The Procurement Process and Contract

Types : L10
Chibwe D. MWELWA
(MSc Procurement, MBA, BSc, MEIZ, FCIPS, FZIPS, MCCOMI)

Email: chibwemwelwa@gmail.com

Course: Project and Contract Management

Assessments: CA=40 %; Sessional= 60%.

 PROCUREMENT
PROCESS & CONTRACT
TYPES
PROCUREMENT PROCESS & CONTRCAT TYPES L10
Procurement Process
Procurement Process
Procurement is the process by which goods and services are
acquired.
Procurement is a very Important function both in the Government /
Public and Private.
In Zambia close of 10% GDP is controlled by public procurement.
In Private companies 50-80% of Production costs are controlled by
the procurement function.
Thereby impacting the bottom line of the most production
companies directly.
Procurement Cycle
THE PURCHASING CYCLE

Identification of Need & Procurement Plan

 User department/section generates the need.
 Need identification is not a province of suppliers/contractors.
 Need for Procurement Plan (takes into account lead time i.e. from
identification of need, to receipt of goods, works or services)
This is for planning purposes
This is to allow for suppliers to start preparing for the launch of the
procurement

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Purchasing Cycle
ddingProces
Identification of Need & Procurement Plan
 The Budget confirmation
 Confirmation of Source of Funds
 The Procurement Plan
 The Approval/Clearance
 Specification Drafting
THE PURCHASING CYCLE

BIDDING PROCESS / TENDER PROCESS

 Open, fair, and competitive procedures used in a transparent manner in

the procurement process.
 Solicitations based on clear and accurate descriptions of what need to be
acquired.
 Contracts awarded only to qualified and capable suppliers / Contractors.
 No more than a commercially reasonable price shall be paid

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BIDDING PROCESS / TENDER PROCESS
Notices
General for Adv.
Procurement Notice (GPN)
 Required to alert prospective bidders to the procuring entity. The
notice usually includes information on the estimated value and
brief description of the requirements.
 The GPN is issued usually in a minimum of 45 days prior to first
procurement action.

Specific Procurement Notice (SPN)

 Required to alert prospective bidders to prequalify or bid for
specific contracts.
 Published in newspapers and/or websites
 BIDDING PROCESS / TENDER PROCESS

SPECIFICATIONS
 Specification must define quality
 Quality is suitability for intended purpose.
 Specifications must be neutral / Generic (i.e. avoid use of
brand names). Where a standard exists, such shall be used.
 Services specifications come in form of Terms of Reference
(TOR) i.e. define minimum performance levels
 Works specifications come in form of scope of works, bill of
quantity and material specifications or standards.

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BIDDING PROCESS / TENDER PROCESS
OPENING OF TENDERS
 Tenders shall be deposited in a tender box.
 Tenders submitted within the stipulated period shall be
opened;

 Opened Publicly
 By an authorized officer,
 On a day other than a public holiday or day after a public
holiday

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 BIDDING PROCESS / TENDER PROCESSOpeni
Bids
OPENING OF TENDERS / TENDERS
 Time for opening is immediately after submission deadline
 Late bids cannot be accepted; should be returned unopened
 The same opening procedure will apply for each bid;
 Any question relating to the process of evaluation may be answered but
only with reference to the bidding document
 No statements referring to evaluation are to be made in the bid opening.
For that reason, no bids are rejected at bid opening
 Only the relevant points are to be read in a bid opening, using a Bid
Opening Checklist form.
 EVALUATION PROCESS
Evaluation Panel
TECHNICAL EVALUATION COMMITTEE (TEP)
 Membership
3 – 5 members
 Ad-hoc
Cannot be a standing committee
 Technical capacity
One or more members should be technically knowledgeable of subject
matter
 Conflicts of Interest
 None, declared, perceived?
 EVALUATION PROCESS
Evaluation Panel
TECHNICAL EVALUATION COMMITTEE (TEP)

 Administrative Compliance and Preliminary Examination

 Technical Evaluation
 Financial Evaluation
 Post Qualification
 Preparation of Evaluation Report(s)
 All stages are progressive!
 Admin Compliance/Prelim Exam
(Compliance)
 Eligibility
 Bid/Proposal Submission Form
 Power of Attorney
 Legal Status
 Bid Security
 Financial Capacity (see Post-Qualification)
 Manufacturer’s Authorization
 Reference Checks (see Post-Qualification)
EVALUATION PROCESS

TECHNICAL EVALUATION COMMITTE

 The purpose of tender evaluation is to identify the lowest evaluated
bidder [BEST EVALUATED] i.e. which when awarded the contract, shall
ensure:

 Best value for money is obtained

 Delivery/completion shall be on schedule
 The right quality and quantity is supplied

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AWARD AND APPROVAL

 PURCHASE APPROVAL

 Purchase approval must be obtained from the appropriate authority

prior to contract award.
 The approving authority is determined by the value of the purchase.
 The Tender Regulations stipulate the financial limits for each
approving authority.
 Retrospective approval cannot be granted, i.e. after the contract
award has already been made.
 The Tender Regulations have a procedure for emergency/urgent
purchases

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AWARD AND APPROVAL

CONTRACT AWARD
 Contract award notification to the supplier/contractor shall be in
writing and shall be by the purchasing officer.

 Simple or low value/risk contracts can be by local purchase order.

However, complex and high value/risk contracts must be written
with relevant Conditions of Contract.

 Advance payments are generally not permitted. Where this is

unavoidable, the supplier/contractor must submit an advance
payment guarantee of equivalent value from a financial institution.

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Contract Administration / Contract Implementation
Contract Administration
 Ensure supplier’s goods, services and works delivered
comply with contract requirements (time, quality and
cost).
 Ensure management of relationship between the parties
involved in the contract for future business.

 Ensure all contractual obligations are being done

correctly and in line with the specification and quality
envisaged in the contract.

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Closeout Process
CLOSE OUT

Closing out the transaction consists of three elements:

 receiving the goods or accepting the services,
 paying for the goods or services, and
 ensuring the satisfactory life cycle of the product or
service. 
 If it is works going into the Defects Reliability Period

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POST CONTRACT APPRAISAL/ VENDOR RATING

 This is intended to assess whether the purchase has been

conducted in accordance with the procurement plan.
 Deviations are evaluated to ensure they are not repeated and
corrective adjustments made to the procurement and associated
plans.
 After delivery, vendor performance is rated against quality,delivery,
service and cost elements.

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IFB

FLOATATION

4/8 WEEKS AUTHENTICATION

3 DAYS
EVALUATION

21 DAYS
ZPPA/PC AUTHORITY

10 DAYS
AWARD

TOTAL PERIOD 14 DAYS

60 – 108 DAYS
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Contract Types

Cost – Plus – Award – Fee (CPAF)

 An award pool is created. The level of award is determined by an
award committee.
 Downside: admin cost are high due to award committee.
Contract Type cont….
Cost-Plus- Percentage of Cost (CPPC)
 Supplier is reimbursed for allowable costs of performing the contract
and receives a profit as an agreed upon percentage of the costs.
 No limit on the supplier’s profit. If supplier’s costs increase, so does
the profit.
 Susceptible to abuse. No motivation for supplier to reduce costs.
 The buyer bears 100% of the risk.
Contract Type cont….
 Cos-Plus-Fixed Fee (CPFF)
 Supplier is reimbursed for allowable costs of performing the contract
and receives as profit a fixed fee payment based on the percentage of
the estimated costs.
 Primarily used in research projects where the effort required to
achieve success is uncertain until well after the contract is signed.
Contract Type cont….
Cost-Plus-Incentive Fee (CPIF)
 Supplier is paid for allowable performance costs along with a
predetermined fee and an incentive bonus.
 Primarily used when contracts involve a long performance period with
a substantial amount of hardware development and test
requirements.
 Risk is shared by both buyer and seller.
Contract Type cont….
 Fixed-Price-Plus-Incentive Fee (FPI)
 Most complex type of contract.
 Consists of target cost, target profit, target price, ceiling price, and
share ratio.
 Risk is shared by both buyer and seller, but risk is usually higher for
seller.
 Usually used when contracts are for a substantial sum and involve a
long production time.
Contract Type cont….
Firm-Fixed Price (FFP)
 Supplier agrees to perform a service or furnish supplies at the
established contract price.
 Will also be called Lump Sum.
 Supplier bears the greatest degree of risk
 Best specifications are available and costs are relatively certain.
 Common type of contract.
END