1. Module 10 Organizing Procurement Session 10.7 Procurement of Goods:
Evaluation and Award

2. Instructional Objectives
Describe how to prepare a list of acceptable suppliers.
Describe the bid evaluation process and characterize the major activities and issues.
Compare the advantages and disadvantages of giving preferences (for example, to local industries). 2

3. Instructional Objectives (continued)
Describe the problems that arise from (a) deficiencies in bids and (b) challenges to selection and how those problems may be addressed.
Given a case example (or vignettes), evaluate bids and propose an award.
See outline for additional objectives. 3

4. Preparation of List of Acceptable Suppliers
One-stage process (if readily available)
Two-stage process (if custom designed or complex) (Prequalification)
Submission of technical proposals
Submission of price proposals 4

5. Prequalification Criteria
Supplier’s production capacity
Track record (experience under operational conditions) of the product(s)
Experience and reputation of the supplier(s)
Financial position of the supplier(s)
Capability and reputation for after sale service 5

6. Bidding Documentation
Bid submission procedure
Describe goods sought
Enunciate evaluation procedures for bids
Set out conditions of contract for successful bidder
Complexity of documents will vary by situation 6

7. Way to Classify Documentation
“Mechanism” of bidding process
Conditions of contract
Procedures for clarification, modification, and withdrawal of instructions
Prices, currencies, preferences, payments, and so forth.
Securities
Evaluation criteria 7

8. Mechanism of Bidding Process
Form of bid
Number of copies
Language to be used
The addressee
Validity of bid
Date, time, and place for submission 8

9. Conditions of Contract (Format)
General Conditions
Inspection and shipment
Documentation
Payment terms
Performance securities
Damage and delays 9

10. Conditions of Contract (Format)-2
Special conditions
Insurance
Procedures for testing and inspection
Special payment terms, currency or price adjustment
Regulations for import of equipment
Preferences
Other deletions/additions to general conditions
Procedures for clarification/modification 10

11. Bids/prices, Currencies, and Preferences
Typically complex
Bids may be in different currencies, including local currency
Evaluation and payments in various currencies
Goal: remove currency risk from the bidders (should lead to lower level of bids).
Goal: permit bidders from countries with relatively weak currencies to bid.
Goal: ensure fairness to all bidders. 11

12. Bid/prices, Currencies and Preferences (continued)
International institutions’ requirements
Bids be expressed in currencies of member countries
Not more than three currencies plus local
Local expenses expressed in local currency 12

13. INCOTERMS Rules (1990) EXW: ex works (the place being named)
FOB: free on board (named port of shipment)
CFR: cost and freight (named port of destination)
CIF: cost, insurance, and freight (named port of destination)
CIP: carriage and insurance paid (named place of destination) 13

14. Insurance Duration Supplier’s Obligation Buyer’s Obligation
EXWORKS loaded
Warehouse
FOB (on Ship)
CIF (at Port)
Port of Entry
CIP
Final Destination
Final Site

15. Currency Conversion
Must convert bids to common currency for evaluation/comparison and determination of lowest evaluated bid
Three decisions involved:
The common currency to be used
The conversion rates to be used
The date selected for the conversion 14

16. Conditions for Granting Local Preferences
The local product must contain a specified level of local inputs as required by each IFI.
For example, the World Bank requires that the aggregate cost of domestic labor and raw materials and equipment must account for not less than 30 percent of the ex works price.
The local supplier must be engaged in production of such goods at the time of the submission of the bid. 15

17. Security Bidding stage—to ensure bidders are serious
Protects buyer if bidder declines to sign contract
Should be reasonable amount (1% - 5%)
Performance stage—to ensure manufacture/ delivery
Protects buyer
Should be reasonable (5% - 10% of contract) 16

18. Bid Evaluation Should be based on criteria (session 10.6)
Two-stage process
Commercial—price, freight, insurance, and so forth
Technical
Delivery may be staged over time.
Bid documents should set out delivery requirements. 17

19. Payment Terms
Should conform to generally accepted commercial practices
Technical evaluation starts with evaluated cost
Life-cycle costing preferable
Include streams of fuel and maintenance costs
Include salvage/resale value to present value
Merit point evaluation (alternative) 18

20. Award Made within period of validity of bids to bidder with
Lowest evaluated bid
Must meet standards
Successful bidder should not be required to take on work not in the contract.
Buyer reserves right to reject any or all of bids without stating reason. 19

21. Rejecting Bids May discourage future bids
Reasons for rejecting bids include
The lowest bid exceeds the estimate by a substantial margin.
All bids were judged to be nonresponsive.
There was an obvious lack of competition in the bidding process. 20

22. Summary Prepare a list of acceptable suppliers.
Prepare bidding documentation.
Mechanisms
Conditions of contract (general and specific)
Determine how will handle currency conversions and comparisons
Determine if preferences will be applied
Determine what security is required (bid and performance)
Set evaluation criteria.
Evaluate and award.
Reject (all) bids, but only exceptionally and with caution. 21