Procurement is the acquisition of goods or services. Professional, fair, transparent, and ethical procurement processes are geared towards achieving greater efficiency in the use of financial resources as well as complying with the principles of objectivity in selection processes, competitiveness, sustainability and accountability.
Sustainable procurement is a process whereby organisations meet their needs for goods, services, works and utilities in a way that achieves value for money on a whole life basis, i.e., benefitting not only the organisation, but also the society and economy in question, while minimising damage to the environment (DEPARTMENT FOR ENVIRONMENT, FOOD AND RURAL AFFAIRS 2006).
Procurement of goods and services depends on the size of the budget that has been approved for this purpose, as well as on the availability of the required financial resources.
See our practical experiences, lessons learned and recommendations below.
Why you should care
Optimizing procurement processes helps to boost efficiency and obtain the best possible value-for-money ration when acquiring the goods and services necessary to meet project objectives.
What really matters: Lessons learned & recommendations
Make sure governmental tax exemption is in place before the start of the project
Projects funded by an international donor agency are typically tax exempted (as outlined in the prime contract). This tax exemption requires a lengthy application process and concerted follow-up efforts to obtain the necessary official approvals. In the case of ISSRAR, this took about one year. Therefore, it is advisable to begin this process before the actual start of the project to avoid any delays in your procurement processes.
Do your homework, if you engage external consultants for specific tasks.
As in most sanitation projects, the ISSRAR consortium involved multiple consultants that supported the implementation of different project components. Two steps are crucial to ensure that the hired consultants deliver value for money: 1) defining clearly what exactly the consultants are supposed to do (and capturing this in the ToRs), and 2) finding good consultants whose fees do not extend the available budget. Furthermore, keep in mind that managing external consultants takes time (your most precious resource), so make sure not to hire more external consultants than you can handle.
For both of these two crucial steps, developing Terms of References (ToRs) with clear scope, deliverables, and timelines is critically important. When developing ToRs, the following questions are a good starting point: How exactly will we use the results generated by our consultants? To be of good use to us, what should the results look like, what should and shouldn’t they include? The answers to these questions provide the basis for developing the different elements of the ToRs, which usually include:
- Project background (standard)
- Main objectives and outputs of the assignment
- Roles and responsibilities (for the project team and the consultant)
- Work packages and budget (linking level of effort with tasks)
To find good consultants within the available budget it has proven very helpful to include a budget ceiling whenever proposals are requested from external consultants. When omitting this point, we often received offers that outlined approaches that were too extensive and/or too expensive.
Beyond the evaluation of proposals from consultants, it has proven very important to engage in further due diligence regarding shortlisted consultants by exploring which experiences other organizations had in working with them. This process helps to sort out applicants that are only good on paper but do not deliver (effectively) when it comes to actually performing the work at hand.
Getting the formalities right when hiring external consultants
To manage external consultants effectively, a clear framework needs to be established. This requires clearly communicating tasks and fees in negotiations with consultants, drafting adequate contracts as well as clarity on progress monitoring, controlling and approval of deliverables.
Negotiation is a give-and-take that requires a certain level of compromise. At the same time, it is an important opportunity to further clarify expectations and deliverables in direct exchange with the respective consultants.
Aside from the generic contractual topics, we have learned it is important that assignments for external consultants require some flexibility on both sides. In the contract you should specify that consultants may be requested to adjust their work to shifting project timelines if this becomes necessary. You should also consider that you may not be able to assign liability for certain services exclusively to independent consultants. These and other related aspects should be discussed with your legal department or a legal expert you work with.
Internally you should clearly assign one team member to manage a specific contract. Clarify which milestones should be monitored and how the consultants’ deliverables should be approved. You should also specify in which kinds of instances the team member in question should engage the management level (e.g., for renegotiation/budget adjustments, insufficient quality of deliverables, significant delays, or the like).
Identify and agree on the best tendering option
There are different ways to approach construction works and tender operations related to wastewater management projects. Each of these options can affect your timeline differently and may pose additional risks regarding liabilities, corruption, etc.
If you are not familiar with the different options at hand, a first important step is to meet with the project donors and owners, who are usually familiar with the available tendering options. Refer to them to identify which options are available and feasible for your project, and which actors will be involved in the tender. In our case, the most relevant options were to tender directly as the project consortium, going through the Government Tender Directorate or establishing a Special Tendering Committee under the Ministry of Water and Irrigation (i.e., the project owner).
The next important step is to evaluate the risks associated with different tendering options. Among other aspects, it is worth looking at:
- Time implications (risk of delay),
- Who is the lead of the selection committee and thereby the liable institution,
- Required contracts for financial agreements that could pose risks for corruption,
- Existence of proven legal forms (establishing new tendering formats bears high risks of legal loopholes).
- In this process it was very helpful to receive input from different tendering experts. The objective of this step is to determine which option carries the least risks and liabilities for the project implementer as well as the highest chances of success for the project.
Based on the resulting preference we engaged in discussions with the donor and the project owner. After a tentative consensus was reached, we sent a formal request to the donor to opt for a Special Tendering Committee. This request comprised a comprehensive justification for this option. The donor agency then sent an exception request to the project owner, who in turn initiated the process of making the required arrangements for the selected tendering option.
Determine what your chosen tendering option means for contracting conditions
Clarify and select the contract type as well as the general condition of the contract to be used (design and build or build, operate and transfer, or only build, etc.). As the Ministry of Water and Irrigation (MWI) is a key stakeholder of the ISSRAR Project, it was decided that the International Federation of Consulting Engineers’ (FIDIC) Red Book 1999 would be used for this project. It is essential to duly review what the selected tendering option implies and which sections can be modified. Tendering according to the FIDIC Red Book, entails the documents listed below. In the case of ISSRAR they required review and approval by the Special Tendering Committee (keep in mind that this takes time).
- Volume I - Invitation to tender, contractual conditions, Tender and Contract Forms, general conditions, and particular conditions of the Contract
- Volume II - General & Technical Specification: to be developed by the implementing agency, reviewed and approved by the Water Authority of Jordan (WAJ)
- Volume III - Priced and Unpriced Bill of Quantities: to be developed by the implementing agency, reviewed and approved by WAJ
- Volume IV - Detailed Drawings: to be developed by the implementing agency, reviewed and approved by WAJ
- If your intervention is eligible for tax exemption from the government: Have you initiated the tax exemption process at the outset of the project to avoid related delays in any of your procurement processes?
- Did you thoroughly think through what external consultants should deliver before tendering specific tasks?
- Have you established a clear framework to effectively manage external consultants?
- Have you clarified and agreed upon the best option for tendering of construction works and operations related to the wastewater management project?
- Are you clear about the implications of the tendering option for the contracting conditions?