1. VALUE FOR MONEY 1 OGC buying.solutions Procurement of Projects Presented by Andy Hamer Pre Accession Advisor, Finance Ministry

2. VALUE FOR MONEY 2 To cover:  EU legislative background  Key concept  Typical procurement process  Comparison of EU to Latvia  Open Competition – steps  Restricted Competition – steps  Structural / Cohesion Funds  Final thoughts Introduction

3. VALUE FOR MONEY 3 Objective of purchasing To obtain:  the RIGHT Quality Product / Service  in the RIGHT Quantity  in the RIGHT Place  at the RIGHT Time  at the RIGHT Price = VALUE FOR MONEY!! Basic principles

4. VALUE FOR MONEY 4 EC Procurement EU Objectives Achievement of the Single Market via the four freedoms:  free movement of people  freedom of establishment and services  free movement of capital  free movement of goods Basic principles

5. VALUE FOR MONEY 5 EC Procurement Legislative Framework European Community Treaties  European Community Regulations  European Community Directives  European Commission and National policies Practical experiences  Member state examples  Court of Justice decisions Basic principles

6. VALUE FOR MONEY 6 EU Directives There are three kinds of procedures: Open – all interested parties may tender for the contract Restricted – only selected persons may submit tenders Negotiated – purchaser may negotiate with one or more selected person(s) Basic principles

7. VALUE FOR MONEY 7 EC Procurement Impact on Procurement  Non-discrimination  Transparency  Mutual Recognition  Competition  Fairness = VALUE FOR MONEY!! Basic principles

8. VALUE FOR MONEY 8 Typical Tender Process (in EU; eg UK)  Business Case Development and Approval  Advertise in OJEC  Receive and Evaluate Expressions of Interest (Supplier Appraisal)  Shortlist and Produce Tender List  Site Visits  Produce Invitation to Tender Package  Set Evaluation Criteria  Issue ITT  Receive Responses  Undertake Evaluation  Contract Award  Debriefing The Procurement Cycle

9. VALUE FOR MONEY 9 Identify Need Financial Approval Option Appraisal Business Case Develop Specification Contract Strategy Evaluation Criteria Identify Suitable Suppliers Source the Market Appraise Suppliers Compile Tender Documents Specification Terms and Conditions Pricing Schedule Invite Tenders Receive Tenders Open Tenders Evaluate Tenders Post Tender Negotiation (not Latvia) Award Contract Manage Contract Vendor Rating Supplier Evaluation

10. VALUE FOR MONEY 10 LATVIAEU Open competition Goods, services 10 000 Construction works 50 000 Goods, services 162 000 EUR (> 104 000 LVL) Construction works 6 200 000 EUR (> 3 970 000 LVL) Restricted competition Services only 10 000 Goods, services 162 000 EUR (> 104 000 LVL) Construction works 6 200 000 EUR (> 3 970 000 LVL) Value levels – comparison with EU

11. VALUE FOR MONEY 11 PRICE QUOTATION OPEN COMPETITIONRESTRICTED COMPETITION SERVICES 1 000 – 10 000 lats Lowest price Over 10 000 lats Economically most advantageous Over 10 000 lats Economically most advantageous GOODS 1 000 – 10 000 lats Lowest price Over 10 000 lats Lowest price _____ WORKS 1 000 – 50 000 lats Lowest price Over 50 000 lats Lowest price _____ Latvian selection process

12. VALUE FOR MONEY 12 Section 1 – Concepts behind large competitions

13. VALUE FOR MONEY 13 The two main procurement procedures Open competition (Latvia) Restricted competition (Latvia)

14. VALUE FOR MONEY 14 1.Identify purchasing need 2.Form procurement commission 3.Draft tender documentation and specifications 4.Formal announcements 5.Respond to any requests for information 6.Competition regulation sent to tenderers 7.Submission of tenders Open competition (Latvia) – 13 key steps 8.Tender opening 9.Evaluation of tenders 10.Announcement of results 11.Complaints period 12.Proceed with contract 13.Retain records

15. VALUE FOR MONEY 15 Step 1 – Identify purchasing need Do we need ? Have we got budget ? What will it cost ? Business case & option appraisal Project strategy = Project pipeline and associated tasks!

16. VALUE FOR MONEY 16 Step 2 – Form procurement commission Section 23 of the Law Competent + authorised person Minimum 5 persons Relevant experience / construction specialists Additional person from official approved list for construction works over 500 000 lats

17. VALUE FOR MONEY 17 Step 3 – Draft tender documentation and specifications Technical specifications: Procurement Commission approves technical specifications Competition Regulations: Requirements that each supplier must meet (e.g.Track record, technical competence, quality, place and time of delivery, deadline for submission of tenders) Invitation to tender package = Competition Regulations + Technical specifications + draft contract + templates

18. VALUE FOR MONEY 18 Step 4 – Formal announcements Send notice to PMB Publication on Internet + “Latvijas Vēstnesis” Does not meet EC-Directives Send notice to PMB Publication on Internet + “Latvijas Vēstnesis” Does not meet EC-Directives

19. VALUE FOR MONEY 19 Step 5 – Send invitation to tender packages Package sent to all interested suppliers Technical specification Competition Regulations Draft contract Templates for replies

20. VALUE FOR MONEY 20 Step 6 – Respond to any requests for information All requests for information on Competition Regulations treated equally Any responses copied to all suppliers Retain audit trail

21. VALUE FOR MONEY 21 Step 7 – Submission of tenders All tenders are submitted to the Procurement Commission Record date and time of receipt

22. VALUE FOR MONEY 22 Step 8 – Tender opening Members of the Procurement Commission to sign declaration of Impartiality and Confidentiality At time and date specified in Competition Regulations – the applications are opened Procurement Commission must read out the values Persons who submitted are permitted to attend Procurement Commission record the meeting

23. VALUE FOR MONEY 23 Step 9 – Evaluation of tenders The evaluation is carried out in accordance with the descriptions given in the Competition Regulations 3 main aspects of evaluation: Candidate compliance Technical compliance Lowest price / economically most advantageous tender Each member of the Procurement Commission should complete a written evaluation form

24. VALUE FOR MONEY 24 Step 9 – Evaluation of tenders (2) Evaluation tools: The Procurement Commission has designed the competition and chosen the balance between candidate ability, technical competence and price/MEAT Using weighted criteria Example on weighting Concept of most economically advantageous versus lowest price

25. VALUE FOR MONEY 25 Step 10 – Announcement of result Procurement Commission select one tenderer, done within 1 month of tender deadline as a result of their evaluation Procurement Commission must complete formal report on the procedure to Contracting authority The decision must be published: by PMB on the Internet by Contracting Authority in “Latvijas Vēstnesis” Termination of tender process can happen if : No tenders received No compliance PMB prohibits

26. VALUE FOR MONEY 26 Step 11 – Complaints periods 1.Before submission deadline (to Contracting authority) 2.Between decision of Procurement Commission and the time of entering into contract, minimum 10 days (to PMB) 3.After contract award (to Latvian courts)

27. VALUE FOR MONEY 27 Step 12 – Proceed with contract Note the job of the Procurement Commission has finished and the Contracting authority proceeds with the contracting process Can’t enter into contract until at least 10 days after publication of the notice Contract is between Contracting authority and successful tenderer

28. VALUE FOR MONEY 28 Step 13 – Retain records Records have been made throughout the process: Retain for accessibility keep copies of report of Procurement Commission for use as management information (e.g. Technical specifications)

29. VALUE FOR MONEY 29 Control of major projects Procurement is one step in the project cycle: Identify need Research (option appraisals, business case) Design Investigate market Procurement Enter into contract Run and manage contract (many years) UK OGC – sponsored Gateway process

30. VALUE FOR MONEY 30 Restricted competition (Latvia) – 16 key steps 1. Identify purchasing need 2.Form procurement commission 3.Draft tender documentation and specifications 4.Formal announcements 5. Selection Regulations sent to candidates 6.Respond to any requests for information 7.Sumbission of applications by candidates 8.Selection of candidates 9.Preparation of tender documentation and invitations to tender 10.Submission of tenders 11.Tender opening 12.Evaluation of tenders 13.Announcement of results 14.Complaints period 15.Proceed with contract 16.Retain records

31. VALUE FOR MONEY 31 Steps 1 – 6 1.Identify purchasing need 2.Form procurement commission 3.Draft tender documentation and specifications 4.Formal announcements 5.Selection Regulations sent to candidates 6.Respond to any requests for information

32. VALUE FOR MONEY 32 Step 7 – Submission of applications by candidates Expressions of interest at first stage

33. VALUE FOR MONEY 33 Step 8 – Selection of candidates may not be by weighted evaluation can be by compliance only Within 10 days of closing date specified in Selection Regulations additional information can be obtained from supplier (clarification) Notify unsuccessful candidates within 3 days of taking decision Aiming to have between 5 and 20 tenderers

34. VALUE FOR MONEY 34 Step 9 – Preparation of tender documentation and invitations to tender Only sent to the selected candidates Time periods: 40 days above 120 000 Ls 25 days less than 120 000 Ls 15 days less than 50 000 Ls Gives time for good tenders

35. VALUE FOR MONEY 35 Steps 10 - 16 Submission of tenders Tender opening Evaluation of tenders Announcement of results Complaints period Proceed with contract Retain records

36. VALUE FOR MONEY 36 MAIN points from SF / CF regulations Project procurement must comply with EU rules on award of public contracts [SF1260/99 Art 12; CF1164/94 Art 8-1] Publication notice in OJEC [SF; CF 1164/94, Annex II Art I] CF: Implementing body shall retain all tendering and contracting documents as part of the required ‘audit trail’ for each Project [1386/02 Annex I para 3] SF: documents on tendering and contracting procedures required for ‘audit trail’ [438/01 Annex I para 3] Contracts to include access clause for all persons [SF 448/01 Art 7-3c; CF1386/02, Art 6-4c]

37. VALUE FOR MONEY 37 Possible issues to consider When do we begin to plan the procurement? Who is the contracting authority? Do we have an option over procurement strategy? Who needs to be involved the procurement process? How to identify any risks beyond the Latvian Law (from EU rules)