of the technical proposal and should be evaluated carefully. Subcriteria for evaluating this component of the proposal should include the following:

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technical approach and methodology; work plan; and organization and staffing.

Technical Approach and Methodology. Here consultants explain their understanding of the objectives of the assignment, highlight the issues and their importance, and explain the technical approach they would adopt to address them. They should then explain the methodologies they propose to adopt, demonstrate the compatibility of those methodologies with the proposed approach (for instance, the methods of interpreting available data; carrying out investigations, analyses, and studies; and comparing alternative solutions), and address in Form 3C of the RFP any modifications to the TOR proposed by the consultants. In case the TOR require the consultant to provide a Quality Plan and carry out the assignment according to its provisions, an outline of the Quality Plan (its list of contents, for example) should be included in this section of the proposal. Work Plan. Here consultants propose the main activities of the assignment, their content and duration, phasing and interrelations, milestones (including interim approvals by the Procuring Entity or Project Owner), and delivery dates of the most important reports. The consistency of the technical approach and methodology with the proposed work plan is a good indication that consultants have understood the TOR and are able to translate them into a feasible working plan. A list of the final documents, including reports, drawings, and tables to be delivered as final output, should be included here. The work plan will enable the consultants to prepare the Activity Schedule following Standard Forms in the RFP. Organization and Staffing. In this section the consultants propose the structure and composition of their team. It will list the main disciplines involved, the key expert responsible, and proposed technical and support staff. The roles and responsibilities of key experts should be set out in job descriptions. In case of association, this section will indicate how the duties and responsibilities will be shared. Completion of the organization and staffing section will allow consultants to summarize the team composition and task assignments in Form 3E of the RFP and prepare the time schedule for professional personnel following Form 3F. An organization chart illustrating the structure of the work team and its links to the Procuring Entity or Project Owner and institutions involved in the project also should be provided. The importance of organization and staffing increases with the size of the team; in fact, larger teams, such as those required by multidisciplinary projects, are far more difficult to manage. The methodology, work plan, and organization are all integrated. The work plan depends on the technical approach and methodology adopted, and those in turn determine the required organization. To facilitate the evaluation, Procuring Entity or Project Owner should invite consultants to illustrate separately, in a concise manner, each of these three aspects. Larger technical proposals may contain more details, but they may not contain better ideas.

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In very complex assignments, when the TOR require consultants to carry out activities that differ substantially from each other, additional evaluation subcriteria may be inserted in this section. Take, for example, a feasibility study of a new sea port in which the TOR assign major importance to traffic forecast, comparison of different layout alternatives, and design of large maritime structures. In this case, the subcriterion technical approach and methodology might be split into four sections, increasing the total number of subcriteria to six, as follows: traffic forecast; analysis of alternative layouts; geotechnical studies; other aspects of technical approach and methodology; work plan; and organization and staffing. This breakdown helps the Bidding Committee to better focus on the different levels of detail in its evaluation. Take another example of a phased assignment in which there is a need to evaluate the different phases separately. In this case, the subcriterion technical approach and methodology might be split further and become approach and methodology of the first phase; approach and methodology of the subsequent phases; work plan; and organization and staffing.

The total points that can be allocated to methodology and work plan (20 to 50) have to be split among the subcriteria depending on their relative importance for the assignment. Even in these cases the number of subcriteria should be kept low. Otherwise, the features being evaluated may become individually irrelevant and render the evaluation a mechanical exercise rather than an informed professional assessment of quality. 4.4. Selection and Competence of Key Staff

Key staff refers to the consultant staff who have management responsibilities or have key qualifications needed for the assignment. Consultant key staff are evaluated based on the qualifications and experience shown in their curriculum vitae (CV). The evaluation is carried out using the three subcriteria indicated in the ITC:2 General Qualifications. This subcriterion covers the general experience of the candidate (total duration of professional activity), level of education and training, positions held by the candidate, time spent with the consultant as staff, experience in the region where the assignment is to be carried out, and so on. Adequacy for the Assignment. This relates to the education, training, and experience of the candidate in the specific sector, field, subject, and so on directly relevant to the assignment and the proposed position. This factor is critical and should be given the highest weight among the three subcriteria.

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Experience in the Region and Language. This illustrates the candidates knowledge of national or local conditions, including culture, administrative systems, and government organizations, and his or her ability to communicate in the national language. The points allocated to the criterion qualifications and competence of key staff are distributed among the above subcriteria according to the percentages set out in Table 12.2 (see the Data Sheet of the ITC). Table 4.2 Range of Percentage in Point Distribution of Key Staff Qualifications and Competence Subcriteria Subcriteria Range of Percentage General Qualifications 20-30 Adequacy for the assignment 50-60 Experience in region and language 10-20 Total 100 The RFP should indicate the distribution of points and what fraction of the total refers to the team leader and to the remaining key staff. Since the success of the assignment depends to a large extent on the performance of the team leader, in no circumstances should he or she be given less weight than any other staff member. In small teams the team leader may be given more than 50 percent of the points. The evaluation of key staff may require interdisciplinary weighting, particularly for assignments requiring large teams. In this case, the RFP should indicate not only the weight relevant to the team leader but also the weight given to each of the most relevant staff members. The proposal should group the experts by discipline (or activity), and the Procuring Entity or Project Owner should evaluate them by applying the established weight to each group. The following example illustrates the interdisciplinary weighting of key staff for an assignment relevant to the feasibility study of a new seaport. The weighting indicated in the RFP is supposed to be as follows: The main criterion qualifications and competence of key staff is allocated 50 points, and the three subcriteria are allocated the following points: General qualifications: 10 Adequacy for the assignment: 30 Experience in region and language: 10 Total: 50 The RFP states that, besides the management of the assignment entrusted to the team leader, the most important disciplines are traffic forecast studies, alternative layout analyses, and geotechnical studies. The relative weights indicated in the RFP are the following: Team leader: ............................................ 40% Traffic forecast studies: 10% Analysis of alternative layouts: 30% Geotechnical studies: 20%

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The detailed point allocation resulting from the breakdown above is summarized in Table 4.3. According to Table 4.3, the team leader can be given a maximum of 12 points under adequacy for the assignment. Similarly, the geotechnical expert can be assigned a maximum of two points under general qualifications. When more than one expert is proposed for the same activity, the relevant points are evenly distributed among them. For instance, if in the above example a consultant proposes three traffic forecast experts, each of the three is evaluated according to the table, and then the total score is divided by three. Table 4.3 Distribution of Points between Team Leader and Remaining Key Staff TEAM TRAFFIC ALTERNATIV GEOTECHNIC
LEADER FORECAST EXPERTS E LAYOUT EXPERTS AL EXPERTS

Subcriteria General Adequacy for Experience in Total

Points 10 30 10 50

Relative weight 40% 40% of 10 = 4 40% of 30 = 12 40% of 10 = 4 Subtotal = 20

Relative weight 10% 10% of 10 = 1 10% of 30 = 3 10% of 10 = 1 Subtotal = 5

Relative weight 30% 30% of 10 = 3 30% of 30 = 9 30% of 10 = 3 Subtotal = 15

Relative weights 20% 20% of 10 = 2_ 20% of 30 = 6_ 20% of 10 = 2_ Subtotal = 10

4.5.

Transfer of Knowledge (Training)

When transfer of knowledge is an important component of the assignment, more than 10 points can be allocated to this area. This area could be divided into the following subcriteria:Relevance of Program. Transfer of knowledge should cover in sufficient depth important developments in a given sector that will benefit the Procuring Entity or Project Owner. Training Approach and Methodology. This refers to the methodology and work program proposed to achieve the objectives specified in the TOR and ensure lasting results for the Procuring Entity or Project Owner. Qualifications of Experts and Trainers. This covers the pedagogical qualifications in training of the proposed specialists. 4.6. National Participation

The IRR encourage consultants to maximize the use and expertise of nationals by factoring it into the evaluation of proposals with a specific criterion. Depending on the importance given to participation of nationals and the characteristics of the assignment, a maximum of 10 points may be given to this criterion. National participation is assessed on the basis of the percentage share of national consultants covering key positions in terms of staff months over the total staff months of key staff proposed for the assignment. Foreign consultants may satisfy national participation requirements either by associating (joint venture or subcontract) with their national branch, if one exists, or with independent national firms, or incorporating national individual experts into the work team. In all cases, for national participation to be effective and rewarded in the evaluation of proposals, national experts of the Procuring Entitys or Project Owners country should be part of the key staff. Page 105 of 150

4.7.

Point System

The allocation of points to the main evaluation criteria might fall within the ranges indicated in Table 4.4, depending on the specifics of different assignment types. 4.8. Evaluation Criteria and Sub Criteria

Table 12.5 summarizes the five evaluation criteria provided in the Standard Request for Proposals (SRFP) and gives examples of subcriteria that could be adopted by the Procuring Entity or Project Owner when preparing the RFP. Table 4.4 Allocation of Points to Main Criteria SPECIFIC ADEQUACY KEY STAFF
EXPERIEN CE OF METHODOLO GY WORK PLAN QUALIFICATI ONS

TRANSFER OF
KNOWLEDGE (OPTIONAL)

NATIONAL PARTICIPAT ION (OPTIONAL) 010

TOTAL POINTS

Guidelines

510

2050

3060

010

100

Type of assignment Technical 510 2035 5060 010* 010 100_ assistance/ training Preinvestment 510 3550 4050 010 010 100 studies Design 510 3045 4050 010 010 100 Implementati 510 2035 5060 010 010 100_ on/ supervision * When training is an important component of the assignment, more points can be given to this criterion, and points of the other criteria are reduced accordingly.

Table 4.5 Evaluation Criteria and Sample Subcriteria Evaluation criteria (as defined in the IRR) Evaluation subcriteria (select a maximum of three) Specific experience of the consultants in the field of the assignment Adequacy of the proposed methodology and work - Technical approach and plan in responding to the TOR methodology - Work plan - Organization and staffing Note: The number of subcriteria may be increased depending on the characteristics of the assignment. Qualification and competence of key staff proposed - General qualifications for the assignment - Adequacy for the assignment - Experience in the region and language

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Suitability of the transfer of knowledge program (training) National participation (nationals among key staff )

Note: These three subcriteria are defined by the RFP and cannot be changed. - Relevance of program - Training approach and methodology - Qualifications of training specialists

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Section 5: Request for Proposals

5.1. Preparation and Issuance of the Request for Proposals

Procuring Entity shall use Standard RFPs issued by the Ministry of Finance. The RFP shall include: (a) (b) (c) (d) 5.2. Letter of Invitation, Information to Consultants, The proposed contract, and Terms of Reference.

Advertising of Invitation

To prepare a general list of consultants the invitation informing intention of the Procuring Entity or Project Owner to enter into a contract for the provision of consulting services, objectives of the assignment, the source of funds, the details of the client and the date, time, and address for submission of proposals may be advertised in a mass circulation daily newspaper and other forms of mass media. 5.3. Letter of Invitation (LOI)

At least 3 qualified candidates in the general list, which expressed interest in the assignment, should be short-listed. And LOI shall be send to them. 5.4. Short List of Consultants

The Bidding Committee and Procuring Entity or Project Owner is responsible for preparation of the short list in accordance with IRR Article 27.3.2, 27.3.3. Generally, the Procuring Entity or Project Owner shall give first consideration to those firms expressing interest, which possess the relevant qualifications. Short lists shall comprise at least three firms. The short list may comprise entirely national consultants (firms with majority national ownership), if the assignment is small, a sufficient number of qualified firms (at least three) are available at competitive costs, and competition including foreign consultants is prima facie not justified. However, if foreign firms have expressed interest, they shall not be excluded from consideration. 5.5. Terms of Reference (TOR)

The Procuring Entity or Project Owner shall be responsible for preparing the TOR for the assignment. A person(s) or a firm specialized in the area of the assignment shall prepare the TOR. The scope of the services described in the TOR shall be compatible with the available budget. TOR shall define clearly the objectives, goals, and scope of the assignment and provide background information (including a list of existing relevant studies and basic data) to facilitate the consultants preparation of their proposals. If transfer of knowledge or training is an objective, it should be specifically outlined along with details of number of staff to be trained, and so forth, to enable consultants to estimate the required resources. TOR shall list the services and surveys necessary to carry out the assignment and the expected outputs (for example, reports, data, maps, and surveys). However, TOR should be flexible, so that competing consultants may propose their own

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methodology and staffing. The Procuring Entity or Project Owner and consultants respective responsibilities should be clearly defined in the TOR. 5.6. Cost Estimate (Budget)

The cost estimate shall be based on the Procuring Entity's or Project Owners assessment of the resources needed to carry out the assignment: staff time, logistical support, and physical inputs (for example, vehicles, laboratory equipment) and shall be realistic as possible. Costs shall be divided into two broad categories; (a) fee or remuneration (according to the type of contract used) and (b) reimbursable, and further divided into foreign and local costs. The cost of staff time shall be estimated on a realistic basis for foreign and national personnel. 5.7. Types of Contracts

Procuring Entity or Project Owner shall use the appropriate Standard Form of Contract issued by the Ministry of Finance with minimum changes, as necessary to address specific project issues. Any such changes shall be introduced only through Contract Data Sheets or through Special Conditions of Contract and not by introducing changes in the wording of the General Conditions of Contract included in the Standard Form. Below is given briefly the two general types of contracts. a) Lump Sum (Firm Fixed Price) Contract. Lump sum contracts are used mainly for assignments in which the content and the duration of the services and the required output of the consultants are clearly defined. They are widely used for simple planning and feasibility studies, environmental studies, detailed design of standard or common structures, preparation of data processing systems, and so forth. Payments are linked to outputs (deliverables), such as reports, drawings, bills of quantities, bidding documents, and software programs. b) Time-Based Contract. This type of contract is appropriate when it is difficult to define the scope and the length of services, either because the services are related to activities by others for which the completion period may vary, or because the input of the consultants required to attain the objectives of the assignment is difficult to assess. This type of contract is widely used for complex studies, supervision of construction, advisory services, and most training assignments. Payments are based on agreed hourly, daily, weekly, or monthly rates for staff (who are normally named in the contract) and on reimbursable items using actual expenses and/or agreed unit prices. The rates for staff include salary, social costs, overhead, fee (or profit), and, where appropriate special allowances. This type of contract shall include a maximum amount of total payments to be made to the consultants. This ceiling amount should include a contingency allowance for unforeseen work and duration, and provision for price adjustments, where appropriate. 5.8. Currency

RFPs shall clearly state the currency of the contract in accordance with the IRR. 5.9. Price Adjustment

To adjust the remuneration for foreign and/or local inflation, a price adjustment provision shall be included in the contract if its duration is expected to exceed 18 months. Page 109 of 150

Exceptionally, contracts of shorter duration may include a provision for price adjustment when local or foreign inflation is expected to be high and unpredictable. 5.10. Contract Payment Payment provisions, including amounts to be paid, schedule of payments, and payment procedures, shall be agreed upon during negotiations. Payments may be made at regular intervals (as under time-based contracts) or for agreed outputs (as under lump sum contracts). Payments for advances (for example, for mobilization costs) exceeding 10 percent of the contract amount must normally be backed by advance payment securities. Payments shall be made promptly in accordance with the contract provisions. To that end, only disputed amounts shall be withheld, with the remainder of the invoice paid in accordance with the contract. 5.11. Settlement of Disputes The contract shall include provisions dealing with the forum for the settlement of disputes. For large contracts, international commercial arbitration may have practical advantages over other methods for the settlement of disputes. 5.12. Information to Consultants (ITC)

The ITC shall contain all necessary information that would help consultants prepare responsive proposals, and shall bring as much transparency as possible to the selection procedure by providing information on the evaluation process and by indicating the evaluation criteria and factors and their respective weights and the minimum passing quality score. The ITC shall not indicate the budget (since cost is a selection criterion), but shall indicate the expected input of key professionals (staff time). Consultants, however, shall be free to prepare their own estimates of staff time necessary to carry out the assignment. The ITC shall specify the proposal validity period. As specified in the IRR the Procuring Entity or Project Owner shall use the standard RFPs issued by the MOF, which include the ITC. If under exceptional circumstances, the Procuring Entity needs to amend the Standard ITC, it shall do so through the technical data sheet and not by amending the main text. The ITC shall include adequate information on the following aspects of the assignment: 1. A very brief description of the assignment; 2. Standard formats for the technical and financial proposals; 3. The names and contact information of officials to whom clarifications shall be addressed and with whom the consultants representative shall meet, if necessary; Details of the selection procedure to be followed, including: (a) A description of the two-stage process, if appropriate; and A definition of consultant, in case using of the two-stage process method; (b) A listing of the technical evaluation criteria and weights given to each criterion; (c) The details of the financial evaluation; (d) The relative weights for quality and cost in the case of Combined Evaluation Method;

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(e) The minimum pass score for quality; and (f) The details on the public opening of financial proposals; (g) An estimate of the level of key staff inputs (in staff-months) required of the consultants; and indication of minimum experience, academic achievement, and so forth, expected of key staff or the total budget, if a given figure cannot be exceeded; (h) Details and status of any external financing; (i) Information on negotiations; and financial and other information that shall be required of the selected firm during negotiation of the contract; (j) The deadline for submission of proposals; (k) Currency(ies) in which the costs of services shall be expressed, compared, and paid; (l) Reference to any laws of Lao PDR that may be particularly relevant to the proposed consultants contract; (m) A statement that the firm and any of its affiliates shall be disqualified from providing downstream goods, works, or services under the project if, such activities constitute a conflict of interest with the services provided under the assignment; (n) The method in which the proposal shall be submitted, including the requirement that the technical proposals and price proposals be sealed and submitted separately in a manner that shall ensure that the technical evaluation is not influenced by price; (o) A request that the invited firm (p) Acknowledges receipt of the RFP, and (ii) Informs the Procuring Entity whether or not it will be submitting a proposal; (q) The short list of consultants being invited to submit proposals, and whether or not associations between short-listed consultants are acceptable; (r) The period for which the consultants proposals shall be held valid will be 30-60 days normally. During this time the consultants shall undertake to maintain, without change, the proposed key staff, and shall hold to both the rates and total price proposed; in case of extension of the proposal validity period, the right of the consultants not to maintain their proposal; (s) The anticipated date on which the selected Consultant shall be expected to commence the assignment; (t) A statement indicating (i) whether or not the consultants contract and personnel shall be tax-free or not; if not, (ii) what the likely tax burden will be or where this information can be obtained, and a statement requiring that the Consultant shall include in its financial proposal a separate amount clearly identified, to cover taxes; (u) If not included in the TOR or in the draft contract, details of the services, facilities, equipment, and staff to be provided by the Procuring Entity or Project Owner; (v) Phasing of the assignment, if appropriate; and likelihood of follow-up assignments; (w) The procedure to handle clarifications about the information given in the RFP; and (x) Any conditions for subcontracting part of the assignment. 5.13. Submission of Proposals When consultants receive the RFP, and if they can meet the requirements of the TOR, and the commercial and contractual conditions, they should make the arrangements necessary to prepare a responsive proposal (for example, visiting the site, seeking associations, collecting documentation, setting up the preparation team). If the consultants find in the RFP documents-especially in the selection procedure and evaluation criteria-any ambiguity, omission or internal contradiction, or any feature that is unclear or that appears discriminatory or restrictive, they should seek clarification from the Procuring Entity or Project Owner, in writing, within the period specified in the RFP for seeking clarifications.

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Consultants should ensure that they submit a fully responsive proposal including all the supporting documents requested in the RFP. Noncompliance with important requirements will result in rejection of the proposal. 5.14. Receipt of Proposals The Procuring Entity or Project Owner shall allow enough time for the consultants to prepare their proposals. The time allowed shall depend on the assignment, but normally shall not be less than 30 days or more than three months. During this interval, the firms may request clarifications about the information provided in the RFP. The Procuring Entity shall provide these clarifications in writing and copy them to all firms on the short list. If necessary, the Procuring Entity shall extend the deadline for submission of proposals. The technical and financial proposals sealed in the separate envelopes shall be submitted at the same time. No amendments to the technical or financial proposal shall be accepted after the deadline. The technical envelopes shall be opened immediately by the Bidding Committee of officials drawn from the relevant departments (technical, finance, legal, as appropriate), after the closing time for submission of proposals. The financial proposals shall remain sealed and shall be deposited with the Chairman of the Bidding Committee until they are opened publicly. Any proposal received after the closing time for submission of proposals shall be returned unopened. 5.15. Evaluation of Proposals The evaluation shall be carried out in full conformity with the provisions of the RFP and the IRR. The evaluation of the proposals shall be carried out in two stages: first the quality, and then the cost. Evaluators of technical proposals shall not have access to the financial proposals until the technical evaluation, including Bidding Committee approvals, are concluded. Financial proposals shall be opened only thereafter. 5.16. The Technical Evaluation

The Procuring Entity or Project Owner (the Evaluation Committee) shall evaluate each technical proposal taking into account following criteria: (a) (b) (c) (d) (e) The Consultants relevant experience for the assignment, The quality of the methodology proposed, The qualifications of the key staff proposed, Transfer of knowledge, and The extent of participation by nationals among key staff in the performance of the assignment.

Each criterion shall be marked on a scale of 1 to 100. Then the marks shall be weighted to become scores. The following weights are indicative, and may be adjusted for specific circumstances. The proposed weights shall be disclosed in the RFP. Consultants specific experience: Methodology: Key personnel: Transfer of knowledge: Participation by nationals: 5 to 10 points 20 to 50 points 30 to 60 points 0 to 10 points 0 to 10 points

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Total:

100 points

The Procuring Entity or Project Owner shall normally divide these criteria into sub criteria. For example, sub criteria under methodology might be innovation and level of detail. However, the number of sub criteria should be kept to the essential. The Delegated Authority recommends against the use of exceedingly detailed lists of sub criteria that may render the evaluation of mechanical exercise more than a professional assessment of the proposals. The weight given to experience can be relatively modest, since this criterion has already been taken into account when short-listing the Consultant. More weight shall be given to the methodology in the case of more complex assignments (for example, multidisciplinary feasibility or management studies). Evaluation of only the key personnel is recommended. Since key personnel ultimately determine the quality of performance, more weight shall be assigned to this criterion if the proposed assignment is complex. The Procuring Entity or Project Owner shall review the qualifications and experience of proposed key personnel in their curricula vitae, which must be accurate, complete, and signed by an authorized official of the Consultant and the individual proposed. When the assignment depends critically on the performance of key staff, such as a Project Manager in a large team of specified individuals, it may be desirable to conduct interviews. The individuals shall be rated in the following three sub criteria, as relevant to the task: (a) General qualifications: general education and training, length of experience, positions held, time with the consulting firm as staff, experience in developing countries, and so forth; (b) Adequacy for the assignment: education, training, and experience in the specific sector, field, subject, and so forth, relevant to the particular assignment; and (c) Experience in the region: knowledge of the local language, culture, administrative system, government organization, and so forth. Procuring Entity or Project Owner shall evaluate each proposal on the basis of its responsiveness to the TOR. A proposal shall be considered unsuitable and shall be rejected at this stage if it does not respond to important aspects of the TOR or it fails to achieve a minimum technical score specified in the RFP. At the end of the process, the Procuring Entity or Project Owner shall prepare an evaluation report of the quality of the proposals. The report shall substantiate the results of the evaluation and describe the relative strengths and weaknesses of the proposals. All records relating to the evaluation, such as individual mark sheets, shall be retained. 5.17. The Financial (Cost) Evaluation After the evaluation of quality is completed, the Procuring Entity or Project Owner shall notify those consultants whose proposals did not meet the minimum qualifying mark or were considered non responsive to the RFP and TOR, indicating that their financial proposals will be returned unopened after completing the selection process. The Procuring Entity or Project Owner shall simultaneously notify the consultants that have secured the minimum qualifying mark, and indicate the date and time set for opening the financial proposals. The opening date shall not be sooner than 14 days after the notification date. The financial proposals shall be opened publicly in the presence of representatives of the

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consultants who choose to attend. The name of the consultant, the quality scores, and the proposed prices shall be read aloud and recorded when the financial proposals are opened. The Procuring Entity or Project Owner shall prepare the minutes of the public opening. After the opening the Procuring Entity or Project Owner shall review the financial proposals. If there are any arithmetical errors, they shall be corrected. For the purpose of comparing proposals, the costs shall be converted to a single currency as stated in the RFP and in accordance with the IRR. The Evaluation Committee shall make this conversion by using the exchange rate as posted by the Central Bank of Lao PDR on the RFP sending date. For the purpose of evaluation, cost shall exclude local taxes, but shall include other reimbursable expenses, such as travel, translation, report printing, or secretarial expenses. The proposal with the lowest cost may be given a financial score of 100 and other proposals given financial scores that are inversely proportional to their prices. Alternatively, a directly proportional or other methodology may be used in allocating the marks for the cost. The methodology to be used shall be described in the RFP. 5.18. Final evaluation (Combined Technical and Financial Evaluation) The total score shall be obtained by weighting the technical and financial scores and adding them. The weight for the cost shall be chosen, taking into account the complexity of the assignment and the relative importance of quality. The weight for cost shall normally be in the range of 10 to 20 points, but in no case shall exceed 30 points out of a total score of 100. The proposed weightings for quality and cost shall be specified in the RFP. The firm obtaining the highest total score shall be invited for negotiations. 5.19. Negotiations and Award of Contract Negotiations shall include discussions of the TOR, the methodology, staffing, Procuring Entity's or Project Owners inputs, and special conditions of the contract. These discussions shall not substantially alter the original TOR or the terms of the contract, lest the quality of the final product, its cost, and the relevance of the initial evaluation be affected. Major reductions in work inputs should not be made solely to meet the budget. The final TOR and the agreed methodology shall be incorporated in Description of Services, which shall form part of the contract. The selected firm should not be allowed to substitute key staff, unless both parties agree that undue delay in the selection process makes such substitution unavoidable or that such changes are critical to meet the objectives of the assignment. If this is not the case and if it is established that key staff were offered in the proposal without confirming their availability, the firm may be disqualified and the process continued with the next ranked firm. Financial negotiations shall include clarification of how the tax and other concerned issues would be reflected in the contract. Proposed unit rates for staff-months and reimbursable shall not be negotiated, since these have already been a factor of selection in the cost of the proposal, unless there are exceptional reasons.

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If the negotiations fail to result in an acceptable contract, the Procuring Entity or Project Owner shall terminate the negotiations and invite the next ranked firm for negotiations. The Consultant shall be informed of the reasons for termination of the negotiations. Once negotiations are commenced with the next ranked firm, the Procuring Entity or Project Owner shall not reopen the earlier negotiations. After negotiations are successfully completed, the Procuring Entity or Project Owner shall promptly notify other firms on the short list that they were unsuccessful. 5.20. Rejection of All Proposals, and Re-invitation The Procuring Entity or Project Owner will be justified in rejecting all proposals only if all proposals are non responsive and unsuitable either because they present major deficiencies in complying with the TOR, or because they involve costs substantially higher than the original estimate. In the latter case, the feasibility of increasing the budget, or scaling down the scope of services with the firm should be investigated. 5.21. Confidentiality Information relating to evaluation of proposals and recommendations concerning awards shall not be disclosed to the consultants who submitted the proposals or to other persons not officially concerned with the process, until the signing of contract is notified to the successful firm.

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Annex 1: Flow Diagram for Selection of Consultants Procurement planning, preparation of the list of consultant services Develop TOR

Develop RFP Prepare General List of Consultants Prepare Short List of Consultants

Issue RFP & TOR

Receive and evaluate Technical & Financial Proposals

Combined evaluation method / Lowest price method Technical Proposal Evaluation of Technical Proposal Financial Proposal

Quality evaluation method

Technical Proposal

Financial Proposal

Evaluation of Technical Proposal

Financial evaluation of all Proposals Attained Minimum technical Score Open the financial envelope of the technically first ranked consultant Select the tenderer who achieves highest overall (technical & financial) score Negotiations with the technically first ranked consultant

Negotiations with the selected consultant

Award of Contract

Award of Contract

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Annex 2: Detail Plan for Selection of Consultants No. Weeks Activities 1 1 Consideration of consultants expressed interest 2 Preparation of the short list and TC meeting 3 First meeting of the Evaluation Committee 4 Issue RFP for consultants approved by TC 5 Preparation of Proposals by Consultants 6 Evaluation of proposals received 7 Next meeting of the Evaluation Committee 8 Approval of Lowest evaluated Consultant by TC and Procuring Entity, inviting to negotiations 9 Contract negotiation 10 Approval of Contract and Signing 11 Preparation for Assignment 12 Start assignment 2 3 4 5 6 7 8 9 10 11 12 13 14 15

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Section 6: Selection of Individual Consultants

6.1.
GENERAL

The process by which Procuring Entity or Project Owner select individuals does not follow strictly the normal selection methods used for firms. It is worth describing here the main steps that Procuring Entity or Project Owner are required to take into account. The IRR 063 also have overall applicability for the selection of individual consultants. 6.2. TERMS OF REFERENCE

Procuring Entity or Project Owner should first prepare a TOR for the consultant assignment, including the scope of work and its estimated budget. 6.3. ADVERTISING

For individual assignments of a long duration (say, six months) it is recommended that the Procuring Entity or Project Owner publish a call for submission of qualifications in the media. Procuring Entity or Project Owner may decide to proceed in the same way for shorter assignments if potential suitable candidates are unknown. The call should include a short description of the task or job description and the criteria for selection. 6.4. SELECTION

Individual consultants are selected based on their qualifications for the assignment. They shall be selected through comparison of qualifications of at least three candidates among those who have expressed interest in the assignment or have been approached directly by the Procuring Entity or Project Owner. Individuals employed by the Procuring Entity or Project Owner shall meet all relevant qualifications and shall be fully capable of carrying out the assignment. Capability is judged on the basis of academic background, experience, and, as appropriate, knowledge of local conditions, such as local language, culture, administrative system, and government organization. Individual consultants may be selected on a sole-source basis with due justification, in exceptional cases such as: (a) tasks that are a continuation of previous work that the consultant has carried out and for which the consultant was selected competitively; (b) assignments lasting less than six months; (c) emergency situations resulting from natural disasters; and (d) when the individual is the only consultant qualified for the assignment. For key assignments, interviews may be set up. Suitability of the candidates should be evaluated on the basis of their academic background, experience, and, when needed, knowledge of local conditions. Contracts normally take the form of a simple letter of appointment with TOR and employment conditions covering remuneration and direct expenses, including medical, travel, insurance, housing, and so forth. The Sample Contract for Consulting ServicesSmall Assignments, which appears in the SRFP, can also be used.

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Section 7: Standard Templates

7.1. Sample Activity Schedule

The following table is a sample of the Activity Schedule for the Contract Design of a New Hospital. It corresponds to the Schedule 3H, Section 3, of the SRFP.

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ASSIGNMENT: Contract Design of a new Hospital

ACTIVITIES MONTHS 1 1 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.11 2 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 Study Phase Conceptual design Design criteria Medical aspects Architectural aspects Structural solutions Electromechanical equipment Construction technique Preliminary cost estimate Interim Report Delivery of the Interim Report Approval of the Interim Report Design Phase Civil works Electromechanical equipment Technical Specifications Tender drawings Contract documents Construction program Maintenance plan Detailed cost estimate Final report Delivery of the Contract Design 2 3 4 5 6 7

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7.2.

Sample Staffing Schedule

The following table is a sample of the Staffing Schedule for the Contract Design of a new Hospital. It corresponds to the Schedule 3G, Section 3, of the SRFP.

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Sample Staffing Schedule Contract Design of a new Hospital

No. POSITION NAME MAIN ACTIVITIES
(refer to the Activity Schedule Annex 1)

MONTHS 1 2 3 4 5 6 7

TOTAL STAFF MONTHS

1 2 3 4 5 6 7 8 9 10 11 12

Project Director Team Leader Architect Civil Engineers

0.2 0.2 0.2 0.2 0.2 0.2 0.2 1 1 1 1 1 1 1 0.8 0.2 0.2 1.2, 1.5, 1.7, 1.8, 1.9, 2.1, 2.4 4 4 4 4 4 4 4 1 0.5 0.5 1 1 1 0.5 1 2 2 2 1 2 3 3 2 1 1 2 2 0.5 0.5 1 0.4 0.4 0.4 0.4 0.4 0.2 2 2 2 4 3 1 4 4 4 39.4 57.9

All All 1.1, 1.4, 1.9, 2.9

1.4

7 1.2 28 5 7.5 11 2 5 3.2 4 22

1.2, 1.5, 1.7, 2.1, 2.3, 2.4, 2.9 Structural Engineers 1.6, 1.8, 2.2, 2.3, 2.4, 2.7, 2.8 Electrical Engineers 1.6, 1.8, 2.2, 2.3, 2.4, 2.7, 2.8 Mechanical Engineers Cost Engineers 1.8, 1.9, 2.8, 2.9 Medical experts 1.1, 1.3, 1.9, 2.9 Quality Assurance expert All Contract Documents 2.5 experts personnel Support 1.1, 1.9, 2.4, 2.9 Total Staff Months Phase 1 Total Staff Months Phase 2 Total Staff Months of the assignment

97.3

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7.3.

Cost Estimate Templates

[Procuring Entity] [Project] [Assignment] Cost Estimate 1. The following cost estimate is presented in a generic form; it can be used for most assignments that include a team of experts (nationals and/or foreigners) working in the Procuring Entitys or Project Owners or the consultants country, or any other country, on a long-term or short-term assignment. The consultant is incurring office expenses in the Procuring Entitys or Project Owners country. 2. Should the assignment include surveys (as may be the case in most sectors such as health, education, rural development, and privatization), their cost would need to be assessed separately. The templates in this annex do not provide guidance to cost these surveys. 3. To establish a cost estimate, costs are normally estimated using unit rates (staff remuneration rates, reimbursable expenses) and quantities; exceptionally, some items may be estimated on a lump-sum basis. The method used to establish the cost estimate bears no relation to the type of contract that will be used and the method of remuneration of the consultant (time-based or lump-sum remuneration). 4. The consultant may be a firm or a joint venture. The firm may have subcontracted part of the services. In both situations, the cost estimate does not provide information on the split of the work between the partners of the joint venture or the prime and subconsultants. This could be done, however, using appropriate codes, should there be a need to do so (for instance, to assess the participation of the shortlisted consultant versus the subconsultant(s), or to determine the breakdown of tax liabilities between consultants). 5. Costs are estimated in the currency in which they are incurred, that is, in the currency of the clients country (national currency) and in foreign currencies, as permitted under the IRR. The use of different currencies is frequent in international assignments that involve associations among consultants of different nationalities. 6. Price contingencies need to be included in the costs to reflect the impact (if significant) of the rate(s) of inflation in the countries in which the assignment takes place. This may be the case because inflation is (or is expected to be) high (say, above 5 percent per annum) and/or because of the length of the assignment (say, beyond 18 months). Price contingencies must also be included to reflect physical contingencies (uncertainties about the quantities proposed in the technical proposal). 7. Assignment costs have to be estimated net of local taxes; nevertheless, the Procuring Entities Executing Agency should take into account its own tax liability deriving from the consultants contract for budgeting purposes.

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[Procuring Entity:] [Project:] [Assignment:] Cost Estimate - Summary Local currency (LC) 1. Staff Remuneration Key staff Other staff Total 1 2. Reimbursables Transportation Air Ground Staff accommodation Office Rent Furniture/Equipment Supplies, Utilities Reports, Documents Total 2 3. Surveys (a) (b) Total 3 4. Miscellaneous Total 4 Total Foreign currency(ies) (FC) (FC) (FC)

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[Procuring Entity] [Project] [Assignment]

Cost Estimate - Staff Remuneration

Position

Name

Remuneration Rate LC FC FC FC
1 2

Year 1

Year 2

Year 3

Year 4

Total

1. Key Staff 1.1 .. 1.2 .. 1.3 .. Subtotal 1 2. Other Staff 2.1 .. 2.2 .. 2.3 .. Subtotal 2 Total

SM Amoun SM Amt SM Amoun SM Amoun LC FC1 FC2 FC3 t t t

. . . . . .

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[Procuring Entity:] [Project:] [Assignment:]

Cost Estimate Reimbursables

Reimbursables 1. Air transportation - Tickets - Luggage 2. Ground transportation - Mobilization/demobilization, holidays - Operational: Vehicles Motorcycles 3. Relocation/Storage 4. Temporary housing 5. Miscellaneous Total LC FC1 FC2 FC3

126

[Procuring Entity:] [Project:] [Assignment:]

Cost Estimate - Office Costs

LC Rent Supplies Computer operation costs Telecommunications Equipment, furniture Total FC1 FC2 FC3

127

[Procuring Entity:] [Project:] [Assignment:]

Cost Estimate - Office Furniture and Equipment

No. Description Office Furniture (Purchase) Large desks and chairs Medium desks and chairs Typist desks and chairs Double door cupboard Plan filing cabinet Filing cabinet Desk lamps Meeting table with 12 chairs White board Sofa set Office Equipment (Purchase) Drawing pen set Lettering set Photocopying machine Blueprint machine Electric typewriter Manual typewriter Computer Facsimile Ring binding machine Large stapler Safe Drafting board, machine, chairs, etc. Video multi system Camera SLR Total Unit Quantity Rate (LC) Amount (LC)

1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14

Set Set Set Unit Unit Unit Unit Set Unit Set Set Set Set Set Unit Unit Set Set Nos Nos Nos Set Set Nos

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Section 8: Examples of Evaluation of Proposals

8.1. Annex 8.2 Annex 8.3 Project and Construction Management of a Water Supply System Technical Assistance Services for an Agricultural Settlement Program Technical Assistance Services for a Privatization Project

This annex refers to three typical assignments to be awarded under QCBS. It highlights the following components of the proposal evaluation: point allocations for the main evaluation criteria to be specified in the RFP; subcriteria to be specified in the RFP for each one of the main evaluation criteria; points allocations to the subcriteria; relative weights to be indicated in the RFP for the technical and financial proposals; and worksheets that may be used by the Tender Committee to carry out the proposal evaluations.

These examples may be used as a guide when preparing the RFP for a given assignment, and for proposal evaluations. They are compatible with the IRR 063 Sample Form of Evaluation Report -Selection of Consultants.

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Annex 8.1 Project and Construction Management of a Water Supply System

The Procuring Entity or Project Owner needs to select a consultant to carry out the project and construction management activities related to the implementation of a municipal water supply system, including a water treatment plant, water distribution network, water tanks and towers, pumping stations, and so forth. Six qualified consultants are invited to submit proposals to be evaluated with QCBS. Transfer of knowledge is not required, while the participation of local experts during the construction management activities is considered important by the client. In the RFP the points indicated in Table A8.1 are allocated to the evaluation criteria. The 55 points allocated to the criterion qualifications and competence of the key staff are distributed among the relevant subcriteria according to the percentages of Table A8.2. Table A8.1 Points Allocated to Main Criteria Criteria 1 Specific experience of consultants related to the assignment 2 Adequacy of the proposed methodology and work plan 3 Qualifications and competence of the key staff 4 Suitability of the transfer of knowledge 5 Local participation Total Table A8.2 Key Staff Evaluation Subcriteria General qualifications Adequacy for the project Experience in region & language Total

Points 5 30 55 0 10 100 % Points 25 55 20 100

For the criterion adequacy of the proposed methodology and work plan, the following three subcriteria and relevant point allocations are selected: Technical approach and methodology Work plan Organization and staffing 8 points 7 points 15 points

The scope of work of the assignment as detailed in the TOR includes the following main tasks: (a) the review of the detailed design of the water supply system to be prepared by the selected contractor based on the existing contract design, and (b) the supervision during the construction of the water supply system. Since the type of organization and staffing required to carry out these two tasks is different, the Procuring Entity or Project Owner considers it important to separately evaluate the organization and staffing proposed by the invited consultants for the two tasks. Consequently, the subcriterion organization and staffing and relevant points are split into the following subcriteria: Review of the detailed design 4 points

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Supervision during construction

11 points

Within the criterion qualifications and competence of the key staff, the team leader is given a weight of 40 percent. As for other members of the key staff, the characteristics of the assignment suggest the need to stress the importance of hydraulic engineering, structural engineering, soil engineering, electromechanical engineering, and time and cost control specialists. Consequently, the Procuring Entity or Project Owner indicates in the RFP the following weights for relevant key staff in those five disciplines: Hydraulic engineering Structural engineering Soil engineering Electromechanical engineering Time and cost control specialists weight of 15% weight of 10% weight of 10% weight of 10% weight of 15%

The overall setup of the different subcriteria and relevant points for evaluating the technical proposals (provided in the ITC) is summarized in Table A8.3A. Table A8.3B indicates the points available within qualifications and competence of the key staff for the different members of the key staff, resulting from the total points (55) allocated to this criterion and the weights indicated in the RFP (see above). Table A8.3A Points Allocated to Criteria and Subcriteria
1-Specific Experience of Consultants No subcriteria Points 2-Methodology & Work Plan Points 3- Qualifications and Competence of Key Staff General qualifications Adequacy for the project Points 5-Local Participation Points

Approach & methodology Work plan Organization & staffing review of detailed design supervision during construction 5

13.75

No subcriteria

30.25

Experience in region & language

11

11 30

55

10

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Table A8.3B Key Staff Evaluation Key Staff Members Team leader Hydraulic engineering Structural engineering Soil engineering Electromechanical engineering Time & cost control specialists Total

Points 22 8.25 5.5 5.5 5.5 8.25 55

The RFP also indicates the weights given to the technical and financial proposals as follows: Weight for the technical proposal Weight for the financial proposal 0.8 0.2

Before receiving the technical proposals, the Evaluation Committee met to define the grades to adopt for the evaluation and made the following decisions: (a) Since no subcriteria were specified in the RFP under the criterion specific experience of consultants related to the assignment, the committee decided to evaluate the specific experience as a whole, considering the following aspects: (i) experience in similar projects, (ii) experience in similar areas and conditions, and (iii) size and organization. For each one of the three subcriteria of adequacy of the proposed methodology and work plan, the committee adopted the four grades suggested (Poor, Satisfactory, Good, Very Good) and set the relevant definitions. Similarly, for each one of the three subcriteria of the qualifications and competence of the key staff, the committee adopted the four grades suggested (Poor, Satisfactory, Good, Very Good) and set the relevant definitions. For the criterion local participation the committee decided to allocate the available points in a proportion equal to the percentage share of national key staff in the total key staff time effort proposed.

(b)

(c)

(d)

The following pages provide samples of the different evaluation worksheets that may be used by the members of the Evaluation Committee when evaluating the proposals, and a scoring example based on the points indicated for the different criteria and subcriteria in the preceding tables. For the sake of simplicity, the samples refer to only one member of the Evaluation Committee and two of the six invited proposals. As for the proposed key staff, it is assumed that Consultant 1 proposes three hydraulic engineers for the Hydraulic Engineering Group, a civil engineer for the Structural Engineering Group, a soil engineer for the Soil Engineering Group, an electrical engineer and a mechanical engineer for the Electromechanical Engineering Group, and a time and cost control specialist for the Project Control Group.

132

Consultant 2 proposes three hydraulic engineers for the Hydraulic Engineering Group, a civil engineer for the Structural Engineering Group, a soil engineer for the Soil Engineering Group, an electrical engineer for the Electromechanical Engineering Group, and a time and cost control specialist for the Project Control Group.

Two of the five groups proposed by consultant 1 and one of the five groups proposed by consultant 2 include more than one expert. For these groups, each expert is separately evaluated and scored, then the scores are averaged to obtain the group score. All scores shown in the different samples are rounded to the third decimal. The Minimum Qualifying Mark specified in the RFP is 70. In this example it is furthermore assumed that total prices offered by the consultants are: Consultant 1: Consultant 2: Consultant 3: Consultant 4: Consultant 5: Consultant 6: US$3,100,000 US$3,400,000 US$2,950,000 US$3,600,000 US$3,220,000 US$3,360,000

The formula indicated in the RFP for determining the financial scoring is: Sf = 100 x Fm/F Where Sf is the financial score, Fm the lowest price, and F the price of the proposal under consideration.

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Table A8.4 - Evaluation Worksheet for Specific Experience Procuring Entity: Assignment: Country: Project: Date of Evaluation: Evaluation Carried Out by: Name of Consultants: 1.____________ 2._____________ 3.____________ 4 ____________ 5.____________ 6.____________ Consultant Criteria Specific experience (similar projects, similar areas & conditions, specialization) TOTAL 1 2 3 4 5 6

Points Rating Score Rating Score Rating Score Rating Score Rating Score Rating Score (P) (R) % P x R (R) % P x R (R) % P x R (R) % P x R (R) % P x R (R) % P x R 5 70 3.5 100 5

3.5

5.00

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Table A8.5 - Evaluation Worksheet for Methodology and Work Plan Procuring Entity: Assignment: Country: Project: Date of Evaluation: Evaluation Carried Out by: Name of Consultants: 1.____________ 2._____________ 3.____________ 4.____________ 5.____________ 6.____________ Consultant Criteria Approach & Methodology Work Plan Organization & Staffing Review of detailed design Supervis. during construction TOTAL 4 11 30 70 90 2.8 9.9 20.8 90 100 3.6 11 23 1 2 3 4 5 6

Points Rating Score Rating Score Rating Score Rating Score Rating Score Rating Score (P) (R) % P x R (R) % P x R (R) % P x R (R) % P x R (R) % P x R (R) % P x R 8 7 40 70 3.2 4.9 70 40 5.6 2.8

135

Table A8.6A - Evaluation Worksheet for Qualifications and Competence of the Key Staff (Group Scoring) Procuring Entity: Assignment: Country: Project: Date of Evaluation: Evaluation Carried Out by: Name of Consultants: 1.____________ 2._____________ 3.____________ 4.____________ 5.____________ 6.____________ Consultants: 1 General Qualifications 25% Name Adequacy for the Project 55% Experience in Region & Language 20%

Group 1 Hydraulic Engineering Group Hydraulic Engineer 1 Hydraulic Engineer 2 Hydraulic Engineer 3 Averaged Subtotal 2 Electromech. Engineer.Group Electrical Engineer Mechanical Engineer Averaged Subtotal

Total Points Rating Score Points Rating Score Points Rating Score Points (P) (R) % P x R (P) (R) % P x R (P) (R) % P x R 8.250 2.063 70 2.063 70 2.063 90 5.500 1.375 40 1.375 90 0.550 3.025 40 1.238 3.025 90 0.894 1.210 1.100 90 2.723 1.100 100 1.966 0.990 1.100 1.045 1.444 4.538 90 1.444 4.538 90 1.857 4.538 70 1.582 4.084 1.650 90 4.084 1.650 40 3.177 1.650 90 3.782 1.485 0.660 1.485 1.210

Note: This table may be used for scoring groups. In case the Key Staff include only one expert per each of the disciplines or activities indicated in the RFP, they may all be scored using Table A8.7A. If some of the disciplines or activities include more than one expert, and others only one, the former may be scored as Groups using Table A8.6B, and the latter as individuals using Table A8.7B.

136

Table A8.6B - Evaluation Worksheet for Qualifications and Competence of the Key Staff (Group Scoring) Procuring Entity: Assignment: Country: Project: Date of Evaluation: Evaluation Carried Out by: Name of Consultants: 1.____________ 2._____________ 3.____________ 4.____________ 5.____________ 6.____________ Consultants: 2 General Qualifications 30% Name Adequacy for the Project 50% Experience in Region & Language 20%

Group 1 Hydraulic Engineering Group Hydraulic Engineer 1 Hydraulic Engineer 2 Hydraulic Engineer 3 Averaged Subtotal

Total Points Rating Score Points Rating Score Points Rating Score Points (P) (R) % P x R (P) (R) % P x R (P) (R) % P x R 8.250 2.063 2.063 2.063 90 70 90 1.857 4.538 1.444 4.538 1.857 4.538 1.719 70 70 90 3.177 1.650 3.177 1.650 4.084 1.650 3.479 70 40 90 1.155 0.660 1.485 1.100

Note: This table may be used for scoring Groups. In case the Key Staff include only one expert per each of the disciplines or activities indicated in the RFP, they may all be scored using Table A8.7A. If some of the disciplines or activities include more than one expert, and others only one, the former may be scored as Groups using Table A8.6B, and the latter as individuals using Table A8.7B.

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Table A8.7A - Evaluation Worksheet for Qualifications and Competence of the Key Staff (Consolidated Scoring) Assignment: Country: Project: Date of Evaluation: Evaluation Carried Out by: Name of Consultants: 1.____________ 2._____________ 3.____________ 4.____________ 5.____________ 6.____________
Consultants: 1 General Qualifications 25% Total Points 22.000 8.250 5.500 5.500 5.500 8.250 Subtotals TOTAL for the Key Staff
1

Adequacy for the Project 55% Points (P) 12.100 4.538 3.025 3.025 3.025 4.538 70 70 40 Rating (R) % 90 Score PxR 10.890 3.782 1 2.118 1.210 1.966 1 3.177 23.143 41.651

Experience in Region & Language 20% Points (P) 4.400 1.650 1.100 1.100 1.100 1.650 100 70 90 Rating (R) % 70 Score PxR 3.080 1.210 1 0.770 0.990 1.045 1 1.650 8.745

Group Team Leader Hydraulic Engineering Group Structural Engineering Group Soil Mechanics Group Electromechanical Engineer. Group Project Control Group

Points (P) 5.500 2.063 1.375 1.375 1.375 2.063

Rating (R) % 90

Score PxR 4.950 1582 1

70 40

0.062 0.550 0.894 1

40

0.825 9.763

55

This score is taken from Table A8.6A. Note: In this example it is assumed that the Key Staff proposed by Consultant 1 includes three experts for the Hydraulic Engineering Group, two experts for the Electromechanical Engineering Group, and only one expert for each of the three remaining Groups. Consequently, the Team Leader and the experts pertaining to the Structural, Soil Mechanics, and Project Control Groups of the Consultant 1 have been scored as individuals using Table A8.7A. The other Key Staff have been first scored as Groups using Table A8.6A, and then the relevant averaged scores transferred to Table A8.7A.

138

Table A8.7B - Evaluation Worksheet for Qualifications and Competence of the Key Staff (Consolidated Scoring) Procuring Entity: Assignment: Country: Project: Date of Evaluation: Evaluation Carried Out by: Name of Consultants: 1.____________ 2._____________ 3.____________ 4.____________ 5.____________ 6.____________
Consultants: 2 General Qualifications 25% Total Points 22.000 8.250 5.500 5.500 5.500 8.250 Subtotals TOTAL for the Key Staff
1

Adequacy for the Project 55% Points (P) 12.100 4.538 3.025 3.025 3.025 4.538 70 70 100 40 Rating (R) % 100 Score PxR 12.100 3.479 1 2.118 2.118 3.025 1.815 24.655 42.791

Experience in region & Language 20% Points (P) 4.400 1.650 1.100 1.100 1.100 1.650 40 40 70 100 Rating (R) % 70 Score PxR 3.080 1.100 1 0.440 0.440 0.770 1.650 7.480

Group Team Leader Hydraulic Engineering Group Structural Engineering Group Soil Mechanics Group Electromechanical Engineer. Group Project Control Group

Points (P) 5.500 22.063 1.375 1.375 1.375 2.063

Rating (R) % 90

Score PxR 4.950 1.719 1

70 90 70 40

0.962 1.238 0.962 0.825 10.656

55

This score is taken from Table A8.6B. Note: In this example it is assumed that the Key Staff proposed by Consultant 2 includes three experts for the Hydraulic Engineering Group and only one expert for each of the four remaining Groups. Consequently, the Team Leader and the experts of the Structural, Soil Mechanics, Electromechanical, and Project Control Groups of Consultant 2 have been scored as individuals using Table 8B. The experts of the Hydraulic Engineering Group have been first scored as a Group using Table A8.6B, and then the relevant averaged score transferred to Table A8.7B.

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Table A8.8 - Evaluation Worksheet for Local Participation Procuring Entity: Assignment: Country: Project: Date of Evaluation: Evaluation Carried Out by: Name of Consultants: 1.____________ 2._____________ 3.____________ 4 ____________ 5.____________ 6.____________ Consultant Criteria Rating equal to the percentage share of national key staff in the total key staff time effort proposed by the consultants TOTAL 1 2 3 4 5 6

Points Rating Score Rating Score Rating Score Rating Score Rating Score Rating Score (P) (R) % P x R (R) % P x R (R) % P x R (R) % P x R (R) % P x R (R) % P x R 10 32 3.2 26 2.6

10

3.2

2.6

140

Table A8.9 - Summary of Evaluation (Technical Proposal) Procuring Entity: Assignment: Country: Name of Project: Date of Evaluation: Evaluation Carried Out by: Name of Consultants: 1.___________ 2.____________ 3.___________ 4.____________ 5.___________ 6.____________ Consultants Criteria Specific experience related to the assignment Adequacy of the proposed work plan & methodology Qualifications and competence of the key staff Suitability of the transfer of knowledge Local participation Total Staff-Months Local: Staff-Months In Field: Total Points 5 30 55 n. a. 10 100 3.200 69.151 2.600 73.391 1 Score 3.500 20.800 41.651 2 Score 5.000 23.000 42.791 3 Score 4 Score 5 Score 6 Score

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Table A8.10 - Summary of Evaluation Procuring Entity: Assignment: Country: Project: Date of Evaluation: Evaluation Carried Out by: Name of Consultants: 1.___________ 2.____________ 3.___________ 4.____________ 5.___________ 6.____________
TECHNICAL EVALUATION FINANCIAL EVALUATION COMBINED EVALUATION Price Points Total Points

Consultants

Technical Score

Technical Weight Factor 0.8 0.8 0.8 0.8 0.8 0.8

Technical Points

Price (US$)

Financial Score

Price Weight Factor 0.2 0.2 0.2 0.2 0.2 0.2

1. 2. 3. 4. 5. 6.

69.151 73.391

55.321 58.713

3,100,000 3,400,000 2,950,000 3,600,000 3,220,000 3,360,000

95.161 86.765 100.000 81.944 91.615 87.798

19.032 17.353 20.000 16.389 18.323 17.560

74.353 76.066

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8.2. Technical Assistance Services for an Agricultural Development Project

The Procuring Entity or Project Owner needs to select a consulting firm to provide technical assistance services related to the implementation of a large agricultural development project in a developing country. Five qualified consultants are invited to submit proposals, to be evaluated with QCBS. Due to the importance placed by the Procuring Entity or Project Owner on the transfer of knowledge, the TOR include a specific requirement of a training program for the The Procuring Entitys or Project Owners personnel. The participation of local experts in the technical assistance is also considered important by the Procuring Entity or Project Owner client. In the RFP the points indicated in Table A8.11 are allocated to the evaluation criteria: The 50 points allocated to the criterion qualifications and competence of the key staff are distributed among the relevant subcriteria according to the percentages of Table A8.12. For the criterion adequacy of the proposed work plan and methodology, the following three subcriteria and relevant point allocations are selected: Technical approach & methodology Work plan Organization and staffing 5 points 5 points 10 points

Within the criterion qualifications and competence of the key staff,, the team leader is given a weight of 50 percent. As for other members of the key staff, the characteristics of the assignment suggest the need to stress the importance of pedology, agroeconomy, socioeconomy, hydraulic engineering, and farm development. Consequently, the client indicates in the RFP the following weights for the relevant key staff in the five sectors: Pedology Agroeconomy Socioeconomy Farm development Hydraulic engineering weight of 15% weight of 10% weight of 10% weight of 8% weight of 7%

Table A8.11 Points Allocated to Main Criteria Criteria 1 Specific experience of consultants related to the assignment 2 Adequacy of the proposed methodology & work plan 3 Qualifications and competence of the key staff 4 Suitability of the transfer of knowledge 5 Local participation Total

Points 10 20 50 10 10 100

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Table A8.12 Key Staff Evaluation Subcriteria General qualifications Adequacy for the project Experience in region & language Total

% Points 30 50 20 100%

The overall setup of the different subcriteria and relevant points for evaluating the technical proposals (provided in the ITC) are summarized in Table A8.13A. Table A8.13B indicates the points available within qualifications and competence of the key staff for the different members of the key staff, resulting from the total points (50) allocated to this criterion and the weights indicated in the RFP. The RFP also indicates the weights given to the technical and financial proposals as follows: Weight for the technical proposal Weight for the financial proposal 0.8 0.2

Before receiving the technical proposals, the Evaluation Committee met to define the grades to adopted for the evaluation and made the following decisions: (a) Since no subcriteria were specified in the RFP under the criterion specific experience of consultants related to the assignment, the committee decided to evaluate the specific experience as a whole, considering the following aspects: (i) experience in similar projects, and (ii) experience in similar areas and conditions. For the criterion Suitability of transfer of knowledge, the committee decided to evaluate the transfer of knowledge as a whole, considering the following aspects: (i) methodology and outcome of the program, (ii) organization of the program, and (iii) experience in training. For the criterion local participation, the committee decided to allocate the relevant points in proportion to the percentage share of national key staff time effort proposed.
Table A8.13A - Points Allocated to Criteria and Subcriteria 1 Specific Poi 2 Poi 3 Poi 4 Suitability Poi 5 - Local Poi Experience of nts Methodology nts Qualifications nts of Transfer of nts Participation nts Consultants & Work Plan and Knowledge Competence of Key Staff No subcriteria Approach & 5 methodology Work plan 5 General 15 No subcriteria qualifications Adequacy for 25 the project Organization 10 Exp. in region 10 & staffing & language 10 20 50 10 No subcriteria

Total

10

(b) For each one of the three subcriteria of adequacy of the proposed methodology & work plan, the committee adopted the four grades suggested (Poor, Satisfactory, Good, Very Good) and set the relevant definitions. 144

(c) Similarly, for each one of the three subcriteria of the qualifications and competence of the key staff, the committee adopted the four grades suggested in (Poor, Satisfactory, Good, Very Good) and set the relevant definitions. Table A8.13B Key Staff Evaluation Key staff members Team leader Pedologist Agroeconomist Socioeconomist Farm development specialist Hydraulic engineer Total

Points 25 7.5 5 5 4 3.5 50

The evaluation worksheets that may be used by the evaluation committee in evaluating the proposals are similar to the samples included in Annex 8.1.

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8.3.

Technical Assistance Services for a Privatization Project

The Procuring Entity or Project Owner needs to select a consultant to provide technical assistance services related to the privatization of the power sector of the country. Four qualified consultants are invited to submit proposals, to be evaluated with QCBS. Transfer of knowledge is not required, although the participation of local experts is considered essential by the Procuring Entity or Project Owner. In the RFP the points indicated in Table A8.14 are allocated to the evaluation criteria. The 60 points allocated to the criterion qualifications and competence of the key staff are distributed among the relevant subcriteria according to the percentages of Table A8.15. For the criterion adequacy of the proposed methodology and work plan, the following three subcriteria and relevant point allocations are selected: : Technical approach and methodology Work plan Organization and staffing 5 points 5 points 10 points

Within the criterion qualifications and competence of the key staff, the team leader is given a weight of 30 percent. As for the other components of the key staff, the characteristics of the assignment suggest the need to stress the importance of financial analyses, institutional framework, legal aspects, and pricing of the assets to be privatized. Consequently, the Procuring Entity or Project Owner indicates in the RFP the following weights for the relevant key staff in the four sectors: Financial analysts Institutional experts Legal advisers Pricing experts weight of 20% weight of 20% weight of 15% weight of 15%

Table A8.14 Points Allocated to Main Criteria Criteria 1 Specific experience of consultants related to the assignment 2 Adequacy of the proposed methodology & work plan 3 Qualifications and competence of the key staff 4 Suitability of the transfer of knowledge 5 Local participation Total Table A8.15 Key Staff Evaluation Subcriteria General qualifications Adequacy for the project Experience in region & language Total

Points 10 20 60 0 10 100 % Points 30 50 20 100% 146

The overall setup of the different subcriteria and relevant points for evaluating the technical proposals (provided in the ITC) are summarized in Table A8.16A. Table A8.16B indicates the points available within qualifications and competence of the key staff for the different members of the key staff, resulting from the total points (60) allocated to this criterion and the weights indicated in the RFP. The RFP also indicates the weights given to the technical and financial proposals as follows: Weight for the technical proposal Weight for the financial proposal 0.9 0.1

(a) Since no subcriteria were specified in the RFP under the criterion specific experience of consultants related to the assignment, the committee decided to evaluate the specific experience as a whole, considering the following aspects: (i) experience in similar projects, and (ii) experience in similar areas and conditions. For the criterion local participation, the committee decided to allocate the relevant points in proportion to the percentage share of national key staff time effort proposed. (b) For each one of the three subcriteria of adequacy of the proposed methodology & work plan, the committee adopted the four grades suggested (Poor, Satisfactory, Good, Very Good) and set the relevant definitions. (c) Similarly, for each one of the three subcriteria of the criterion qualifications and competence of the key staff, the committee adopted the four grades suggested (Poor, Satisfactory, Good, Very Good) and set the relevant definitions. The evaluation worksheets that may be used by the Evaluation Committee in evaluating the proposals are similar to the samples included in Annex 8.1.
Table A8.16A - Points Allocated to Criteria and Subcriteria 1 Specific Experience of Consultants No subcriteria Poi 2 Methodology Poi 3 Qualifications Poi nts & Work Plan nts and Competence nts of Key Staff Approach & methodology Work plan Organization & staffing Total 10 5 General qualifications 5 Adequacy for the project 10 Experience in region & language 20 5 - Local Participation Poi nts

18 No subcriteria 30 12 60 10

Table A8.16B Key Staff Evaluation Key Staff Members Team leader Financial analysts Institutional experts Legal advisers Pricing experts Total

Points 18 12 12 9 9 60 147

8.4.

Form for Performance Evaluation

Form for Performance Evaluation1
2. Procuring Entity (Client)

1. Loan, Credit, or Grant No. 3. Project Name

4. Consulting Firm's Name, Nationality2, and Address 5. Participating Firms (for Associations)3 (a) ..................................................................................................................................... (b) ..................................................................................................................................... (c) ..................................................................................................................................... 6. Description of Services (brief, less than a quarter of a page) 7. Contract Date4 9. Original Contract Amount (Approx. in US$) 8. Completion Date 5 (Actual) 10. Final Contract Amount (Approx. in US$)

11. Evaluation, based on (a) your own knowledge, (b) a review of the records, and (c) discussions with Procuring Entity and Other staff. (See next page for details) Score Rating 5 4 3 2 1

Outstanding Good Adequate Marginally adequate Unsatisfactory

Explanation of Above Score (Use additional sheets, if necessary) Name of Governments responsible officer Managers Name Signature Signature Units Acronym Units Acronym Date Date

Note: This table is use when the assignment is completed according to the contract, the procuring entity or project owner shall evaluate the performance of the consultant using this form. The information provided in the following table is confidential and used only to report to the Ministry of Finance, (PrMO) on the consultants performance.

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Consultant Performance Evaluation Evaluation Checklist

The approach below may be used as a guide to evaluating performance. The checklist should be used for each firm. 1. General Background 2. Before consultants appointment: (a) What was (were) the justification(s) for appointing the consultant? (b) Did the Procuring Entity or Project owner and the sponsoring agency agree on the role of the consultant? (c) What role did the sponsoring agency play in assisting the Procuring Entity or Project owner ( for example, through participation in the preparation of the terms of reference)? 3. During consultants performance: (a) What events were connected with the services of the consultant? (b) What actions should be avoided or repeated in similar future projects? (c) What was the quality of supervision of the consultant by the Procuring Entity or Project owner? (d) Did the sponsoring agency bring to the attention of the Procuring Entity or Project owner and the firm the deficiencies in the performance of the consultant? What was the response? Typical Factors Assessed 4. Technical performance criteria: (a) Appropriateness of recommendations and solutions, and of cost-effectiveness. (b) Applicability to the country and agency conditions; reliability, sustainability, and ease of implementation. (c) Flexibility and adaptability to changes. (d) Cost estimate reliability. (e) Frequency of design changes. (f) Technology transfer. 5. Managerial Criteria (a) Communications effectiveness. (b) Cultural adaptation. (c) Organization and execution of tasks. (d) Quality of staff assigned. (e) General cooperation and responsiveness, adherence to commitments. (f) Quality of relationships with implementing agency, suppliers and contractors, other government agencies, funding agencies, and so forth. (g) Training. 6. Overall Criteria (a) Timeliness of performance. (b) Adherence to budget. (c) Professional conduct

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Section 9: Taxation of Consulting Services

9.1. Tax Payment of Consulting Services

To allow procuring entity or project owner to evaluate financial proposals correctly, the IRR require that consultants submit their cost proposals excluding local taxes, which shall be estimated and shown as separate amounts. Local tax liabilities originating from consulting services contracts are often the cause of unclear proposals and of unsatisfactory contracts. The identification and calculation of local tax amounts are a difficult and time-consuming task for consultants, especially for foreign consultants with little knowledge of the tax system of the country. Such local taxes generally include the following: indirect taxes, that is, ad valorem taxes (VAT) on contract items, for example, VAT on consultant remuneration; duties on imported equipment and supplies later exported by the consultants, for example, personal computers, scientific equipment; duties and levies on equipment imported or locally acquired by the consultants that is treated as property of the client, for example, cars, office equipment; local income taxes on the remuneration of services rendered locally, and profit taxes.

Note the IFIs do not reimburse for payments related to the above taxes and duties, it leaves the Borrower to decide whether the consultant should (a) be reimbursed by the procuring entity or project owner, (b) be exempted, (c) have the procuring entity or project owner pay such levies on behalf of the consultants and its personnel, or (d) pay taxes without reimbursement by the procuring entity or project owner. The procuring entity or project owner must identify and advise the consultants about which of the above alternatives or combination thereof apply before the financial proposal is submitted. The ITC of the RFP should list the applicable regulations necessary to allow the consultant to estimate their tax liability separate from the proposal price. Before finalizing the ITC for a specific assignment, the client must gain clarity on the tax liabilities that arise for the agency itself when using consultants and at an early stage make adequate provision in their budget. When in doubt consultants should ask the procuring entity or project owner in writing for explanations and, if needed, seek the advice of an expert in local taxation. During negotiations consultants must ensure that the contract contains accurate provisions for all local taxes that they will have to bill to the executing agency. Local direct taxes, that is, income or corporate taxes that cannot be identified separately, are not relevant for the purpose of comparison of proposals and should not be considered in the context explained in the above paragraphs.

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