Catalog

5.4 Procurement Process

During project implementation, the procurement process typically involves the following steps:

• bid packaging,
• prequalification (for complex or turnkey contracts),
• preparation of bid documents,
• bid opening,
• bid evaluation, and
• contract award.

See: Procurement Documents and Guide on Bid Evaluation.

Depending on the type of project and practice within each sector, the procurement process may (i) include the manufacture and supply of goods as one or more separate packages; or (ii) provide for a turnkey arrangement where the contractor supplies the goods and carries out the detailed design, construction, installation, testing, and commissioning. Variations on this theme include the following:

• BOT—build, operate, and transfer; BOO (build, own, operate) or BOOT (build, own, operate, and transfer). In a BOT arrangement, the private sector designs and builds the infrastructure; finances its construction; and owns, operates, and maintains it over a period, often as long as 20–30 years prior to transferring its ownership. This period is sometimes referred to as the "concession" period.
• EPC—Engineer, procure, construct (similar to design-build or turnkey).

The different types of contract payment include the following:

• Fixed price contracts provide for the specified services to be performed for a fixed, nonvariable price. The contractor assumes the risk for any cost changes (e.g., for changes in prices of goods, wages, the cost of living index, currency exchange rates, etc).
• Variable price contracts for specified services provide for variations in price due to escalation or other defined components, according to specific cost formulas stated in the contract. If the defined prices fluctuate, then the contract price is adjusted according to the cost formulas.
• Unit price (also referred to as bill-of-quantities) contracts provide for work to be carried out "per unit" of work performed (e.g., dollars per cubic meter of soil excavated). This system is often included in large contracts where the actual quantities of work are not exactly known (e.g., road or dam construction). Unit price contracts will include the EA’s estimate of the quantities of each type of work to be performed; these estimates are also used when evaluating bids. Agreed methods need to be put in place at the onset of the contract to accurately measure the quantities worked during construction; the measured quantities are then used for calculating payments to the contractor.