1. Module 10 Organizing Procurement
Session Procurement of Services: Evaluation Criteria and Selection Procedures for Procuring Consultant Services 1

2. Instructional Objectives
At the end of this lesson, the learners will be able to
Design a transparent process for selecting consultants using either (a) quality or (b) quality and cost criteria.
Describe the process of preparing to negotiate with a service provider. 2

3. Method 1: Selection Based on Quality
Based on nonquantifiable attributes
Opposite of procurement of civil works that have quantifiable attributes
Selection process should be criteria based
Quality of principle staff proposed
Approach and methodology proposed
Experience and breadth of firm 3

4. Qualifications of Staff
General qualifications and education
Experience directly relevant to the proposed assignment
Language fluency
Local knowledge
Training experience 4

5. Work Plan Considerations
Understanding of objectives
The methodology proposed
The breadth of the head office support
The degree of innovation proposed
The specific work program
The extent to which technology would be transferred during the assignment 5

6. Criteria for Evaluating the Firm’s Experience
The capacity to carry out the assignment
Recent experience with similar projects
Experience in similar areas and under similar conditions
Criteria and weights should be agreed upon by staff before RFP is issued.
Include criteria and weights in letter of invitation 6

7. Method 2: Selection Based on Quality and Cost
Quality criteria plus cost factored in
Only use cost judiciously
Principle emphasis should be on quality
Weights for complex assignments
90/10 ratio of quality to cost recommended
Never have ratio lower than 70/30 quality to cost
Weights for routine assignments
Recommended: 85/15 7

8. The Request for Proposals (RFP)
Letter of Invitation
Information to Consultants
Terms of Reference for the assignment
A blank proposed contract
Criteria for evaluation of proposals 8

9. Letter of Invitation States intention Source of funding
Date and time for submission
Address for delivery of proposal 9

10. Letter of Invitation (continued)
Selection process and evaluation criteria
Estimate of consultant inputs (cost estimates)
Financial information for negotiations
Conflict of interest clause
Names of invited consultants
Transfer of skills program
Attachments
Site visits
Bidders’ meetings 10

11. Information to Consultants
Necessary information for preparing proposals
Make process of selection transparent
Clarify evaluation criteria for selection
Factors
Weights
Minimum passing score
Level of effort envisioned (man months)
Validity period of proposal (60-90 days) 11

12. Terms of Reference Include in proposal Include blank proposed contract
Consider using standard and comprehensive forms published by international development institutions 12

13. Evaluating Proposals with Quality Criteria (Method 1)
Use a small, in-house team.
Use pre-established criteria and weights.
Criteria should be developed within the client organization.
Criteria should be understood and accepted by the team. 13

14. Evaluating Proposals with Quality Criteria Sample Criteria
Qualifications
and experience
of firm
Type of assignment/
weight
Methodology
and work plan
Individual staff
qualifications
Total
points
Technical assistance
and training
Preinvestment and
feasibility studies
Engineering design
Implementation
and supervision
10-15
10-20
75-80
100
15-20
30-35
50-55
100
25-30
25-30
40-50
100
10-15
20-25
60-70
100 14

15. Evaluating Proposals with Quality Criteria—The Evaluation Process
1. Determine if substantially responsive to RFP.
2. Identify any reservations.
3. Identify statements that need special attention.
4. Start individual evaluations.
5. Everyone should use the same worksheet. 15

16. Evaluating Individuals with Quality Criteria Sample Worksheet
Assignment:
Country:
Project:
Date of Evaluation:
Name of Firm:
Evaluated by:
.80 24
.90 36
1.0 30 90 17

17. Evaluating Proposals with Quality Criteria Summary Worksheet
Assignment:
Country:
Project:
Date of Evaluation:
Evaluated by:
ABC Consultants
Wgt.
.10 80 8
.20 90 18
.70 70 49 75
1.00 16

18. Evaluating Proposals with Different Technical/Price Ratios
FIRM A
FIRM B
FIRM C
FIRM D
FIRM E 17

19. Consultant Comments on TOR
Consider on their merit
Review carefully (do not automatically reject)
Provide benefit of consultant’s expertise
Level of consultant understanding is potential measure of competency 18

20. Evaluating Proposals with Quality Criteria—Committee Review Process
Committee convenes after individual reviews
Individual evaluations and scores are compared.
Determine the best proposal.
Rank order the other proposals.
Prepare an evaluation report on the proposals.
Preserve all records for transparency.
Notify consultants of results. 19

21. Evaluation Based on Quality and Cost (Method 2)
Use a two-stage process.
Evaluate quality first (as above).
Evaluate cost second. 20

22. Evaluation Based on Quality and Cost—The Process
Evaluate quality.
Notify consultants who failed.
Either did not meet minimum qualifying mark for quality
Or were not responsive
Return their financial proposals unopened. 21

23. Evaluation Based on Quality and Cost—The Process (#2)
Notify consultants who qualified of date and time set for opening of financial proposals.
Open financial proposals in public.
Read aloud and record the following:
Name of consultant
Quality scores
Proposed costs
Prepare minutes. 22

24. Evaluation Based on Quality and Cost—The Process (#3)
Client reviews financial proposals
Correct arithmetical errors.
Convert to single currency (per RFP).
Use official exchange rates (per RFP).
Date for setting rate should be set in RFP.
Not earlier than four weeks prior to deadline for submission
Not earlier than original date of expiration of period of validity of proposal 23

25. Evaluation Based on Quality and Cost—The Process (#4)
Cost should exclude local taxes.
Lowest cost proposal gets financial score of 100.
Weight financial and quality scores.
Firm with highest total combined score is invited for negotiations. 24

26. Summary Selection of consultants primarily judgmental
Two basic ways to select
Quality criteria alone
Quality + cost criteria
Cost alone should never be used for selection 25

27. Summary Method 1: Quality selection process Client issues RFP.
Firms prepare and submit proposals.
Client uses pre-established criteria and weights to evaluate.
Individual reviews followed by group review.
Single overall score given each proposal, and firm with highest scoring proposal invited for negotiations. 26

28. Summary Method 2: Quality + cost selection process
Quality process plus
Eliminate proposals below a quality cutoff.
Return unopened financial proposals of nonqualifiers.
Open financial proposals of qualifiers in public. 27

29. Summary Quality + cost selection process (continued)
Review financial proposals for accuracy and convert to common currency.
Give lowest bidder score of 100.
Add financial and quality scores.
Highest overall score wins.
Invite winning firm to negotiations.
Transparency is important for both methods. 28

30. Module 10 Organizing Procurement
Session Procurement of Services: Contracts and Negotiations

31. Types of Contracts for Service Providers
Time inputs (may or may not include reimbursable expenses)
Lump sum (may or may not include reimbursable expenses)
Cost-plus fixed fee
Retainer with or without contingency

32. Time Input Contracts Rate X Time
Monthly
Weekly
Hourly
Should have a maximum amount (ceiling) with contingency
Payment based on inputs, which encourages quality work
Client administration required
Considered flexible and fair and widely used

33. Lump-Sum Contracts Payment based on output
Fixed payment for delivery of product or service within a specified time period
Should include contingency allowance
Easier to manage than time-based contract
Appropriate for well-defined services with clear TOR
Convenient for repeat assignments

34. Cost-Plus Fixed Fee Contracts
Special type of contract for “know-how”
Includes licensing fee (as for a patented industrial process)
Cost + Fee (for know-how)
Also appropriate when inputs/outputs not clearly defined

35. Retainer and/or Contingency Fee Contracts
Not commonly used except for management consultants and legal firms
Retainer fee = number of days of effort over a fixed time period
Must pay retainer even if less effort required

36. Best “Bets” for Most Projects
Time-based contract
Lump-sum contract

37. The Consultant Contract: Possible Clauses
The nature of the association (for joint ventures)
The procedure for amendments
Staff substitution
Consultant authority
Conflict of interest
Cofinancier’s contribution to cost
Price adjustment
Contingency allowance

38. The Consultant Contract: Possible clauses (2)
Rates for additional work
Payment procedures
Audits
Taxation
Termination
Local law

39. The Consultant Contract: Possible clauses (3)
Liability
Insurance
Settlement of disputes
Penalties, performance bonds, and guarantees

40. The Consultant Contract: Annexes
Terms of reference
Performance schedules
Cost estimates
Terms of payment
Lump sum
Monthly rates
Reimbursables

41. Contract Negotiations
Procurement should focus on quality of consultant, not price.
Notifications should be in writing:
Invite in writing representative of winning proposal team to negotiations.
Notify others of negotiations and request they hold their proposal valid.
Consultant team leader should be present at negotiations.

42. Contract Negotiations (continued)
No contract before meeting between client and consultant
Costs of attending negotiations are borne by consultant.
Client should prepare for the negotiation.
Train staff.
Clarify position and objectives.
Develop strategy.

43. Order of Negotiations The methodology or work plan
The proposed staffing
Financial conditions
Contract

44. Methodology and Work Plan
Client should have evaluated plan during selection process.
Examine consultant’s suggestions for improving the TOR.
Consultant’s suggestions are not part of contract but may be incorporated in the definitive TOR included in contract documentation

45. Proposed Staffing Review each key member’s role.
Substitutions must be equivalent or better.
Substitutes must be specifically named.
Review activity schedules for staff (schedule resources).
Agreed staff should not be replaced except for good reason.

46. Contract and Financial Conditions
Review clauses and terms and conditions.
Modifications must be mutually agreed upon.
Financial negotiations will vary depending upon
If price was a factor in the selection
The type of contract used

47. Contract and Financial Conditions (continued)
For time-based contracts
Staff inputs usually paid on basis of agreed rates with ceiling
Field work usually paid on staff-month basis
Head office work on a staff-hour or staff-day basis

48. Time-based Contracts: Typical Clauses
Foreign Currency
Schedule 1. Staff services
Schedule 2. Staff services in home office
Schedule 3. Reimbursables
Allowances
Mobilization/demobilization
Schedule 4. Foreign currency
Schedule 5. Foreign currency payment schedule

49. Time-based Contracts: Typical Clauses (continued)
Local currency
Schedule 1. Local staff services
Schedule 2 . Reimbursables
Living allowances per diem
Local transportation
Office costs
Other costs
Schedule 3. Local taxes

50. Calculating Staff Rates
Basic salary
Monthly salary
No bonus payments included
Non-negotiable
Social charges
Benefit charges (vacation, sick leave, and retirement)
Result from legislation in consultant’s country

51. Calculating Staff Rates (continued)
Overhead
Administrative and business costs
Range: 65 to 200% basic salary
Fee or profit
Gross profit before taxes
Percentage of total basic salaries (10-20%)
Overseas or inducement allowance
Hardship allowance
Usually 20 to 60% basic salary

52. Calculating Staff Rates (continued)
No negotiation of rates should occur during negotiations if price was considered in the evaluation and rates were established in competition.

53. Reimbursable Costs
Out of pocket expenses incurred in carrying out duties
Reimbursed at cost
Documentation (receipts, invoices) required
Contract should specify what costs are reimbursable and how they will be paid.

54. Common Reimbursable Costs
Mobilization/Demobilization (airfare, visa)
Subsistence costs
Communications charges
Office rent and supplies/equipment; printing
Insurance costs
Transport of project-related equipment
Surveys and subcontracted services

55. The End-Product = Contract
A “win-win” contract is the goal!
Negotiations should end with a friendly atmosphere.
Want to establish spirit of cooperation and confidence

56. Other Procedures for Selection
Fixed budget
Least cost
Consultant’s qualifications
Single source

57. Selection under a Fixed Budget
Conditions when appropriate
Simple assignment
Precise and unambiguous TORs
Budget fixed
RFP should indicate available budget.
Firms submit separate technical and financial proposals.
Evaluate initially on technical merits
Open price bids in public
Highest technically ranked firm within budget is invited to negotiations.

58. Least-Cost Selection Conditions when appropriate
Standard or routine assignments
Well-established practices and standards exist
Contract amount is small
RFP sets minimum qualifying mark for quality.
Firms submit separate technical and financial proposals.
Evaluate initially on technical merits
Open price bids in public
Least-cost bidder that meets quality mark is invited to negotiations.

59. Selection by Consultant Qualifications
Conditions when appropriate
Small assignments
Competitive evaluation not worth effort
Client prepares TOR and requests expression of interest.
Short list established
Most qualified firm is selected and invited to submit a combined technical/financial proposal.
Contract negotiated

60. Single-source Selection
Does not provide benefit of competition
Only use in exceptional cases
Services are natural continuation of firm’s previous work.
Rapid selection is essential (emergency).
Small assignments
Only one firm is qualified.

61. Summary Four types of contracts for services Contract Negotiations
Time
Lump-sum
Cost plus
Retainer
Contract Negotiations
Be prepared!
Typical order
Methodology
Staffing
Financial conditions and contract

62. Summary (continued) Typical clauses in time-based contract
Currency
Rates
Reimbursable expenses
End product of negotiations = “Win-win”
Other forms of selection
Fixed budget
Least cost
Qualifications
Single source