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Sunil Bhattacharya January 2010 Slide 2 TOPICS FOR DISCUSSIONS WHAT DO WE UNDERSTAND BY PROCUREMENT OF PLANT DESIGN, SUPPLY, AND INSTALLATION UNDER BANK PROJECTS--SOME KEY CONCEPTS WHEN TO USE THIS TYPE OF CONTRACT SOME IMPORTANT AND SOME UNIQUE TERMS USED AND WHAT DO THEY MEAN SINGLE AND TWO STAGE BIDDING STRUCTURE OF BIDDING DOCUMENT AND SOME IMPORTANT PROVISIONS IMPORTANT PROCUREMENT ASPECTS KEY DIFFERENCES FROM PROCUREMENT OF GOODS AND WORKS WATCH LIST TO AVOID COMMONLY ENCOUNTERED PROBLEMS 2 Slide 3 PROCUREMENT OF PLANT DESIGN-SUPPLY AND INSTALLATION CONSTRUCTION OF A FACILITY THAT INCLUDES SPECIALLY ENGINEERED PLANTS AND EQUIPMENT INVOLVING THEIR DESIGN, SUPPLY, INSTALLATION AND COMMISSIONING AND AT TIMES CONSTRUCTION OF CIVIL WORKS UNDER A SINGLE RESPONSIBILITY CONTRACT APPLICABLE BANK GUIDELINES: GUIDELINES PROCUREMENT UNDER IBRD LOANS AND IDA CREDITS OF MAY 2004-REVISED OCTOBER 2006 APPLICABLE SBDs ON BANKS WEBSITE FOR USE UNDER ICB: I) PLANT DESIGN, SUPPLY AND INSTALLATION OF APRIL 2008 FOR PROJECTS WITH PCN ON OR AFTER OCTOBER 15, 2006; AND II) SUPPLY AND INSTALLATION OF PLANT AND EQUIPMENT OF MAY 2005 REVISED JUNE 2007 FOR PROJECTS WITH PCN PRIOR TO OCTOBER 15, 2006 BOTH DOCUMENTS ARE NOT DESIGNED FOR TURNKEY TYPE OF CONTRACTS THAT ARE ACCEPTABLE UNDER BANK PROCUREMENT GUIDELINES BANK NORMATIVE GUIDELINES ON FRAUD AND CORRUPTION IS APPLICABLE FOR PROJECTS WITH PCN ON OR AFTER OCTOBER 15, 2006 3 Slide 4 TURNKEY CONTRACTS--KEY CONCEPT TURNKEY TYPE CONTRACT IS ONE WHERE A SINGLE ENTITY TAKES TOTAL RESPONSIBILITY TO PROVIDE A FULLY-EQUIPPED FACILITY READY FOR OPERATION AT THE TURN OF THE KEY AND PROVIDES KNOW-HOW, BASIC AND DETAILED DESIGN AND ENGINEERING, IS RESPONSIBLE FOR ALL PROCUREMENT, SUPPLY AND INSTALLATION OF PLANT AND EQUIPMENT AND CONSTRUCTION OF THE FACILITY INCLUDING ANY CIVIL WORKS UNDER ONE SINGLE RESPONSIBILITY CONTRACT-- GENERALLY A LUMP-SUM CONTRACT WITH MUCH HIGHER RISKS BORNE BY CONTRACTOR DEGREE OF EMPLOYERS INVOLVEMENT IN DESIGN AND ENGINEERING IS MINIMAL 4 Slide 5 DESIGN SUPPLY AND INSTALLATION CONTRACTSKEY CONCEPTS EMPLOYER ESSENTIALLY REMAINS RESPONSIBLE FOR HIS DESIGN AND ENGINEERING PROVIDED FOR THE CONTRACT EMPLOYER PROVIDES TECHNICAL SPECIFICATIONS AND DRAWINGS AS HE THINKS ARE ESSENTIAL FOR TECHNICAL AND PERFORMANCE CHARACTERISTICS AND REQUIREMENTS CONTRACTOR TAKES RESPONSIBILITY FOR DESIGN, ENGINEERING, MANUFACTURE, INSTALLATION, CONSTRUCTION AND EACH ACTIVITY AS OFFERED BY HIM AND ACCEPTED IN THE CONTRACT THAT ARE REQUIRED TO COMPLETE THE FACILITY FOR THE PURPOSE INTENDED 5 Slide 6 PLANT DESIGN-SUPPLY AND INSTALLATION-- KEY CONCEPTS CONTRACTOR HAS THE RIGHT TO DISCLAIM RESPONSIBILITY FOR THE DESIGN, DATA, DRAWING, SPECIFICATIONS GIVEN BY EMPLOYER RESPONSIBILITIES OF EMPLOYER AND CONTRACTOR UNDER BOTH SBDs ARE NOT MATERIALLY DIFFERENT ALTHOUGH DETAILS OR EXTENT OF DESIGN, ENGINEERING AND SPECIFICATIONS PROVIDED BY THE EMPLOYER FOR EACH TYPE OF CONTRACT MAY VARY 6 Slide 7 WHEN TO USE WHEN VALUE OF PLANT AND EQUIPMENT REPRESENTS MAJOR PROPORTION OF CONTRACT AMOUNT; AND WHEN FACILITY CANNOT BE TAKEN OVER SAFELY WITHOUT TESTING, COMMISSIONING AND OTHER ELABORATE PROCEDURES BEFORE ACCEPTANCE EXAMPLES: DESIGN, SUPPLY AND INSTALLATION OF TURBINES, GENERATORS, BOILERS, SWITCHYARDS, PUMPING STATIONS, TELECOMMUNICATIONS, PROCESS AND TREATMENT PLANTS UNDER POWER, WATER, SEWERAGE, TELECOM AND SIMILAR PROJECTS TO BE PROVIDED UNDER SINGLE RESPONSIBILITY CONTRACT 7 Slide 8 UNCLEAR WHEN TO USE? WHICH DOCUMENT TO USE? WHAT PROCEDURE TO USE? CONSULT RPM OFFICE OR OTHER SENIOR PROCUREMENT STAFF AT EARLY STAGES OF DESIGNING PROCUREMENT ARRANGEMENTS FOR THE PROJECT AND BEFORE ADVISING BORROWERS CONTRACTS ARE GENERALLY COMPLEX AND LARGE VALUE --MORE THAN $ 10 MILLION REQUIRING ADDED ATTENTION DEPENDING UPON SIZE, NATURE AND COMPLEXITY PREQUALIFICATION AND/OR SINGLE OR TWO STAGE BIDDING PROCEDURES MAY APPLY 8 Slide 9 SOME IMPORTANT AND SOME UNIQUE TERMS USED AND WHAT DO THEY MEAN PROJECT MANAGER FACILITY PLANT CONTRACTORS EQUIPMENT INSTALLATION SERVICES COMPLETION PRE-COMMISSIONING COMMISSIONING FUNCTIONAL GUARANTEE AND LIABILITY OPERATIONAL ACCEPTANCE DEFECT LIABILITY PERIOD 9 Slide 10 SINGLE AND TWO STAGE BIDDING WHAT IS A SINGLE STAGE BIDDING? TECHNICAL AND PRICE BIDS ARE RECEIVED AT THE SAME TIME AND BOTH PUBLICLY OPENED IMMEDIATELY THEREAFTER WHEN AND WHY A SINGLE STAGE BIDDING IS USEFUL OR NOT SO USEFUL USEFUL IF PROCUREMENT IS LESS COMPLEX USEFUL IF EMPLOYER'S SPECIFICATIONS ARE CLEAR AND LESS POSSIBILITY OF BIDDERS TAKING EXCEPTIONS OR DEVIATIONS TO SPECIFICATIONS NOT SO USEFUL TO RESCUE A LOW BID FROM A QUALIFIED BIDDER IF IT DEVIATED AS AFTER PRICE BID OPENING NO CHANGES IN SUBSTANCE OR PRICE CAN BE PERMITTED ADVANTAGE---PROCESSING TIME MAY BE LESS 10 Slide 11 SINGLE AND TWO STAGE BIDDING WHAT IS A TWO STAGE BIDDING? TECHNICAL PROPOSALS AND PRICE BIDS ARE RECEIVED AT DIFFERENT TIMES AND BOTH PUBLICLY OPENED AT DIFFERENT TIMES AT FIRST STAGE UNPRICED TECHNICAL PROPOSALS ARE INVITED BASED ON CONCEPTUAL DESIGN OR PERFORMANCE SPECIFICATIONS AT THE SECOND STAGE FINAL TECHNICAL PROPOSALS AND PRICE BIDS ARE INVITED FROM THOSE THAT PASS THE FIRST STAGE EVALUATION CRITERIA AND AFTER OBTAINING TECHNICAL AND COMMERCIAL CLARIFICATIONS FROM THEM AS NECESSARY 11 Slide 12 SINGLE AND TWO STAGE BIDDING WHEN AND WHY A TWO STAGE BIDDING IS USEFUL OR NOT SO USEFUL USEFUL FOR VERY COMPLEX PROCUREMENT OR OF SPECIAL NATURE USEFUL IF DUE TO COMPLEX NATURE IT IS UNDESIRABLE OR IMPRACTICAL TO PREPARE SPECIFICATIONS IN ADVANCE USEFUL IF HIGH POSSIBILITY OF BIDDERS TAKING EXCEPTIONS OR DEVIATIONS TO BORROWERS SPECIFICATIONS OR MAY OFFER BETTER ALTERNATIVE SOLUTIONS OR SPECIFICATIONS THAT MEET REQUIRED PERFORMANCE AND FUNCTIONAL GUARANTEES USEFUL TO RESCUE A BID IF IT DEVIATED IN TECHNICAL SPECIFICATIONS AT THE FIRST STAGE BID BY SEEKING CLARIFICATIONS AND MODIFICATIONS AS THERE IS NO PRICES INFORMATION DISADVANTAGE---PROCESSING TIME MAY BE LONGER 12 Slide 13 Two-Stage Procedure Employer issues bidding docs. including conceptual design and performance specifications Bidders asked to submit technical-only proposals Employer evaluates technical proposals responsiveness to conceptual/performance specs. Employer also verifies bidders qualification Bidders may be invited to discuss content of tech. proposals and tech./commercial changes required Employer prepares minutes of required changes and may amend bidding documents based on discussions Bidders invited to submit 2 nd stage bids including final technical proposals and priced bids Employer evaluates 2 nd stage bids per evaluation criteria Award to qualified bidder with responsive, lowest evaluated 2 nd stage bid Invitation to 1 st Stage Bidding Evaluation of Technical Proposals Clarification/Feedback Meeting with Qualified Bidders Invitation to 2 nd Stage Bidding Technical/Financial Evaluation and Award 13 Slide 14 SINGLE AND TWO STAGE BIDDING DONT BE CONFUSED---TWO STAGE BIDDING AND TWO ENVELOPE SYSTEMS ARE QUITE DIFFERENT IN TWO ENVELOPE SYSTEM TECHNICAL AND PRICE BIDS ARE RECEIVED AT THE SAME TIME BUT IN TWO SEPARATE SEALED ENVELOPESFIRST TECHNICAL BIDS ARE OPENED AND EVALUATED --PRICE BIDS OF ONLY THOSE THAT ARE QUALIFIED AND PASS THE TECHNICAL EVALUATION ARE OPENED FOR AWARD BASED ON LOWEST EVALUATED PRICE PRICE ENVELOPES OF THOSE THAT FAIL IN TECHNICAL EVALUATION ARE RETURNED UNOPENED NOT A GOOD PRACTICENON-TRANSPARENT AND NOT RECOMMENDED PROCUREMENT GUIDELINES PERMIT TWO STAGE BIDDING BUT DOES NOT MENTION ABOUT TWO ENVELOPE SYSTEM 14 Slide 15 Structure of Bidding Document PART 1 Bidding Procedures OPTION A: Single Stage Bidding Section I. Instructions to Bidders Section II. Bid Data Sheet Section III. Evaluation and Qualification Criteria (Following Prequalification) Section III. Evaluation and Qualification Criteria (Without Prequalification) 15 Slide 16 Structure of Bidding Document OPTION B: Two Stage Bidding Section I. Instructions to Bidders Section II. Bid Data Sheet Section III. Evaluation and Qualification Criteria (Following Prequalification) Section III. Evaluation and Qualification Criteria (Without Prequalification) Section IV. Bidding Forms Section V. Eligible Countries 16 Slide 17 Structure of Bidding Document PART 2 Employers Requirements Section VI. Employers Requirements PART 3 Conditions of Contract and Contract Forms Section VII. General Conditions (GC) Section VIII. Particular Conditions Section IX. - Contract Forms Users Guide 17 Slide 18 INSTRUCTIONS TO BIDDERS- IMPORTANT PROVISIONS ELIGIBLE BIDDERS CONFLICT OF INTEREST FRAUD AND CORRUPTION AND AUDIT RIGHTS CLARIFICATIONS-SITE VISITS-PRE-BID MEETINGS AMENDMENTS OF BIDDING DOCUMENTS ALTERNATIVE BIDS DOCUMENTS ESTABLISHING CONFORMITY OF PLANT AND INSTALLATION SERVICES BID PRICES AND DISCOUNTS 18 Slide 19 INSTRUCTIONS TO BIDDERS- IMPORTANT PROVISIONS CURRENCY OF BID AND PAYMENT BID VALIDITY AND BID SECURITY EVALUATION OF BIDS-TECHNICAL AND ECONOMIC QUALIFICATION OF BIDDERS PERFORMANCE SECURITY 19 Slide 20 CONDITIONS OF CONTRACT- IMPORTANT PROVISIONS CONTRACTORS RESPONSIBILITY EMPLOYERS RESPONSIBILITY SECURITIES TAXES AND DUTIES INTELLECTUAL PROPERTY SUBCONTRACTING PROCUREMENT CONTRACTORS PLANT EMPLOYER SUPPLIED PLANT CUSTOMS CLEARANCE COMPLETION OF FACILITIES 20 Slide 21 CONDITIONS OF CONTRACT- IMPORTANT PROVISIONS COMMISSIONING AND OPERATIONAL ACCEPTANCE PARTIAL ACCEPTANCE COMPLETION TIME GUARANTEE DEFECT LIABILITY FUNCTIONAL GUARANTEES PATENT INDEMNITY LIMITATION OF LIABILITY LOSS OF OR DAMAGE TO PROPERTY; ACCIDENT, INJURY ETC. INSURANCE 21 Slide 22 CONDITIONS OF CONTRACT- IMPORTANT PROVISIONS CHANGES IN FACILITIES SUSPENSION TERMINATION-FOR EMPLOYERS CONVENIENCECONTRACTORS DEFAULTBY CONTRACTOR ASSIGNMENT EXPORT RESTRICTIONS DISPUTES AND ARBITRATIONDRB ADJUDICATOR [BD FOR SUPPLY AND INSTALLATION] 22 Slide 23 IMPORTANT PROCUREMENT ASPECTS BORROWERS REQUIREMENTS AND PROCUREMENT STRATEGY-ARRANGEMENTS SPECIFICATIONS AND FUNCTIONAL GUARANTEES BIDDERS QUALIFICATIONS-PREQUALIFICATION PACKAGING BID PRICES BID OPENING 23 Slide 24 IMPORTANT PROCUREMENT ASPECTS BID EVALUATION SEQUENCE OF COMPLETION TAKING OVER AND OPERATIONAL ACCEPTANCE OF FACILITY PAYMENT TERMS BIDDERS COMPLAINTS 24 Slide 25 BORROWERS REQUIREMENTS AND PROCUREMENT STRATEGYARRANGEMENTS KEY FACTORS TO BE CONSIDERED AT PREPARATION AND APPRAISAL: BORROWERS NEED ASSESSMENT-FEASIBILITY STUDY SCOPE OF WORK GREEN FIELD OR UPGRADING OR REHABILITATION-IS INSTALLATION OR ONLY SUPERVISION OF INSTALLATION-SIZE-COST-NATURE-COMPLEXITY-REASONABLE COMPLETION TIME-NEED FOR EFFECTIVE COMPETITION PAST EXPERIENCE OF IMPLEMENTING AGENCY IN HANDLING SUCH PROCUREMENT IN-HOUSE TECHNICAL EXPERTISE OF IMPLEMENTING AGENCY FOR PREPARATION OF SPECIFICATIONS, MANAGEMENT AND SUPERVISION OF CONTRACT-OPERATION OF THE PLANT- INSPECTION INCLUDING STAGE INSPECTION AT FACTORY OR NEED TO ENGAGE TECHNICAL EXPERT/FIRM NEED FOR TRAINING 25 Slide 26 SPECIFICATIONS AND FUNCTIONAL GUARANTEES SOME IMPORTANT CONSIDERATIONS SHOULD MEET PROJECT NEEDS IS IT TOO DEMANDING OR REASONABLE HAS MARKET AVAILABILITY BEEN CHECKED? IS IT TOO DETAILED DESIGN BASED-OR CONCEPTUAL OR PERFORMANCE BASED? 26 Slide 27 SPECIFICATIONS AND FUNCTIONAL GUARANTEES SOME IMPORTANT CONSIDERATIONS DESIRABLE CHARACTERISTICS MAY INCLUDE E.G. MINIMUM GUARANTEED OUTPUT- PRODUCT QUALITY AND APPLICABLE STANDARDS-PLANT PERFORMANCE FACTORS -RELIABILITY- FUNCTIONAL GUARANTEES-PLANT AVAILABILITY OPERATIONAL FLEXIBILITY AND SUCH OTHER CRITERIA AS RELEVANT 27 Slide 28 SPECIFICATIONS AND FUNCTIONAL GUARANTEES SOME IMPORTANT CONSIDERATIONS DESIRABLE TO PROVIDE FOR COMPETITION BASED ON LIFE CYCLE COST AND TO SPECIFY RELATED TECHNICAL PARAMETERS E.G. ENGINEERING CALCULATION AND WHERE APPROPRIATE FORMULA TO DETERMINE MONETARY IMPACT FOR AN INCREASE OR DECREASE OF EFFICIENCY ABOVE OR BELOW THE MINIMUM REQUIRED OR IN COMPARISON WITH THE HIGHEST EFFICIENCY OFFERED BY ANY BIDDER DESIRABLE TO PROVIDE FUNCTIONAL GUARANTEES SUCH AS MINIMUM ACCEPTABLE PRODUCTION CAPACITY AND/OR MAXIMUM LEVELS OF CONSUMPTION OF RAW MATERIALS AND UTILITIES AND RESPECTIVE ENGINEERING CALCULATIONS FOR CLAIMING LIQUIDATED DAMAGES IN CASE OF FAILURE OF CONTRACTOR TO ACHIEVE CAPACITY SPECIFIED IN THE CONTRACTRATE OF LIQUIDATED DAMAGES SHOULD NOT BE LESS THAN THE RATE USED FOR PURPOSES OF BID EVALUATION AGGREGATE LIQUIDATED DAMAGES GENERALLY MAY NOT EXCEED 10% OF THE TOTAL VALUE OF THE CONTRACT 28 Slide 29 LIFE CYCLE COST METHODS COST TO OWN AND OPERATE ITEM DURING ITS USEFUL LIFE INITIAL PURCHASE PRICE ADJUSTED FOR EXTRAS, DELIVERY, VARIATIONS IN PAYMENT TERM, ETC. VALUE OF ADJUSTMENTS ADDED TO BID PRICE OPERATING COST DURING LIFE OF ITEM FUEL, SPARE PARTS, MAINTENANCE, (X YEARS) ANNUAL COSTS DISCOUNTED TO NPV OWNERSHIP COST DURING LIFE OF ITEM ECONOMICAL USEFUL LIFE (X YEARS) RESALE OR SCRAP VALUE DISCOUNTED TO NPV 29 Slide 30 LIFE CYCLE COST METHODS EFFICIENCY COST METHOD CAPITALIZE DIFFERENCES IN EFFICIENCY IN OPERATION OF ITEMS, i.e. Boiler, Turbine, Transformer, etc., DURING LIFE PRODUCTIVITY COST METHOD DETERMINE LIFE CYCLE COST PER UNIT OF OUTPUT FOR COMPARISON PURPOSES LIFE CYCLE COST OF PLANT (X YEARS) NPV DIVIDED BY TOTAL UNIT OUTPUT OF PLANT 30 Slide 31 LIFE CYCLE COST METHODS EVALUATION USING LIFE CYCLE COSTING FOR THE PROCUREMENT OF A 500 MW COAL-FIRED POWER STATION BOILER COMPLEX BIDS WILL BE EVALUATED ON LIFE CYCLE PRINCIPLES BY EVALUATING THE INITIAL COST AND THE COST OF OPERATION OF THE PLANT OVER A PERIOD OF 20 YEARS. THE EVALUATION OF THE OPERATING COSTS WILL BE BASED ON THE CAPITALIZED COST FOR EACH PERCENT OF BOILER EFFICIENCY ABOVE THE MINIMUM ACCEPTABLE, AS SPECIFIED IN THE TECHNICAL SPECIFICATION, DISCOUNTED TO PRESENT VALUE AT A DISCOUNT RATE OF 10 PERCENT. THE EVALUATION WILL BE ON THE FOLLOWING NORMS: 31 Slide 32 LIFE CYCLE COST METHODS EVALUATION USING LIFE CYCLE COSTING FOR THE PROCUREMENT OF A 500 MW COAL-FIRED POWER STATION BOILER COMPLEX 1. BID PRICE FOR THE BOILER AND MANDATORY SPARES. 2. PRICE FOR SPARES REQUIRED FOR THE FIRST FIVE YEARS OF OPERATIONS, CAPITALIZED TO PRESENT VALUE AT 10 PERCENT DISCOUNT. 3. ADJUSTMENTS TO BID PRICE FOR OMISSIONS, DEVIATION AND EXCEPTIONS TO TECHNICAL AND COMMERCIAL CONDITIONS IN THE BIDDING DOCUMENTS. 4. CAPITALIZED COST SAVINGS FOR BOILER EFFICIENCY AT THE RATE OF US$500,000 PER EACH 0.1 PERCENT ABOVE 80 PERCENT. 5. CAPITALIZED COST FOR THE AUXILIARY POWER CONSUMPTION AT US$2,000 PER KW. 32 Slide 33 LIFE CYCLE COST METHODS EVALUATION USING LIFE CYCLE COSTING FOR THE PROCUREMENT OF A 500 MW COAL-FIRED POWER STATION BOILER COMPLEX ALL FIGURES IN USD (IN THOUSANDS) 1. INITIAL COSTS A C TOTAL QUOTED PRICE, INCLUDING 185,000 200,000 MANDATORY SPARES 2. ADJUSTMENTS (A)FOR OMISSIONS IN MANDATORY 3,000--- SPARES (B)COMMERCIAL EXCEPTIONS 15,500 12,000 (delivery, payment terms) (C)TECHNICAL EXCEPTIONS 28,000 24,000 (omission of equipment, capacity shortage, etc.) INITIAL COST 231,500 236,000 33 Slide 34 LIFE CYCLE COST METHODS EVALUATION USING LIFE CYCLE COSTING FOR THE PROCUREMENT OF A 500 MW COAL-FIRED POWER STATION BOILER COMPLEX ALL FIGURES IN USD (IN THOUSANDS) 3. ADJUSTMENTS FOR A C FOLLOW-ON COSTS (A)CAPITALIZED COST OF SPARES40,000 28,000 FOR FIVE YEARS (B) CAPITALIZED COST SAVING-12,000 -18,000 FOR HIGHER EFFICIENCY ( C) CAPITALIZED COST OF AUXILIARY 5,000 7,000 POWER CONSUMPTION TOTAL ADJUSTMENT FOR 33,000 17,000 FOLLOW-ON COST 4. TOTAL EVALUATED COST ON 264,500 253,000 LCC PRINCIPLES RANKING 21 34 Slide 35 LIFE CYCLE COST METHODS BID EVALUATION USING LIFE CYCLE COSTING OIL PALM PLANT THE EVALUATION AND COMPARISON OF RESPONSIVE BIDS SHALL BE BASED ON THE TOTAL LIFE CYCLE COST FOR SIX YEARS, PER UNIT OF OUTPUT. THE LIFE CYCLE COST SHALL BE THE SUM OF THE INITIAL PURCHASE PRICE OF THE PLANT AND THE COST OF OPERATION IN ELECTRIC ENERGY FOR SIX YEARS OF OPERATION OF A UNIT COST OF US$0.10 PER KWH, DISCOUNTED TO PRESENT VALUE AT 12 PERCENT. 35 Slide 36 LIFE CYCLE COST METHODS BID EVALUATION AND COMPARISON ALL FIGURES IN USD (IN THOUSANDS) A B 1. INITIAL COST9,500 10,300 2. OPERATING COST PER YEAR (1,200) (1,000) OPERATING COST FOR 6 YEARS 4,933 4,111 NPV AT 12 PERCENT 3. TOTAL LIFE CYCLE COST 14,433 14,411 4. OUTPUT PER YEAR (TONS) 3,600 4,000 5. EVALUATED COST PER TON OF OUTPUT 4.01 3.60 6. RANKING 2 1 A-12 MILLION KWH @.10 PER KWH B-10 MILLION KWH @.10 PER KWH 36 Slide 37 BIDDERS QUALIFICATIONS- PREQUALIFICATION QUALIFICATION AND EXPERIENCE REQUIREMENTS WILL DEPEND ON NATURE AND COMPLEXITY SHOULD NOT BE SET TOO HIGH OR TOO MANY KEEP IN VIEW INDUSTRY PRACTICES FOR CONSTRUCTION OF REQUIRED FACILITIES IN DESIGNING MINIMUM QUALIFICATION CRITERIA SPECIFY RELEVANT AND REASONABLE MINIMUM CRITERIA FOR BIDDERS TECHNICAL CAPABILITY, FINANCIAL RESOURCES AND PAST EXPERIENCE INCLUDING THAT REQUIRED FOR MANUFACTURERS AND SUBCONTRACTORS OF CRITICAL ITEMS INCLUDE STANDARD FORM OF MANUFACTURERS AUTHORIZATION (NOT IN SBD FOR S&I) 37 Slide 38 BIDDERS QUALIFICATIONS- PREQUALIFICATION DECIDE EARLY ON PREQUALIFICATION AT PREPARATION OR APPRAISAL GIVEN LARGE VALUE AND COMPLEXITY, COST OF PREPARING BIDS BEING HIGH, TO SOLICIT INTEREST OF QUALIFIED BIDDERS AND TO ASCERTAIN EXPECTED LEVEL OF COMPETITION, PREQUALIFICATION IS NORMALLY REQUIRED AND RECOMMENDED IN CERTAIN CASES E.G. WHERE COST OF PREPARING BIDS IS NOT VERY HIGH OR OTHER JUSTIFIABLE REASONS E.G. URGENCY-- PREQUALIFICATION MAY BE OMITTED IN A TWO STAGE BIDDING FOLLOW ALL STANDARD RULES AND PROCEDURES FOR PREQUALIFICATION AS PER GUIDELINES AND STANDARD PREQUALIFICATION DOCUMENT 38 Slide 39 BIDDERS QUALIFICATIONS- PREQUALIFICATION MAIN CRITERIA GENERAL EXPERIENCE SPECIFIC EXPERIENCE IN CONSTRUCTION OF SIMILAR FACILITIES HOW MANY AND HOW FAR BACK IN TIME HAVING SUCCESSFULLY COMPLETED? ANY OTHER SPECIFIC WORK EXPERIENCE UNIQUE TO PROCUREMENT IN QUESTION MANUFACTURERS AUTHORIZATION FOR MAJOR ITEMS NOT MANUFACTURED BY CONTRACTOR AND/OR OTHER RELEVANT DOCUMENTS SUCH AS LICENSING AGREEMENTS WITH MANUFACTURERS MINIMUM QUALIFICATION REQUIREMENT FOR MAJOR ITEMS INCLUDING THOSE PERMITTED OR LIKELY TO BE OFFERED BY SUBCONTRACTORS IF LONG TERM OPERATION AND/OR MAINTENANCE SERVICES ARE REQUIRED THEN DEMONSTRATED EXPERIENCE FOR SUCH SERVICES OVER A PERIOD OF TIME FINANCIAL RESOURCESAVERAGE CONSTRUCTION TURNOVER INCLUSIVE OF INSTALLATION AND OTHER SERVICES AND CASH FLOW PERSONNEL AND EQUIPMENT IS CHECKED AT PRICE BID STAGE 39 Slide 40 PACKAGING IMPORTANT CONSIDERATIONS OTHER FINANCIERS-- PARALLEL OR JOINT FINANCING AGREE ON BIDDING AND REVIEW PROCEDURES TO THE EXTENT PRACTICAL PACKAGING SHOULD BE SUCH THAT MANUFACTURERS OF MAJOR PLANT AND EQUIPMENT FOR FACILITY WOULD BE ABLE TO PARTICIPATE BY OBTAINING ITEMS THEY DO NOT MANUFACTURE FROM OTHER SOURCES ESPECIALLY IF OUTSOURCED ITEMS DO NOT BELONG TO A DIFFERENT CLASS OF INDUSTRY WHERE A SEPARATE PACKING WOULD BE TECHNICALLY FEASIBLE VERY LARGE PACKAGES MAY REDUCE COMPETITION DUE TO CAPACITY LIMITATIONS 40 Slide 41 BID PRICES BID PRICES SHALL BE INVITED AS FOLLOWS: (SCHEDULES OF RATES AND PRICES IN SBD) 1. SCHEDULE 1-CIP FOR PLANT AND MANDATORY SPARES SUPPLIED FROM ABROAD 2. SCHEDULE 2-EXW FOR PLANT AND MANDATORY SPARES SUPPLIED FROM WITHIN EMPLOYERS COUNTRY 3. SCHEDULE 3-DESIGN SERVICES 4. SCHEDULE 4-INSTALLATION AND OTHER SERVICES [OTHER SERVICES TO INCLUDE TRANSPORTATION, INSURANCE, TEMPORARY WORKS, OTHER CIVIL WORKS, OPERATION AND MAINTENANCE SERVICES, TRAINING, ETC. INCLUDING ALL TAXES AND DUTIES ON SUCH SERVICES] 5. SCHEDULE 5-GRAND SUMMARY TOTAL OF SCHEDULES 1 TO 4 6. SCHEDULE 6-BIDDERS RECOMMENDED SPARE PARTS [NOT TO BE INCLUDED FOR BID EVALUATION] 41 Slide 42 BID OPENING ALL BID OPENING WHETHER SINGLE OR TWO STAGE BIDDING ARE PUBLIC BID OPENING STRICTLY FOLLOW THE RULES IN THE BIDDING DOCUMENTS AND OPEN BIDS ACCORDINGLY AT THE DESIGNATED PLACE AND AT THE SPECIFIED TIME AND DATE GOOD PRACTICE IS TO ALSO READ ALOUD OPERATING COSTS WHERE APPLICABLE FUNCTIONAL AND OTHER GUARANTEE PARAMETERS AND EFFICIENCIES OFFERED BY BIDDERS 42 Slide 43 BID EVALUATION SINGLE STAGE DETERMINATION OF SUBSTANTIAL RESPONSIVENESS NON-MATERIAL NON-CONFORMITIES ARITHMETICAL CORRECTIONS CONVERSION TO SINGLE CURRENCY (USUALLY USING DATE OF BID OPENING TO BE SPECIFIED IN BD) NO DOMESTIC PREFERENCE APPLIES 43 Slide 44 BID EVALUATION-CONTINUED SINGLE STAGE BIDDING TECHNICAL EVALUATION MEETS MINIMUM ACCEPTABLE STANDARDS AND PARAMETERS OF BD? MEETS FUNCTIONAL GUARANTEES AS PER BD? SUITABILITY IN TERMS OF ENVIRONMENTAL AND CLIMATIC CONDITIONS SPECIFIED IN BD? IF THE BID DOES NOT MEET MINIMUM ACCEPTABLE STANDARDS OF COMPLETENESS, CONSISTENCY AND DETAILS AND SPECIFIED MINIMUM (OR MAXIMUM, IF APPLICABLE) REQUIREMENTS FOR FUNCTIONAL GUARANTEES THE BID WILL BE REJECTED AS NON- RESPONSIVE NO CLARIFICATIONS CAN BE ASKED OR PERMITTED THAT WILL CHANGE THE SUBSTANCE OR PRICE OF THE BID ALTERNATIVE BIDS IF ALLOWED IN BD IT WILL BE EVALUATED 44 Slide 45 BID EVALUATION-CONTINUED SINGLE STAGE ECONOMIC EVALUATION BID PRICE EXCLUDING PROVISIONAL SUM AND CONTINGENCY IN PRICE SCHEDULES ADJUSTED FOR ARITHMETICAL CORRECTIONS ADJUSTED FOR DISCOUNTS ADJUSTMENT FOR QUANTIFIABLE NONMATERIAL NONCONFORMITIES CONVERSION TO SINGLE CURRENCY ANY OTHER EVALUATION FACTORS AS PER SECTION III OF THE BD PRICE ADJUSTMENT AS ALLOWED UNDER PRICE ADJUSTMENT CLAUSE OF THE CONDITIONS OF CONTRACT IS NOT TAKEN INTO ACCOUNT AWARD WILL BE MADE TO THE LOWEST EVALUATED BIDDER DETERMINED QUALIFIED AS PER SPECIFIED CRITERIA 45 Slide 46 BID EVALUATION-CONTINUED TWO STAGE BIDDING FIRST STAGE TECHNICAL EVALUATION CHECK FOR COMPLETENESS IF GENERALLY IN ORDER BIDS FOUND NON-RESPONSIVE OR NOT MEETING THE MINIMUM LEVELS OF PERFORMANCE OR OTHER CRITERIA OF THE BD WILL BE REJECTED PRELIMINARY EXAMINATION OF ALTERNATIVE BIDS DETAILED TECHNICAL AND COMMERCIAL EVALUATION WILL BE CARRIED OUT FOR REMAINING BIDS THAT PASSED THE TEST OF SUBSTANTIAL RESPONSIVENESS 46 Slide 47 BID EVALUATION-CONTINUED TWO STAGE BIDDING FIRST STAGE TECHNICAL EVALUATION CLARIFICATION OF FIRST STAGE TECHNICAL PROPOSALS EMPLOYER MAY HOLD CLARIFICATION MEETINGS WITH BIDDERS ONE ON ONE AND ALSO ASK IN WRITING BIDDERS WILL BE INFORMED ANY AMENDMENTS OR CHANGES THAT THEY SHOULD MAKE IN THEIR TECHNICAL PROPOSALS AND ALSO ANY UNACCEPTABLE COMMERCIAL DEVIATIONS THAT SHOULD BE WITHDRAWN AT THE SECOND STAGE SUBMISSION EMPLOYER MAY ISSUE AN AMENDMENT TO BD EMPLOYER WILL ISSUE TO EACH BIDDER A MEMORANDUM CHANGES REQUIRED PURSUANT TO FIRST STAGE EVALUATION GOOD PRACTICE IS THAT MEMORANDUM IS SIGNED BY BOTH PARTIES 47 Slide 48 BID EVALUATION-CONTINUED TWO STAGE BIDDING SECOND STAGE BID EVALUATION BID IS DETERMINE SUBSTANTIAL RESPONSIVE IF IT HAS PROPERLY INCORPORATED ALL MODIFICATIONS LISTED IN MEMORANDUM CHANGES REQUIRED PURSUANT TO FIRST STAGE EVALUATION WITHOUT ANY MATERIAL DEVIATIONS, RESERVATIONS OR OMISSIONS SECOND STAGE BID CONTAINING TECHNICAL OR COMMERCIAL ALTERNATIVES NOT SUBMITTED AS PART OF FIRST STAGE TECHNICAL PROPOSAL WILL BE TREATED AS NON-RESPONSIVE REST OF THE BID EVALUATION AND AWARD PROCEDURES IS SIMILAR TO SINGLE STAGE BIDDING 48 Slide 49 SEQUENCE OF COMPLETION TAKING OVER AND OPERATIONAL ACCEPTANCE OF FACILITY FLOW CHART (ATTACHED) PLANT PHYSICALLY AND STRUCTURALLY COMPLETED PRE-COMMISSIONING COMPLETION CERTIFICATE IS ISSUED EMPLOYER TAKES OVER AND RESPONSIBLE FOR CARE AND CUSTODY COMMISSIONING AND/OR GUARANTEE TESTS OPERATIONAL ACCEPTANCE DEFECT LIABILITY PERIOD STARTS AT COMPLETION OF FACILITY 49 Slide 50 Flow Chart 50 Slide 51 TERMS OF PAYMENT SUPPLY ITEMS 10 % ADVANCE 80% UPON SHIPMENT(CIP)/DELIVERY TO CARRIER (EXW) 5% ISSUE OF COMPLETION CERTIFICATE 5% ISSUE OF OPERATIONAL ACCEPTANCE CERTIFICATE DESIGN SERVICES 10% ADVANCE 90% PRORATE INSTALLATION SERVICES 10% ADVANCE 80% UPON INSTALLATION WORK PERFORMED 5% ISSUE OF COMPLETION CERTIFICATE 5% ISSUE OF OPERATION ACCEPTANCE CERTIFICATE 51 Slide 52 BIDDERS COMPLAINTS TAKE ALL COMPLAINTS SERIOUSLY ENTER IN COMPLAINT DATA BASE REPORT TO RPM AND OPRC FOR CASES REQUIRING OPRC APPROVAL OBTAIN BORROWERS CLARIFICATIONS AND ENSURE THAT BANKS NO-OBJECTION IS GIVEN ONLY AFTER ALL ISSUES RAISED HAVE BEEN ADDRESSED SATISFACTORILY REPORT TO RPM/INT IN CASES OF FRAUD OR CORRUPTION ALLEGATIONS BEFORE SUGGESTING DEBRIEFING CONSULT RPM 52 Slide 53 Differences among Goods, Works and Design Supply & Installation GoodsWorksDesign Supply and Install SINGLE STAGE BIDDING SINGLE AND TWO- STAGE BIDDING CONTRACT FOR SPECIFIC QUANTITY OF EACH ITEM CONTRACT FOR ESTIMATED QUANTITY OF EACH ITEM CONTRACT FOR SPECIFIC QUANTITY OF EACH ITEM CONTRACT DOES NOT PROVIDE FOR VARIATIONS IN QUANTITY CONTRACT PROVIDES FOR VARIATION IN QUANTITY WHICH IS COMMON (VARIATION ORDER) CONTRACT PROVIDES FOR CHANGES IN FACILITIES BID EVALUATION EXCLUDING TAXES AND DUTIES BID EVALUATION INCLUSIVE OF ALL TAXES AND DUTIES BID EVALUATION EXCLUDES TAXES AND DUTIES FOR SUPPLY ITEMS BUT INCLUDES FOR OTHER SERVICES 53 Slide 54 Differences among Goods, Works and Design Supply & Installation GoodsWorksDesign Supply and Install TYPE OF CONTRACT CONTRACT FOR SALE ADMEASUREMENT TYPE OF CONTRACT MIX OF PROVISIONS OF BOTH GOODS AND WORKS PRICE ADJUSTMENT CLAUSE EXCLUDES PAYMENT OF ADVANCE PRICE ADJUSTMENT CLAUSE APPLIES FOR TOTAL VALUE OF CONTRACT PRICE ADJUSTMENT CLAUSE EXCLUDES ADVANCE PAYMENTS COMMISSIONING IS NOT APPLICABLE COMMISSIONING REQUIRED BORROWERS MAY APPLY DOMESTIC PREFERENCE IN ICB ELIGIBLE COUNTRIES MAY APPLY DOMESTIC PREFERENCE IN ICB DOMESTIC PREFERENCE IS NOT ALLOWED 54 Slide 55 WATCH LIST TO AVOID COMMON PROBLEMS DO IMPLEMENTING AGENCIES HAVE REQUIRED TECHNICAL EXPERTISE I) TO PREPARE SPECIFICATIONS THAT WILL MEET THE PROJECT NEEDS AND ALSO ENSURE BROADEST POSSIBLE COMPETITION AND TO EVALUATE TECHNICAL PROPOSALS WHEN RECEIVED; AND II) FOR INSPECTION AND SUPERVISION OF CONTRACT DURING IMPLEMENTATION? IF NOT LET CONSULTANT (S) BE HIRED DO BANK TASK TEAMS HAVE REQUIRED TECHNICAL EXPERTISE I)TO REVIEW WHETHER BORROWERS SPECIFICATIONS ARE CORRECT, REASONABLE, UNAMBIGUOUS, FREE FROM ANY BIASES AND WILL MEET PROJECT NEEDS; AND II) TO SUPERVISE TECHNICAL ASPECTS ARISING DURING BID EVALUATION AND CONTRACT IMPLEMENTATION? IF NOT ENGAGE EXTERNAL EXPERT PLAN ADVANCE PROCUREMENT ACTION AND DECIDE EARLY ABOUT BIDDING STRATEGY PRIOR REVIEW MINUTES OF PRE-BID MEETINGS AND CLARIFICATIONS PROVIDED BY BORROWERS AT BID PREPARATION STAGE 55 Slide 56 WATCH LIST TO AVOID COMMON PROBLEMS TRAIN AND FAMILIARIZE BORROWER AND THEIR CONSULTANTS ABOUT BANK GUIDELINES AND BIDDING DOCUMENTS EMPLOYER SHOULD DESIGN SIMPLIFIED AND REASONABLE QUALIFICATION REQUIREMENTS PARTICULAR ATTENTION TO PRICE SCHEDULES ESPECIALLY OTHER SERVICES AND CIVIL WORKS TO BE QUOTED ON LUMP-SUM BASIS CAREFULLY REVIEW REASONS FOR REJECTION OF LOW BIDS IN A TWO STAGE BIDDING REVIEW CAREFULLY THE FIRST STAGE TECHNICAL EVALUATION REPORT AS MANY PROBLEMS ARISE DUE TO REJECTION OF POTENTIALLY RESPONSIVE BIDS BEFORE MOVING FROM FIRST STAGE TO THE SECOND STAGE ENSURE BORROWER HAS CONSIDERED AND OBTAINED CLARIFICATIONS ON ALL COMMERCIAL AND TECHNICAL ASPECTS OF THE BID AND EACH BIDDER WAS INFORMED BY MOU ALL COMMERCIAL RESERVATIONS THAT NEED TO BE WITHDRAWN AND AMENDMENTS TO MADE IN THEIR TECHNICAL SPECIFICATIONS WHILE SUBMITTING FINAL SECOND STAGE BID CONTAINING UPDATED TECHNICAL SPECIFICATIONS AND PRICE 56 Slide 57 WATCH LIST TO AVOID COMMON PROBLEMS WATCH FOR INTERNAL INCONSISTENCIES IN TECHNICAL AND FINANCIAL PROPOSALS OF BIDDERS CAREFULLY CHECK OPERATIONAL AND MAINTENANCE COST AS THEY REPRESENT A SIGNIFICANT PROPORTION BY VALUE FOR EVALUATION PURPOSES CAREFULLY ADDRESS DEVIATIONS IN BIDS AS BIDDERS USE TRICKY LANGUAGES WHICH MAY HAVE DIFFERENT INTERPRETATIONS --CONSULT RPM AND LEGAL IF NECESSARY PRIOR REVIEW DRAFT CONTRACTS ESPECIALLY OF HIGH VALUE AND IF BID EVALUATION WAS COMPLEX AND BORROWERS PROPOSALS WERE QUESTIONED IN THE FIRST REVIEW CONTRACT SIGNED SHOULD BE CONSISTENT WITH BID SUBMITTED AND THE FORM OF CONTRACT ATTACHED TO THE BIDDING DOCUMENT BORROWERS TO BE CAREFUL IN TAKING OVER OF PLANT AFTER COMPLETION CERTIFICATE AND IF MAJOR DEFICIENCIES REMAIN COMPLETION CERTIFICATE SHOULD NOT BE ISSUED 57 Slide 58 WATCH LIST TO AVOID COMMON PROBLEMS ISSUES CONCERNING CONFLICT OF INTEREST AND ELIGIBILITY DO ARISE QUITE OFTEN AND SHOULD BE HANDLED WITH GREAT CARE --BEFORE CONCLUDING BANKS POSITION AT PRE- OR POST BID STAGE RPM/OPCPR OR OTHER SENIOR PROCUREMENT STAFF AND/OR LEGAL SHOULD BE CONSULTED CONTRACT DISPUTE REVIEW MECHANISM SHOULD BE OPERATIONAL AS SOON AS POSSIBLE (DRB OR ADJUDICATOR) PROMPTLY REVIEW ALL ASPECTS OF ANY COMPLAINT FROM BIDDERS BORROWERS SHOULD USE BANKS SAMPLE EVALUATION FORM AND PROVIDE ANY ADDITIONAL INFORMATION AS APPROPRIATE BORROWERS SHOULD AVOID DELAYS IN BID EVALUATION AND AWARD OF CONTRACTS LIKEWISE BANK SHOULD REVIEW AND RESPOND PROMPTLY AS PER BANKS SERVICE STANDARDS 58 Slide 59 DESIGN, SUPPLY AND INSTALLATION THANK YOU FOR YOUR ATTENTION Sunil Bhattacharya 59