Sound public procurement is vital for ensuring success of a Project through promoting good governance and better fiscal management with economy and efficiency. Under the World Bank-financed Projects the Procurement procedure of the World Bank is required to be followed. This is essential to make the expenditure eligible for reimbursement.
The Articles of the agreement requires the Bank to ensure that the proceeds of Loan/Credit are used for the purposes intended with due attention to economy and efficiency. Accordingly, the Bank has developed Guidelines for procurement of Goods, Works and Consultancy, which represent;
· Accumulated Experience of the Bank/IDA and
· Good Public Procurement practices on a Global scale.
The World Bank Guidelines explain the various procedures acceptable and these are applicable only to the extent provided in the Legal Agreements for specific projects.
· Need for economy and efficiency in the execution of the project.
· The Bank’s interest as a co-operative institution in giving all eligible bidders from the developed and developing countries the same information and equal opportunity to compete.
· The Bank’s interest as a development institution in encouraging the development of domestic contracting and manufacturing industries.
· The importance of transparency in the procurement process.
Important Concerns in Procurement of Goods in India
Methods for Procurement of Goods Under World Bank Financed Projects
The following methods of procurement will generally be applicable:
· International Competitive Bidding;
· Limited International Bidding;
· National Competitive Bidding;
· Shopping, International/National;
· Direct Contracting; and
· Force Account.
In the subsequent paragraphs a brief note detailing the salient points on methods of procurement are explained.
International Competitive Bidding (ICB)
Afford opportunity to all eligible prospective bidders from all countries to bid.
To be Adopted:
- For packages costing more than the equivalent of US $ 1 Million* (Goods),
- Irrespective of value, where supplies need import and entail payment in foreign currency; and,
- Generally for all contracts in which foreign firms can be expected to participate.
[*Threshold Limits indicated are as proposed in the Project Appraisal Document of NAIP].
- Publication of General Procurement Notice, followed by specific Invitation for Bid (IFB) in the United Nations Development Business (UNDB) online and through Market publication:
- Transmission of IFB to those who have been expressed interest in response to the General Procurement Notice:
- Publication of IFB in national newspapers having wide circulation in all region of country;
- Use of the World Bank’s standard bidding document:
- Sale of bidding document to start only after publication of IFB in UNDB and national newspapers; and
- Bidding period 45 to 90 days from date of start of sale of bidding documents.
- (Pre-qualification, if provided in legal agreement);
- Issue of Bidding Documents;
- Submission of Bid;
- Public opening of Bids;
- Selection of lowest evaluated responsive bid based on post qualification;
- Contract Award;
- Contract Performance;
- Award to be published in UNDB online/web; and
- Publication of award in Development Business.
Other Methods of Procurement
To be Adopted:
- Where ICB would not be most economic and efficient method of procurement and where other methods are deemed more appropriate.
- as provided in the Legal Agreements.
National Competitive Bidding (NCB)
Competitive Bidding advertised nationally for procuring Goods or Works, which by their nature or scope are unlikely to attract foreign competition. Currency specified is Indian Rupees for bidding as well as for payment. However, foreign bidders are not to be precluded from participation, if they wish to bid; but they are also to be paid only in Indian Rupees. Domestic preference will not be applicable.
To be adopted where:
- The contract values are more than the equivalent of US $ 50,000 for goods / work *
- Works are scattered geographically or spread over time;
- Works are labour intensive;
- The Goods and Works are available at prices below international market; or
- Foreign firms are not likely to be interested.
Also see Appendix-21
[*(Threshold limits indicated are as proposed in the Project Appraisal Document (PAD) of NAIP.]
Shopping: International / National
Shopping is a Procurement method based on comparing price quotations obtained from several foreign or National proven suppliers, usually at least three, to ensure competitive prices. It is an appropriate method [a] for procuring small amounts of off-the-shelf goods or standard specification commodities for which more competitive methods are not justified on the basis of cost or efficiency; [b] for procurement in emergency projects or for urgent relief-type operations including re-establishment of vital services like utilities, communication, shelter and vital supplies which stem for disaster or conflict. These emergency contracts may involve one or several activities in supply of goods, installation and commissioning and very urgent minor civil works. Is case of civil works or supply involving substantial installation, the term shopping is not used but referred to commonly as “price comparison”. Such individual contracts not costing more than the equivalent of US $ 50,000 for both Good & Equipment and Works (threshold limit as proposed in the PAD of the NAIP) will be procured through using Shopping Procedure. The threshold for procurement of vehicles would be US $ 100,000 for adopting Shopping procedure.
The requests for quotations shall indicate the description and quantity of the goods as well as desired delivery time and place.
Under International shopping, quotations should be solicited from at least three suppliers in two different countries.
Quotations could be obtained by telex or facsimile. The evaluation shall follow sound public or private sector practices. The terms of the accepted offers shall be incorporated in a purchase order.
Rate Contracts of the Directorate General of Supplies and Disposals (DGS&D) are acceptable under National shopping (Rate Contracts of State Governments are not acceptable, but they can be considered as one quotation and compared with those obtained from other suppliers).
Goods that otherwise qualify for shopping could be procured directly from UN agencies.
Note: shopping is intended to be a simple and rapid procurement method; it is one of the least competitive procurement methods and may be abused unless it is carried out in compliance with legal agreements and observing a minimum formality in the process and with appropriate record keeping for verification and audit. Shopping shall be restricted to cases when the justification for it is beyond contention. Shopping should not be used as an expedient to by-pass more competitive methods or fraction large procurement into smaller ones solely to allow the use of Shopping. When the nature of the specification is complex or type of procurement requires an elaborate, detailed evaluation system (i.e. efficiency delivery times etc.) That needs substantial documentation, a formal bidding process instead of shopping is to be used. Shopping is not appropriate in these cases because it is a method that would not require complex documentations or all the formalities of a bidding process.
Direct contracting without competition may be an appropriate method under the following circumstances:
- Extension of existing contracts for Works or Goods awarded with procedures acceptable to the World Bank, justified on economic grounds;
- Standardization of equipment or spare parts to be compatible with existing equipment;
- Proprietary items, books & periodicals, satellite imagery, data, aerial photography, maps and research data, manuals, software, seeds, plants, fertilizer, etc. and petty items costing less than US $ 100 equivalent. Items costing US $ 50,000 equivalent or more proposed under Direct Contracting Procedure would require prior approval of the Bank.
- Need for early delivery to avoid costly delays;
- In exceptional case, such as in response to natural disasters; and
- Award to be published in UNDB online/web.
Force Account is construction by the use of borrower’s/implementing agency’s own personnel, materials and equipment (generally limited to 10% of the cost of Civil Works) where:
- Quantities of work involved cannot be defined in advance;
- Works are small and scattered or in remote locations where mobilization costs for contractors would be unreasonably high;
- Work must be carried out without disrupting on-going operations;
- The risk of unavoidable work interruption are better borne by the borrower/ implementing agency than by a contractor; or
- There are emergencies needing prompt attention.
Farm development works are expected to be carried out following Force Account procedure. The works estimated to cost US $ 10,000 equivalent or more proposed under Force Account procedure would require prior approval from IDA/Bank.
Procurement of Consultants
· The need for high quality services;
· The need for economy and efficiency;
· The need to give qualified consultants from all eligible countries an opportunity to compete in providing the services financed by the Bank;
· The Bank’s interest in encouraging the development and use of national consultants in it’s developing member countries; and
· The importance on transparency in the selection process.
Steps for Hiring Consultant
· Preparation of the Terms of Reference (TOR);
· Preparation of the cost estimate and the budget;
· Preparation of the shortlist of consultants;
· Preparation and issue of the Request for Proposals (RFR);
(i ) Letter of Invitation (LOI);
(ii) Information to Consultants (ITC); and
(iii) Proposed contract;
(iv) Receipt of proposals;
(v) Evaluation of Technical Proposals: consideration of quality;
(vi) Evaluation of Financial Proposals;
(vii) Final evaluation of quality and cost; and
(viii) Negotiations and award of the contract to the selected firm.
Preparation of the Terms of Reference of Consultant
It should include the following points:
· A precise statement of objectives;
· An outline of the tasks to be carried out;
· A schedule for completion of tasks;
· The support/inputs provided by the client;
· The final outputs that will be required of the Consultant;
· Composition of Review Committee (not more than three members) to monitor the Consultant’s works and procedures;
· Mid term review and Progress Reports required from Consultant;
· Review of the final draft report;
· List of key positions whose CV (1 to 6, exceptionally 8 and experience would be evaluated.
Cost Estimates or Budget
The cost estimates or budget should be based on the client’s assessment of the resources needed to carry out the assignment: staff time, logistical support, and physical inputs (for example, vehicles and laboratory equipment). Costs shall be divided into two broad categories; (a) fee or remuneration and (b) reimbursable and further divided into foreign and local costs.
Advertising (Seeking Expression of Interest) for Short listing
The advertisement is mandatory for all consultancies valued at US $ 200, 000 equivalent and over in thefollowing magazines/ bulletins/newspaper:
· National Newspapers;
· International Newspapers; and
· Technical Magazines
Short listing of Consultants
Borrowers are responsible for preparation of the shortlist and shall give first consideration to those firms expressing interest which possesses the relevant qualifications. The shortlists shall comprise of six firms with a wide geographic spread, with no more than two firms from any one country and at least one firm from a developing country, unless qualified firms from developing countries are not identifiable.
The shortlist can comprise entirely national consultants if the value of assignment is less than equivalent US $ 500, 000. However, if foreign firms have expressed interest, they shall not be excluded from consideration (in these cases payment can be in the Country’s Currency).
Government-owned enterprises in the Borrower’s country may participate only if they can establish that they:
· Are legally and financially autonomous, and
· Operate under prevalent commercial law.
No dependent agency of the Borrower or Sub-borrower of the project shall be permitted to submit or participate in a proposal for the provision of consulting services under the project.
Hiring of Government Employees as Consultants
The revised guidelines allow the use of Government officials and civil servants to be hired as consultants under the conditions of paragraph 1.11(d). Paragraph 1.6.3of the new RFP has been modified to suit this as under:
“No agency or current employees of the Client shall work as Consultants under their own ministries, departments or agencies. Recruiting former government employees of the Client to work for their former ministries, departments or agencies are acceptable provided no conflict of interest exists. When the Consultant nominates any government employee as Personnel in their technical proposal, such Personnel must have written certification from their government or employer confirming that they are on leave without pay from their official position and allowed to work full-time outside of their previous official position. Such certification shall be provided to the Client by the Consultant as part of his technical proposal. ”
The various procedures of selection of a Consultant, depending upon the appropriateness in each case, are described in detail in Consultancy Guidelines, May 2004 (CGL). These are as under:
- Quality and Cost-Based Selection (QCBS): This will be the preferred method.
- Quality-Based Selection (QBS): For small assignments costing US $ 200,000, equivalent or less, selection based on Consultants qualification may be adopted.
- Single Source: May be adopted in cases where the conditions specified in Para 3.9 and 3.10 of the CGL are satisfied. Assignments above US $ 100,000 equivalent will require clearance from the World Bank before adopting Single Source Method of selection.
- Fixed Budget.
- Least Cost, etc.
Selection of Particular Types of Consultants
- UN Agencies
- Procurement and Inspection Agents
QCBS is to be used (up to 50% weightage for cost)
· QCBS or Least Cost is to be used; and
· Cost could be given weightage unto 40-50 points
- Selection of Individual Consultants
Teams of Personal are not required
(when coordination, administration or collective responsibility becomes difficult because of the number of individuals, it would be advisable to recruit a firm).
· Advertisement is not mandatory. Implementing agencies are however, free to advertise if they so desire.
NGOs (Non-Governmental Organizations)
All procedures specified in Consultancy Guidelines will apply;
· No preference;
· No mix up in short list with others; and
· Criteria to adequately reflect the considerations
The selection of NGOs in the shortlist should generally take into account among others, the following criteria;
· The NGOs should be non-political and should be having a proven track record of satisfied beneficiaries on similar assignments (at least two years of experience in works of this type);
(Period could be modified to suit individual cases);
· It should be registered as a society or have other corporate status;
· It should have facilities to maintain separately, records and accounting and auditing of funds allocated for assignment;
· It should consist of adequate number of experienced field staff conversant with the local culture and language, and the socio-economic dimensions of the beneficiary groups:
· The staff of the selected NGOs should have excellent communication skills;
· It should posses internal stability so as to assure long-term support; and
· It should not have been blacklisted by the Central Social & Welfare Board (CSWB) or Council for the Advancement of Peoples Action &Rural Technology (CAPART) or by Central or any State Governments in India.
Evaluation of Consultants
The evaluation of the technical proposals should be done as per criteria (Appendix 22) specified in the Letter of Invitation. The evaluation report should be compiled in the format specified and forwarded to Bank for review and comment for all prior review cases, firstly before price envelopes are opened publicity and combined evaluation is done (financial cum technical), and secondly after final selection is made following combined evaluation and before the contract is negotiated with selected consultant.
(a) General qualifications: General education and training, length of experience, positions held, time with consulting firm as staff, experience in developing countries and so forth;
(b) Adequacy for the assignment: Education, training, and experience in the specific sector, field, subject, and so forth, relevant to the particular assignment; and
(c) Experience in the region: Knowledge of the local language, culture, administrative system government organization, and so forth.
Negotiation with Consultant
Negotiations shall include discussions of the TOR, the methodology, staffing, Borrower’s inputs and special conditions of contract.
The selected firm should not be allowed to substitute key staff, unless both parties agree that undue delay in the selection process makes such substitution unavoidable or that such changes are critical to meet the objectives of the assignment.
Financial negotiations shall include clarification of the consultants’ tax liability in India (if any), and how this tax liability has been or would be reflected in the contract. (Consultancy Services tax (in respect of all consultancies) and tax on fees for technical services provided by foreign consultants, payable as per Section 115A (1) (b) of Income Tax Act and duties on imported equipment brought by foreign consultants to India for providing the required services are to be paid/reimbursed by the client separately. (The World Bank does not finance taxes imposed by borrowing country).
Where QCBS procedure is followed, in the case of lump sum contract price neither should nor be negotiated UNCLEAR!!!!; in the case of Time-Based contracts, proposed unit rates for staff months and reimbursables shall be negotiated (since these have already been a factor in selection) unless there are exceptional reasons. Reimbursables are paid on actual upon presentations of receipts and hence not subject to negotiation. If client wants to fix a ceiling he/she should do so by indicating this in the RFP.
Rejection of Consultants
Cases of rejection of all proposals received need to be referred to the World Bank, through the PIU of NAIP, for no objection and clearance.
Selection and Employment of Consultants
Types of Contracts specified in the Consultant Guidelines are as under:
- Lump Sum
Lump Sum contracts are used for assignments in which the content and the duration of the work are clearly defined. Payment is made upon delivery of outputs. The main advantage of this type of contract is that it is easy to administer.
Examples of Lump Sum contracts include-
· Feasibility studies.
· Environmental Studies.
· Detailed design of a standard structure.
Time Based contracts are used for assignments in which it is difficult to define the scope and the duration of the work to be performed. Payment is based upon an hourly, daily or monthly rate, plus reimbursable expenses using expenses or agreed-upon unit prices. This type of contract provides for a maximum total payable amount that includes a contingency for unforeseen work and duration, price adjustments etc.
Examples of Time-Based contracts include-
· Preparation of data.
· Complex Studies.
· Supervision of construction.
· Training assignments.
· Advisory services.
- Retainer and/or Contingency Fee;
- Retainer and/or Contingency fee contracts (success-fee) contracts are used to remunerate consultants or banks on performance –for example for privatization of public assets.
Example of success-fee contracts include:
- Privatization (sale of publicity-owned assets);
Percentage contracts relate to the fee paid to the consultant based upon the estimated or actual project construction cost or the cost of the goods to be procured or inspected. The percentage is established based upon the market norm or standard practice in the industry.
Examples of percent contracts include:
- Architectural services
- Engineering services
- Procurement services
- Inspection agents
- Indefinite Delivery
Indefinite-delivery contracts are used for on-call specialized services. The Borrower and the firm agree upon the unit rates to be paid to the experts and payments are made on the basis of the time actually used.
Examples of Indefinite-delivery contracts include-
- Advisors for complex projects, e.g., a dam panel
- Expert adjudicators
- Technical troubleshooting
(Use of the World Ban- issued Contract Forms is mandatory)
Request for Proposals (RFPs)
The RFP shall include:
· A Letter of Invitation (LOI);
· Information to Consultants;
· The TOR; and
· The proposed contract
The Implementing agencies are required to use the standard RFPs issued by the World Bank and adopted in NAIP.
The following types of model RPFs are available with the PIU-NAIP:
· Hiring of Consultancy Services – Request for Proposals – Quality & Cost Based Selection (QCBS) – Time Based Payments;
· Hiring of Consultancy Services – Request for Proposals – Quality & Cost Based Selection (QCBS) – Lump Sum Payments;
· Hiring of Consultancy Services – Request for Proposals – Fixed Budget Selection (FBS);
· Hiring of Consultancy Services - Request for Proposals – Least Cost Selection (LCS); and
· Hiring of Consultancy Services - Request for Proposals –Selection Based on Qualification or Single Source Selection (SSS).
Standard Forms of Contract:
· Small Assignments – Time Based Payments
· Small Assignments – Lump Sum Payments
The above models should only be used for inviting proposals from short-listed firms (including sole source).
Conditions for Prior Review by World Bank
Prior review of the World Bank is necessary for the following:
· Contracts for Consultancy Services valued:
Ø US $ 200,000 equivalent and above for Consultancy Firms;
Ø US$ 50,000 equivalent and above for Individual experts as Consultants.
- All Consultant Contracts for assignment of a critical nature regardless of value:
§ Contract amendments valued at more than the equivalent of US$ 100,000 and US$50,000 for Firms and Individuals, respectively, or those that raise the total contract value above these thresholds;
§ Any standard document that the Borrower/implementing agency intends to develop and use repeatedly;
§ First few contracts (say three), irrespective of value in the case of all new projects;
§ Procurement Plan for Consultancy (reviewed annually).
[* The Prior review thresholds are as proposed in the Project Appraisal Document of NAIP. Actual Threshold Limits will be as indicated in the Legal Agreement of NAIP.]
Prior review would be at every stage as follows:
· Terms of Reference;
· Short list;
· RFP documents containing Letter of Invitation, Information to Consultants and Conditions of Contracts;
· Evaluation report of the technical proposals;
· Report after financial/ combined evaluation (with a copy of the winning proposal for information only):
· Negotiated draft contact: and
· Final Contract (to be accompanied by Checklist). *
(*The checklist would be available in the detailed Procurement Manual of NAIP. It could however be obtained from the PIU, NAIP separately.)
Post Review by World Bank
All other cases:
Post review covers the final contract alongwith appendices and copy of evaluation note/award recommendations, which should be submitted alongwith the Checklist (however, TOR and Consultants contracts for assignments of critical nature will be reviewed in all cases, regardless of value)
Guidelines for Procurement of Costly Equipments
For procurement of costly equipments, the following points may be kept in view:
Ø Specifications: The specifications of the required goods/equipment should be clearly stated without any ambiguity so that the prospective bidders can send meaningful bids. In order to attract sufficient number of bids, the specifications should be broad-based to the extent feasible. A technical committee may be constituted to review and finalize the specifications. Finalization of specifications should also be preferably based on a market survey of available models and their specifications.
Ø Warranty: Warranty and Annual Maintenance Contract (AMC) for the duration of the life of the equipment are desirable but we have to be careful in deciding the period for which they are to be provided. Laboratory equipment may get obsolete with time and there is a need to replace them. Providing a very long warranty with AMC coverage may therefore add to the cost without being fruitfully utilized as the length of commitment does have an effect on price. A Warranty with AMC coverage of around 5 years (2+3 years or 3+2 years, respectively) may be preferable to begin with. The AMC can be extended beyond this if the equipment remains serviceable and is to be continued. The World Bank suggests that the Warranty period of 24/27 months should be provided only if it is an accepted industry standard for the equipment being procured. Otherwise, this may result in reduced competition and increased cost. The period should therefore be stipulated after ascertaining the normal industry standards. Bank Guarantee (BG) coverage for AMC should invariably be obtained so that the supplier or his agent have continued interest in maintaining the equipment.
Ø Qualification Criteria: It may be desirable to buy a standard model befitting the laid down specifications rather than an equipment tailor-made for the purpose. This is likely to give more trouble free service as such equipment has stood the test of time. In the qualification criteria therefore we may include that the bidder or his principal should have been manufacturing and supplying the particular equipment for say six months or one year prior to bid opening. Qualification criteria like years of experience and extent of sales in the past have a bearing on quality as also on competitiveness. It is better to base them on a market survey. In case an Indian agent is to provide substantial incidental services it may be desirable to prescribe qualification criteria for the agent in addition to the qualification criteria for the manufacturer/supplier.
Ø Training: Training for use of critical equipment is necessary and should form part of the incidental services. However free training at a manufacturer’s end if located in a foreign country will add to the cost and should be asked for only when it is considered essential. Otherwise non-utilization of this provision will only mean payment of a hidden cost, remaining unused. Further the break-up of the cost of training must be obtained at the time of bidding itself. Also the nature and scope of training should be clearly defined in the bid documents.
Ø On-site Service: Unless onsite service is provided for both warranty and AMC there may be problems, wherein the bidder may agree to provide replacement of parts but the work involved with documentation, import, customs clearance, insurance etc. for replacement of parts may fall on the purchaser.
Ø Consumer Certificates: Bidders are usually required to furnish certificates from their consignees for satisfactory performance of the equipment supplied. If complete details are not given by the bidder, the purchaser is not able to verify. It is desirable to ask the bidder to provide the names of contact persons and their telephone numbers with a confirmation that the bidder has no objection to the purchaser verifying with the users.
Ø Bid Evaluation Committees: It is better to constitute standing bid evaluation committees for major points of purchase at the site, to avoid delays in approvals for constituting such committees each time.
Ø Indian Laws: The Bidding Document should indicate that the relevant contract would be interpreted under Indian Laws.
Ø Successful Bidder: The name of successful bidders awarded the contract should be mentioned on the notice board of the Department/Organization or in the Bulletin or the Website.
Ø Payment Schedule: The payment schedule should be: (i) ten percent as advance, (ii) seventy percent on shipment (in case of imported items), seventy percent on proof of delivery in case of indigenous supply; and (iii) twenty percent on final acceptance.