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E2-E3 Finance Tender Evaluation,Negotiation, Arbitration For Internal Circulation of BSNL only

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Page 1: E2-E3 Financetraining.bsnl.co.in/digital_library_source/upgradation/E2-E3/E2-E3 Finance/E2-E3... · Tender Evaluation Committee : • The Technical Member would be from the concerned

E2-E3

FinanceTender Evaluation,Negotiation,

Arbitration

For Internal Circulation of BSNL only

Page 2: E2-E3 Financetraining.bsnl.co.in/digital_library_source/upgradation/E2-E3/E2-E3 Finance/E2-E3... · Tender Evaluation Committee : • The Technical Member would be from the concerned

WELCOME

• This is a presentation for the E2-E3 Core Module for the Topic:

Tender Evaluation ,Negotiation ,Arbitration. .

• Eligibility: Those who have got the Upgradation from E.2 to E.3.

• This presentation is last updated on 22-3-2011.

• You can also visit the Digital library of BSNL to see this topic.

For Internal Circulation of BSNL only

Page 3: E2-E3 Financetraining.bsnl.co.in/digital_library_source/upgradation/E2-E3/E2-E3 Finance/E2-E3... · Tender Evaluation Committee : • The Technical Member would be from the concerned

Tender Evaluation.

• Tender Evaluation is necessary to identify the Lowest

Bidder commonly known as L1

Bidder.

Unless Tenders are evaluated we cannot know whether

the price quoted is reasonable or not.

Thus Tender Evaluation is an important stage in the

Tender Processing.

For Internal Circulation of BSNL only

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Tender Evaluation.

• Examination of Bids before Evaluation:

• Prior to the detailed evaluation of bids, it will be

examined whether each bid:

• A) Meets the eligibility criteria.

• B) Has been properly signed.

• C) Is accompanied by the required

securities called for.

• D) Is substantively responsive to the

requirements of the bidding

documents.

For Internal Circulation of BSNL only

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Tender Evaluation.

• The TEC does the above checks.

• What is substantively responsive Bid?

• A Bid is said to be substantively responsive when it conforms to

all the terms, conditions and specifications of the bidding

documents without any material deviation or reservation.

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Tender Evaluation.

• Transparent Tender Processing.• To have a transparent tender processing, the DOT has issued

the following guidelines vide Lr No 26-405/92 MMC (pt) dt 12-09-96.

• a) The Tender conditions should be clear and unequivocal. The technical specifications should be firm and clear.

• b) In TWO Bidding system, price Bids of only those Bidders who are qualified on technical and other prescribed conditions to participate in the tender are only to be opened. The Price Bids of those Bidders who do not qualify must be returned unopened by Registered Post.

For Internal Circulation of BSNL only

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Tender Evaluation.

• Transparent Tender Processing -----

• e) The tender conditions should clearly indicate the share of

orders which the successful bidders are likely to get.

• f) Norms and procedure for vendor rating should be

formulated and published well in advance.

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Tender Evaluation Committee :

• Who has to Constitute the TEC?

• The Tender Accepting Authority has to constitute the

TEC.

• NOTE: The Tender Evaluation Committee is to be so

constituted that the officer holding power by virtue of

his position as a member of the Tender Committee

should not be the accepting authority also.

For Internal Circulation of BSNL only

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Tender Evaluation Committee :

• The Constitution of Tender evaluation committees is to be

determined by the virtue of lowest acceptable Tender Value.

• The Tender evaluation Committee basically comprises of three

members representing Technical, Commercial and financial

wings of the unit so that the Bids can be evaluated technically,

commercially and financially.

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Tender Evaluation Committee :

• The Technical Member would be from the concerned user wing

of the unit who will generally be the convener and having the

prime responsibilities for preparation of the Minutes. The

commercial Member can be from MM Cell of the Unit and the

Finance Member would be from the financial cell of the Unit.

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Convener of TEC

• Immediately after opening of the Tenders, the following

documents will be handed over to the convener of the TEC.

• a) All bids accepted at the bid opening alongwith a copy of

NIT.

• b Original Bid documents along with specifications.

• c) Guide lines for TEC. (issued by Tender Accepting Authority)

d) Minutes of bid opening register.

e) Extract of Tender Opening Register.

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Tender Evaluation Process

• The following are the allocation of responsibilities among the

three wings of the TEC.

• Technical Evaluation:

• This work is to be carried out by the Technical branch

representative of the TEC. The technical comparative

assessment of the material list is required to be done alongwith

the corresponding

• Prices to be taken for evaluation. Such comparative list will be

done by the Finance representative of the TEC.

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Tender Evaluation Process

• Commercial Evaluation:

• The Commercial evaluation is to be carried

out by the MM Cell representative in TEC

and vetted by the Finance representative.

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Points of consideration by TEC.

• The prices quoted in the Tender should be compared with the

prices quoted for similar items in the last contract.

• Rates should be reasonable.

• Meaning of reasonable:

• The rates should reasonable considering the market conditions

and other factors like prevailing prices of raw materials, Taxes

etc.

• This price analysis can be got done before accepting the lowest

one, in as much as the lowest one need not be a reasonable

one.

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Points of consideration by TEC.

• In case of Single Tender;

• Sometimes in response to open Invitation only a single Tender

might be received. Even then, the TEC should examine whether

the rate quoted is reasonable or not, as the only such tender

need not necessarily be accepted merely because it is received

in response to the call of the open tenders.

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Points of consideration by TEC.

• Importance of after Sales Service…

• In modern technology, especially Computers or any

sophisticated equipments, “After Sales Service” is of

vital importance. In determining the L1, adequate

weightage may be given to the above point.

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Points of consideration by TEC.

• The points to be seen are:

• i) Does the supplier have a team of competent technicians and

engineers employed exclusively for after sales service ?

• ii) Are required Spares readily available to meet any

emergency ?

• iii) Is after sales service price reasonably priced.

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Report of TEC.

• The criteria adopted for evaluation should be clearly

indicated in its report. The TEC should clearly spell out

its recommendations in its report about technically

acceptable bids, listed in order starting lowest technical

bids L-1 upwards or as per vendor rating starting from

VI.

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Report of TEC.

• The report should contain complete Technical,

Commercial and Financial appraisal of each tenderer

with its remarks and recommendations. The Technical

bids should be ranked and then prices should be

evaluated .

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Recording of Decisions of TEC.

• Recording of decisions of TEC in other words means

preparation of Minutes. The following points should be

kept in mind in arriving at decisions and record of

minutes.

• The tender evaluation report should clearly indicate

deviations recommended vis-à-vis tender conditions

alongwith reasons for such deviations. When there are

no such deviations from tender conditions, a

declaration to that effect must be given.

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Recording of Decisions of TEC.

• The TEC will record its decision with full justification. There may

be some difference in the opinion of one or more members. The

views of the dissident member (s) if any, will also be duly

recorded on the file. The authority competent to decide the

tender however has got the final say in the matter (i.e., his

decision will prevail) in consultation with his IFA.

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Recording of Decisions of TEC.

• Again there may be difference of opinion between the

Tender accepting authority and IFA. In such cases the

matter should be referred to next higher authority for

decision.

For Internal Circulation of BSNL only

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Recording of Decisions of TEC.

• The recommendations of the Committee for Evaluation of tender

are essentially internal document. Final decisions are taken by

the competent authority on the basis of TEC recommendations.

The confidentiality of the TEC document from outsider is

therefore, to be maintained. No information to substance,

examination, clarification or evaluation of bids would be

communicated to persons other than those officially connected

with it.

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Recording of Decisions of TEC.

• But in the light of RTI 2005 Act the above provision has

to be suitably amended to accommodate the queries

taken up by public.

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What is Price ?

• Price can be defined as cost plus reasonable profit. In

other words the difference between price and cost

would be the profit, which can be higher than

reasonable when the supplier wants to exploit in case

of high demand and less competition. Thus the lowest

price tendered need not necessarily be the

Reasonable price.

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What is Price ?

• In respect of items, which are being procured

continuously over a period of 3 years, the average

price of previous purchases made as well as market

price can be the guiding factors to certain extent.

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Page 27: E2-E3 Financetraining.bsnl.co.in/digital_library_source/upgradation/E2-E3/E2-E3 Finance/E2-E3... · Tender Evaluation Committee : • The Technical Member would be from the concerned

What is Price ?

• For those costly items which are of Proprietary nature of new

item, estimate of cost plus can be made to arrive at reasonable

price (generally allowing profit margin of 5%). This price analysis

can be done for package works inclusive of supply of materials

(I.e.,) Supplying,

• installing, Testing & Commissioning to enable negotiations for

reasonable price.

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Page 28: E2-E3 Financetraining.bsnl.co.in/digital_library_source/upgradation/E2-E3/E2-E3 Finance/E2-E3... · Tender Evaluation Committee : • The Technical Member would be from the concerned

What is Price ?

• Unbalanced Bids:

• If the L1 price is disproportionate with the price

estimated by the Purchaser, the

Latter may ask the bidder to produce detailed analysis

for the same.

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Acceptance of Tenders

• Who has to accept ?

• The Officer competent to accept the Tender as per the

delegated Financial powers should be the Tender accepting

authority.

• Which Bid is to be accepted?

• The lowest Bid in terms of cost is generally accepted if all other

conditions like substantively responsive are fulfilled.

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Acceptance of Tenders

• Purchaser’s right to accept or reject any or all the Bids.

– It shall be the prerogative of the purchaser to accept or reject

any bid, or to annul the bidding process and reject all bids at

any time prior to award of the contract, where the purchaser

does not incur any liability or obligation. It need not state any

reasons for its action.

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Acceptance of Tenders

• An Offer (Tender) when accepted, becomes “Promise”

(vide Section 2 (b) of Law of Contracts).

• Acceptance of a Tender can be by means of a letter or

memorandum communicated to the contractor and this

includes Advance acceptance of tender.

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Multiple Vendor System

• Multiple Vendor System is where it

• becomes necessary to sustain multiple

• vendors/suppliers. The intention behind

• this is to ensure speedy supplies of goods

• without any hitch.

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Multiple Vendor System.

• DOT has laid down the following guidelines for Multiple Vendor

System.

• A) The distribution of orders should normally be restricted to

the bidders who are bidding 50 to 60% of the lowest bids.

• All such bidders will be offered unit price for supply, which is of

the lowest bidder.

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Multiple Vendor System

• b) The distribution of quantities amongst the bidders who are

within the above range will be in inverse ratio to their original

price quotations. This will ensure bidders who quoted the lower

rates to get a major share of distribution.

• c) While deciding the quantities as above, the technical

feasibility of the distribution and capability of the supplier is also

to be kept in view.

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Multiple Vendor System.

»For the above, the following special

condition will be made in Tender Document.

• “The purchaser intends to limit the number of

technically and commercially responsive bidders to ( )

from the list of such bidders arranged in increasing

order of their evaluated prices starting from the lowest

for the purpose of ordering against this tender.

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Multiple Vendor System.

• The bidder with the lowest evaluated price will be

ordered on the remaining selected bidders inversely

proportional to their quoted prices. However, the

purchaser reserves the right for the placement of order

of entire tendered quantity on the bidder with the

lowest evaluated price.

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Multiple Vendor System.

Number of Bidders on whom the

order is proposed to be placed.

Proposed Quantity of

Distribution.

2 L -1 would get 70% L -2 would get 30%

3 L-1 would get 50 % Remaining Qty to other selected

bidders in inverse ratio of their

evaluated price.

4 L-1 would get 40% -do-

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Multiple Vendor System.

Number of bidders on

whom the order is proposed

to be placed.

Proposed quantity of

Distribution.

5 to 9 L-1 would get 30%

10 & above L-1 would get

20%

Remaining Qty to other

selected bidders in inverse

ratio of their evaluated

price.

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Purchase Orders

• Purchases made are to be governed by certain Terms and

Conditions of the contract both General as well as “Special

conditions”.

• In addition, they are also governed by the following:

• Indian contract Act 1872.

• Sale of Goods Act 1930.

• Insurance Law.

• Sales Tax Act.

• Central Excise Act.

• Arbitration and conciliation Act.

• Other General Laws At applicable from time to time.

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Acceptance Letter

• After the tender for the work is accepted, the same will

be communicated to the contractor in the prescribed

form:

• It is important that:

• A copy of the letter will be endorsed to the following in

addition to the related officers in charge of execution of

work and the concerned branches.

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Acceptance Letter

• 1) Assistant Labour Commissioner.

• 2) Conciliation Officer (Labour)

• 3) Income Tax Officer (of concerned circle)

• 4) Labour Officer.

• The Contractor has to obtain a valid license under Contract

Labour (R&A Act),1970 and the Contract Labour (R&A) Central

Rules 1971.

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Security Deposit/PG

• While the EMD/Bid Security is required for safeguarding the

Dept in case the selected contractor fails to take up the work by

the specified date, the Security Deposit is for the due fulfillment

of the contract entered thereafter.

• It ranges from a minimum of 5% to a maximum of 10% of the

amount of tendered value.

• It has to be submitted within 21 days of receipt of APO.

• Security Deposit is also known as Performance Guarantee.

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Security Deposit

• Security Deposit Period.

• Delivery Period Period of SD

• Upto 6 Months 2 years.

• 6 Mnths to One Year 2yrs and 6 Months.

• > One Year 3 years.

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Security Deposit.

• After the above period, the purchaser will discharge the

PG/SD.

• If any loss is incurred during the course of Contract

Period, the proceeds will be realised from the PG/SD in

f/o Purchaser.

• Time of release: Within 30 days after completion of

suppliers obligations including Warranty.

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SD Exemption

• Following are exempted subject to production of

documentary proof regarding Regn etc.

• A) Firms registered with DG S&D.

• B) SSI registered NSSIC.

• C) PSUs registered with DG S&D.

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Liquidated Damages.

• Liquidated Damages are the amount payable by the

Contractor to the Purchaser in the event of delay in

supply of goods or in completion of work. It shall be

made clear in the Tender Schedule itself and also

made a part of the agreement. This is recovered from

the amounts payable to the Contractor through his

Bills.

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Liquidated Damages

• Recovery rates.

• If the tenderer fails to supply goods within the

prescribed period of delivery, LD is levied at the

following rates.

• .5% of the value of delayed supply for each week of

delay for a period upto 10 weeks. 0.7% of the value of

the delayed supply for each week for another 10 weeks

of delay.

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Arbitration and conciliation

• During the course of execution of contract works,

sometimes disputes may arise. Though we say that the

decision of the Department is final and binding,

sometimes either of the parties may find the solution

not satisfactory or convincing. Hence there is a

recourse to 1) Arbitration or 2)Conciliation.

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Arbitration and conciliation

• 1) Arbitration: Arbitration means referring the present

or future dispute to a private tribunal for settlement by

an agreement between the parties to refer the dispute

to a third party for settlement outside the court.

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Arbitration and conciliation

• It may consist of one or more members but the figure

should be odd one.

• Arbitrator can be of any nationality.

• The arbitration proceedings are conducted in a quasi

judicial manner.

• The tribunal shall fix the cost, fee for arbitration,

administrative charges.

• It decides cost payable by each party and also decides

the cost payable by one party to another.

For Internal Circulation of BSNL only

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Arbitration and conciliation

• Conciliation:

• This provides a legal forum to encourage voluntary

compromise/conclusion of disputes arising out of legal

relationship connected with commercial disputes.

• Conciliators may be one or more.

• He/they will assist the parties in an independent/impartial

manner to reach an amicable settlement.

For Internal Circulation of BSNL only

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Arbitration and conciliation

• When settlement is reached, it shall be reduced to

writing and authenticated by the conciliator.

• Cost of the proceedings is borne equally by both the

parties or in any agreed ratio.

For Internal Circulation of BSNL only

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For Internal Circulation of BSNL only