Consultancy Services

By
Fuad Mahmood
 Types of Services

• Services are generally divided into 2 categories.

• Services involving predominantly intellectual inputs,

called Consultancy service

• Services involving predominantly physical work.

• Ex: maintenance services, security, catering, etc.

• Works Contracts are also categorised as service

contracts.
 Types of Consultants
• i) Individuals as Consultants, or

• Ii) A firm / organisation as Consultant.

• When we need a firm, it is expected that the firm will depute a

team of experts with support staff.

• Our focus of attention in selection process is, therefore, on:

• a) Experience & Capability of the Firm, and

• b) Experience & Capability of Professional Staff to be

deputed.
 Selection of Individual consultant
1. Preparation of a short list through advertisement/ enquiry.

2. Test/ Interview/ presentation by shortlisted candidates to

select the most suitable candidate.

3. Award of contract.

4. Contents of Contract:
i) Remuneration
ii) Duty list.
iii) Reporting relationships
iv) Other terms of contract, like, termination/ extn. of
contract, performance evaluation, leave rules,etc
 Selection process of a Firm/ organisation
as Consultant.

• Selection is based on- (1) Firm’s professional capability &

experience,

• (2) professional capability and experience of its key project

team and the

• (3) quoted cost.

• Generally a 2 stage bidding process is followed, which starts

with short listing of firms through invitation of “ Expression of
Interest”, advertised in newspapers.
• After short listing bids (proposals) are invited in 2 packets
(Technical and Financial) separately.

• For small value assignments, Single packet system can also

be followed with or without any initial short listing.

• In small value assignments short listing can be done without

releasing the advertisement in the newspaper, through
enquiries.

• The services to be performed by the Consultant are

described in a statement called TOR ( Terms of Reference).
 Invitation of bids
Step 1) Careful preparation of TOR, which includes:

i) Description of work in sufficient detail, identifying various

stages/ milestones in the consultancy project.

ii) Qualification/ Capability/ experience required of the

Consultancy Firm (assignment specific).

iii) Qualifications/ capability required of the Key

Professionals (assignment specific).

iv) Procedure to monitor and test the consultant’s work.

Step 2) Preparation of a cost estimate and Budget.

Step 3) Prequalification ( Short listing) of Consultancy Firms
capable of performing the assignment, through a
Public Advertisement calling for ‘ Expression of Interest’ .

Step 4) Preparation of Standard Bidding Document, called

‘Request for Proposal (RFP)’, for inviting bids ( also
called Proposals).

Step 5) Send RFP to short listed bidders.

Step 6) Receipt of Technical & Financial Proposals.

Step 7) Evaluation of Technical Proposal.

Step 8) Public opening of Financial Bids for Consultants which
secure minimum pass marks.

Step 9) Selection of the Successful bidder

Step 10) Negotiations

Step 11) Award of Contract

 Contents of RFP (bid document)
1) The Instructions to Consultants (ITC), which include:

i) Instructions for bid (proposal) submission, date, time,

place, etc.

• ii) Methodology of payments.

• iii) Procedure for evaluation of Technical Proposal)

(usually by awarding marks).

• iv) Minimum pass marks.

• Firm securing higher marks is considered more capable of

performing the job.
• Firm not securing the minimum pass marks is considered as
ineligible. Its Financial bid (proposal) is not opened

• v) Procedure for evaluation of Financial proposal

• vi) Procedure for selection of the Successful bidder.

2) Terms of Reference (TOR).

3) Formats for Technical Proposal.

4) Formats for Financial Proposal.

5) Conditions of Contract, General as well as those particular

(special) to the project.
 Types of Payments
• Lump -sum: Total value of the contract is quoted by the
bidder in Lump Sum ( with break-up), and payment is
released in stages on achievement of milestones in the
contract.

• Time- based: Payment is made on monthly/ weekly basis.

• Percentage basis: The rate is quoted in percentage terms.

Payment is released in stages based on progress achieved.

• Retainership, work-related fees and/ or success fee

based: the consultant is paid a retainership- whether there
is work or no work, a work- related fees and/or an agreed
success fee.
 How to select the most suitable method
of payment ?

• Payments should be linked to performance (milestones),

even if it is lump-sum, or percentage based.

• However, It can be monthly too where the job is of

repetitive nature, or of uncertain outcome.

• In case of uncertain outcomes, a success fee can also be

paid.
 Consultant’s Cost?
• It includes:

• Remuneration payable to each staff, i.e. Key staff and

Support staff.

• Firm’s overheads and profit

• Reimbursable costs of travel expenses.

• Site office expenses.

• Equipment costs.

• Cost of Surveys/ laboratory tests, etc

 Terms of reference (TOR)

• Name of the consultancy assignment.

• Very brief description of work.

• About the organisation.

• Objective of Consultancy work.

• Identification of all salient features/ milestones of the job.

• Expectations from the consultant relating to quality of work.

• What outputs are expected on completion of every
milestone? (draft reports, Reports, maps, designs, software,
etc.).

• For each milestone, there can be separate method of

presenting the results of consultancy work.

• Facilities, data, records, etc., which the Employer can

provide.

• Procedure for testing the quality of work at each milestone.

• Requirement of the team of Professional Experts, their

experience and educational qualifications, man-months
required
 Formats of technical Proposal

• 1) Comments of Consultant on TOR

• 2) Proposed Methodology.

• 3) Work Plan, scheduling of various activities.

• 4) Schedule of deployment of Key staff.

• 5) Details of past experience of Firm.

• 6) Bio- data of Key Staff

 Formats for Financial Proposal

• Format for quoting remuneration of staff including

overheads and profit.

• Format for quoting outstation travel & stay costs.

• Format for quoting site office expenses.

• Format for quoting equipment cost.

• Format for quoting costs of surveys/ laboratory tests, etc

Evaluation Process
 Marks for Evaluation of Technical
proposal- A suggested structure
• Criteria • Max. Marks from
• 1) Firm’s past Experience 5 to 10

• 2) Firm’s understanding of TOR, 5 to 10

• 3) Quality of proposed methodology, 10 to 30

• 4) Edu. Of Key Professionals. 10 to 20

• 5) Exp. Of Key professionals. 40 to 60

• 6) Knowledge of local Language 5 to 10

• Total 100
 Methodology for evaluation of bids

• Max. marks for each criteria of technical qualification are

disclosed in the ‘ Instructions to Consultants’ (ITC) in the
‘RFP’ document.

• Minimum marks required to ‘qualify’ are also disclosed in

ITC.

• Minimum pass marks can be in the range of 50 to 90.

• Weightage to be given to technical score and quoted price is

indicated in ITC.
• Technical bids, called ‘technical proposal’, received in a
separate envelope , are opened first and evaluated.

• Marks are allotted for each criteria of qualification by an

‘Evaluation Committee’.

• Grand total of marks for each bidder is worked out.

• A ‘yes/ no’ or Fit/ Not Fit based marking system can also be
followed .

• Financial bids, called ‘financial proposal’ are opened for

those bids only, which secure the minimum pass marks
prescribed in the bid document (RFP).
• After opening of the financial bid one of the following
methods of selection of the succeful bidder can be followed:

1. Least Cost Method.

2. Fixed Budget Method.

3. Quality & Cost based Selection (QCBS).

4. Quality based Selection (QBS).

• The method chosen is also indicated in ITC.

 QBS
• This method involves awarding the contract to the
Consultant who secures the highest marks in evaluation of
professional capability.

• Financial bid of only the bidder securing the highest marks

in technical score is opened.

• The pass marks in such a case can be 90 or more.

• Negotiations can be held, if required.

• The bidder securing the highest marks in technical

evaluation is selected.
 Least Cost method

• The Financial Bids of technically qualified bidders are

are ranked as L1 (lowest), L2 ( 2nd lowest) and so on.

• The L1 bidder is declared successful and called for

negotiations, if required.

• Contract is awarded.
 Fixed Budget Method

• Available budget is disclosed in advance in the RFP.

• Bidders are asked to quote rates within the budget.

• The bidder with the highest technical score but with cost
within the budget is selected.

• Negotiations can be held, if required, with selected bidder

before award of contract.
 QCBS
• The method involves assigning a weight to technical score
(Ts) as well as to quoted price, to select a ‘ technically more
qualified’ consultant for the assignment.

• The weight for technical score is usually fixed between 60%

to 80%.

• The higher is the weight for technical proposal, the lesser is

the importance for financial quote.

• The weighted technical marks (Tm) are then worked out as

under:
• That is, Tm = weight x Ts
• Quoted cost of each bidder is also converted into a score
using the following formula:

Fs = Lc/ Li X100,

where,

Lc is the lowest bid received,

Li is the cost quoted by the bidder i

• Fs is then converted into Fm by multiplying Fs with the ‘weight’ of
financial score.

• That is, Fm = weight x Fs

• Then, combined score is worked out, using the following formula:

• That is T= Tm + Fm.

• The bidder securing the highest T is declared as successful.

• This method helps in selecting a ‘more qualified bidder’.

 Sample Evaluation

Criteria Max Marks Firm A Firm B Firm C

Firm’s Exp. 10 08 07 07

Methodology & 20 15 18 16
Understanding of TOR

Edu. Qual. Of Key Prof.(Av. 20 15 17 16

of all key proffessionals)

Prof. Exp.( av. Of all Key Prof 50 48 50 46

Total 100 86 92 85
• If 75 % marks is the minimum qualifying criteria,

• all 3 firms qualify.

• Financial bid of all 3 firms will be opened.

• Assume the following price bids have been received:

• Firm A: Rs 100

• Firm B: Rs 110

• Firm C: Rs 105
• Least Cost Method:
Firm A shall be Selected.

• Fixed Budget Method:

If the budget is Rs 105

Firm A shall be selected

• QBS Method:
• The Firm with highest points is selected.
 QCBS Method

Firm A Firm B Firm C

Quoted cost: 100 110 105

Conversion Formula:
Lc / Li X 100

Points Awarded (Fs): 100 90 95

Weight of Financial Score: 0.25

Weighted Points ( Fm): 25 22.50 23.75

• Wt of Technical Score: 0.75

• Technical Points( Ts): 86 92 85

• Weighted Points( Tm): 60.75 69.00 63.75

• Financial Score( Fm) : 25.00 22.50 23.75

• Combined Tm + Fm : 85.75 91.50 83.00

• Firm B shall be selected.

Services involving physical
work
 Essential aspects

• The service to be performed is identified.

• Inputs or output based targets of work to be performed are

worked out/ estimated by the employer.

• A Bill of Quantity or Rate Schedule is prepared with

quantities of inputs/ outputs required for the job.

• Specifications of the quality of inputs/ output is defined in

technical note/ specifications

• An Eligibility/qualification criteria for the bidding firm and their

key staff can be prescribed.
 Preparation of bid document
• Bid document contains:

1. Instructions to bidders.

2. Qualification/ eligibility criteria is worked out.

3. Technical specifications, quality and performance standards.

4. Formats for technical proposal.

5. Bill of quantity.

6. General conditions of contract.

7. Special conditions of contract.

 Bid Process
• Depending on requirements, a single packet / 2 packet/ 2
stage bidding process can be followed.

• Evaluation of ‘technical proposal’ is done first.

• In case of 2 packet or 2 stage bidding, the financial packet is

opened for those only who meet the qualifying criteria.

• Among them the L1 bidder is considered as winner.

• For evaluation of technical proposal, a marks based

evaluation criteria can also be followed.
• As in the case of Works contracts, the method of selection
can be:

• Single Packet, advertised (open) or Limited tender.

• Double Packet, advertised (open) or Limited tender.

• 2 stage bidding. 1st stage through advertisement for pre-

qualification of bidders.