Civil society Procurement Monitor

Civil society Procurement Monitor
As we earlier discussed, civil society groups can be involved as procurement monitors or observer members of the evaluation committee. This lecture focuses on the role of the CSO as a procurement monitor.

Civil Society Organization
Engaged through through competitive bidding to undertake performance monitoring, evaluation, and audit of procurement and contract implementation Civil society organizations can be engaged by government as procurement monitors through Article 52.3 of the PPLM. “52.3. Private and specialized non government organizations can be selected through competitive bidding as stated in articles of this law, to conduct the progress or performance monitoring, evaluation and auditing on the activity of procuring entity, the contract execution and quality.” CSOs will be selected through a competitive selection process for consultants. The CSO selected will then perform its duties as procurement monitors according to terms of contract set by he procuring entity. But it may also find use in a suggested monitoring framework which is being suggested in this presentation.

Procurement Guiding Principles (Article 6)
Transparency Equal opportunity to compete Economy and efficiency Responsibility The guiding principles of the PPLM are: transparency, fair competition, economy and efficiency, and accountability. CSO procurement monitors could use the same guiding principles when they evaluate the conduct of procurement. These same principles can inform the monitoring framework of civil society groups evaluating public procurement.

CSO Monitoring Framework
Questions to ask when monitoring Tips and notes for monitoring Transparency Fair competition As such, CSOs can frame their monitoring questions alongside these four guiding principles. Has the conduct of procurement been transparent? Has the conduct of procurement promoted fair competition to as many players possible? Has the procurement resulted in the most advantageous deal to government? Was it conducted efficiently? Are the accountability lines clear? These four big questions will reveal the quality of the procurement process conducted. Economy/ Efficiency Accountability

HOW PROCUREMENT IS ORGANIZED
Let’s begin with the procurement planning stage or how procurement is organized. HOW PROCUREMENT IS ORGANIZED

Evaluation Committee: Composition (Art. 47)
Who are the members of the committee? Are the members specialized in procurement or the item to be procured? Are there conflict of interest relations? Is there an NGO member? Who? Has any of the members had a record of civil servant duty violations in the past year? Are majority of the members procurement specialists? Transparency Fair competition Family relations Contractual relations with tenderer in the past 3 years In the constitution of the evaluation committee, it is critical that the procurement monitor determine: Whether there is procurement competency by the number of procurement specialist members Whether there are conflict of interest relations Whether there is an NGO member as a built-in check and balance Whether there have been identified members with questionable integrity record These questions Economy/ Efficiency Accountability

Evaluation Committee: Code of ethics and conduct
Do the committee members adhere to the following? Transparency Ensure fair competition Promote state interests Should not accept bribes and other illegal proposals Should inform supervisor of potential conflict of interest Should inform supervisor immediately if tenderer attempted to influence procurement results Fair competition It is also important that the procurement monitor evaluate the performance of the evaluation committee in adhering to their duties in: Ensuring fair competition Promoting state interests Non-acceptance of bribes and other illegal proposals Transparency in revealing conflict of interest relations Economy/ Efficiency Accountability

SELECTION OF PROCUREMENT PROCEDURE
In the selection of procurement procedures, it is key that the procurement monitor know the rules that limit the choice of the procedure. SELECTION OF PROCUREMENT PROCEDURE

Three Types of Procurement Procedures
Open procurement procedure Exceptional procurement procedure Selection of a contractor of consulting services Selection of procurement procedure is based on cost estimate of goods, works, or services or GWS (Art. 8.4) There are three general types of procurement procedures – 1) open procurement or competitive bidding, 2) exceptional procurement, and 3) selection of consultants. The selection of procurement procedure is limited by the cost estimates set by the procuring entity for the goods, works, or services.

Threshold Values and Procurement Method (Art. 8)
Goods, works or services (GWS) under Comparison Method Transparency CABINET SETS THRESHOLDS UPPER CEILING of cost estimates for… LOWER CEILING of cost estimates for… GWS under Direct procurement Fair competition Consulting services under least-cost method Thresholds are set by the cabinet for: Goods, works and services under comparison method Goods, works, and services under direct procurement Selection of consultants under least-cost method These thresholds should be observed. It is important for the monitor to obtain what these thresholds are to know which procurement projects can be procured using the exceptional methods of procurement such as comparison method, limited bidding, and direct contracting. Also note that the thresholds and other conditions need to be met for the procuring entity to be allowed to use exceptional methods of procurement. Economy/ Efficiency GWS that require state administrative body authorization for budget issues Accountability GWIS whose Invitation to tender is posted in nationwide newspapers and other mass media

Threshold Values and Procurement Method (Art. 8)
Transparency Goods, works or services (GWS) under Comparison Method CABINET SETS THRESHOLDS UPPER CEILING of cost estimates for… If cost estimates > upper ceiling set for comparison method, OPEN PROCUREMENT PROCEDURE and following 3 methods should be used Fair competition If the cost estimate of goods, works or services is higher than the upper ceiling for the same under comparison method, open procurement or competitive bidding should be the procurement method used. Competitive bidding should be the default method of procurement except during which conditions are established which make it impossible or impractical as will be discussed later. Community participation method was recently introduced as a procurement method in the amendment of the PPLM in June 2011 (Article 7.4). Community participation can be availed of for projects costing less than 20 million MNT. GWS under Direct procurement Economy/ Efficiency Consulting services under least-cost method Accountability Community participation method, where cost estimation is below 20mn MNT

Creating Packages of Goods, Works, and Services
General Rule: Splitting of GWS into packages is prohibited The general rule is goods, works, and services cannot be split into smaller packages to circumvent competitive bidding.

Splitting of goods, works, and services into several packages
Transparency Did splitting result in greater competition? Are packages created rationally? Did the procuring entity indicate the existence of packages in the invitation to tender and tender documents? Did the procurement procedure minimize the total cost of all contracts? Fair competition The few instances that this is allowed is if the splitting of the project resulted in greater competition. The project packages could be too big that only a few firms can participate and by splitting the project into smaller packages, more firms can participate and compete. Government would then have a better chance of getting a good deal from the competition that is created by the smaller packaged projects. Also if the project is split into smaller packages, there should be some rational explanation for doing so, such as packaging is done according to: 1) similarity of purpose and/or 2) geographical location of the project. If this is done, the procuring entity should make sure to to indicate the existence of these packages in the invitation to bid and the tender documents. It should also establish that the total cost of the contracts are minimized by the splitting. This provides proof of the benefit of splitting and greater competition among smaller firms. According to type and similarity of purpose, and geographical locations Economy/ Efficiency Accountability

For packages, in determine procurement method to use…
Total cost of all packages as determinant (Art. 8.7) Opt for procurement method where total cost of all contracts are signed at its minimum Assuming that the big project has been split into smaller packages for purposes of promoting greater competition, the procuring entity will not use the cost estimate of each package as the basis for the choice of the procurement method to be used. The total cost estimate for all the packages shall serve as the basis. The procuring entity will have to opt for the procurement method where the total cost of all contracts will be signed at its minimum. What this really means is that the favored method of procurement is competitive bidding where there is a greater chance for government to get the most advantageous deal or the minimum cost of all the contracts.

Preferences allowed by law
Tenderers that supply goods of Mongolian origin Bodies tendering to execute at least 50% of works independently Mongolian citizens or legal entity Foreign legal entity registered in Mongolia and with 50% equity owned by Mongolian citizen or legal entity Tenderer with largest use of locally produced goods, materials and services Tenderer that employs largest share of local labor Tenderer with 90% of employees Mongolian Tendering price shall be discounted: 10% for goods of Mongolian origin 7.5% for works Transparency Fair competition The law allows for government to have preferences, especially for products or services provided by Mongolian firms. These are as follows: Tenderers that supply goods of Mongolian origin Firms that execute at least 50% of works independently of Mongolian citizenship or legal entity Foreign legal entities registered in Mongolia with 50% equity owned by Mongolian citizens or legal entity Tenderers with largest use of locally produced goods, materials and services Tenderers that employ largest share of local labor Tenderer with 90% of employees who are Mongolian A discount is also given to goods of Mongolian origin (10%) and works by Mongolian firms (7.5%). For works costing more than 10 million MNT and goods and services costing more than 100 million MNT, foreign tenderers cannot be excluded from participating. The monitor should be aware of these preferences because these could also limit the competition to the disadvantage of government. Economy/ Efficiency Accountability Is there bias against FOREIGN TENDERERS? Did the procuring entity exclude foreign tenderers for works costing more the MNT 10 million and goods and services costing more than MNT 100 millon?

Bidding Process (Pre-contracting)
Procurement planning Preparation of bid documents Public announcement of invitations for tendering Clarification of Bidding document and Pre-bid meeting Submission of tenders Opening of tenders Review of tenders Evaluation of tenders Authorization to enter into a contract Just to remind us once again, these are the procurement stages which the monitor can follow to check on the transparency, fair competition, economy and efficiency, and the accountability of the conduct of procurement.

Prequalification Transparency Fair competition Economy/ Efficiency
What were the Cabinet procedures for pre-qualification? Did the procuring entity make the announcement in a nationwide newspaper and other mass media Transparency Fair competition Take note of the prequalification criteria – does it allow for greater competition or limits competition? Are the requirements reasonable and appropriate? Even before competitive bidding happens, sometimes the procuring entity conducts prequalification. Prequalification is a pre-screening process that determines the qualified potential bidders who may participate in the bidding process. If prequalification is conducted, it is important for the monitor to know the procedures adopted by the procuring entity. Was the prequalification process publicly announced? Are the criteria used fair, reasonable and appropriate? Economy/ Efficiency Accountability

Disqualified tenderers
Insolvent and under receivership Not fulfilling tax payments and obligations Operations of legal entity with whole or partial state ownership Bad track record (violation of contractual obligations) for the past 3 years With conflict of interest (design and contract execution) Submitted false information Court decided that the tenderer committed a corruption crime in past 3 years Verify reasons for disqualifying tenderers Normally, the prequalification is based on the following minimum requirements of government: Solvency Fulfillment of tax payments and obligations Non-state entity Good track record or no contractual violations within the past 3 years No conflict of interest in the design and contract execution of the project No false information No corruption record for the past 3 years

Disqualification/ Blacklist
Did the state administrative body disclose publicly bodies whose rights to tender were restricted? Transparency Fair competition Normally, government maintains a blacklist or a list of disqualified contractors. Try to obtain this list and refer to the same for reference. Economy/ Efficiency Accountability

Tenderer’s proofs Court ruling and/or official document issued by the competent public administrative authority Certificate and/or other equivalent documents issued by competent authorities A tenderer can use court rulings or official documents issued by a competent public administrative authority to certify its good standing and its prequalified status.

OPEN PROCUREMENT PROCEDURE
Open procurement procedure is competitive bidding which is the ideal default method of procurement of government. OPEN PROCUREMENT PROCEDURE

Single or Two-stage Open Tendering
Transparency The default mode is single-stage open tendering. If the procuring entity adopted two-stage open tendering, verify if there is presence/absence of conditions justifying use of two-stage tendering. Fair competition Normally, a single stage open tendering is the process used for competitive bidding. There are a few instances however when two-stage tendering is adopted and this is done if: The scope of work is large. The cost estimates are high. The contract includes a mix of goods, works, and services. The technical submissions of tenderers are likely to be unequal because of undefined or vague technical specifications or simply because there are several technical and equally acceptable solutions that will satisfy the requirements of the procuring entity Economy/ Efficiency Scope of work is large; Cost estimates are high; Contract includes goods, works, and services; Technically unequal proposals likely to be submitted; Several technical and equally acceptable solutions can satisfy requirements of procuring entity Unable to establish technical specifications in advance Accountability

Two-stage Open Tendering
Did the procuring entity indicate in invitation to tender and tendering documents use of two-stage open tendering? Transparency Fair competition When a two-stage open tendering process is adopted, it is important that the procuring entity indicate this in the invitation to tender so that the bidders are properly informed and will not be driven away because of the vagueness of the technical specifications. Economy/ Efficiency Accountability

Two-stage open tendering
Tenderers invited to submit technical proposals Technical proposals are assessed by procuring entity Technical specifications are revised and clarified by procuring entity => standard technical specifications Tenderers invited to submit financial proposals based on revised and clarified technical proposals Procuring entity to evaluate The tenderers will be invited to submit technical proposals which will be assessed by the procuring entity based on a set of general requirements. The project technical specifications will then be revised and clarified by the procuring entity and based on which the bidders will now satisfy in their technical bid submissions and submit financial proposals. The proposals will then be evaluated by the procuring entity.

Two-stage Open Tendering
Transparency Are the revised standard technical specifications fair or is there bias for a specific tenderer? Fair competition It is therefore critical for the monitor to assess the revised technical specifications if these are in some way biased for a specific bidder based on the initial submissions. In single-stage bidding, the technical specifications are clearly and specifically determined using generic terms. The bidders will satisfy these requirements in their technical bids and are generally competing through their financial proposals. The technical and financial bids are given in a single submission thus the name “single-stage” bidding. Economy/ Efficiency Accountability

Is the cost of tender documents prohibitive?*
Transparency Where foreign tenderers are allowed to participate, are the tender documents presented in a language widely used in international trade? Is the cost of tender documents prohibitive?* Are the tender documents made available to all interested parties without unreasonable delay? Are the documents available the day before the publication of invitation to tender? Fair competition The monitor could assess the fairness of procurement by looking at the way the tender documents are prepared and made available. For instance if foreign bidders are allowed to participate, is their participation limited by the language of the tender documents? Are the tender documents presented in a language widely used in international trade (e.g. English)? Another indicator would be cost of the tender documents – are these made available at prohibitive costs so much so that only the big and rich firms are able to participate in the procurement? Are the tender documents made available to all interested parties without unreasonable delay? The procurement monitor could refer to a registry of bidders who obtained the tender documents and the dates on which the bidders obtained the tender documents. If there is some showing that some bidders were able to obtain the documents so much earlier than the rest, the monitor could probe further on why the other bidders obtained the bid documents much later given them less time to prepare for the bids than the bidders who obtained the tender documents much earlier than the rest. Economy/ Efficiency Accountability

Tender Documents Transparency Fair competition Economy/ Efficiency
Is the invitation to tender posted in a nationwide newspaper and other mass media? Does it contain complete information? Transparency Fair competition The monitor could also probe further into the fair competition and transparency of the procurement by examining the invitation to bid: Is the invitation posted in a nationwide newspaper and other mass media that has the widest reach? Does the invitation contain complete information about the project to be bid out, giving potential bidders sufficient information to effectively participate in the competitive bidding? Some of the critical information that a bidder needs to know are: A description of the goods, works, and services that will be procured by government Where the tender documents can be obtained and the cost of the same What are the requirements to participate When is the deadline for submission of bids and where to submit bids What is the evaluation criteria adopted (including the preferences) Identity of procuring entity Brief summary of the works, goods or services to be procured Address where tender documents and other information can be obtained and submitted Cost of tender documents Special requirements to tender selection Deadline for tender submission Time of commencing the tendering Participation of foreign tenderers allowed or not Granting of a margin of preference Economy/ Efficiency Accountability

Clarification on tender documents
Transparency Did the changes (clarification/ additional information) give undue advantage to any one tenderer? Did these changes affect the ability of other tenderers to respond to the tender opportunity? Fair competition After obtaining the tender documents, bidders are allowed to ask for clarifications on the tender documents to the procuring entity. It is important that the monitor later track the changes or modifications made on the technical specifications of the project to be bid out. If there are changes or refinements (out of the clarifications) on the technical specifications, were these in any way favoring a specific bidder? Did the changes affect the ability of other bidders to respond to the tender opportunity? What is important for the monitor to note is that the clarificatory communications between the bidders and the procuring entity did not in any way result in undue advantage to any one bidder through some form of negotiation via clarificatory communications. Economy/ Efficiency Accountability

Clarification of Bidding document and Pre-bid meeting
Transparency Did the procuring entity respond to the bidders clarification? Was there amendment to the Bidding document in accordance with the potential clarification by bidders? Did procuring entity conduct pre-bid meeting and respond to the bidders clarification during the meeting? Fair competition There is always room to improve bidding document in case violation of principle for fair competition. One of this is the clarification of bidding document prior to 5 working days from bid submission. It gives opportunity for both procuring entity and bidders to fix any of their uncertainty and mistakes before going far. Economy/ Efficiency Accountability

Deadline for submission
Transparency Did the procuring entity set the deadline for submission at least 30 days or more from publication of invitation to tender? Are the tenderers given sufficient and equal time to prepare their tenders? Fair competition It is also important that the monitor see whether the set deadline was set too early giving some bidders insufficient time to prepare their bids. This could be compared with the date when bid documents were obtained by the potential bidders – who were able to obtain the bid documents earliest and submit tenders on time too and those who obtained bid documents late and unable to submit their bids on time. This could be indicative that bidders were given unequal treatment in the access of bid documents or in the submission of bids especially if the deadline was set earlier than is prescribed by the law. Economy/ Efficiency Accountability

Submission and opening of tenders
Transparency Take note of announced details of tenders opened (tenderer’s name, tendering price, alternative tendering price, discounts offered, tender security, modifications, withdrawals, etc.)* Are the Notes of the procuring entity made available to any interested party? Fair competition Was the submission and opening of bids done in one day? Ideally, these two activities are conducted in one day so as to avoid switching of bids or rigging of bids. The monitors should be able to take note of those bidders who were not able to meet the set deadline and make sure that the procuring entity does not bend its own rules and allow late submissions even if these are just a matter of minutes. This is to avoid doubts on the integrity of the process. If the procuring entity gives in to what it would determine to be minor deviations, other deviations could also be let pass as minor and the whole process will be questioned. During the opening of bids, the procuring entity should announce the details of the tenders for purposes of transparency. The monitors should note of these details and make their own documentation to compare with the official documentation made by the procuring entity (evaluation committee). Whatever is not announced should not form part of the tender and will not be included in the evaluation process. The monitor should also be able to access the official documentation of the evaluation committee of the opening of bids. The official documentation should also be made available to the public. Economy/ Efficiency Is there strict compliance with the deadline?* Accountability *Details of tenders not announced (ex: tendering price) shall not be considered in tender evaluation.

Review of technical qualifications
Review of tenders Transparency Check on whether the tenderers are qualified (see bases for disqualification) Fair competition A review of tenders then follows where the bidders are evaluated first on their qualification. Are they solvent? Have they had a bad track record in the past, etc. The grounds for disqualification and blacklisting were discussed in the previous slides. The bidders’ technical qualifications will then be reviewed – its manpower, its track record, and other performance records such as quality control measures and quality certificates. Review of technical qualifications Education and professional qualifications of management, supervision, and execution employee Works carried out in last 5 years Tenderer’s instruments and technical facilities, list of plants and equipment Quality control measures (if sub-contracting) Quality certificates issued by competent authority Economy/ Efficiency Responsibility

Review of Financial Qualifications
Review of tenders Transparency Check on whether the tenderers are qualified (see bases for disqualification) Fair competition The bidders’ financial standings will also be checked through a review of its bank statements, financial statements, and other related reports. Review of Financial Qualifications Statements by correspondent bank Audited financial statements Table of consulting staff, remuneration and other cost estimations Reports on annual sales up to last 5 years Economy/ Efficiency Responsibility

Are the contract terms inconsistent with the law?
Review of tenders Transparency Has there been negative influence on scope, quality and performance of goods, works or services? Are the contract terms inconsistent with the law? Has there been unfair influence on competition of other responsive tenders? Fair competition Aside from the technical documents aforementioned, the monitor may also want to ask about the way the bidder conducted itself during the procurement process. Did it in any way try to influence the scope, quality and design of the project that is being bid out? Did it try to influence other bidders to fall out from the competition or other ways to undermine competitive bidding? Economy/ Efficiency Responsibility

Evaluation of tenders Transparency Fair competition
IS THE KEY CRITERION THE TENDERING PRICE? Are there other factors considered? What were these? Fair competition The evaluation of technical submission usually merely examines whether the submissions meet the minimum requirements of the project. The criteria used is an objective pass/fail l where either the bidder meets the minimum technical requirements or not. Those that were determined to have passed the technical evaluation then proceed for their financial bids to be evaluated. Evaluation of financial bid is done with the bid price as the sole criterion. Tenders are arranged from lowest (bid price) to highest with the tender prices adjusted according to the margin of preference discounts. The lowest price is usually determined to be the best evaluated tender everything being equal (after sales service, completion date, etc.). Economy/ Efficiency Time of completion of works and services and/or delivery of goods Current expenses or cost and efficiency estimations After-sales service and technical assistance Commitment to supply spare parts Quality and and technical merits of works, goods and services Other criteria consistent with law This is done only for the purpose of comparing tenders and shall not be a justification for changing tender price. Responsibility

Evaluation of tenders Tenders shall be arranged from lowest to highest
Tender price adjusted according to margin of preference discounts Lowest price = BEST EVALUATED TENDER In case of foreign currency, currency to be converted at Mongolbank rate effective on day of tender announcement The monitor should see to it that evaluation of bids is based on a pre-determined criteria duly published in the tender documents.

Authorization to enter into a contract
Transparency Did the procuring entity authorize the tenderer with the BEST EVALUATED TENDER to enter into contract? Did the other losing tenderers get notification in writing? Was the contract signed after 5 days from notification? Fair competition The procuring entity then proceeds to award the contract to the best evaluated tender. At this stage, it is critical that the monitor check whether the best evaluated tender had been later found to be disqualified. The monitor should probe on the grounds for disqualification if they are valid and justified. Post-qualification is important because the best evaluated tender could be deliberately disqualified to favor the next-ranked bidder. On the other hand, if post-qualification is not done properly, bidders could just lower their bids and submit false information knowing that these will not be validated anyway during post-qualification. In the awarding of the contract, the monitor should also find out if the losing bidders have been duly notified with sufficient explanation of the results of the bidding. This is to ensure transparency of the process but more importantly this is critical in helping build the bidders’ trust and confidence in the public procurement system. If the bidders fully understand why they lost in the bidding process, then the government can be sure that the bidders will want to try and compete again. If they don’t understand the results, they will doubt the integrity of the process and will easily think that the winning bidder was a favored contractor. This will discourage them to participate again In a competitive bidding process. In the end, it will be a huge loss for government – fewer participating bidders would mean less competition and less chances for government to get an advantageous deal for the public goods and services it needs to provide its people. Lastly, the monitor should find out if the contract was immediately signed (5 days after the notification). This is part of the efficiency question. But also, if the contract-signing is unduly delayed, the monitor should be alarmed of possible ‘influences’ that will change the results of the bidding. Economy/ Efficiency Responsibility

Authorization to enter into a contract
The procuring entity may extend tender validity period if it becomes impossible to sign contract due to reasons not dependent on the procuring entity. Extension shall be justified in writing There will be times of course that the delay is justified and therefore the monitor should seek out an explanation in writing from the procuring entity.

Rejecting all tenders All tenders are not responsive
Determination of unfair competition Court or competent authority determines that the tendering price was negotiated Conditions of tendering were not provided accurately to tenderers Competitors were put under pressure Tendering prices of all responsive tenders exceeded procuring entity’s cost estimate by more than 5% Negotiation with tenderer whose tendering price exceeded cost estimates failed Negotiation is done to bring down tendering price to exceed cost estimates by less than 5% There will be instances when no award is made to any bidder. This is called a bid failure. This happens if: All bids are not responsive, meaning, all those who submitted their bids did not satisfy the technical and financial requirements of the project There is a determination of unfair competition by a government authority. Bidder/s may have reported that they were put under pressure by other bidder/s or government personality which prevented them from submitting a competitive bid. Or the bid conditions were not given equally and accurately to all bidders. The financial bids exceeded the procuring entity’s cost estimate by more than 5% and negotiations to bring down the price to within 5% has failed

If procuring entity rejected all tenders…
It shall examine the reasons that resulted in failure, make relevant amendments to content of tender documents, and conduct open tendering If reason for failure is all responsive tenders exceeded cost estimates by more than 5% and negotiation failed, relevant modifications will be made in tender documents, and conduct limited tendering Reoccurrence of rejection of all tenders after amendments and conduct of open tendering/ limited tendering (30.4.3) , procuring entity shall proceed to conduct direct contracting In case there is a bid failure, the monitor should validate the basis for the failure. The monitor may consider probing whether the bid failure was deliberate so that the procuring entity can proceed immediately to direct contracting. The monitor should also look into the response of government to the bid failure. Government should learn from the failure to improve the bid conditions and allow bidders to become more responsive to the bid without compromising the need requirements of government. If the failure is the cost estimates ceiling, government may resort to limited tendering after modifying the bid documents. If at a second competitive bidding or limited tendering, there is still failure, government may proceed to conduct direct contracting. It is critical that the monitor evaluate whether the first failure has been properly addressed (modifications in bid documents) because this could lead to lesser competitive methods such as limited tendering and direct contracting.

EXCEPTIONAL PROCUREMENT PROCEDURES
While competitive bidding is the default method of procurement for government, government may also resort to other exceptional or alternative methods if certain conditions are met such as earlier discussed in the case of a bid failure. The succeeding slides will show the kinds of alternative methods of procurement and when these are resorted to by government.

Limited tendering is a process where the public announcement for bidding is foregone and instead a few pre-qualified bidders are invited directly to submit bids. LIMITED TENDERING

Limited Tendering Transparency Fair competition Economy/ Efficiency
Are there limited tenderers capable of executing goods, works, services requiring high qualification, expertise, equipment, technology? Was there a rejection of all tenders because responsive tenders exceeded cost estimates by more than 5% and negotiations to bring down tender price to less than 5% in excess of cost estimate have failed? Fair competition This method is availed of by government because there is a determination that there are just a few bidders who can deliver the required goods, works, or services. Or in the case of a bid failure due to bids exceeding the cost estimates by more than 5%, limited tendering is an option that the procuring entity may resort to after the first failure. In the first case, the monitor should validate and assess whether the procurement item is a highly specialized project that only a few bidders can deliver. In the second case, the monitor should obtain the report of the evaluation committee discussing in detail the failure of bid especially the part where negotiations to bring down the tender price to less than 5% in excess of cost estimates have failed. Economy/ Efficiency Responsibility

Procedure Simultaneous invitation to tender is sent to bodies with capacity to execute contract Tender documents shall be provided to interested tenderers without unreasonable delay Tender submission deadline is set to 15 or more days from delivery of invitation to tender Once there is justified use of limited tendering, the monitor will now review the procedure adopted by the procuring entity. Were the pre-selected tenderers simultaneously given invitations to tender? The monitor may look at the registry of invitations sent out to potential bidders and verify if invitations and tender documents were sent out to the same on the same dates or if there were others who were able to obtain the invitation and bid documents much earlier giving them more time to prepare their bids. Even with the limited bidding, there should be some semblance of fair competition at least amongst those who have been pre-identified as potential bidders.

Comparison method is a procurement method where at least 3 bidders are invited to submit bids. Unlike limited bidding, comparison method is resorted to for small value procurements and not necessarily for highly specialized procurements. Comparison method is usually identified as a procurement method for common goods, works and services of small value and where it is determined that it is more cost efficient as a procurement method as against competitive bidding where preparations and conduct could be costly. COMPARISON

When is comparison method allowed?
If the cost estimate of goods, works, services does not exceed the threshold values Again, it is critical to know the cost estimate thresholds for goods, works, and services as earlier set by the procuring entity during procurement planning. This will be the basis for which comparison method can be availed of. If the cost estimate of the goods, works, and services are below the threshold values, the procuring entity may use comparison method. The monitor should be aware of the practice of splitting however as earlier discussed. Take note of possible splitting of cost estimates to circumvent open tendering method and for availment of comparison method.

Procedure Procuring entity invites 3 or more bodies that satisfy the technical specifications and other conditions and requirements to submit price proposals Procuring entity to authorize qualified tenderer with lowest price to enter into contract Submission of price proposal shall be done in not less than 5 working days from the day the invitation was delivered As earlier mentioned, the process is that at least 3 bidders are invited to submit price proposals. The bidders should be first determined to be qualified. Whoever submits the lowest price shall be authorized to enter into contract with government.

Procedure If there is failure to compare, procuring entity may proceed to direct contracting If comparison method failed, the procuring entity may proceed to direct contracting. It is important that the monitor therefore be mindful of how the procuring entity conducted comparison method. Is the procuring entity’s choice of the bidders to be invited carefully done so that they are all qualified and able to submit responsive bids? The monitor should probe why a comparison method failed and be sure to know if the failure was deliberately done by the procuring entity so that it can proceed to direct contracting.

Direct contracting is the least preferred method of procurement, primarily because there is no competition and only one contractor/firm is approached and negotiated with. This procurement method is least likely to produce the most advantageous deal with government and therefore sets more conditions and prerequisites before a procuring entity can justify use of this method. DIRECT CONTRACTING

Are these conditions present?
Direct contracting Are these conditions present? Transparency Second failure of open tendering and failure to compare Procured item is protected by copyright laws Additional supplies (replacement, repair, replenishment) do not exceed 20% of value of initial contract and change in supplier will result in cost-inefficiencies and other technical difficulties Additional works do not exceed 15% of initial contract Emergency cases due to unforeseeable and force majeur circumstances Fair competition Direct contracting can only be resorted to if: There is second failure of open tendering There is a failure of comparison method The project to be procured is protected by copyright and patent laws The procurement is just a replenishment of a previously bid good where the contract value is not more than 20% of the initial contract The procurement is just additional works of a previously bid work where the contract value does not exceed more than 15% of the initial contract The procurement is an emergency purchase due to unforeseeable and force majeur circumstances Economy/ Efficiency Responsibility

Procedure Procuring entity shall negotiate with one or more bodies that satisfy basic technical and financial qualifications. The procuring entity shall enter into contract with body that best satisfies the technical specifications, conditions and requirements Contract and statement justifying the application of procedure shall be sent to central administrative authority The procuring entity negotiates with the contractor that is best able to satisfy the technical requirements of the contract. A report that sufficiently justifies the use of such method shall be produced by the procuring entity and which the monitor should review to determine whether the use of the direct contracting was indeed justified and fairly executed.

PROCUREMENT OF CONSULTING SERVICES
Procurement of consulting services is slightly different because of the use of a different set of evaluation methods as will be explained later. The monitor should first examine why government needs a consultant. Normally, a consultant is hired because government lacks the expertise or lacks the people with the expertise to undertake a specific study or consulting service. Consultants have specialized knowledge and skills to offer. PROCUREMENT OF CONSULTING SERVICES

Consultants can be… Individuals Legal entities
Individual qualifications and expertise Legal entities Multidisciplinary expertise and specialized personnel There are 2 types of consultants: individual consultants and consultancy firms

Procedure Procuring entity shall prepare terms of reference (TOR) detailing objectives, expected outcome, and other relevant information Procuring entity shall make cost estimations of service Based on type and level of personnel background, time required for works at field and office, office supplies and other expenses required for a given service Just like the in goods, works and services, the procuring entity should also clearly define the terms of reference of the consultants. It should also make a cost estimate of the services required based on the kinds of expertise needed and the time for which the service shall be delivered and other related operational expenses.

Consulting Services Transparency Fair competition Economy/ Efficiency
Was there a publication of the invitation to tender in a nationwide newspaper or other mass media? Is there a general list of consultants? Where did the names come from? Transparency Fair competition Similarly, an invitation to bid should be published in a medium that has maximum reach such as a news paper and other mass media. The monitor may also ask from the procuring entity of a general list of consultants that government refers to. Economy/ Efficiency Consultants who responded to the invitation National and/or international consultants providing services in Mongolia Consultants listed in government registry Consultants affiliated with professional associations and international financial organizations Responsibility

Procedure Procuring entity to draw up a shortlist from the general list of at least three consultants that satisfy the basic technical and financial capacity requirements Procuring entity shall provide the Request for Proposal and TOR to shortlisted consultants. The RFP shall contain: Brief description of assignment and details of financing TOR Qualification requirements, evaluation criteria and methodology Name of legal entities invited and/or individuals invited Draft contract Instructions for submitting proposals Evaluation method to be used Deadline for submission shall not be more than 60 days. For legal entities, more than 30 days. For individuals, more than 7 days Is the shortlist of consultants based on a clear set of criteria (basic qualifications)? From those who responded to the invitation to bid and those who are listed in the government registry, the procuring entity now draws up a short list of at least 3 consultants who are able to satisfy the technical and financial requirements of the consulting service required. The procuring entity provides a more detailed request for proposal to the shortlisted consultants, who will then prepare their bid submissions. The monitor can check on the short list of government and how the procuring entity was able to come up with such short list. What was the criteria that it used to draw up the short list? Is the criteria objective enough?

Procedure Technical and financial proposals are prepared separately and submitted concurrently. They may be in separate sealed envelopes if the RFP requires so. Technical: professional qualification and expertise. For legal entities, this includes lead specialist and operating practice Financial: price The financial proposal will be evaluated after the evaluation of the technical proposal

Individual consultants
Evaluation Methods Qualification Quality Combined evaluation method Least-cost method Individual consultants For individual consultants, the evaluation method is merely looking at the qualifications of the individual. For firms, quality and quality-cost based evaluation methods may be used. For consulting services costing less than 30 million MNT, the least cost method is used. Consulting firms

Qualification evaluation method
Consultant’s knowledge, expertise, professional level, and other professional skills In the qualification evaluation method, what is being assessed by the evaluation committee is the consultant’s knowledge, expertise, professional track record. The monitor must be able to discern the qualification needs of the project and the fairness, appropriateness, and reasonableness of the qualification requirements set by the procuring entity. For instance, if the project needs only a masters degree candidate for the conduct of a study but the procuring entity requires at the minimum a PhD candidate, this could be an indication that competition is already limited to ‘favored’ candidates. The procuring entity should be able to justify requiring more. The monitor should also weigh whether a better qualified candidate may be able to deliver best the requirements of the project at the cost that government can afford. The monitor’s assessment of the evaluation method used in this particular case will be subjective. Similarly government’s evaluation will also be subjective. The key question that should be asked of government is: is the professional expertise requirements of the individual consultant fair, reasonable and appropriate for the consulting services required?

Quality evaluation method
Contract requires simultaneous execution of a number of services requiring comprehensive qualification expertise and technical qualifications Proposals are compared on operating practice, work schedule, personnel’s expertise and capabilities, and quality of service Technical proposals are assigned scores based on basic technical and financial qualification standards (Articles 14-16). Technical proposals will be ranked according to score Highest ranked firm shall have his financial proposal opened first. Procuring entity will negotiate to agree on price and other conditions. Procuring entity shall not require consultant to reduce proposed price without justification If negotiation fails with first ranked, procuring entity will proceed to open financial proposal of next ranked firm and undertake negotiations with the same Consultant may be asked to submit relevant documents, cost estimates and other information and evidence. Quality evaluation method is used for projects that require consulting firms that are able to provide several expertise. The procuring entity will establish a scoring system that assigns points to the professional qualifications of the consultants. Consultants will be ranked according to their scores and the highest ranked firms will be the first with whom government will negotiate for the price and conditions of the consulting services. The procuring entity shall not require the reduction of the consultant’s proposed price without justification. If no agreement is met, the procuring entity proceeds to negotiate with the next ranked firm. If there is failure to negotiate with the first-ranked firm, the monitor should probe on the reasons for the failure. Was the procuring entity reasonable in its negotiation with the firm or did it deliberately make the negotiations fail so that it may negotiate with a favored next-ranked firm.

Combined evaluation method
For all other consulting services other than individual consultants and those under quality evaluation method Procuring entity to indicate minimum score for technical proposal Technical proposals will be evaluated and ranked. Those meeting the minimum score will be notified for the opening of financial proposals. Those who did not meet the minimum score shall receive their financial proposals unopened. Financial proposals of those who met the minimum score shall be opened publicly at a date/time set by procuring entity and notified to qualified consultants. Financial proposals will be scored in manner set in RFP Total score of quality and price evaluation = technical proposal score + financial proposal score Combine evaluation method or quality-cost-based evaluation is used for consulting firms. This method requires a minimum score that the consultant must reach for its technical proposal. The technical proposals will be ranked according to the scores the consultants obtained. Those who have met the minimum score will be notified for the opening of their financial proposals. This will be done in public. The financial proposals will likewise receive points according to the scoring system set in the Request for Proposal. The total score of the consultants would then be the basis for the ranking.

Combined evaluation method
Procuring entity will negotiate with highest ranked firm What can be negotiated # Person-days, # person-months Time required for field work Office supplies Unit costs cannot be modified If negotiation fails, procuring entity shall proceed to negotiate with next-in-rank Again, the procuring entity will negotiate with the highest ranked firm only on the following items: Person-days/ person-months Time required for field work Office supplies If the negotiation fails, the procuring entity proceeds to negotiate with the next-ranked firm. Again, the monitor should be careful to see whether the negotiations were deliberately conducted for failure to favor a next-ranked firm.

Least-cost method For consultancy assignments with established practices, the least cost method shall be adopted (Negotiation with firm with lowest priced financial proposal) Where the consultancy work is quite regular (e.g. land surveying, land use planning, etc.) and is an established practice, the least cost method shall be adopted. Also, it is automatic that if the consultancy service costs less than 30 million MNT, least cost method shall be used. The monitor should be able to determine whether the consultancy assignment is an established practice of government already and the least cost method is the most appropriate evaluation method.

Thank you! Remember that the mindset that we are trying to use here is the mindset of a monitor whose job is to ensure that public procurement is conducted according to the rules and regulations set by the law. A different mindset will have to be adopted by the CSO who will assume the role of an observer member of the evaluation committee albeit you will notice certain similarities. A reporting checklist will be handed to you to facilitate your work as procurement monitor. The checklist details the kinds of questions that you will need to answer.

Civil society Procurement Monitor

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