MOSCOW SCHOOL OF MANAGEMENT SKOLKOVO The Law Project Balance between the State and Business in state procurement

MOSCOW SCHOOL OF MANAGEMENT SKOLKOVO

The Law ProjectBalance between the State and Business in state procurement

19.04.23 2MOSCOW SCHOOL OF MANAGEMENT SKOLKOVO

Table of Contents

1. Working steps 2. Scope of work3. Pain Points for FL №94: Analysis and Recommendations4. The Problem of FL №945. The Team Goal6. Step 1 and 2: Bid Price7. Step 3: Pre-qualification Requirements8. Step 4: Quality Criteria


Working Steps

1. Analysis1. Analysis• Analyze the 1st intake report and third party research (magazines, literature)• Expert interviews: over 15 interviews conducted, 1 round table for PR• Study of international government procurement procedures

2. Problem2. Problem

3. Modeling3. Modeling

4. Recommendations4. Recommendations

• Defining problems for supplier, government worker and state• Defining problems associated with e-auctions and electronic system• Defining Pain Points to improve in the FL №94

• Modeling of possible law changes and their effect on supplier, civil servant and state• Modeling of possible prequalification criteria• Modeling of quality criteria for 3 sectors (PR, Audit and Appraisal)

• Recommendation to tackle paint point of FL №94• Recommendation on transferable prequalification requirement • Recommendation of quality criteria for 3 sectors (Audit, PR, Appraisal)

WEEK

1

3

5

7


Scope of work

Initial task assigned to us by client

FL №94FL №94

Analysis Modeling

Quality criteriaQuality criteriaPain Points Prequalification

PRPR AuditAudit AppraisalAppraisal


Pain Points for FL №94: Analysis and Recommendations

1. Starting bid over or underpriced- Overpriced starting bid to over-inflate the budget or show imaginary control of budget for personal gain- Underpriced starting bid due to insufficient knowledge of market quotations on the given type of work

1. Starting bid over or underpriced- Overpriced starting bid to over-inflate the budget or show imaginary control of budget for personal gain- Underpriced starting bid due to insufficient knowledge of market quotations on the given type of work

• Establishment of an average price per unit for all services in accordance with industry associations and the statistical agency

2. Price as leading factor in the evaluation of proposals- Supplier can win auction by simply lowering the price 20% - 40%- Not enough evaluation of quality in auctions, quality in service sector correlates with price

2. Price as leading factor in the evaluation of proposals- Supplier can win auction by simply lowering the price 20% - 40%- Not enough evaluation of quality in auctions, quality in service sector correlates with price

• Lower weight of price in evaluation criteria down to 40%• Raise weighting of quality

3. Price dumping- Suppliers don’t calculate their costs accurately and are unable to finish their contract at all or with sufficient quality or in time

3. Price dumping- Suppliers don’t calculate their costs accurately and are unable to finish their contract at all or with sufficient quality or in time

• Recommendation to reject all proposals from suppliers when the sum of order is over 15% of their annual revenue



4. Risk of failure by supplier for the state- Suppliers are not able to stay within the first proposed budget- Suppliers run out of money before finishing their contract

4. Risk of failure by supplier for the state- Suppliers are not able to stay within the first proposed budget- Suppliers run out of money before finishing their contract

• Introduce mandatory detailed plan of working steps to be submitted by the supplier• Payment is not done upfront and is instead done only after each completed working step

5. No differentiation in the procurement process regarding the size of the order- Same procedures for an evaluation of a 100,000 Ruble contract as a 20 mln. rubles contract5. No differentiation in the procurement process regarding the size of the order- Same procedures for an evaluation of a 100,000 Ruble contract as a 20 mln. rubles contract

• Introduce harsh pre-qualification requirements for tenders over 2 000,000 rubles

6. Qualitative evaluation of proposals by the civil servant missing the necessary classification of sectors and sub sectors- Classification of services is sometimes misleading in e- auctions- Classification and scope of work not clarified in civil servants proposal

6. Qualitative evaluation of proposals by the civil servant missing the necessary classification of sectors and sub sectors- Classification of services is sometimes misleading in e- auctions- Classification and scope of work not clarified in civil servants proposal

• Establishment of strict guidelines for proposals by the civil servant• Establish a classification for services, sectors and subsectors



7. Board of control - Under current law the board of control must consist of at least 5 people, however these people can be employees of the contractor or civil servant

7. Board of control - Under current law the board of control must consist of at least 5 people, however these people can be employees of the contractor or civil servant

• Our recommendation is to include experts from industry associations onto the board of control

8. No protection against disregardful participants- Currently only companies are listed in the register of disregardful market participants8. No protection against disregardful participants- Currently only companies are listed in the register of disregardful market participants

• Our recommendation is to include disregardful individuals into register of disregardful participants and deny them the opportunity to open new companies under their control

9. Lack of transparency and criteria for assessment of quality delivered by the supplier- Access to information about the results of tenders, their detailed assessment and information about the quality and result of work are restricted

9. Lack of transparency and criteria for assessment of quality delivered by the supplier- Access to information about the results of tenders, their detailed assessment and information about the quality and result of work are restricted

• Need for transparency to public regarding results of a tender and the evaluation of quality criteria in auctions• Need for transparency to public regarding the progress of work along each step of the job•Ability to cancel contract by contractor and name no.2 at auction on each step

Before the Law• Over inflation of Budget and corruption• No or only Imaginary economy of budget• High margins for contractor


The Problem of FL №94

Today• Economy of Budget by supplier• Lack of quality in services• No profits / looses for contractor• Unqualified suppliers misuse the system

Must be optimal outcome when there is a balance between the State

and Business interests in the state procurement


The Team Goal

Forming starting

Bid

Forming starting

Bid

Bid Price Barrier

Bid Price Barrier

Upper than 2 mln. rub.Upper than 2 mln. rub.

Up to 2 mln. rub.

Up to 2 mln. rub.

PrequalificationRequirements

Auction Quality criteria

11 22

33

44

4 steps to create the Evaluation System for Bidders in the Field of Intellectual Services


Step 1 and 2: Bid Price

1. Forming the starting bid- Establishment of an average price per unit for all services in accordance with industry associations and the statistical agency -Establish a classification for services, sectors and subsectors to know the exact service to be purchased

1. Forming the starting bid- Establishment of an average price per unit for all services in accordance with industry associations and the statistical agency -Establish a classification for services, sectors and subsectors to know the exact service to be purchased

2. Making the differentiation in the procurement process regarding the size of the order-Introduce harsh pre-qualification requirements for tenders over 2 000,000 Rubles basing on the statistical information industry professionals on the average market volume of a large contract

2. Making the differentiation in the procurement process regarding the size of the order-Introduce harsh pre-qualification requirements for tenders over 2 000,000 Rubles basing on the statistical information industry professionals on the average market volume of a large contract


Step 3: Pre-qualification Requirements

Criteria for orders > 2 000,000 Rubles


Step 4: Quality Criteria for Bidders Evaluation

•

(Initial Task assigned to the group by the Client)


Our team

Mark Zotkin

Fedor Sarokvasha Robert Bowen Boris Agababov

Irina Ambartsumyan Arevik Sahakyan

Alexey Germanovich,Public Projects

Director, Professor of

Practice


THANK YOU FOR YOUR ATTENTION!

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MOSCOW SCHOOL OF MANAGEMENT SKOLKOVO The Law Project Balance between the State and Business in state procurement