Case Studies on Procurement

Case Study 1: An Indian company submitted its bid for the supply of PVC pipes, which are manufactured in its factory in New Delhi, but raw material is proposed to be obtained from Dubai. India is a member country of the ADB, Dubai is not. True Statements PVC pipes are not eligible to be supplied in the contract since the raw material for pipes is sourced from ADB non-member country. False

Case Study 2: 1. An EA invited bids under National Competitive Bidding (NCB). The bid validity date was 30 April 2007. The EA completed the bid evaluation, and requested ADBs no-objection on 15 April 2007 for award the contract to the lowest evaluated substantially responsive bidder DEF Constructions. ADB provided its no objection on 18 April 2007 to the EA. The EA sent out a letter of acceptance to DEF Constructions on 29 April 2007 in Hindi language through speed post mail. The bidder received the notice of award on 1 May 2007 and refused to accept the contract. The EA forfeited the contractors bid security. 2. The lowest evaluated bidder complained that the EA forfeited his bid security even when the notification of award was not valid.

S.No. 1.

Statements

True

False

The EAs decision to forfeit the bid security was appropriate since the EA had dispatched the letter of acceptance to the lowest evaluated bidder before the bid validity date of 30 April 2007. The LOA can be issued in Hindi (as a national language), instead of English that was stated as language of bid in the as-issued bid documents.

2.

Case Study 3: 1. An EA invited bids under National Competitive Bidding (NCB) and completed bid evaluation. The EA sought ADBs no-objection on its recommendation to negotiate with the lowest evaluated substantially responsive Bidder ABC Ltd. to bring down the quoted bid price which was substantially higher than the Engineers estimate. After attending contract negotiations, the bidder ABC in his letter refused to bring down the bid price and also, didnt agree to extend its bid validity. Instead, Bidder ABC requested to increase the bid price as a result of increase in service tax to be levied by the Government of India from the next financial year. 2. The EA considered this as a modification in price bid, and sought ADBs no-objection to forfeit the bid security submitted by ABC S.No.
1.

Statements The Bidder, ABCs request to increase the bid price to cover the increase in service tax by the Government is a modification in the bid price. Bidder, ABC is obliged to negotiate and reduce their bid price. Bidder ABC can refuse to extend the validity of its bid without forfeiting its bid security. The EA can forfeit the bid security.

True

False

2. 3. 4.

Case Study 4: 1. Under ADB-assisted Water Supply and Sanitation Project, an EA invited proposals from shortlisted consultants for Design and Supervision Consultant (DSC) contract on the basis of Quality and Cost-based Selection (QCBS) method. The EA evaluated the proposals and requested ADBs no-objection on its recommendation to award the contract to the association of LEAD-PQR consultants. Upon receiving ADBs no-objection, the EA awarded the contract to the association of LEAD-PQR consultants, in which PQR consultant (a subsidiary of PQR Group) was an associate member. 2. After 18 months of awarding the above consulting contract, the EA invited bids for civil works of supply and installation of water supply pumps. After completing the bid evaluation, the EA requested ADBs no objection to award the contract to the single responsive bidder PQR Brothers, which is a subsidiary of the PQR Group. Statements The EAs recommendation to award the contract to the sole bidder PQR brothers was appropriate. True False

S.No 1.

Case Study 5: A EA for an urban development project invited bids under NCB for supply and laying of water supply pipeline. By the bid closing, the EA received bids from 3 Bidders ABC, DEF and GHI. The EA evaluated all three bidders as technically responsive, and requested ADBs no-objection for opening their price bids. While examining the EAs Bid Evaluation Report, ADB investigated the relationship between two bidders. The investigation found that the two companies (ABC and DEF) had the same head office address and that the owners were brothers, living at the same address. S.No 1. Statements It is possible that two bidders, (ABC and DEF), may have a conflict of interest. EA needs to get further investigation by an expert on company affairs the relationship between the two bidders If both the bidders ABC and DEF - are found to have controlling shareholders in common, they cannot be disqualified. True False

2 3.

Case Study 6: An EA for a road project invited bids for supply of equipment on certain technical specifications. The EA received a single responsive bid, which also contained a brochure of similar equipment manufactured by the same bidder. The EA observed that although similar equipment mentioned in the brochure had different technical and financial specifications, but they better suited to its requirements. Based on this analysis, the EA requested ADBs no objection for diluting the technical specifications and procure the similar equipment as mentioned in the brochure from the single responsive bidder. S.No. 1. Statements What should be the EAs action? (a) (b) Procure similar equipment, which has different specifications from the original, from the single bidder Go for re-bidding with the revised technical specifications. True False

Case Study 7: In a road project, the EA invited bids for construction of highway. After completion of technical bid evaluation, the EA opened the price bids of 4 technically qualified bidders ORI, MBL, IJK and NCC. During financial bid evaluation, the EA observed that IJKs total bid price was lowest among all the bidders, but IJK did not quote the price of any individual BOQ item and all items were left blank.

S.No 1.

Statements IJKs bid will be considered as non-responsive and rejected.

True

False

Case Study 8: In a Power Sector Development Project, the EA invited bids for supply of transformers. After completion of technical bid evaluation, the EA opened the price bids of technically qualified bidders. During financial bid evaluation, the EA observed that one of the bidders, GHI Ltd. did not quote the price of 2 individual Bill of Quantities (BOQ) items (out of total 36). Those 2 items were left blank. GHI Ltd. total bid price was lowest among all the bidders. S.No 1. Statements GHI Ltd. will be requested to clarify and quote the price of those 2 BOQ items and then comparative statement will be prepared by the EA. GHI Ltd. bid will be rejected by the EA without any further evaluation. It will be considered that 2 items against which no rate or price are entered by the bidder will not be paid for by the Employer when executed and shall be deemed covered by the rates and prices for other items in the BOQ. True False

2. 3.

Case Study 9: Bids were invited under Single stage Two envelope bidding procedure for improvement and upgradation of a road up to WBM level. The qualification criteria stated that the prospective bidder must have (i) 5 years of relevant experience and (ii) net worth of Rs 20 million. There were 3 bidders, A, B and C. As on date of bid closing, Bidder A had 4.5 years of relevant experience while Bidder B had net worth of Rs18 million. The EA evaluated bidders A and B non-responsive. The non-responsive bidders appealed to the EA to relax the qualification criteria. S.No 1. Statements Can the EA consider the appeal of the 2 non-responsive bidders favorably. True False

10

Case Study 10: Bids were invited under Single stage Two envelope bidding procedure for improvement and upgradation of a road in a remote area located in an underdeveloped state. Of the 4 technically qualified bids, the bid of the lowest evaluated substantially responsive bidder was 20% higher than the Engineers estimate.

S.No 1. 2.

Statements Can the EA accept the lowest bid. What are the issues that the EA needs to consider.

True

False

11

Case Study 11: Under a single stage, two-envelope bidding, 2 bidders were technically qualified for a road work contract. On opening their price proposals, the EA recommended award of the contract to the lowest evaluated substantially responsive bidder, XYZ Ltd., which was 5% below the Engineers estimate. The quoted price of the second bidder, ABC Ltd. was 15% above the Engineers estimate. Both bidders had submitted their provisional audited statements for evaluation of their technical responsiveness. While forwarding the PBER to ADB, the EA copied the PBER report to ABC Ltd. for information with words of instruction as The above recommendations are based on XYZ Ltd. assurance to submit their original audited accounts and verification of the same for compliance before the notification of award of contract.

S.No 1. 2. 3.

Statements Was XYZ Ltd. technically qualified without submission of the audited accounts. Any violation made by the EA Is this a case of misprocurement.

True

False

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Thank You

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AnswerKeysandConsiderationPoints
1. Case Study 1: Eligibility to ADB projects Points for Consideration: Place of manufacture, Nationality of Bidder.

This case of eligibility to ADB projects is the place of manufacture of the final product that is of concern, not the raw materials or components that go into the manufactured item. ADBs Standard Bidding Document for procurement of goods states: The term country of origin means the country where the goods have been produced, manufactured, or processed; or through manufacture, processing, or assembly, another commercially recognized article results that differs substantially in its basic characteristics from its imported components. In this particular case, the country of manufacture is the India and the finally manufactured product (i.e. PVC pipe) differs substantially in its basic characteristics from its imported components. Therefore, the PVC pipes are eligible to be supplied, and the bid is acceptable. 2. Case Study 2: Points for Consideration: Communication with bidder , bid validity, language of bidding i. The EA needed the bidder to receive notification of award (NOA)/letter of acceptance (LOA) within the bid validity date.

ii. The NOA/LOA should have been issued in English, which was mentioned as language of bid in the as-issued bid documents. Since the NOA/LOA was received by the bidder after the bid validity expiry, and also, it was issued in a language which was different from the language mentioned in as-issued bid documents, the employer may not have ground to forfeit the bidder's bid security.

3.

Case Study 3: Points for Consideration: Modification of Bid, bidders right during negotiations and on bid security.

ADB did not agree to the EAs recommendation and advised to release the bid security submitted by the bidder ABC: a) ITB Clause 18.2 states that A bidder may refuse the request to extend the period of validity of the bid without forfeiting its bid security; b) A bidder is under no obligation to negotiate and can refuse to reduce their bid price. Therefore the bidder cannot be considered non-cooperative or non-responsive; and c) General Conditions of Contract (GCC) state that if a contract had been awarded, any increase in tax imposed after 28 days prior to submission of bids would have to be paid. Thus the increase in levied taxes as a result of increase in service tax (as described in the above case) to be levied by the Government of India from the next financial year, does not constitute a modification in price bid.

4.

Case Study 4: Point for Consideration: conflict of interest

1. Clause 4.3 of Section 1: Instructions to Bidders, a bidder is considered to be in a conflict of interest with one or more parties in the bidding process if, a bidder participated as a consultant in the preparation of the design and/or technical specifications of the contract that is the subject of the bid; or a bidder was affiliated with a firm or entity that has been hired (or is proposed to be hired) by the employer as consultant for the contract, or they have a relationship with each other, directly or through common third parties, that puts them in a position to have access to information about or influence on the bid of another bidder. 2. In this case, PQR Brother is in conflict of interest with PQR consultants which has been hired as a design and supervision consultant. Both, the bidder and the consultant are affiliated to the same parent holding company, the PQR Group and therefore, the bidder PQR brother was disqualified. ADBs Standard Bidding Document for Procurement of Goods states that the bidders are considered to have a conflict of interest if they have a relationship with each other, directly or through common third parties, that puts them in a position to have access to information about or influence on the Bid of another bidder. The ADB investigation found that these two bidders had a conflict of interest and both were rejected. 5. Case Study 5 Point for Consideration Conflict of Interest

1. The EA was advised that the relationship between ABC Ltd. and DEF Ltd. should be examined in the context of conflict of interest as per Clause 4.3 of Section 1: Instructions to Bidders which mentions that all the bidders found to have a conflict of interest shall be disqualified. A Bidder may be considered to be in a conflict of interest with one or more parties in this bidding process if, including but not limited to:
(a) they have controlling shareholders in common; or (b) they receive or have received any direct or indirect subsidy from any of them; or (c) they have the same legal representative for purposes of this bid; or (d) they have a relationship with each other, directly or through common third parties, that puts

them in a position to have access to information about or influence on the Bid of another Bidder, or influence the decisions of the Employer regarding this bidding process; or
(e) a bidder participates in more than one bid in this bidding process. Participation by a Bidder in

more than one Bid will result in the disqualification of all Bids in which the party is involved. However, this does not limit the inclusion of the same subcontractor in more than one bid; or
(f) a bidder participated as a consultant in the preparation of the design or technical

specifications of the contract that is the subject of the Bid; or

(g) a bidder was affiliated with a firm or entity that has been hired (or is proposed to be hired) by

the Employer or Borrower as Engineer for the contract. 2. Upon ADBs advice, EA had got checked some of the relevant documents from ABC Ltd. and DEF Ltd., by an expert on company affairs. The expert established that as per Clause 4.3 of Section 1 of the bid document, there was a conflict of interest between ABC Ltd. and DEF Ltd. because they had controlling shareholders in common which is one of the above situations of conflict of interest as per the as-issued bid documents. Therefore, bids submitted by ABC Ltd. and DEF Ltd. were rejected and both bidders were disqualified.

6.

Case Study 6: Point for Consideration: revising technical specifications in bid document After bidding document are issued, but before bids are opened.

(a)

After bidding documents are issued, but before bids are opened, and that the bid documents require modification, the bidding documents should be amended by issuing an addendum. It should also change the date set for the opening of bids if that is necessary to give bidders sufficient time to take the modifications into account in their bids. (b) Modifications of bid specifications after opening of bids.

If the specifications in the bid documents need to be changed after bids are opened, the Executing Agency (EA) must examine whether the new requirements are of such magnitude that all bids should be rejected and new bids invited. This would occur only if fundamental changes in the EAs requirements have occurred for example, if the bill of quantities have to change substantially based on a revised design, or if major characteristics. i. Contract bidding document, under Instruction to Bidders (ITB) Clause 13.1 states that Alternative Bids shall not be permitted.

ii. A change of the technical specifications may be unfair to other bidders, who may have equipment conforming to the revised technical specifications, but opted not to bid for the equipment conforming to the technical specifications prescribed by the EA. 2. Since the revised technical specifications was better suited to the requirements of the EA, ADB advised EA to re-bid the contract package with modified technical specifications after rejecting the single bid received for supply of the equipment. 7. Case Study 7 Point for consideration - Deviation in Bid Price Quotation major or minor deviation?

1. Since IJK quoted the bid price on lump sum basis instead of unit rate basis; it will be treated as major deviation from the bid conditions. Also, during execution, the EA will not have any basis for payment for running account bill submitted by the contractor. 2. 8. The EA rejected IJKs bid despite being the lowest price bid. Case Study 8 Deviation in Bid Price Quotation Major or Minor deviation?

1. As per Clause 14.2, Section 1: Instruction to Bidders (ITB), the bidder shall fill in rates and prices for all items of the works described in the Bill of Quantities. Items against which no rate or price is entered by the bidder will not be paid for by the Employer when executed and shall be deemed covered by the rates and prices for other items in the Bill of Quantities. 2. In this case, Rama, being the lowest evaluated bidder will be awarded the contract, but will not be paid for execution of 2 items, for which prices are not quoted.

9.

Case Study 9 For consideration Relaxation of qualification. Relaxation of qualification criteria is not acceptable.

10.

Case Study 10 For consideration Relaxation of qualification, flexibility in approving over-estimated bid price.

ADB needs to have an overall review in terms of (i) accuracy of the estimate (ii) economy and efficiency, if rebidding proposed (iii) analyze scope of work, specifications. In this particular case, due to remote site location, limited working season, ADB recommended award of contract to the lowest evaluated, though the bid is 20% than the Engineers estimate. 11. Case Study 11 For Consideration Bid evaluation according to bid documents, conditional approval of price bid evaluation report and (ii) confidentiality compliance by EA (iii) was technical evaluation appropriate (iv) can the EA consider conditional award when audited financial statements were not submitted; (v) Can this be a case of Mis procurement. As per Procurement Guidelines (February 2007), ADB finances expenditures for goods and works that are procured in accordance with the provisions in the financing agreement and these Guidelines. If procurement is not carried out as agreed, ADB will declare misprocurement, and normally cancel that portion of the contract misprocured. In appropriate cases, ADB may permit rebidding after declaring misprocurement. ADB may, in addition, exercise other remedies provided for under the financing agreement. Even, if a contract is awarded after obtaining a no objection, from ADB, ADB reserves to declare misprocurement if it concludes that no objection was obtained of incomplete, inaccurate, or misleading information or the terms and conditions of the contract has been substantially modified without ADBs approval.

THE INDIAN CONTRACT ACT, 1872

Excerpt

Source: http://www.netlawman.co.in/acts/indian-contract-act.php