MBA – Semester 4

Contracts Management in Project

PM0009

Assignment – 1

1.List and explain in brief the methods of selection of consultants.

Methods of Selection of Consultants

The methods of selection have been designed to achieve the objectives of quality, efficiency, and
economy, fairness and transparency in selection process and to encourage competition.

Quality and Cost based Selection (QCBS):

(a) Features: QCBS is a method based on the quality of the proposals and the cost of the
services provided. It is the most commonly used method of selection for most of the types of
services. Under QCBS the technical and financial proposals are submitted simultaneously in
separate sealed envelopes (Two-cover system). Proposals received after the deadline is rejected.
Evaluation of the proposals is done in two stages-Quality and cost. The envelopes containing the
technical proposals are opened by a committee of officials of the Client immediately after the
closing time for submission. The financial proposals envelopes remain sealed. The evaluation of
the technical proposals is done as per criteria set out in the RFP. Technical scores of the technical
proposals are notified publicly. The financial envelopes of those consultants who score more
than the stipulated minimum qualifying score are opened in the presence of the consultants or
their representatives wishing to attend. The financial proposals are then evaluated and the
technical and financial scores are then combined according to the weights indicated in the RFP.
The consultant obtaining the highest combined score is selected for award. He is then invited for
negotiations. Because price is a factor of selection, the staff rates and other unit rates are not to
be negotiated.

(b) Where appropriate: This method of selection is appropriate when:

• The type of services required is common and not too complex;

• The scope of the work of the assignment can be defined with precision and the TOR is
clear and well specified;
• We (Client who hires the consultant) as well as the consultant can estimate with
reasonable precision the staff time, the assignment duration and the other inputs and costs
required of the consultants;
• The risks of downstream impacts are quantifiable and manageable;
 • The capacity building aspect of the assignment can be estimated with regard to duration
and staff time effort;

To ensure receipt of responsive proposals, the RFP under QCBS shall indicate the level of key
staff inputs (in staff time) estimated by us (theClient) to carry out the assignment or the estimated
cost of the services, but not both. However the consultants shall be free to determine their own
estimates of staff time to carry out the assignment and to offer the corresponding cost in their
proposals.

(c) Type of assignments for which this method of selection is adopted: QCBS is adopted for
the following assignments:

· Feasibility studies and designs where in the assignment is simple and well defined;

· Preparation of bidding documents and detailed designs;

· Supervision of the construction of works and installation of equipment;

· Technical, financial or administrative services of a noncomplex nature;

· Procurement and inspection services;

QCBS may not be appropriate for complex or specialized assignments in which the scope of the
assignment is not well defined and staff time are difficult to estimate. Since cost is a factor in
selection under QCBS consultants may propose conventional approaches and tested
methodologies to keep the costs low. This may ultimately affect the quality of the assignment
especially if the downstream impacts are complex, large or unknown.

Quality Based Selection (QBS):

(a) Features: QBS is based on the evaluation of the proposal quality without any initial
consideration of cost. As in the case of QCBS, the technical and financial proposals are received
in two separate envelopes. The technical proposals are evaluated. The financial proposal of that
consultant who has scored the highest technical score (which should of course be more than the
stipulated minimum score) shall be opened for evaluation of financial proposals. Because the
TOR of the assignments under QBS are generally more complex and less defined than under
QCBS, contract negotiations with the winning consultant may be lengthy and complicated, we
may need the assistance of a Technical advisor.

(b) Where appropriate:

QBS is appropriate when:

· The downstream impact of the assignment can be so large that the quality of the services is of
overriding importance for the success of the project as a whole;
· The scope of the work, the duration of the assignment, and the TOR require a degree of
flexibility because of the novelty or complexity of the assignment, the need to select among
innovative solutions, or the particular physical, environmental, social or political circumstances
of the assignment;

· The assignment itself can be carried out in substantially different ways such that cost proposals
may not be easily or necessarily comparable;

· The introduction of cost as a factor of selection makes competition unfair;

· The need exists for an extensive and complex capacity building program;

The RFP under QBS shall also indicate the level of key staff inputs (in staff time) estimated by
the Client to carry out the assignment or the estimated cost of the services, but not both.
However the consultants shall be free to determine their own estimates of staff time to carry out
the assignment and to offer the corresponding cost in their proposals. The staff time indicated by
the consultants or the cost may differ considerably from our (Client’s) estimates, depending on
the particular methodology adopted by the consultant. The proposals should not be rejected on
this account.

(c) Type of assignments where this method of selection is adopted:

QBS shall be adopted for assignments such as the following:

· Complex sector and multidisciplinary studies of a complex nature;

· Important and far reaching strategy studies;

· Complex master plans, pre-feasibility and feasibility studies, or design of large and complex
projects;

· Assignments in which consultant organizations with different cost structures (for example
traditional consultants, nongovernmental organizations (NGOs) are required to compete;

· In situations of strong uncertainty or risk for the project;

· Design contests in which consultants present a plan or design based on concept or criteria
provided by the Client examples being:

- Railway Stations, Ports, Airport Terminals,

- Public buildings such as hospitals, theatres, concert halls, university campuses, arts and sports
centres, exposition and fair complexes, Malls, Multiplexes and government buildings;

- Rehabilitation of large, obsolete, or abandoned structures and areas to create multipurpose

centres for public use;
Selection under a Fixed Budget (FBS):

(a) Features: In this method, the available budget is disclosed in the RFP to the invited
consultants. The budget indicated in the RFP should be reasonable, compatible with the TOR and
the consultants should be able to perform within the budget. Under the FBS, the consultants to
whom the RFP is issued are requested to submit their technical and financial proposals in
separate envelopes. Technical proposals are evaluated first using the same procedures as for
QCBS and QBS and the financial proposals of those consultants who score more than the
minimum are opened in public.

Because Lump sum form of contract (this will be described in paragraph 6.9.2 later) no
corrections shall be made to the financial proposals. Activities and items described in the
technical proposals but not priced or quantified differently in the financial proposal from the
technical proposal shall be assumed to be included in the prices of other activities or items. That
means the financial proposals will not be altered. We discard the proposals that exceed the
indicated budget and select the consultant who has submitted the highest ranked proposal within
the budget.

(b) Where appropriate: FBS is appropriate only when:

• The budget cannot be exceeded;

• The objective and the TOR including the scope of work are very precisely defined;
• The time and the staff month effort required from the consultants can be assessed with
precision;
• Capacity building is limited to a simple transfer of knowledge, that can be very easily
estimated;

(c) Negotiations: Because the budget is fixed, the consultant’s TOR cannot be changed
substantially and technical negotiations cover only minor aspects. Financial negotiations will not
include discussions of remuneration rates and of other unit rates, but only of minor
rearrangement of activities and staff for compatibility with the work plan and clarification of tax
liability.

(d) Type of assignments for which this method of selection is adopted:

FBS is likely to result in better quality proposals than under QCBS, because it is easier for
consultants to maximize quality under a fixed budget than under simultaneous quality and cost
competition. FBS also requires a shorter time than QBS for negotiations. FBS is convenient for
consultants because the pre-established budget allows them to determine in advance whether
they are interested in competing for the proposed assignment and to develop the best proposal
consistent with budget.

More so than with QBS and QCBS, FBS requires the TOR to be consistent with the established
budget and to contain a well specified scope of work for consultants to present clear and
responsive proposals. The main risk of using the FBS is under budgeting the TOR and in doing
so, discourage good consultants from participating and then receiving poor performances from
the awarded consultant.

Least Cost Selection (LCS):

(a) Features: Under LCS a minimum qualifying mark for quality is fixed and indicated in the
RFP. Shirt listed consultants are requested to submit their proposals (technical and financial) in
two separate envelopes. Of the consultants who have scored more than the minimum technical
score, the consultant with the lowest price is selected. LCS shall not normally used as a substitute
for QCBS. Because quality is to be ensured, we should set a mark that is higher than usual (for
example 75 or 80 percent) to ensure quality and avoid the risk of selecting low cost proposals of
poor or marginally acceptable quality.

(b) Where appropriate: The LCS method is appropriate only for small assignments of a
standard or routine nature wherein the intellectual component is minor, well established practices
and standards exist.

(c) Type of assignments for which method of selection is adopted:

The LCS method of selection is adopted for the following assignments:

• Standard accounting or simple audits;

• Engineering designs or supervision of simple projects;
• Repetitive operations, maintenance work and routine inspections;
• Simple surveys;

Selection Based on Consultant’s Qualifications (CQS):

(a) Features: Under CQS, we first request expression of interest (EOI) and qualification
information relating to the experience and competence of the consultants relevant to the
assignment. We then evaluate the information, establish a shortlist and then select the firm with
the best qualifications and references among those who confirm to be willing to submit a
proposal if selected. The RFP is then sent to the selected consultant and asked to submit
technical and financial proposals and then invited to negotiate the contract if the technical
proposal proves acceptable.

(b) Where appropriate: CQS method is appropriate for assignments for which the cost of a full
fledged selection procedure would not be justified. CQS method can substantially reduce the
process cost for us as well as the consultants and the time required to hire a consultant as well.
This method is particularly suitable when the past qualifications and experience of the consultant
are crucial to the choice while the technical proposal itself is not likely to reveal much additional
or decisive information on the suitability of the consultant for the proposed assignment.

(c) Type of assignments for which this method is adopted:

CQS is usually adopted for the following assignments:

 • Evaluation studies at critical decision points in the project implementation such as review
of alternative solutions with large downstream effects;
• Executive assessments of strategies and programs;
• High level, short term, expert advice;
• Participation in project review panels;

Single Source Selection (SSS):

(a) Features: Under this method, we request the already identified consultant to prepare
technical and financial proposals which are then negotiated.

(b) Where appropriate: Because there is no competition, we should use this method, only when
it offers obvious advantages over a competitive method, as in the following cases:

• The assignment represents a natural or direct continuation of a previous one awarded

competitively and the performance of the consultant has been good or excellent;
• The consultant’s prompt availability is essential (for example in emergency operations
following a natural disaster, a financial crisis etc.);
• The contract value is very small;
• Only one consulting organization has the qualifications or experience required to carry
out the assignment;

(c) Type of assignment for which this method of selection is adopted: Good or excellent
performance in the first assignment has to be a precondition for contract continuation. In such
cases, we should weigh the importance of continuing with the same technical approach, the
experience acquired and the continued professional liability of the incumbent consultant against
the benefits of competition, such as fresh technical approaches and competitive remuneration
rates. In theses cases we have to consider and account for the time and cost of a competitive
round, because it may weigh considerably on our decision.

SSS should not normally be adopted when the downstream assignment is substantially larger in
value than the initial one.

2.Describe six channels that can be used for communication, giving the salient
advantages/disadvantages of each and the situation each is best suited for.

Some key factors for effective verbal communication are as under:

· Grammar;

Grammar rules are well defined, but in practice, good communicators violate some of these
rules. Informal speech often uses abbreviations, contractions and colloquialisms. e.g. ‘hope’ is
less formal than ‘expectation’; the words ooh, oodles and oomph are casual and used in
conversations. This only means that good communicators adjust the level of formality to the
context in which they are speaking or writing.

· Objective:

Stephen Covey’ book, The Seven Habits of Highly Successful People suggests that while
communicating the end must be kept in mind e.g. If the CEO wants to call six of the
departmental heads for a budget meeting knowing that all of them may not be able to free
themselves on an early date and time,

– The first message can be just informing them about the meeting. The goal of having most of
them attend the meeting may not be achieved with this message

– The second message given the next day can read ‘just a heads-up that the budget meeting is the
day after tomorrow Nov. 8th at 11.00 a.m’; this message is only a reminder and is not likely to
convince some of the very busy departmental heads that the meeting is really important. A more
effective message would be ‘Some people have asked whether they really need to attend this
meeting. The answer is ‘yes’. If we do not get everyone’s inputs we cannot achieve consensus on
capital spending priorities for next year. So please arrange your workday routine and be sure to
attend’. This message is more persuasive.

· Matching level of formality in communication to business context:

The same level of formality will not suit all business contexts. A company party or celebration
demands a low level of formality. But a discussion on non-routine business or contract has a high
level of formality. Fig.7.4 illustrates this variation in the degree of formality.\
We see that at the lowest (casual) and uppermost (formal) ends of the chart, the choices of the
context are narrow i.e. office chit-chat is casual whereas contracts are written in formal language.
In the middle portion, the oval is broad, and this shows a range of varying acceptable levels of
formality.

· Tone of communication:

The tone of a business communication is also chosen with the objective of the communication in
mind. The tone can be considered as the third dimension of communication, the other two being
the business context and the level of formality. If the supplier realizes that he must maintain
good relationship with a strategic customer, his tone will be friendly. If the customer defaults on
or delays payments, the supplier’s tone can vary from a friendly reminder to a hostile demand.
The publication referred in fig.7.4 illustrates the variation in the communication as shown below.

Variation in the Tone of Communication

· Channel of Communication:

Different channels (media) of communication are available today. Table 7.6 presents the
advantages and disadvantages of using the various channels available.

Medium Advantages Disadvantages Best used for

Face-to- 1. Promotes trust 1. Expensive 1. Recruiting
face
meeting 2. Content & level of 2. Time 2. Team building
formality can be adjusted consuming
during the meeting 3. Brainstorming

3. Disagreements can be 4. Developing new

negotiated business

5. Confidential and
sensitive personal
issues
Phone call 1. Requires immediate 1. interrupts work 1. Social interaction
response flow
2. Quick fact-
2. opportunity to restate 2. Can extend for checking
or clarify if the listener a long time
does not understand
 3. No record

4. Hard to judge
the emotional
component
Video 1. Can be used for a 1. Substantial 1. Meetings required
confe- ‘milestone’ interaction organization to to be conducted
rence e.g. finalizing an arrange a video periodically when
important drawing to be conference participants are
issued for construction (especially across geographically
time zones dispersed
2. Relatively inexpensive
compared to face-to face 2. Limited
meeting possibility of a
breakthrough if
participants have
not previously met
face-to-face
e-mail 1. Easy and quick 1. Impersonal and Normal
especially across time lacks emotional communication
zones issues and hence between co-workers
liable for
2. Easily copied to misinterpreta-tion
several people
simultaneously

3. Can be saved and

printed

4. recipient can access the

message at any time
Memo Quasi-formal Routine
announcements
Letter 1. Permits time for 1. One-sided 1. statement of terms
analysis of proposals & conditions of a
2. Response may business deal
2. Can be the basis of a be delayed
formal contract 2. Formal
3. It takes time to instructions
3. Can be formal or prepare a good
informal as per the letter 3. Formal warnings
intended message to be
conveyed 4. Documenting
items agreed in face-
 to-face meetings
3.Explain International competitive Bidding, its requirements and steps followed for ICB

International Competitive Bidding (ICB)

In ICB, we (as Employer or Purchaser) invite open bids for works and goods (through wide
advertisement in electronic as well as print media) from Contractors and Suppliers across the
globe, who are eligible to perform the contract. That is why it is also called Global Competitive
Bidding. Since it is open for a large contracting and supplier community who have the advantage
of scale of operations and high level of expertise, it is expected to result in most economic and
efficient procurement. The contractors and suppliers can submit bids in internationally
convertible currency and they get paid in that currency. To safeguard the interests of the
domestic contractors and suppliers, we usually allow a certain amount of domestic preference.

Where best suited

We adopt International Competitive Bidding (ICB) when:

· The value of the package of works and goods are high in value or the works/goods are complex
in nature. Currently for works contracts estimated to cost more than the equivalent of say 50
million US dollars we could adopt ICB; Similarly for goods contracts of value more than 0.5
million US dollars[1]. In case of works we usually pre-qualify the bidders and invite bids from
pre-qualified bidders only;

· We expect foreign contractors/suppliers to participate in the bid, thus ensuring competition

resulting in economy and efficiency in procurement;

· High degree of mechanization is involved for execution of the work;

· The works are concentrated at a place;

· We have adequate foreign exchange or have financial assistance from an international financial
institution to meet the foreign currency payments involved in the contract;

Requirements for ICB

(a) Advertisement: we (as Employer or Purchaser)[2] have to publish the Invitation for Pre-
qualification of works/Invitation for Bids (IFB) in widely seen websites such as United Nations
development Business online (UNDB online)[3], and in the Development Gateway’s
dgMarket[4] to attract the attention of the foreign contractors and suppliers,. The Invitation for
pre-qualification/IFB shall contain details regarding the scope of the ICB, the address and
telephone numbers of the officer from whom details could be got (or the/pre-
qualification/bidding documents are available), the website where the detailed Invitation for pre-
qualification/IFB and pre-qualification/bidding documents are available, the last date and time,
the place for submission of the pre-qualification applications/bids. To ensure further wide
publicity, we could also send copy of the Invitation for pre-qualification/IFB to the Embassies
and Trade representatives of the countries from where we can expect participation in the bid. All
the countries have their Embassies and Trade representatives in New Delhi. We should also
publish the Invitation for pre-qualification/IFB in national news paper(s) having wide circulation
in metros and principal cities of India and also in the region where the procurement is being
made. We should also publish the Invitation for pre-qualification/IFB in appropriate Trade
Journals published in the country. These actions will ensure adequate publicity and we could
expect better competition and thus economic and efficient procurement.

(b) Pre-qualification document (for works): The pre-qualification document shall include
sufficient details regarding eligibility, method of submission of pre-qualification documents,
details of documents/ information to be furnished, qualification criteria to be satisfied, evaluation
methodology, preparation of the list of pre-qualified applicants and notification of the list of
approved pre-qualified bidders.

(c) Period for submission of pre-qualification documents: The pre-qualification submission

period, that is the period from the date of publication of the Invitation for pre-qualification in the
press or the date of making available the document for sale (whichever is later) shall be
sufficiently large, depending on the size and complexity of the proposed contract to enable the
prospective applicants to obtain the pre-qualification document, study the field conditions,
collect field data, compile the qualification and other required information and then submit pre-
qualification applications. A period between 45 to 60 days depending on the size and complexity
of contracts is considered reasonable.

(d) Bidding document (for works and goods): The bidding document shall include sufficient
details regarding eligibility, method of submission of bids, bid security (amount and currency) to
be furnished, period for submission of bids, qualification criteria to be satisfied, evaluation
methodology, securities to be submitted, award of contract etc. It shall also include
internationally accepted Conditions of Contract, such as those developed by Federation
Internationale Des Ingenieurs-Conseils (FIDIC) and Institution of Engineers, U.K.

(e) Bidding period (for works): The bidding period, that is the period from the date of issue of
the bid document to pre-qualified bidders to the last date stipulated for the submission of the pre-
qualification document, shall be sufficiently large, depending on the size and complexity of the
proposed contract to enable the prospective bidders to obtain the bidding document, study the
field conditions, collect field data, work out reasonable rates and then submit meaningful bids. A
period between 45 to 60 days or even more in case of large and complex contracts is considered
reasonable.

(f) Bidding period (for goods): The bidding period, that is the period from the date of
publication of the IFB in the press or from the date of making available the document for sale
(whichever is later) to the last date for submission of bids, shall be sufficiently large, depending
on the size and complexity of the proposed contract to enable the prospective bidder to obtain the
bidding document, study the same, work out the reasonable rates and then submit meaningful
bids. A period between 45 to 60 days is considered reasonable.
Steps for ICB

(a) Works with pre-qualification:

We, as the Employer, have to take the following essential steps:

· Notification and advertising for submission of pre-qualification applications;

· Issue/sale of pre-qualification documents to prospective bidders;

· Submission of pre-qualification applications by the prospective bidders;

· Opening of pre-qualification applications;

· Evaluation of pre-qualification applications;

· Preparation of the list of pre-qualified bidders;

· Issue the bidding document to the pre-qualified bidders;

· Submission of bids by pre-qualified bidders;

· Evaluation of the bids;

· Selection of lowest evaluated responsive bid;

· Contract award and signing of the contract with the Contractor;

· Contract performance by the Contractor[5];

(b) Works and goods without pre-qualification (post-qualification):

We, as the Employer/ Purchaser, have to take following essential steps:

· Notification and advertising;

· Issue/sale of the bidding document to the prospective bidders;

· Submission of bids by prospective bidder and Evaluation of the bids;

· Selection of lowest evaluated responsive bid based on post-qualification;

· Contract award and signing of Agreement with the Contractor/ Supplier[6];

· Contract performance by Contractor/Supplier;