Three

PROCUREMENT MANAGEMENT

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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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 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 timing is essential)
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 The purposes of a Procurement Management System can
be summarized into two major points:

i. To satisfy the need for economy and efficiency,

ii. To provide equal opportunity to competitive
bidders.

But the successful achievement of these purposes requires

the following seven characteristics
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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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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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 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 to all tenders
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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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 Procurement cycle
Before we go to the discussion on procurement method and
procurement management process, we have to oversee procurement
where to where.

Procurement Cycle 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.

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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 before
submission of requirements.

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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?
All requirements should ideally appear on the procurement plan

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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 the procurement method
needs to be determined.
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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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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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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
Price comparison is done to determine the lowest qualified and
responsive bidder.

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Discussion in group about “responsiveness”
1. What do you understand from the term "the least qualified
and competitive Contractor”?
 Qualified to imply eligibility and technical competence;
Competitive to imply commercial and financial evaluation;
and
 Least to imply the lowest value among those qualified and
competitive.

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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 bids or cancellation of the evaluation process.

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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 least 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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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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 3.2 Procurement Methods
Procurement types mainly can be classified based on The things to
be procured and The way how they are procured.
But, basically There are five bases for classifying procurement
methods. These are:

Bases Things Bidders Geographical Procuremen Procurement

procured coverage coverage t awareness steps
Types Goods Competitive International General PN Single
Services Negotiated Regional Specific PN Two stage
Works National Pre-Qualification
Local Post-Qualification

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 Note: Depending on the delivery system
chosen during the contract planning phase,
mixed types of procurement types can be
adopted.

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 1. Things to be Procured
(Goods Vs Services Vs Works)
•Procurement of Goods: Physical resources such as Materials and Equipment
•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.

• Procurement of Works: the tangible form of design

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 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.
Note: Limited Competitive Bidding is often used when the nature and
urgency of the work justifies to do so.
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 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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Common Qualifying criteria in PPA and ERA tenders
Annual construction turnover (ACT)
Liquid Asset(cash flow requirement)
General construction experience
Specific construction experience
 Number of projects, Value of the project, Nature , Complexity
and Similarity of Projects
Historical contract non – performing records
 litigation processes
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 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 the price offered
can usually be higher than the competitive bidding.

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Federal public procurement directive 2010 , allows the following
(part 5, Article 15)
The following procurement methods are approved as per article 33 of
the Proclamation.
a) Open bidding
b) Restricted bidding
c) Request for quotations
d) Single source/ direct procurement
e) Request for proposal, and
f) Two stage bidding
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 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. Eg: ERA’s Bid
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 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 documents.
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 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 low-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
Why?-- to create awareness and let bidders’ prior information
about upcoming projects
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 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 further information
can be obtained.
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 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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 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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 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 least
evaluated bidder recommended for award.

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 5 Procurement Steps
The advantages of pre - qualification in procurement are:
To the employer To the Bidder
Protect the employer against Saves bidders from the cost of
unqualified bidders preparing bids
Quicker Evaluation for only pre- Assure pre-qualified bidders for their
qualified bidders bid considerations
Ensure award to least evaluated not Reduce low balling bidders from
lowest bidder participation
Assess level of interest shown by Make bidders to be better planned
bidders
Show competency & methods of
implementation

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 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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 pre-qualification flow chart

Procedure Employer / Consultant Contractors

 
Procurement and Contract Delivery
DeliverySystem
System
Strategy Procurement
ProcurementMethod
Method Awareness on Future
  Business and
(Contract Planning Phase) Contract
ContractType
Action
Type Follow Up
ActionPlan
Plan

Pre-qualification Documents Letter

Letterof
ofInvitation
Invitation
Tender Document Preparation Information
Informationabout
aboutprequalification
prequalificationprocedure
procedure Collect information about the project
Project Information
Project Information and its location  
Prequalification
PrequalificationApplication
Application

Advertisement
Invitation To Advertisement
Project Check
Check Eligibility
ProjectScope,
Scope,Location,
Location,Source
Sourceofoffinance
finance Eligibility
Pre-qualify Issue,
Issue,Submission
Submissionand
andOpening
Openingdates
datesofofTenders
Tenders Check
Check Competitive
Competitive Advantage
Advantage
Tendering Instructions
Instructionsto
topre-qualify
pre-qualifyand
andevaluation
evaluationcriteria
criteria Collect Information  
Collect Information
Decide
Decide to
to participate
Phase participate

Issuance & Submission of Pre- Organization,

Organization,Structure
Structure&&Experience
Experience Request and Obtain Pre – Qualification docs.
Resources
Resources (Financial,Managerial,
(Financial, Managerial,Technical,
Technical,Labor,
Labor,Plant, Request & Obtain Clarifications
qualification docs. Stock, etc)
Plant,

Tendering
Stock, etc)
Current
Complete
Complete and
and Submit   and
Submit Docs
Docs and Relevant
Relevant Info.
Info.
CurrentCommitments
Commitments
Phase Acknowledge
AcknowledgeReceipt
Receipt

Open
OpenTender
Tenderininthe
thepresence
presenceofofrelevant
relevantattendee
attendee
Opening & Analysis of Pre – Evaluate
Evaluate for Eligibility, Technical,Organizational
for Eligibility, Technical, Organizational, ,Financial
Financial Attend Tender Opening Ceremony
Capability
Qualification Capability
Tender Evaluation Phase

Pre-qualified
Pre-qualifiedtenderers
tenderersare
areselected
selected Acknowledge & Confirm Intention
Intention to
to
Selection and Notification of Winners are Notified
Winners are Notified participate in succeeding tender
tender
Tenders
Tender Evaluation Phase
 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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