The Point Based System For Contractor Selection For Award Of Construction Works

1. The Point Based System For Contractor Selection For Award Of Construction Works Accelerating Bhutan’s Socio-Economic Development- GNHC, MoWHS & MoF

2. Outline of Presentation: 1. The Point Based System 2. Reclassification of Construction Firms 3. Schedule of Implementation 4. e-tool for evaluation

3. Background: Why the need for a new point based system? • A point based system in place prior to April 2009 • From 1st April 2009, a pass/fail system was introduced that used a series of parameters on which a contractor needed to pass in order to qualify. • Both these systems however addressed the needs of a robust process only partly and suffered from some drawbacks.

4. Objectivity Incentives for best practices Rigidity Old Point Based System Current Pass/Fail System Criteria • Project specific requirements for manpower, equipment specified; one-on-one comparison done • No test for proven past performance • Subjective evaluation on technical capability – manpower, equipment, performance • Requirements loosely defined; no quantification 1 + - • Potentially possible for contractors to score low on some parameters and compensate by scoring high on others • But high weightage given only to experience related parameters • Stringent qualification criterion for each parameter • Must to pass on ALL parameters to qualify • Extremely difficult for young, promising contractors to qualify • Often leads to re-tendering 2 + - 3 • Possible to build-in incentives but not done • No reason for contractors to get incorporated, employ local people etc. • Incentives for best practices cannot be built in as by definition they will need to be pass/fail - -

5. The Point Based System:- Background contd.. • Need for a system that addresses their shortfalls of the both the systems while retaining the positive aspects • Need for a system that can evaluate contractors on parameters most critical in achieving good performance in Bhutan’s construction sector context, and • Need for a system that can give incentives to the contractors to adopt some of the best practices that will help in development of the sector in general.

6. + system’s advantage - system’s disadvantage Objectivity Rigidity Incentives for best practices Criteria Old Point Based System Current Pass/Fail System Proposed Point Based System • Project specific requirements for manpower, equipment specified; one-on-one comparison done • No test for proven past performance • Subjective evaluation on technical capability – manpower, equipment, performance • Requirements loosely defined; no quantification • Objective levels of achievement and scoring specified for all technical parameters • Project specific requirements clearly defined 1 - + + • Stringent qualification criterion for each parameter • Must to pass on ALL parameters to qualify • Extremely difficult for young, promising contractors to qualify • Often leads to re-tendering • Potentially possible for contractors to score low on some parameters and compensate by scoring high on others • But high weightage given only to experience related parameters • Adequate flexibility to allow young, promising contractors to qualify • Weightage to parameters well in-line with their relative importance in project execution 2 + - + • Suitable incentives for local employment, commitment for VTI internships, incorporation etc. 3 • Possible to build-in incentives but not done • No reason for contractors to get incorporated, employ local people etc. • Incentives for best practices cannot be built in as by definition they will need to be pass/fail - - +

7. The Point Based System of Evaluation: combination of technical and financial parameters The New Point Based System Technical Parameters Financial Parameters Capability Capacity Organizational strength 1. Financial bid quoted by a Contractor

8. Technical Parameters - 40% Financial Parameters - 60% Two stage qualification & evaluation process: Techno-Financial Score Lowest quoted bid among qualifying bids 60% -------------------------------- Financial bid quoted by x 40% of Technical score for x

9. 1. First Stage : Technical Qualification Technical Parameter (40%) C. Organizational Strength 25 points A. Capability – 50 points B. Capacity – 25 points A contractor needs to obtain a score of at least 60 points out of 100 to qualify for the next stage.

10. A. Capability – 50 points • Similar work experience - 10 • Access to adequate equipment - 15 • Availability of manpower - 15 • Average performance score from previous work* - 10 Total - 50 points • Parameters above tests on the capability to execute the given work. • Capability is taken to be a function of prior experience, their ability to generate enough resources in form of manpower and equipment, and their performance track-record from previous works.

11. 1 - Similar work experience (last 5 calendar years) Two options:- a. the contractor can either be evaluated on the size of a SINGLE largest similar work that (s)he might have executed in the past OR b. on the aggregate size of THREE similar works that (s)he might have executed in the past

12. Scoring pattern for similar works:-

13. 2 – Access to adequate equipments: Allocate points to each equipment based on its importance:- • Equipments of Tier-I importance: 50 points • Equipments of Tier-II importance: 30 points • Equipments of Tier-III importance: 20 points • Total marks out of 100 to be scaled down to 15 • 100% marks if the equipment are owned and 75% marks if hired. • Scoring on equipment is fundamentally similar to the way it has been done in the pass/fail system

14. An illustrative list of prescribed equipments :

15. An illustrative list of prescribed equipments :

16. 3 – Availability of Manpower The 100 points allocated is as follows: • Personnel position of Tier-I importance: 50 points • Personnel position of Tier-II importance: 30 points • Personnel position of Tier-III importance: 20 points • This parameter evaluates contractors on their ability to deploy personnel with suitable qualifications and experience • Scoring on manpower is fundamentally similar to the way it has been done in the pass/fail system • Allocate points to each of they key project personnel positions based on its importance

17. An illustrative list of manpower requirements:

18. 4. Average performance score from previous work (0-10 pts) The 100% performance score is composed of the following parameters: 1. On-time completion - (30%) 2. Quality of execution - (70%)

19. 4 – Average performance score from previous work (0-10 pts) • This parameter gives points based on contractor’s performance score of the last 5 calendar years • To begin with, all contractors will have a default performance score of 100%. • This score will diminish whenever a contractor defaults on any one of the parameters of performance • Performance score information system and will be institutionalized with the introduction of the new point based system. • As contractor execute more projects, this score will keep getting averaged out over the number of projects executed

20. 1. First Stage : Technical Qualification Technical Parameter (40%) C. Organizational Strength 15 points A. Capability – 50 points B. Capacity – 25 points A contractor needs to obtain a score of at least 60 points out of 100 to qualify for the next stage.

21. B. Capacity – 25 points This category of parameter tests the contractor on his/her ability to generate adequate financial resources for executing the project. The parameters covered under this category are: • Bid Capacity - 15 • Credit line available (unused) - 10 Total - 25 points

22. 1 – Bid Capacity (15 points) A= Average turnover of the contractor over the last 3 calendar years N= Estimated duration of the project being tendered in years B= Portion of other ongoing works to be completed in the period that overlaps with the current project’s duration (that is, N)

23. Bid capacity having calculated, the scoring will be as follows:

24. 2 – Credit line available (Unused):- • This parameter evaluates the contractor on his/her ability to raise credit from banks and other financial institutions to manage the working capital requirements of the project. • The contractor will get a score based on a letter of credit from a bank that gives the amount of credit available to the contractor for the work to be awarded. • Level of achievement on this parameter will be judged in terms of months of project cash flow for which the credit is available.

25. Scoring pattern will be done as follows: This sums up the scoring of 25 points under the “capacity” category in the technical score. We now proceed to the next category – “organizational strength”:

26. 1. First Stage : Technical Qualification Technical Parameter (40%) C. Organizational Strength 15 points A. Capability – 50 points B. Capacity – 25 points A contractor needs to obtain a score of at least 60 points out of 100 to qualify for the next stage.

27. C. Organizational Strength 15 points This category of parameters evaluates the contractor on how well the contractor’s organization is set up and functioning and how much is it contributing to the overall betterment of the sector. The parameters under this category are: • Status (incorporated, proprietorship, JV etc.) - 05 • Employment of local people - 10 • Strength of special skill & knowledge base - 05 • Commitment for internships to VTI graduates - 05 Total - 25 points

28. 1 – Status (incorporated, proprietorship, JV etc.) The scoring on this parameter will be as follows:

29. 2 – Employment of local people - This parameter is designed to give the contractors benefit for employing local people in construction jobs. The scoring on this parameter are as follows:

30. Organisational contd…. 3 – Strength of special skill & knowledge base - This parameter is to encourage contractors to employ environment friendly and new and innovative technologies etc. in construction The scoring on this parameter are as follows:

31. 4 – Commitment for internships to VTI graduates - This parameter is designed to provide incentives to contractors to facilitate the betterment of vocational training for construction in Bhutan The scoring on this parameter are as follows: This sums up the scoring of 25 points under the “Organizational Strength ” category in the technical score.

32. Award of Work:- • Contractors who obtain a score of 60 points or more on technical will move to the second stage. • In the second stage, the technical score from the previous stage will be combined with the financial bid to obtain the overall techno-financial score as given below: Lowest quoted bid among qualifying bids 60% -------------------------------- Financial bid quoted by x 40% of Technical score for x **Work shall be awarded to the contractor obtaining the highest overall techno-financial score.

33. 2. New System For Contractor Classification

34. Simplifications to the existing classification system Class Requirements PRESENT CLASSIFICATION PROPOSED CLASSIFICATION • LARGE contractors • No restriction on number of projects? • Eligible for projects > Nu 15 million • To be awarded projects based on the new point based system proposed • Same as class B; equipment of class A • Should get incorporated within 1 year Nu 15 million • MEDIUM contractors • No restriction on number of projects? • Nu 15 mn ≥ Project size > Nu 4 mn • To be awarded projects based on the new point based system proposed • Same as those for class C Nu 4 million • One site supervisor • Incentive to those bidders who employ VTI site supervisor • SMALL contractors • Maximum 2 project allowed at a time? • Total works (all together) ≤ Nu 4 mn • To be awarded projects based on the lowest bid basis • No requirements on track-record for being in any class – registration purpose • Possible for new, promising contractor to enter higher class • Adequate consideration for the large number of small contractors

35. Class –Largeallowable Range :- > 15 mnmax No of Project :- No limit /5 Nos. Proposed System for Contractor Classification Class –Mediumallowable Range :- 4-15 mnmax No of Project :- No Limit/ 4 Nos Class –Smallallowable Range :- < 4mnmax No of Project :- 2 Nosprovided the total amount is <4mn

36. 3. Schedule of Implementation

37. 4. e-tool for evaluation

38. Bid Invitation Stage CDB WEB E-Software CDB Database Up-load Tender • Enter Requirements • Equipments • Manpower • Special Strength Information gets Stored Work ID Generated • Enter • Name of the work • Estimate Amount • Project Duration

39. Evaluation Stage • Enter Work ID • Receives Information from Database • Name of the work • Estimate Amount • Project Duration • Set Criteria (manpower, equipment etc.) CDB WEB E-Software (Enter ID)/ CDB No. CDB Database • Enter CDB No. • Receives Information from Database for contractor • Similar Experience • Annual Turnover • Past Performance • Nos. of work in hand & value of works that overlaps with the current project Enter other parameters: eqip, m/p etc. Gets Storied in Database Repeat for each bidder – evaluation complete

40. Work Completion stage CDB Database CDB WEB E-Software • The past performance score of the bidder’s gets updated which will be used in the next bidding process • Work awarded gets updated as completed • Enter • Date of completion • Final Amount • Performance Score • Timely Completion Score • Quality Score

41. Tashi Delek