105 Section 16 Methods of Procurement 16.1 _Introduetion ‘As indicated in Section 13, the method of procurement that the Borrower chooses to use for a particular project depends on the nature and size of a project and its procurement element and the urgency with which the goods or services to be procured are required. Commonly used methods of procurement include International Competitive Bidding (ICB), National Competitive Bidding (NCB), Limited Intemational Bidding (LIB), Intemational and National Shopping, Direct Contracting and Force Account. Experience has shown that in many cases Intemational Competitive Bidding (ICB) open to all eligible and qualified bidders, with an optional element of domestic preference, achieves the principal objectives of Bank procurement most effectively. The Bank thus considers ICB the preferred method for procurement, However, in circumstances in which it can be demonstrated that ICB is not appropriate, the Borrower may with the approval of the TTL/PS/PAS, use the other methods of procurement, In such cases the Bank requires the Borrower to ensure that the method used is the most economic and efficient method. The Borrower also has to show that by using such a method it will get the best value for money. The method other than ICB, must also be open and fair to all the interested bidders to the extent possible. 16.2 __ International Competitive Bidding The purpose of International Competitive Bidding (ICB) is to give all eligible and qualified prospective bidders adequate and timely notification of a Borrower's requirements and to give them equal access and a fair opportunity to compete for contracts for required goods and services. (see Procurement Guidelines p2.1) Bidding opportunities must therefore be advertised internationally and all eligible bidders given reasonable possibilities to participate. These notification requirements distinguish ICB from other methods of procurement. (Refer to Section 14 of this Manual for detailed instructions on Advertising and Notification requirements) ICB requires formal bidding documents which are fair, non-restrictive, clear and comprehensive. The bidding documents and technical specifications relating to the project should clearly describe the criteria and methodology for evaluation of bids and selection of the successful bidder. The Bank requires the Borrower to use Bank Standard Bidding Documents (SBD) whenever these have been prepared for procurement of particular types of goods and services. When an SBD does not exist, the Borrower may use other bidding documents provided that they contain intemationally recognized standard conditions of contract and contract forms acceptable to the Bank. As part of the bidding documents, the Borrower under ICB also provides technical specifications and wherever available international standards and specifications are used. Bidding documents for procurement by ICB procedures should be prepared and the whole procurement process conducted in English, French or Spanish. However, bids submitted by, and contracts with, local bidders (excluding joint ventures between local and foreign bidders) Draft Procurement Manual Eaited: January 29, 2003 11:20 AM pm7-3.01106 Section 16, Methods of Procurement may, at the Borrower's option, be in the local language which shall be the governing language for such contracts. The Borrower is required to send the Bank a certified translation of (i) the bid and the bid evaluation report, and (ii) the contract, prior to the first application for withdrawal of funds against it, in one of the above three languages. The Bank also requires a certified translation of any proposed substantive modifications to such contracts. Registration of foreign bidders with local authorities should not be a requirement for bidding under ICB procedures. The successful bidder may have to register if required by law, but should not be denied registration on grounds unrelated to the bidder’s ability to perform the contract. Likewise, where the subject of procurement requires, a successful bidder may have to establish a local agency or representation. For instance, the supplier of a large fleet of equipment may have to establish service or spare parts facilities needed to maintain the procured equipment. Foreign firms should not be required to associate with domestic firms in joint ventures or employ specific personnel - e.g. maintain ethnic ratios in the labor force, as a condition for prequalification or bidding. Further, local or foreign contractors should not be permitted to present more than one bid either individually or as members of a joint venture. Bids should be opened at a time and place specified in the bidding documents and data sheets, in the presence of the bidders or their representatives who wish to be present. The name of the bidder and total amount of each bid, and of any alternative bids if they have been requested or permitted, should be read aloud and recorded when opened. The Bank does not accept the “two - envelope” bidding system, in which bidders simultaneously submit technical and price bids that are opened at different times. However, a similar procedure is allowed in the case of proposals for consultant services to be evaluated on Quality and Cost Based Selection (QCBS) procedure. (Refer to, Guidelines: Selection and Employment of Consultants by World Bank Borrowers, January 1997, Revised September 1997 and January, 1999.) Conversely, the “two step” (or “two stage”) bidding procedure, usually applied in complex industrial projects, procurement of textbooks and information technology projects is acceptable to the Bank. “Two stage” bidding involves, first a presentation of only technical proposals, and after discussion of their technical merits and compliance with performance specifications, submission and evaluation of priced bids. All quotations by bidders for imported goods should be on INCOTERMS, Cost Insurance and Freight (CIF) or Carriage and Insurance Paid (CIP). Domestic suppliers/bidders quote off-the shelf, ex-factory or ex-warehouse (EXW), with prices that exclude sales taxes on the finished product. A margin of preference may be allowed for domestic bidders offering bona- fide domestic manufactured goods subject to the conditions stated in the Loan Agreement. (For detailed instructions on application of domestic preference margins in the evaluation of bids refer to Section 19.12 of the Manual) Under ICB, the Borrower should award the contract within the period of validity of the bids to the bidder whose bid has been determined to be the lowest evaluated responsive bid. Such a bidder must also meet the appropriate standards of capability and financial resources. A bidder should not be required, as a condition of award, to undertake responsibilities for work Draft Procurement Manual Edited: January 29, 2003 11:20 AM pm7-3-01Section 16, Methods of Procurement oT not stipulated in the specifications or to modify his/her bid. (Refer to Section II of the Guidelines for detailed procedures for the implementation and supervision of ICB) 16.2.1 Types of ICB Methods Procurement using ICB methods can follow either a one-stage and two-stage bidding process. In a one-stage process, the borrower's agency prepares a bidding document with, among other things, detailed functional and technical requirements. In response, suppliers submit bids containing their technical and financial proposals at the same time but, in separate envelopes. The borrower's agency then evaluates each of the bidders’ proposals and awards the contract to the lowest evaluated bidder, according to the method and criteria specified in the bidding documents. In a two-stage process, the borrower’s agency prepares a first stage bidding document with functional performance specifications, rather than detailed technical specifications. In response, bidders offer unpriced technical proposals (j.e., no financial proposal is submitted at this time). The borrower's agency then: + assesses the suppliers” qualifications; ‘evaluates the technical proposals; * indicates to the suppliers precisely what must be done to make their bid technically responsive. Following the first stage evaluation, the agency prepares the memoranda of changes for each bidder and may prepare addenda to the bidding documents, including revisions to the technical requirements made in the light of the first stage technical evaluation, and initiates the second stage bidding process, During the second stage bidding process, bidders offer amended bids containing their final technical proposal and a financial proposal. The borrower's agency then evaluates the combined proposals (technical and financial) according to the method specified in the bidding documents The advantages of the two-stage process include the ability of the borrower's agency, during the first stage, to interact extensively on technical matters with bidders than is permissible in a one-stage process. In this way, an agency can learn from the market and adapt its requirements. In addition, a two stage process allows an agency to, in the first stage, state its requirements in more general functional terms than the detailed functional and technical requirements necessary to carry out a one-stage process. By knowing the bidders and their technologies prior to the second stage, this reduces the burden of preparing detailed functional and technical requirements which are so comprehensive that they can accommodate the entire universe of potential technical proposals. One-stage processes are most appropriate for relatively straight - forward procurement of fairly standard technologies and ancillary services. In contrast, the additional capacity to review technical proposals, revise technical requirements and interact directly with the suppliers during the first stage make the two stage process much more suitable for the procurement of goods such as complex information systems and procurements which involve extensive technical services, Draft Procurement Manual Eaited: January 29, 2003 11:20 AM pm7-3.01108 Figure 1: One Stage ICB, Process Flow and Indicative Timing Organize Project Management / Implementation Teams 0-12w Prepare Implementation Plan Determine high —level functional requirements (2-12w) 6-Aw + perform site assessments (2-12w) organize user advisory groups (2 -12w) * organize receiving & acceptance testing, if'any + draft plan and obtain agency approval (2-12w) ) Draft Bidding Documents hnical specifications (2-24w) * schedule of requirements (2-4w) ‘special conditions of contract & sample forms (1-8w) + instructions to bidders and bid data sheet, including supplier qualifications and bid evaluation method (2 - 8w) ‘+ invitation to bid & procurement notice (1 - 2w) Obtain World Bank No-objection Revise and Clear Bidding Documents (if necessary) + revise documents (-12w) obtain agency clearance (2-4w) obtain World Bank no-objection (1-4) Advertise Bidding Opportunity * Publish specific procurement notice (1-4w) @_Dictrihnte inv Draft Procurement Manual Edited: January 29, 2003 11:20 AM pm7-3-01Section 16, Methods of Procurement 109 16.3 National Competitive Bidding National Competitive Bidding (NCB) is acceptable when, in the judgment of the Borrower and the Bank: the nature or scope of the goods or works being procured; when the advantages of ICB are clearly outweighed by the administrative or financial burden involved; contract values are small; works are geographically scattered; or the goods or works are available locally at prices below the international market. When considering whether NCB is acceptable for use in procurement under Bank financing, local procedures and practices should be examined to determine whether they meet the Bank's essential criteria for acceptability. An acceptable NCB system generally incorporates the basic principles of ICB including inter alia, timely notification through advertising in local newspapers, adequate competition, clarity of procedures, fair treatment for all bidders and award to the lowest evaluated bidder in accordance with the criteria set out in the bidding documents Eligible foreign firms are also allowed to participate in procurement under NCB procedures. The essential differences include the use of national advertising and the Borrower county's local language in bidding documents. The currency of the bid and payment are also in the local currency. (Refer to Sections 9 of the Manual for a checklist of allowable practices in procurement using NCB) In some situations the Loan Agreement specifies a U.S. dollar value below which NCB may be used, The RPA and the OPCPR, are usually consulted on setting of appropriate thresholds where there are no precedents or where special circumstances apply. To avoid uneconomic splitting of contracts, an aggregate total for goods and works to be procured through NCB may also be agreed and specified in the Loan Agreement. Where there is doubt whether to use ICB or NCB, the choice should be ICB. 16.4 Limited International Bidding Limited Intemational Bidding (LIB) is essentially ICB by direct invitation, without open advertisement, LIB is an option generally where there is a limited number of possible suppliers or where contract values are small or other special circumstances that may justify departure from ICB, Where the Borrower uses LIB as the method of procurement, bids should be solicited from a list of potential suppliers broad enough to ensure competitive prices, including all known suppliers if their number is small. The geographical spread of the list should also be as wide as practicable and upon prior review, acceptable to the Bank. Advertising, prequalification and application of domestic preferences are not required when goods and services are procured under LIB procedures. (Refer to Section 13.7 of the Procurement Manual for additional instructions on LIB) Draft Procurement Manual Edited: January 29, 2003 11:20 AM pm7-3-010 Section 16, Methods of Procurement Shopping is an appropriate method for procuring readily available off-the-shelf goods or standard commodities in quantities of small value and in some cases, small simple works. Shopping does not require formal bidding documents, and is carried out by requesting written quotations from several local or foreign suppliers or contractors -- usually at least three — to ensure competitive prices. Telephone or verbal quotations are not acceptable. International shopping is used to solicit quotations on a Cost Insurance Paid (CIP) or Cost Insurance Freight (CIF) basis, and quotations from at least three suppliers in two different countries are necessary. National shopping is used to procure goods which are ordinarily available locally from more than one source at competitive prices which include tarifis and sales taxes. In evaluating quotations submitted by bidders under shopping, price and ability to meet required delivery requirements are usually the main selection considerations for these simple purchases. However, the Borrower may also take into account, things such as the availability and costs of maintenance services and spare-parts over a reasonable period of use. The terms of the accepted offer are incorporated in the purchase order. (Section 13.7 sets out the situations in which the Borrower may use Shopping as a procurement method) 16.6 Direct Contracting Direct contracting without competition is another method of procurement open to Borrowers ina limited number of circumstances. In all cases where direct contracting is proposed, Bank staff must ensure that it would not be feasible to apply a competitive bidding procedure. Where appropriate, purchasers should inquire into the prices paid by other recent purchasers of goods or examine recent contracts of a similar nature, to determine the fairness of the quoted price for single source procurement. Any differences in the quantities ordered or delivery requirements should be considered when comparing prices. The contractors or suppliers hired by direct contracting must be qualified to perform the works or supply of goods on time, meeting specifications and fulfilling the special requirements of the sole source contract. They should also be required to meet any performance security and warranty conditions that would normally apply in a competitive bidding situation. (Refer to Section 13.7 of the Manual for breakdown of the situations where direct contracting may be used as the procurement method). 16.7__ Force Account 16.7.1 General Force account is construction by the use of the Borrower's or a government agency’s own personnel and equipment. Force account should be used only under the following circumstances: (a) quantities of work involved cannot be defined in advance; (b) works are small and scattered or in remote locations for which qualified construction firms are unlikely to bid at reasonable prices; (©) work is required to be carried out without disrupting ongoing operations; Draft Procurement Manual Edited: January 29, 2003 11:20 AM pm7-3-01Section 16, Methods of Procurement ut (@) risks of unavoidable work interruption are better bome by the Borrower than by a Contractor; and (c) there are emergencies needing prompt attention. If after reviewing all options, the use of force account is decided upon, it should be managed so as to introduce productivity controls approximating those of commercial contracting. The Borrower and the Bank should agree on appropriate production standards for the works items involved, and Bank disbursements should be linked to the production of predetermined physical units Draft Procurement Manual Edited: January 29, 2003 11:20 AM pm7-3-01