Procurement of Information Technology: Fiduciary Forum 2008

Procurement of Information
Technology
Fiduciary Forum 2008
Overview
Procurement of IT- Fiduciary Forum 2008 – Page 1

AGENDA
• Characteristics of ICT
• packaging approach for IT components;
• selection of Standard Bidding Documents (Goods
vs the SBD for Supply and Installation of
Information Systems (SII; and single stage vs two-
stage bidding);
• evaluation methodology and technical
requirements, including establishing
price/technical ratio
• Two stage bidding

Characteristics of ICT
• Enormous level of continuing innovation
• Prices come down, performance increases
• Lifetime of “hard” investments potentially low
• Technology now permeates business processes, with
heavy integration across all systems
• Private sector (as provider) remains key driving force

Typical Parts of Major ICT
Components
• General studies (BPR, IT strategy, establishing the linkage
with project goals, establishing priorities, approach)
• Design studies (user requirements, functional
specifications, designs, “blueprints”)
• Application software customization/development
• Hardware and standard software delivery
• Project management (often a complex task)
• Training (users, technical staff)
• Other services (e.g., digitization, data conversion, surveys)

FAILURE FACTORS
Factor Percent
1 Incomplete requirements 13.1

2 No user involvement 12.4
3 Lack of resources 10.6
4 Unrealistic expectations 9.9
5 No support from senior management 9.3
6 Unstable requirements 8.7

7 Poor planning 8.1
8 System non-usable at finish 7.5
9 No IT management 6.2
10 No technical competence 4.3
SUCCESS FACTORS
Factor Percent
1 User involvement 15.9
2 Support from senior management 13.9
3 Clearly defined requirements 13.0
4 Good planning 9.6

5 Realistic expectations 8.2
6 Phased approach 7.7
7 Competent personnel 7.2
8 User ownership 5.3
9 One vision and clear goals 2.9
10 Effective and goal oriented personnel 2.4

Examples of ICT Components in
Typical Bank-Financed Projects
 Computer classrooms for schools
 Agency’s main e-mail and document handling system (e.g.,
Outlook/Exchange, Lotus Notes)
 Court administration system
 Financial Information System (e.g., Budget, Payroll, Integrated FMS)
 Geographical Information System (e.g., cadastre, forest management)
 Information System (laws, general statistics, highway accidents, etc.)
 Management Information System (e.g., health, education)
 Operational Information System (e.g., Railway, Central Bank RTGS)
 Social Insurance System (medical, pensions, unemployment)
 Revenue Management System (tax, customs administration)
 Treasury System (budgeting, expenditure control)

Large IT projects

Why IT Procurement Is Different
• IT Professional Mindset
• Know chances of failure are high (US gov. study – 45% of projects
unusable)
• Are experienced to eliminate ambiguity and uncertainty
• Know who can do the job best
• Fast technical changes
• Market
• extremely competitive It Is a
• becoming commodity driven
• Environment Lethal Mix
• Policy, legal and regulatory changes of Risks
• Management change

Procurement challenges presented by IT
• IT frequently combines Goods and Services elements

• software pricing/licensing/IP presents an additional
element needing special treatment, as do possible
telecommunications facilities
• installed base and related staff skills may have
considerable impact
• de-facto market monopolies may weigh heavily
 Need for specialized Standard Bidding Documents (SBDs)

and for skill in packaging the overall procurement

Complexity diagram
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Content
Low

The available instruments
 ICT toolset for Task Managers
 Guidance on SBD selection for ICT procurement
 Other IT Guidance Notes
 SBD for Information Systems Supply and Installation (IS1STG
SBD, Version 3a, March 2003)*
 Two-stage (IS2STG SBD, Version 3a, March 2003)*
 Goods SBD (use only for IT products)*
 Shopping (only for well-defined IT products of small value)
 RFP approach (for strategy development, design studies, development
of user requirements and application software development)*
Appropriate overall approach may use all of these options to advantage

* Versions in French and Spanish are available

Which Approach to Use?
High
IS1STG SBD IS2STG SBD
Goods Content
Goods SBD IS1STG SBD
Shopping RFP
Low
Low Services Content High
Procurement Methods
• ICB is common for initial investment. Goods or Single-
stage Supply and Installation of Information Systems
SBDs are used.
• Two-stage Supply and Installation of Information Systems
SBDs used for turnkey and complex procurements
• Pre-qualification for exceptional very specialized cases
critical for project implementation. No standard pre-
qualification document is available. LIB can be used in
lieu of pre-qualification in some cases.
• Shopping may be necessary for start up activities, to fill
gaps, for specialized tools, and minor purchase updates

Practical suggestions
• Turnkey implementation SBD – only exceptional, high risk of failure.

• Goods SBD – general purpose hardware and off-the-shelve software
(without customization).
• Single-stage SBD – detailed requirements for system (hardware and
software) are known and the weight of technical scoring is no more
than typically 25%.
• Two-stage SBD – the solution is known but the alternatives are
allowed and there is need for the weight of technical scoring higher
than typically 25 % (30%-50%), in the first stage.
• Technical assistance RFP – for design, development and integration of
the system, or any combination of these activities (the suggested
minimum is design and/or integration).

Approaches for dividing and packaging
• single responsibility (“turnkey”) contract(s)

• separating the application software development
• building on existing efforts if they hold promise
• phasing application software development (prototyping,
RAD, piloting, partial and full “roll-out”)
• splitting procurement and managing several suppliers
(splitting in time, and by type of procurement package)
Each approach has its own set of pros and cons.

Actual approach needs to fit the situation.
Should also reflect Borrower’s competence and will.
Use SBD for Goods…
• For ready-made equipment and materials, pre-installed
software packages and consumables only
• Package contains only incidental services, such as
installation, LAN, standard training, etc. (15% of total
contract value)
• Contract can be fully implemented in at most 6 months
• Recurrent costs comprise only the standard warranties and
software licenses, up to 3 years
In other words, the procurement package
resembles a typical Goods procurement.
SHOPPING
The ITQ for Shopping (SH) may be used as an
alternative when the procurement package is:
• only off-the-shelf IT and is small in value (consult
thresholds in LA/DCA/PP) and can be handled by
simple payment on Delivery (in any case max
US$100,000);
• only incidental services are delivery and
installation;
• must use the ECA Shopping Website:

Use RFP…
• Typically for IS project management support, development of ICT
strategies, user requirements, functional specifications, design of
application software, and the assembly of ICT bidding documents
• For implementation: When the content comprises almost only services
(e.g., development of an application system), and usually for pilot
applications
• The size of the task is within the grasp of typical consultant or software
engineering firms
• The hardware and packaged software content should be minimal, e.g.,
less than 20% of the estimated contract value
• Requires special customization to the standard contract (for intellectual
property rights, support/warranty, testing and acceptance, and
appropriate payment clauses
Purchaser assumes higher risk.
Provides good scope for the use of competent local firms.
Use the Single-Stage SBD…
• Especially if procurement package combines critical
Goods and Services elements
• Sophisticated hardware requiring an informed performance
comparison and special training requirements
• A dominating value of the software packages
• Extra installation and support requirements for these
• Software design, large-scale adaptation and/or
development
• Requirements for the supplier to continue to operate the
equipment after installation
• For contracts requiring pricing for both investment &
recurrent costs (life-cycle)
Use as default for Information Systems
Use the Two-Stage SBD…
• When it is unclear whether full solutions are available from
potential bidders
• When the submission of technical alternatives is actively
encouraged
• When it is important to gain confidence via the bidding
process about acceptable and desirable solutions
• Includes the possibility to test proposed solutions prior to
contracting
Requires more time than single-stage; entails the
prospect of prejudicing the Purchaser.

Typical Borrower Issues
• Reliance on inadequate IT expertise
• Project management and implementation capacity often
lacking or unsustainable
• Mindset fixed on obtaining specific brands
• Eager to receive hardware, with little regard to use it
productively any time soon
• Lack of attention to the effort and skills it takes to put
adequate BDs together
• Desire to do everything with own staff
• Poor communication with the World Bank

Typical World Bank Issues
• Giving ICT components a separate life from the
start
• No or inadequate reliance on IT expertise
• Non-use of World Bank procurement expertise in
IT
• Lack of problem appreciation by Task Manager
and Procurement Accredited Staff
• Clearing BDs and BERs in frustration

Preparation of Bidding Documents
• Clearly describe what is to be procured (Technical

Specifications and IFB) ... can be complex
• Pay attention to how the global and local markets work in
the areas of the technical requirements (what to include
and what not, RFP vs. ICB, division into lots)
• Needing special attention: technical evaluation method (if
any), recurrent cost table, schedule
• Also needing attention: investment price table, payment
schedule, project management and approach to acceptance
• Capture required quality / performance for equitable
competition

Preparation of Bidding Documents
• To the extent possible, simplify bid evaluation. Define

what is really wanted and make it mandatory
• Quality points reserved only for extra value offered by
the Bidder, and the value is actually invited by the
Purchaser
• The dilemma of the argument of Purchaser “wants”
versus “needs”.
• Eliminate recurrent costs evaluation if at
all possible. This is the most common TIP
cause of problems in bid evaluation. Use International
Consultants to assist
the Borrower
Key areas needing attention
Bidding and bid evaluation stages
• Composition of evaluation team

• Letting evaluators do their job
• Expectation of non-conformities (bids are rarely perfect)
• Special issues in two-stage bids between stage one and two
• If technical merit is scored, BER must be informative to
allow World Bank to review the scoring
• Review outcome as to being competitive in view of the
expected market

Key Areas Needing Attention
Contract execution
• Maintain focus on milestones, goals
• Prevent premature delivery and payment of hardware and
user licenses for packaged software
• Carefully assess proposed replacements of Supplier staff
and resist if appropriate, especially at the start of the
contract
• World Bank involvement typically is a positive factor
outside the contractual conflict resolution framework
• but, World Bank policies typically are very restrictive in
times of contract implementation

Software Rights
• STANDARD SOFTWARE
– RIGHTS WITH OWNER
• CUSTOM (DEVELOPED) SOFTWARE
– MUST BE SPECIFIED IN SCC
• A) FULLY VESTED IN PURCHASER
• B) REMAIN VESTED IN SUPPLIER
• C) ANY INTERMEDIATE APPROACH (BETWEEN A AND
B)
• SOURCE CODE
• SOFTWARE MONOPOLY – both Purchaser and
Supplier are SW owner with equal and separate
rights to develop the software independently of
each other after contract execution
PAYMENT CONDITIONS
• PAYMENT IS DIVIDED AMONG 7 CATEGORIES

– ADVANCE (USUALLY 10% excl. Recurrent Costs)
– INFORMATION TECHNOLOGIES, MATERIALS AND
OTHER GOODS (not custom software or custom materials)
usually 60% delivery, 10% installation, 10% Op. Accept.
– CUSTOM SOFTWARE AND CUSTOM MATERIALS usually
60% installation, 20% Op. Accept.
– SERVICES`OTHER THAN TRAINING (usually 80% monthly
in arrears against services performed)
– TRAINING (usually 30% at start of training and 50% monthly in
arrears)
– COMPLETE SYSTEM INTEGRATION (usually 10% of entire
contract excl. Recurrent Costs)
– RECURRENT COSTS (100% monthly in arrears against services
delivered)

MAIN FEATURES
BIDDING MAY BE CONDUCTED AS A

SINGLE OR TWO STAGE PROCESS
STG 1
STG 1 STG 2

MAIN FEATURES
USE A SINGLE STAGE PROCESS

as default anytime,
but especially if procurement package
combines critical Goods and Services
elements and result is critical for production
operation
Requires comprehensive specifications; at a
minimum functionally comprehensive
specifications.
MAIN FEATURES
USE A SINGLE STAGE PROCESS WHEN:

- Procurement is simple e.g. “supply and install”
- Technical requirements are well defined and can be
defined by clear technical specifications
- Purchaser is clear what technical solution is required
- Solution can be met by products that are already
available
- Procurement involves purchase and installation of large
number of computers and off-the-shelf software
- Design risk is borne by the Purchaser
SINGLE STAGE FLOWCHART
1. Pre-bid
Conference
Bidding Documents Bid
2. Questions
(issued by Purchaser) & answers (submitted by Bidder)
3. Amendments
Contract Documents

PROCEDURE
Bidding Documents
(issued by Purchaser)
Invitation for Bids (IFB) 4. General Conditions of Contract

(GCC)
1. Instructions to Bidders (ITB)
5. Special Conditions of Contract
2. Bid Data Sheet (BDS) (SCC)
3. Eligibility for the Provision of 6. Technical Requirements (TS)

Goods, Works and Services in Bank-
Financed Procurement 7. Sample Forms

PROCEDURE
Bid
(submitted by Bidder)
Bid Form 3.Eligibility of goods and services

4. Conformity of the information
Price Schedules system (incl. technical bid and
project plan) and deviations if any
Bid Security exists.
5. Proposed Subcontractors
Authorization to sign (& any Joint 6. Intellectual property
Venture documents)
[7. Alternative technical bids]
Attachments:
1. Bidder’s eligibility
2. Bidder’s qualifications (incl.
manufacturer’s authorizations)

PROCEDURE
Contract Documents
Notification of Award
Bid Form
Price Schedules
General Conditions of Contract
Special Conditions of Contract
Contract Agreement and
Appendixes:
1.Supplier’s Representative
2.Adjudicator
3.Approved Subcontractors
4.Categories of Software
5.Custom Materials
6.Revised Price Schedules (if any)
7.Minutes of Contract Finalization
8. Change order procedures and forms
Updated Technical Bid
Any other documents agreed as forming a part of the Contract

ITB – Bidder Qualifications
• ITB 6.1
• Ask bidders for:
– Experience, staffing, financial stability
– Installed user base, references, site visits
– Software history, development methodology,
maintenance, and stability`
• Set thresholds/hurdle targets
• Subcontractors’ qualifications can be indicated
here, however note provisions of ITB 6.2
• Manufacturer’s authorization (usually always)
Bid evaluation
• Avoid technical scoring of mandatory requirements unless
it concerns the method of implementation
• Select only few features – in the range 5-8 ; bidder
capacity should be evaluated mostly as qualifications
• Describe the rules of assigning scores for each technical
feature; predefined values for each feature
• Subjective scores should be assigned by consensus of the
evaluation committee not by simple averaging

Bid Evaluation
• Technical evaluation is complex to review, often requiring

professional expertise - include IT specialists in evaluation
committee
• Use pre-defined procedures for assigning scores and conclude with a
consensus of the evaluation committee
• Bidders complain a lot
• No perfect bids
• Applying corrections
• When are recurrent costs needed
• When to use technical evaluation for
merit as opposed to technical compliance

MATERIAL DEVIATION
A material deviation, exception, objection, conditionality,

or reservation is one
 that limits in any substantial way the scope, quality, or performance

of the Information System; or
 that limits, in any substantial way that is inconsistent with the
Bidding Documents, the Purchaser’s rights or the successful Bidder’s
obligations under the Contract; or
 the acceptance of which would unfairly affect the competitive
position of other Bidders who have submitted substantially
responsive bids.

AWARD
AWARD OF CONTRACT TO THE

LOWEST EVALUATED BIDDER WHO:
 MEETS THE SPECIFICATIONS

 HAS CAPABILITIES AND RESOURCES
 HAS BEEN DETERMINED TO BE
SUBSTANTIALLY RESPONSIVE TO THE
BIDDING DOCUMENTS
 OFFERS THE LOWEST EVALUATED BID PRICE

ITB –Evaluation Methodology
• ITB 28
• Evaluation Formula (B=Evaluated Bid
Score):
B
Clow
X 
T
1  X 
C Thigh
C = Evaluated Bid Price
Clow= Lowest of all Evaluated Bid Prices among responsive bids
T = Total Technical Score awarded to the bid
Thigh= Technical Score achieved by bid scored highest
X = Weight for the Price as specified in the BDS
Bid with highest B will be termed “Lowest Evaluated Bid”

ITB –Evaluation Methodology
• ITB 28.4
• In most cases, you will assign a weight to
technical factors
• Technical weight determined by degree of
professional judgment, project management, and
risk management skills required from Supplier
• Range from 0% for well defined products to up to
60% could be justified for highly complex
requirements of high intellectual input
• Typical 15%

ITB – Evaluation Methodology
Why use merit scoring…
• Often very difficult to describe technical limits
(i.e., server expansion or performance
benchmarks, such as TPC-C)
• Purchaser would like to look at a spectrum of
options in their investment decisions
• High divergence in functionality in the application
software market
• Adequate evaluation of service elements of bids

Determining ‘1-X’ – Method for obtaining a composite merit weight
• Estimate the costs of major components and assign weight:
C1 hardware and standard software c1 (0%)
C2 application software package functionality c2 (50%)
C3 custom application development, studies c3 (60%)
C4 other services (training, project mgt., etc.) c4 (30%)
• C1+C1+C2+C4 must be total estimate for the procurement

• c1, c2, c3, c4 represent technical “importance” within the
component (prior to bidding)
• Compound merit weight is: Sum of Ci*ci/sum of Ci

Determining ‘1-X’ – Example
• Estimate the costs of major components and assign weight:
5m hardware and standard SW c1=0%
1m application software package functionality c2=30%
1m custom application development, studies c3=50%
1m other services (training, project mgt., etc.) c4=20%
• C1+C1+C2+C4 = 8m
• Compound merit weight is: Sum of 0+0.3+0.5+0.2 / 8
» = 12% technical merit weight

• ITB 28.5 (a),(b): Category merit sub-weights
• Must list categories and list of preferred/Desirable
features within each category
• Number of scored features should be kept to a
minimum
• Scoring based on pre-specified assignment of
points
• Operative goals is for a bidder to be able to
accurately forecast its own technical score

ITB 28.5 (a),(b) – What to score
• Score features which influence life-cycle cost and
effectiveness of IS and exceed mandatory
requirements
• Performance, capacity, or functionality features
• Usability features (ease of use, administration,
expansion, etc.)
• Quality of Bidder’s project/implementation plan,
staff experience, training, etc.

• ITB 28.5 (c), (e), (f): Category Weight

• Categories (i.e, SW, BQ) are given weights
• Features with each category may be given
weights
Category Weight
Software (SW) 60%
Bidder Qual. (BQ) 20%
Training Plan (TR) 10%
Implementation Plan (IP) 10%

• ITB 28.6: Evaluated Bid Price
• C = Adjusted Bid Price (P)+Recurrent Cost (R)
• P=total price for all goods/services less
adjustments
• Adjustments include deviations as defined in ITB
28.6 (c)
– Deviations to Implementation Plan
– Deviations taken to contract payment schedule
– Missing items (missing scored items are scored ‘0’)
– Discounts
Evaluated Bid Price – Recurrent Cost
• Recurrent Costs are reduced to net present
value using the following formula:
NM R
R  x
x  1 1  I 
x
N = Number of years of Warranty Period (SCC 29.4)

M = Number of years of Post-Warranty Period (SCC 1.1(e)(xii)
x = Index from 1 to N+M
Rx = Total Recurrent Cost for year “x” as recorded in the Recurrent Cost Form
I = Discount Rate, defined in the BDS 28.6 (d), typically 10%

ITB – Bid Evaluation
An Example Evaluation
• Price Weight X = 80%
• Technical Weight (1-X) = 20%
• T = 0.6*SW+0.2*BQ+0.1*TR+0.1*IP
• Three bidders, C evaluated as follows:
Bidder 1 3.3 million

The T’s & the C’s
C - Evaluated Bid Price

Bidder 1 3.3 million Clow
T – Total Technical Score

Bidder 1 65.0 Thigh
Bidder 2 88.5
Bidder 3 46.0

Determining B – Evaluated Bid Score
Lowest
Evaluated Bid
C - Evaluated Bid Price

Bidder 1 (3.0/3.3)* (0.8) + (65.0/88.5) * (0.2) = 0.87
Bidder 2 (3.0/4.7)* (0.8) + (88.5/88.5) * (0.2) = 0.71
Bidder 3 (3.0/3.0)* (0.8) + (26.0/88.5) * (0.2) = 0.66
ITB 28.4: Highest Score (B) is termed Lowest Evaluated Bidder

and is eligible for contract award, subject to ITB 32

ITB – Schedule/Payment Deviations
• ITB 28.6 (c) (i) & (ii)

• Usually not used
• State maximum advance period and
maximum delay period, in weeks
• 0.5% per week typical rate for delay, of bid
price (none for advance)

ITB – Post Qualification
• ITB 31
• Use to specify specific tests on solutions provided
(i.e. performance tests, benchmarks)
• Clear success criteria must be indicated
• Site visits can be indicated
• Clearly indicate how site visits will be conducted,
what evaluation methodology will be used, who
will carry them
• Purchaser will bear cost of site visits

ITB - Adjudicator
• ITB 38
• There should be an Adjudicator named (or
agreed upon)
• Should play “honest broker” role (typically
not from Purchaser’s country)
• Bidders can counter-propose an Adjudicator

GCC
Payment Terms – Example
Advance Payment
10 %
Information Delivery Installation Operational
Technologies 60% 10% Acceptance
(standard) 10%
Custom Installation Operational Acceptance
Software 60% 20%
Performed Operational Acceptance
Services 20%
60%
Mobilization Delivery
Training
30% 50%
Complete System Integration
10%
GCC
• GCC 15.4 – Intellectual Property Rights (IPR) -
Copyright
• Many possible approaches for custom
software/materials
– Purchaser retains all IPR
– Supplier retains all IPR, and license Purchaser
– An intermediate arrangement, with mutual benefit
• Seek Computer/Software Law expert when
drafting these clauses

GCC
• GCC 15.5 – Source Code Escrow
• Source code is deposited with an “Escrow Agent”,
a neutral third party
• Escrow agent keeps copy of source code secure
and safe
• Source can be released to Purchaser based on pre-
set “release conditions”, such as:
• Supplier goes bankrupt
• Supplier stops honoring software maintenance agreement

GCC
GCC 15.5 – Source Code Escrow - Continued
• Language of Escrow agreement depend on
laws of the country in which agreement is
drawn
• Can be used to provide a level of protection
for investments in custom software
• Can be costly to manage and administer,
depending on level of verification required
by the Purchaser

Technical Requirements
General Guidelines
• Technical requirements must be comprehensive
and unambiguous
• Requirements must be stated clearly, with
minimum room for differing interpretations
• Technical specifications must be vendor neutral
and specified to elicit widest range of responses
and competition, and not restrictive
• Brand names allowed in exceptional circumstance
(Proc Tech Note #4), but always use “or
substantially equivalent”
General Guidelines - Continued
• Requirements should be definitive and offer
quantifiable measure, and allow for comparable
bids
• Use “not less than” or “greater than or equal”
when specifying technical characteristics
• Standard performance benchmark can be used,
except in cases where they become restrictive or
un-economical
• Clearly identify items which are mandatory, and
those that are preferred (scored)
Specifications – in General Must be
• Clear, comprehensive
• Non-discriminatory
• Non-restrictive
• Up-to-Date
• Suitable to task

The Major Sections
• Background
• Business Function & Performance
Requirements
• Technical Specifications
• Testing Requirements
• Implementation Schedule

Technical Specifications
• Must clearly designate Mandatory vs.
Preferred Specifications
• Use the following notation and enumerate
specifications:
<M:cc-nnn>: Mandatory requirements which must be satisfied for a
bid to be considered responsive (e.g., <M:HW-001> ).
<P:cc-nnn>[score] Preferred specifications which will receive

points based on performance/functionality (e.g., <P:HW-001>[10] )
where cc indicates the Category (i.e., SW, BQ, etc.)

Technical Specifications –Mandatory Requirements Sample
Requirement No. Feature

<M:SW-001> Bilingual (Arabic/English)
<M:SW-002> Multi-platform hardware support
<M:HW-001> Processor performance benchmark
<M:HW-002>  60 GB Serial ATA Hard disk

Processor benchmark
• Previously used clause:

 3.0GHz x86 CPU equivalent
• Present recommendation:
Performance benchmarks such as
BAPCO Sysmark 2004 SE, or
SPEC (select appropriate one)

Technical Specifications –Preferred Requirements Sample
Requirement No. Feature

<P:SW-001>[30] Data replication
<P:SW-002>[20] Support for mobile device messaging
<P:SW-003>[40] Multi-class/course add & drop
<P:SW-004>[10] Self-serve kiosk operation

Technical Specifications - Continued
• Service specifications typically are for:
– Systems Integration elements
– Training
– Technical Support
– Maintenance (Warranty & Post-Warranty)

Recurrent Costs
• Hardware maintenance (post-warranty) for key
technology
• Cost of keeping wear and tear-type of spare parts
ready at hand and replacing these parts as needed
• Basic software bug correction and hot line service
(post-warranty) for basic and application software
• Ongoing licensing costs of basic and application
software
• Automatic supply of new versions/releases (for certain
basic or application software packages)

Recurrent Costs
Continued…
• Cost of Supplier’s technical support staff for on-site and off-site
support and software improvement work (staff-days or numbers)
• Cost to operate the information system for a specified period
after operational acceptance
• Cost of consumables (toner for printers or copiers, special paper
costs if and as needed)
• Telecommunications costs (if facilities will not be owned by
Purchaser, or will directly be purchased, such as for one-time
set-up fees, monthly rental charges, data volume charges based
on expected average needs)

Two-Stage SBD
• For Two-Stage procurement of supply &

installation of Information Systems.
• Developed from existing Single-Stage IS
SBD, and…
• The Two-Stage SBD for Supply &
Installation of Plant & Equipment

Two-Stage SBD
When to use
• Complex business applications (e.g., Real-Time
Gross Settlement Systems)
• Systems requiring extensive software development
• Complex information technologies (e.g., GIS)
• Systems involving extensive technical services for
design, development, customization , installation,
training, operations and technical support

Two-Stage SBD
General Approach
• In the first-stage, Purchaser solicits non-priced
technical proposals to address business/functional
requirements
• By way of dialog, Purchaser arrives with each
Bidder at a clear understanding of the aspects of
the bid that:
– (a) full-fill Purchaser’s requirements
– (b) do not conform to the requirements
– (c) are missing

Two-Stage SBD
General Approach - continued
• Bidders who offered sufficiently responsive
first-stage bids are requested to submit
second-stage bids
• Second-stage bids are priced bids, and are
handled and evaluated in essentially the
same manner as Single-Stage bids

Two-Stage vs. Single-Stage SBD
• Preface: provides rationale when to use two-stage
• IFB: Two invitations, for first versus second stage,
respectively
• ITB: Twelve clauses added after clause 12 of Single-Stage
SBD, to lay out first stage bid preparation, submission and
evaluation
• BDS: Only one new entry related to hardware and
software tests, but minor changes in other clauses too
• Sample Forms: Two bid forms (for first and second stage)
instead of one such form in single-stage bidding
• GCC is unchanged
• Fully detailed on IT Procurement Web Site in IS2STG
Publication Note
Additional Provisions
• Content of first stage bid: Allows bidders to state
exceptions to contract and technical requirements, and
offer alternative components/bids
• Clarification meetings: Discuss bid deviations and agree
on changes required in second stage bids
• Optional live tests: Mostly software tests; May include
pass/fail tests; Purchaser must bear any own travel costs
• Invitation to second stage: Individual (bidder-specific)
protocol of changes; perhaps general addendum for all
bidders. Otherwise, bid must be updated first-stage bid.

First-Stage Bid
• Similar to what is required as a full Single-Stage
Bid, but without the Price Schedules
• Bidders are permitted to propose technical
alternatives for components of their base bid or
entire alternative bids (ITB 13.2)
• This would be in addition to, or in lieu of a base or
main bid that meets the specified requirements
• Alternative bids maybe subject of discussion
during the possible Clarification Meetings

First-Stage Bid
• Bids are opened in public
• Names of bidders who submitted bids will
be announced and recorded
• Other information maybe recorded, as
considered by the Purchaser
• Bid opening minutes to be distributed to all
Bidders that met the bid submission
deadline

First-Stage Bid
• First-Stage bids are examined for
completeness, are in order, etc.
• Purchaser will determine if a bid
substantially departs from the requirements
• If the departure is such that the bid cannot
be reasonably expected to become fully
responsive, Purchaser may exclude bid from
further consideration

First-Stage Bid – Technical
Evaluation
• Purchaser will carry out detailed technical
evaluation for non-rejected bids
• Purchaser must examine bids for:
• Overall completeness and compliance with technical
requirements
• Suitability of the offered Information System
• Adherence to specified performance criteria
• Compliance with the Implementation Schedule
• Other factors, including maintenance services, that affect life-
cycle of the Information System

Bid Evaluation – Two-Stage
• Objective of first-stage is to refine the

Purchaser’s specifications
• To allow Bidders to enhance their technical
solutions to make them responsive
• In the second-stage, evaluation proceeds
similar to the Single-Stage evaluation

First-Stage Evaluation Process
• Individual technical solutions are assessed to
ascertain their acceptability in response to Bid
specifications
• Alternative solutions should be evaluated on their
own merit
• Determine if there are major deficiencies in the
solutions and identify whether these deficiencies
could be rectified by the Bidder
• This is when Clarification Meetings may be held

First-Stage Evaluation Process - Continued
• In the first-stage, technical solutions should
be evaluated with respect to mandatory
criteria for reference purposes only
• Purchaser should work with Bidders to
make the technical solutions responsive and
to refine technical specifications if
warranted

First-Stage Evaluation Process - Continued
• Bids that cannot be made technically
responsive, or
• If the Supplier cannot provide references or
is not meeting qualification criteria, then
• Bid may be eliminated as being no-
responsive
• Every attempt should be made to minimize
the elimination of bidders at this stage

Clarification Meeting
• All changes required in the second-stage bid will
be listed in a bidder-specific memorandum entitled
“Changes Required Pursuant to First Stage
Evaluation”
• The memorandum also should include deviations
with are unacceptable to the Purchaser
• Changes applicable to all Bidders invited to the
second bidding-stage will be reflected in an
Addendum to the initial Bidding Documents
First-Stage Clarification Meetings
• A Bidder-specific Clarification meeting may
be conducted
• Used to clarify aspects of the Bid that
require explanation or are not considered
fully responsive by the Purchaser
• Purchaser needs to inform Bidder of any
matters that would make the Bid conform to
the requirements

• Bidders are not required to attend a

Clarification Meeting
• If Bidder elects not to attend, Purchaser will
undertake reasonable effort to achieve
required clarification by correspondence
• Bidders do this on their own risk

• First-Stag Bid clarification stage may include live
demonstrations and tests of Bidder’s proposed
solution(s)
• BDS must clearly describe such test (ITB 23.3)
• Purchaser must bear all staff, travel, and
subsistence costs associated with traveling to
Bidder site
• Bidder is responsible for all costs in preparing,
conducting, and dismantling tests

• Purchaser must advise Bidder of any

deviations the Bidder made, and which the
Purchaser finds
– Unacceptable and that must be withdrawn
– Acceptable and will be incorporated into the
Bidding documents by way of an Addendum
– Addendum would be sent to all Bidders invited
to submit second-stage bid

• All changes required in the second-stage bid will
be listed in a bidder-specific memorandum entitled
Evaluation”
• The memorandum also should include deviations
with are unacceptable to the Purchaser
• Changes applicable to all Bidders invited to the
second bidding-stage will be reflected in an
Addendum to the initial Bidding Documents
• At end of first stage evaluation, Purchaser will
either:
– Invite Bidder to submit an updated technical &
commercial, priced bid, based on revisions as recorded
in the Bidder-specific memo and/or Addenda
– Invite Bidder to submit alternative bid(s) in lieu of or in
addition to the main First Stage Bid
– Notify Bidder that its bid has been rejected on grounds
of being substantially non-responsive

SUBSTANTIALLY RESPONSIVE BID
A substantially responsive bid is one that
(a) materially conforms with the First Stage Bid and/or any alternative
components or alternative bids which the Purchaser invited the
Bidder to offer in its Second Stage Bid,
(b) incorporates the modifications, if any, listed in the bidder-specific
memorandum titled “Changes Required Pursuant to First Stage
Evaluation” pursuant to ITB Clause 23.8, and
(c) reflects amendments, if any, to the Bidding Documents issued as
Addenda together with or subsequent to the Invitation for Bids --
Second Stage, pursuant to ITB Clause 11.2.

Evaluation of Bids - Forms
• Use Trial Standard Bid Evaluation Form for

Supply & Installation of Information
Systems, October 2004 Version
• IT Procurement Web Site
• Feedback welcome on the Trial Version

First-Stage Evaluation Report
• First-stage bid evaluation report should be
formulated and sent to the Bank for review and
issuance of “no objections”
• Report should include Bid opening minutes, and a
copy of bidder-specific memorandum entitled
Evaluation”
• The Draft “Invitation for Bids – 2nd Stage”
• Amendments to the Bidding Document (if any)
From that point on, it’s as if a Single-Stage Bid

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Procurement of Information

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1 Incomplete requirements 13.1

6 Unstable requirements 8.7

1 User involvement 15.9

2 Support from senior management 13.9

3 Clearly defined requirements 13.0

4 Good planning 9.6

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• IT frequently combines Goods and Services elements

 Need for specialized Standard Bidding Documents (SBDs)

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Appropriate overall approach may use all of these options to advantage

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Goods SBD IS1STG SBD

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• Turnkey implementation SBD – only exceptional, high risk of failure.

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• single responsibility (“turnkey”) contract(s)

Each approach has its own set of pros and cons.

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• Clearly describe what is to be procured (Technical

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• To the extent possible, simplify bid evaluation. Define

• Composition of evaluation team

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• PAYMENT IS DIVIDED AMONG 7 CATEGORIES

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BIDDING MAY BE CONDUCTED AS A

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USE A SINGLE STAGE PROCESS

USE A SINGLE STAGE PROCESS WHEN:

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Invitation for Bids (IFB) 4. General Conditions of Contract

3. Eligibility for the Provision of 6. Technical Requirements (TS)

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Bid Form 3.Eligibility of goods and services

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Any other documents agreed as forming a part of the Contract

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• Technical evaluation is complex to review, often requiring

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A material deviation, exception, objection, conditionality,

 that limits in any substantial way the scope, quality, or performance

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AWARD OF CONTRACT TO THE

 MEETS THE SPECIFICATIONS

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Bid with highest B will be termed “Lowest Evaluated Bid”

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