EIABC

DEPARTMENT OF CONSTRUCTION TECHNOLOGY

AND MANAGEMENT

PROCUREMENT AND CONTRACT

MANAGEMENT

CHAPTER THREE: PROCUREMENT MANAGEMENT

LESSON 1
 3. Procurement Management
3.1 Introduction and purpose
2

 Procurement is a process used to select the lowest

competitive and qualified bidder for procuring
services or works or goods from potential
competitors based on reasonable relevant criteria.
 Physical infrastructures are cost extensive and
appropriate savings obtained through
competition are the main factor behind the
procurement process.
 3.1 Introduction and purpose
3

 An effective and efficient procurement method

ensures the following rights called the "Five
Rights". These are
The Right Quality,(technical expectation
and economic consideration)
The Right Quantity, (Take-off-Sheet
Measurements and Resources Allocations)
 3.1 Introduction and purpose
4

The Right Cost / Price /(quality related

and the right cost is nearby cost, achieved
mainly through competition)
The Right Counterpart (to guarantee
that the parties are fit to the job) and
The Right Time. (scheduling with regard
to right timing is essential)
 3.1 Introduction and purpose
5

 The purposes of a Procurement Management

System can be summarized into two major
points:
To satisfy the need for economy and
efficiency,
To provide equal opportunity to
competitive bidders.
 The successful achievement of these purposes
requires the following seven characteristics
 Characteristics of Tendering
6

1. Notice of advertisement:
 Through an official newspaper, mass media, and

notice boards etc. which can enable the

advertisement to reach wide range of
competitors.
2. Proof of Competition:
 tenders should be unlimited competition, unless

otherwise conditions such as complexity and

specialisation of projects require restriction to
open competition.
 Characteristics of Tendering
7

3. Neutrality: care shall be taken When

 The specifications are prepared

 To avoid preference to limited alternatives

 The bidding documents (contract conditions) shall be
balanced
 Not to cause disruption of the task to be
accomplished.
4. Accessibility:
The place where bid documents are purchased
shall be clearly indicated
The place, dates and time for submission shall be
notified
 Characteristics of Tendering
8

5. Impartiality: During tendering if clarification is

requested, do so accordingly to all bidders
Often Pre-Bid Submission Meeting is used for this
purpose.
Negotiation is not allowed during tender period.
6. Formality: Strict adherence to formality shall be taken to
all tenders like
the submission & opening of bids (place, date and
time)
rejection of late and non-responsive bids
the bid security condition shall also be a formality
to all tenders
 Characteristics of Tendering
9

7. Avoidance of subjectivity:
 Criteria for evaluation shall be strictly set out

in the instruction to bidders’ part of the

bidding document and all evaluations shall be
carried out accordingly.
 3.2 Procurement Methods
10

Procurement types can be classified based on the

things to be procured and the way how they are
procured. There are five bases for classifying
procurement methods. These are:
Bases Things Bidders Geographical Procurement Procurement
procured coverage coverage awareness steps
Types Goods Competitiv International General PN Single
e
Services Negotiated Regional Specific PN Two stage

Works National Pre-

Qualification
Local Post-
Qualification
 3.2.1 Things to be Procured
(Goods Vs Services Vs Works)
11

Depending on the delivery system chosen during the contract

planning phase, mixed types of procurement types can be adopted
 Procurement of Goods: Physical resources such as Materials

and Equipments
 Procurement of Services: often termed as consultancy services

procurement. These include services like

pre-feasibility and feasibility studies,
design and contract administration of projects,
Construction management consultancy services,
research or study based consultancy services, etc.
 Procurement of Works: the procurement of contractors to
carryout the actual physical infrastructures.
 3.2.2 Bidders’ Coverage
(Competitive Vs Negotiated Tendering)
12

Competitive Tendering: selection of better and capable

winning bidder among the various eligible firms. it can
either be Open or Limited Competitive Bidding in the form
of their invitations.
Open competitive bidding allows all eligible bidders to
participate.
Limited competitive bidding allows a number of
selected firms only.
The major difference between open and limited
competitive bidding is the addition of qualifying
criteria beyond eligibility.
 Limited Competitive Bidding is often used when the nature
and urgency of the work justifies to do so
 3.2.2 Bidders’ Coverage
(Competitive Vs Negotiated Tendering)
13

Some of the qualifying criteria used for Limited Competitive

Bidding are ( usually short listing is done based on):
the firms past performance,
work load at present,
presence of a firm in the vicinity of the projects,
knowledge of similar type of works before and
financial and technical capabilities of the firms
Usually in Limited Competitive Bidding, cost of projects
might be higher than expected
 3.2.2 Bidders’ Coverage
(Competitive Vs Negotiated Tendering)
14

Negotiated Tendering: Under certain circumstances, The

nomination of this direct invitation is usually based on
good performance,
contact with the Project Owner,
for supplementary agreements, etc.
 This kind of tendering is exceptionally exercised when

the project under consideration is very urgent or needs

special skill whereby the required skill is rarely available.
 The main disadvantage of this type of tendering is that

the price offered can usually be higher than the

competitive bidding.
 3.2.3 Geographical Coverage
15
(International Vs Regional Vs National Vs Local Tendering)
 These types of procurements are generally caused by
three major factors. These are
Local Capacity,
Financial Sources ( dictate regional or
international)
Globalization (globalization and principles of
Free Trade and Trade Liberalization also
encourages international tendering)
 3.2.4 Procurement Awareness
(General and Specific Procurement Tendering)
16

 Following requirement like proof of competition

and increase accessibility,
 General Procurement Notice (GPN) is made during
projects planning phase and
interests of the bidders are aroused because
sufficient tender documents are not available.
 3.2.4 Procurement Awareness
(General and Specific Procurement Tendering)
17

 There are two types of General Procurement

Notice based on their purpose why and when they
are notified
The first type of GPN
 When?-- announced as soon as the design is

started
 Why?-- to create awareness and let bidders’

prior information about upcoming projects

 3.2.4 Procurement Awareness
(General and Specific Procurement Tendering)
18

 The second type of GPN

When?--announced after financial sources are
determined
Why?--to determine interested bidders who could
be invited in the form of Limited Competitive
Tendering.
 GPN covers
the Employer and its financiers for its project;
Description of the project with its probable or
planned implementation time;
type of procurement method and address
where further information can be obtained.
 3.2.4 Procurement Awareness
(General and Specific Procurement Tendering)
19

 Specific Procurement Notice (SPN)

is an Invitation for Tender or a Request
for Proposal when the project is ready for
implementation.
can be sent to those interested bidders
identified following GPN directly.
Otherwise, it should be advertised on
the bases of enlarging opportunities
 3.2.5 Procurement Steps:
(Single Vs Two Staged and Pre-Vs Post-Qualification Tendering)
20

 Single or Two Staged Tendering: are related with

whether tender packaging for submission
separately and their evaluations are staged for a
single or two steps when invitations are made.

 Pre-Qualification Tendering: It is a procedure in

which eligible bidders are invited to provide
evidence of their ability to perform the services
required by the employer.
 3.2.5 Procurement Steps:
(Single Vs Two Staged and Pre-Vs Post-Qualification
21 Tendering)
 Pre - qualification can be of two types
The first is Single stage tendering: when companies
are already considered qualified during their
licensing requirements. (evaluation criteria
becomes the low priced bid)
The Second is when two staged tendering is used to
pre-qualify tenderers’ for their technical
competency. Once pre-qualify, either the lowest
priced or the lowest evaluated bidder
recommended for award.
 3.2.5 Procurement Steps

22

 The advantages of pre - qualification in procurement :

To the employer To the Bidder
Protect the employer against unqualified Saves bidders from the cost of preparing
bidders bids
Quicker Evaluation for only pre- Assure pre-qualified bidders for their bid
qualified bidders considerations
Ensure award to least evaluated not Reduce low balling bidders from
lowest bidder participation
Assess level of interest shown by Make bidders to be better planned
bidders
Show competency & methods of
implementation
 3.2.5 Procurement Steps
23

 The following pre-qualification criteria's are often used

in determining the ability of the bidder to carry out the
works:
Experience and past performance,
Health, Safety and Environment Records, if
any,
Capability in respect of personnel and
equipment,
Organizational arrangement and facilities,
Financial Status, and
Schedule of Commitments.
 3.2.5 Procurement Steps
24

 Post - qualification is a tendering type where

Financial Evaluation is carried out first and rank
bidders on the basis of their offer for tender price.
 Technical Evaluation is performed step by step
starting from the lowest financially evaluated bidder
until technically or cumulatively qualified bidder is
determined.