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Public Procurement
(an overview)
Satya Narayan Shah
B.Sc. In Mechanical Engineering (India) MS in Manufacturing Engineering & Management (UK)

What is Public Procurement?

It is the acquisition of goods, works and services by procuring entities government ministries and agencies local bodies agencies, bodies, municipalities, state enterprises and private utilities holding monopoly as well as any other entity to whom public funds have been allocated for use in public procurement

Email: er.snshah@gmail.com
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Why is it important?
Very large portion of national budget for maintenance and capital investment is spent for acquisition of works goods and services works, through the procurement process. Public Procurement covers

What do the Stakeholders expect?

Tax Payers and general public look for:

15 to 30 % of the Gross Domestic Product 15 to 70 % of the budget

Includes very large contracts for infrastructure, energy, communication, defense , education

Value for money i.e. economy Transparency of process and decisions Non-discrimination in treatment of vendors Accountability of public officials Quality of works/goods/services Responsiveness, efficiency Integrity in use of public money Support to public policies e.g. protection of environment, social equality, minimum wages, balanced development, etc

What do the Stakeholders expect? Domestic private sector looks for: development of local industry-industry manufacturing, construction and services reasonable protection against foreign competition

Growing importance is due to

International development institutions such as the World Bank, ADB etc. Trade Agreements such as: g

EC (European Commission) common market WTO GPA (Government Procurement Agreement) NAFTA (North American Free Trade Agreement) APEC (Asia Pacific Economic Cooperation)

All the above, require a set of transparent, nondiscriminatory public procurement regime open to all members

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Important component of Governance

Public procurement is one important activity of governance with high potential for corruption People look for integrity and honesty The image of any government, particularly in the developing world, is largely influenced by the quality and integrity of public procurement

Procurement Procedure

Formation procuring Unit -PPA -7(3) Formation Evaluation Committee-PPA -71 Preparation of procurement Plan/strategy PPA -6 Preparation of Estimate ( Rs. 25000.00)-PPA (5) p (> ) ( ) Preparation of Bid document
Opening of Bids Evaluation of bids Award of the contract Completion/Termination of the contract
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Procurement Cycle
Procurement is conceived as a series of stages and those stages in logical sequence is known as the procurement cycle l The sequences of activities (cycle) can be presented in a number of ways

GeneralProcurementProcess

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Procurement Methods and Practices

Procurement Methods {PPA; Procurement Method to be Selected: 8- (a)}
Force account Through Consumers Society/Stake holders participation Direct Purchase/Negotiation Sealed Quotation National Competitive Bidding (NCB) International Competitive Bidding (ICB)

DirectPurchase
ProvisionConcerningDirectProcurement: PPR,85.
IT IS JUSTIFIED WHEN:
WORK INVOLVED CANNOT BE DEFINED IN ADVANCE WORKS ARE SMALL AND SCATTERED OR IN REMOTE PLACES FOR WHICH QUALIFIED CONTRACTORS ARE NOT INTERESTED OR LIKELY TO ASK UNREASONABLE PRICE CRISIS SITUATION NEEDING PROMPT ATTENTION

DirectPurchasefromlocalshops Di tP h f l l h Upto3Lakh(Goods/Services) Upto5Lakh(works) Upto15LakhsfromDomesticManufacturer.

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SealedQuotation
ProvisionsConcerningSealedQuotation: PPR 84

Smallcontracts Amountupto10Lakh (forgoodsor services)andupto20Lakh (forworks ProcedureofNCB tofollow Noticeperiodissmall(15days) Usedforurgentlyrequiredgoods/small jobs Minimum3Quotationsrequiredonthe firstnotification,minimumnumbernot requiredforrenotice.
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NationalCompetitiveBidding (NCB)
Mediumsizecontract Localproduction,reasonablecost, promptdelivery Availabilityoflocalresourcestechnical, financial,etc. Widecompetitionispossible Noticeperiod(30daysminimum) PPA14 (4)(1)
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InternationalCompetitiveBidding(ICB)
InternationalLevelBidding:PPA 15

Sizeandscopeofcontractusuallycosting largeamountforwhichdomestic contractors,manufacturersandsuppliers dontpossessesadequatecapabilityand p q p y resources Thegoodsarenotproducedlocally Thegoodsareofcomplicatednature Thejobishighlytechnical Noticeperiod(45daysminimum) PPA14(4)(1)
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(ForGoodsandOtherServicesProcurement)

PPR Schedule3,(RelatingtoSubrule(1)ofRule21)

Contracttypes

Contractforsupplyofspecificgoods. FrameworkContract(unitratecontract). Multiyearcontract. Contractfordesign,supplyanderect. C f d i l d Turnkeycontracts.(design,procurementof allinputs,erectionatsite,commissioning, testingandevenoperationforaninitial period)

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(FortheProcurementofWorks)

PPR Schedule4,(RelatingtoRule22)

Contracttypes

(FortheProcurementofConsultancyServices)

PPR Schedule5,(RelatingtoRule23)

Contracttypes

Unitratecontract Lumpsumcontract Costreimbursementcontract Timeandmaterialratecontract Designandbuildcontract Managementcontract Performancebasedmaintenanceor managementcontract Pieceworkcontract

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Lumpsumcontract. Timebasedcontract Performancebasedfeepaying Performancebasedfeepa ing contract Percentagebasedcontract. Indefiniteserviceperiodcontract

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Procurement Planning

OtherMethodsofProcurement
TwoStageBidding:Wherethepreparationofcomplete technicalspecificationsinadvanceisundesirableor impractical.
Firststage
unpriced technicalproposalonthebasisofaconceptual designorperformancespecificationsareinvited subjecttotechnicalaswellascommercialclarifications andadjustmentstobefollowedbyamendedbidding documents

DOCUMENTS

SecondStage
submissionoffinaltechnicalproposalandpricedbids

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Procurement Plan
Establishment of the need for Sustainable Procurement. Fix the procurement policy/strategy based on the best purchasing option considering requirements, risk, cost and other q , , management issues.
The Australian Procurement and Construction Councils (APCC) defines sustainable procurement as a process whereby organizations meet their needs for goods, services, works and utilities in a way that achieves value for money on a whole of life basis in terms of generating benefits not only for the organisation, but also to society and the economy, whilst minimizing damage to the environment.

Procurement Planning: Need and Importance

Timely completion of the project Cost saving Identification of critical and non-critical activities Monitoring supervision and control Monitoring, Resource management: organize people and resource Resource scheduling Theft, damage, loss, out dated, etc Assignments and responsibilities Other issues
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Procurement Plan
(need analysis)
The following questions should be answered
Do we really need to purchase, or can the need be met in another way? Can the quantity or scale of the goods, works or services be reduced whilst achieving the same service delivery? Can alternative goods or service be used to meet this need? Can the works, goods, service be specified to have improved sustainability outcomes, including being able to serve a useful purpose after its initial use? What information is available regarding sustainably-preferable options for this purchasing requirement? Where can more information be obtained about suitable alternatives?

Procurement Plan
Master Procurement Plan to be Prepared- PPR (clause 7) for a period of more than one year or in making a procurement of an amount exceeding one hundred million Rupees annually. The master procurement plan to be approved by the secretary of the Public Entity. To be up dated each fiscal year.

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Procurement Plan
Master Procurement Plan
shall contain, the following matters:-

Procurement Plan
Annual Procurement Plan to be PreparedPPR (clause 8) In the cases where a Public Entity requires to make procurement of an amount exceeding one million Rupees annually.

Type, quantity and tentative estimated cost, Procurement method, Slice or package for maximizing competition, Tentative numbers of contracts, Pre-qualification proceedings (if required), Tentative time-table of proceedings, Any other matter as directed by PPMO

Annual procurement plan to be attached with the annual program and budget of the next fiscal. The annual procurement plan to be revised and sent to its superior office, Treasury and Controller Office and PPMO. 26

Procurement Plan
Annual Procurement Plan to be Prepared- PPR (clause 8) the following matters shall have to be stated

Specification
The act of specifying, a detailed, exact statement of particulars particulars, especially a statement prescribing materials, dimensions, and quality of work for something to be built, installed, or manufactured.

The types of procurement, Possible package of procurement, Ti Time t bl of procurement proceedings, table f t di
such as Preparation of specification, cost estimate, bidding documents, notice for invitation, evaluation, Acceptance, contract, commencement, and completion.

Procurement method, Types of contracts, and Any other matter as directed by PPMO

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Specification
Specifications are a part of contract documents It is the document where the level of intended quality is specified. It is clear and concise description of materials and workmanship. d k hi If required the specifications are attached with proper drawings and other related documents They should be non-discriminatory.
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Specifications help to avoid lengthy description in the Bill of Quantities. They guide Bidders about the clients intended quality requirements and to arrive them at fair price. Part of the contract document limiting and describing the risks and responsibilities. Formation of contractual obligations as to what exactly the client wants. Help the supervisors and commissioning and testing team.
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Specification Purposes

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Specification Purposes
It guides to achieve the required total quality and performance of the end product, It helps the Contractor/ Supplier to workout the rates and prices for bidding the contract, p g , It helps the Engineer/ Employer to monitor and control the quality of end product, It provides basis for dialogue between the Contractor and the Engineer to agree or disagree for quality of materials and works.
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Specification Purposes
It is basis for the Engineer to approve or reject materials or works Clear specifications will result in less Claims, Disputes and Litigation problems

Thats why, the specifications are to be written by an experienced professional.

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Specifications
Use of standard specifications reduces the chances of ambiguity and also makes easier for preparation of contract documents. Standard Specification- Prepared and published by the organization. They are generally prepared on the basis of reference, e.g. ISI, BSI, NS etc.
Standard Specification needs to be approved by the Cabinet level.
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Preparation of Specification
Language: Simple and clear, same tense Brief: as brief as possible. Standard articles code books specified by references, no need of explanation. Fairness: fair to all parties, proper sharing of risk. Clear Requirement: Express requirement clearly No repetition: Repetition of information should be avoided. Unnecessary text: Inapplicable text should not be included.
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Preparation of Specification (contd)

Inclusions: Inclusion of proper paragraphs for specification of materials, Major Components, Installations, Tests and Commissioning, After sales service, Guarantee/Warranty. Standard Size: Commercial sizes should be specified as far as possible possible. Brand/Model: Any particular brand or model should not be specified as far as possible. If it is quoted, options and choice should be given.

Specifications and Drawings

Specifications and Drawings are the 2 integral parts of contract, which shows the requirements (needs and expectations) of the Employer. Specifications are referred more in cases of conflict and disputes whereas the drawings are dealt in day-to-day work execution. Notes mentioned in the drawings are also treated as specifications and are effective.

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Specifications and Drawings

Thats why the Notes written in the drawings are also to be clear, specific, complete, and carefully worded as in the Specification. To minimize the discrepancy it is important to take care in finalizing the drawings and specifications specifications. It is advised to include clauses stating in case of discrepancy in Drawings and Specifications, the Engineer will decide . Such authority to the Engineer may avoid disputes and litigations arising from some small mistakes.
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Preparation of Specification
Example Vehicle
Type General Sedan, Hatchback, - Seating capacity, Engine Power, C.C etc. Spec, Tech T h Transmission 4 speed, 5 speed T i i d d Steering Manual, power Spec, Perfor Options AC, Non AC, mance Warranty - Period to be covered
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Conclusion

Specification to be required to describe the desired p performance, and not to reduce competition.

BID DOCUMENTS

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Contract and Bid documents Contract is an offer & an acceptance Contract is an agreement between 2 or more parties t b t ti to do or not to do something that is enforceable by law.(Contract Act, 1999)
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Contract and Bid documents

Bid Documents provide a Bidder to make an responsive cost effective offer to the Employer considering; Scope and Quality of works, Conditions (liability and risks of Employer and Bidder), Time for completion, Payment modes etc.

Proper Bid Documents helps an Employer to assess all the Bidders Bid at equal footing and provides a basis for acceptance of Responsive, Qualified and CostShah effective bid. Er. Satya Narayan

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Purpose of Bidding Documents

Lay down Rules of the Competition
How to prepare and submit bids What will be the selection criteria What will be the qualification criteria How to price Technical Specifications Bill of Quantities Delivery/Completion Time Warranty/Service Obligations

Specify Scope of Works & Obligations

Specify Clearly the Conditions of Contract

General, Time, Cost, and Quality Control
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Content of Bid Document: Invitation for Bids (IFB) Section I.Instructions to Bidders (ITB) Section II. Bid Data Sheet (BDS) Section III. Evaluation and Qualification Criteria Section IV Bidding Forms IV. Section V. Schedule of Requirements Section VI. General Conditions of Contract (GCC) Section VII. Special Conditions of Contract (SCC) Section VIII. Contract Forms
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IMPORTANT NOTES
PREPARATION OF BID DOCUMENTS TO BE DONE IN CLOSE CONSULTATION WITH THE USER. USER USE OF APPROPRIATE STANDARD BIDDING DOCUMENTS ISSUED BY PPMO.
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Contract form.
Main Agreement document signed by both parties and witness. Contractor/Suppliers commitment to complete the job and remedy the defects in conformity with the provision of contract. Employers commitment to pay the supplier as per the conditions of contract. List of documents to form and be read and interpreted as part of the greement.
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Completion of the Contract

Inspection & Commissioning Inspection Committee Physical verification Verification & validation of performances Inspection Report
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Employers most contractual obligation Principal source of funds for supplier to discharge his duty Delay or default in release in payment has a negative impact on discharge of obligation by the contractor/supplier Release of excessive payment or advancing of payments may dilute the motivation level of contractor/ supplier in discharging his duty A balance is therefore necessary to be maintained so that the supplier is suitably compensated for works completed and adequately motivated for completion of work
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