INSTITUTE OF TECHNOLOGY

DEPARTMENT OF CONSTRUCTION
TECHNOLOGY AND MANAGEMENT
PROCUREMENT AND CONTRACT MANAGEMENT
FOR COTM 5th year

(BY Wondirad W.)

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 Objectives
 It to give a basic understanding of the principles which
govern public project procurement.
• Know what Ethiopian law and regulations govern
public procurement
• Be able to explain the basic concerns that govern
public procurement; and

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 PROCURMENT
Defn:
Means the purchasing, hiring or obtaining by any
other contractual means of goods, works and
services.

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 PUBLIC PROCUREMENT
Means procurement by procuring entities using
public funds.
Procuring Entity : Means public body, which is
partly or wholly financed by the Federal
Government budget.
Public Fund :Means any monetary resources
appropriated to procuring entities from the Federal
Government treasury or aid grants .

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 PUBLIC PROCUREMENT
 Public procurement is the process of purchasing
inputs for public investment

 Quality, timeliness, local appropriateness and

affordability of inputs dictates the success of the
investment

 Procurement can impact greatly on a nation’s

development

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 PUBLIC PROCUREMENT IN
ETHIOPIA
 The Federal Government of Ethiopia’s Proclamation No. 430/2005
(Determining Procedures of Public Procurement and Establishing
its Supervisory Agency.) and

 The Ministry of Finance and Economic Development’s

Federal Public Procurement Directive of July 2005.
 In addition it is important to comply with the PPA or any involved
funding agency’s rules and regulations

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 3.1 Procurement Management
3..1 Introduction and purpose
Procurement is a process used to select the lowest
competitive and qualified bidder for procuring services
or works or goods from potential competitors based on
reasonable relevant criteria
Physical infrastructures are cost extensive and
appropriate savings obtained through competition are
the main factor behind the procurement process

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 3.1 Introduction and purpose
An effective and efficient procurement method ensures
the following rights called the "Five Rights". These are
The Right Quality,(technical expectation and
economic consideration)
The Right Quantity, (Take-off-Sheet Measurements
and Resources Allocations)
The Right Cost / Price /,(quality related and the
right cost is nearby cost, achieved mainly through
competition)
The Right Counterpart (to guarantee that the parties
shall be fit to the job) and
The Right Time. (scheduling with regard to right
8 timing is essential)
 3.1 Introduction and purpose
The purposes of a Procurement Management System can
be summarized into two major points:
To satisfy the need for economy and efficiency,
To provide equal opportunity to competitive bidders.
The successful achievement of these purposes requires the
following seven characteristics

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 3.1 Introduction and purpose
Figure : Seven Characteristics of Tendering

Notice of
Advertisement

Avoidance of Proof of
Subjectivity Competition

Characteristics
of tendering

Accessibility Impartiality

Formality Neutrality

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 Characteristics of Tendering
Notice of advertisement:
Through an official newspaper, mass media, and
notice boards etc. which can enable the
advertisement to reach wide range of competitors.
Proof of Competition:
tenders should be unlimited competition, unless
otherwise conditions such as complexity and
specialisation of projects require restriction to open
competition.

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 Characteristics of Tendering
Neutrality: care shall be taken When
The specifications are prepared
To avoid preference to limited alternatives
The bidding documents (contract conditions) shall
be balanced
 Not to cause disruption of the task to be
accomplished.
Accessibility:
The place where bid documents are purchased shall
be clearly indicated
The place, dates and time for submission shall
be notified
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 Characteristics of Tendering
Impartiality: During tendering if clarification is
requested, do so accordingly to all bidders
Often Pre-Bid Submission Meeting is used for this
purpose.
Negotiation is not allowed during tender period.
Formality: Strict adherence to formality shall be taken
to all tenders like
the submission & opening of bids (place, date and
time)
rejection of late and non-responsive bids
the bid security condition shall also be a formality
13 to all tenders
 Characteristics of Tendering
Avoidance of subjectivity:
Criteria for evaluation shall be strictly set out in
the instruction to bidders’ part of the bidding
document and all evaluations shall be carried
out accordingly.

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 3.1.2 Procurement cycle
Before we go to the discussion on procurement method
and procurement management process, we have to
oversee procurement where to where.
It include the time frame between the identification of
requirement and the ultimate award of contract. The
followings are fundamental steps, to accomplish the
ultimate goal of procurement cycle.
A. Requirement identification
The procurement cycle begins with identification of need
which creates a requirement.
 E.g. a need to cross a body of water creates
a requirement to build a bridge.
Budget allocation and fund availability are determined
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before submission of requirements.
 3.1.2 Procurement cycle
B. Procurement Planning:
once requirements are defined and approved, procurement
planning begins. At this phase determine the following;
i. What is needed, when and what is the relationship to
other requirement?
ii. Is the requirement dependent or independent of other
requirements?
iii. if dependent, what is the relationship to other dependent
requirement
iv. When is the dead line to fulfilling the requirement.
v. Is there sufficient time to fulfill the requirement given
the project schedule.
16 All requirements should ideally appear on the
 3.1.2 Procurement cycle
C. Procurement requisition processing:
The first step here is to determine what the requesting
entity
wants. This is done by reviewing specification or
description of
goods or services or works required.
D. Determine procurement method:
One must determine the appropriate procurement method
to fulfill the requesting entity's need in most expeditious
and cost-effective manner. This should ideally be done
during procurement planning stage.
However, if this was not the case, at this point
17 the procurement method needs to be
 3.1.2 Procurement cycle
E. Prepare and publish bidding document:
 Bidding process to begin after procurement method
determined
F. Pre-bid / meeting and site visit:
 Pre-bid meetings are held alone or in conjunction with a
site visit.
 Pre-bid meetings are held primarily for complex
requirements.
 The purpose of pre-bid meeting is to clarify the bid
documents.

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 3.1.2 Procurement cycle
G. Bid submission and opening:
During the opening event the following needs to be
determined
Is the bid received in a sealed envelope?
Is the bid form completed and signed?
Is the bid received on or before the submission date
and time?
Is there a power of attorney mandating the
authorized representative to sign the bid?
Is the bid security ( if any) in the form and amount
stipulated in the bidding document?

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 3.1.2 Procurement cycle
H. Bid evaluation: before the bid evaluation takes place,
an evaluation panel is formed and approved.
 Initial examination is done during the bid opening:
circumstances that could lead to the rejection of bid at this
stage are
Compliance of documents received with the
submission requirements.
Late bids
 Preliminary examination of the bid
The responsiveness of the bid to the bid documents
 Detailed examination of the bid

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Price comparison is done to determine the lowest
qualified and responsive bidder
 3.1.2 Procurement cycle
I. Award recommendation:
the contract award recommendation resulting from
evaluation of bids lead to a request for clearance/ no-
objection to award contract.
If no-objection, the contract award
recommendation will be published and noticed.
If there is any claim received, it will be reviewed
and investigated to determine validity.
A valid claim may result in suspension of the
intent to award, in order to undertake detail
investigation which could lead to re-evaluation of
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bids or cancellation of the evaluation process.
 3.1.2 Procurement cycle
J. Contract negotiation:
 Contract for goods or works procurement are not a
usually negotiated except under special circumstances
the details of which must be specifically stipulated in the
bidding document.
K. Contract award:
 For goods and works procurement, contract award takes
place with the notification of the responsive bidder with
lowest evaluated price.
 Such notification is done by the way of a formal letter of
acceptance to which the response must be received
within stipulated time period.
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 3.1.2 Procurement cycle
Post contract award considerations:
After contract signing, unsuccessful
bidders have the right to request
debriefing by the procurement entity.
The debrief can be done orally or in
writing.

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  International Competitive Bidding
(ICB)
 National (Local) Competitive Bidding
(NCB)

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 Methods of Procurement
Open Tendering;
Restricted Tendering;
Direct Procurement;
Request for Proposals;
Request for Quotation;
Two-stage Bidding;

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 Open Tendering
Open Tendering
Making advertisement for all interested bidders
through Invitation for Bids;
The issuance of Instruction to Bidders which
contains:
The preparation & submission of Bids by the Bidders;
Receiving, opening, examination, evaluation and comparison of
Bids by the Procuring Entity;
Notification of Award & signing of Contract with the winning
Bidder;

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 Restricted Tendering
 The Invitations for Bids is addressed to a limited
number of qualified candidates which have declared an
interest in submitting bids.
 Restricted Tendering may be allowed if the following
conditions are met:
 The goods, works or services, by reason of the highly
complex or specialized nature, are available only from a
limited number of suppliers; or
 The time and cost required to examine and evaluate a
large number of bids would be disproportionate to the
value of goods, works or services to be provided;
 

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 Direct Procurement
The goods, works or services can be supplied or
provided only by one candidate;
For additional deliveries of goods by the original
supplier;
When additional works which were not included in
the initial contract have through unforeseeable
circumstances become necessary;
For new works consisting of the repetition of similar
works which conform to a basic project of which an
initial contract was awarded on the basis of open or
restricted bidding;
 
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 For continuation of consultancy services, where the
original contract has been satisfactorily performed
and the continuation is likely to lead to gains in
economy & efficiency;
For purchase of goods made under exceptionally
advantageous conditions which only arise in the very
short term;
The need is one of pressing emergency;
When the contract price does not exceed n amount
stated in the procurement directives;

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 Request for Proposals

This is the case where the Procuring Entity seeks to

obtain consultancy services or contracts for which
the component of consultancy services represents
more than 50% of the amount of contract.

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 Request for Quotations
Request for Quotations may be used for the
purchase of readily available goods, or for
procurement of works or services for which there is
an established market.

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 Choice of Procurement Methods
The choice of procurement method depends on:

• the nature of the goods and services to be procured

• the value of the procurement

• the likelihood of interest by international bidders, which is a function

of the local availability and cost of goods and services

• critical dates for delivery

• transparency of procedures proposed.

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 3.2 Procurement Methods
Procurement types can be classified based on the things
to be procured and the way how they are procured. There
are five bases for classifying procurement methods.
These are:
Bases Things Bidders Geographi Procureme Procurement
procured coverage cal nt steps
coverage awareness
Types Goods Competitiv Internationa General PN Single
e l
Services Negotiated Regional Specific PN Two stage

Works National Pre-

Qualification
Local Post-
Qualification
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 3.2.1 Things to be Procured
(Goods Vs Services Vs Works)
Depending on the delivery system chosen during the
contract planning phase, mixed types of procurement
types can be adopted
Procurement of Goods: Physical resources such as
Materials and Equipments
Procurement of Services: often termed as consultancy
services procurement. These include services like
pre-feasibility and feasibility studies,
design and contract administration of projects,
Construction management consultancy services,
research or study based consultancy services, etc.
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 3.2.2 Bidders’ Coverage
(Competitive Vs Negotiated Tendering)
Competitive Tendering: selection of better and
capable winning bidder among the various eligible
firms. it can either be Open or Limited Competitive
Bidding in the form their invitations.
Open competitive bidding allows all eligible
bidders to participate
Limited competitive bidding allows a number
of selected firms only. The major difference
between open and limited competitive bidding
is the addition of qualifying criteria beyond
eligibility
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Limited Competitive Bidding is often used when the
nature and urgency of the work justifies to do so
 3.2.2 Bidders’ Coverage
(Competitive Vs Negotiated Tendering)

Some of the qualifying criteria used for Limited

Competitive Bidding are ( usually short listing is done
based on):
the firms past performance,
work load at present,
presence of a firm in the vicinity of the projects,
knowledge of similar type of works before and
financial and technical capabilities of the firms
Usually in Limited Competitive Bidding, cost of
projects might be higher than expected
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 3.2.2 Bidders’ Coverage
(Competitive Vs Negotiated Tendering)
Negotiated Tendering: Under certain circumstances,
The nomination of this direct invitation is usually based
on
good performance,
contact with the Project Owner,
for supplementary agreements, etc.
 This kind of tendering is exceptionally exercised when
the project under consideration is very urgent or needs
special skill whereby the required skill is rarely
available.
 The main disadvantage of this type of tendering is that
38 the price offered can usually be higher than the
 3.2.3 Geographical Coverage
(International Vs Regional Vs National Vs Local
Tendering)
These types of procurements are generally caused by
three major factors. These are
Local Capacity,
Financial Sources ( dictate regional or international)
Globalization (globalization and principles of Free
Trade and Trade Liberalization also encourages
international tendering)
In practice, Preference Margins in the range of 7% are
applied to local, national or regional tenderers, which
imply tender offers higher than 7 % will be given
preference to encourage local participation.
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 3.2.4 Procurement Awareness
(General and Specific Procurement Tendering)
Following requirement like proof of competition and
increase accessibility, General Procurement Notice
(GPN) is made during projects planning phase and it is
only interests of the bidders are aroused because
sufficient tender documents are not available. This
approach is used:
The Project Owners to
identify interested bidders to issue Invitations by
letters and save time;
identify bidders relevant for the procurement
required;
protect loss of cost in preparing lots of tender
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documents.
 3.2.4 Procurement Awareness
(General and Specific Procurement Tendering)

The Bidders to:

give sufficient time to assess the cost of the
project;
protect loss of cost only to participate; and
encourage competent bidders who wary about
law-balling to participate
There are two types of General Procurement Notice based
on their purpose why and when they are notified
The first type of GPN
When?-- announced as soon as the design is
started
41 Why?-- to create awareness and let bidders’
 3.2.4 Procurement Awareness
(General and Specific Procurement Tendering)
The second type of GPN
When?--announced after financial sources are
determined
Why?--to determine interested bidders who
could be invited in the form of Limited
Competitive Tendering.
GPN covers
the Employer and its financiers for its project;
Description of the project with its probable or
planed implementation time;
type of procurement method and address where
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further information can be obtained.
 3.2.4 Procurement Awareness
(General and Specific Procurement Tendering)
Specific Procurement Notice (SPN)
is an Invitation for Tender or a Request for
Proposal when the project is ready for
implementation.
can be sent to those interested bidders identified
following GPN directly. Otherwise, it should be
advertise on the bases of enlarging opportunities

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 3.2.5 Procurement Steps:
(Single Vs Two Staged and Pre-Vs Post-Qualification
Tendering)
Single or Two Staged Tendering: are related with
whether tender packaging for submission separately and
their evaluations are staged for a single or two steps
when invitations are made. Often two staged biddings are
made for the submission of technical and financial
proposals separately and their evaluations one after the
other.
Pre-Qualification Tendering: It is a procedure in which
eligible bidders are invited to provide evidence of their
ability to perform the services required by the employer.

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 3.2.5 Procurement Steps:
(Single Vs Two Staged and Pre-Vs Post-Qualification
Tendering)

Pre - qualification can be of two types

The first is Single stage tendering: when
companies are already considered qualified during
their licensing requirements. (evaluation criteria
become the low priced bid)
The Second is when two staged tendering is used
to pre-qualify tenderers’ for their technical
competency. Once pre-qualify, either the lowest
priced or the lowest evaluated bidder
recommended for award.
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 3.2.5 Procurement Steps
The advantages of pre - qualification in procurement are:
To the employer To the Bidder
Protect the employer Saves bidders from the
against unqualified cost of preparing bids
bidders
Quicker Evaluation for Assure pre-qualified
only pre-qualified bidders bidders for their bid
considerations
Ensure award to least Reduce law balling
evaluated not lowest bidders from participation
bidder
Assess level of interest Make bidders to be better
shown by bidders planned
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Show competency &
 3.2.5 Procurement Steps
The following pre-qualification criteria's are often used
in determining the ability of the bidder to carry out the
works:
Experience and past performance,
Health, Safety and Environment Records, if any,
Capability in respect of personnel and equipment,
Organizational arrangement and facilities,
Financial Status, and
Schedule of Commitments.

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Procedure
Procurement and Contract Strategy
(Contract Planning Phase)
Pre-qualification Documents
Tender Document Preparation
Invitation To
Pre-qualify
Tendering
Phase
Issuance & Submission of Pre-
qualification docs.
Tendering
Phase
Opening & Analysis of Pre –
Qualification
Tender Evaluation Phase
Selection and Notification of
48 Tenders
Tender Evaluation Phase
pre-qualification flow chart
Employer / Consultant Contractors
Delivery System
Procurement Method Awareness on Future
Contract Type  
Business and Follow Up
Action Plan
Letter of Invitation
Information about prequalification procedure Collect information about
Project Information the project and  its location
Prequalification Application
Advertisement
Project Scope, Location, Source of finance Check Eligibility
Issue, Submission and Opening dates of Check Competitive Advantage
Collect Information
Tenders  
Decide to participate
Instructions to pre-qualify and evaluation
criteria
Organization, Structure & Experience Request and Obtain Pre –
Resources (Financial, Managerial, Technical, Qualification docs.
Labor, Plant, Stock, etc) Request & Obtain Clarifications
Current Commitments   Docs and
Complete and Submit
Acknowledge Receipt Relevant Info.
Open Tender in the presence of relevant
attendee Attend Tender Opening
Evaluate for Eligibility, Technical, Ceremony
Organizational , Financial Capability
Pre-qualified tenderers are selected Acknowledge & Confirm Intention
Winners are Notified to participate in succeeding
tender
 3.2.5 Procurement Steps
Post – qualification:
where Financial Evaluation is carried out first and rank
bidders on the basis of their offer for tender price.
That is, Technical Evaluation will be done after
the Financial Evaluation
The advantage of this approach is
not to loose the lowest financially evaluated
bidder and
to save time during technical evaluations.
However, Post qualification approaches often cause to fix
evaluators on financial results and be locked and biased
for successive technical evaluations.
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 THANK YOU

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