Procurement Technical Practice Manual      June, 20011     DRAFT VERSION      (RELEASE 8.2)FOR REVIEW AND COMMENT         ...
TABLE OF CONTENTS      PART 1            GENERAL___________________________________________ 2             1.1    Backgroun...
TABLE OF CONTENTS                    2.7.5   Receiving bids .................................................................
TABLE OF CONTENTS                    3.6.5   Arbitration ....................................................................
TABLE OF CONTENTS             Work processes ______________________________________________             General indicators...
SAMPLE - PROCUREMENT MANUALAttention: Author’s NoteThis manual is by Deed of Contract copyright protected to the Arrina Gl...
SAMPLE - PROCUREMENT MANUAL Version        Date           DetailsDRS520011 Version 0.1
SAMPLE - PROCUREMENT MANUAL               PART 1               GENERALDoc DRS 52001 Version 0.1 (draft)                   ...
SAMPLE - PROCUREMENT MANUALPART 1                                  GENERAL1.1            BACKGROUND                       ...
SAMPLE - PROCUREMENT MANUAL                              This product is not a stand alone technical manual a series of   ...
SAMPLE - PROCUREMENT MANUAL                                    Part 3 – Logistics – which is directed at the delivery,    ...
SAMPLE - PROCUREMENT MANUAL1.3            SUPPORTING DOCUMENTATION                              Where appropriate, this pr...
SAMPLE - PROCUREMENT MANUAL1.4.1          Abbreviations used in this Manual                              The following abb...
SAMPLE - PROCUREMENT MANUAL1.4.2          Special abbreviations                              The abbreviations listed belo...
SAMPLE - PROCUREMENT MANUAL                Term                 MeaningDoc DRS 52001 Version 0.1 (draft)                  ...
SAMPLE - PROCUREMENT MANUAL1.5            THE APPROACH TO PROCUREMENT MANAGEMENT                              This section...
SAMPLE - PROCUREMENT MANUAL                                           SUPPLY PLANNING                                     ...
SAMPLE - PROCUREMENT MANUAL                                           Finance/accounts personnel                         ...
SAMPLE - PROCUREMENT MANUAL                              Supplier selection involves appraisal and evaluation,            ...
SAMPLE - PROCUREMENT MANUAL               1.5.1.5      Finalising the contract                              The purpose of...
SAMPLE - PROCUREMENT MANUAL                                                    UNDERSTAND THE NEED                        ...
SAMPLE - PROCUREMENT MANUAL               1.5.2.2      Key deliverables to support the procurement process                ...
SAMPLE - PROCUREMENT MANUAL                                    International procurement. Buyers are finding that, in     ...
SAMPLE - PROCUREMENT MANUAL                                            An acquisition plan.                              ...
SAMPLE - PROCUREMENT MANUAL                                       Interpersonal experience and skills                    ...
SAMPLE - PROCUREMENT MANUAL               PART 2               PROCUREMENT MANAGEMENTDoc DRS 52001 Version 0.1 (draft)    ...
SAMPLE - PROCUREMENT MANUALPART 2 – PROCUREMENT MANAGEMENT                              Bid and contract activities undert...
SAMPLE - PROCUREMENT MANUAL                Carrier             Any person who, in a contract of carriage, undertakes to   ...
SAMPLE - PROCUREMENT MANUAL                                    the seller is not responsible for unloading.               ...
SAMPLE - PROCUREMENT MANUAL                                    occurring after the goods have been so delivered.          ...
SAMPLE - PROCUREMENT MANUAL                Delivered           import, and not unloaded from any arriving means of        ...
SAMPLE - PROCUREMENT MANUAL                              The WB document for pharmaceuticals and vaccines is titled:      ...
SAMPLE - PROCUREMENT MANUAL                                      END-USER                                    NEEDS DEFINED...
SAMPLE - PROCUREMENT MANUAL                              delivered to the group effecting the procurement and are         ...
SAMPLE - PROCUREMENT MANUAL                              Bids    prepared and submitted by Suppliers: While the           ...
SAMPLE - PROCUREMENT MANUAL                              For contracts over the stipulated value, award documentation     ...
Dr Rovel Shackleford procurment open v2 handbook drs 14112011
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Dr Rovel Shackleford procurment open v2 handbook drs 14112011
Dr Rovel Shackleford procurment open v2 handbook drs 14112011
Dr Rovel Shackleford procurment open v2 handbook drs 14112011
Dr Rovel Shackleford procurment open v2 handbook drs 14112011
Dr Rovel Shackleford procurment open v2 handbook drs 14112011
Dr Rovel Shackleford procurment open v2 handbook drs 14112011
Dr Rovel Shackleford procurment open v2 handbook drs 14112011
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This procurement handbook is for both private and public sector purchasing personnel by Dr Rovel Shackleford

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Dr Rovel Shackleford procurment open v2 handbook drs 14112011

  1. 1. Procurement Technical Practice Manual June, 20011 DRAFT VERSION (RELEASE 8.2)FOR REVIEW AND COMMENT Manual Author: Dr. Rovel Shackleford
  2. 2. TABLE OF CONTENTS PART 1 GENERAL___________________________________________ 2 1.1 Background ____________________________________________ 2 1.2 Scope and purpose of this manual __________________________ 3 1.3 Supporting documentation _________________________________ 5 1.4.1 Abbreviations used in this Manual ......................................... 6 1.4.2 Special abbreviations............................................................. 7 1.4.3 New Terminologies ................................................................ 7 1.5 The approach to procurement management ___________________ 9 1.5.1 Procurement management .................................................... 9 1.5.2 The procurement process .................................................... 13 1.5.3 Other issues impacting on procurement............................... 15 1.5.4 The procurement team......................................................... 16 PART 2 – PROCUREMENT MANAGEMENT __________________________ 20 2.1 Use of generic contract documentation ______________________ 20 2.1.1 Standard delivery terms for contracts................................... 20 2.1.2 Bid and contract documents ................................................ 24 2.2 Procurement planning and scheduling_______________________ 25 2.3 Determination of contract packages ________________________ 31 2.4 Determination of bidding requirements ______________________ 31 2.5 Preparation of bid/contract package documents ___________________________ 32 2.5.1 General................................................................................ 32 2.5.2 Elements of the bid package................................................ 32 2.5.3 Technical specification......................................................... 34 2.5.4 Schedules............................................................................ 35 2.6 Pre-qualification of Bidders _______________________________ 36 2.6.1 General................................................................................ 36 2.6.2 The assessment process ..................................................... 36 2.6.3 The assessment criteria....................................................... 38 2.7 Calling bids ___________________________________________ 40 2.7.1 General................................................................................ 40 2.7.2 Notification of opportunity to bid........................................... 42 2.7.3 Provision of documents to Bidders....................................... 42 2.7.4 Communication with Bidders................................................ 42DRS520011 Version 0.1
  3. 3. TABLE OF CONTENTS 2.7.5 Receiving bids ..................................................................... 43 2.8 Evaluation of bids_______________________________________ 44 2.8.1 General................................................................................ 44 2.8.2 Opening of bids ................................................................... 45 2.8.3 Preliminary examination....................................................... 45 2.8.4 Evaluation and comparison of bids ...................................... 47 2.8.5 Summary and recommendation ........................................... 51 2.9 Selection, negotiation and award of contract __________________ 52 2.9.1 Selection.............................................................................. 52 2.9.2 Negotiation .......................................................................... 53 2.9.3 Award .................................................................................. 53 PART 3 – LOGISTICS ____________________________________________ 56 3.1 Verification of product conformance during manufacture ________ 56 3.1.1 General................................................................................ 56 3.1.2 Inspection ............................................................................ 59 3.1.3 Acceptance.......................................................................... 65 3.2 Expediting ____________________________________________ 67 3.2.1 General................................................................................ 67 3.2.2 Schedule for expediting ....................................................... 67 3.2.3 Progress reporting ............................................................... 69 3.2.4 Corrective action.................................................................. 70 3.3 Customs and tax clearance _______________________________ 70 3.3.1 Opening letter of credit......................................................... 72 3.3.2 Release of goods imported by sea freight............................ 74 3.3.3 Release of goods imported by air freight.............................. 77 3.3.4 Particular arrangements....................................................... 80 3.4 Monitoring delivery and distribution _________________________ 83 3.5 Final acceptance _______________________________________ 83 3.5.1 General................................................................................ 83 3.5.2 Acceptance Inspection......................................................... 83 3.6 Dispute resolution ______________________________________ 87 3.6.1 General approach ................................................................ 87 3.6.2 Preparatory activities ........................................................... 88 3.6.3 Informal dispute resolution................................................... 89 3.6.4 Formal dispute resolution..................................................... 90DRS520011 Version 0.1
  4. 4. TABLE OF CONTENTS 3.6.5 Arbitration ............................................................................ 92 3.6.6 Records ............................................................................... 92 3.7 Asset management _____________________________________ 93 3.8 Records and contract completion __________________________ 93 3.8.1 General................................................................................ 93 PART 4 – FINANCIAL MANAGEMENT ______________________________ 96 4.1 Financial planning ______________________________________ 96 4.2 Financial controls _______________________________________ 96 4.3 Financial monitoring_____________________________________ 96 4.4 Expenditure reporting____________________________________ 96 PART 5 – ASSET MANAGEMENT ____________________________________ 4.1 Asset planning ___________________________________________ 4.2 Asset controls ___________________________________________ 4.3 Asset monitoring _________________________________________ 4.4 Asset reporting___________________________________________ PART 5 – AUDIT CONTROL _________________________________________ 4.1 Audit planning ___________________________________________ 4.2 Audit controls ____________________________________________ 4.3 Auditing Performance _____________________________________ 4.4 Audit reporting ___________________________________________ ANNEX 1: REQUIREMENTS FOR LOCAL GOVERNMENT UNITS _______________________________________________ ANNEX 2: INSPECTION PLAN ____________________________________ Part 1: Arrangements _________________________________________ Part 2: Inspection schedule_____________________________________ ANNEX 3 PRE-QUALIFICATION ASSESSMENT CHECKLIST __________ Corporate data _______________________________________________ Management strengths and limitations _____________________________DRS520011 Version 0.1
  5. 5. TABLE OF CONTENTS Work processes ______________________________________________ General indicators _____________________________________________ Business management system ___________________________________ ANNEX 4 PROJECT INSPECTION REPORT ________________________ Part 1 – Format for PROJECT Inspection Report _____________________ Part 2 – Example of a completed Inspection Report___________________ ANNEX 5 ETHICAL CONDUCT ___________________________________ ANNEX 4 PROBITY IN CONTRACTING ____________________________ Part 1 – Explanation odf Probity __________________________________ Part 2 – Technical Asspects of Implimentation/Practice ________________DRS520011 Version 0.1
  6. 6. SAMPLE - PROCUREMENT MANUALAttention: Author’s NoteThis manual is by Deed of Contract copyright protected to the Arrina Global LLC.Please contact the following Agency to obtain the appropriate approvals to copy eithermanually, electronically or by any other data transfer means all or any singlecomponent of this Manual.Development LiaisonAll feedback is extremely useful. If you have a contribution to make to the developmentof this Procurement Manual please contact the author;Dr Rovel ShacklefordEmail admin@arrinaglobal.comDOCUMENT AUTHORISATIONDocument Number: DRS52001Version: 8.2 (draft) for submission and ongoing reviewAbbreviated Title: Procurement Manual Document reviewed by: Date : Document approved by: Date : Release of this version authorised Date by: :REVISION HISTORYDRS520011 Version 0.1
  7. 7. SAMPLE - PROCUREMENT MANUAL Version Date DetailsDRS520011 Version 0.1
  8. 8. SAMPLE - PROCUREMENT MANUAL PART 1 GENERALDoc DRS 52001 Version 0.1 (draft) Page 1
  9. 9. SAMPLE - PROCUREMENT MANUALPART 1 GENERAL1.1 BACKGROUND This Manual has been developed in response to the DEPT. Subcontractor Contract output requirement within the Procurement Hurdle Specialists terms of reference (TOR) 5.1 (1) “Draft Standards for procurement management by agencies in a form suitable for inclusion in a practical technical manual that is relevant in the Thai context”. This project referred to in its totality as the Procurement Management Hurdle covers four fundamental elemental activities initiated and completed by the hurdle specialist in conjunction with the stakeholders counterparts teams. The functions are as follows;  Development of a technical procurement manual  Development of procurement guides  Development of a reform migration/implementation strategy  Development/introduction of core IT support tool. A more detailed work activity plan is available on request from the procurement hurdle specialist. The sources of information that have been utilized to develop this technical manual are in accordance with and deemed by the Dept. to be most relevant to meet the department’s requirement at an operational level in it’s Commodity Group. The predominant information sources are;  Country or Company procurement practice information PMO and Pilot Agencies.  Best practice publications as listed in the bibliography.  World Bank Procurement Practice/Policy Guides.  Asia Development Bank Practice/Policy Guides. The technical manual is not intended to be the definitive procurement practice technical handbook in its current form; it is fundamentally an indicative model of a best practice manual that should be augmented with current procurement resource materials utilized by procurement personnel in their respective agencies. The author anticipates and recommends that relevant elements of the manual may be integrated where appropriate into existing Country or Company Procurement Manuals and Practice Guides.Doc DRS 52001 Version 0.1 (draft) Page 2
  10. 10. SAMPLE - PROCUREMENT MANUAL This product is not a stand alone technical manual a series of supporting Procurement Guides will be developed to provide additional overlaying procurement practice guidance to all personnel involved in managing or expediting the procurement function within the Country or Company. This activity forms an integral part of the specialists TOR 5.1 (2) ‘to develop a checklist for the Dept. and line agencies’. The author intends this technical manual and its content to be as relevant as practicable for those personnel who are predominantly involved in managing and undertaking the day- to-day task of preforming the procurement function in the public sector. Direct consultation with end users has greatly assisted in the evolution of this manual from a conceptual document to a tool that it is hope will greatly assist procurement practitioners in their daily work activity. The author wishes to convey a special note of thanks to the following personnel for their support and candid feedback; both necessary ingredients in the development of a technical manual;1.2 SCOPE AND PURPOSE OF THIS MANUAL This document – the Dept. Procurement Manual – describes the arrangements, systems and practices that will be applied to the procurement, and logistics activities for the Dept.. It provides descriptions of the various requirements and activities that are used in providing goods and services for the Dept., and identifies indicative forms and templates that are may be used in carrying out procurement, logistics and financial management activities. The purpose of the technical manual is to provide a comprehensive source of information to support the procurement teams in the Dept.. It will also provide the basis for delivering consistent and effective training to the participants in the procurement activities. The manual is presented in four parts: Part 1 – General – (this part) that contains a description of the general approach to procurement management. This is intended to set the context for the particular activities and processes described in the following parts of the technical manual. Part 2 – Procurement Management – which is focussed on identifying the end-user needs, preparation of procurement plans and obtaining supplies of products and services to meet those needs.Doc DRS 52001 Version 0.1 (draft) Page 3
  11. 11. SAMPLE - PROCUREMENT MANUAL Part 3 – Logistics – which is directed at the delivery, inspection, acceptance and distribution of the procured items to the end-users. Part 4 – Financial Management – which is concerned with the provision of funding and control of disbursements associated with the procurement and logistics activities.Doc DRS 52001 Version 0.1 (draft) Page 4
  12. 12. SAMPLE - PROCUREMENT MANUAL1.3 SUPPORTING DOCUMENTATION Where appropriate, this procurement manual will utilise particular arrangements described in other, specific documents. Where a supporting document is used as a general reference, it will be identified by its title alone. (For example: Standard Bidding Documents.) Where a particular section of a document is referenced, it will be identified by the title and the principal section in which the referenced information is located. (For example: Standard Bidding Documents – Procurement of Pharmaceuticals and Vaccines: Section III – Bid Data Sheet) The title and a brief description of the scope of the various documents which support the implementation of this Procurement Manual is provided in the following table. Docu Version Title and scope of application ment No N/A 1996 Standard Bidding Documents: Procurement Contains bidding and contract documentation for use on World Bank-funded procurements. N/A N/A (No title indicated) Contains bidding and contract documentation for use on Asian Development Bank-funded procurements. N/A 1 Jan, 2000 Incoterms 2000 The ICC official rules for the interpretation of trade terms. N/A January, Standard Bidding Documents: Procurement of 1995 Goods. Amended Contains bidding and contract documentation for Oct 6, 1996 use on World Bank-funded procurements.Doc DRS 52001 Version 0.1 (draft) Page 5
  13. 13. SAMPLE - PROCUREMENT MANUAL1.4.1 Abbreviations used in this Manual The following abbreviations are used in this document: Abbreviation Abbreviation Definition ADB Asian Development Bank Dept. Bureau of the Budget FCL Full Container Load GCC General Conditions of Contract PA Pilot Agency ICC International Chamber of Commerce L/C Letter of Credit LCL Less than (full) Container Load LGU Local Government Unit RTG Country or Company WB World Bank ADB Asia Development Bank BHTDoc DRS 52001 Version 0.1 (draft) Page 6
  14. 14. SAMPLE - PROCUREMENT MANUAL1.4.2 Special abbreviations The abbreviations listed below are used in bid and contract documents to specify particular terms and conditions for carriage, delivery and cost responsibility. Term Meaning Associated detail EXW Ex Works …named place FCA Free carrier …named place FAS Free Alongside Ship …named port of shipment FOB Free On Board …named port of shipment CFR Cost and Freight …named port of destination CIF Cost. Insurance Freight …named port of destination CPT Carriage Paid To …named place of destination CIP Carriage and Insurance Paid …named place of destination to DAF Delivered At Frontier …named place DES Delivered Ex Ship …named place of destination DEQ Delivered Ex Quay …named place of destination DDU Delivered Duty Unpaid …named place of destination DDP Delivered Duty Paid …named place of destination Source: Incoterms ICC1.4.3 New Terminologies The terminologies listed below are used in modern procurement practice around the world. This table is only for general reference purposes, those wishing to adopt the terminology, as a way of doing business should read the full document to gain a thorough understanding of how the terminologies are applied in practice. Term MeaningDoc DRS 52001 Version 0.1 (draft) Page 7
  15. 15. SAMPLE - PROCUREMENT MANUAL Term MeaningDoc DRS 52001 Version 0.1 (draft) Page 8
  16. 16. SAMPLE - PROCUREMENT MANUAL1.5 THE APPROACH TO PROCUREMENT MANAGEMENT This section of the Procurement Manual has been included as guide to help the procurement personnel to understand the general approach that should be applied to ensure timely and cost-effective procurement of goods and services. This approach is fundamental in achieving ‘best value for money’ in procurement practice and process.1.5.1 Procurement Management Procurement management is not just tendering, contracting, canvassing or buying. It is a professionally managed interaction of many and varied activities including the effective use of resources. Vision The indicative procurement Vision in the public sector should be as follows, ‘Procurement will serve the outcomes and objectives of the Country or Company by delivering resources to government in a timely cost effective, transparent and ethical manner’ Mission; Utilize a level of professional procurement practice/development that produces an environment that uses the tools of good communication, governance and cross-functional activity to achieve the Vision. The procurement management process involves the management of both ‘upstream’ and ‘downstream’ activities. The ‘downstream’ activities involve process issues such as;  budgeting,  production of tracking documents,  receiving goods and services  paying Suppliers. While each activity is important, the more significant in achieving value for money is the ‘upstream’ activity. The concept of ‘upstream’ activities underpinning procurement management is important in understanding how procurement is managed to produce ‘best value for money’ and can be illustrated by the following steps.Doc DRS 52001 Version 0.1 (draft) Page 9
  17. 17. SAMPLE - PROCUREMENT MANUAL SUPPLY PLANNING SPECIFIC REQUIREMENTS IDENTIFICATION CONTRACT STRATEGY SUPPLIER SELECTION FINALISING THE CONTRACT MANAGING THE SUPPLY REVIEW Each of the activities is not discrete but overlaps with other activities. 1.5.1.1 Supply planning The purpose of supply planning is to ensure the existence of a viable and dynamic supply market to which buyers have ready access now and in the future. There are three main tasks:  Establish the significance to buyers of the goods or services sought. (Critical needs evaluation)  Gain an understanding of the present and possible, future market conditions.  Change some features of the current supply market to meet the full requirements of buyers in the future. A number of techniques can be used by buyers to assist in each task including:  Supply positioning.  Vulnerability analysis.  Supplier preference overview.  Procurement marketing.  Reverse marketing.  Supplier improvement. 1.5.1.2 Specific requirements identification Requirements identification is a cross functional activity, (cross functional teams) it includes appropriate representation from all stakeholders in the procurement outcome. Stake holders represented in a cross functional team may be;  End users/beneficiariesDoc DRS 52001 Version 0.1 (draft) Page 10
  18. 18. SAMPLE - PROCUREMENT MANUAL  Finance/accounts personnel  Asset management  Commodity specialists By working with a cross-functional team to establish the true nature of the requirement, the supply market can be effectively managed by the Buyer to produce the optimal result for all stakeholders. The development of a culture where all interested parties become involved at an early stage of the procurement cycle can be useful. It is also useful to understand what is really required as opposed to what is specified. The Buyer/Supplier relationship should be pro-actively managed. A number of techniques can be used by Buyers to identify requirements such as:  Market intelligence.  Supplier intelligence.  Supplier conditioning. 1.5.1.3 Contract strategy The purpose of contract strategy is to define the right contractual arrangements within which Suppliers can make a maximum contribution to a Buyer’s organization. Contract strategy includes deciding on the number of Suppliers to be used, whether contracts should be short, medium or long- term, and the intended relationship with the supply market. It also includes taking note of the prevailing market conditions and setting in place ways and means of dealing with monopolies, cartels and other market distortions, and then managing the risk inherent in all of these situations including the issue of Supplier dependency. A number of analytical techniques and tools can be used by Buyers to evaluate the supply market such as:  Supplier dependency analysis.  Vulnerability management.  Managing monopolies and cartels.  Competitive advantage matrix.  Accredited sourcing. 1.5.1.4 Supplier selection The purpose of Supplier selection is to find the Supplier that can best achieve the objectives of the contract strategy.Doc DRS 52001 Version 0.1 (draft) Page 11
  19. 19. SAMPLE - PROCUREMENT MANUAL Supplier selection involves appraisal and evaluation, conditioning, and identifying the appropriate methodology to be used. This result can determine strategic issues such as whether it is appropriate to go to tender, to seek competitive quotations or to negotiate. The techniques used include:  Conventional appraisal.  Alliance evaluation.  Buyer/Supplier conditioning.  Bid/negotiate grid. Conventional appraisal is the standard technique concerning an assessment of capability in terms of quality, delivery and financial strength. The focus is usually on the current level of product or service that is offered with the emphasis on the need for Suppliers to offer a higher level of performance or lose the business. In some cases Buyers may wish to consider an alliance with a particular Supplier. Alliance evaluation techniques are used to assess whether there is a true management and financial orientation fit and whether the two parties can work together for mutual benefit. The alliance evaluation will include seeking evidence of the following:  A genuine commitment from the top to make it work.  A clear understanding by both parties concerning what is required.  The existence of capable staff trained to make the relationship work.  Sufficient resources and flexibility to ensure success.  Patience to overcome obstacles and teething problems.  Channels of open communication between the parties.  Goodwill trust implying an open commitment to resolve issues.  A culture of change and continuous improvement as the norm.  A dynamic approach to cost reduction and value enhancement. In all relationships of whatever type, skilled Suppliers will subject Buyers to conditioning. In addition to ensuring that they are fully aware of the process, Buyers may wish to employ some of the techniques to reverse the process. Most Buyers are obligated to use some form of competitive bidding, and others impose this obligation on themselves. Experience provides substantial evidence that, while this approach is valid in many instances, it can often be inappropriate. Experienced buyers now make use of the bid/negotiate matrix to assist in deciding on the most appropriate approach.Doc DRS 52001 Version 0.1 (draft) Page 12
  20. 20. SAMPLE - PROCUREMENT MANUAL 1.5.1.5 Finalising the contract The purpose of this activity is to create a contract with terms and conditions that provide buyers with adequate protection and remedies against possible difficulties and disputes while at the same time motivating Suppliers to perform in the best possible manner. This requires an understanding of all the legal, cost and other implications associated with the placement of the contract.1.5.2 The procurement process 1.5.2.1 Key steps in the procurement process The diagram on the following page identifies the key steps in a procurement process.Doc DRS 52001 Version 0.1 (draft) Page 13
  21. 21. SAMPLE - PROCUREMENT MANUAL UNDERSTAND THE NEED IDENTIFY AN APPROPRIATE PROCUREMENT STRATEGY APPOINT THE CROSS FUNCTIONAL TEAM COLLECT ALL AVAILABLE INFORMATION DEVELOP A BUSINESS CASE DEVELOP A PROCUREMENT PLAN DEVELOP AN EVALUATION PLAN DEVELOP, APPROVE AND RELEASE DOCUMENTS TO POTENTIAL SUPPLIERS EVALUATE RESPONSES SELECT SUCCESSFUL SUPPLIER NOTIFY OTHER SUPPLIERS NEGOTIATE KEY ISSUES WITH SELECTED SUPPLIER DEVELOP, APPROVE AND SIGN CONTRACT DEVELOP AND IMPLEMENT SUPPLIER DEVELOPMENT PLANS MANAGE CONTRACT MEASURE AND EVALUATE SUPPLIER REVIEW, MEASURE AND EVALUATE THE PROCUREMENT PROCESS REVIEW AND UPDATE ORGANISATION’S PROCUREMENT PROFILE A number of steps will normally take place in parallel rather than sequentially as illustrated. Specifically, it may be necessary to identify a procurement strategy and establish a cross functional team before it is possible to commence collecting information leading to the development of a business case and an acquisition plan.Doc DRS 52001 Version 0.1 (draft) Page 14
  22. 22. SAMPLE - PROCUREMENT MANUAL 1.5.2.2 Key deliverables to support the procurement process Buyers should be guided by the above steps, noting the key steps and key deliverables required to support a significant, complex or high value procurement activity, specifically as illustrated in the diagram below. Business Case Acquisition initiation Acquisition Plan Acquisition planning Procurement Contract recommendation development Contract Contract finalisation Periodic and Contract annual reporting management and evaluation1.5.3 Other issues impacting on procurement Issues that have the potential to impact on the management of a procurement are: Cost. - Most organizations are seeking ways to cut costs in order to reduce budgets and taxes. Supply changes – more or less Suppliers? - Buyers in capital intensive situations now face a reduced number of potential Suppliers. Buyers in non-capital intensive environments face a very large increase in potential Suppliers; the response has been buyers rationalising the supply market in order to consolidate volumes to give themselves bigger leverage with Suppliers and to ensure that they can exert greater control and influence over a smaller number of Suppliers.Doc DRS 52001 Version 0.1 (draft) Page 15
  23. 23. SAMPLE - PROCUREMENT MANUAL International procurement. Buyers are finding that, in order to obtain the most cost competitive and technically advanced Suppliers, they are having to switch the basis of their sourcing from local to regional and often international markets. Increased contracting out of non-core activities. Many organizations are focusing on core activities and are contracting to third parties the responsibility for all others. This results in a proliferation in the variety of procurement activities. Centralisation/decentralisation. This is a dilemma facing most organizations. Whatever choice the organization makes, the procurement function should have the flexibility to work with and respond to the changing needs of the organization. Impact of technology. Technology has provided an enormous capability to collect and analyse data and convert it into effective information as the basis of decision-making. If procurement is to make full use of technology, it must learn to manage and control it. The search for new relationships. The emphasis is on developing a range of relationships depending on the needs of the organization and the nature of the supply base.1.5.4 The procurement team Buyers should manage and coordinate information and develop clear and logical procurement documents. However, Buyers cannot undertake this task alone and ideally should seek input from a wide range of people and sources including representatives from the appropriate Government Departments, and other specialists. The need to have other organizations involved in the approval process should not be seen as introducing unnecessary levels of difficulty or complexity, rather it should be viewed as an opportunity to gain value from other buyers who may be more experienced in strategic, complex and higher value procurement activities. This will ensure that strategies, plans and processes are developed in accordance with key procurement principles while minimising the potential for delays. 1.5.4.1 A team approach Successful procurement is enhanced by the establishment of an appropriate, cross functional team. When establishing the team consider the following factors: What does the team need to do ? – Is it responsible for the development of?  The specification.  A business case.Doc DRS 52001 Version 0.1 (draft) Page 16
  24. 24. SAMPLE - PROCUREMENT MANUAL  An acquisition plan.  The tender evaluation plan.  The tender document. Will the team be involved in?  The evaluation.  Negotiations.  Contract development.  Contract management. Who is needed on the team? The team may be made of representatives from the  end users,  legal and or finance areas,  engineering/technical,  industry sector expert/s  representatives from the Dept. or other Government Departments (if appropriate), and others who may be involved in the development of the requirement, the evaluation of tender responses, or the management of the contract. It is important to consider the following issues,  What experience and skills do the team have and need?  Is training required?  What resources are required to manage the procurement process?  When should the team meet?  Do roles and responsibilities need to be defined?  Who manages the procurement process in the organization?  Is it the buyer, or is someone appointed?  Does the organization have the necessary level of knowledge, experience and skills to manage complex procurement processes? If buyers do not have the necessary level of knowledge, experience and skill required, advice and support should be sought, initially from senior management within the buyer’s organization, then from the appropriate member or representative of the Government Departments or external advisers and specialists. 1.5.4.2 Knowledge, experience and skills in managing the procurement process The knowledge, experience and skills required for managing complex procurement processes include:Doc DRS 52001 Version 0.1 (draft) Page 17
  25. 25. SAMPLE - PROCUREMENT MANUAL  Interpersonal experience and skills  communications and negotiation experience and,  project/risk management.  subject specific knowledge,  relevant industry knowledge;  high-level procurement,  financial management/budgeting experience;  human resources skills; and  legal contract/process knowledge.Doc DRS 52001 Version 0.1 (draft) Page 18
  26. 26. SAMPLE - PROCUREMENT MANUAL PART 2 PROCUREMENT MANAGEMENTDoc DRS 52001 Version 0.1 (draft) Page 19
  27. 27. SAMPLE - PROCUREMENT MANUALPART 2 – PROCUREMENT MANAGEMENT Bid and contract activities undertaken by Agencies for the procurement of supplies must comply with the requirements of Rule XXXV – Local Government Supply and Property Management Act XX – Rules and Regulations Implementing the Local Government Code of XX and the National Government. A summary of the principal requirements is provided in Annex 1. The generic contract documentation provided by the World Bank and the Asian Development Bank for use on projects funded by those entities are not inconsistent with the requirements of the Rule.2.1 USE OF GENERIC CONTRACT DOCUMENTATION Generic contract documentation is standard documents that can be used to make up a specific contract document. This is by either using the generic document exactly as it is or else by starting with a standard document and making changes to suit the particular needs of the contract. There are a number of standard terms used to nominate specific delivery arrangements – known as ‘Incoterms’ – that are based on the official ICC rules for the interpretation of trade terms. A short description of each term appropriate for Dept. procurements is provided in Section 2.1.1 It is standard practice for the Dept. to provide generic contract documents as word processing (or spreadsheet) computer files which are in ‘Read Only’ format. This is to ensure that the base document is not accidentally ‘overwritten’ and thus lost when a new document is being generated. The various types of generic contract documents available for use in the are listed below. The details of how each type is to be used are provided in the subsections of this Manual, following the list. Bid and contract documents (see Section 2.1.2).2.1.1 Standard delivery terms for contracts Shipper In some cases it has been necessary to use the same term to express two different meanings simply because there has been no suitable alternative. Traders will be familiar with this difficulty both in the context of contracts of sale and also of contracts of carriage. Thus, for example, the term ‘shipper’ signifies the person handing over the goods for carriage .and the person who makes the contract with the carrier. However, these two ‘shippers’ may be different persons, for example under an FOB contract where the seller would hand over the goods for carriage and the buyer would make the contract with the carrier.Doc DRS 52001 Version 0.1 (draft) Page 20
  28. 28. SAMPLE - PROCUREMENT MANUAL Carrier Any person who, in a contract of carriage, undertakes to perform or to procure the performance of transport, by rail, road, air, sea, inland waterway or by a combination of such modes. If subsequent carriers are used for the carriage to the agreed destination, the risks passes when the goods have been delivered to the first carrier. This term may be used irrespective of the mode of transport, including multimodal transport. Delivery It is particularly important to note that the term ‘delivery’ is used in two different senses in Incoterms. Firstly, it is used to determine when the seller has fulfilled his obligation which is specified in clauses throughout Incoterms Secondly, the term ‘delivery’ is also used in the context of the buyer’s obligation to take or accept delivery of the goods, and obligations which appears in Incoterms. The word delivery means first that the buyer ‘accepts’ the very nature of the ‘C-’ term (such as CIF, CPT), namely that the seller fulfils his obligations upon the shipment of the goods and second that the buyer is obliged to receive the goods. Ship and In the terms intended to be used for carriage of goods by Vessel sea, the expression, ‘ship’ and ‘vessel’ are used interchangeably. Needless to say, the term ‘ship’ would have to be used when it is an ingredient in the trade term itself as in ‘free alongside ship’ (FAS) and ‘delivery exship’ (DES). Also, in view of the traditional use of the expression ‘passed the ship’s rail’ in FOB, the world ‘ship’ has had to be used in that connection. Checking In the A9 and B9 clauses of Incoterms the headings, and ‘checking-packaging-marking’ and ‘inspection of the goods’ Inspection respectively have been used. Although the words ‘checking’ and ‘inspection’ are synonyms, it has been deemed appropriate to use the word ‘checking’ with respect to the seller’s delivery obligation under A4 and to reserve the word ‘inspection’ for the particular case when a ‘pre-shipment inspection’ is performed, since such inspection normally is only required when the buyer, or the authorities of the export or import country, want to ensure that the goods conform with contractual or official stipulations before they are shipped. EXW The seller delivers when he places the goods at the disposal of the buyer at the seller’s premises or another named place Ex Works (such as works, factory, warehouse, and so on) but not cleared for export and not loaded on any collecting vehicle. This term thus represents the minimum obligation for the seller, and the buyer has to bear all costs and risks involved in taking the goods from the seller’s premises. FCA The seller delivers the goods, cleared for export, to the carrier nominated by the buyer at the named place. It should Free be noted that the chosen place of delivery has an impact on Carrier the obligations of loading and unloading the goods at that place. If delivery occurs at the seller’s premises, the seller is responsible for loading, If delivery occurs at any other place,Doc DRS 52001 Version 0.1 (draft) Page 21
  29. 29. SAMPLE - PROCUREMENT MANUAL the seller is not responsible for unloading. This term may be used irrespective of the mode of transport, including multimodal transport. FAS The seller delivers when the goods are placed alongside the vessel at the named port of shipment. This means that the Free buyer has to bear all costs and risks of loss of or damage to Alongside the goods from that moment. The FAS term required the Ship seller to clear the goods for export. The term can be used only for sea or inland waterway transport FOB The seller delivers when the goods pass the ship’s rail at the named port of shipment. This means that the buyer has to Free On bear all costs and risks of loss of or damage to the goods Board from that point. The FOB term requires the seller to clear the goods for export. This term can be used only for sea or inland waterway transport. If the parties do not intend to deliver the goods across the ships’ rail, the FCA term should be used. CFR The seller delivers when the goods pass the ship’s rail in the port of shipment. The seller must pay the costs and freight Cost and necessary to bring the goods to the named port of destination Freight but the risks of loss of or damage to the goods, as well as any additional costs due to events occurring after the time of delivery, are transferred from the seller to the buyer. The CFR term requires the seller to clear the goods for export. This term can be used only for sea and inland waterway transport. If the parties do not intend to deliver the goods across the ship’s rail, the CPT term should be used CIF The seller delivers when the goods pass the ship’s rail in the port of shipment. The seller must pay the costs and freight Cost, necessary to bring the goods to the named port of destination Insurance but the risks of loss of or damage to the goods, as well as and any additional costs due to events occurring after the time of Freight delivery, are transferred from the seller to the buyer, However, in CIF the seller also has to procure marine insurance against the buyer’s risks of loss of or damage to the goods during the carriage. Consequently, the seller contracts for insurance and pays the insurance premium. The buyer should note that under the CIF term the seller is required to obtain insurance only on minimum cover, the buyer would either need to agree as much expressly with the seller or to make his own extra insurance arrangement. The term CIF requires the seller to clear the goods for export. This term can be used only for sea and inland waterway transport. If the parties do not intend to deliver the goods across the ship’s rail, the CIP term should be used. CPT The seller delivers the goods to the carrier nominated by him but the seller must in addition pay the costs of carriage Carriage necessary to bring the goods to the named destination. This Paid To means that the buyer bears all risks and any other costsDoc DRS 52001 Version 0.1 (draft) Page 22
  30. 30. SAMPLE - PROCUREMENT MANUAL occurring after the goods have been so delivered. CIP The seller delivers the goods to the carrier nominated by him but the seller must in addition pay the costs of carriage Carriage necessary to bring the goods to the named destination. This and means that the buyer bears all risks and any additional costs Insurance occurring after the goods have been so delivered. Paid to However, in CIP the seller also has to procure insurance against the buyer’s risk of loss or damage to the goods during the carriage. Consequently, the seller contracts for insurance and pays the insurance premium. DAF The seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport not unloaded, Delivered cleared for export, but not cleared for import at the named At Frontier point and place at the frontier, but before the customs border of the adjoining country. The term ‘frontier’ may be used for any frontier including that of the country of export. Therefore, it is of vital importance that the frontier in question be defined precisely by always naming the point and place in the term. This term may be used irrespective of the mode of transport when goods are to be delivered at a land frontier. When delivery is to take place in the port of destination, on board a vessel or on the quay (wharf), the DES or DEQ terms should be used. DES The seller delivers when the goods are placed at the disposal of the buyer on board the ship not cleared for import at the Delivered named port of destination. The seller has to bear all the costs Ex Ship and risks involved in bringing the goods into the named port of destination before discharging. If the parties wish the seller to bear the costs and risks of discharging the goods, then the DEQ term should be used. This term can be used only when the goods are to be delivered by sea or inland waterway or multimodal transport on a vessel in the port of destination. DEQ The seller delivers when the goods are placed at the disposal of the buyer not cleared for import on the quay (wharf) at the Delivered named port of destination. The seller has to bear costs and Ex Quay risks involved in bringing the goods to the named port of destination and discharging the goods on the quay. The DEQ term requires the buyer to clear the goods for import and to pay all formalities, duties, taxes and other charges upon import. This term can be used only when the goods are to be delivered by sea or inland waterway or multimodal transport on discharging from a vessel onto the quay (wharf) in the port of destination. However, if the parties wish to include in the seller’s obligation the risks and costs of the handling of the goods from the quay to another place (warehouse, terminal, transport station, etc,) in or outside the port, the DDU or DDP terms should be used. DDU The seller delivers the goods to the buyer, not cleared forDoc DRS 52001 Version 0.1 (draft) Page 23
  31. 31. SAMPLE - PROCUREMENT MANUAL Delivered import, and not unloaded from any arriving means of Duty transport at the named place of destination. The seller has to Unpaid bear the costs and risks involved in bringing the goods thereto, other than, where applicable, any ‘duty’ (which term includes the responsibility for and the risks of the carrying out of customs formalities, and the payment formalities, customs duties, taxes, and other charges) for import in the country of destination. Such ‘duty’ has to be borne by the buyer as well as any costs and risks caused by his failure to clear the goods for import in time. This term may be used irrespective of the mode of transport but when delivery is to take place in the port of destination on board the vessel or on the quay (wharf), the DES or DEQ terms should be used. DDP The seller delivers the goods to the buyer, cleared for import, and not unloaded from any arriving means of transport at the Delivered named place of destination. The seller has to bear all the Duty Paid costs and risks involved in bringing the goods thereto including, where applicable, any, ‘duty’ (which term includes the responsibility for and the risk of the carrying out of customs formalities and the payment of formalities, customs duties , taxes and other charges) for import in the country of destination. While the EXW term represents the minimum obligation for the seller, DDP represents the maximum obligation. This term should not be used if the seller is unable directly or indirectly to obtain the import license. However, if the parties wish to exclude from the sellers’ obligations some of the costs payable upon import of the goods (such as value added tax; VAT) this should be made clear by adding explicit wording to this effect in the contract of sale. This term may be used irrespective of the mode of transport but when delivery is to take place in the port of destination on board the vessel or on the quay (wharf), the DES or DEQ terms should be used2.1.2 Bid and contract documents (INSERT RELEVANT AGENCY DOCUMENT REQUIREMENT HERE) The documentation used for bids and contracts must conform to the requirements of the organization providing the funds for the procurement. Each bank has issued a set of generic bid and contract documents that they require to be used for procurement activities they are funding. The Asian Development Bank (ADB) has issued a single set of generic documents, while the World Bank (WB) has issued two sets. One set is procurement of pharmaceuticals and vaccines; the other is for all other goods.Doc DRS 52001 Version 0.1 (draft) Page 24
  32. 32. SAMPLE - PROCUREMENT MANUAL The WB document for pharmaceuticals and vaccines is titled: Standard Bidding Documents – Procurement of Pharmaceuticals and Vaccines and contains the following sections:  Invitation to Bid  Instructions to Bidders  Bid Data Sheet  General Conditions of Contract  GCC Data Sheet and Special Conditions of Contract  Technical Specifications  Schedule of Requirements  Bidding and Contract Forms  Eligibility for the Provision of Goods, Works and Services in Bank Funded Procurement The WB document for general procurement activities: Standard Bidding Documents – Procurement of Goods and contains the following sections:  Invitation for Bids  Instructions to Bidders  Bid Data Sheet  General Conditions of Contract  Special Conditions of Contract  Schedule of Requirements  Technical Specifications  Sample Forms  Eligibility for the Provision of Goods, Works and Services in Bank-Financed Procurement The ADB document covers all procurements; it does not have a formal title. It contains the following sections:  Instructions to Bidders  General Conditions of Contract  Special Conditions of Contract  Technical Specifications  Sample Forms  List of Eligible Member Countries of the Asian Development Bank2.2 PROCUREMENT PLANNING AND SCHEDULING Procurement planning and scheduling is based a standard procurement-logistics cycle with five key elements, as illustrated in the following diagram.Doc DRS 52001 Version 0.1 (draft) Page 25
  33. 33. SAMPLE - PROCUREMENT MANUAL END-USER NEEDS DEFINED Bid call and Contract award Manufacture of supplies Delivery and distribution END-USER NEEDS SATISFIED The cycle commences with the definition of the end-user needs – what they need and when it is to be provided to them. This forms the basis for preparation of technical specifications, delivery schedules and so on that are to be called up in the contract. The next element is the selection and engagement of a cost- effective Supplier of goods and services to meet the defined needs of the end-user. The element commences with the preparation of the documents that will be used to call bids – terms and conditions, technical specifications and so on. The quality of end-user satisfaction is directly dependent on the quality of the planning of procurement activities and the quality of the documentation used in the bid call and contract award process – so this is a critical step in the cycle. After bids have been received and evaluated for conformance, the preferred Supplier is selected and, after the recommendation has been approved, the contact is awarded. Award of contract initiates the commencement of the next element – the Supplier’s activities to provide the items being supplied. The exact nature of these activities will depend on the circumstances of the contract, but could include one or more of the following: Manufacture of the items. Purchase of the items from an overseas Supplier which will include a period to allow for shipment of the items from the country of origin. Purchase of the items from a local Supplier. This may be either from stock held locally, or may require the Supplier to import the required stock from overseas. The end of this element occurs when the procured items are ready for delivery to the group effecting the procurement. The next element – delivery and distribution – is the logistics aspect of the procurement cycle. The procured items areDoc DRS 52001 Version 0.1 (draft) Page 26
  34. 34. SAMPLE - PROCUREMENT MANUAL delivered to the group effecting the procurement and are inspected for acceptance. After the items are accepted, they are distributed to the end-users’ receiving points. The cycle is finished when the end-users receive the procured items. This simple procurement cycle contains seven main stages in its progress from defining the end-users’ needs to providing the goods to meet those needs, and within those seven stages there are two significant milestones; the diagram following illustrates these seven main stages and two principal milestone. Prepare and issue bid documentation Bids prepared and submitted by suppliers Bid closing date Bid evaluation Award of contract Supply of goods Delivery to acceptance point Acceptance by purchaser Distribution to end- users The main activities and typical duration for each stage is described below. Preparation and issue of bid documentation: The principal activities undertaken in this stage are preparation of bid documentation, based on the user needs, in terms of specific requirements in the special conditions of contract and technical specifications, production of document sets for Bidder, advertising the bid, issuing bid documentation and handling requests for information and clarification. For bids over the stipulated value, the bid documentation must be submitted to the funding bank organization for their review and ‘no objection’ to proceed. The duration of this stage depends on the complexity of the procurement and the extent of bid documentation to be prepared.Doc DRS 52001 Version 0.1 (draft) Page 27
  35. 35. SAMPLE - PROCUREMENT MANUAL Bids prepared and submitted by Suppliers: While the preparation and submission of bids is the responsibility of the intending Suppliers (the Bidders), the effectiveness of this stage of the procurement process is determined by the quality of the bidding documentation provided to the Bidders and the time allowed for Bidders to prepare their bids. The main activities for the Bidders are, firstly, to examine the bid documentation and understand the requirements for their bids, then – secondly – to develop and cost an offer which conforms to the bid requirements. The third activity is to prepare the documentation for the offer and then – as the fourth and final activity – to submit the offer, as a formal bid, at the stipulated time and place. The duration of this stage – the bid preparation period – depends on both the complexity of the bid and the extent of information to be included in the submitted bid. For simple bids, such as supplying standard items from local stock, the bid period may be as short as five working days from issue of the bidding documentation. For extremely complex bids, a period of up to eight weeks may be necessary to allow the Bidders sufficient time to collect information form sub-tier Suppliers and prepare the documentation required to support their bid. Another factor in determining how long to allow for the bid preparation period is the reasonable time required to allow the Bidders to collect the bid documentation once it is released, and how long it takes for the Bidders’ documentation to be sent to the bid lodgement location. For overseas Suppliers, it may be necessary to allow an additional week to allow transmission of bidding documentation. Typically, for the Dept., a period of 60 calendar days (two months) is allowed for Bidders to prepare and submit their bids. Bid evaluation: The first set of activities in the evaluation of submitted bids are review of each received bid to ensure that it complies with the general and special conditions of contract, complies with the technical requirements for the supplies. Following these activities, the details of the conforming bids are listed to allow comparative analysis and selection of the preferred Supplier. A formal recommendation is then prepared as the vehicle to proceed to award of contract. The duration of this stage will be typically between three to five days. Award of contract: Award of contract covers the review and acceptance of the recommendation, notification of the preferred Supplier, preparation of the contract documents and their presentation for signature by the authorised individuals. The levels of authority and particular requirements for award will be determined by the value of the contract.Doc DRS 52001 Version 0.1 (draft) Page 28
  36. 36. SAMPLE - PROCUREMENT MANUAL For contracts over the stipulated value, award documentation must be submitted to the funding bank organization for their review and ‘no objection’ to proceed. The duration of this stage is typically between one and two weeks. Supply of goods: The management of activities in this stage is the sole responsibility of the Supplier. It may include the manufacture of the items being procured, importation of the items from an overseas Supplier, or assembly of the items from stocks held locally by the Supplier or by some other Supplier (or subcontractor). The duration of this stage is dependent on the nature of the supply arrangements; for supply from local stocks it may be as short as one or two weeks, for supply through overseas manufacture and shipment it may be as long as two to four months. Because the duration of this stage is under the control of the Supplier, it is essential that – during the bidding stage – the Supplier be required to provide a factually based statement of the expected duration for the supply period. Delivery to acceptance point: In general, the Supplier is required to deliver the procured items to the receiving point for a formal acceptance inspection. This stage of the procurement process – which is also the first part of the logistics process – commences either with completion of manufacture or arrival of imported items, followed by inspection by the Supplier to establish that only conforming supplies will be delivered to the Agency. The Agency performs an acceptance inspection – which may be either a full inspection of the delivery or else an inspection of a random sample of the delivery – leading to acceptance and issue of the required inspection report and acceptance certificate. The duration of this stage is usually around two to four weeks; the longer period is when there are additional activities involved, such as customs and tax clearance. Distribution to end users: This stage – the second part of the logistics activities – involves the movement of the procured items from the Agency warehouse to the receiving point for the end users in the three regions. Once the items arrive at the receiving point in the they are checked to identify any damage or loss in transit, a receiving report completed, and the items made available to the end-users. The duration of this stage is typically between one and five weeks. The two principal milestones are: Bid closing date: This is the date on which all bids are to be received – it is the ‘gate’ between the period used by prospective Suppliers to prepare and document their offerDoc DRS 52001 Version 0.1 (draft) Page 29

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