# Procurement & Tendering — Reference

## Table of Contents
1. [Procurement Strategy Framework](#strategy)
2. [MDB Procurement Principles](#mdb)
3. [Tendering Methods](#tendering)
4. [Bid Evaluation Methods](#evaluation)
5. [Prequalification](#prequalification)
6. [Collaborative Contracting](#collaborative)
7. [Compliance in Tenders](#compliance)

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## Procurement Strategy Framework {#strategy}

### Three Phases

| Phase | Focus | Activities |
|-------|-------|-----------|
| 1. Analysis | Understand context | Pre-investment studies, stakeholder ID, SWOT, market analysis |
| 2. Choices | Strategic decisions | Contract type, delivery method, packaging, risk allocation |
| 3. Planning | Implementation prep | Procurement plan, timeline, bidding documents, evaluation criteria |

### Procurement Strategy Decisions

**Project characteristics** → assess complexity, size, duration, risk profile
**Packaging decisions** → single contract vs multiple packages vs lots
**Pricing strategy** → lump sum, remeasurement, cost-plus, target cost
**Risk allocation** → who bears design, ground, weather, price risks
**Competition level** → open, limited, direct, framework

### Fitness-for-Purpose Procurement
Procurement must reflect:
- Project complexity (simple works ≠ mega infrastructure)
- Institutional capacity (can employer manage multiple contracts?)
- Risk profile (who is best placed to manage which risks?)
- Market conditions (are qualified contractors available?)
- Implementation timeline (fast-track vs traditional sequencing)

> Standardised approaches may be unsuitable. Strategy must be fit for purpose, not one-size-fits-all.

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## MDB Procurement Principles {#mdb}

### Core Principles (ADB / IFI Framework)

| Principle | Meaning |
|-----------|---------|
| Economy | Optimal price without harming project viability |
| Efficiency | Procurement proportionate to complexity and risk |
| Fairness | Equal treatment of bidders; credible complaint mechanisms |
| Transparency | Public access to procurement information |
| Quality | Outputs suitable for project objectives |
| Value for Money | Lifecycle cost and socio-environmental benefits considered |

### Value for Money vs Lowest Price
MDB procurement does NOT require award to lowest bidder. Award based on:
- Lifecycle cost (total cost of ownership)
- Technical quality
- Risk allocation
- Sustainability impact
- Delivery capability

### Risk Allocation Principle
Allocate risk to the party best able to:
1. Identify that risk
2. Control that risk
3. Mitigate that risk
4. Absorb that risk

Incorrect allocation → pricing inflation, claims escalation, programme delay, disputes.

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## Tendering Methods {#tendering}

### Main Methods

| Method | Description | When Used |
|--------|-------------|-----------|
| Open competitive (with PQ) | Prequalification → shortlist → bid | Large/complex projects |
| Open competitive (without PQ) | Direct bidding, qualification with bid | Simple projects |
| Limited/Restricted | Invite specific firms | Specialist work, limited market |
| Competitive dialogue | Discussion with bidders before final tender | Very complex, unclear specs |
| Negotiated/Direct | Direct negotiation with selected vendor | Emergency, sole source, proprietary |
| E-Reverse auction | Online reverse bidding | Routine procurement |
| Framework agreement | Pre-qualified pool at predefined rates | Repetitive works |

### Negotiated Procedure — Justification
- Emergency/urgency
- Small quantity — competitive tendering not feasible
- Proprietary equipment — only original supplier compatible
- Remote locations — limited contractor access
- Usually requires minimum 3 quotations

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## Bid Evaluation Methods {#evaluation}

| Method | Description | When Used |
|--------|-------------|----------|
| Lowest Evaluated Cost | Award to lowest compliant bid | Clearly defined specifications |
| QCBS (Quality & Cost Based) | Weighted technical + financial score | Complex projects needing quality |
| Fixed Budget Selection | Best technical score within fixed budget | Budget-constrained projects |
| Least Cost Selection | Cheapest technically compliant bid | Routine/standardised assignments |
| Quality-Based Selection | Best technical score wins | Highly specialised/critical work |

> MDB projects typically apply weighted evaluation criteria rather than price-only selection.

### Evaluation Process
1. Preliminary examination (completeness, eligibility, signatures)
2. Technical evaluation (scored against published criteria)
3. Financial evaluation (arithmetic check, currency conversion, price adjustment)
4. Combined evaluation (weighted score or pass/fail technical + lowest price)
5. Post-qualification (verify winner's capacity)

### Abnormally Low Bids
- May indicate: misunderstanding of scope, unsustainable pricing, error
- Evaluator should: request clarification, verify cost breakdown
- Risk: contractor wins → fails → project hostage → termination + re-tender
- Some MDB rules allow rejection of abnormally low bids

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## Prequalification {#prequalification}

### PQ Document Contents
1. Employer identity & representative
2. Project description & scope
3. Qualification criteria (technical, financial, experience)
4. Required documents (financial statements, project references, personnel CVs)
5. Evaluation methodology
6. Timeline

### Qualification Criteria

| Category | Examples |
|----------|---------|
| Financial | Annual turnover, liquid assets, credit facilities, audited accounts |
| Technical | Similar project experience, equipment, methodology |
| Personnel | Key staff qualifications and experience |
| Legal | Registration, licensing, litigation history, debarment status |
| Safety | Safety record, certifications (ISO 45001) |
| Quality | Quality management system (ISO 9001), CONQUAS history |

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## Collaborative Contracting {#collaborative}

### Spectrum of Collaboration

| Level | Type | Risk Culture |
|-------|------|-------------|
| Low | Traditional/Binary | Claims culture — adversarial |
| Medium | Intermediate (NEC partnering, VE incentives) | Mixed |
| High | Full Alliancing | Collaborative — "project first" |

### Alliance Governance Structure

| Level | Body | Function |
|-------|------|----------|
| Strategic | Alliance Leadership Team (ALT) | Strategic decisions and oversight |
| Operational | Alliance Management Team (AMT) | Operational coordination and issue resolution |
| Execution | Integrated Delivery Teams | Daily execution responsibility |

These structures support collective decision-making and replace traditional adversarial contract hierarchies.

### Target Cost & Pain/Gain
1. Parties agree target cost
2. Contractor reimbursed for all actual costs + fixed profit
3. At completion: actual < target → gain shared; actual > target → pain shared
4. Creates incentive to optimise without incentive to inflate

### Key Features of Alliancing
- Shared project objectives (not individual scope targets)
- Joint management team
- Risk register — risks discussed and mitigated together
- Early engagement — contractor involved before final design
- No-claim/no-blame culture
- Open book — full cost transparency
- Conflict avoidance (CAB/dispute board)

### Heathrow T5 — Landmark Example
- £4.2 billion project
- BAA absorbed ALL risks
- Target cost with pre-agreed profit margins
- Pain/gain incentive mechanism
- Only 6 major disputes over 5 years; only 1 went to arbitration
- Remarkable for project of this size and complexity

### NEC — Only Standard Form with Alliancing
- Option C = target cost
- Clause 10.1 = mutual trust and cooperation (express obligation)
- Only mainstream form with built-in alliancing/partnering option
- FIDIC has NO alliancing form (reportedly working on one)

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## Compliance in Tenders {#compliance}

### Key Compliance Areas

| Area | Key Legislation/Framework |
|------|--------------------------|
| Anti-bribery | FCPA (US), UK Bribery Act, French Sapin II |
| Sanctions | US OFAC, EU Sanctions, UN Security Council |
| Modern slavery | UK Modern Slavery Act, US TVPA, ILO conventions |
| ESG | EU CS3D, MDB environmental/social safeguards |
| Integrity | ADB Integrity Policy, World Bank sanctions framework |

### MDB Prohibited Practices (ADB)
- Corrupt, Fraudulent, Coercive, Collusive, Abuse, Conflict of Interest
- Plus: Obstructive practices, violation of sanctions
- Sanctions: debarment (fixed/indefinite), conditional non-debarment, reprimand
- Cross-debarment across all major MDBs

### Sanctions Screening
- Must check: beneficial ownership, ultimate controlling parties
- Indirect participation risks (JV partners, subcontractors, suppliers)
- Supply chain exposure
- Continuous screening, not one-time
- Debarment consequences: cross-default in bank financing, reputational exclusion

### Compliance-by-Design
- Beneficial ownership disclosure
- Sanctions screening (continuous)
- Supply chain traceability and audit rights
- Internal compliance programme (demonstrate effectiveness, not just existence)
- Whistleblowing mechanisms
- Training and disciplinary regime