WORLD BANK Evaluation Process (Goods/Works)

BID EVALUATION Objective Other factors Secure goods/services at most economical cost Price only one factor Other factors Commercial Time of delivery/completion Terms of payment Terms of guarantee

BID EVALUATION Other factors (cont’d) Criteria Technical Technical merits Operating cost Maintenance cost Efficiency Resale value Criteria Shall be stated in bid documents Ideally all factors quantified in monetary terms

BID EVALUATION Bid opening Examination Cost comparison Price Price and commercial Price, commercial and technical Lowest evaluated bid Post qualification Award recommendation Evaluation report No objection

BID OPENING Public opening Minutes to be recorded Rationale Minutes to be recorded Single stage - single envelope Bid form Technical data Bid price schedule Bid security

PRELIMINARY EXAMINATION Clarification Permissible and warranted Cannot change substance of bid or price Confidentiality Important Examination of bids Is bid complete? Signed? Is bid security attached? Major deviations from bid conditions Computational Errors Figures/Words Unit rate/Total Misplacement of decimal point

PRELIMINARY EXAMINATION Technical Assessment - substantial responsiveness Detailed evaluation only for substantially responsive bids

DEVIATIONS Unacceptable Late bid Unsigned bid Inadequate bid security Different prequalified firms and bidders Different price conditions Unacceptable alternative, timing and phasing Unacceptable sub-contracting Qualification of arbitration rules Unacceptable applicable law

DEVIATIONS For Consideration Different payment terms Alternative methods/bids Minor omissions Limitation of liabilities Liquidated damages

COMPARISON OF BIDS CONVERSION TO COMMON CURRENCY Object To determine lowest evaluated bid on date specified Bid price Convert into amounts payable in each currency Common currency Borrower’s or any other currency Exchange rates Official source such as central bank As on Any specified date not earlier than 4 weeks prior to bid closing nor later than original date for expiry of bid validity Date to be clearly specified in bid documents

EXAMPLE: CURRENCY CONVERSION (EQUIPMENT) A B C 1. Evaluated Price US$6,300 DM15,000 Ll3,000 FF15,000 Converted to local currency pesos: At exchange rate on date of bid opening 63,000 60,000 64,000 Ranking 2 1 3 3. At exchange rate on date of decision 66,500 65,000 64,800 Ranking 3 2 1 At exchange rate on date of 71,000 68,000 67,000 expiry of bid validity Ranking 3 2 1 At exchange rate on actual date of delivery 130,000 94,000 100,000 which is 6 months after expiry of original validity period Ranking 3 1 2

COMMERCIAL FEATURES Price Price adjustment over contract period Adjust basic price for features, options, etc. To make bid prices comparable Price adjustment over contract period Ignore Delivery point Add local transportation

COMMERCIAL FEATURES Time of delivery Warranty Payment terms Evaluate loss or gain by late or early delivery Warranty Evaluate variation Payment terms Evaluate variations at specified interest/discount rate

BID EVALUATION FOR URBAN BUSES A B DOMESTIC BID FOREIGN BID PRICE EX-WORKS/FOB PES900,000 DM100,000 OCEAN FREIGHT AND INSURANCE -- DM5,625 PRICE EXWORKS/CIF PORT OF ENTRY PES900,000 DM105,625 PRICE EXWORKS/CIF CONVERTED TO 45,000 42,250 COMMON CURRENCY (USD) INLAND TRANSPORTATION 200 1,500 EVALUATED COST DELIVERED AT 45,200 43,750 SITE

BID EVALUATION FOR URBAN BUSES (CONTD.) A B DOMESTIC BID FOREIGN BID PENALTY FOR DEVIATION IN -- 500 PAYMENT TERMS DELIVER/COMPLETION EVALUATION 1,200 -- WARRANTY -- 100 TOTAL EVALUATED COST 46,400 44,350 RANKING 2 1

EVALUATION CRITERIA TECHNICAL FEATURES Operating cost Fuel Training Maintenance cost Standardization Resale value/depreciated cost Life cycle cost

BID EVALUATION USING LIFE CYCLE COSTING FOR PROCUREMENT OF 100 HIGHWAY TRUCKS Relevant part of the bid evaluation clauses in the bidding documents The evaluation and comparison of bids shall be based on the life cycle cost for the vehicles during the first 6 years, worked out in the following manner 1. Initial price CIF price quoted for trucks offered from abroad Ex-works/ex-showroom price for vehicles offered from within the country 2. Operating and maintenance costs Fuel costs shall be computed on the basis of 100,000 km of operation per year at a fuel price of 0.80 US$ per liter, discounted to net present value at a discount rate of 10 percent

BID EVALUATION USING LIFE CYCLE COSTING FOR PROCUREMENT OF 100 HIGHWAY TRUCKS Spare parts cost shall be based on 100,000 km per year of operation, based on the guaranteed figures provided by the bidder for each year, discounted to net present values at a discount rate of 10 percent. If guaranteed figures are not provided purchaser may use estimated figures. 3. Depreciated cost Purchaser shall estimate the depreciated cost of the vehicle offered based on the guaranteed life prior to the first major overhaul, or based on past experience, but in no case more than 8 years 4. Bidders shall furnish all the data required for the above computations.

BID EVALUATION USING LIFE CYCLE COSTING 100 HIGHWAY TRUCKS A B USD USD 1. INITIAL COSTS BID PRICE EX-WORKS/CIF EVALUATION 65,000 70,000 ADJUSTMENT FOR DELIVERY SCHEDULE 6,000 -- EVALUATION ADJUSTMENT FOR VARIATION -- 1,000 IN PAYMENT TERMS TOTAL 71,000 71,000 2. OPERATING AND MAINTENANCE COSTS: FUEL - GUARANTEED COST FOR EACH YEAR (8,000) (6,000) NPV FOR 6 YEARS 34,840 26,130 SPARES - GUARANTEED COST (AVERAGE) (5,000) (4,000) NPV FOR 6 YEARS 21,775 17,420 TOTAL 56,615 43,550

BID EVALUATION USING LIFE CYCLE COSTING 100 HIGHWAY TRUCKS (CONTD.) A B USD USD 3. DEPRECIATED VALUE LIFE (6 YEARS) (6 YEARS) DEPRECIATED VALUE 0 12,500 4. TOTAL LIFE CYCLE COST 127,615 102,050 RANKING 2 1

BID EVALUATION WORKS Comparison of bids Conversion to single currency, after excluding provisional sums, contingency Adjust value of benefits gained or lost for completion period Adjust for “acceptable” quantifiable variations

EXAMPLE: CURRENCY CONVERSION (CIVIL WORKS) BID A BID B 1. BID AS SUBMITTED BID PRICE IN LOCAL CURRENCY, PESOS P9,000,000 P10,000,000 FOREIGN CURRENCY COMPONENT AT EXCHANGE RATE 28 DAYS PRIOR TO CLOSING 33.3% IN US$ 40% IN DM 2. EXCHANGE RATES AS OF 28 DAYS PRIOR TO BID CLOSING US$1=P100 DM1=P50 ON DATE OF BID CLOSING US$1=P120 DM1=P55 ON DATE OF DECISION US$1=P150 DM1=P55 3. LOCAL CURRENCY COMPONENT P6,000,000 P6,000,000

EXAMPLE: CURRENCY CONVERSION (CIVIL WORKS) BID A BID B 4. FOREIGN CURRENCY COMPONET US$30,000 DM80,000 FOREIGN CURRENCY COMPONENT CONVERTED TO LOCAL CURRENCY EQUIVALENT A. 28 DAYS PRIOR TO BID CLOSING P3,000,000 P4,000,000 B. B. ON DATE OF BID CLOSING P3,600,000 P4,400,000 C. C. ON DATE OF DECISION P4,500,000 P4,400,000 TOTAL BID PRICE A. AS OF 28 DAYS PRIOR TO BID CLOSING P9,000,000 P10,000,000 B. ON DATE OF BID CLOSING P9,600,000 P10,400,000 C. ON DATE OF DECISION P10,500,000 P10,400,000

EXAMPLE: BID EVALUATION FOR CONSTRUCTION OF HOSPITAL A B 1. PRICE 5,000,000 5,650,000 (IN LOCAL CURRENCY EQUIVALENT) 2. ADJUSTMENT FOR COMPLETION TIME -- 565,000 (AT 20% ANNUAL RATE OF RETURN) 3. ADJUSTMENT FOR 5% CEILING FOR 250,000 -- LIQUIDATED DAMAGE 4. ADJUSTMENT FOR PARKING LOT 250,000 -- OMITTED (FROM ORIGINAL ESTIMATE) 5. ADJUSTMENT FOR 20% OF 202,464 -- MOBILIZATION ADVANCES REQUESTED AS AGAINST 10% STIPULATED (AT 12% INTEREST RATE) TOTAL 5,702,464 6,215,000 RANKING 1 2

DOMESTIC PREFERENCE Goods Civil works Only to locally manufactured goods which contain labor, raw materials and components accounting for at least more than 30% of the EXW price Production facility to be used must be engaged in production of such goods at time of bid submission Applicable import tariff or 15% of CIF whichever is less Available for all borrowers Civil works Only to domestic contractors majority owned by nationals Domestic contractor must not subcontract more than 10% of the contract price excluding provisional sum to foreign contractors Must be register in the borrower country Margin 7-1/2% No domestic preference to joint venture of domestic and foreign contractor Only for borrowers below US$755 per capita GNP (Year 2000)

DOMESTIC PREFERENCE (ILLUSTRATIONS) CASE 1 - PROCUREMENT OF VEHICLES A1 B1 C1 C2 C3 PRICE EX-WORKS/CIF 10,000 9,900 10,500 11,300 12,000 STEP 1 LOWEST BID IN EACH 10,000 9,900 10,500 GROUP RANKING 2 1 3 AWARD B1

DOMESTIC PREFERENCE (ILLUSTRATIONS) CASE 2 - PROCUREMENT OF VEHICLES A1 B1 C1 C2 C3 PRICE EX-WORKS/CIF 10,000 9,900 9,500 11,300 12,000 STEP 1 Lowest bid in each Group 10,000 9,900 9,500 RANKING 3 2 1 Since LEB in group C STEP 2 Lowest in group A and 10,000 9,900 9,500 11,300 12,000 All in group C bids Domestic Preference Customs Duty or 15% of CIF For group C

DOMESTIC PREFERENCE (ILLUSTRATIONS) CASE 2 - PROCUREMENT OF VEHICLES A1 B1 C1 C2 C3 Customs Duty 30% of CIF - - 1,425 1,695 1,800 so 15% of CIF Total for Comparison 10,000 - 10,925 12,995 13,800 RANKING 1 Award A1

DOMESTIC PREFERENCE (ILLUSTRATIONS) CASE 3 - 1 PROCUREMENT OF VEHICLES A1 B1 C1 C2 C3 PRICE EX-WORKS/CIF 10,000 11,000 12,000 13,500 9,000 NVP of operating costs 10,000 10,000 5,000 8,000 8,500 Total Evaluated Cost 20,000 21,000 17,000 21,500 17,500 STEP 1 Lowest bid in each Group 20,000 21,000 17,000 RANKING 2 3 1 STEP 2 Group A and 20,000 17,000 21,500 17,500 All in group C

DOMESTIC PREFERENCE (ILLUSTRATIONS) CASE 3 – 1 PROCUREMENT OF VEHICLES A1 B1 C1 C2 C3 Domestic Preference – Customs Duty 30%, so 15% of CIF - - 1,800 2,025 1,350 Total for Comparison 20,000 - 18,800 23,525 18,850 RANKING 3 1 4 2 Since the lowest is from Group C, go back to Step 1 (To ascertain the lowest among C without domestic preference Margin 1 3 2 Award C1

DOMESTIC PREFERENCE (ILLUSTRATIONS) CASE 3 – 2 PROCUREMENT OF VEHICLES

DOMESTIC PREFERENCE (ILLUSTRATIONS) CASE 3 – 2 PROCUREMENT OF VEHICLES

POSTQUALIFICATION Only for selected bidder Criteria (goods) Capacity Technical capability Product reputation Financial resources Parts and service Past performance

POSTQUALIFICATION Criteria (works) Past experience (size/complexity) Personnel resources Equipment resources Financial capacity Litigation/arbitration history If there was prequalification, confirm that bidder’s status is substantially the same as at prequalification

BID EVALUATION REPORT Content Reason for rejecting each bid Received after bid opening Incomplete Non-Responsive Commercial responsiveness Delivery Completion date Payment terms Warranty

BID EVALUATION REPORT Qualifications/alternatives Currency conversion Errors (arithmetic) Currency conversion Include publication official exchange rates Technical comparison Each criteria listed and compared (attach table) Responsive bid comparison Selection of lowest evaluated bid Postqualification of selected firm Recommendation for contract award

AWARD CONTRACT Selected bidder should not be required To reduce price To undertake work not specified in bidding document, or To modify the bid