ILO Training Procurement Rules and Procedures 15 September 2016 Anders Unnervik

Agenda Procurement organization and budget What does CERN buy? How? Procedures and Rules Some figures Results of contracts with CERN How to become a successful supplier

Organization of the Procurement Service

CONTRIBUTIONS FOR 2016 (CHF) * Associate Member States

Procurement Expenditures 2000-2015 Long term average Long term average

What do we buy ? Supplies for 297 MCHF (2015)

Recurrent supplies and services What do we buy? Recurrent supplies and services Civil engineering Buildings, roadworks Utilities Cooling & ventilation Power distribution, cables, overhead cranes Infrastructure & services Metal structures Mechanical engineering Radiation shielding Transport & handling Safety & access control Installation, operation & maintenance Data acquisition, computing & networking Various supplies Furniture, tooling, gases, etc.

What do we buy? Accelerator technologies required for consolidation projects and new developments Industrial controls & field buses Timing & “fast” real-time controls Beam collimation Beam injection, ejection & dump Radio-frequency equipment Power converters Beam instrumentation & diagnostics Permanent and electro-magnets Cryogenic equipment Vacuum equipment

Standard or Non-Standard? What do we buy ? Standard or Non-Standard? Off-the-shelf or non-standard products, using existing manufacturing techniques and/or technologies => functional specification Non-standard products, industry has neither the required know- how nor the immediate interest to develop and design the products for its existing markets => built to print Prototypes and/or pre-series needed?

CERN “Shopping list” https://found.cern.ch/java-ext/found/CFTSearch.do

HL-LHC “Shopping list” http://project-hl-lhc-industry.web.cern.ch/content/main-procurement-needs-hl-lhc

Legal framework CERN, an Intergovernmental Organization, was established in July 1953, by the “Convention for the establishment of a European Organization for Nuclear Research”. As an Intergovernmental Organization, CERN is not a legal entity under national law but governed by public international law. CERN benefits from immunity from national jurisdiction and execution. Thus, legal disputes between CERN and its suppliers and contractors are not submitted to national courts but solved via international arbitration. CERN is thus entitled to establish its own internal rules necessary for its proper functioning, such as the rules under which it purchases equipment and services.

Mission of Procurement and Industrial Services The mission of the Procurement and Industrial Services group is to: procure all supplies and services for CERN; meeting all requirements; at the lowest possible overall cost, while; achieving balanced industrial return for the CERN Member States, and; respecting the CERN Procurement Rules.

Procurement Principles CERN purchases supplies and services and awards contracts in compliance with the principles of transparency and impartiality Limited to firms established in the Member States. Invitation to tender documents are drafted in an objective way so as to guarantee fair competition As a rule, CERN’s tendering procedure is selective and does not take the form of open invitations to tender or price enquiries The opening, negotiation and evaluation processes of the bids are strictly confidential Is either the lowest; or Represents the best value for money.

Procedures for obtaining offers Requirements < 10’000 CHF Users may issue enquiries directly provided CERN procurement rules are followed Requirements > 10’000 CHF and < 200’000 CHF Price Enquiries issued by Procurement Service Requirements > 200’000 CHF Announcement, Market Surveys & Invitations to Tender

Requirements > 10’000 and < 200’000 CHF Price enquiries: Time for bidding 4 weeks; Invite 3 -5 firms; >50’000 CHF sent to ILOs for information; Adjudication based on lowest offer (FCA price) which complies with all requirements, subject to the alignment rules aimed at achieving well balanced industrial return coefficients for the Member States (from 100’000 CHF).

Requirements > 200’000 CHF Market Survey followed by a Call for Tenders: Announcement in the document “Advance information on Forthcoming Market Surveys and Invitations to Tender expected to exceed 200’000 Swiss francs”; Market survey; brief technical description (1-2 pages); qualification criteria (financial and technical) with questionnaire. Current Market Surveys available on Procurement Service home page https://found.cern.ch/java-ext/found/CFTSearch.do

Requirements > 200’000 CHF Market Survey Time for replying, normally 4 weeks, but OK until Invitation to Tender has been issued; List of firms participating to Market Survey: Firms proposed by Technical Officer Firms registered in CERN’s Supplier Database (by Procurement Officer) Firms having expressed an interest Firms proposed by ILOs and Delegations Invitation to tender: Time for bidding 4 weeks; Invite (guidelines) - 10 firms for contracts > 200’000 and < 750’000 CHF; - 15 firms for contracts > 750’000 CHF; All invitations to tender sent to ILOs for information;

ILO wants to add firms Requirements > 50’000 and < 200’000 CHF Price Enquiries are issued via CERN’s e-tendering platform. Bids MUST be uploaded on the platform to be accepted. Only firms (persons) having received access right to the platform for the Price Enquiry concerned, from CERN, will be able to upload their bid. ILOs must NOT send copies of complete Price Enquiries to firms (Specifications can be sent). ILOs should inform the Procurement Service in case new firms are found. In case CERN accepts, the firm will be invited by CERN and receive access to the e-tendering platform.

ILO wants to add firms Requirements > 200’000 CHF Market Survey ILOs are encouraged to send Market Surveys to firms. No special access rights are required. All firms can reply to a Market Survey Invitation to Tender In general, once the Invitation to tender has been issued, new bidders should not be added. In exceptional cases, ILOs should inform the Procurement Service in case new firms are found. Firms will be invited to reply to the Market Survey and in case CERN accepts, the firm will be invited to tender by CERN and receive access to the e-tendering platform.

Technical auditing of tendering package Purpose: Review MS and IT documents Ensure Procurement Rules are complied with 2 phases: MS: Simplified Technical Auditing IT: Specification Committee Participants Technical Officer (TO) Procurement Officer Head of TO’s Dept. or representative A representative from HSE Unit A technical expert from another dept. Head of Procurement Service or representative If necessary, another representative appointed by chairman; e.g. Legal Service

Bid assessment Bids shall be examined to establish that they comply with the technical, financial and delivery requirements in all respects Bids in single envelop - Lowest bid evaluated first, if needed, the next, etc. Bids in double envelopes Technical evaluation of all bids Commercial bid to be opened only when technical bid found technically accepted.

Basis of Award – Supply contracts Price based on ‘Free Carrier’ basis (FCA as per Incoterms 2010), i.e.: Without transport costs With packing and loading No disadvantage to firms located in distant countries However, if the ratio of DAP price (‘Delivered at Place’ as per Incoterms 2010) of the lowest FCA bid to the lowest DAP bid exceeds 1.10, Supply contracts shall be adjudicated on a DAP basis.

Lowest cost ……? Takes into account: Initial investment Operating costs: Energy consumption Spares Maintenance Training, etc. Disposal costs

Basis of Award – Service contracts Service contracts are awarded on a «Best Value for Money» basis to the bidder submitting the most economically advantageous bid

Best Value For Money The following criteria and weights will be applied by CERN to evaluate the bids for Service contracts: Criterion Weight Price (inc. all relevant costs) XX Quality Experience of the key personnel Stability of the personnel External references Technical know-how Technical training Quality of the bid Tests Etc. TOTAL 100

Country of origin Supply contract: Service contract: According to standards defined by EU: “the country(ies) where the supplies (including their components and sub-assemblies) are manufactured or undergo the last major transformation by the contactor or his sub-contractor” If at least 60% of the total amount of the bid comes from a poorly balanced MS, then the whole bid will be treated as that from a bidder in a poorly balanced MS Service contract: Country(ies) in which the bidder is established. If at least 40% of the total amount of the bid comes from a poorly balanced MS, then the whole bid will be treated as that from a bidder in a poorly balanced MS

Industrial Return Coefficient For Supply contracts and for a 12-month period starting on 1st March, defined as: “The ratio between that Member State's (MS) percentage share of all purchases of supplies (excluding purchases funded by non-MS) during the preceding four calendar years and that State's percentage contribution to the budget over the same period”. Return Coef. = % expenditure of the MS % contribution to CERN budget for this MS

Industrial Return Coefficient For 2016: Very poorly balanced < 0.30 Poorly balanced (PB) 0.30 ≥ x < 0.90 Well balanced (WB) ≥ 0.90 Supply contracts (period 1/03/2016 to 28/02/2017): Well balanced : Bulgaria, Czech Republic, France, Hungary, Italy, Switzerland; Poorly balanced: Austria, Belgium, Denmark, Finland, Germany, Greece, Netherlands, Poland, Portugal, Romania, Serbia*, Slovakia, Spain, Sweden, United Kingdom; Very poorly balanced: Cyprus*, Israel, Norway, Pakistan*, Turkey*. *Associate Member States

The alignment rule For supply contracts to be awarded on the lowest compliant bid basis and exceeding 100’000 CHF in value A bidder offering goods originating from poorly balanced Member States is offered to align his price, under certain conditions, to that of the lowest bidder and thereby be awarded the contract

The alignment rule, 1 Lowest bid from a PB MS contract placed with it Bid (CHF) Well balanced MS Poorly balanced MS Contract

The alignment rule, 2 Lowest bid from a WB MS realignment rule applies if bid difference <20% Bid (CHF) <20% Well balanced MS Poorly balanced MS

The alignment rule, 2 Lowest bid from a WB MS (a) 1st bidder from PB MS aligns contract placed Bid (CHF) <20% Well balanced MS Poorly balanced MS Contract

The alignment rule, 2 Lowest bid from a WB MS (b) if not, 2nd lowest bidder from PB MS aligns contract placed Bid (CHF) <20% Well balanced MS Poorly balanced MS Contract

The alignment rule, 2 Lowest bid from a WB MS (c) if no alignment, contract placed with lowest bidder from WB MS Bid (CHF) <20% Well balanced MS Poorly balanced MS Contract

The alignment rule, Splitting 2 first lowest bids from a WB MS and the 3rd from a PB MS 1st bidder from PB MS aligns contract placed with lowest bids from WB MS and PB MS Bid (CHF) <20% Well balanced MS Poorly balanced MS Contracts

Information to bidders During bidding process – Q & A After bid opening Clarifications Correction of obvious errors After award E-mail with ranking Customized debriefing on request

Industrial return target for 2016 = 0.90

How to improve industrial return? Balanced industrial return Industry CERN ILO

How to improve industrial return? At CERN A working group will propose modifications of the Procurement rules E-mail sent to ILOs and FC delegates Working group has met to discuss changes Document will be sent to ILOs for comments White Paper to FC in December 2016 Possibly a Green Paper to FC and Council in March 2016

How to improve industrial return? And you, as an ILO….? Proposing firms Contacts with CERN technical personnel Organizing visits In your country At CERN Other….?

Organizing industrial exhibitions at CERN CERN can coordinate: For official opening –various services (VIP, Protocol office, etc..), reservations of conference rooms, auditoria.. Site visits Cocktail, lunch…with NOVAE Stands, information about safety rules, drawings Reservation at CERN hostel Preparation of access cards Informing internal stake holders about the event (Press office, technical departments, etc..) Delivery of packages sent by companies, to the area of the exhibition Match making between CERN technical staff, procurement officers and companies Etc.. Various unplanned issues

Organizing industrial exhibitions at CERN Responsible at CERN: Karine.Robert@cern.ch

Reports and studies

Results of contracts with CERN 38% had developed new products 42% increased international exposure 44% improved technological learning 52% would have had poorer sales performance without CERN 17% opened a new market 60% acquired new customers all firms had derived great value from CERN as a marketing reference

Successful bidders and contractors Often small – medium sized and flexible firms Ensure full understanding of specifications – exceeded specifications may be too expensive (adjudication to lowest compliant bid for supplies) Communicate with CERN (problems, issues, alternatives, etc.) Take into account test requirements and documentation Make best offer directly Ensure good working relationship with partners and sub-contractors