ZHRC/HTI Financial Management Training

1. ZHRC/HTI Financial Management Training Session 7: Procurement and Tendering Methods

2. Learning Objectives • By the end of this session participants will be able to: • Describe different procurement methods • Know factors affecting the choice of procurement method • List monetary procurement value thresholds for the different methods • Define tendering • Describe tendering processes • Describe the preparation of tendering documents • Explain awarding and evaluation of tenders

3. Procurement Methods • Tanzania Procurement Regulations of 2005 require that procurement of goods, works and services be made through competitive tendering • There are several methods of competitive procurement including: • International competitive tendering • National competitive tendering, restricted tendering • Competitive quotations

4. International Competitive Tendering: (Reg. 65) • International Competitive Tendering (ICT) is used when there will be participation from foreign suppliers • Procuring entity is required to invite suppliers or contractors, regardless of nationality, to submit priced tenders • International competitive tendering is used: • Where it is desired to attract tenders from a wide range of suppliers or contractors • Where payment is to be made in foreign currency

5. National Competitive Tendering: (Reg. 66) (1) • National Competitive Tendering (NCT) is used when the procuring entity does not intend to invite foreign suppliers or contractors to participate in tendering • The procuring entity is required to invite suppliers or contractors, regardless of nationality, by means of tender notice advertised only in the national press • Foreign firms wishing to participate are allowed to do so. Tender documents may be in Kiswahili language

6. National Competitive Tendering: (Reg. 66) (2) • NCT is appropriate in the following cases: • Payment is to be made in Tanzanian shillings • Goods or works are available within Tanzania at prices below the international market • Estimated cost of goods or works is small and does not exceed threshold for international competitive tender • Costs involved in using international competitive tendering method outweigh its advantages • Foreign suppliers are not expected to be interested in the tender

7. Restricted Tendering: (Reg. 67) (1) • Restricted tendering is inviting tenders from a few selected potential suppliers • Restricted tendering may be used in the following cases: • Goods required are of specialized nature or can be obtained from a limited number of reputable suppliers

8. Restricted Tendering: (Reg. 67) (2) • Restricted tendering may be used when (list continued from previous slide): • There is an urgent need for goods or works such that there would be insufficient time for procuring entity to engage in national or international tendering • There are other exceptional reasons to justify departure from full competitive tendering procedures

9. Competitive Quotations: (Reg. 68) (1) • Quotations are invited from a minimum of three suppliers • They are compared to ensure competitive prices • The contract is awarded to the supplier with lowest-priced quotation meeting the needs of procuring entity

10. Competitive Quotations: (Reg. 68) (2) • This method is used in the following situations: • Goods to be procured are so diversified that it would be of no commercial interest for any single supplier to tender for them • Goods are readily available off the shelf or the goods are standard specification commodities • List of suppliers to be contacted has to be submitted to Ministerial Tender Board (MTB) for approval • Once approved, the request for quotations should be sent simultaneously to suppliers

11. Single Source Procurement: (Reg. 69) (1) • Single source procurement is when goods or services are procured from a single supplier • Should be approved by appropriate Tender Board • This method is used when goods are available only from a particular supplier and no reasonable alternative exists, or when…

12. Single Source Procurement: (Reg. 69) (2) • There is an urgent need for goods, and use of other procurement methods would be impractical • Provided that circumstances giving rise to urgency were neither foreseeable by procuring entity nor result of dilatory conduct • Where additional supplies of same type as those purchased under an existing contract are required

13. Minor Value Procurement: (Reg. 71) • Goods or minor works may be procured directly from a supplier where no advantage is likely to be obtained by seeking further quotations • Appropriate where price quoted is reasonable and value of goods and services does not exceed Tsh 10,000,000/=, or value of minor works does not exceed Tsh 20,000,000/= • And for non consultancy services does not exceed Tsh 10,000,000/= as specified in Second Schedule of these regulations

14. Force-Accounts (Reg. 73) (1) • Force account procurement is used for construction conducted by a public agency using its own personnel and equipment • Force account may be justified where: • The works are small and scattered or in remote locations for which qualified construction firms are unlikely to tender at reasonable prices

15. Force-Accounts (Reg. 73) (2) • Work is required to be carried out without disrupting ongoing operations • Risks of work interruption are better borne by a procuring entity or public authority than by a contractor; or • There are emergencies needing prompt attention

16. Procurement Method Choice • Various procurement methods can be employed. Guiding factors include: • Value of procurement • Urgency • Nature of requirement • Limited number of supply sources • Currency of payment • Standardization • Contract Extensions

17. Monetary Procurement Thresholds (Second Schedule) Methods of Selection and Limit of Application Source: PPR, 2005, G. N 97

18. Group Work: Choice of Procurement Method

19. Tendering Processes

20. What is Tendering?

21. Definition of Tendering • Tendering is one of the methods of procurement whereby potential suppliers are invited to make a formal offer to supply goods, provide services, or carry out works; which on acceptance, shall be the basis of subsequent contract

22. Need for Tendering and Its Application • Procuring entities create an annual procurement plan which is submitted to the PMU for action • Procurement officers are required to prepare tendering packages and to advertise them to ensure transparency and guarantee receiving the best value for Government money

23. Tendering Procedures • Tendering process in procuring entity may be divided into several stages: • Preparation of tender documents • Review and approval of tender documents by the Tender Board • Advertising of tender and issuing of tender documents • Submission and custody of tender bids • Opening of tenders • Evaluation of tender • Approval and award of the tender by the tender board

24. Preparation of Tender Documents (1) • Tender documents generally include the following components, each is discussed in slides that follow: • Section 1: Invitation for Tenders • Section 2: Instruction to Tenderers • Section 3: Tender Data Sheet • Session 4: General Conditions of Contract • Section 5: Special Conditions of Contract • Section 6: Schedule of Requirements • Section 7: Sample Forms • Section 8: Technical Specifications • Section 9: Security Forms • Section 10: Anti-Bribery Policy/Code of Conduct

25. Preparation of Tender Documents (2) • Tender documents generally include the following components: • Section 1: Invitation for Tender • This is a letter that invites bidders to apply for tenders. It provides basic information that will attract and inform potential bidders on how to obtain the tender document.

26. Preparation of Tender Documents (3) • Section 2: Instructions to Tenderers • This Section explains how to prepare the bid, requirements or documents that should be attached to the bid, whether bid security is required, criteria used for evaluation and the time and place of bid opening. • Section 3: Tender Data Sheet • Provides information that supplements or amends instructions to bidders.

27. Preparation of Tender Documents (4) • Section 4: General Conditions of Contract • Contains general conditions for supply of goods under tendering methods. The conditions are standard for all tenders pursued under the Public Procurement Act . • Section 5: Special Conditions of Contract • Some tenders have special conditions that supplement or amend the General Conditions.

28. Preparation of Tender Documents (5) • Section 6: Schedule of Requirements • This form should be completed by the Procuring Entity indicating description, quantity and delivery schedule. The bidder will use this information during performance of the contract. The bidder must indicate compliance with the schedule.

29. Preparation of Tender Documents (6) • Section 7: Sample Forms • Forms that should be filled in by the bidder include: • Bid Forms • Price schedules for local and imported goods • Forms for qualification information • Sample Letter of Acceptance • Sample contract

30. Preparation of Tender Documents (7) • Section 8: Technical Specifications • These are prepared by the buyer. Technical specifications describe the physical characteristics of required goods or works. • Section 9: Security Forms • Used by bidders to prepare the bid security or bonds or bid security declaration.

31. Preparation of Tender Documents (8) • Section 10: Anti-Bribery Policy and Code of Conduct • These are also called integrity forms. The bidder is required to fill in the forms and or attach the Company’s Code of Conduct or Anti-Bribery Policy. The absence of these forms in a bid is sufficient to disqualify a bidder.

32. Preparation of Tender Documents (9) • Tender documents should be worded to encourage competition • The documents should clearly and precisely provide all information necessary for potential tenderers to prepare bids

33. Preparation of Tender Documents (10) • Tender documents should be worded to encourage competition • The documents should clearly and precisely provide all information necessary for potential tenderers to prepare bids

34. Opening of Tenders (1) • Tenders should be opened at the deadline for receipt of tenders or promptly thereafter • All tenders submitted before the deadline shall be opened in public and the following read out loudly: • Tenderers’ names • Tender prices and total amount of each tender • Discount if any • Tender security

35. Opening of Tenders (2) • Tenders should be numbered consecutively • Secretary of the Tender Board should prepare minutes of opening

36. Evaluation of Tenders (Reg. 90-94) (1) • Accounting Officer or Chief Executive Officer shall establish a tender evaluation committee which should be comprised of not less than three and not more than five members • All tenders that have been accepted and opened should be passed promptly to the evaluation committee • Record of tenders received and attendees of the opening meeting should also be provided to the evaluation committee

37. Evaluation of Tenders (Reg. 90-94) (2) • Tender evaluation should be consistent with the terms and conditions of the tender documents • The evaluation shall be carried out using the criteria explicitly stated in the tender documents

38. Tender Evaluation Sequence • Tender evaluation should be carried out in the following sequence: • Preliminary evaluation to determine commercial responsiveness • Detailed Technical Evaluation • Post-qualification to the lowest evaluated bidder

39. Preliminary Examination • During preliminary examination, the committee will establish whether each tender is substantially responsive to requirements of tender documents • A substantially responsive tender conforms to terms and conditions of tender documents without material deviations • A material deviation affects the scope, quality or performance of contract, or is inconsistent with tender document • Procuring entity may ask suppliers/contractors for clarification of their tenders

40. Negotiation (Reg. 95) (1) • Negotiation may be undertaken with lowest evaluated tenderer • Negotiation with tenderers are not permitted until after tender board has approved evaluation committee's recommendations • PMU shall recommend membership of a negotiation team based on appropriate seniority and experience depending on value and complexity of procurement • Tender board shall approve the negotiation plan prior to negotiations taking place

41. Negotiation (Reg. 95) (2) • Prior to confirming an agreement, the Procurement Management Unit shall seek approval of the Tender Board • Appropriate tender board shall approve the negation plan prior to any negotiations taking place • Prior to confirming any agreement reached, the Procurement Management Unit shall seek approval of the Tender Board

42. Negotiation (Reg. 95) (3) • Negotiations may be undertaken with the lowest evaluated bidder in the following areas: • A minor alteration of the technical details • Reduction of quantities for budgetary reasons • A minor amendment to the special conditions of contract • Finalising payment arrangements

43. Negotiation (Reg. 95) (4) • Mobilisation arrangements • Agreeing to final delivery or work schedule to accommodate changes required by procuring entity • Methodology or staffing • Clarifying details that were not apparent or could not be finalised at time of bidding

44. Negotiation (Reg. 95) (5) • Negotiations shall not be conducted to: • Substantially change specification or details of requirement, including tasks or responsibilities of tenderer • Materially alter terms and conditions of contract • Reduce prices • Increase prices in case of disposal of assets

45. Approval of Award of Contract (1) • Evaluation committee will prepare a detailed report on evaluation of tenders • Committee will give specific reasons upon which the determination of the lowest evaluated tender is based • Report will be submitted to PMU

46. Approval of Award of Contract (2) • Tender Board shall review the evaluation and may either: • Approve recommendation and, authorize the procuring entity to accept the tender and award a contract • Refuse to authorize any of the of tenders and refer the evaluation back to procuring entity with instructions to re-evaluate tenders the tenders or re-tender Award of contract must be made within period of validity of the bid or extension thereof

47. Group Work: Tendering Process

48. Key Points (1) • Procurement methods include: • International competitive tendering, • National competitive tendering • Restricted tendering • Competitive quotations • Single source • Minor value procurement • Force accounts • A number of factors can guide in selecting procurement methods

49. Key Points (2) • Tendering is inviting suppliers to make a formal offer to supply goods, services or works, shall be the basis of the contract. • Tendering procedures include: • Preparation of tender documents • Approval of documents by Tender Board • Advertising of tender • Submission and custody of bids • Opening of tenders • Evaluation of tenders • Approval and award of tender by the Tender Board