 Acceptance - agreeing to a contractor’s offer or tender thereby creating a binding contract.

 Agent- person or organization that is not an employee of the employer and that acts on the employer’s behalf.
 Bill of Quantities - document that lists the items of work and the quantities and rates associated with each item to allow
contractors to be paid, at regular intervals, an amount equal to the agreed rate for the work multiplied by the quantity of
work completed.
 Bond - sum of money or securities submitted to the employer or placed in the hands of a third party to guarantee
completion of the work and recovery of the sums which the contractor would be recognized as owing under the terms of
contract.
 Competitive negotiation procedure - procurement procedure which, through a series of negotiations, reduces the number
of tenderers competing for the contract until the remaining tenderers are invited to submit final offers.
 Competitive selection procedure - any procurement procedure in which the contract is normally awarded to the contractor
who submits the lowest financial offer or obtains the highest number of tender evaluation points.
 Conditions of contract - terms that collectively describe the rights and obligations of contracting parties and the agreed
procedures for the administration of their contract; or document containing conditions of contract.
 Conflict of interest - any situation in which:
a) someone in a position of trust has competing professional or personal interests which make it difficult for him to fulfill
his duties impartially,
b) an individual or organization is in a position to exploit a professional or official capacity in some way for his personal or
for corporate benefit, or
c) incompatibility or contradictory interests exist between an employee and the organization which employs that
employee
 Contract - legally enforceable agreement to supply goods, execute work or provide services.
 Contract Data - document that identifies the applicable conditions of contract and states the associated contract-specific
data.
 Contracting Strategy - strategy which is adopted to procure goods, services, or construction works, to hire or let anything,
to undertake disposals or to operate a concession in the most advantageous and cost-effective manner.
 Contractor - person or organization that contracts to provide the goods, services or construction works covered by the
contract.
 Corrupt practice - offering, giving, receiving or soliciting of anything of value to influence the action of the employer or his
staff or agents in the procurement process or the administration of the contract.
 Cost plus contract - reimbursement contract in which the contractor is paid for his actual expenditure plus a percentage or
fee.
 Cost reimbursement contract - contract based on costs expended.
 Disposal - divestiture of assets
 Electronic auction - repetitive process involving an electronic device for the presentation of new prices, revised downwards
or new values concerning certain elements of tenders (or both), and which occurs after an initial full evaluation of the
tenders, enabling them to be ranked using automatic evaluation method.
 Expression of interest - request for respondents to register their interest in undertaking a specific contract or to participate
in a project or programme and to submit their credentials so they may, in terms of the organization’s procurement
procedures, be invited to submit a tender offer should they qualify or be selected to do so
 Framework agreement - agreement between an organization and one or more contractors, the purpose of which is to
establish the terms governing contracts to be awarded during a given period, in particular with regard to price and, where
appropriate, the quantity envisaged
 Fraudulent practice - misrepresentation of the facts in order to influence the tender process, the award of a contract arising
from a tender offer to the detriment of the employer, including collusive practices intended to establish prices at artificial
levels, or the administration of the contract including compensation procedures.
 Joint venture - grouping of two or more contractors acting as one legal entity, where each is liable for the actions of the
other.
 Method - documented, systematically ordered collection of rules or approaches
  Organization - company, firm, enterprise, association or other legal entity, whether incorporated or not, or a public body
 Price adjustment - amount to be added or to be deducted from the contract price in accordance with the terms of the
contract by way of allowances for increases or decreases in the costs of labour, plant, materials and equipment occurring
during the performance of the contract
 Pricing strategy - strategy which is adopted to secure financial offers and to remunerate contractors in terms of the
contract
 Procedure - formal steps to be taken in the performance of a specific task, which may be called upon in the course of a
process
 Process - succession of logically related actions occurring or performed in a definite manner which culminates in the
completion of a major deliverable or the attainment of a milestone
 Procurement - process which creates, manages and fulfils contracts relating to the provision of goods, services and
construction works or disposals or any combination thereof
 Procurement document - documentation used to initiate or conclude (or both) a contract
 Project - contract or a series of related contracts
 Quality - totality of features and characteristics of a product or service that bears on the ability of the product or service to
satisfy stated or implied needs
 Respondent - person or organization that submits an expression of interest in response to an invitation to do so
 Scope of work - document that specifies and describes the goods, services, or construction works which are to be provided,
and any other requirements and constraints relating to the manner in which the contract work is to be performed
 Secondary procurement policy - procurement policy that promotes objectives additional to those associated with the
immediate objective of the procurement itself
 Submission data - document that establishes the respondent’s obligations in responding to a call for an expression of
interest and the employer’s undertakings in administering the process of calling for and receiving expressions of interest
 Sustainability - state in which components of the ecosystem and their functions are maintained for the present and future
generations.
 System - organized scheme or plan of action or an orderly or regular procedure or method
 Target cost contract - cost reimbursement contract in which a preliminary target cost is estimated and on completion of
the work the difference between the target cost and the actual cost is apportioned between the employer and contractor
on an agreed basis
 Targeted procurement procedure - process used to create a demand for the services or goods (or both) of, or to secure the
participation of, targeted enterprises and targeted labour in contracts in response to the objectives of a secondary
procurement policy
 Tender data - document that establishes the tenderer’s obligations in submitting a tender and the employer’s undertakings
in administering the tender process and evaluating tender offers
 Tender offer - written offer for the provision of goods, or to carry out a service or construction works under given
conditions, usually at a stated price, and which is capable of acceptance and conversion into a binding contract
 Tenderer - person or organization that submits a tender offer

CONSTRUCTION PROCUREMENT MANAGEMENT DEFINED

Procurement is the process which creates, manages and fulfils contracts. Procurement can, as such, be described as a succession of
logically related actions occurring or performed in a definite manner and which culminate in the completion of a major deliverable
or the attainment of a milestone. Processes, in turn, are underpinned by methods (i.e. a documented, systematically-ordered
collection of rules or approaches) and procedures (i.e. the formal steps to be taken in the performance of a specific task), which are
informed and shaped by the policy of an organization. Methods and procedures can likewise be documented and linked to
processes.

Construction procurement is a strategy to satisfy a client’s development and/or operational needs with respect to the provision of
constructed facilities for a discrete life cycle. A construction procurement manager must be aware of the actions to be done
including:
  Making the contract (type of contract, conditions, terms)
 Selecting the contractor
 Establishing the contract price
 Economic considerations (labor, materials, plants, capital)

NATURE OF CONSTRUCTION PROCUREMENT MANAGEMENT

Procurement is essentially a series of considered risks – each method has individual strengths and weaknesses, which must be
carefully calculated by clients and industry alike. There are a number of different types of procurement routes available for clients to
select. Each different type of procurement (Traditional, Design and Build, Construction Management, etc) has its own advocates and
inherent strengths and weaknesses.

Selection of an absolute optimal procurement method is difficult, because even the most experienced client or contractor does not
know all the potential benefits or risks for each method. Procurement is, therefore, a succession of ‘calculated risks’. Industry and
academia have consistently focused on reducing this risk through the use of innovative methods of procurement. The difficulty, and
what sets construction industry procurement far apart from anything else, is the complexity of projects. Influences such as ground
conditions, topography, logistics, weather, available technologies, finance, labour availability and services, just to name a few, all
affect the ability of a project to be completed on time, on budget and to a high quality.

Procurement management follows a logical order. First, you plan what you need to contract; then you plan how you’ll do it. Next,
you send out your contract requirements to sellers. They bid for the chance to work with you. You pick the best one, and then you
sign the contract with them. Once the work begins, you monitor it to make sure that the contract is being followed. When the work
is done, you close out the contract and fill out all the paperwork.

You need to start with a plan for the whole project. Before doing anything else, you need to think about all of the work that you will
contract out for your project. You will want to plan for any purchases and acquisitions. Here’s where you take a close look at your
needs to be sure that contracting is necessary. You figure out what kinds of contracts make sense for your project, and you try to
define all of the parts of the project that will be contracted out.

Contract planning is where you plan out each individual contract for the project work. You work out how you’ll manage the contract,
what metrics it will need to meet to be considered successful, how you’ll pick a seller, and how you’ll administer the contract once
the work is happening.

The procurement management plan details how the procurement process will be managed. It includes the following information:

 The types of contracts you plan to use and any metrics that will be used to measure the contractors’ performance
 The planned delivery dates for the work or products you are contracting
 The company’s standard documents you will use
 The number of vendors or contractors involved and how they will be managed
 How purchasing may impact the constraints and assumptions of the project plan
 The coordination of purchasing lead times with the development of the project schedule
 The identification of prequalified sellers (if known)

The procurement management plan, like all other management plans, becomes a subsidiary of the project management plan. Some
tools and techniques you may use during the procurement planning stage include makeorbuy analysis and definition of the contract
type.

THE ROLE OF THE CLIENT

All construction projects must begin with a client. This is the party who has instigated the project, will have thought about why the
facility should be built, will have organized the funding and be convinced that it is a worthwhile investment.
They are therefore the sponsor of the whole construction process, who provides the most important perspective on project
performance and whose needs must be met by the project team. However, the term ‘client’ implies that it is one person or one
organization to whom all other parties can refer. This is not necessarily the case, especially with large complex organizations where
users, decision makers and financers may all work in quite separate departments, each with its own procedures, priorities and
attitudes.

Construction projects themselves are unique; in general, they are all one-off products designed to satisfy the bespoke needs of the
particular client at a particular time. It is entirely down to objectives and needs. Therefore it is paramount that clients who need
these one-off works are educated and informed sufficiently, so as to ensure best value for money and take into account risk
accordingly.

PUBLIC SECTOR AND VALUE FOR MONEY

Public sector work accounts for approximately 40% of all turnover generated by the UK construction industry. The public sector has
been widely credited for keeping construction from entering into a far worse situation than it did during the start of the 2008
recession.

The 2012 Olympics, BSF, Crossrail, NHS projects and other, less high-profile works at local Government level sustained the industry
enough to soften the blow of the downturn and, even during the tough economic climate, construction contributed 8% to the UK’s
GDP

The advent of the Comprehensive Spending Review (CSR) has seen spending dramatically reduced, sparking fears that construction
could be heading for a ‘double-dip’ recession. Government has committed to investment in the construction sector, specifically £3bn
more than set out in early 2010, with most of this to be spent on infrastructure projects. However, approximately £20bn of work will
be lost in total, largely through the 60% cut in projects from the cancellation of BSF and the 74% reduction in the Department of
Communities and Local Government’s (DCLG) capital budget.

So what does this mean in terms of construction procurement? Fundamentally, Government bodies are looking at how to achieve
best value for money from construction projects, particularly in the wake of the waste that emerged from the procurement process
on the BSF programme. Value for money must be defined clearly so that it does not automatically create the assumption that the
lowest bid should be accepted, especially with the focus now on austerity. Otherwise, industry and clients risk poor quality projects
that will result in unplanned increases in cost and time, all of which contribute to a poor position for the construction industry.

The recent National Audit Office (NAO) report on the £3.4bn M25 widening scheme has highlighted procurement on this PFI project
as wasteful, primarily as the contract was too prescriptive and had little room for manoeuvre. In addition, the NAO states that the
slowness of taking the project forward contributed heavily to the eventual 25% increase in cost.

The construction procurement process could be expected to become less expensive and wasteful as a result of the spending review,
with a greater emphasis on transparency and e-procurement, and simplified pre-qualification questionnaires (PQQs). Conversely, the
severity of the spending review could result in a focus on lowest cost rather that greatest value. In other words, the pressure to
reduce spending could lead to less importance placed on quality and whole-life costs.

Palaneeswaran et all (2003) found that best value on a public project could ultimately be defined as improved maintainability and
lower operating costs, followed by earlier project completion. 8 Sustainability was seen as the eighth most important criteria for
defining best value. Therefore, the whole-life costs of the project must be considered thoroughly by the client before going out to
tender. Since 2003, the UK Government has committed to reducing the country’s carbon dioxide emissions by 80% (compared to
1990 levels) by 2050, which places far more emphasis on the sustainability aspect of a construction project.

SUICIDE BIDDING
The practice of bidding unusually lower than competitors in order to obtain work is referred to in the industry as ‘suicide bidding’.
Companies do this simply to ensure they have work for their skilled staff to undertake, even if it means only breaking even on a
project or, in some cases, making a loss.

Connaught plc, which recently went into administration and caused over 1,400 immediate job losses, bid for a contract by nearly a
fifth less than the nearest rival bid on a Norwich City Council social regeneration project; a bid described by rival contractor Morrison
as “abnormally low”.

To remain in business, some companies will have to resort to suicide bidding and then to use adversarial behaviour to increase their
final accounts. When the inevitable happens and the company enters dire financial straits, this affects the client, the project, and all
subcontractors associated with the works. Responsibility does, in part, lie with the company who bids so low. However, it can be
argued that clients have a certain degree of responsibility for accepting the lowest bid. Regrettably, some clients enter this arena
willingly.

COVER PRICING

Cover pricing, a form of bid rigging, is the act of placing a high bid at tender stage to clients. Contractors work in collusion to do this,
as they require a base price that the other contractors will place a serious bid for. The said contractor will usually increase their own
price by approximately 10% higher than the ‘serious’ bidder knowing that the client will not select them, but will still have seen their
credentials and that they have the resources to work on future projects.

The obvious issue with cover pricing is that clients will be receiving a false indication of tender price, especially when more than one
bid has been inflated. This harms competition levels and skews the outlook on value for money, which clients will not always be
getting with a cover priced bid.

The Office of Fair Trading (OFT) conducted a four-year investigation ending in 2008 into cover pricing practices in the UK, which
culminated in 103 construction firms being found guilty of cover pricing, and fined a total of £129 million.

COMPONENTS OF PROCUREMENT MANAGEMENT PLAN

 Stakeholder
A stakeholder is a party that has an interest in a company and can either affect or be affected by the business. The primary
stakeholders in a typical corporation are its investors, employees, customers, and suppliers
 Make-or-Buy Analysis
This means figuring out whether or not you should be contracting the work or doing it yourself. It could also mean deciding
whether to build a solution to your problem or buy one that is already available. Most of the same factors that help you
make every other major project decision will help you with this one. How much does it cost to build it as opposed to buying
it? How will this decision affect the scope of your project? How will it affect the project schedule? Do you have time to do
the work and still meet your commitments? As you plan out what you will and won’t contract, you need to think through
your reasoning very carefully.
There are some resources (like heavy equipment) that your company can buy, rent, or lease depending on the situation.
You’ll need to examine leasingversusbuying costs and determine the best way to go forward.

 Type of Contract
A construction contract is a mutual or legally binding agreement between two parties based on policies and conditions
recorded in document form. The two parties involved are one or more owners, and one or more contractors. The owner
has full authority to decide what type of contract should be used for a specific development to be constructed and to set
forth the legally-binding terms and conditions in a contractual agreement.

The five types of contracts are:

1. Lump sum contract
 In a lump sum contract an owner agrees to pay a contractor a specified lump sum after the completion of work without
a cost breakdown. After work no detailed measurements is required.

2. Lump sum and scheduled contract

In lump sum contract the complete work as per plan and specifications is carried out by contractor for certain fixed
amount as per agreement. The owner provides required information and contractor charges certain amount. This
contract is suitable when the number of items are limited or when it is possible to work out exact quantities of work to
be executed. The detailed specifications of all items of work,plans and detail drawings, security deposit, penalty,
progress and other condition of contract are included in agreement.Though it is lump sum and scheduled
contract,contractor will be paid at regular interval of 2-3 months as per progress of work on the basis of certificate
issued by engineer in charge. A scheduled of rate is included in agreement for making payment of extra items.

3. Cost plus fixed fee contract

In cost plus fixed fee, the owner pays the contractor an agreed amount over and above the documented cost of work.

4. Cost plus percentage of cost contract

In cost plus percentage, the owner pays greater than 100 percent of the documented cost, usually requiring detailed
expense accounting. In this type of contract,contractor is paid the actual cost of work plus certain percentage as profit.
Various contract documents,drawing,specifications are not necessary at the time of signing the agreement.Contractor
has to keep all records for cost of material and labour and contractor will be paid accordingly to engineer incharge.This
type of contract is suitable for emergency work like difficulties in foundation conditions,construction of expensive
structure etc.

5. Special contracts
Special contracts are further classified into five types:
5.1 Turn key contract – an agreement under which a contractor completes a project, then hands it over in fully
operational form to the client which needs to do nothng but “turn a key”, as it were, to set it in motion.
5.2 Negotiated contract - contract awarded on the basis of a direct agreement with a contractor, without going
through the competitive bidding process.
5.3 Continuing contract –is a contract calling for periodic performances. Under such a contract, performance in
several units over a period of time. In continuing contract there is no obligation to trade in the second period
but if there are gains from trade the parties will bargain in “good faith” using the first period contract as a
reference point. This can reduce the cost of negotiating the next contract.
5.4 Running contract – is one under which, during the period of its currency the contractor engages to supply, and
the other party to contract to take, a specified quantity (with a percentage tolerance either way) of materials,
as and when ordered, at fixed unit rates or prices, within a given period of the receipt of such order.

 Documentation
The act or an instance of furnishing or authenticating with documents; the usually printed instructions, comments, and
information using a particular piece or system of computer software or hardware.

 Estimate
A cost estimate is the approximation of the cost of the program, project or operation. The cost estimate is the product of
the cost estimating process. The cost estimate has a single total value and may have identifiable component values.

 Schedule
 A schedule or a timetable, as a basic time-management tool, consists of a list of times at which possible tasks, events, or
actions are intended to take place, or of a sequence of events in the chronological order in which such things are intended
to take place.

 Performance report
A performance report is a report on the performance of something. They are routinely produced by government bodies,
which, being financed by public money, are required to show that the money was spent efficiently and usefully.

 WBS
A work breakdown structure is a key project deliverable that organizes the team’s work into manageable sections. The
Project management Body of Knowledge (PMBOK) defines the work breakdown structure as a “deliverable oriented
hierarchal decomposition of the work t be executed by the project team.”

 Bonds or insurances
(also known as financial guaranty insurance) is a type of insurance whereby an insurance company guarantees scheduled
payments of interest and principal on a bond or other security in the event of the payment default by the issuer of the
bond or security.

 Progress Payments and Change Management

Vendors and suppliers usually require payments during the life of the contract. On contracts that last several months, the
contractor will incur significant cost and will want the project to pay for these costs as early as possible. Rather than wait
until the end of the contract, a schedule of payments is typically developed as part of the contract and is connected to the
completion of a defined amount of work or project milestones. These payments made before the end of the project and
based on the progress of the work are called progress payments. For example, the contract might develop a payment
schedule that pays for the design of the curriculum, then the development of the curriculum, and then a final payment is
made when the curriculum is completed and accepted. In this case there would be three payments made. There is a defined
amount of work to be accomplished, a time frame for accomplishing that work, and a quality standard the work must
achieve before the contractor is paid for the work.

 Assumption and Constraints

An assumption is a belief of what you assume to be true in the future. You make assumptions based on your knowledge,
experience or other available on hand.
A constraint is a factor that limits the team’s options, limits on time, schedule, resources, cost, and scope.

 Risk
Risk is the potential gaining or losing something of values. Values (such as physical health, social status, emotional well-
being, or financial wealth) can be gained or lost when taking risk resulting from a given action or inaction, foreseen or
unforeseen. Risk can also be identified as the intentional interaction with uncertainty.

PRINCIPAL ACTIVITIES OF PROCUREMENT PROCESS

Procurement activities commence once the need for procurement is identified and end when the transaction is completed. There
are six principal activities associated with the procurement process, namely:

1. Establish what is to be procured;

2. Decide on procurement strategies in terms of contract, pricing and targeting strategy and procurement procedure;
3. Solicit tender offers;
4. Evaluate tender offers;
5. Award contract; and
6. Administer contracts and confirm compliance with requirements.
7.
 PART II - THE PROCUREMENT PROCESS

FRAMEWORK OF CONSTRUCTION PROCUREMENT PROCESS

Can be divided into two categories:

1. Processes during pre-construction stage

2. Processes during construction stage
3. Processes during post construction stage

1. PRE-CONSTRUCTION STAGE

Pre-construction services are used in planning a construction project before the actual construction begins. These services are
often referred to as preconstruction or precon. It is a modern practice, considered to be part of construction project
management, which is the overall planning, coordination, and control of a project from inception to completion aimed at
meeting a client’s requirements in order to produce a functionally and financially viable project.

a. Design Stage
 Conducting Design Coordination Meetings with Consultants along with client.
 Collection of all Drawings and review the drawings.
 Value Engineering

a) Review by Relevant Experts.

b) Study on Constructionability and Feasibility.

c) Suggestion on sourcing and alternate material & agency.

 Foresee the real requirement of details proactively.

 Optimization of Cost & Time.
 Collecting the technical Specification and BOQ with estimate from the entire consultant.
 Reviewing & Making consolidated budget and get it approved from the client.
 Preparation of Tender Document and get it approved from the client

b. Tendering Stage
 Short listing of Vendors for various works.
 Issue of tender document for short listed vendors.
 Conducting pre bid meeting with consultants on the queries raised by the vendors.
 Collecting filled tender documents and making comparative statements.
 Attending negotiation meetings and giving guidance on selecting of correct vendor to the client.

c. Contract Award Stage

 Preparing contract document along with drawings and get it approved from the client.
 Collecting all necessary documents from the finalized vendor like project schedule, cash flow statement, resource
deployment schedule and quality & safety policies along statutory requirements like CAR policy, labour license, bank
guarantee etc,.
 After collecting all documents, Issue of contract document to the finalized vendor.
 Based on the finalized contract values preparing 2nd cut budget.
 Conducting Kick off meeting at site and start the work at site.

2. CONSTRUCTION STAGE
 The construction stage commences after the finalisation of the design and in a traditional model leads to the appointment of a
contractor to undertake the construction of the facility. It encompasses all works on the site including any specialist tasks which
may be carried out by subcontractors or equipment suppliers. The contractor is usually responsible for undertaking all of the
works including provision of all materials, labour, plant and equipment required to complete the works. The contractor also
controls the sequence and coordination of works to ensure that construction is undertaken in an ordered and logical way. The
contractor is also responsible for coordination with the works of other parties which may be involved in the project, such as
service authorities relocating their assets or contractors on adjacent projects.

 Making the Schedule as per the requirement of Client and Practical applicability.
 Projecting the cash flow statements to the client and reviewing periodically.
 Review of Drawings and inform consultants regarding any additional / changes required in the drawing.
 Conducting Progress review meetings in regular intervals.
 Implementing & maintaining the checklists for all the works.
 Providing technical & experienced team to the site for effective execution of Project in time and quality.
 Check and approve the materials quality
 Involve and discuss with all the consultants regarding the shortfalls in the detailing and sort out all issues including
service integration
 Providing Methodology of working for all works before starts.
 Tracking the project as per the schedule and also recording the delays in project due to un expected issues like strike,
weather conditions, material short supply etc.
 Plan for accommodating the delays in the project schedule and completing the project in initial planned time.
 To equip the execution team by providing formats, check lists & reports.
 Submitting Monthly Progress, Quality and EHS report to the client.
 Check & Certifying of all contractors/Agencies Bills.
 Keep a track of executed quantity against budgeted quantity. Any escalation in quantity & financial implications in
budget to be highlighted to the client in time and getting approval.
 Check & approve the rates for NT items before execution.
 Reconciliation of Materials.
 Implementing and insisting to follow safety.
 Responsible to provide the required data to Technical, Finance & Accounts department related to billing.
 Maintaining Bills and Reports in proper filing system.
3. POST-CONSTRUCTION STAGE
 Collection all as built drawings from vendors and consultants and approved by architect.
 Collection of warranty manuals, maintenance manuals.
 Certifying all vendor bills after collecting all documents and attending snags.
 Preparing detailed statement of all vendor details with contacts of key persons for approaching client for any kind defects
created during the defect liability period.
 Preparation of Completion certificate based on all documents & Drawings.
 Assist in finding suitable facility Manager.
 Handing over all documents and giving basic guidelines about the project to facility manager.
 Handing over consolidated details of retention amount and release schedule to the client.

THE PROCUREMENT PLAN

After the decision has been made to purchase goods or outsource services, the procurement team develops a plan that includes the
following:

 Selecting the appropriate relationships and contract approaches for each type of purchased goods or outsourced service
 Preparing requests for quotes (RFQs) and requests for proposals (RFPs) and evaluating partnership opportunities
 Evaluating RFQs, RFPs, and partnerships
 Awarding and signing contracts
 Managing quality and timely performance
  Managing contract changes
 Closing contracts
SELECTING THE CONTRACT APPROACH

The technical teams typically develop a description of the work that will be outsourced. From this information, the project
management team answers the following questions:

 Is the required work or materials a commodity, customized product or service, or unique skill or relationship?
 What type of relationship is needed: supplier, vendor, or partnership?
 How the supplier, vendor or potential partner should be approached: RFQ, RFP, or personal contact?
 How well known is the scope of work?
 What are the risks and which party should assume which types of risk?
 Does the procurement of the service or goods affect activities on the project schedule’s critical path and how much float is
there on those activities?
 How important is it to be sure of the cost in advance?

The procurement team uses the answers to the first three questions listed above to determine the approach to obtaining the goods
or services and the remaining questions to determine what type of contract is most appropriate.

A key factor in selecting the contract approach is determining which party will take the most risk. The team determines the level of
risk that will be managed by the project and what risks will be transferred to the contractor. Typically, the project management team
wants to manage the project risk, but in some cases, contractors have more expertise or control that enable them to better manage
the risk associated with the contracted work.

ESTABLISHING PROCUREMENT SYSTEM

A. Developing and documenting the system

An organization shall develop and document its procurement system

a) in a manner which is fair, equitable, competitive and cost-effective and which may, subject to the policies of an
organization and any prevailing legislation, include the promotion of other objectives, in accordance with the requirements of Table
1, and

b) around a process which commences once the need for procurement is identified, ends when the transaction is completed
and includes the attainment of procedural milestones which enable the system to be controlled and managed. The organization’s
executive shall designate persons to undertake the actions associated with the attainment of procedural milestones.
Attribute Basic System Requirement

The process of offer and acceptance is conducted impartially without bias and provides
Fair participating parties simultaneous and timely access to the same information. Terms and
conditions for performing the work do not unfairly prejudice the interests of the parties.

The only grounds for not awarding a contract to a tenderer who complies with all
Equitable requirements are restrictions from doing business with the organization, lack of capability
or capacity, legal impediments and conflicts of interest.

The procurement process and criteria upon which decisions are to be made shall be
Transparent publicized. Decisions (award and intermediate) are made publicly available together with
reasons for those decisions. It is possible to verify that criteria were applied.

The system provides for appropriate levels of competition to ensure cost-effective and
Competitive
best value outcomes.

The processes, procedures and methods are standardized with sufficient flexibility to
Cost-effective attain best value outcomes in respect of quality, timing and price, and the least resources Table 1 -
to effectively manage and control procurement processes. Basic
procurement
system
requirements
The system may incorporate measures to promote objectives associated with a secondary
Promotion of other
procurement policy subject to qualified tenderers not being excluded and deliverables or
objectives
preferencing criteria being measurable, quantifiable and monitored for compliance.
B. Res
pon
ding
to actions taken

The organization shall provide upon request written reasons to tenderers, respondents and contractors for any action that is taken,
but may withhold information which

a) would not be in the public interest to be divulged,

b) is considered to prejudice the legitimate commercial interests of tenderers and respondents, or

c) might prejudice fair competition between tenderers, Organizations should consider, when developing their procurement
systems how challenges resulting from the outcomes of the tender process should be dealt with.

C. Conduct of employees, agents and contractors

1. Code of conduct

The organization shall comply with all legal obligations and shall establish a code of conduct for procurement to regulate the actions
of its employees, agents, public office bearers or board members. Such a code shall at least require that these persons
a) discharge their duties and obligations with integrity,

b) behave equitably, honestly and transparently,

c) avoid conflicts of interest and, where a conflict of interest is known, declare and address that conflict, and

d) not maliciously or recklessly injure or attempt to injure the reputation of another party.

2. Disciplinary action

Organizations shall discipline their employees, agents, public office bearers or board members who contravene the requirements of
their code of conduct for procurement. Organizations may place contractors or their principals (or both) who have engaged in
corrupt and fraudulent practices under restrictions from participating in the organization’s procurement for periods of time.
Contractors and persons placed under restrictions shall be advised of the restriction and the reason therefor.

D. Procurement Policy

The organization’s executive shall develop and document a procurement policy which shall, as a minimum, establish:

a) which of the standard procurement procedures listed in table 2 shall apply to which categories of procurement and under which
circumstances,

b) whether or not framework agreements may be utilized,

c) the manner in which procurements, including disposals, shall be managed and controlled,

d) requirements for recording and reporting,

e) the functioning and composition of the organization’s oversight structures and evaluation panels,

f) requirements for managing risks associated with the breaching of the basic procurement system requirements established in table
1,

g) the organization’s procedures for placing contractors and persons under procurement restrictions,

h) whether or not agents and contractors that are commissioned to prepare a procurement document or part thereof for a
particular procurement shall be excluded from submitting a tender for that procurement even if it is determined that the outputs of
their commission and the procurement document is objective and unbiased having regard to their role and recommendations.
 Procedure
1 Negotiation procedure
Competitive selection procedure
A Nominated procedure
B Open procedure
C Qualified procedure
2 Tender offers are solicited from not less than three tenderers in any manner the
D Quotation procedure
Proposal procedure using the
E proposal is only opened should the technical proposal be found to be attain a
twoenvelope system
Proposal procedure using the two-stage
F
system
G Shopping procedure
3 Competitive negotiation procedure
A Restricted competitive negotiations
B Open competitive negotiations
4 Electronic auction procedure
Table 2 – Standard Procurement Procedures
Description
A tender offer is solicited from a single tenderer.
Any procurement procedure in which the contract is normally awarded to the
contractor who submits the lowest financial offer or obtains the highest number
of tender evaluation points.
Tenderers that satisfy prescribed criteria are entered into an electronic database.
Tenderers are invited to submit tender offers based on search criteria and, if
relevant, their position on the database. Tenderers are repositioned on the
database upon appointment or upon submission of a tender offer.
Tenderers may submit tender offers in response to an advertisement by the
organization to do so.
A call for expressions of interest is advertised and thereafter only those tenderers
who have expressed interest, satisfy objective criteria and who are selected to
submit tender offers, are invited to do so.
organization chooses, subject to the procedures being fair, equitable, transparent,
Tenderers submit technical and financial proposals in two envelopes. The financial
minimum threshold score
Non-financial proposals are called for. Tender offers are then invited from those
tenderers that submit acceptable proposals based on revised procurement
documents. Alternatively, a contract is negotiated with the tenderer scoring the
highest number of evaluation points.
Written or verbal offers are solicited in respect of readily available goods obtained
from three sources. The goods are purchased from the source providing the
lowest financial offer once it is confirmed in writing.
A procurement procedure which reduces the number of tenderers competing for
the contract through a series of negotiations until the remaining tenderers are
invited to submit final offers.
A call for expressions of interest is advertised and thereafter only those tenderers
who have expressed interest, satisfy objective criteria and who are selected to to
submit tender offers, are invited to do so. The employer evaluates the offers and
determines who may enter into competitive negotiations.
Tenderers may submit tender offers in response to an advertisement by the
organization to do so. The employer evaluates the offers and determines who
may enter into competitive negotiations.
Tender submissions are initially evaluated using stated methods and criteria. All
tenderers who submit responsive tenders are invited simultaneously by electronic
means to submit new evaluation parameters and have their evaluation scores,
but nor their identity, made know to other tenderers. Tenderers may amend their
offers up until such time as the auction is closed.
PREPARING FOR PROCUREMENT

A. Initial considerations

Each time an organization undertakes a procurement, it should commence by establishing

a) the broad scope of work associated with the procurement, including aspects such as

1) sustainability

2) health and safety,

3) considerations involving the service life of buildings and infrastructure (see ISO 15686),

b) the need and justification for the procurement,

c) if it is possible to avoid unnecessary consumption through demand management initiatives or by considering alternatives, reuse,
refurbishment or reconditioning or the acquiring of second-hand or used items;

d) the estimated market-related costs, whole-life costs and benefits of the procurement,

e) the resources and expertise available for the management, administration and supervision of the procurement,

f) the risks associated with the procurement,

g) the public authorities, if any, which should be consulted in connection with the procurement,

h) the secondary procurement policies and targeted procurement strategies, if any, which shall apply to the contract, or project,

i) the appropriate contract and pricing strategy,

j) the appropriate procurement procedure(s), and

k) the funding source(s) for the contract or project.

B. Readiness to solicit tender offers

Tender offers should not be solicited unless and until

a) the necessary resources to administer the contract or project have been obtained or put in place,

b) all the necessary organizational approvals for the project or contract have been obtained,

c) organizational approval has been obtained for the selected contract and pricing strategy, for the procurement procedure, and
where a secondary procurement policy is to be pursued, for the targeting strategy,

d) all necessary feasibility studies, impact assessments, preliminary investigations, life-cycle costs, commensurate with the selected
contract strategy have been completed and their outcomes captured in the procurement documents,

e) all the necessary and appropriate procurement documents have been prepared,

f) the need for the procurement, the financial and technical viability of the proposed procurement, and the organization’s firm
intention of proceeding with the procurement is confirmed, and

g) the funding for or the arrangements for the financing of the contract or project are in place.
SOLICITING BIDS

A solicitation is the process of requesting a price and supporting information from bidders. The solicitation usually takes the form of
either an RFQ or an RFP. Partnerships are pursued and established differently on a casebycase basis by senior management.

QUALIFYING BIDDERS

Potential bidders are people or organizations capable of providing the materials or performing the work required for the project. On
smaller, less complex projects, the parent company typically has a list of suppliers and vendors that have successfully provided goods
and services in the past, and the project has access to the performance record of companies on that list. On unique projects, where
no supplier lists exist, the project team develops a list of potential suppliers and then qualifies them to become eligible to bid on
project work. Eligible bidders are placed on the bidders list and provided with a schedule of when work on the project will be put out
for bid.

The eligibility of a supplier is determined by the ability to perform the work in a way that meets project requirements and
demonstrates financial stability. Ability to perform the work includes the ability to meet quality specifications and the project
schedule. During times when economic activity is high in a region, many suppliers become busy and stretch their resources. The
project team investigates the potential suppliers, before they are included on the bidder’s list, to ensure that they have the capacity
and track record to meet deadlines.

REQUEST FOR QUOTE

An RFQ focuses on price. The type of materials or service is well defined and can be obtained from several sources. The bidder that
can meet the project quality and schedule requirements usually wins the contract by quoting the lowest price.

REQUEST FOR PROPOSAL

An RFP accounts for price but focuses on meeting the project quality or schedule requirements. The process of developing a
proposal in response to an RFP can be very expensive for the bidder, and the project team should not issue an RFP to a company
that is not eligible to win the bid.

EVALUATING BIDS

Evaluation of bids in response to RFQs for commodity items and services is heavily graded for price. In most cases, the lowest total
price will win the contract. The total price will include the costs of the goods or services, any shipping or delivery costs, the value of
any warranties, and any additional service that adds value to the project.

The evaluation of bids based on RFPs is more complex. The evaluation of proposals includes the price and also an evaluation of the
technical approach chosen by the bidder. The project team evaluating the proposal must include people with the expertise to
understand the technical aspects of the various proposal options and the value of each proposal to the project. On more complex
projects, the administrative part of the proposal is evaluated and scored by one team, and the technical aspect of the proposal is
evaluated by another team. The project team combines the two scores to determine the best proposal for the project.

AWARDING THE CONTRACT

After the project team has selected the bidder that provides the best value for the project, a project representative validates all
conditions of the bid and the contract with the potential contractor. Less complex awards, like contracts for printed materials,
require a reading and signing of the contract to ensure that the supplier understands the contract terms and requirements of the
project schedule. More complex projects require a detailed discussion of the goals, the potential barriers to accomplishing those
goals, the project schedule and critical dates, and the processes for resolving conflicts and improving work processes.

MANAGING THE CONTRACTS

The contract type determines the level of effort and the skills needed to manage the contract. The manager of supplier contracts
develops detailed specifications and ensures compliance with these specifications. The manager of vendor contracts ensures that
the contractors bidding on the work have the skills and capacity to accomplish the work according to the project schedule and tracks
the vendor’s performance against the project needs, supplying support and direction when needed. The manager of partnering
arrangements develops alignment around common goals and work processes. Each of these approaches requires different skills and
various degrees of effort.

Items that take a long time to acquire—longlead items—receive early attention by the project leadership. Examples of longlead
items are equipment that is designed and built specifically for the project, curriculum that is created for training a new workforce,
and a customized bioreactor for a biotech project. These items might require weeks, months, or years to develop and complete. The
project team identifies longlead items early to begin the procurement activities as soon as possible because those procured through
the normal procurement cycle may cause delays in the project.

After the contract is awarded, the project team tracks the performance of the contractor against performance criteria in the contract
and his or her contribution to the performance of the project. Usually, contractors deliver the product or service that meets the
quality expectations and supports the project schedule. Typically, there are also one or two contractors that do not perform to
project expectations. Some project managers will refer to the contract and use it to attempt to persuade the contractor to improve
performance or be penalized. Other project managers will explore with the contractor creative ways to improve performance and
meet project requirements. The contract management allows for both approaches to deal with non`performing contractors, and the
project team must assess what method is most likely to work in each situation.

Managing contractor performance on a project is as important to the overall project outcomes as the work performed by the project
team.

LOGISTICS AND EXPEDITING

Equipment and materials that are purchased for use on the project must be transported, inventoried, warehoused, and often
secured. This area of expertise is called logistics. The logistics for the project can be managed by the project team or can be included
in the RFP or RFQ. On international projects, materials may be imported, and the procurement team manages the customs process.
On smaller projects, the logistical function is often provided by the parent company. On larger projects, these activities are typically
contracted to companies that specialize in logistical services. On larger, more complex projects, the procurement team will include
logistical expertise.

The project work often depends on materials procured for the project. The delivery of these materials influences the scheduling of
the project, and often some materials are needed earlier than normal procurement practices would deliver. On long -lead items, the
project schedule is included in the contracting plans and contractors must explain how they will support the project schedule.

CONSTRUCTION PROCUEMENT METHODS

The term 'construction contract' now has a statutory definition, covering most but not all types of construction work, and including
both building and engineering work. However, the different types of contract used in the construction industry are numerous and
varied. At the root of all construction contracts lies the method of procurement: the contractual methods by which construction
projects are to be set up and constructed. There are four common methods of construction procurement used in the UK. This is
before taking into account the different financing options available (e.g. project finance), which will also impact on the procurement
method selected (although the procurement will probably still be based on one of the methods below). The contractual impact of
the procurement method that is ultimately selected is most clearly seen in the main building contract and the appointments of the
professional team, although it will also affect the form of sub-contract that is used.
1. Traditional Procurement
This covers the situation where the employer employs the main contractor to undertake the construction of the works only,
and does not require the main contractor to take responsibility for the design of those works. The main contractor is
contractually responsible for undertaking the whole of the construction but will typically appoint several sub-contractors to
undertake individual works packages. The design of the works is solely the responsibility of the professional team, who are
also employed directly by the employer. The employer will also appoint his own quantity surveyor, and the architect usually
acts as the contract administrator and issues the interim certificates. This method allows careful planning of the design, the
build and health and safety, and also allows the employer closer control of the works. The risks are that it is unlikely to be
the cheapest method of procurement, there are many points of responsibility and it may need long lead-in times.

2. Design and Build ('D&B')

This method of procurement does exactly what it says on the tin: the employer employs a main contractor who is
responsible for not only the construction of the works but also the design of those works. The professional team is either
appointed directly by the main contractor or is initially appointed by the employer to put together the scheme and then the
appointments are novated to the contractor. 'Novation' is a process whereby the rights and obligations of the employer
under the appointment Services for Business Services for Individuals Property Services are transferred to the contractor.
The appointment continues in full force and effect but the obligations on the professional team to perform the design
services are owed to the contractor, who in turn is obliged to pay their fees. Either way, the design consultants are
ultimately answerable to the contractor and not the employer, with the contractor as the single point of responsibility in
the event of a defect in the design or workmanship of the project. Nevertheless, the employer will usually require collateral
warranties from the design consultants as a second tier of contractual protection in the event that the employer has to
bring a claim and the main contractor has ceased trading. The works are not supervised by the architect but by an
employer's agent who issues the interim certificates. The quantity surveying role is usually performed in-house by the
contractor. The advantages of D&B are that there is one point of responsibility for the employer, and this method of
procurement can be the cheapest option with the shortest leadin times. The major disadvantage is that the employer has
less control over the works and so their quality can suffer. The process whereby the appointments of the professional team
are novated from the employer to the contractor can also cause problems from a project management perspective as this is
where disputes over the allocation of the designers' roles often occur. Resolving this can be costly in terms of time and
professional fees. As a very rough rule of thumb, if a project is worth around £1m or more then a D&B procurement
method is likely to be more suitable than a traditional method, unless the design is very simple (e.g. an unsophisticated
industrial warehouse).

3. Management Contracting
The contractual structure of management contracting appears similar to traditional procurement: the employer appoints a
management contractor who appoints works contractors to carry out individual works packages, and the professional team
is appointed by the employer. The crucial difference is that the management contractor does not take any responsibility for
undertaking the works. Rather the works contractors undertake the entirety of the works, and the management contractor
manages them in return for a fee. He also issues the interim certificates. The management contractor undertakes no work
himself and is liable to pay the employer damages for breach of contract only to the extent that he can recover those
damages from a works contractor, unless the management contractor himself is in breach of contract (unlikely). This
artificial contract structure means that there are no real advantages to using this form of procurement. The fact that it is
now rarely used means that most people are unfamiliar with it, with a resultant increase in costs for anyone who selects it.

4. Construction Management
Here the contractual structure is essentially similar to management contracting, but the management contractor is
removed and the employer employs the works contractors directly. The works are managed by a construction manager (the
same company may offer both management contracting and construction management services) appointed by the
employer. Unlike a management contractor, the construction manager does not have any contractual link with the works
contractors - they are responsible directly to the employer. The construction manager issues the interim certificates. This
method of procurement can be highly flexible, efficient and cost effective. However, unless the employer is very
 experienced, construction management can be a dangerous tool. If the project is not managed well then cost and time
overruns are virtually guaranteed, which raises the risk of multiple claims both by and against the employer.

GROUP 2

INTRODUCTION

The ultimate goal of procurement planning is coordinated and integrated action to fulfil a need for goods, services or works
in a timely manner and at a reasonable cost. Early and accurate planning is essential to avoid last minute, emergency or ill-planned
procurement, which is contrary to open, efficient and effective – and consequently transparent – procurement. In addition, most
potential savings in the procurement process are achieved by improvements in the planning stages. Even in situations where
planning is difficult such as emergencies, proactive measures can be taken to ensure contingency planning and be better prepared to
address upcoming procurement requests.

PROCUREMENT PLANNING

Procurement planning is the process of deciding what to buy, when and from what source. During the procurement
planning process the procurement method is assigned and the expectations for fulfillment of procurement requirements
determined.

Good procurement planning is essential to optimize the contribution of the procurement function towards achieving the
overall goals of the organization. It supports:

 Transparency.
 Development of Key Performance Indicators (KPIs) according to milestones and accountabilities set in the procurement
plan, and use of the same to monitor performance.
 Effective and timely solicitation of offers, award of contracts and delivery of the goods, services and works required.
 Early requisition to reduce any delays in procurement and timely delivery to project sites.
 Early identification of right commodities and quantities to meet programme needs.
 Sourcing the right suppliers on time to avoid cutting corners under rush procurement to meet deadlines or budget
expenditure.
 Effective supply strategy and timely programme and project implementation.
 Avoidance of unnecessary exigencies and urgencies, enabling full competition and full compliance with standard rules and
procedures.
 Sufficient time to fully explore alternative procurement approaches, such as joint bidding with other organizations and use
of LTAs of others.
 Strengthened procurement power vis-à-vis suppliers.
 Obtaining best prices for aggregate requirements.
 Establishment of criteria to measure effectiveness of the procurement function.

 Systematic and procedurally correct procurements.

 Development of long term agreements.
 Procurement planning clarifies what is needed and when it is needed to both user and buyer. Effective procurement planning
enables the UN organization and its staff to work smoothly to achieve the organization’s goals with the right quality and quantity of
inputs in place; ineffective procurement planning may result in failure to achieve those goals, putting in jeopardy the FRR and
procurement principles and causing damage to the credibility of the organization.

Procurement Planning and the Procurement Plan: Why are they Important?

Procurement planning is the process of deciding what to buy, when and from what source. During the procurement
planning process the procurement method is assigned and the expectations for fulfillment of procurement requirements
determined.

Procurement Planning is important because:

1. It helps to decide what to buy, when and from what sources.

2. It allows planners to determine if expectations are realistic; particularly the expectations of the requesting entities, which
usually expect their requirements met on short notice and over a shorter period than the application of the corresponding
procurement method allows.
3. It is an opportunity for all stakeholders involved in the processes to meet in order to discuss particular procurement
requirements. These stakeholders could be the requesting entity, end users, procurement department, technical experts,
and even vendors to give relevant inputs on specific requirements.
4. It permits the creation of a procurement strategy for procuring each requirement that will be included in the procurement
plan. Such strategy includes a market survey and determining the applicable procurement method given the requirement
and the circumstances.
5. Planners can estimate the time required to complete the procurement process and award contract for each requirement.
This is valuable information as it serves to confirm if the requirement can be fulfilled within the period expected, or
required, by the requesting entity.
6. The need for technical expertise to develop technical specifications and/or scope of work for certain requirements can be
assessed, especially where in-house technical capacity is not available or is non-existent.
7. Planners can assess feasibility of combining or dividing procurement requirements into different contract packages.
The Procurement Plan is the product of the procurement planning process. It can be developed for a particular
requirement, a specific project, or for a number of requirements for one or many entities in the public or private sectors.

TYPES OF PROCUREMENT PLANNING

1. Consolidated Procurement Plans.

2. Individual Procurement Planning.

CONSOLIDATED PROCUREMENT PLANS

Consolidated procurement plans are often developed for the whole organization, but depending on the structure and level
of decentralisation these may be developed at the corporate, divisional, country office or business unit level – or even at a number
of these levels.
  Responsibility

At the organizational level the responsibility for preparing the plan would normally lie with the authority responsible for
procurement policy and planning, but in smaller business units it may lie with the procurement officer. Consolidated procurement
plans would normally be prepared annually, but in some environments where the needs are more difficult to define, e.g. because
business focus is on emergency relief or on procurement agency services, these may be done more frequently, though not normally
more than quarterly.

The procurement plan is always based on estimates of procurement operations to be carried out in the specified period.
Some procurement needs cannot be anticipated, and the plans can therefore never be accurate. However, a procurement plan
based on estimates is still better than no procurement plan.

 Information sources

The information for the procurement plan should be collected by the responsible person from a variety of sources
depending on the particular organization. In some cases the information can be collected by asking requisitioners and clients to
complete questionnaires, while in other cases the information can be collected through Management Information Systems or ERPs.
Typically the information is collected from requisitioners, clients, project plans, forecasting systems and lists of expiring LTAs.

Data collected varies from organization to organization, but as a minimum would include:

1. expected requirement for goods/services/works

2. quantities
3. delivery time requirements
4. estimated budget.

 Consolidation

Once this data has been collected from all the appropriate sources it should be consolidated into the overall procurement plan.
Analysis of the plan provides an opportunity to identify potential consolidation of procurements to achieve economies of scale, to
better utilize resources, and to provide an overview of the magnitude of the procurement activity. In addition, when used as a
management tool, plans can identify periods of time in which a large percentage of procurement actions are required. This
information can assist in planning and distribution of workload between various projects and operational units.

 Good Practice

It is good practice to publish these consolidated procurement plans, for example on the organization’s website. This provides
advance information to the outside world of upcoming procurement activities and advances the key principle of transparency in
procurement.

INDIVIDUAL PROCUREMENT PLANS

 Once a requisition or project plan is received determining an actual requirement, the procurement officer is then
responsible for developing the individual procurement plan. The scope of the individual procurement plan will depend on the
complexity of the requirement. While it is good practice to always make a plan, in the case of low risk/low spend requirements the
plan should be simple, but should include an overview of the necessary steps of the process and associated timeline. At the other
end of the scale, managing the procurement of an extremely high risk/high spend requirement is in fact project management and
should entail a thorough and comprehensive planning process.

 Responsibility

It is the responsibility of the procurement officer to ensure that an appropriate level of procurement planning is conducted
depending on the particular requirement.

 Significant purchases

Particular focus needs to be made in developing plans for “significant purchases”. Significant purchases are those goods, services of
works that have been identified as being of high relative expenditure and/or are difficult to secure (see Unit 2.5 for details on
objectives for significant purchases). An example of a significant purchase could be one annual purchase valued at USD 1 million,
such as a complex consulting assignment. Alternatively it could be a large number of low value purchases within one year, which
could be more economically addressed through an LTA.

 Process

The diagram below shows each of the stages in the individual procurement planning process.

IDENTIFICATION OF DESIRED PROCUREMENT OUTCOMES AND OBJECTIVES

The first step in the planning process is to identify the desired outcomes and objectives of the procurement. However the
process is not necessarily linear. In some cases information obtained in the informational gathering stage will also have an impact on
the identification of objectives. For example, an analysis of the supply market shows that there are limited sources of supply which
means that a key objective is to identify suppliers who can develop alternative products. This, in turn, will have an impact on the
requirement definition stage of the process.

The complexity of this process will vary from case to case. In some instances, for example where the requirement is for a
commodity used across the organization with high volume, e.g. vehicles, the objectives and the desired outcomes of the
procurement action may already be clearly defined in the organization’s procurement strategy. In other instances, such as the
procurement of a complex and high value solution that is critical to the organization or the client, then there may be a complex
network of stakeholders each with their own ideas of objectives and desired outcomes.

Stakeholders

Where the situation is complex it can be a good idea to systematically analyse the stakeholders involved. Stakeholders are
anyone who has an interest in procurement activities delivering actual or perceived objectives. They can include development
partners, clients, end-users, civil society, senior management, finance, technical experts, etc. It is important to identify the interests
and relative importance of each stakeholder. Sometimes the interests of various stakeholders can be in conflict or competition with
each other. In practice the procurement officer usually needs to develop a collaborative, but focused relationship with key
stakeholders. This includes listening to their concerns and ideas, seeking their agreement where necessary, keeping them informed,
challenging their needs and wants, and adapting to their needs where necessary. Nevertheless, in this process, the procurement
officer at the same time needs to represent and defend the interest of the UN organization within its regulative and procedural
framework.
Specific objectives of key stakeholders may relate to:

 delivery times
 adherence to specific regulatory frameworks
 sourcing from specific groups of suppliers
 use of specific brands, if justified.

These stakeholder objectives need to be combined with the information gathered during the requirement specification and
supply market analysis and the organization’s overall procurement strategy. Then, if necessary through a collaborative process, the
objectives and outcomes for the procurement should be agreed. At this time performance measures and indicators should also be
agreed which will enable the procurement officer to determine whether the agreed procurement objectives have been met.

Information gathering

The Information gathering stage relates to collecting and analysing two types of information:

 definition of requirement
 analysis of the supply market.
 The information gathered in both cases will provide input into the identification of the objectives and outcomes and
development of the procurement plan.

Development of the procurement plan

Once the objectives have been set and the relevant information on the requirement definition and the supply market has
been gathered the next stage is to develop the “procurement plan”. A key element of this is selection of the procurement method.
This is covered in detail in Unit 3.4 Selection of a Procurement Strategy.
Once the procurement method has been selected the procurement plan can be elaborated, often in collaboration with key
stakeholders such as the client, requisitioner or technical experts. Typically the procurement plan would include the following
information:

 procurement objectives and performance indicators

 breakdown of activities in accordance with the selected procurement method
 identification of responsible party for each activity
 timeline and milestones taking into consideration procurement method and required clearances
 all appropriate administrative requirements (relevant codes, budget allotments, etc.).

PROCUREMENT PROCESS DEFINITION

The procurement process consists of full cycle of activities to undertake a specified need, starting in identification of the said need.

STEP 1: IDENTIFICATION OF NEEDS.

 List of goods (e.g. equipment, materials, plant, IT systems)

 Types of works (large, small, very small)
 Associated services: transport, distribution, training, maintenance

STEP 2: PROJECT IMPLEMNTATION PLAN.

 Design and specification

 Packaging: organizational implementation
 Schedule: time frame of implementation

STEP 3: BIDDING METHODS AND DOCUMENTS

 Competitive methods
 Shopping methods
 Direct contracting

STEP 4: ADVERTISING
STEP 5: BIDDING PROCESS

 Issuance of bidding documents or request for quotations

 Bid or quotations submission and opening
 Bid or quotation evaluation

STEP 6: CONTRACT AND PURCHASE ORDER AWARD

 Notications
 Signature
 Effectiveness

STEP 7: CONTRACT MANAGEMENT

 Contract execution
 Delivery, commissioning, acceptance
 Warranty
 Maintenance period

STEP 8: NEED FULFILLED

Procurement Strategy Development

Procurement, by definition, is the acquisition of the materials, supplies, services, etc. that a company or project requires in
order to successfully operate.

In these terms, a procurement strategy would refer to the planned approach of cost-effectively purchasing a company’s
required supplies, taking into consideration several elements and factors such as the timeline for procurement, the funding and
budget, the projected risks and opportunities, among others.

To develop an effective procurement strategy or sourcing strategy, first it is necessary to sit down to assess the details that you have
to work with. These details will include the business’ or project’s objectives, the available and existing resources and supplies, the
budget and the timeline. Through the assessment of these elements, the team would be able to start planning for an effective
procurement strategy that would be as custom-made as possible for the company; the key here is to make sure that every detail of
the plan would contribute towards attaining the company’s established goals and objectives. A good question to ask would be, “Why
are we purchasing this equipment?” The answer must be in accordance with the company’s goals.

Another key item that would be planned for during this brainstorming stage would be the choices of either making or creating the
materials (or doing procurement outsourcing) with the costs and sustainability being the major determining factor, and whether the
existing company resources would be able to support the decision over a long period of time.

Supplier Relationship Management

Supplier relationship management, also known as SRM, is a strategic and segmented approach, executed on the entire
supply base, to maximize value and minimize risks.

It is a concept that is comparable to customer relationship management, also known as CRM. Whereby a company has
nominated dedicated account managers. They manage a number of strategic clients. In their capacity as account manager and
within CRM the overall goals are to develop a strong relationship with the strategic clients to safeguard the existing business and to
generate more business with them.

SRM on the other hand is about the company managing its entire supply base. The purpose is that this will lead to better
cooperation between the company and its suppliers in order to contribute to the company’s business strategy.

The SRM method contains five steps. Given that SRM involves a continuous approach, the team can decide to restart the whole
exercise based on the conclusions when they conduct the evaluation step.

 Step 1 – Supplier identification: The first step in the SRM method is supplier identification. The company must sort out and
identify all its suppliers, to whom they paid invoices over a certain period.

 Step 2 – Supplier segmentation: This is an important step. The long list of suppliers to whom invoices have been paid must
be segmented. Segmentation helps to find those suppliers that are capable of contributing to the business strategy. Only
these, limited number of suppliers are worth the time and effort to build a close relationship and partnership, with.

 Step 3 – Relationship analysis: Mainly for the top segment of suppliers classified as interesting to build a partnership with,
the company must determine the existing relationship type. This is realized by using the supplier relationship analysis tool.

 Step 4 – Relationship management: Mainly for the top segment of suppliers the existing relationship type needs to be
managed towards the ideal relationship type, which is the leverage-core relationship type.
 Step 5: – Evaluation: On a regular basis the SRM results and lessons learned need to be documented and evaluated. This
will lead to a series of recommendations towards the business like integrating the top segment suppliers for new research
and development activities or proposing to restart step 2, the supplier segmentation.

The Benefits of Effective Procurement Planning

Effective Procurement Planning is essential for all procuring entities in the implementation of the purchasing objectives for
the following reasons:
 1. An effective plan saves time and money
2. An effective plan serves as a conduit to achieving entity’s objectives
3. An effective plan ensures compliance with regulatory policies
4. An effective plan provides a framework to guide procurement officers in the achievement of their tasks and duties.

Procurement planning, evaluation reports and contract management

Effective planning at the project initiation stage, quality evaluation processes, and effective contract management post-
contract award are critical to facilitating successful contract delivery.

Procurement planning and adoption of sound procurement practices lead to consistently better value for money; higher
quality project and service delivery; and reduced risks to the agency. Procurement planning involves consulting key stakeholders to
define requirements, analysing how the supply market works, assessing risks and ultimately defining the best procurement strategy
to meet the agency's business needs.

However, the scale and scope of research, analysis and planning should be proportionate to the importance of the
procurement to the agency, the level of risk inherent in the procurement and its value.

A procurement plan must be developed for procurements with a total estimated value of $5 million and above except
where the Accountable Authority decides that the plan would be of no benefit due to the nature of that procurement.

Evaluation Reports

Appropriate records should be kept of the decision making process leading up to the award of a contract. This decision
making process should be recorded in an evaluation report for all written quotes and public tenders.

An evaluation report must be developed for procurements with a total estimated value of $5 million, including those
contracts established through the use of a Common Use Arrangement, (CUA) except where the CUA Buyers Guide states otherwise.

Contract Management Plans

All contract managers should have a good knowledge of the operation and performance of the contracts under their
responsibility in order to enhance contract outcomes.

Contract management is an integral part of the procurement cycle. A contract management plan assists contract managers
to properly manage contracts by addressing transition management, performance monitoring and by helping to ensure that both
parties fulfil their commercial and contractual commitments.

Contract management plans should be developed for all medium to high risk contracts. A public authority should ensure
that contracts are managed in accordance with the contract management plan and that plans are kept current.

A contract management plan must be developed for procurements with a total estimated value of $5 million and above
except where the Accountable Authority decides:

 the purchase is a one-off good and/or service that is not the subject of a period contract arrangement; or
 that the plan would be of no benefit due to the nature of that procurement.
Contract Variations

Good contract managers understand that their contract should reflect any agreed changes to the contract scope. These
changes should be recorded in writing and the contract management plan amended if required.

Legal Backing

Formulation and development of procurement plans is not just a good practice that must be embraced by Procuring Entities
but it is also a legal requirement.

Section 42 (1) of the Public Procurement Act No. 12 of 2008 mandates each procuring entity to plan its procurements. In particular,
the Act states that a procuring entity shall:

 aggregate its requirements wherever possible, both within the procuring entity and between procuring, entities, to obtain
value for money and reduce procurement costs;
 make use of rate or running contracts wherever appropriate to provide an efficient, cost effective and flexible means to
procure goods, works and services that are required continuously or repeatedly over a set period of time;
 avoid splitting of procurement to defeat the use of appropriate procurement methods; and
 integrate its expenditure programme with the procurement plan.

Further, Section 42 (2) of the Act states that procuring entities shall submit their procurement plans to the Zambia Public
Procurement Authority.

Consequences of Lack of Procurement Planning

 Delays in project implementation

 Inappropriate procurements
 Use of inappropriate procurement methods and procedures
 Increased packaging costs

Important Considerations for Procurement Planning

 Annual planning should be integrated with applicable budget processes and based on indicative or approved budgets
 Procuring entities should revise and update their procurement plans, as appropriate, during the course of each year

3 factors affecting procurement planning

The Procurement Plan is the product of the procurement planning processes, which is about identifying which supplies,
services or works need to be procured over a defined future timescale; this is sometimes referred to as ‘the work plan’. The work
plan will identify individual projects to be tendered over a given time period which should be scheduled in relation to deadlines and
available resource.

To ensure each scheduled tender runs successfully, strategic planning is essential. Procurement practitioners should
undertake what is known as scoping or pre-procurement engagement work to ensure the actions they take are appropriate to meet
the commercial business requirements and conditions at that time. These steps require engagement with the market, as well as end-
users and stakeholders to make sure the planned work achieves its desired results.

1. Market Analysis

Before devising a procurement plan, it is vital for the buyer to have a strong understanding of the market dynamics of the
industry they are looking to procure work from.

This means engaging with the market place in-order to understanding the market rivalry. Factors to take into account
include looking at whether or not the sector market is going through a period of growth, decline or stagnation.

Market analysis can be time-consuming resource intensive and costly.

An alternative, faster and more economic approach for buyers in the Utility sector is to engage with a pre-qualification
platform such as UVDB or Building Confidence which are provided by Achilles. These allow procurement professionals to research
and identify the capability and capacity available within market. Buyers are also able to use a Qualification System Notice (QSN) to
attract new market participants to develop the market.

2. Spend Analysis

Without visibility of spend data, it becomes difficult to accurately analyse the goods and services that have been historically
procured, and therefore it becomes more difficult to forecast accurately purchases for the future.

Essentially, spend analysis is the process for analysing the organisation’s non-pay historical spend. The analysis will disclose
issues concerning spend visibility, contract compliance and control.

It is important that the spend analysis promotes the alignment of the procurement sourcing strategy with the commercial
corporate strategy, both working to the same vision.

The procurement team needs to make sure that the spend analysis informs all future sourcing strategies to ensure up and
coming contracts leverage significant benefits for the organisation, adds value and allows it to recognise areas where savings can be
made and innovation achieved.

3. Needs Analysis

It is important to identify the ‘need’ and not the ‘want’, ensuring a clear understanding and have agreement for the
context.

All team members need to be on the same page with regard to the motivations behind the procurement plan to ensure all
relevant parties are properly engaged with the project. This means pulling together a multi-disciplinary stakeholder group and
clearly understanding their relationship with the intended project, and their relevant characteristics and input.

CONCLUSION

To summarise, it is important for buying organisations to remember that successful procurement planning is all about
matching market knowledge with demand via analysis.
 GROUP 3

INTRODUCTION

Definition

Solicitation is the practice or act or an instance of asking for something such as money or help from people,
companies and other group entities.

Construction Bidding is the process of submitting a proposal to undertake, or manage the undertaking of a
construction project. The process starts with the cost estimate form blueprints and material take-offs. The proposal is treated as an
offer to do the work for a certain amount of money (firm price), or a certain amount of profit (cost reimbursement or cost plus). The
tender, which is submitted by the competing firms, is generally based on a bill of quantities, a bill of approximate quantities or other
specifications, which enable the tenders to attain higher levels of accuracy, the statement of work.

Bid Solicitation is the process of making published construction data readily available to interested parties,
including construction managers, contractors, and the public. A call for bids, call for tenders, or invitation to tender (ITT, often called
tender for short) is a special procedure for generating competing offers from different bidders looking to obtain an award of
business activity in works, supply, or service contracts. They are usually preceded by a pre-qualification questionnaire (PQQ). Call for
bids (CfB) generally means the same thing as Request for quotation (RfQ) or Invitation for bid (IfB).

Purpose

Bid Solicitation is practically done by project owners in order to obtain proposals from different interested entities
and select the best one he/she thinks best suites the job and will benefit him/her or the project most.

Parties Involved

Basically, there are two people or group of individuals involved in this process: the owner and the potential
awardee.

The Owner is the entity who has a need to be satisfied, that is to construct or manage the construction of his/her
project. That is why, the owner is referred to be the buyer in a sense that he will avail the service of the contractor. The owner can
be a private individual, a group of individuals or company, or the government itself.

On the other hand, the Contractors are those who creates a proposal and submits a construction bid in response to
the bid solicitation given by the owner. That is why, the contractors are referred to as the seller in a sense that they offer the owner
there services and goods and try to persuade the owner to avail the same among others. The potential awardees can be
construction managers, a firm, a group of individual, or the public as long as that certain entity has the capability to supply the
posted need of the owner.

Medium or Means
 There are several services, including government entities and private plan rooms, that allow project owners to Bid
solicitation release project details to solicit and obtain contractor bids. Some means of bid solicitation are through public
advertisement, through direct invitation of selected suppliers by means of a source list where permitted, or by invitation of one
source only if conditions for a non-competitive process have been met. These services act as a gateway for project owners to release
project information to a large group of contractors, general contractors or subcontractors in an attempt to solicit bids. Many of these
services are subscription based or charge a flat rate for project data.

Types

According to Price and Quality

• Request for Quotation- The main consideration in selecting to which contractor the project will be awarded is the
price of the service or construction of the project rather than the manner or methodology used to finish the construction.

• Request for Proposal- In contrast of the first, the main deciding factor being considered in this type of solicitation is
the effectiveness of the methodology used in the construction. . A RFP should be used when, owing to the nature of the
requirement, suppliers are invited to propose a solution to a problem, requirement or objective, and the selection of the contractor
is based on the effectiveness of the proposed solution.

According to Openness

• Open tenders, open calls for tenders, or advertised tenders are open to all vendors or contractors who can
guarantee performance.

• Restricted tenders, restricted calls for tenders, or invited tenders are only open to selected prequalified vendors or
contractors. This may form part of a two-stage process, the first stage of which (as in the expression-of-interest (EOI) tender call)
produces a shortlist of suitable vendors.

The reasons for restricted tenders differ in scope and purpose. Restricted tenders can come about because:

o essentially only one suitable supplier of the services or product exists

o of confidentiality issues (such as in military contracts)

o of the need for expedience (as in emergency situations)

o of a need to weed out tenderers who do not have the financial or technical capabilities to fulfill the requirements

General Process

Bid Solicitation has two major steps:

1. Solicitation Planning-documenting product requirements and identifying

 potential sources.

2. Solicitation—obtaining quotations, bids, offers, or proposals as appropriate.

-Reported by: Cantiga

Solicitation

Solicitation involves obtaining bids and proposals from prospective sellers on how project needs can be met. Most of the
actual effort in this process is expended by the prospective sellers at no cost to the project.

Source Selection involves the receipt of bids or proposals and the application of the evaluation criteria to select a provider.
This process is seldom straightforward:

• Price may be the primary determinant for an off-the-shelf item.

• The lowest price may not be the lowest cost if the seller fails to deliver in a timely manner.

• Technical and commercial sections are often evaluated separately.

• Multiple sources may be required for critical products.

Contract Administration is the process of ensuring that the seller's performance meets contractual requirements. The legal
nature of the contractual relationship makes it imperative that the project team are acutely aware of the legal implications of
actions taken when administering the contract.

Contract administration includes the application of the appropriate project management processes to the contractual
relationship and integration of outputs from these processes into the overall management of the project. The key processes are:

Project plan execution - to authorize contractor work at the right time

Performance reporting - to monitor contractor, cost, schedule and technical performance

Quality control - to inspect and verify the adequacy of the contractor's product.

Change control - to ensure that change are properly approved and all those with a need to know are aware of the changes

INPUTS

1. Contract

2. Work Result

3. Change Request
 4. Seller Invoices

Contract

A contract is a mutually binding agreement which obligates the seller to provide the specified product and obligates the
buyer to pay for it. A contract is a legal relationship subject to remedy in the courts. The agreement may be simple or complex,
usually (but not always) reflecting the simplicity or complexity of the product. It may be called, among other names, a contract, an
agreement, a subcontract, a purchase order, or a memorandum of understanding.

The primary focus of the contract review process should be to ensure that the contract language describes a product or
service that will satisfy the need identified.

A contract is comprised of a number of clauses between the buyer and seller. So representative clauses are:

• At the beginning of the contract, certain definitions may be clarified.

• Scope of responsibilities of the buyer and seller may be included.

• How the price will be determined and how payments will be made may be set forth.

• How changes to work effort are to be made and who is to approve them.

• The project manager may desire some written guarantee regarding the goods and services.

• Insurance concerns such as workmen's compensation, title change and damage to equipment may be covered.

• Conditions under which requirements may be wavered.

• Inspections may be desired at set intervals.

• The buyer or seller may desire to set forth terms of termination.

• Results of a delay in completion.

Work Results

The seller's work results:

• which deliverables have been completed

• to what extent quality standards are met

• what costs are being incurred or committed

Change Request
 Change requests may include modifications to the terms of the contract or to the description of the product or services to
be provided. This includes:

• a decision to terminate the contract

• claims, disputes or appeals

Seller Invoices

The seller must submit invoices from time to time (as defined in the contract) and request payment.

TOOLS AND TECHNIQUES

1. Contract Change Control System

2. Performance Reporting

3. Payment System

Contract Change Control System

A contract change control system defines the process by which the contract may be modified. It defines the paperwork,
tracking systems, dispute resolution procedures, and approval levels necessary for authorizing changes. The contract change control
systems should be integrated into the overall change control system.

A change is a modification of the contract done to alter the specifications, delivery time, price, quality or any other
provisions of the contract. Except in a sale of goods contract or the "changes" clause in a government contract, there must be
mutual agreement to modify a contract and that agreement must be supported by consideration. Modification of a contract is
different from:

• reformation - in which a court infers the real intention of the contract

• constructive change - where the project manager's conduct implies a change

Performance Reporting

Performance reporting provides management with information about how effectively the seller is achieving contractual
objectives.

Payment System

he project may need to develop its own payment system which should include appropriate reviews and approvals by the
project management team.
 OUTPUTS

1. Correspondence

2. Contract Changes

3. Payment Request

Correspondents

Contract terms and conditions often require written documentation of certain aspects of buyer/seller communications,
such as warnings of unsatisfactory performance and contract changes or clarifications.

Contract Changes

Changes (approved and unapproved) are fed back through the appropriate project planning and procurement processes,
and the project plan or other documentation is updated as appropriate.

Payment Request

This assumes that the project is using an external payment system. If the project has its own internal system this will be
called "payments".

-Reported by: Peña

DETAILED DISCUSSION

Project Procurement Management includes the processes required to acquire goods and services from outside the
performing organization.

 A Project Procurement Process [also called “Project Procurement Management Process”] is a method for
establishing relationships between an organization’s purchasing department and external suppliers to order, receive, review and
approve all the procurement items necessary for project execution.

 The process aims to ensure timely delivery of the purchased items which are selected and acquired according to
the specifications and requirements set up by the purchasing department and approved by the project manager.

MAJOR PROCESSES OF PROCUREMENT PLAN

1 Procurement Planning—determining what to procure and when.

2 Solicitation Planning—documenting product requirements and identifying

 potential sources. This step involves the purchasing department in communicating with the project manager to develop and
approve a list of procurement items necessary for project implementation.

3 Solicitation—obtaining quotations, bids, offers, or proposals as appropriate.

4 Source Selection—choosing from among potential sellers. This step of the project procurement process requires the
department to find potential suppliers which can procure the necessary items, according to the specifications.

5 Contract Administration—managing the relationship with the seller. The department must communicate with the
suppliers on delivery dates and payment conditions in order to ensure “on-time” delivery of the ordered items within the stated
project budget. Success of the procurement management process depends on how the purchasing department controls the delivery
and payment processes.

6 Contract Close-out—completion and settlement of the contract, including resolution of any open items.

PROCUREMENT PLANNING

Procurement planning is the process of identifying which project needs can be best met by procuring products or services
outside the project organization. It involves consideration of whether to procure, how to procure, what to procure, how much to
procure, and when to procure it.

When the project obtains products and services from outside the performing organization, the processes from solicitation
planning (Section 12.2) through contract close-out (Section 12.6) would be performed once for each product or service item. The
project management team should seek support from specialists in the disciplines of contracting and procurement when needed.

When the project does not obtain products and services from outside the performing organization, the processes from
solicitation planning (Section 12.2) through contract close-out (Section 12.6) would not be performed. This often occurs on research
and development projects when the performing organization is reluctant to share project technology, and on many smaller, in-house
projects when the cost of finding and managing an external resource may exceed the potential savings

Procurement planning should also include consideration of potential subcontracts, particularly if the buyer wishes to
exercise some degree of influence or control over subcontracting decisions.

A PROJECT PROCUREMENT PLAN TEMPLATE DOCUMENTS:

 Deliverables to be procured by proposed agreements/contracts.

 Effective resource management strategies for negotiating and managing the agreements/contracts.

 The need for staged delivery and desirability of testing the procured items before introducing them into the
implementation process (this item is optional).

 The chosen procurement method (payments, expressions of interest, request for price/quote, request for tender).
  Key stages of the process for selecting suppliers and vendors.

 The model of procurement funding.

 The sample of procurement contract/agreement.

 References to quality approvals, quality assurance and risk management.

-Reported by: Ramos

A statement of work (SOW) is a document routinely employed in the field of project management. It defines
project-specific activities, deliverables and timeliness for a vendor providing services to the client. The SOW typically also includes
detailed requirements and pricing, with standard regulatory and governance terms and conditions. It is often an important
accompaniment to a master service agreement or request for proposal (RFP). An SOW is often included as part of a request for
proposal (RFP), which solicits business proposals from potential vendors.

The statement of work describes the procurement item in sufficient detail to allow prospective sellers to
determine if they are capable of providing the item. “Sufficient detail” may vary based on the nature of the item, the needs of the
buyer, or the expected contract form.

A statement of work typically addresses these subjects.

• Purpose: Why are we doing this project? A purpose statement attempts to answer this.

• Scope of Work: This describes the work to be done and specifies the hardware and software involved.

• Location of Work: This describes where the work is to be performed, including the location of hardware and
software and where people will meet to do the work.

• Period of Performance: This specifies the allowable time for projects, such as start and finish time, number of
hours that can be billed per week or month, where work is to be performed and anything else that relates to scheduling.

• Deliverables Schedule: This part lists and describes what is due and when.

• Applicable Standards: This describes any industry specific standards that need to be adhered to in fulfilling the
contract.

• Acceptance Criteria: This specifies how the buyer or receiver of goods will determine if the product or service is
acceptable, usually with objective criteria.

• Special Requirements: This specifies any special hardware or software, specialized workforce requirements, such as
degrees or certifications for personnel, travel requirements, and anything else not covered in the contract specifics.

• Type of Contract/Payment Schedule: The project acceptance will depend on if the budget available will be enough
to cover the work required. Therefore, a breakdown of payments by whether they are up-front or phased will usually be negotiated
in an early stage.
 • Miscellaneous: Many items that are not part of the main negotiations may be listed because they are important to
the project, and overlooking or forgetting them could pose problems for the project.

Some application areas recognize different types of SOW. For example, in some government jurisdictions, the term
SOW is reserved for a procurement item that is a clearly specified product or service, and the term Statement of Requirements (SOR)
is used for a procurement item that is presented as a problem to be solved.

The statement of work may be revised and refined as it moves through the procurement process. For example, a
prospective seller may suggest a more efficient approach or a less costly product than that originally specified. Each individual
procurement item requires a separate statement of work. However, multiple products or services may be grouped as one
procurement item with a single SOW.

The statement of work should be as clear, as complete, and as concise as possible. It should include a description
of any collateral services required, such as performance reporting or post-project operational support for the procured item. In
some application areas, there are specific content and format requirements for a SOW.

Statement of Work VS. Scope of Work

So what’s the difference between the statement of work and the scope of work? The scope of work is just one
section of the statement of work. While the SOW is a comprehensive document that details the project’s goals, guidelines,
deliverables, schedule, costs and more, the scope section focuses on how those goals will be met.

The scope section of the SOW describes project outcomes and the type of work that will be done to achieve them.
For example, if the project was to build a software system, the scope would describe the hardware and software that will be part of
that system. It would also give a high-level overview of the steps involved in building and implementing the system.

Three Types of Statement of Work

There are three different categories of SOWs, some of which may be more popular than others in different
industries. The main types are:

1. Design/Detail Statement of Work

This category of SOW tells the vendor, contractor or supplier exactly how to do the work and what processes to
follow. It clearly defines the buyer, client or entity’s requirements, whether they be materials, measurements, quality control
requirements, or something else. This type of SOW is often used in government contracts, where contractors are required to follow
specific regulations, and is the preferred SOW for manufacturing or construction projects.

In this type of SOW, the buyer, client or entity assumes most of the risk, since the contractor is obligated
to follow the standards laid out for them.

2. Level of Effort/Time and Materials/Unit Rate Statement of Work

 This is a flexible SOW that is frequently used for hourly service workers. It is simply based on work hours and the
material needed to perform the service. The SOW describes the service being performed over a given period of time in a general
way. It is often used for temporary or contract workers, or for delivery order contracts.

3. Performance-Based Statement of Work

This is the preferred type of SOW by most government entities, and the standard SOW for most American and
Canadian government procurements. It covers the purpose of the project, the resources and equipment that will be provided, and
the quantifiable end results. However, it does not tell the contractor how to perform the work. This SOW offers the most flexibility in
terms of how the contractor works, and focuses on outcomes over processes.

In this model, more accountability is placed on the contractor or supplier, since they are responsible for delivering
results using whatever methods they think are most effective.

-Reported by: Mariano II

To the extent that other planning outputs are available, they must be considered during procurement planning. Other
planning outputs which must often be considered include preliminary cost and schedule estimates, quality management plans, cash
flow projections, the work breakdown structure, identified risks, and planned staffing.

The output of strategic planning includes documentation and communication describing the organization's strategy and
how it should be implemented, sometimes referred to as the strategic plan. The strategy may include a diagnosis of the competitive
situation, a guiding policy for achieving the organization's goals, and specific action plans to be implemented. A strategic plan may
cover multiple years and be updated periodically.

The organization may use a variety of methods of measuring and monitoring progress towards the objectives and measures
established, such as a balanced scorecard or strategy map.

Preliminary costs

Preliminary costs are expenses that will be incurred during construction, which are directly related to the running of the
project and have not been included in the materials, labour or overheads. ... Preliminary costs apply to all projects including those
with small tender values

Schedule Estimates

Schedule Estimation is an indispensable activity performed on the project planning phase. By this activity we aim to give a
maximally accurate appraisal to the project timeline. Schedule estimate is to be well-elaborated, realistic and feasible as it gives a
ground for setting up expectations on a date of obtaining the project’s results and deliverables. These expectations (along with
certain allowance of delay) are to be officially documented in the project’s contract and signed by its stakeholders as the project’s
due date which the project performers should be committed to.

Inaccurate estimation can lead to violating of these timeframes, and this issue can entail penalties applied against the
project’s performers. Schedule estimating is composed from putting in order and estimating durations of the smaller schedule
elements, such as activities or tasks. In order to make a proper project schedule estimation you need to have a set of certain items at
your hands (availability of all these items will maximize accuracy of estimate):

• Detailed outlook and a well-designed conception of work involved into the project;

• Work breakdown structure (WBS);

• Complete and systematized register of the actions to be done ;

• The Critical Path of the project ;

• Profound appraisal and opinions from concerned professionals and experts;

• Previous experience on similar type of work performed in the past;

• Assessment of risks which are forecasted to arise (for every task involved into the project);

• Capacity and productivity of equipment and manpower available to the project;

Quality management plans

The Quality Management Plan defines the acceptable level of quality, which is typically defined by the customer, and
describes how the project will ensure this level of quality in its deliverables and work processes. Quality management activities
ensure that: ... Work processes are performed efficiently and as documented.

Cash flow projections

A cash flow forecast is an estimate of the amount of money you expect to flow in and out of your business and includes all
your projected income and expenses. A forecast usually covers the next 12 months, however it can also cover a short-term period
such as a week or month.

The work break down structure

A work-breakdown structure (WBS) in project management and systems engineering, is a deliverable-oriented breakdown
of a project into smaller components. A work breakdown structure is a key project deliverable that organizes the team's work into
manageable sections. The Project Management Body of Knowledge (PMBOK) defines the work-breakdown structure as a "A
hierarchical decomposition of the total scope of work to be carried out by the project team to accomplish the project objectives and
create the required deliverables."

Identified risks

“An untoward occurrence for which there is adequate evidence of an association with the medicinal product of interest.”
 Planned staffing

Contracting for the regular use of temporaries to handle peak production periods, seasonal activities or special projects .
May involve the supplementation of a customer’s traditional workforce, or the provision of a temporary workforce to handle a
project that occurs periodically . (The concept of “Planned Staffing” differs from “Facilities Staffing” in that planned staffing refers to
cyclical or intermittent staffing needs, while facilities staffing refers to the process of “planning turnover” in a continuous function.
However, as might be expected, these terms are often used interchangeably.) Precarious Work — A pejorative definition used to
describe non-standard forms of work including contingent work. A similar pejorative term also used occasionally is “Atypical Work.”

-Reported by: Villamin

STANDARD CONTRACT TERMS AND CONDITIONS

PAPER CONTRACT

1. TERM OF CONTRACT

The term of the Contract shall commence on the Effective Date (as defined below) and shall end on the Expiration Date
identified in the Contract, subject to the other provisions of the Contract. The Effective Date shall be fixed by the Contracting Officer
after the Contract has been fully executed by the Contractor and by the Commonwealth and all approvals required by
Commonwealth contracting procedures have been obtained. The Contract shall not be a legally binding contract until after the
Effective Date is affixed and the fully-executed Contract has been sent to the Contractor. The Contracting Officer shall issue a written
Notice to Proceed to the Contractor directing the Contractor to start performance on a date which is on or after the Effective Date.
The Contractor shall not start the performance of any work prior to the date set forth in the Notice to Proceed and the
Commonwealth shall not be liable to pay the Contractor for any service or work performed or expenses incurred before the date set
forth in the Notice to Proceed. No agency employee has the authority to verbally direct the commencement of any work under this
Contract.

2. EXTENSION OF CONTRACT TERM

The Commonwealth reserves the right, upon notice to the Contractor, to extend the term of the Contract for up to three (3)
months upon the same terms and conditions.

3. DEFINITIONS

As used in this Contract, these words shall have the following meanings: a. Agency: The department, board, commission or
other agency of the Commonwealth of Pennsylvania listed as the Purchasing Agency. If a COSTARS entity or external procurement
activity has issued an order against this contract, that entity shall also be identified as "Agency". b. Contracting Officer: The person
authorized to administer this Contract for the Commonwealth and to make written determinations with respect to the Contract.

4. INDEPENDENT PRIME CONTRACTOR

In performing its obligations under the Contract, the Contractor will act as an independent contractor and not as an
employee or agent of the Commonwealth. The Contractor will be responsible for all services in this Contract whether or not
Contractor provides them directly. Further, the Contractor is the sole point of contact with regard to all contractual matters,
including payment of any and all charges resulting from the Contract.

5. DELIVERY

a. Supplies Delivery: All item(s) shall be delivered F.O.B. Destination. The Contractor agrees to bear the risk of loss, injury, or
destruction of the item(s) ordered prior to receipt of the items by the Commonwealth. Such loss, injury, or destruction shall not
release the Contractor from any contractual obligations. Except as otherwise provided in this contract, all item(s) must be delivered
within the time period specified. Time is of the essence and, in addition to any other remedies, the Contract is subject to termination
for failure to deliver as specified. Unless otherwise stated in this Contract, delivery must be made within thirty (30) days after the
Effective Date. b. Delivery of Services: The Contractor shall proceed with all due diligence in the performance of the services with
qualified personnel, in accordance with the completion criteria set forth in the Contract.

6. ESTIMATED QUANTITIES

It shall be understood and agreed that any quantities listed in the Contract are estimated only and may be increased or
decreased in accordance with the actual requirements of the Commonwealth and that the Commonwealth in accepting any bid or
portion thereof, contracts only and agrees to purchase only the materials and services in such quantities as represent the actual
requirements of the Commonwealth. The Commonwealth reserves the right to purchase materials and services covered under the
Contract through a separate competitive procurement procedure, whenever Commonwealth deems it to be in its best interest.

7. WARRANTY

The Contractor warrants that all items furnished and all services performed by the Contractor, its agents and
subcontractors shall be free and clear of any defects in workmanship or materials. Unless otherwise stated in the Contract, all items
are warranted for a period of one year following delivery by the Contractor and acceptance by the Commonwealth. The Contractor
shall repair, replace or otherwise correct any problem with the delivered item. When an item is replaced, it shall be replaced with an
item of equivalent or superior quality without any additional cost to the Commonwealth.

8. PATENT, COPYRIGHT, AND TRADEMARK INDEMNITY

The Contractor warrants that it is the sole owner or author of, or has entered into a suitable legal agreement concerning
either: a) the design of any product or process provided or used in the performance of the Contract which is covered by a patent,
copyright, or trademark registration or other right duly authorized by state or federal law or b) any copyrighted matter in any report
document or other material provided to the commonwealth under the contract

9. OWNERSHIP RIGHTS

The Commonwealth shall have unrestricted authority to reproduce, distribute, and use any submitted report, data, or
material, and any software or modifications and any associated documentation that is designed or developed and delivered to the
Commonwealth as part of the performance of the Contract.

10. ACCEPTANCE
 No item(s) received by the Commonwealth shall be deemed accepted until the Commonwealth has had a reasonable
opportunity to inspect the item(s). Any item(s) which is discovered to be defective or fails to conform to the specifications may be
rejected upon initial inspection or at any later time if the defects contained in the item(s) or the noncompliance with the
specifications were not reasonably ascertainable upon the initial inspection. It shall thereupon become the duty of the Contractor to
remove rejected item(s) from the premises without expense to the Commonwealth within fifteen (15) days after notification.
Rejected item(s) left longer than fifteen (15) days will be regarded as abandoned, and the Commonwealth shall have the right to
dispose of them as its own property and shall retain that portion of the proceeds of any sale which represents the Commonwealth’s
costs and expenses in regard to the storage and sale of the item(s)

11. PRODUCT CONFORMANCE

The Commonwealth reserves the right to require any and all Contractors to: a. Provide certified data from laboratory
testing performed by the Contractor, or performed by an independent laboratory, as specified by the Commonwealth. b. Supply
published manufacturer product documentation. c. Permit a Commonwealth representative to witness testing at the Contractor's
location or at an independent laboratory. d. Complete a survey/questionnaire relating to the bid requirements and specifications. e.
Provide customer references. f. Provide a product demonstration at a location near Harrisburg or the using agency location.

12. REJECTED MATERIAL NOT CONSIDERED ABANDONED

The Commonwealth shall have the right to not regard any rejected material as abandoned and to demand that the
Contractor remove the rejected material from the premises within thirty (30) days of notification. The Contractor shall be
responsible for removal of the rejected material as well as proper clean-up. If the Contractor fails or refuses to remove the rejected
material as demanded by the Commonwealth, the Commonwealth may seek payment from, or set-off from any payments due to the
Contractor under this or any other Contract with the Commonwealth, the costs of removal and clean-up. This is in addition to all
other rights to recover costs incurred by the Commonwealth.

13. COMPLIANCE WITH LAW

The Contractor shall comply with all applicable federal and state laws and regulations and local ordinances in the
performance of the Contract.

14. ENVIRONMENTAL PROVISIONS

In the performance of the Contract, the Contractor shall minimize pollution and shall strictly comply with all applicable
environmental laws and regulations, including, but not limited to, the Clean Streams Law Act of June 22, 1937 (P.L. 1987, No. 394), as
amended 35 P.S. § 691.601 et seq.; the Pennsylvania Solid Waste Management Act, Act of July 7, 1980 (P.L. 380, No. 97), as
amended, 35 P.S. § 6018.101 et seq.; and the Dam Safety and Encroachment Act, Act of November 26, 1978 (P.L. 1375, No. 325), as
amended, 32 P.S. § 693.1.

15. POST-CONSUMER RECYCLED CONTENT

a. Except as specifically waived by the Department of General Services in writing, any products which are provided to the
Commonwealth as a part of the performance of the BOP-1204 PAGE 5 of 25 Revised: 07/27/2018 Contract must meet the minimum
percentage levels for total recycled content as specified on the Department of General Services website at www.dgs.state.pa.us on
the date of submission of the bid, proposal or contract offer.

b. Recycled Content Enforcement: The Contractor may be required, after delivery of the Contract item(s), to provide the
Commonwealth with documentary evidence that the item(s) was in fact produced with the required minimum percentage of post-
consumer and recovered material content.

16. COMPENSATION

a. Compensation for Supplies: The Contractor shall be required to furnish the awarded item(s) at the price(s) quoted in the
Contract. All item(s) shall be delivered within the time period(s) specified in the Contract. The Contractor shall be compensated only
for item(s) that are delivered and accepted by the Commonwealth. b. Compensation for Services: The Contractor shall be required to
perform the specified services at the price(s) quoted in the Contract. All services shall be performed within the time period(s)
specified in the Contract. The Contractor shall be compensated only for work performed to the satisfaction of the Commonwealth.
The Contractor shall not be allowed or paid travel or per diem expenses except as specifically set forth in the Contract.

17. BILLING REQUIREMENTS

Unless the Contractor has been authorized by the Commonwealth for Evaluated Receipt Settlement or Vendor Self-
Invoicing, the Contractor shall include in all of its invoices the following minimum information: a. Vendor name and "Remit to"
address, including SAP Vendor number; b. Bank routing information, if ACH; c. SAP Purchase Order number; d. Delivery Address,
including name of Commonwealth agency; e. Description of the supplies/services delivered in accordance with SAP Purchase Order
(include purchase order line number if possible); f. Quantity provided; g. Unit price; h. Price extension; i. Total price; and j. Delivery
date of supplies or services

STANDARD DESCRIPTIONS

1. RESPONSIBILITY

1.1 Responsibility for Acquisition Pursuant to Rule 110.13 (a) of the Financial Rules and Regulations of the Court, the
Registrar is responsible for all procurement functions of the Court.

In accordance to Financial Rule 110.13 (a), the over-all responsibility for the acquisition and the procurement process of
supplies, equipment and services are delegated to the Chief of the Procurement Section duly designated by the Registrar. To this
end, the Chief Procurement Officer shall ensure that the relevant Financial Regulations and Rules on Procurement are strictly
complied with.

1.2 Responsibility for Procurement planning The Procurement planning is essential for the effective and timely
solicitation of bids, proposals, award of contracts and delivery of the goods and services required for the operations of the Court.
Chiefs of Section are responsible for developing their procurement plans in cooperation with the Procurement Section and the
budget officers of the Court.

2. REQUISITION

2.1 Requisitions for Supplies, Equipment and Services

 Supplies, equipment and services are ordered by requisitions which are raised by the Section Chiefs and/or requisitioning
officers. All requisitions must be first certified by a duly designated Certifying Officer, as provided under Financial Rule 110.3.
Certifying Officers are officials designated by the Registrar for the account(s) pertaining to a section or subsection of an approved
budget, or by the Prosecutor in areas falling under his authority, in accordance with Financial Rule 110.4. The main responsibilities of
the Certifying Officers with regard to authorizing the requisitions are as follows:

(a) Review all requisitions in the light of actual needs for procurement and to establish that funds are available for the
goods/services being processed.

(b) Specifications should be comprehensive and unambiguous, and the description of scope of work in the requisition must
be clear. A complete description or detailed specifications which may be available should be listed on the requisition for each item. It
is of utmost importance for evaluating offers and for the winning supplier that Certifying Officers make sure that technical
specifications of goods and/or services are sufficiently detailed.

(c) Ensure that the requisitions are consolidated by line and type as much as possible

2.2 Procurement Requisitions

All requests for procuring supplies, equipment and services shall be submitted to the Procurement Section with a
requisition using the Court’s ERP System SAP. The requisitions shall include the following information:

(a) A clear, concise statement of what is required. This may consist of a simple description or a fully developed
specification. To develop this specification, the Section Chiefs and/or the requisitioning officers may use experts within the Sections
of the Court or, where appropriate, an outside source; (

b) A detailed technical specification or Statement of Work, where applicable, prepared by the Section Chiefs and/or the
requisitioning officers on a separate sheet and as an attachment to the requisition;

3. PURCHASING METHODS

3.1 Competition

The Court recognizes the basic principles of competition and equal treatment of bidders as outlined in Financial Rules
110.12 and 110.15. The principles of fair and equal competition ensure that the Court can obtain the best value for money by
soliciting participation of a number of qualified bidders. The principle of equality requires the Court to avoid preferring or
discriminating against any bidder to the detriment or benefit of the other bidders.

3.2 Required Competition Level

If under € 3,000.00 per purchase order, whether an item is to be bid will be at Procurement Section’ discretion and should
be based upon many factors, including but not limited to the following: quantity, lead-time, and availability. If between € 3,000.00
and € 10,000.00 per purchase order, three (3) written competitive bids whenever possible should be obtained.

If over € 10,000.00 per purchase order, a minimum of three (3) competitive bids are required.

3.3Sealed Bids
 Sealed bidding is a method of soliciting competitive offers to purchase goods or services. The Court shall make an award to
the supplier providing the best overall value to the Court, considering price and other related performance and quality factors.

4. SOLICITATION DOCUMENTS

Solicitation Documents shall be used to request quotations or proposals from suppliers for goods, works or services
required. While the details and complexity of Solicitation Documents will vary according to the nature and value of the
requirements, they will contain all information necessary to prepare a suitable Offer.

4.1 Types of Solicitation Documents

4.1.1 Expression Of interest

4.1.2 Request for Quotations

4.1.3 Requests for Proposals

5. SOLE OR SINGLE SOURCE

5.1 Due to the fact that competition is the preferred acquisition method of the Court, careful consideration must be given
to, and appropriate justification provided for all Sole or Single Source procurement actions to ensure that they are more
advantageous to the Court rather than an award obtained through competition.

6. SUBMISSION AND RECEIPT OF BIDS

Bidders must comply with the specified procedure for submission of bids as well as the technical requirements in the
solicitation to allow for the fair and nondiscriminatory evaluation of their bids.

6.1 Bid Opening The purpose of the bid opening is to verify that all formalities indicated in the solicitation are met, including
the timeliness of the bid receipt and its sealed condition.

7. PROCUREMENT REVIEW COMMITTEE

The Registrar is empowered under Financial Rule 110.14 to establish a Procurement Review Committee (PRC) to render
written advice to him/her on:

(i) all contractual agreements to be entered into involving commitments to a single supplier, in respect of a single
requisition or series of related 12 requisitions exceeding € 50,000.00 or such other amount as may be amended from time to time by
the Registrar;

(ii) (ii) all proposals for the amendment, modification or renewal of contracts and/or agreements previously
recommended by the PRC,

8. CONTRACT TYPES

A contract is a legally binding agreement between two or more parties and its contents reflect the parties’ mutual
obligations to one another. The type of contract most suitable to the procurement (e.g., Purchase Order or Agreement) and its
pricing depends, in large measure, upon the scope and nature of the parties’ obligations. The Procurement Section shall prepare the
agreement or purchase order and ensure, with the support of technical and professional assistance as required, that it contains all
the provisions necessary to protect the Court’s interest.

8.1 Purchase Orders

Purchase orders are used when contracting for the provision of goods and simple services.

8.2 Written Procurement Contracts

Written procurement contracts (hereinafter referred to as ‘Agreements’) (Financial Rule 110.19) are generally used to
obtain the services from a specific company for a given task or period of time, or to procure goods and/or services.

8.3 Terms and Conditions

Terms and conditions are a key component of agreements and purchase order documents. Together with the Statement of
Work or Scope of Work (SOW) and applicable specifications, they form the written intent of the parties to the agreement and
purchase order.

8.4 Procurement Plan and Contracts database

It is important that all contracts and agreements are reviewed, placed and renewed in a timely manner. To this end, all
contracts or agreements which have a duration clause must be recorded in the contracts database. This database will form part of
the Procurement Plan.

-Reported by: Salvador

Expert Judgment is use for situations which require recourse to expert judgment by completing, validating, interpreting and
integrating existing data, assessing the impact of a change, predicting the occurrence of future events and the consequences of a
decision, determining the present state of knowledge in one field, providing the elements needed for decision-making in the
presence of several options.

Expert judgment will often be required to assess the inputs to this process. Such expertise may be provided by any group or
individual with specialized knowledge or training and is available from many sources including:

• Other units within the performing organization. They fill gaps in data and in the understanding of existing or missing data.
They introduce, apply and teach techniques and methods, some of which staff of the experts’ principals - and ultimately others - will
continue to employ and disseminate. Technical experts reduce uncertainty by working out consensus opinions and probability
ranges. Policy experts unravel the preferences and capacities of stakeholders; by doing so they dampen excessive certainty and may
thereby increase uncertainty in strategic ways that decision makers and analysts find productive. When experts give their opinions in
a context of decision-making, these become expert judgments.
 • Consultants. Engineering consultants are usually self-employed, but also work for consulting firms. Consultants are
experts, and clients rely upon their knowledge and advice to save money. The consultant can provide a variety of advice, such as
effective equipment or system design plans. Aspiring engineer consultants must meet certain requirements, including a college
degree and professional license.

• Professional and technical associations. knowledge base can be provided by a member of the project team, or multiple
members of the project team, or by a team leader or team leaders. However, typically expert judgment requires an expertise that is
not present within the project team and, as such, it is common for an external group or person with a specific relevant skill set or
knowledge base to be brought in for a consultation,

• Industry groups. Suppliers, Stakeholders, including customers or sponsors

-Reported by: SantoS

1. DEFINITION

• PROCUREMENT - The act of obtaining or buying goods and services. The process includes preparation and
processing of a demand as well as the end receipt and approval of payment. It often involves (1) purchase planning, (2) standards
determination, (3) specifications development, (4) supplier research and selection, (5) value analysis, (6) financing, (7) price
negotiation, (8) making the purchase, (9) supply contract administration, (10) inventory control and stores, and (11) disposals and
other related functions. The process of procurement is often part of a company's strategy because the ability to purchase certain
materials will determine if operations will continue. A business will not be able to survive if it's price of procurement is more than
the profit it makes on selling the actual product.

2. TYPES OF PROCUREMENT DOCUMENTS

A few types of procurement documents are:

• RFP - A request for proposal is an early stage in a procurement process issuing an invitation for suppliers, often
through a bidding process, to submit a proposal on a specific commodity or service.

• RFI - A request for information (RFI) is a proposal requested from a potential seller or a service provider to
determine what products and services are potentially available in the marketplace to meet a buyer's needs and to know the
capability of a seller in terms of offerings and strengths of the seller.

• RFQ - A request for quotation (RFQ) is used when discussions with bidders are not required (mainly when the
specifications of a product or service are already known) and when price is the main or only factor in selecting the successful bidder.
 • Solicitations: These are invitations of bids, requests for quotations and proposals. These may serve as a binding
contract.

• Offers - This type of procurement documents are bids, proposals and quotes made by potential suppliers to
prospective clients.

• Contracts - Contracts refer to the final signed agreements between clients and suppliers.

• Amendments/Modifications - This refers to any changes in solicitations, offers and contracts.

Amendments/Modifications have to be in the form of a written document.

3. Examples of Procurement Documents

• Some examples of what constitutes procurement documents include the buyer's commencement to bid and the
summons by the financially responsible party for concessions.

• In addition, requests for information between two parties and requests for quotations, and proposals and seller's
response are also parts of procurement documents.

• Basically procurement documents comprise of all documents that serve as invitations to tender, solicit tender
offers and establish the terms and conditions of a contract.

-Reported by: Sandigan

INTRODUCTION

This Guidance describes the different types of evaluation criteria that may be used to select contractors for Goods, Works
and Non-consulting Services when using Request for Bids or Request for Proposals selection methods.

This Guidance should be read with reference to the World Bank Procurement Regulations for IPF Borrowers, the Standard
Procurement Document (SPD) and if applicable, the associated User Guide relevant to the Selected SPD. Specific application of
evaluation criteria is detailed in each of the Bank’s SPDs.

Evaluation criteria are a standard or test used in the evaluation of Bids/Proposals to select the Most Advantageous
Bid/Proposal which best meets the requirements and offers the best value for money (VFM).

The following requirements govern the Bid/Proposal evaluation criteria:

a) the evaluation criteria shall be proportionate and appropriate to the type, nature, market conditions, complexity, risk,
value and objective of what is being procured;

b) To the extent practicable, evaluation criteria should be quantifiable (such as convertible to monetary terms);
 c) The SPD shall include the complete evaluation criteria and the specific manner in which they shall be applied;

d) Only the evaluation criteria, and all the evaluation criteria, indicated in the SPD shall be applied;

e) Once the SPD has been issued, any change to the evaluation criteria shall be made only through addenda; and

f) The evaluation criteria shall be applied consistently to all Bids/Proposals submitted.

Evaluation criteria must be established in the early stages of the procurement in order to support transparency, value for
money and integrity in the procurement process. After the contract requirements have been defined and the selection method
decided (e.g. RFP, RFB), the evaluation criteria are set so that the Borrower can appropriately evaluate which Bidder/Proposer is best
able to deliver the requirements and maximize VFM.

To achieve VfM, the evaluation criteria may take into account such factors as the following:

a) Cost: evaluation of cost using a methodology that is appropriate to the nature of the procurement including:

i. adjusted Bid/Proposal price; or

ii. Adjusted Bid/Proposal price plus the running/recurrent cost over the useful life time of the asset on a net present cost
basis (life-cycle costs);

b) Quality: evaluation of quality using a methodology to determine the degree to which the Goods, Works, Non-consulting
Services or Consulting Services meet or exceed the requirements;

c) Risk: criteria that mitigate the relevant assessed risk;

d) Sustainability: criteria that take into account stated economic, environmental, and social benefits in support of the
project objectives, and may include the flexibility of the Proposal to adapt to possible changes over the life-cycle; and/or

e) Innovation: criteria that allow assessment of innovation in the design and/or delivery of the Goods, Works, Non-
consulting Services, or Consulting Services and that give Bidders/Proposers the opportunity to include, when appropriate, in their
Bids/Proposals, solutions that exceed the requirements or alternative solutions that could deliver better VfM.

SUBSTANTIAL RESPONSIVENESS

Preliminary examination

The evaluation process should begin immediately after opening of the Application/Bid/Proposal with a preliminary
examination to verify the overall completeness of the Application/Bid/Proposal received as required by the SPDs before undertaking
their detailed examination or evaluation.

All Application/Bid/Proposal should be subjected to a preliminary examination. This action enables evaluation committee to
identify and reject Applications/Bids/Proposals that are incomplete, invalid or substantially non-responsive.
 The results of preliminary examination should be presented in the Evaluation Form. If the Application/Bid/Proposal fails
preliminary acceptance, the reasons must be clearly explained in footnotes or in an attachment, as necessary.

Justification to reject must therefore be based on the existence of one or more major deficiencies or deviations which
cannot be permitted to be rectified or accepted in any case, and rejection would be justified and sustainable. A material deviation is
one which:

a) Has an effect on the validity of the bid; or

b) Has been specified in the bidding documents as grounds for rejection of the bid; or

c) Is a deviation from the commercial terms or the technical specifications in the bidding documents whose effect on the
bid price is substantial but cannot be given a monetary value.

The following checks should be applied:

a) Verification: The validity of the Application/Bid/Proposal requires that all relevant forms be signed by authorized person
or persons. If the Applicant/Bidder/Proposer is a joint venture, the joint venture agreement must be submitted; if the
Applicant/Bidder/Proposer is an agent, an authorization from the supplier or manufacturer must be provided in addition to any
documentation required of the supplier or manufacturer itself.

b) Eligibility: All goods and services shall originate from eligible source countries. In the case of plant and equipment, this
eligibility test is applied only to the finished product offered in the Application/Bid/Proposal and to its major and clearly identifiable
components.

c) Bid/Proposal Security: The SPD may require submission of a Bid/Proposal security. If so, the Bid/Proposal security must
conform to the requirements of the SPD, and it must accompany the Bid/Proposal.

d) Completeness of Application/Bid/Proposal: Unless the SPDs have specifically allowed Applicant/Bidder/Proposers to

quote for only select items or for only Section II. Substantial responsiveness Guidance – Evaluation Criteria 6 partial quantities of a
particular item—those not offering all of the required items should ordinarily be considered nonresponsive. However, under works
contracts, missing prices for occasional work items are considered to be included in prices for closely related items elsewhere.

TECHNICAL AND COMMERCIAL QUALIFYING CRITERIA

Technical and Commercial Qualifying criteria are the minimum and/or maximum requirements in the SPD that are normally
evaluated on a pass/fail basis.

Qualifying (pass/fail) criteria should be stated in such a way that an assessment can determine whether the Bid/Proposal is
substantially responsive to the technical and commercial requirements.

The Borrower should be careful not to limit market competition through unnecessary or unduly onerous qualifying criteria.

Material deviations to the commercial requirements and technical specifications are a basis for the rejection of an
Application/Bid/Proposal. As a general rule, material deviations are those that, if accepted, would not fulfill the purposes for which
the Application/Bid/Proposal is requested, or would prevent a fair comparison with Applications/Bids/Proposals that are properly
compliant with the SPDs. Examples of material deviations include:

a) Refusing to bear important responsibilities and liabilities allocated in the SPD, such as performance guarantees and
insurance coverage;

b) Inability to meet the critical delivery schedule or work schedule clearly specified in the SPD;

c) Failure to comply with minimum experience criteria as specified in the SPD;

d) Failure to meet major technical requirements (e.g., offering completely different types specified, plant capacity well
below the minimum specified, equipment not able to perform the basic functions for which it is intended; and/or

e) Failure to bid for the required scope of work (e.g., for the entire works or a complete package or a complete schedule) as
instructed in the SPD and where failure to do so has been indicated as unacceptable.

PREQUALIFICATION AND INITIAL SELECTION

Prequalification and Initial Selection are processes used to shortlist Applicants in the procurement of Goods, Works and
Non-consulting Services. These processes ensure that only those with appropriate and adequate capacity, capability and resources
as assessed against the qualification criteria in the SPD, are invited to submit Bids/Proposals.

PREQUALIFICATION

Prequalification is normally used with Requests for Bids and is optional depending on the nature and complexity of the
Goods, Works or Non-consulting Services.

In prequalification, minimum requirements are normally assessed on a pass/fail basis against such criteria as:

a) Eligibility

i. Nationality

ii. Conflict of Interest

iii. Bank Eligibility

iv. United Nations resolution or Borrower’s country law

b) Historical Contract Non-Performance

i. History of Non-Performing Contracts

ii. Suspension Based on Execution of Proposal Securing Declaration by the Employer

iii. Pending Litigation

iv. Litigation History

c) Financial Situation and Performance

 i. Financial Capabilities

ii. Average Annual Turnover

d) Experience

i. General Experience

ii. Specific Experience All Applicants to a prequalification that substantially meet the
qualification requirements are invited to submit a Bid.

INITIAL SELECTION

Initial Selection is normally used with Request for Proposals and for all Competitive Dialogue processes. It enables
the Borrower to invite only the highest ranked Applicants to submit Proposals.

Initial selection involves a two-step process. The first step is similar to the Prequalification process described above. All
Applicants to an Initial Selection are assessed against minimum (pass/fail) qualification requirements.

In Initial Selection, qualification requirements are normally assessed on a pass/fail basis against such criteria as:

a) Eligibility

i. Nationality

ii. Conflict of Interest

iii. Bank Eligibility

iv. United Nations resolution or Borrower’s country law

b) Historical Contract Non-Performance

i. History of Non-Performing Contracts

ii. Suspension Based on Execution of Proposal Securing Declaration by the Employer

iii. Pending Litigation

iv. Litigation History

c) Financial Situation and Performance

i. Financial Capabilities

ii. Average Annual Turnover

d) Experience
 i. General Experience

ii. Specific Experience

e) Past performance

i. Number of similar contracts

ii. Timeliness of delivery

Applicants that substantially meet the meet the qualification requirements are then assessed against the rated type criteria
in the Initial Selection document in order to be ranked on merit.

a) Management capability (policy, systems, practice)

i. Management facilities

ii. Financial management

iii. Risk management

iv. Health and safety management

v. Innovation

vi. Sustainable business

b) Contract / Project Management Capability (policy, systems, practice)

i. Contract/Project management

ii. Scope of human resources and structure assigned to contract/project management

iii. Budget and financial management

iv. Risk processes to mitigate and manage

v. Value engineering, continuous improvement

c) Employer’s requirements

i. Full understanding of the Employer’s Requirements

ii. Practical and realistic preliminary approach and methodology

iii. Realistic preliminary timeline/delivery schedule

iv. Effective risk identification

d) Sustainable Procurement

i. Sustainable procurement (policy and systems)

 ii. Track record of delivering successful sustainable procurement result/s (actual examples to be provided)

iii. Sustainable procurement accreditation from a recognized body

iv. Sustainable procurement award from a recognized body

After ranking the combined rated criteria scores the Borrower selects the highest ranked Applicants to submit Proposals.
The Borrower must state in the Initial Selection document, the range of Applicants that may be Initially Selected.

EVALUATION OF BID/PROPOSAL COST

As specified in the SPD, quoted costs are evaluated against monetarily quantifiable criteria. This allows the Borrower to
compare and evaluate costs of each Bidder/Proposer.

Examples of where monetarily quantifiable methodology can apply, include:

a) Domestic margin of preference;

b) Time schedule adjustment;

c) Payment schedule adjustment;

d) Life cycle costing; e) functional guarantees min/max adjustment; and

f) Discounts for multiple lots.

ADJUSTED BID/PROPOSAL PRICE

Adjusted Bid/Proposal price forms part of the evaluated cost of each Bid/Proposal. Adjustments of Bid price include
arithmetic correction, any discounts, and other adjustments specified in the SPD for evaluation purposes.

Price adjustment provisions that are used in long-term contracts instead of a fixed price are not considered in the
evaluation.

Discounts that are conditional on the award of more than one lot, or slice shall not be considered for proposal evaluation

LIFE-CYCLE COSTS

Evaluation of Bid/Proposal cost may also include an assessment of life cycle costs. The principle of VFM does not necessarily
mean selecting the lowest price, but rather total cost of ownership (or lifecycle cost) over a specified period, generally the useful life
of an asset. VFM represents the optimum combination of total cost of ownership and quality (or fitness for purpose) to meet the
buyer’s requirements. It allows the relative benefits of different Bids/Proposals to be measured by taking into account all costs
including for example:

a) Purchase price or upfront costs of acquisition;

b) Installation and commissioning costs;

c) Cost of operation and maintenance including costs of materials, servicing, spare parts, etc. over the useful life;
 d) Sustainability savings e.g. lower fuel consumption; and/or e) decommissioning and disposal costs.

RATED-TYPE CRITERIA

Rated-type criteria are used to assess non-price attributes using merit points. They are normally used in an RFP process
when attributes or differences in attributes among different Bids/Proposals may not be quantifiable (or the evaluation criteria
cannot be expressed) in monetary terms or where a Borrower wishes to differentiate proposals using merit points.

Rated criteria can be used:

a) In conjunction with pass/fail criteria in order to rank and initially select Applicants; and

b) In the evaluation of proposals (and exceptionally of bids) to identify the most advantageous proposal (bid)

When using rated criteria at the Proposal stage of an RFP, rated criteria are assessing the extent to which the firm is able to
meet and exceed the requirements to perform the contract, rather than past performance.

At the Proposal stage rated criteria may include, but are not limited to, the following features as relevant: a) to what extent
the performance, capacity, or functionality features meet or exceed the levels specified in the performance / functional
requirements and/or influence the life-cycle cost;

b) quality of Technical Proposal in terms of method statement, key personnel, access to key equipment, site organization,
safety, quality assurance, mobilization schedule, Implementation Schedule and any other activities as specified by the Employer; and

c) Ability to meet and exceed any sustainable procurement requirement if specified in the Employer’s Requirements.

EXAMPLE RFP EVALUATION USING RATED TYPE CRITERIA

The following example illustrates evaluation of an RFP using rated type criteria and lifecycle costing for the evaluation of
five Proposals that were Initially Selected.

The weighted score for each Proposer shown, in Table IV, is calculated as:

T = the Technical Score awarded (0-4)

Thigh = the Technical Score achieved by the Proposal that was scored best among all responsive Proposals (0-4)

w = % weight for the category or factor as specified in the SPD (e.g. Methodology 10%)
 -Reported by: Martinez