ADB Procurement System Overview

Asian Development Bank
Business Opportunities
Procurement of
Goods and Works
BOS 1
Procurement System – Principles
Key Principles
 Source of Procurement
 Economy and Efficiency
 Fairness
 Transparency
 Promotion of Domestic Industries
BOS 2
Procurement System - Guidelines
ADB Commercial
Charter Practices
PROCUREMENT
GUIDELINES
Other ADB
MDBs Board Policy
ADB
Experience
BOS 3
Procurement System - Eligibility
Eligibility
 Goods
• must be produced in a member country
 Bidders
• must be nationals of eligible source countries
• must not have a conflict of interest
• must not be under declaration of ineligibility by ADB
• must not be ineligible due to an UN Security Counsel
resolution
• must be, in case of a GOE, legally and financially
autonomous, operate under commercial law and be
independent of the Employer
BOS 4
Procurement System - Responsibilities
Responsibilities
 The Borrower (Executing Agency) is responsible
for all procurement activities
 ADB will review the procurement activities to
ensure that the ADB’s Guidelines for
Procurement are followed
BOS 5
Procurement System - Anticorruption
Definitions
 Corrupt Practice
offering, giving, receiving, or soliciting, directly or indirectly, anything of
value to influence improperly the actions of another party
 Fraudulent Practice
any act or omission, including a misrepresentation, that knowingly or
recklessly misleads, or attempts to mislead, a party to obtain a financial
or other benefit or to avoid an obligation
 Coercive Practices
impairing or harming, or threatening to impair or harm, directly or
indirectly, any party or the property of the party to influence improperly
the actions of a party
 Collusive Practice
an arrangement between two or more parties designed to achieve an
improper purpose, including influencing improperly the actions of
BOS 6
another party
Procurement System – Anticorruption
Actions
ADB will if it determines at any time that any party has
engaged in corrupt, fraudulent, coercive, or collusive
practices
 reject a proposal to award contract
 cancel the portion of a loan
 declare a firm ineligible either indefinitely or for a stated
period of time
 inspect accounts and records of suppliers and contractors
and have them audited by auditors appointed by the Bank
BOS 7
Procurement System – Procurement Methods
 International Competitive  Procurement in Loans to Financial
Bidding Intermediaries
 Limited International Bidding  Procurement under BOO / BOT /
BOOT, Concessions and Similar
 National Competitive Bidding Private Sector Arrangements
 Shopping
 Performance Based Procurement
 Direct Contracting
 Procurement under Loans
 Force Account Guaranteed by ADB
 Procurement from Specialized  Community Participation in
Agencies Procurement
 Procurement Agents  Procurement under Disaster and
 Inspection Agents Emergency Assistance
BOS 8
International Competitive Bidding (ICB)

 For supply contracts valued at US$1.0 million or more
 For works contracts valued at US$10.0 million or more
 Value for money
 Provides for adequate, fair and equal opportunities
BOS 9
Prequalification
ICB Activities
Preparation of Bids
Bid Opening
Bid Evaluation
Award of Contract
BOS 10
Key Provisions of ICB
 Source of Procurement  Currency of Bid
 Use of SBDs  Currency of Bid Comparison
 Reference to ADB  Currency of Payment
 Bid Validity & Bid Security  Terms of Payments
 Language
 Alternative Bids
 Clarity
 Conditions of Contract
 Standards
 Use of Brand Names  Performance Security
 Pricing  Liquidated Damages & Bonus
 Price Adjustment  Force Majeure
Transportation and Insurance Settlement of Dispute
BOS 11
 
Key Provisions of ICB

 Time for Preparation of  Domestic Preference
Bids
 Extension of Bid Validity
 Bid Opening Procedures
 Postqualification of Bidders
 Clarification or Alteration
of Bids  Award of Contract
 Confidentiality  Publication of the Award of
Contract
 Examination of Bids
 Rejection of all Bids
 Evaluation and
Comparison of Bids  Debriefing
BOS 12
Limited International Bidding

 ICB by Invitation
 Appropriate for
. . . if there is only a limited number of suppliers
. . . other exceptional reasons
BOS 13
National Competitive Bidding
 Procurement is done domestically, within the borrowing
DMC
 Allowed when :
 Domestic production or construction facilities are
available
 Foreign contractors and suppliers are unlikely to be
interested
 Procedures for domestic procurement are acceptable
to ADB
 Borrower has requested for NCB
BOS 14
Procurement System – Bidding Procedures
Single-Stage: One-Envelope
Single-Stage: Two-Envelope
Two-Stage: Two-Envelope
Two Stage
BOS 15
Bidding Procedures
Single-Stage: One-Envelope
ADB
Deadline Approval
STOP
Technical
Proposal Technical
Proposal
Technical
Financial Financial
Proposal Financial
Proposal
BOS 16
Preparation Evaluation
Bidding Procedures
Single-Stage: Two-Envelope
ADB ADB
Deadline Approval Approval
Technical
STOP Proposal
Financial
Technical Proposal
Proposal
Technical
Financial
Proposal
Financial
Financial
BOS 17
Preparation Evaluation 1 Evaluation 2

Bidding Procedures
Two-Stage: Two-Envelope
ADB ADB
Deadline Approval Deadline Approval
Technical Technical Revised Techn. Revised Techn.
Proposal STOP Proposal Proposal STOP Proposal
Suppl. Financial Suppl. Financial
Proposal Proposal
Technical
Revised Technical
Financial Suppl. Financial

Proposal
Financial
Proposal
Financial Financial Financial

BOS 18
Preparation 1 Evaluation 1 Preparation 2 Evaluation 2

Bidding Procedures
Two-Stage
Deadline ADB Deadline ADB
Approval Approval
STOP STOP
Technical Technical Revised Revised
Proposal Proposal Technical Proposal Technical Proposal
Financial Financial
Proposal Proposal
Revised Technical
Technical
Financial
BOS 19
Preparation 1 Evaluation 1 Preparation 2 Evaluation 2

Procurement System – ADB Prior Review
• Contracts (Goods, Works, Services)
• Procurement Mode
• Procurement Timing
Procurement Plan • ADB review (post/prior)
•Advertisement and Invitation to Prequalify

•Evaluation Criteria
Prequalification •Evaluation of Applications
•Invitation to Bid
Preparation of Bid •Advertisement
•Bid Documents EA
Documents
•Evaluation Report
•Proposal of Award
Bid Evaluation
•Certified Contract
Award of Contract
BOS 20
Procurement System – ADB Prior Review
Additional ADB Approval Requirements

 Extension of bid validity
 Complaints from bidders after contract award
 Change in contract award recommendation
 Change in the terms and conditions of contract
 Time extensions, modifications of conditions, change orders
increasing in aggregate the original contract amount by
more than 15%
BOS 21
Procurement System – ADB Post Review
Prerequisite - EA capacity assessment
Procedure - Prior review of 1st set of procurement
documents in project only
- Advertisement provided after posting
- ADB reviews contract award decisions post
facto
Timing - BER and contract documents to be submitted
as soon as completed
- ADB must respond in 6 months
- EA required to keep files for 2 years
Risk - Misprocurement  cancellation of funds
BOS 22
Procurement System – ADB Review
Award of contracts for values of $10.0mill. and above

must be approved by the Bank’s
— Procurement Committee —
Chairman : Principal Director, COSO
Members : Assistant General Counsel
Director, Sector Division
Secretary : Senior Procurement Specialist
(Non-Voting)
BOS 23
Procurement System – ADB Review
Matters for Consideration
 For contracts estimated at $10.0 million or more
 Prequalification Evaluation
 Technical Evaluation (2-stage/2-envelope bidding)
 Bid Evaluation  Award
 Proposal for Rebidding
 Proposal for Cancellation
 Actions in conflict with the ADB requirements
 Proposal to vary previous PC decisions
 Any matters designated by management
BOS 24
Procurement System – Prequalification
Purpose
to ensure that bids are submitted only by firms
that have the necessary qualifications in terms of
 Eligibility
 Experience
 Financial Capacity
 Pending Litigation
to undertake the work for which bids are to be
invited.
BOS 25
Procurement System – Prequalification
Used for
 Large complex works contracts
 Turnkey contracts
 Contracts for fabrication of custom designed plant
and equipment
 Specialized service contracts
 Complex IT contracts
BOS 26
Preparing responsive bids

Avoiding common pitfalls
BOS 27
Preparing Responsive Bids
Joint Venture Requirements

 All partners must be eligible
 J.V. agreement must contain provision for joint and
several liability
 One of the partners must be authorized to be in
charge
 Copy of Joint Venture agreement must be included
in the bid
BOS 28
 Be compliant !
Submit a basic offer that complies with all terms and
conditions of the bidding document, even if some of these
conditions appear irrelevant
 Don’t qualify !
Do not add any conditions. Conditionalities or qualifications
will lead to rejection
 Get official clarification !
Submit an official inquiry to the EA if any provisions of the
bidding document are unclear or unacceptable before the bid
closing date or such date as may be specified. A copy may
also be submitted to the bank if appropriate
BOS 29
 Be aware of bid evaluation criteria !
Check if other factors besides price, such as delivery periods,
efficiency, operating & maintenance costs, will be considered
in the bid evaluation. These factors must be specified in the
bidding document to be applied.
 Be clear with alternatives !
Submit alternatives only if explicitly allowed in the bidding
document. Alternative proposal, if allowed, should be
submitted in addition to the compliant proposal. The
proposed alternatives and corresponding changes in bid price
should be clearly indicated. Only the alternative proposal
submitted by the bidder with the lowest evaluated and
substantially responsive compliant bid can be considered,
unless otherwise provided in the bidding documents.
BOS 30
 Ensure bid is complete !
Check if the bid complies with all the requirements of the
bidding document such as bid security, power of attorney,
additional documents such as test certificates and technical
brochures. Incomplete Bids may be rejected.
 Make final check of bid !
 Amount, validity and text of Bid Security
 Signatures and power of attorney
 Joint venture agreement enclosed
 References enclosed
 Discounts in covering letter or appropraiate place as
specified in the bidding document
 Marking of envelopes
BOS 31
 Be on time !
Submit bid within the stipulated deadline. Late bids will
not be accepted.
 During opening ensure !
 All relevant prices are read out
 All discounts are read out
 Presence and amount of bid security is read out
 No envelope remains unopened
 All the above is recorded correctly
 The record is signed by all bidders present and by the buyer
 Be Aware of Possible Extension !
There may be a request to extend the bid validity period by
several months, as in certain cases the evaluation of bids
requires more time than originally expected.
BOS 32
How your bid is evaluated

Determining the winning bid
BOS 33
Bid Evaluation – Purpose
Determination of the
lowest evaluated and
substantially responsive bid
BOS 34
Opening of Bids
Public Opening of Bids
 Bids received are opened publicly by the EA at the time and
place indicated in the bidding documents
 Required for the sake of Fairness and Transparency
 Gives bidders assurance that all bids will be treated fairly
and impartially
 Bidders’ attendance is encouraged
 Record of the items read out is to be kept by the EA
 Record is initialed by the representatives of bidders present
BOS 35
Opening of Bids
Information read out
 Bidder’s name
 Total bid price
 Price of alternative bids, if any
 Amount or percentage of any discounts offered and the
conditions under which the discounts are applicable
 Bid security - amount and validity
 Any other information which is deemed necessary to be
announced by the Tender Committee.
BOS 36
Bid Evaluation – Typical Sequence
Complete Basic Data Sheet
Prepare Record of Bid Opening
Prepare Table of Bid Prices
Examine Bids for Responsiveness
Identify Bids for Detailed Evaluation
Evaluate Bids in Detail
Adjust Bid Prices
Apply Other Adjustments
BOS 37
Bid Evaluation – Basics
Time Frame
The bid evaluation of bids and the award of contract should
be completed before the expiration of the bid validity as
stipulated in the bid documents
Confidentiality of Procedure
After opening of bids no information to non-authorized
persons on :
 Substance of bid
 Preliminary examination results and status
 Evaluation results and status
 Recommendation of award
BOS 38
Clarification and Alteration of Bids

Only clarifications not changing the substance or the
price of the bid may be requested or accepted by the
Borrower
Arithmetical Errors
No cause for bid rejection. Can be corrected :
 Discrepancy between Unit Price and Total Price
 Unit Price will prevail
 Discrepancy between Total Bid Amount and Sum of
Total Prices
 Total Prices will prevail
BOS 39
Postqualification
Purpose
 Identifies qualified bidders during initial examination
of opened bids
 Spares borrowers/EA from detailed evaluation of bids
of unqualified bidders
Typical Criteria
 Experience
 Financial position
 Staff Qualifications
 Technical capability
 After sales service
 Past performance
BOS 40
Major Deviations
 Has an effect on the validity of the bid; or
 Has been specified in the bid documents as grounds for
rejection of the bid; or
 Is a deviation from the provisions of the bidding
documents with effect on the bid price, but cannot be
given a monetary value; or
 Is a deviation from the minimum experience
qualifications specified in the bidding documents; or
 Is an unacceptable deviation from the specifications
 Conditional bid
BOS 41
Minor Deviations
 Has no effect on the validity of the bid; or
 Has no effect on the price, quality or delivery of the
goods or services offered; or
 Has such effect, but the difference from commercial
terms and technical specifications can be given a
monetary value; or
 Has not been specified in the bid documents as grounds
for rejection, provided total amount of deviations does
not exceed a previous determined percentage of the bid
price (usually 15 per cent)
BOS 42
Extension of Bid Validity
 Considered in exceptional cases
 When considered, all bidders should be asked
 Bidders willing to extend bid validity
cannot modify substance of bid
must extend validity of bid security
Commercial Aspects
Exercise flexibility in evaluating commercial aspects such as :
 Delivery Schedule
 Terms of Payment
 Mode of Payments
BOS 43
Price Adjustment Provision

In evaluating bids do not take into account price adjustment
provisions. Use base price for comparison. All bids are subject
to same degree of adjustment.
Alternative Bids
When acceptable, specify
 Conditions in Invitation to Bid and Instructions to Bidders
 Method of evaluation and comparison
BOS 44
Basis for Price Comparison
Goods
 for Goods from outside
Includes cost of insurance and freight (CIF or CIP)
Excludes custom duties or other taxes levied on goods
 for Goods from inside
Includes ex-factory price (EXW)
Excludes any sales or similar taxes levied on goods
 Related Services including all taxes and duties
Works
 Includes all taxes, duties and other levies
BOS 45
Exchange Rates
 For bid comparison use single currency as specified in bid
documents (usually local currency or US$)
 The rates to be used are the selling rates quoted by an
official source (central bank, commercial bank, or
internationally circulated newspaper)
 Date of exchange rate to be specified in bidding
documents shall be :
 Not earlier than 28 days prior to the deadline for
submission of bids
 Not later than the original date for the expiry of bid
validity
BOS 46
Factors to be considered
 payment schedule
 delivery time
 operating costs
 efficiency and compatibility of the equipment
 availability of service and spare parts, and related
training
 safety, and environmental benefits
The factors other than price to be used for determining the
lowest evaluated bid shall, to the extent practicable, be
expressed in monetary terms
BOS 47
Bid Evaluation – Domestic Preference
Supply Contracts
Example
BIDDER A BIDDER B
1. Bid Price (arithmatically corrected) 31,403,725 33,973,305
2 Adjustment for Scope 2,053,000 240,000
A. Bid Price (adjusted for Scope) 33,456,725 34,213,305
3. Technical Compliance 477,000 723,017
4. Performance 2,488,614 232,000
5. Terms of Payment 340,000 105,000
6. Delivery 1,023,000 123,000
B. Evaluated Bid Price 37,785,339 35,396,322
BOS 48
Purpose
 To provide margin of preference to domestically
manufactured goods or domestic contractors for
ADB-financed projects
 To allow domestic firms to compete with foreign firms
on more equal footing
Conditions
 Granting of preference subject to conditions
 Applies only to ICB
 Needs to be applied for by Borrower
 To be specified in Loan Agreement if scheme is applied
BOS 49
Supply Contracts
Responsive bids are to be classified into three
groups:
Group A: Goods manufactured locally with more
than 30% domestic value added
Group B: Goods manufactured locally with less
than 30% domestic value added
Group C: Imported goods
BOS 50
Supply Contracts
Procedure
 Determine lowest bid in each group
 Compare lowest evaluated bids among the groups
 If lowest is from group A or B, select it for contract
award
 If lowest is in Category III, compare:
1.15 x CIF price of Group C against EXW price of Group A
BOS 51
BIDDER X BIDDER Y
Supply Contract Example Group A Bid Group C Bid
1. Bid Price (arithmetically corrected) 31,403,725 33,973,305
2. Adjustment for Scope 2,053,000 240,000
A. Bid Price (adjusted for Scope) 33,456,725 34,213,305
3. Technical Compliance 477,000 723,017
4. Performance 2,488,614 232,000
5. Terms of Payment 340,000 105,000
6. Delivery 1,023,000 123,000
B. Evaluated Bid Price 37,785,339 35,396,322
7. Domestic Preference (15% of A.) --------- 5,131,996
BOS 52
C. Evaluated Bid Price (w. Dom .Pref.) 37,785,339 40,528,318

Examples Supply Contracts
Group A Group B Group C
BID PRICE 9,000 9,900 10,000
COMPARE 9,000 9,900 10,000
AWARD
BID PRICE 9,900 9,000 10,000
COMPARE 9,900 9,000 10,000
AWARD
BID PRICE 10,000 9,900 9,000
COMPARE 10,000 9,000 x 1.15 =10,350
BOS 53
AWARD
Turnkey / Supply & Installation
Procedure
 Goods offered from outside the Borrower’s country are
quoted CIF
 Locally manufactured goods are quoted EXW
 Other components such as design, installation,
commissioning, testing and supervision are quoted
separately
 For comparison of local goods with imported goods, add to
the offered CIF price of the imported goods the lesser of
either
 15% , or
 applicable duties and taxes to be paid for each item
BOS 54
Example Turnkey / Supply & Installation
BID PRICE
Bidder A Bidder B
SERVICES Design 2,000 2,500
WORKS Civil works 23,000 27,500
Equipment EXW 10,000 60,000
SUPPLY
Equipment CIF 100,000 50,000
Total 135,000 140,000
Domestic Preference
loading 15% of CIF: 15,000 7,500
COMPARE: 150,000 147,500
AWARD
BOS 55
Civil Works
Responsive bids are to be classified into two
categories
 Category I
Bids offered by Domestic Contractors and Joint Ventures
eligible for the Preference
 Category II
Bids offered by other Contractors
BOS 56
Civil Works
Eligibility Criteria for Domestic Contractors

 Incorporated in the borrower’s country
 Majority ownership by nationals of borrowing
country
 Will not subcontract to foreign contractors more than
50% of the total value of their work
BOS 57
Civil Works
Eligibility Criteria for Joint Ventures between
Domestic and Foreign Firms
 The domestic partner is individually eligible
according to the criteria stated previously
 The domestic partner would not qualify for the
works without the participation of the foreign
partner
 The domestic partner will carry out at least 50% of
the works in terms of value
BOS 58
Civil Works
Procedure
 Determine lowest evaluated bid from each category
 Compare lowest bids from each category
 If lowest bid is from category I, award contract
 If lowest bid is from category II add 7.5% and
compare it with lowest bid from Category I, award
contract to lowest
BOS 59
Example Civil Works
Category I Category II
BID PRICE 9,900 10,000
COMPARE 9,900 10,000
AWARD
BID PRICE 9,500 9,000

COMPARE 9,500 9,000 x 1.075 = 9,675
AWARD
BOS 60
Getting Paid
ADB Disbursement Procedures
BOS 61
Disbursement Procedures
 Direct Payment Procedure
used for payment of large civil works progress payments,
consultant’s fees, and importation of goods where not
practical to open a letter of credit
 Reimbursement Procedure
used for payment of local currency costs, petty purchases
and small civil works payments
 Commitment Procedure
used extensively for financing import of goods
 Imprest Fund Procedure
used for payment of contractors’ bills and suppliers’
invoices in small amounts or numerous items of operating
BOS 62
expenses
Disbursement Procedures
2
Borrower’s Supplier’s
Bank Bank
1
Executing 5
Agency 1 - Application for LC
3
2 - LC Opened
3 - Application for CL
4 - CL Approval
4 5 - Issue of CL
BOS 63
Questions, Clarifications, Debriefing, etc

BOS 64

ADB Procurement System Overview

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ADB Procurement System Overview

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Asian Development Bank

International Competitive Bidding (ICB)

Key Provisions of ICB

Limited International Bidding

Preparation Evaluation 1 Evaluation 2

Financial Suppl. Financial

Financial Financial Financial

Preparation 1 Evaluation 1 Preparation 2 Evaluation 2

Preparation 1 Evaluation 1 Preparation 2 Evaluation 2

•Advertisement and Invitation to Prequalify

Additional ADB Approval Requirements

Award of contracts for values of $10.0mill. and above

Preparing responsive bids

Joint Venture Requirements

How your bid is evaluated

Clarification and Alteration of Bids

Price Adjustment Provision

C. Evaluated Bid Price (w. Dom .Pref.) 37,785,339 40,528,318

Eligibility Criteria for Domestic Contractors

BID PRICE 9,500 9,000

Questions, Clarifications, Debriefing, etc

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