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Module 10 Session 10.5 Visual 1
Module 10
Organizing Procurement
Session 10.5 Procurement of Services: Evaluation Criteria and Selection Procedures forProcuring Consultant Services
Module 10 Session 10.5 Visual 2
Instructional Objectives
At the end of this lesson, the learners will be able to
Design a transparent process for selecting consultants using either (a) quality or (b) quality and cost criteria.
Describe the process of preparing to negotiate with a service provider.
Module 10 Session 10.5 Visual 3
Method 1: Selection Based on Quality
Based on nonquantifiable attributes Opposite of procurement of civil works that
have quantifiable attributes Selection process should be criteria based
Quality of principle staff proposed Approach and methodology proposed Experience and breadth of firm
Module 10 Session 10.5 Visual 4
Qualifications of Staff
General qualifications and education Experience directly relevant to the proposed
assignment Language fluency Local knowledge Training experience
Module 10 Session 10.5 Visual 5
Work Plan Considerations
Understanding of objectives
The methodology proposed
The breadth of the head office support
The degree of innovation proposed
The specific work program
The extent to which technology would be transferred during the assignment
Module 10 Session 10.5 Visual 6
Criteria for Evaluating the Firm’s Experience
The capacity to carry out the assignment Recent experience with similar projects Experience in similar areas and under similar
conditions Criteria and weights should be agreed upon by
staff before RFP is issued. Include criteria and weights in letter of
invitation
Module 10 Session 10.5 Visual 7
Method 2: Selection Based on Quality and Cost
Quality criteria plus cost factored in
Only use cost judiciously
Principle emphasis should be on quality
Weights for complex assignments 90/10 ratio of quality to cost recommended Never have ratio lower than 70/30 quality to cost
Weights for routine assignments Recommended: 85/15
Module 10 Session 10.5 Visual 8
The Request for Proposals (RFP)
Letter of Invitation
Information to Consultants
Terms of Reference for the assignment
A blank proposed contract
Criteria for evaluation of proposals
Module 10 Session 10.5 Visual 9
Letter of Invitation
States intention
Source of funding
Date and time for submission
Address for delivery of proposal
Module 10 Session 10.5 Visual 10
Letter of Invitation (continued)
Selection process and evaluation criteria Estimate of consultant inputs (cost estimates) Financial information for negotiations Conflict of interest clause Names of invited consultants Transfer of skills program Attachments Site visits Bidders’ meetings
Module 10 Session 10.5 Visual 11
Information to Consultants
Necessary information for preparing proposals
Make process of selection transparent
Clarify evaluation criteria for selection Factors Weights Minimum passing score
Level of effort envisioned (man months)
Validity period of proposal (60-90 days)
Module 10 Session 10.5 Visual 12
Terms of Reference
Include in proposal
Include blank proposed contract
Consider using standard and comprehensive forms published by international development institutions
Module 10 Session 10.5 Visual 13
Evaluating Proposals with Quality Criteria (Method 1)
Use a small, in-house team.
Use pre-established criteria and weights.
Criteria should be developed within the client organization.
Criteria should be understood and accepted by the team.
Module 10 Session 10.5 Visual 14
Evaluating Proposals with Quality Criteria
Sample Criteria
Qualifications
and experience
of firm
Methodology
and work plan
Individual staff
qualifications
Total
points
Type of assignment/weight
Technical assistance
and training
Preinvestment and
feasibility studies
Engineering design
Implementation
and supervision
10-15
15-20
25-30
10-15
10-20
30-35
25-30
20-25
75-80
50-55
40-50
60-70
100
100
100
100
Module 10 Session 10.5 Visual 15
Evaluating Proposals with Quality Criteria—The Evaluation Process
1. Determine if substantially responsive to RFP.
2. Identify any reservations.
3. Identify statements that need special attention.
4. Start individual evaluations.
5. Everyone should use the same worksheet.
Module 10 Session 10.5 Visual 16
Evaluating Individuals with Quality Criteria
Sample Worksheet Assignment:Country:Project:
Date of Evaluation:Name of Firm:Evaluated by:
.80 24 .90 36 1.0 30 90
Consulting firm Project Sheet No. Country: Date:
General Qualification
Total Points: 30
Adequacy for Project
Total Points: 40
Language and Experiencein Region
Total Points: 30
Personal Rating Group Rating
Group(A)
Position(B)
Name(C)
Age(D)
Rating*(E)
(E) x (Points)= (F)
Rating*(G)
(G) x(Points)= (H)
Rating* (I)
(I) x (Points)= (J)
(F) + (H) + (J)= K
(K)
1.
2.
3.
4.
* Rating is expressed as percentage or fraction of 1.
Module 10 Session 10.5 Visual 17
Evaluating Proposals with Quality Criteria
Summary Worksheet
Firm1. 2. 3. 4. 5. 6.
Item Points* Scoring Rating Scoring Rating Scoring Rating Scoring Rating Scoring Rating Scoring Rating
References
Adequacy of proposedMethodology
Qualifications ofProposed Staff
Total Score
Staff Months Local
Staff Months in Field
* Expressed as percentage or fraction of 1.
Assignment:Country:Project:
Date of Evaluation:Evaluated by:
ABC Consultants
.10
.20
.70
80
90
70
8
18
49
75
Wgt.
1.00
Module 10 Session 10.5 Visual 18
Evaluating Proposals with Different Technical/Price Ratios
TECHNICAL PRICE (HIGHEST SCORE WINS)A B C D E F G H I J K L
TECHNICALSCORE
TECHNICAL SCORE WITHTECHNICAL WEIGHT
WEIGHT: 90 80 70
PRICE ASSUBMITTED(MILLIONS
OF US$)
ADJUSTEDPRICE (A)
ADJUSTED PRICE WITHPRICE WEIGHT
WEIGHT: 10 20 30
TOTALSCORE AT
(B)
90/10 80/20 70/30
92 82.8 73.6 64.4 1.00 70.00 7.00 14.00 21.00 89.90 87.6 85
90 81.0 72.0 63.0 0.85 82.35 8.23 16.46 24.69 89.23 88.46 87
85 76.5 68.0 59.5 0.73 95.89 9.59 19.18 28.77 86.09 87.18 88
78 70.2 62.4 54.6 0.70 100.00 10.00 20.00 30.00 80.2 82.40 84
67 60.3 53.6 46.9 1.10 63.64 6.36 12.72 19.08 66.56 66.32 65
(i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi) (xii)
NOTE (A) ADJUSTED = LOWEST PRICE PRICE X 100… EXAMPLE: ADJUSTED PRICE OF CONSULTANT B SUBMITTED PRICE (B) COLUMN (x) = (ii) + (vii) = 0.70 (xi) = (iii) + (viii) X 100 = 82.35 (xii) = (iv) + (ix) 0.85
FIRM A
FIRM B
FIRM C
FIRM D
FIRM E
Module 10 Session 10.5 Visual 19
Consultant Comments on TOR
Consider on their merit
Review carefully (do not automatically reject)
Provide benefit of consultant’s expertise
Level of consultant understanding is potential measure of competency
Module 10 Session 10.5 Visual 20
Evaluating Proposals with Quality Criteria—Committee Review Process
Committee convenes after individual reviews
Individual evaluations and scores are compared.
Determine the best proposal.
Rank order the other proposals.
Prepare an evaluation report on the proposals.
Preserve all records for transparency.
Notify consultants of results.
Module 10 Session 10.5 Visual 21
Evaluation Based on Quality and Cost (Method 2)
Use a two-stage process.
Evaluate quality first (as above).
Evaluate cost second.
Module 10 Session 10.5 Visual 22
Evaluation Based on Quality and Cost—The Process
Evaluate quality.
Notify consultants who failed. Either did not meet minimum qualifying mark
for quality Or were not responsive
Return their financial proposals unopened.
Module 10 Session 10.5 Visual 23
Evaluation Based on Quality and Cost—The Process (#2)
Notify consultants who qualified of date and time set for opening of financial proposals.
Open financial proposals in public.
Read aloud and record the following: Name of consultant Quality scores Proposed costs
Prepare minutes.
Module 10 Session 10.5 Visual 24
Evaluation Based on Quality and Cost—The Process (#3)
Client reviews financial proposals Correct arithmetical errors.
Convert to single currency (per RFP).
Use official exchange rates (per RFP).
Date for setting rate should be set in RFP. Not earlier than four weeks prior to deadline for
submission Not earlier than original date of expiration of
period of validity of proposal
Module 10 Session 10.5 Visual 25
Evaluation Based on Quality and Cost—The Process (#4)
Cost should exclude local taxes. Lowest cost proposal gets financial score of
100. Weight financial and quality scores. Firm with highest total combined score is
invited for negotiations.
Module 10 Session 10.5 Visual 26
Summary
Selection of consultants primarily judgmental
Two basic ways to select Quality criteria alone Quality + cost criteria
Cost alone should never be used for selection
Module 10 Session 10.5 Visual 27
Summary
Method 1: Quality selection process
Client issues RFP.
Firms prepare and submit proposals.
Client uses pre-established criteria and weights to evaluate.
Individual reviews followed by group review.
Single overall score given each proposal, and firm with highest scoring proposal invited for negotiations.
Module 10 Session 10.5 Visual 28
Summary
Method 2: Quality + cost selection process
Quality process plus
Eliminate proposals below a quality cutoff.
Return unopened financial proposals of nonqualifiers.
Open financial proposals of qualifiers in public.
Module 10 Session 10.5 Visual 29
Summary
Quality + cost selection process (continued)
Review financial proposals for accuracy and convert to common currency.
Give lowest bidder score of 100.
Add financial and quality scores.
Highest overall score wins.
Invite winning firm to negotiations.
Transparency is important for both methods.
Module 10 Session 10.5 Visual 30
Module 10
Organizing Procurement
Session 10.5 Procurement of Services: Contracts and Negotiations
Module 10 Session 10.5 Visual 31
Types of Contracts for Service Providers
Time inputs (may or may not include reimbursable expenses)
Lump sum (may or may not include reimbursable expenses)
Cost-plus fixed fee Retainer with or without contingency
Module 10 Session 10.5 Visual 32
Time Input Contracts
Rate X Time Monthly Weekly Hourly
Should have a maximum amount (ceiling) with contingency
Payment based on inputs, which encourages quality work
Client administration required Considered flexible and fair and widely used
Module 10 Session 10.5 Visual 33
Lump-Sum Contracts
Payment based on output Fixed payment for delivery of product or
service within a specified time period Should include contingency allowance Easier to manage than time-based
contract Appropriate for well-defined services with
clear TOR Convenient for repeat assignments
Module 10 Session 10.5 Visual 34
Cost-Plus Fixed Fee Contracts
Special type of contract for “know-how” Includes licensing fee (as for a patented
industrial process) Cost + Fee (for know-how) Also appropriate when inputs/outputs not
clearly defined
Module 10 Session 10.5 Visual 35
Retainer and/or Contingency Fee Contracts
Not commonly used except for management consultants and legal firms
Retainer fee = number of days of effort over a fixed time period
Must pay retainer even if less effort required
Module 10 Session 10.5 Visual 36
Best “Bets” for Most Projects
Time-based contract
Lump-sum contract
Module 10 Session 10.5 Visual 37
The Consultant Contract: Possible Clauses
The nature of the association (for joint ventures)
The procedure for amendments
Staff substitution
Consultant authority
Conflict of interest
Cofinancier’s contribution to cost
Price adjustment
Contingency allowance
Module 10 Session 10.5 Visual 38
The Consultant Contract: Possible clauses (2)
Rates for additional work Payment procedures Audits Taxation Termination Local law
Module 10 Session 10.5 Visual 39
The Consultant Contract:
Possible clauses (3)
Liability Insurance Settlement of disputes Penalties, performance bonds, and
guarantees
Module 10 Session 10.5 Visual 40
The Consultant Contract: Annexes
Terms of reference Performance schedules Cost estimates Terms of payment
Lump sum Monthly rates Reimbursables
Module 10 Session 10.5 Visual 41
Contract Negotiations
Procurement should focus on quality of consultant, not price.
Notifications should be in writing:
Invite in writing representative of winning proposal team to negotiations.
Notify others of negotiations and request they hold their proposal valid.
Consultant team leader should be present at negotiations.
Module 10 Session 10.5 Visual 42
Contract Negotiations (continued)
No contract before meeting between client and consultant
Costs of attending negotiations are borne by consultant.
Client should prepare for the negotiation.
Train staff.
Clarify position and objectives.
Develop strategy.
Module 10 Session 10.5 Visual 43
Order of Negotiations
The methodology or work plan The proposed staffing Financial conditions Contract
Module 10 Session 10.5 Visual 44
Methodology and Work Plan
Client should have evaluated plan during selection process.
Examine consultant’s suggestions for improving the TOR.
Consultant’s suggestions are not part of contract but may be incorporated in the definitive TOR included in contract documentation
Module 10 Session 10.5 Visual 45
Proposed Staffing
Review each key member’s role.
Substitutions must be equivalent or better.
Substitutes must be specifically named.
Review activity schedules for staff (schedule resources).
Agreed staff should not be replaced except for good reason.
Module 10 Session 10.5 Visual 46
Contract and Financial Conditions
Review clauses and terms and conditions.
Modifications must be mutually agreed upon.
Financial negotiations will vary depending upon
If price was a factor in the selection
The type of contract used
Module 10 Session 10.5 Visual 47
Contract and Financial Conditions (continued)
For time-based contracts
Staff inputs usually paid on basis of agreed rates with ceiling
Field work usually paid on staff-month basis
Head office work on a staff-hour or staff-day basis
Module 10 Session 10.5 Visual 48
Time-based Contracts:Typical Clauses
Foreign Currency– Schedule 1. Staff services
– Schedule 2. Staff services in home office
– Schedule 3. Reimbursables Allowances Mobilization/demobilization
– Schedule 4. Foreign currency
– Schedule 5. Foreign currency payment schedule
Module 10 Session 10.5 Visual 49
Time-based Contracts:Typical Clauses (continued)
Local currency Schedule 1. Local staff services
Schedule 2 . Reimbursables Living allowances per diem Local transportation Office costs Other costs
Schedule 3. Local taxes
Module 10 Session 10.5 Visual 50
Calculating Staff Rates
Basic salary Monthly salary
No bonus payments included
Non-negotiable
Social charges Benefit charges (vacation, sick leave, and
retirement)
Result from legislation in consultant’s country
Module 10 Session 10.5 Visual 51
Calculating Staff Rates (continued)
Overhead Administrative and business costs
Range: 65 to 200% basic salary
Fee or profit Gross profit before taxes
Percentage of total basic salaries (10-20%)
Overseas or inducement allowance Hardship allowance
Usually 20 to 60% basic salary
Module 10 Session 10.5 Visual 52
Calculating Staff Rates (continued)
No negotiation of rates should occur during negotiations if price was considered in the evaluation and rates were established in competition.
Module 10 Session 10.5 Visual 53
Reimbursable Costs
Out of pocket expenses incurred in carrying out duties
Reimbursed at cost
Documentation (receipts, invoices) required
Contract should specify what costs are reimbursable and how they will be paid.
Module 10 Session 10.5 Visual 54
Common Reimbursable Costs
Mobilization/Demobilization (airfare, visa)
Subsistence costs
Communications charges
Office rent and supplies/equipment; printing
Insurance costs
Transport of project-related equipment
Surveys and subcontracted services
Module 10 Session 10.5 Visual 55
The End-Product = Contract
A “win-win” contract is the goal!
Negotiations should end with a friendly atmosphere.
Want to establish spirit of cooperation and confidence
Module 10 Session 10.5 Visual 56
Other Procedures for Selection
Fixed budget
Least cost
Consultant’s qualifications
Single source
Module 10 Session 10.5 Visual 57
Selection under a Fixed Budget Conditions when appropriate
Simple assignment Precise and unambiguous TORs Budget fixed
RFP should indicate available budget. Firms submit separate technical and
financial proposals. Evaluate initially on technical merits Open price bids in public Highest technically ranked firm within
budget is invited to negotiations.
Module 10 Session 10.5 Visual 58
Least-Cost Selection
Conditions when appropriate Standard or routine assignments Well-established practices and standards exist Contract amount is small
RFP sets minimum qualifying mark for quality.
Firms submit separate technical and financial proposals.
Evaluate initially on technical merits
Open price bids in public
Least-cost bidder that meets quality mark is invited to negotiations.
Module 10 Session 10.5 Visual 59
Selection by Consultant Qualifications
Conditions when appropriate Small assignments Competitive evaluation not worth effort
Client prepares TOR and requests expression of interest.
Short list established
Most qualified firm is selected and invited to submit a combined technical/financial proposal.
Contract negotiated
Module 10 Session 10.5 Visual 60
Single-source Selection
Does not provide benefit of competition
Only use in exceptional cases Services are natural continuation of firm’s
previous work.
Rapid selection is essential (emergency).
Small assignments
Only one firm is qualified.
Module 10 Session 10.5 Visual 61
Summary Four types of contracts for services
Time Lump-sum Cost plus Retainer
Contract Negotiations Be prepared! Typical order
• Methodology
• Staffing
• Financial conditions and contract
Module 10 Session 10.5 Visual 62
Summary (continued)
Typical clauses in time-based contract Currency Rates Reimbursable expenses
End product of negotiations = “Win-win”
Other forms of selection Fixed budget Least cost Qualifications Single source
Recommended