University of Technology of Mauritius

Assignment: Risk Assessment for

Procurement Routes At Your
Organisation

Ramdowar Sarvesh (090164)

May 5 2011
Contents

Contents...............................................................................................................................2

1.0 Organization...................................................................................................................3

1.1 Projects / Works Undertaken.....................................................................................3

2.0 Procurement Routes.......................................................................................................3

2.1 Maintenance Contract (MC)......................................................................................3

2.2 Open Advertised Bidding (OAB)..............................................................................4

3.0 Qualitative Assessment..................................................................................................4

3.1 Risk Matrix................................................................................................................6

3.2 Probability Impact Matrix for Maintenance Contract................................................7

3.3 Probability Impact Matrix for Open Advertised Bidding..........................................8

4.0 Quantitative Analysis...................................................................................................10

5.0 Conclusion...................................................................................................................11

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 1.0 Organization
The Ministry of Public Infrastructure, National Development Unit, Land Transport &
Shipping is one of the 25 Ministries of the Government of Mauritius. It has several
Divisions namely the Public Infrastructure Division, Land Transport Division and
Shipping Division .

The Public Infrastructure Division is responsible for the implementation of building

projects for all Ministries in Mauritius and Rodrigues and the other outer islands.

1.1 Projects / Works Undertaken

The main works undertaken by this Ministry are mentioned hereunder:

1) Maintenance of most Government buildings

2) Construction of new buildings for the various ministries

2.0 Procurement Routes

The two main procurement routes are the Maintenance Contract and through Open
Advertised Bidding.

2.1 Maintenance Contract (MC)

The Maintenance Contract is a two year contract which has been awarded to 10 different
contractors, two for each grouping of Districts – Port-Louis, Pamplemousses & Riviere
du Rempart, Moka & Flacq, Grand Port & Savannes and Plaines Wilhems & Black
River. The Ministry has in fact invited eligible contractors, that is those registered with
the Ministry to bid for these contracts for the respective regions. The Bid document is as
per stipulated by the Procurement Policy Office.
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 The particularity of this Contract is that all major maintenance / rehabilitation /
renovation / upgrading works within a particular grouping, provided that the cost
estimates does not exceed Rs 5 millions have been pre-awarded to the selected contractor.
The Ministry has reserved the right to go for open bidding and not to directly award to
them works estimated at above the value.

The Maintenance Contract is an Item Rate Contract, also called a Schedule Contract type.
In this, the Contractor undertakes the execution of the works on an item rate basis. The
amount to be received by the contractor depends upon the quantities of various items of
work actually executed. The payment to the contractor is made on the basis of detailed
items of work actually done by him.

2.2 Open Advertised Bidding (OAB)

When the cost estimate of projects exceed Rs 5 million or when items in the project do
not figure in the Bill of Quantities in the Maintenance contract, the Ministry resorts to
open advertised bidding for procurement of works. This type of procurement is mostly
for the construction of new buildings or extensions for the Government.
The Contract is mainly of Lump Sum and Scheduled Contract type. In this the Contractor
offers to do a particular work at a fixed sum within a specified time as per drawings and
detailed specifications. The schedule of rates for various items is provided which
regulates the extra amount to be paid or deducted for any additions or omissions made
during the progress of the work.

3.0 Qualitative Assessment

Both types of procurement routes entail some risks. The table below illustrates the risks.

Table 1: Risk Register

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Risk No. Description
1 Lowest bidder is awarded the contract and cannot deliver as per
specifications
2 Contractor refuses to carry out the work after award
3 Collusion between Contractor and Engineer
4 Rates quoted by other bidders revealed to competitors before closing date
of Bid submission
5 Cost of total work uncertain till the end of the project

Assumptions:
1) Lowest bidder is awarded the contract and cannot deliver as per
specifications
M.C – Faulty or low quality accessories are used for renovation works, example low
quality taps that become unusable after one month.
OAB – Contractor is not able to make profit and using sub standard material to
compensate for his losses.

2) Contractor refuses to carry out the work after award

M.C – Contractor states he is not being allowed to work during normal working hours
and is regarded as a disturbance, in the case of schools, colleges and hospitals.
OAB – Even the risk of the Bid Bond being seized, the Contractor does not accept the
offer. Time is lost.

3) Collusion between Contractor and Engineer

M.C – Since the engineer prepares scope of works, prepares bill of quantities and
issues works order, bribery or corruption takes place.
OAB – Engineer provides more information to one particular Bidder or favours one
during Bid Evaluation.

4) Rates quoted by other bidders revealed to competitors before closing date

of Bid submission
M.C –Rates are found to be too low compared to cost estimate
OAB - Rates are found to be too low compared to cost estimate
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 5) Cost of total work uncertain till the end of the project
M.C – Unscheduled works to be carried out
OAB – Omissions in the order of 5 % of the contract value

3.1 Risk Matrix

The following scales have been used for the likelihood of risk and risk impact.

Likelihood of Risk

Extremely Extremely Remote Remote Reasonably Probable Frequent

Improbable

1 2 3 4 5

Impact of Risk

Catastrophic Hazardous Extremely Major Major Minor

5 4 3 2 1

Table 2: Risk Matrix for Maintenance Contract

Risk Risk Description Likelihood (A) Impact (B) Risk Risk

No. Level Priority
Scale 1-5 Scale 1-5 (AxB)

1 Lowest bidder is awarded the contract and cannot 5 4 20 1

deliver as per specifications
2 Contractor refuses to carry out the work after award 1 5 5 3
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 3 Collusion between Contractor and Engineer 2 5 10 2
4 Rates quoted by other bidders revealed to competitors 1 5 5 3
before closing date of bid submission
5 Cost of total work uncertain till the end of the project 1 2 2 4

3.2 Probability Impact Matrix for Maintenance Contract

5 2,4 3

4 1

2 5
Impact

1 2 3 4 5

Likelihood

Table 3: Risk Response & Monitoring for Maintenance Contract

Risk No. Description Risk Response Risk Monitoring

1 Lowest bidder is awarded the contract and cannot Eligibility criteria and past Compliance certificate of
deliver as per specifications experience thoroughly materials to be submitted by
checked contractor for approval by
engineer

2 Contractor refuses to carry out the work after Bid Bond mandatory
award
3 Collusion between Contractor and Engineer Contractor to inform the Audit unit performs routine
Chief Engineer or the checks

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 converse

4 Rates quoted by other bidders revealed to No access to the Bids Bids submitted to be safely
competitors before closing date of bid submission sealed and secured

5 Cost of total work uncertain till the end of the Do not carry works Check Works Order
project instructed only verbally by
engineer

Table 4: Risk Matrix for Open Advertised Bidding

Risk Risk Description Likelihood (A) Impact (B) Risk Risk

No. Level Priority
Scale 1-5 Scale 1-5 (AxB)

1 Lowest bidder is awarded the contract and cannot 4 4 16 1

deliver as per specifications
2 Contractor refuses to carry out the work after award 1 3 3 5
3 Collusion between Contractor and Engineer 2 3 9 3
4 Rates quoted by other bidders revealed to competitors 1 5 5 4
before closing date of bid submission
5 Cost of total work uncertain till the end of the project 2 5 10 2

3.3 Probability Impact Matrix for Open Advertised Bidding

5 4 5

4 1

3 2 3
Impact

1 2 3 4 5

Likelihood

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 Risk Description Risk Response Risk Monitoring
No.

1 Lowest bidder is awarded the contract and cannot deliver as Change all Regular supervision and
per specifications unacceptable inspection
accessories

2 Contractor refuses to carry out the work after award Bid Bond seized Bid Bond submitted

3 Collusion between Contractor and Engineer Internal Audit Claims for payment,
compliance certificates and
approval of works checked
by principal engineer

4 Rates quoted by other bidders revealed to competitors before Annul any Bids are well sealed and
closing date of bid submission award of bid secured

5 Cost of total work uncertain till the end of the project Contingency Continual assessment of
provided cost of project value

Table 6: Risk Response and Monitoring for OAB

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4.0 Quantitative Analysis
From the Probability Impact Matrix, the risks found in the red zone are defined as extremely high
probability-impact risk and those in the blue ones have been defined as high probability-impact
risk.

In this respect, a qualitative analysis of these risks should be done. It is observed that for both
types of procurement methods, risk scenario number 1, that is, ‘Lowest bidder is awarded the
contract and cannot deliver as per specifications’ is the most critical risk. No risk is observed on
the blue cells.

The table below illustrates some criteria assessed during procurement. The criteria being unequal
in importance have been assigned weights. In the next column the likelihood how far these
criteria are met is shown by assigning values between 1 and 10. 1 means response is low and 10
means response is high.

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Table 6: Weighted Score for MC & OAB

Criteria for Weightage MC Weighted Score OAB Weighted Score

assessing quality of (MC)
works (0-1) (1-10) (1-10) (OAB)
(Weightage x
Likelihood likelihood) Likelihood criteria (Weightage x
criteria is met is met likelihood)

Technical Proposal +
Plant & Equipment
0.8 8 6.4 9 7.2
+Compliance
certificates

Foreman full time on

0.6 2 1.2 7 4.2
site

No. of skilled labour 0.7 6 4.2 5 3.5

Past Experience in
0.9 8 7.2 7 6.3
similar Works

Average Turnover at
least 5 times cost 0.5 6 3.0 8 4.0
estimate

Profit for past 3 years 0.5 6 3.0 5 2.5

Sum of weighted
25.0 27.7
Score

It is observed that MC having the lowest score is at a higher risk than OAB.

5.0 Conclusion
Maintenance Contract is good as works can be started at a much earlier time than procurement
through Open Advertised Bidding. However, risks of getting works done with inferior quality are
higher, as depicted by a lower score. Hence, procurement via OAB is preferred.

Supervision and Quality Control for Contractors under the Maintenance Contract should be more
stringent.

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