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Presentation on:

“ PROCUREMENT SYSTEM OF PAKISTAN”

By:

Engr. M. Mazhar-ul-Islam

Chief Executive

Techno Legal Consultants (Pvt) Ltd.

1

Regulatory Documents

Federal PPRA Ordinance 2002

Federal PPRA Rules 2004 & Regulation 2010

PEC Act 1976 as amended in 2011

Procurement rules formulated by each of the provinces

Construction and Operation of Engineering Works Bye-laws

Conduct and Practice of Consulting Engineers Bye-laws

19 PEC standard bidding/ contract documents

3 construction docs. Notified by PPRA vide S.R.O 805(I)/2008

dated 11th July, 2008

Pakistan Building Codes (Seismic, Energy, Electrical Safety &

Telecom Safety)

2

List of PEC Bidding/ Contract Documents

1. Standard Form of Bidding Documents (Civil Works)

2. Standard Form of Tender Documents for procurement of

works (Electrical & Mechanical).

3. Standard Form of Tender Documents for procurement of

works For smaller contracts

4. Standard Form of Contract for Engineering Consultancy

Services (Time Based Assignments)

5. Standard Form of Contract for Engineering Consultancy

Services (Lump Sum Assignments)

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6. Standard Form of Contract For Engineering Consultancy

Services For Smaller Projects

7. Rules of Conciliation and Arbitration

8. Standard Procedure for Evaluation of Proposals for

Procurement of Engineering Services

9. Standard Procedure and Formula for Price Adjustment

10. Standard Procedure for Evaluation of Bids for

Procurement of Works

11. Standard Procedure for pre-qualification of constructors

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12. Standard Procedure for pre-qualification of consultants

13. Standard Form of Bidding Documents for Procurement of

Works on BOT Basis


Works on Design and Build Basis


Civil Works (SSTE)

16. Standard Form of Joint Venture/Consortium Agreements

and Memorandum of Understandings

5


17. Standard Form of Bidding Documents for EPC/Turnkey

contracts

18. Standard Form of Bidding Documents for procurement of

Goods

19. Standard Form of Bidding Documents for Operation &

Maintenance Works

6

Relevant Act/ Laws

1. The Contract Act, 1872

2. The Arbitration Act, 1940

3. The Limitation Act, 1908

4. The Specific Relief Act, 1877

5. The Partnership Act, 1932

6. The Stamp Act, 1899

7. Pakistan Environmental Protection Act, 1997

8. The Registration Act, 1908

7

Relevant Act/ Laws

9. Income Tax Laws

10. Law of Conveyancing (Transferring)

11. Land Acquisition Act, 1894

12. Labour Laws

8

Salient Provisions in PEC ACT

PEC is to regulate whole of the engineering profession when

the Preamble read with Section 8 of the Act

Pursuant to section 27 (5) & (5A) professional engineering

works can be carried out only by the professional engineer

Section 25 when read in conjunction with Section 2(xii),

2(xiv) and 2(xxv) empowered PEC to regulate also

Engineering Procurements

Section 2(xxv)(i) provides for standard bidding/contract

documentation and Arbitration rules

9

Salient Provisions in PEC ACT

Section 8(s) stipulates PEC as forum for Arbitration

Section 8(p) entrusted PEC for development of construction

cost data (schedule of rates)

Section 20(4) empowers PEC to take suo-moto action

against any organization

Section 27(1) stipulates punitive action against non

compliance of PEC regulation

PEC under Section 8(k) read with Section 2(xxxiv) can

create subsidiary like PICC created in 2009 to deal with cost

and contract matters

10

Salient Provisions in PEC Construction Bye-laws

Engineering works can only be undertaken by PEC licensed

constructors

Engineering works up to Rs. 4 million can be undertaken

w/o license

PEC license is mandatory for eligibility of a bidder

For the time being licenses are issued in eight categories

License to a foreign constructor is given for specific

projects(s)

11

Salient Provisions in PEC Construction Bye-laws

License to a foreign constructor is issued in two stages

A foreign constructor can work in Pakistan only in joint

venture with Pakistani constructor in which Local share is

minimum thirty percent

A constructor is allowed to undertake work of other

discipline up to 25%

A constructor already licensed and applied for renewal can

enter into bidding process, however, submit valid license

before award (interpreted)

12

Salient Provisions in Consultancy Bye-laws

Only PEC registered consultants are eligible for providing

engineering consultancy services

A consulting firm should have minimum 51% shareholding by

Professional Engineers and remaining by allied professionals; in

case of Government share above is exempted

Chief Executive of a consulting firm must be a Professional

Engineer

Unlike bidding for constructions; bid & performance security

are not required in Consultancy proposal (PEC Interpretation).

13

Salient Provisions in Consultancy Bye-laws

A foreign consultant can undertake consulting assignments

only with joint venture with Pakistani consultant with share

of lacking expertise except in technology transfer cases

A licensed consultant applied for renewal can enter into

bidding process, however renewed license must be

produced before award

A consultant can be a part construction consortium with his

relevant defined scope

Professional liability for design is up to twice the design fee

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Overview of PPRA Act & Rules

World Bank prepared CPAR in the year 2000

PEC contested the CPAR and protested overlapping jurisdiction

PPRA Ordinance promulgated in 2002 under PCO cover

PPRA Rules 2004 needed basic documents

PPRA having jurisdiction to Federal procurement only

18th constitution amendment placed the regulations under

Federal list; Item-6, Part-II, SCH-4 of Article 143 of the

Constitution prohibit provinces to maintain conflicting

regulations

PEC & PC notified standard procurement documents in 2002 &

200815

Overview of PPRA Act & Rules

PEC harmonized its detailed documents up to 2008

PPRA issued consultants’ regulations in 2010

PPRA adopted and notified PEC documents in July 2008

PEC Act 2011 reinforced regulation on engineering

procurement

Standardization of bidding/ contract documents,

development of construction cost data, Arbitration forum,

suo-moto action against organizations etc.

Overlapping jurisdiction b/w PEC and PPRA is a source of

confusion

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PPRA Rules-2004

Applicable for Federal Government procurement only - Rule-3

International agreements by Federal Govt. shall prevail

Specifications shall be generic – Rule-10

Advertisement on PPRA website for Rs. 0.1m - 2m;

advertisement in news paper is optional – Rule-12

Advertisement in Newspapers - one in English and Urdu and

PPRA website

Minimum 15 days response time for LCB and 30 days for ICB

for bidding, EOI, PQs Rule-13

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PPRA Rules-2004

Advertisement not mandatory for National Security objective - Rule-14

Rule-15 recommends PQs for large “expensive and technically

complex” procurement

Rule - 19 requires PAs to specify mechanism for blacklisting

Open competitive bidding except under Rule-42 – Rule-21

Three quotations for Rs. 100,000 to 500,000 (with Board approval)

Limiting bidding to National bidders and Domestic preference allowed -

Rule-24

Bid Security not exceeding 5 percent - Rule-25

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PPRA Rules-2004

Bid validity period depending on nature of procurement – Rule-26

Can be extended equal to original period once – Rule-26(3)

Re-advertisement for extension in bid submission - Rule-27

Evaluation of bids under the specified criteria in the bidding

documents: Otherwise mis-procurement –Rule-29

Clarifications of the Bid can be sought that do not change the

substance of bid-Rule-31

Discriminatory and difficult conditions by PAs not permissible - Rule-

32

PAs requires to state grounds for rejection but not justifications

Rule 35 requires announcement results ten days prior to award

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PPRA Rules-2004

Four modes of competitive bidding:

Single stage single envelope-most bidding under this mode

Single stage two envelope-technical and financial ground

Two stage-in large complex projects where technically unequal

likely

Two stage two envelope-where alternative technical proposals are

possible

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PPRA Rules-2004

Lowest evaluated responsive is the accepted bid for award. Rule-38

Performance Guarantee not exceeding ten percent. Rule-39

Rule 40 limit PA/Bidder in negotiations, across the board reduction

is not permissible

Evaluation process to remain confidential until announcement. Rule-

41

Alterative Method of procurement. Rule - 42

Petty Purchase: without bidding or quotation up to Rs. 25,000-

may be for enhanced amount with justifications. Rule-42(a)

RFQs: minimum three quotations for up to Rs. 100,000-500,000

(with approval of Board), accept lowest price. Rule-42 (b)(i)

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PPRA Rules-2004

Direct Contracting-Rule-42(c): (i) Spare parts or services from

original supplier/manufacturer (ii) only one manufacturer exists

(iii) matching specification required within three years of contract

duration (iv) 15% repeat order (v) In emergency declared by

appropriate (vi) When prices are fixed by the Government or any

other authorized Agents on his behalf (vii) purchase of motor

vehicles from Local Original Manufacturers

Negotiated Tendering –Rule 42(d): with or without

advertisement for (i) study & research (ii)technical & artistic

reasons (iii) extreme urgency-for unforeseen reason not

attributable to PA

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PPRA Rules-2004

Payment to the Contractors shall be made within 30 days

Closing of contract-performance of contract deemed to close on

TOC except DLP (Rule - 45)

Maintenance of record of procurement for minimum five years

(Rule - 46)

Evaluation documents should have public access and transparency.

Rule-47

Redressal of grievances under Rule-48: Committee with odd

number of persons to address complaints prior to entry into force

of contract

23

PPRA Rules-2010 (Consultancy)

Regulation 2010 is contingent on PPRA Rule-2004. Sec-2(2)

Introduced five methods of selection of consultants, Sec-3:

Quality based (QBS)

Quality and Cost based (QCBS)

Least Cost

Single Source or direct selection

Fixed budget

Eligibility under Section 4 to avoid conflict of interest-Constructors

& Consultants

EOI requires 15 days notice to National and 30 days for

International, Sec-5

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Short listing under-Rule-6 (not less than three) except Single

Source; and pre-qualification under Rule-7 of consultants

Components for RFP, Sec-8:

Letter of Invitation

Instructions to consultants

TOR

Evaluation criteria

Proposed Contract Format

Special Provision where needed

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Selection Committee composed of three relevant persons. Sec-9

Negotiation is limited to clarification and no changes in rates. Sec-

10

Professional liability equal to remunerations up to twice the design

fees; for design error and omission (Section-5 of Pec Byelaws).

Sec-11(1)

PA may demand Professional Indemnity Insurance (PII) to cover

above Risks; PA to reimburse cost under Out of Pocket Expenses,

Sec-11(2)

Consultant is responsible for misconduct or unsatisfactory

performance. Sec-11(3)

PPRA Rule-2004 and Regulations-2010 are mutually explanatory

but Rule-2004 shall have precedence

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CRITICAL REVIEW OF PUNJAB PPRA RULE

Rule -13: Advertisements not required in case of National Security & Intellectuals’ Property

Punjab PPRA Rules have been reshuffled with motive- Example: Rule-42 shifted to 49.

Chapter –VII: Consultancy rules are not exhaustive.

Rule 31(3): Procuring Agencies refer this rule to ask for LCM without having minimum slab for the procurement.

Rule 34 is often misinterpreted to impose difficult conditions such as, high bid security and turn over even for consultancy.

Rule 35: Rejection of bid to be notified to each of the bidders and not just hoisting to website.

27

CRITICAL REVIEW OF PUNJAB PPRA RULE

Rule 48(2) & 14 : Separate response time of 14 or 30 days required for PQ and proposals – often confused & not followed.

Rule-55 (A): Single complying proposal may be awarded

Rule 58: Re-bidding process shall not be permitted after announcement of the Evaluation Report.

Rule 59 (c)(iv): 15% repeat order is not synonymous to VO but for goods and spare parts; however, often misinterpreted to deny VO & continuity of Consultancy.

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MIS-INTERPRETATIONS & MANIPULATIONS -PPPRA

Rule 4: Principles of procurement are often compromised.

Rule 13: National Security often misused.

Rule 15: Frame of Contract or Notified SBD.

Rule 16(6 & 8): P & D sole jurisdictions for pre-qualification on yearly basis - also Line Departments are not bound- departmental precedence over spirit of regulations.

Rule 31(3): Procurement through direct request – confusing

Rule 45 (5): Awarding contract to Govt. organizations through direct contracting- Manipulative and Conflicting

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MIS-INTERPRETATIONS & MANIPULATIONS-PPPRA

Rule 57: Negotiation often sought across the board reduction – not permitted in any good practice

Rule 59: Alternative method of procurements.

(c)(iv) - 15% rule shall be for goods & spare parts only.

(c)(v) – declaration of emergency by “authority” – manipulated

(d) – negotiated tendering “with or without” prior publication of notification

(d)(iii) – Extreme urgency – another manipulation

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Rule-60: Unsolicited proposal – additional 5% weightages to the original proposer leads to manipulation

Rule 61(3): Post bid participation of public sector manufacturers with lowest bid matching price -( ill- conceived)

Announcement of cost proposal should annul PA rights for re-bidding unless failure of faithful negotiation.

Violates relevant country laws such as PPRA, PEC, CCP.

Genuine bidders refrain from participation.

Time line and quality are compromised.

31


Loss of investors confidence.

Promote malpractices.

Increase in claims & litigation.

Loss in national exchequer.

Earned bad reputation Globally.

Destroy moral character of the Nation.

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THANK YOU

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