CMS-03.11.08

7/31/2019 CMS-03.11.08

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GENERAL OVERVIEW OF

CONTRACTS MANAGEMENT

A Presentation by:

Reeta Bandopadhyay GM(CS/P&S)

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May 23, 2012

CHANGING BUSINESSENVIRONMENT

REGULATOR IS IN PLACE Employer’s liberties curtailed

Tariff must reflect real cost Closure in specified time frame

Competitive environment resulting due to coming of private sector

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MORE STRINGENT TIMEFRAME

Completion schedule reduced from 60 52 44 36

CHANGING TAXATION STRUCTURE

Creating uncertainty

(VAT, Service Tax, Entry Tax etc.) Increasing risks

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INCREASED BUSINESS OPPORTUNITIESFOR SUPPLIERS

Able to make choice

Business at preferred terms

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INCREASED DEMAND FOR TRANSPARENCY

Right of Information Act 2005

Clauses relating to fraud and corruption,ineligibility, integrity pacts

Publication of contract award details

Debriefing

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INCREASED ENVIRONMENTAL AND SOCIALIMPACTS

Need for improved technology

Concern for natural resources limitation.

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PUBLIC PROCUREMENT IN INDIA

OBJECTIVES

ECONOMY

EFFICIENCY TRANSPARENCY

ACCOUNTABILITY

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Total value Rs. 4500 billion

13% of national budget

20% of GDP

No regulatory framework


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The Govt. is the same, the procurement objectives are the same, even the specific works/goods can be the same, the bidding community is the same but the procedures and policies practiced by each agency are different.

There are about more than 150 different contract

formats are in use by Govt. deptts. and PSE’s.


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What can be done

Introduce a public procurement law which should,as a minimum, cover the objectives, substantive

procedural requirements to achieve them,debriefing of unsuccessful bidders and publication of contract awards. The law may also cover post award issues in contract implementation such as

securities, timely payment, penalties & damages,dispute resolution and termination for default or conveniences.


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Law to be complemented by set of regulations to replace multiplicity of rules & orders issued by different agencies of govt.

Regulations to enshrine five fundamental principles of open tendering viz.- Effective advertisement, non discriminatory tender conditions and technical specifications, public tender opening,


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Evaluation only in accordance with pre-disclosed criteria and methodology and award to the lowest evaluated qualified tenderer without any

negotiations on price or other terms.


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I. PRE-AWARD CONTRACT MANAGEMENT

II. POST-AWARD CONTRACT MANAGEMENT

III. CONTRACT CLOSING

CONTRACT MANAGEMENT – An Overview

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Complexity in construction of large projects may necessitate sharing of responsibilities amongst various

specialised functions of an organisation

DIVISION OF RESPONSIBILITIES

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I. CONTRACT PACKAGING

II. TENDERING

PRE-AWARD CONTRACT MANAGEMENT

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To optimize number of contracts to be

handled for better planning, coordination and timely execution of whole project at optimum cost to the Employer.

WHY PAGKAGING?

CONTRACT PACKAGING

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CONTRACTPACKAGE

Competitive

Aspects

Content of Contract Package

Timing of Delivery

Institutional Capability

Market Practices Location

CONTRACT PACKAGING CRITERIA

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1. CONTENT OF CONTRACT PACKAGE

Allow manufacturers to bid directly

Bid packages should comprise equipment of similar

type that can be procured by one manufacturer to obtain best price.

Combine equipment, supplies, and works of similar nature in one contract for economy of scale, if

possible Check the market on available sources of goods of

similar type and size to obtain best price.


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2. COMPETITIVE ASPECT

Select the right size of the package to allow maximum competition.

Include only equipment of the same or of related nature.

Allow bids for one, or a combination, or for all bid packages

Select the least cost combination of bid packages.


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Bidder Package Discount (Forcombined

award)

I II

A 100 150 10%

B 85 155 NO

C 80 - NO

Lowest Bid for Package-I BID C (80)

Lowest Bid for Package-II BID A (150)

Lowest Combination Bid A (100+150) – 10% = 225 Award

Example for least cost combination

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3. MARKET PRACTICES

Determine the procurement of supplies according to established marketing practices such as the procurement of commodities and package the supplies accordingly.


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4. INSTITUTIONAL CAPABILITY

Determine the capability of Employer to supervise and administer contracts.

Use Design-Build and Turnkey Contracts if the Employer does not have the capability to administer contracts simultaneously


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5. LOCATION

Consider separate contract packages for civil works to be carried out in different locations, even if they

are of similar nature.


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6. TIMING OF DELIVERY

Combine supplies or works according to the requirement of the equipment or the works in view of

the overall project implementation schedule Combine equipment in one package with the same

lead for delivery


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Availability of prospective bidders

Project execution schedule

Combination/ clubbing of equipment/ services that can be advantageously engineered

Independence with regard to its work content

and clear cut terminal points for interfacing

Project financing

FACTORS TO BE CONSIDERED

CONTRACT PACKAGING

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PROJECT FEASIBILITY REPORT (FR)

DESIGN INTENT MEMORANDA (DIM)

PROJECT SCHEMATICS

CASE STUDY

BASE DOCUMENTS FOR CONTRACT PACKAGING

CONTRACT PACKAGING

http://c/Documents%20and%20Settings/Administrator/My%20Documents/CASE%20STUDY-pkg.doc

http://c/Documents%20and%20Settings/Administrator/My%20Documents/CASE%20STUDY-pkg.doc

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Mode of Tendering

Qualifying Requirements for Bidders

Bidding Documents

Invitation for Bids

Submission, Receipt And

Opening of Bids

Evaluation of Bids

Contract Award

TENDERING

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SINGLE STAGE SINGLE ENVELOPE

Ideal for all clearly specified goods

Technical and price bids in one envelope

most common tendering procedure.

TENDERING- Mode of Tendering

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SINGLE STAGE TWO ENVELOPE

Employed for complex equipment

Technical and price bids in separate envelopes

Varying practices for opening of price bids 1. Price bids opened after completion of technical evaluation

without permitting any adjustment in quoted price.

2. Adjustment in price on account of technical features considered in technical evaluation to make bids responsive


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TWO STAGE BIDDING

Price bid sought only after technical evaluation.

Suitable for turnkey contracts for large complex

projects where alternative technical processes are a possibility.

Works of special nature where the problem of unequal technical bids is likely to be encountered.


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QUALIFYING REQUIREMENTS (QR) FORBIDDERS No bidder to be awarded a contract unless the

Employer is satisfied that the bidder is qualified to meet his obligations under proposed contract .

TENDERING- Qualifying Requirements (QR) for Bidders

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FACTORS FOR FRAMING OF QR

Past performance in similar type of job Financial status

Technical capability Organizational capacity QR to be written in an unambiguous manner to

avoid different interpretation during evaluation


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METHODS FOR DETERMINING QUALIFICATION

PRE-QUALIFICATION

Normally followed in case of contracts for civil

works and large turnkey contracts

POST-QUALIFICATION

Followed in case of equipment supply/ supply-cum-

installation contracts


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BIDDING DOCUMENTS

The most important ingredient of contract management function as it lays the basis for contract award and its

execution thereafter. Terms and conditions to be based on principles of

`fairness’ and `equity’

In case of contracts funded through external

assistance, SBD’s of the concerned funding agency to be followed.

TENDERING- Bidding Documents

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CONTENT OF BIDDING DOCUMENTS

INVITATION FOR BIDS (IFB)

Standard Section not required to be changed on Package to Package basis

INSTRUCTIONS TO BIDDERS (ITB)

Standard format with package Specific details required to be filled in


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BID DATA SHEET (BDS)

GENERAL CONDITIONS OF CONTRACT (GCC)

Provides package specific details to

corresponding clauses in ITB Standard conditions which shall govern the

execution of contract



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Should normally be fully descriptive and give

complete requirement in respect of Plant &Equipment/Services to be procured

TECHNICAL SPECIFICATIONS

SPECIAL CONDITIONS OF CONTRACT (SCC)

Supplements/ amends the standard conditions

in GCC for each specific package



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FORMS AND PROCEDURES (FP)

Provides formats to be filled in by the bidders to complete their bids



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Not to be kept very high so that interested bidders do not find it prohibitive. For standardization purpose,

organisation may fix the cost of bidding documents in slabs depending on estimated cost of works .


COST OF BIDDING DOCUMENTS

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Ensure adequate publicity by publishing in leading national /regional newspapers

In case of ICB under WB & ADB, compliance to requirements of funding agencies such as publishing in development business of UN. Copies may also be sent to high commissions/ embassies of member

countries of funding agencies located in the country.

TENDERING- Invitation for Bids

INVITATION FOR BIDS

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Bidding period to be decided depending upon complexity of work involved. Generally, a period of 6

weeks from IFB is considered adequate. For large and complex contracts this may be extended to 10-12 weeks.

Bids to be opened in the presence of bidder’s

representatives who choose to attend and minutes of bid opening to be prepared

TENDERING- Submission, Receipt and Opening of Bids

SUBMISSION, RECEIPT AND OPENING OF BIDS

TENDERING

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Bids to be evaluated for determining the lowest evaluated bid in terms of specified evaluation criteria

Preliminary examination of bids to determine

Bidder’s eligibility Acceptability of bid security Completeness of bid

TENDERING- Evaluation of Bids

EVALUATION OF BIDS

TENDERING

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Preliminary examination of bids to determine

Acceptability of Joint Venture Agreement / Joint Deed Of Undertaking (if envisaged) Computational errors in bid prices Stated deviations from bidding conditions


EVALUATION OF BIDS

TENDERING

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Detailed evaluation for substantially responsive bids only. Evaluation to consider bid price and other

factors such as cost compensation for deviations,differential price for guaranteed parameters etc.

In case of ICB, bid prices to be converted into a single currency at the specified exchange rate.


EVALUATION OF BIDS

TENDERING

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Domestic price preference/ purchase preference to be considered wherever applicable

In absence of pre-qualification, determine whether the lowest evaluated bidder meets the specified qr.

Post bid clarifications, if any, should not call for

material alterations in the bid.


EVALUATION OF BIDS

TENDERING

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Contract to be awarded to the lowest evaluated technically and commercially responsive bid.

Process of evaluation and approval of award recommendation including concurrence of funding agency (wherever applicable) and post-bid discussions with successful bidder to be completed

within bid validity period.

TENDERING- Contract Award

CONTRACT AWARD

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AREAS OF CONCERN

Lack of unified system/multiplicity of practices

Lack of comprehensive and well articulated public procurement policies

Lack of comprehensive legal regime

Weak capacity of procurement staff

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Lack of accountability

Loose institutional and organizational arrangements for processing procurement and for collective decision making in awarding of contracts

Absence of independent appeals body

Lack of independent procurement auditing function

AREAS OF CONCERN

POST AWARD

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MAJOR POST –

AWARD ACTIVITIES Signing of contract agreement

Obtaining performance and advance securities

Approval of manufacturing / construction drawings

Finalisation and approval of quality plans

Amendments / modifications to contract as may

be necessitated during contract execution

POST – AWARDCONTRACT MANAGEMENT

POST AWARD

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Inspection and testing of equipment at manufacturer’s works

Entire co-ordination of work at project site including monitoring

of receipt of material, identifying space for contractor’s site office establishment, ensuring timely receipt of contractors’s erection/ construction equipment, review of manpower deployment of contractor, providing site fronts and other inputs/owner issue material etc., Supervision/ monitoring of

erection/ construction work, start-up activities, trial operation/ commissioning, performance and guarantee tests.


MAJOR POST –

AWARD ACTIVITIES

POST AWARD

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POST-AWARD CONTRACT PLANNING & MONITORING

Periodic contract review meetings (CRMs) between employer and contractor

Submission of monthly progress reports by contractor indicating progress achieved and work on hand


POST AWARD

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Project review team (PRT) meetings of the project authority on monthly basis

Preparation of exception reports indicating hold ups/bottle necks for close monitoring of critical areas

POST-AWARD CONTRACT PLANNING & MONITORING


POST AWARD

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Contract price may vary due to : Addition/ deletions in items of work

Change in quantity of work

Change in technical parameters resulting in changed design features, materials etc.

COST CONTROL SYSTEM


POST AWARD

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Due care is to be taken while finalising technical specifications to avoid post award changes in ordered quantities.

Changes during detailed engineering to be closely monitored while releasing construction drawings with respect to quantities reflected in drawings vis-à-vis BOQ

Engineering progress of each contract to be essentially

monitored at identified intervals


POST AWARD

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CONTRACT BUDGETING SYSTEM

Contract budgeting is essential for proper forecasting and planning of funds on monthly/quarterly/annual

basis.

Yearly budget for a contract to be prepared based on detailed payment schedule tied-up with the contractor

Budgeted expenditure (be) for a financial year to be finalised much before the start of financial year.


POST AWARD

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CONTRACT BUDGETING SYSTEM (contd.)

Review the budgeted expenditure during middle of financial year and prepare revised expenditure taking

into account the physical progress of work.


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All concerned departments/ functions of project authority involved in contract execution to issue certificates certifying fulfillment of respective obligations by the contractor.

Contractor to furnish ‘no claim certificate’ to the employer

Contractor to be discharged of its obligations under the contract after completion of defect liability period.

CONTRACT CLOSING

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THANK YOU

CMS-03.11.08

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