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Presentation on:
“ PROCUREMENT SYSTEM OF PAKISTAN”
By:
Engr. M. Mazhar-ul-Islam
Chief Executive
Techno Legal Consultants (Pvt) Ltd.
1
Regulatory Documents
Federal PPRA Ordinance 2002
Federal PPRA Rules 2004 & Regulation 2010
PEC Act 1976 as amended in 2011
Procurement rules formulated by each of the provinces
Construction and Operation of Engineering Works Bye-laws
Conduct and Practice of Consulting Engineers Bye-laws
19 PEC standard bidding/ contract documents
3 construction docs. Notified by PPRA vide S.R.O 805(I)/2008
dated 11th July, 2008
Pakistan Building Codes (Seismic, Energy, Electrical Safety &
Telecom Safety)
2
List of PEC Bidding/ Contract Documents
1. Standard Form of Bidding Documents (Civil Works)
2. Standard Form of Tender Documents for procurement of
works (Electrical & Mechanical).
3. Standard Form of Tender Documents for procurement of
works For smaller contracts
4. Standard Form of Contract for Engineering Consultancy
Services (Time Based Assignments)
5. Standard Form of Contract for Engineering Consultancy
Services (Lump Sum Assignments)
3
List of PEC Bidding/ Contract Documents
6. Standard Form of Contract For Engineering Consultancy
Services For Smaller Projects
7. Rules of Conciliation and Arbitration
8. Standard Procedure for Evaluation of Proposals for
Procurement of Engineering Services
9. Standard Procedure and Formula for Price Adjustment
10. Standard Procedure for Evaluation of Bids for
Procurement of Works
11. Standard Procedure for pre-qualification of constructors
4
List of PEC Bidding/ Contract Documents
12. Standard Procedure for pre-qualification of consultants
13. Standard Form of Bidding Documents for Procurement of
Works on BOT Basis
14. Standard Form of Bidding Documents for Procurement of
Works on Design and Build Basis
15. Standard Form of Bidding Documents for Procurement of
Civil Works (SSTE)
16. Standard Form of Joint Venture/Consortium Agreements
and Memorandum of Understandings
5
List of PEC Bidding/ Contract Documents
17. Standard Form of Bidding Documents for EPC/Turnkey
contracts
18. Standard Form of Bidding Documents for procurement of
Goods
19. Standard Form of Bidding Documents for Operation &
Maintenance Works
6
Relevant Act/ Laws
1. The Contract Act, 1872
2. The Arbitration Act, 1940
3. The Limitation Act, 1908
4. The Specific Relief Act, 1877
5. The Partnership Act, 1932
6. The Stamp Act, 1899
7. Pakistan Environmental Protection Act, 1997
8. The Registration Act, 1908
7
Relevant Act/ Laws
9. Income Tax Laws
10. Law of Conveyancing (Transferring)
11. Land Acquisition Act, 1894
12. Labour Laws
8
Salient Provisions in PEC ACT
PEC is to regulate whole of the engineering profession when
the Preamble read with Section 8 of the Act
Pursuant to section 27 (5) & (5A) professional engineering
works can be carried out only by the professional engineer
Section 25 when read in conjunction with Section 2(xii),
2(xiv) and 2(xxv) empowered PEC to regulate also
Engineering Procurements
Section 2(xxv)(i) provides for standard bidding/contract
documentation and Arbitration rules
9
Salient Provisions in PEC ACT
Section 8(s) stipulates PEC as forum for Arbitration
Section 8(p) entrusted PEC for development of construction
cost data (schedule of rates)
Section 20(4) empowers PEC to take suo-moto action
against any organization
Section 27(1) stipulates punitive action against non
compliance of PEC regulation
PEC under Section 8(k) read with Section 2(xxxiv) can
create subsidiary like PICC created in 2009 to deal with cost
and contract matters
10
Salient Provisions in PEC Construction Bye-laws
Engineering works can only be undertaken by PEC licensed
constructors
Engineering works up to Rs. 4 million can be undertaken
w/o license
PEC license is mandatory for eligibility of a bidder
For the time being licenses are issued in eight categories
License to a foreign constructor is given for specific
projects(s)
11
Salient Provisions in PEC Construction Bye-laws
License to a foreign constructor is issued in two stages
A foreign constructor can work in Pakistan only in joint
venture with Pakistani constructor in which Local share is
minimum thirty percent
A constructor is allowed to undertake work of other
discipline up to 25%
A constructor already licensed and applied for renewal can
enter into bidding process, however, submit valid license
before award (interpreted)
12
Salient Provisions in Consultancy Bye-laws
Only PEC registered consultants are eligible for providing
engineering consultancy services
A consulting firm should have minimum 51% shareholding by
Professional Engineers and remaining by allied professionals; in
case of Government share above is exempted
Chief Executive of a consulting firm must be a Professional
Engineer
Unlike bidding for constructions; bid & performance security
are not required in Consultancy proposal (PEC Interpretation).
13
Salient Provisions in Consultancy Bye-laws
A foreign consultant can undertake consulting assignments
only with joint venture with Pakistani consultant with share
of lacking expertise except in technology transfer cases
A licensed consultant applied for renewal can enter into
bidding process, however renewed license must be
produced before award
A consultant can be a part construction consortium with his
relevant defined scope
Professional liability for design is up to twice the design fee
14
Overview of PPRA Act & Rules
World Bank prepared CPAR in the year 2000
PEC contested the CPAR and protested overlapping jurisdiction
PPRA Ordinance promulgated in 2002 under PCO cover
PPRA Rules 2004 needed basic documents
PPRA having jurisdiction to Federal procurement only
18th constitution amendment placed the regulations under
Federal list; Item-6, Part-II, SCH-4 of Article 143 of the
Constitution prohibit provinces to maintain conflicting
regulations
PEC & PC notified standard procurement documents in 2002 &
200815
Overview of PPRA Act & Rules
PEC harmonized its detailed documents up to 2008
PPRA issued consultants’ regulations in 2010
PPRA adopted and notified PEC documents in July 2008
PEC Act 2011 reinforced regulation on engineering
procurement
Standardization of bidding/ contract documents,
development of construction cost data, Arbitration forum,
suo-moto action against organizations etc.
Overlapping jurisdiction b/w PEC and PPRA is a source of
confusion
16
PPRA Rules-2004
Applicable for Federal Government procurement only - Rule-3
International agreements by Federal Govt. shall prevail
Specifications shall be generic – Rule-10
Advertisement on PPRA website for Rs. 0.1m - 2m;
advertisement in news paper is optional – Rule-12
Advertisement in Newspapers - one in English and Urdu and
PPRA website
Minimum 15 days response time for LCB and 30 days for ICB
for bidding, EOI, PQs Rule-13
17
PPRA Rules-2004
Advertisement not mandatory for National Security objective - Rule-14
Rule-15 recommends PQs for large “expensive and technically
complex” procurement
Rule - 19 requires PAs to specify mechanism for blacklisting
Open competitive bidding except under Rule-42 – Rule-21
Three quotations for Rs. 100,000 to 500,000 (with Board approval)
Limiting bidding to National bidders and Domestic preference allowed -
Rule-24
Bid Security not exceeding 5 percent - Rule-25
18
PPRA Rules-2004
Bid validity period depending on nature of procurement – Rule-26
Can be extended equal to original period once – Rule-26(3)
Re-advertisement for extension in bid submission - Rule-27
Evaluation of bids under the specified criteria in the bidding
documents: Otherwise mis-procurement –Rule-29
Clarifications of the Bid can be sought that do not change the
substance of bid-Rule-31
Discriminatory and difficult conditions by PAs not permissible - Rule-
32
PAs requires to state grounds for rejection but not justifications
Rule 35 requires announcement results ten days prior to award
19
PPRA Rules-2004
Four modes of competitive bidding:
Single stage single envelope-most bidding under this mode
Single stage two envelope-technical and financial ground
Two stage-in large complex projects where technically unequal
likely
Two stage two envelope-where alternative technical proposals are
possible
20
PPRA Rules-2004
Lowest evaluated responsive is the accepted bid for award. Rule-38
Performance Guarantee not exceeding ten percent. Rule-39
Rule 40 limit PA/Bidder in negotiations, across the board reduction
is not permissible
Evaluation process to remain confidential until announcement. Rule-
41
Alterative Method of procurement. Rule - 42
Petty Purchase: without bidding or quotation up to Rs. 25,000-
may be for enhanced amount with justifications. Rule-42(a)
RFQs: minimum three quotations for up to Rs. 100,000-500,000
(with approval of Board), accept lowest price. Rule-42 (b)(i)
21
PPRA Rules-2004
Direct Contracting-Rule-42(c): (i) Spare parts or services from
original supplier/manufacturer (ii) only one manufacturer exists
(iii) matching specification required within three years of contract
duration (iv) 15% repeat order (v) In emergency declared by
appropriate (vi) When prices are fixed by the Government or any
other authorized Agents on his behalf (vii) purchase of motor
vehicles from Local Original Manufacturers
Negotiated Tendering –Rule 42(d): with or without
advertisement for (i) study & research (ii)technical & artistic
reasons (iii) extreme urgency-for unforeseen reason not
attributable to PA
22
PPRA Rules-2004
Payment to the Contractors shall be made within 30 days
Closing of contract-performance of contract deemed to close on
TOC except DLP (Rule - 45)
Maintenance of record of procurement for minimum five years
(Rule - 46)
Evaluation documents should have public access and transparency.
Rule-47
Redressal of grievances under Rule-48: Committee with odd
number of persons to address complaints prior to entry into force
of contract
23
PPRA Rules-2010 (Consultancy)
Regulation 2010 is contingent on PPRA Rule-2004. Sec-2(2)
Introduced five methods of selection of consultants, Sec-3:
Quality based (QBS)
Quality and Cost based (QCBS)
Least Cost
Single Source or direct selection
Fixed budget
Eligibility under Section 4 to avoid conflict of interest-Constructors
& Consultants
EOI requires 15 days notice to National and 30 days for
International, Sec-5
24
PPRA Rules-2010 (Consultancy)
Short listing under-Rule-6 (not less than three) except Single
Source; and pre-qualification under Rule-7 of consultants
Components for RFP, Sec-8:
Letter of Invitation
Instructions to consultants
TOR
Evaluation criteria
Proposed Contract Format
Special Provision where needed
25
PPRA Rules-2010 (Consultancy)
Selection Committee composed of three relevant persons. Sec-9
Negotiation is limited to clarification and no changes in rates. Sec-
10
Professional liability equal to remunerations up to twice the design
fees; for design error and omission (Section-5 of Pec Byelaws).
Sec-11(1)
PA may demand Professional Indemnity Insurance (PII) to cover
above Risks; PA to reimburse cost under Out of Pocket Expenses,
Sec-11(2)
Consultant is responsible for misconduct or unsatisfactory
performance. Sec-11(3)
PPRA Rule-2004 and Regulations-2010 are mutually explanatory
but Rule-2004 shall have precedence
26
CRITICAL REVIEW OF PUNJAB PPRA RULE
Rule -13: Advertisements not required in case of National Security & Intellectuals’ Property
Punjab PPRA Rules have been reshuffled with motive- Example: Rule-42 shifted to 49.
Chapter –VII: Consultancy rules are not exhaustive.
Rule 31(3): Procuring Agencies refer this rule to ask for LCM without having minimum slab for the procurement.
Rule 34 is often misinterpreted to impose difficult conditions such as, high bid security and turn over even for consultancy.
Rule 35: Rejection of bid to be notified to each of the bidders and not just hoisting to website.
27
CRITICAL REVIEW OF PUNJAB PPRA RULE
Rule 48(2) & 14 : Separate response time of 14 or 30 days required for PQ and proposals – often confused & not followed.
Rule-55 (A): Single complying proposal may be awarded
Rule 58: Re-bidding process shall not be permitted after announcement of the Evaluation Report.
Rule 59 (c)(iv): 15% repeat order is not synonymous to VO but for goods and spare parts; however, often misinterpreted to deny VO & continuity of Consultancy.
28
MIS-INTERPRETATIONS & MANIPULATIONS -PPPRA
Rule 4: Principles of procurement are often compromised.
Rule 13: National Security often misused.
Rule 15: Frame of Contract or Notified SBD.
Rule 16(6 & 8): P & D sole jurisdictions for pre-qualification on yearly basis - also Line Departments are not bound- departmental precedence over spirit of regulations.
Rule 31(3): Procurement through direct request – confusing
Rule 45 (5): Awarding contract to Govt. organizations through direct contracting- Manipulative and Conflicting
29
MIS-INTERPRETATIONS & MANIPULATIONS-PPPRA
Rule 57: Negotiation often sought across the board reduction – not permitted in any good practice
Rule 59: Alternative method of procurements.
(c)(iv) - 15% rule shall be for goods & spare parts only.
(c)(v) – declaration of emergency by “authority” – manipulated
(d) – negotiated tendering “with or without” prior publication of notification
(d)(iii) – Extreme urgency – another manipulation
30
MIS-INTERPRETATIONS & MANIPULATIONS-PPPRA
Rule-60: Unsolicited proposal – additional 5% weightages to the original proposer leads to manipulation
Rule 61(3): Post bid participation of public sector manufacturers with lowest bid matching price -( ill- conceived)
Announcement of cost proposal should annul PA rights for re-bidding unless failure of faithful negotiation.
Violates relevant country laws such as PPRA, PEC, CCP.
Genuine bidders refrain from participation.
Time line and quality are compromised.
31
MIS-INTERPRETATIONS & MANIPULATIONS-PPPRA
Loss of investors confidence.
Promote malpractices.
Increase in claims & litigation.
Loss in national exchequer.
Earned bad reputation Globally.
Destroy moral character of the Nation.
32