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Module I. Basics of the Public Procurement Law of Mongolia (PPLM) - Framework and

Governing Principles

I. Theoretical basics and legislation of public procurement

II. Introduction on Public procurement law of Mongolia

III. Management of public procurement

IV. Supervision & coordination

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Theoretical basics and legislation of public procurement

/Module I.1/

а. What public procurement is?

b. Why it matters?

c. What tender is?

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(Theory of Money, Freidman.A)

Buying by

1. One’s own money for Someone else

2. One’s own money for Oneself

3. Someone else’s money for Oneself

4. Someone’s money for someone

M.I.1.a. What public procurement is?

Mentality of people onQuality and Price

44

Buying by Quality

Economy

1. One’s own money for Someone else 2 1

2. One’s own money for Oneself 1

1

3. Someone else’s money for Oneself 1

2

4. Someone’s money for someone ?

?

M.I.1.a. What public procurement is?

Common altitude of people onQuality and Price

5

Public money for public service delivery

Why it matters?

6

Public Procurement needs to have specific rules and

regulations in order to be beneficial for everyone in the

country!

M.I.1.b. Why it matters?

Thus!

How to be beneficial?There are 5 principles should be pursued to provide

transparency, fairness, efficiency, effectiveness and

responsibility in the implementation of Public

Procurement.

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1. Value for Money

- High quality and technology in industry

- Citizen

2. Win-Win:

Who will win in case of Good procurement?

- Procuring entity

- Bidders

- Citizen

Motto of Procurement

M.I.1.b. Why it matters?

8

1. In your judgment, how to provide

Responsibility and/or Accountability in

Public procurement?

2. Can the independent control and

monitoring be ‘beneficial’ rather than

encouraging the internal control and/or

auditing?

??? Questions for audiences !!!

M.I.1.b. Why it matters?

Why does Procurement Regulation Matter?

• Why are we interested?- wealth of the nation- economy and efficiency

- increased social welfare• How does it work?

- Providing value for money for Government

- Through competitive processes

- On a level playing field

M.I.1.b. Why it matters?

What can go wrong?

• Poor vision/planningProblem of Government leadership

• Bureaucratic excessMisunderstanding of “value for money”

• Administrative mistakesProcedural deficiency and capacity

• State capturePolitical interference

• CorruptionProbity and integrity

M.I.1.b. Why it matters?

Why procurement regulation?

• Understanding the administration- How the Government works

- Bureaucracy• End user Vs Procuring entity• Informational asymmetry

• Controlling the administration- accountability provisions- transparency

- procedural compliance

- verifiability

M.I.1.b. Why it matters?

How does procurement regulation work?

• Public Procurement Law:– accountability provisions– transparency and verifiability– procedural integrity– personal integrity

• Implementation and Enforcement:– PPD– Independent monitoring (amendment 2011)

M.I.1.b. Why it matters?

Why the Public Interest?

• Increasing social welfare– society’s wealth– benefits accrue to public– public services

• Public awareness– of functions– of rules

• Reducing tolerance of corruption

M.I.1.b. Why it matters?

14

What can Civil Society do?

Civil society can do…

• Social accountability– monitoring results– community action

• Investigative journalism– watchdog of the people– government probity– bureaucratic accountability

M.I.1.b. Why it matters?

16

• UNCITRAL model law

• FIDIC contract standards

• Government procurement agreement (GPA)

• EU procurement directives

• Etc.,

International regulations

M.I.1.b. Why it matters?

1717

Key risks and conflicts have to be regulated

• Purchaser’s willingness to procure best quality exceeds their budgets approved

• Procuring entities as government’s organizations have an interests not to save resources, but to spend more in order increase their power and budget

• Conflicts of interests: Conflict may arise due to purchaser’s individual interest

M.I.1.b. Why it matters?

1818

How to prevent conflicts of interests ?

There should be a well-structured legislative

regulation and procedures on public

procurement!

And, there are:

- Common international standards have been

developed

- International organizations comply with ‘harmonized’

set of rules

- Most countries/governments develop their

procurement practices

M.I.1.b. Why it matters?

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• UN’s model • Procurement reform: Countries which are

revising laws on public procurement• Fostering international competition in

procurement markets • Progressive/Good practices of public

procurement

M.I.1.b. Why it matters?

UNCITRAL model law

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• UN’s model • Procurement reform: Countries which are

revising laws on public procurement• Fostering international competition in

procurement markets • Progressive/Good practices of public

procurement

M.I.1.b. Why it matters?

UNCITRAL model law

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Public procurement and Economics

• Interrelated with development key issues - Economic development

- Reducing poverty- Decentralization - Developing private sectors- International trade - Direct investment

• Implementation of mid-term expenditure management

M.I.1.b. Why it matters?

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What does tender stand for?

What tender is?

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M.I.1. c. What tender is?

Subject matter of Tender

WHO

• Eligibility and Capacity of Bidder

WHAT

• Goods, Works, Services to supply

HOW/ WHEN

• Methodology and/or work plan to perform the contract

PRICE

• Cost estimation

TECHNICAL PROPOSAL

FINANCIALPROPOSAL

2424

Introduction on public procurement law of Mongolia/Module I.2/

а. Scope of Public procurement law of Mongolia (PPLM)

b. Overview

c. Common provisions

d. Procurement procedures

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- Constitution (revised 1992, amended 2000)- Budget law (revised 2011)- Public procurement law (adopted 2000,

revised 2005, amended 2007, 2009, 2010, 2011)

- Government decrees & threshold value etc., (2006-2011)

- Standard bidding documents (2001-present)- Implementing rules and regulations approved

by State administrative body for budgetary issue-Ministry of Finance (2001-present)

- Etc.,

M.I.2. a. Scope of Public procurement law of Mongolia (PPLM)

Legislative acts on Public Procurement of Mongolia

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Purpose – To achieve Value for Money!

• Planning, Implementing and Reporting of Public procurement

• Supervision & coordination of Public procurement

• Complaint mechanism

• Sanctions

M.I.2. a. Scope of Public procurement law of Mongolia (PPLM)

Scope of the law

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Chapter 1. General provisions (Articles 1-16)

Chapter 2. Open procurement procedures (Articles 17-30)

Chapter 3. Exceptional procurement procedures (Articles 30-34)

Chapter 4. Procurement of Consulting services (Articles 35-39)

Chapter 5. Procurement contract for Goods, Works and Services (Articles 40-44)

Chapter 6. Managing procurement (Articles 45-53)

Chapter 7. Settlement of disputes, Responsibilities (Articles 53-57) & Article 58. Entering into force

Structure of the lawM.I.2.b. Overview

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Stages of Public procurement Pre October 1, 2012

M.I.2.b. Overview

Planning TenderingMost challenging phase of procurement

Contracting Reporting

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Stages of Public procurement Post October 1, 2012

M.I.2.b. Overview

TenderingMost challenging phase of procurement

Contracting

Reporting

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Tendering• Establishing the ‘Evaluating Committee’;

• Defining of procurement method;

• Stating the justification except open bidding;

• Preparing bidding documents;

• Publishing of bid Invitation;

• Clarification of Bidding document and Pre-bid meeting to ensure the ‘quality’ of Bidding document

• Response to the clarifications and/or amendment to the Bidding document

• Bid opening;

• Evaluating of bids;

• Contract award.

M.I.2.b. Overview

For opening tendering the deadline timeframe for tender submission shall be at least 30 days.

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ContractingM.I.2.b. Overview

• Starting of contracting /negotiating and submission of ‘Performance Security’;

• Signing contract;

• Implementation of contract /Payment Schedule/;

• Testing and Acceptance of contract implementation.

The purchaser shall pay within 30 days, upon received contractor’s claim.

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ReportingM.I.2.b. Overview

• Procuring entity: Preparing Procurement report

• Submit Procurement report to the portfolio Minister;

(before 1 December of given year);

• The portfolio Minister shall submit Procurement report to the State administrative body for budgetary issues

(before 15th Jan of next year);

• The State administrative body for budgetary issues shall submit to the Government of Mongolia.

(within the 1st season of next year)

• Government of Mongolia shall report to Parliament.

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The law does not apply to procurement of the following goods, works and services

• According to national security, the special purpose Goods, Works and Services;

• Maintenance of national roads, to be executed by the state-owned legal entity;

• Procurement of goods, works and services if the relevant treaty specifies particularly the different procedures and/or conditions for the procurement;

• Etc., (Article 3, PPLM)

M.I.2.c. Common provisions

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Article 6. Principles of public procurement

• Transparency

• Providing equal opportunity to compete

• Efficiency

• Economy

• Responsibility

M.I.2.c. Common provisions

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Article 4. Procuring entity

• Legal entity with state and local ownership

• Legal entity with partial state and local ownership of 50% or more

• The project implementing entity defined in the law on Coordination and of foreign loans and aid

M.I.2.c. Common provisions

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Clause 5.1.6. Definition - Bidder

Entities independent from the procuring entity:

• Entity which submits a bid• Several entities which submitted a bid

on the basis of cooperation contract

M.I.2.c. Common provisions

37

Goods 10% discount for goods of Mongolian origin

Works 7.5% discount for works executed by domestic entity

In case of granting preferential rights to the bodies specified in 10.1 of the law, the matter shall be clearly indicated in the bidding documents, and body which is interested in to obtain discount shall deliver information on origin and cost of goods or documents to prove the provisions set forth in provisions 10.1.2-10.1.5 of the law.

Article 10. Domestic preference

M.I.2.c. Common provisions

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• Define given goods, works or services not in terms of their design or descriptive characteristics but in terms of their purpose, application, use, quality and technical merits;

• Define subject to international standards accepted in Mongolia; if such standards do not exist, subject to national standards, technical requirements, regulations and instructions;

• Not specify particular requirements and conditions indicating a trademark, name, design, type, origin, manufacturing method, and manufacturer and/or supplier; if it is required to specify the requirements and conditions, the requirements and conditions shall be followed by “or its equivalent”;

• Procuring entity is prohibited from getting advice on restricting competition from an entity interested in participating in a bid;

Article 11. Technical specifications

M.I.2.c. Common provisions

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Article 14-16. Assessing bidders’ capacity

• To provide equal opportunity and conditions to participate in procurement process to entities interested in a bid;

• To review and evaluate bidders’ general conditions, financial and technical qualifications;

• A procuring entity shall include capacity requirements and criteria in the bidding documents;

• A procuring entity shall reject a bid which does not meet capacity requirements set by it and advise the bidder in written;

• A procuring entity can review the bidder’s qualification who has submitted “the best” evaluated bid before awarding a contract;

• A procuring entity shall keep bidders’ secrets;

M.I.2.c. Common provisions

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Article 7. Procurement procedure

• Open procurement procedure • Exceptional procurement procedure

- Limited bidding - Comparison method- Direct contracting method

• Procedure for selecting contractor of consulting services

a procuring entity may directly procure goods,

works and services when their cost estimates are small.

M.I.2.d. Procurement procedures

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Amendment followed up with revised Budget Law, 23 Dec 2011

Article 7’. Procurement with community participation

M.I.2.d. Procurement procedures

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Article 8. Selection of procurement procedures

The government sets the following thresholds distinguishing the methods for procurement of Goods, Works and Services:

• Comparison ceiling • Direct contracting ceiling • Least-cost consultant selection ceiling • Authorization from MOF ceiling • Publishing on website ceiling

NOTE!!! Selection of procurement procedures shall be based on approved budget. (Clause 8.5)

M.I.2.d. Procurement procedures

4343

a) Procurement planning/packaging;b) Publishing a list of goods, works and services to procured;c) Establishing an evaluation committee;

Functions of Evaluation committee: (d-i)d) Determining which procurement procedure to use;e) Explain reasons for selecting certain procedure except open bidding;f) Preparing bidding documents;g) Publishing a bidding invitation;

(Clarification and Pre-bid meeting)h) Opening bids;i) Evaluating bids;

The end result of tendering k) Awarding a contract;l) Starting and finishing contracting activities, signing a contract;m) Contract implementation

n) Reporting & documenting

Stages of public procurementM.I.2.d. Procurement procedures

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Use of Bidding documents

Limited bidding

Request for quotation

/preparing quotation/

Open bidding Bidding documents

/preparing of bid /

Comparison

Direct contracting

Bidding documents

M.I.2.d. Procurement procedures

45

Split into packaging (Clause 8.6 & 8.7)

Packaging

For the purposes of promoting competition

Packaging goods, works and services

In Considerations of

Pu

rpo

ses

Typ

e an

d

bra

nd

s

Geo

gra

ph

ic

loca

tio

ns

M.I.2.d. Procurement procedures

46

• Selection of procurement procedures is based on the total costs of the package

• A procuring entity shall indicate the existence of package of bids and in the invitation and bidding documents and the right of bidders to submit their proposals on one or several bids

• Evaluating every bids

• Selecting a version of proposals with the least contract values

M.I.2.d. Procurement procedures

Requirements for procuring entities

whilst packaging

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Awarding contract

By every bids

By several bids

By whole package

If any entity is awarded a contract for several bids that should be written in the procurement report.

M.I.2.d. Procurement procedures

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Home work!

Correlation matrix for law articles and Procurement Principles

Articles of law

Article 1. ….

…..Article 58.

Transparency, Equal opp., Efficiency, Effectiveness, Responsibility to compete

✔ ✔ ✔ ✔ ✔

✔

✔ where appropriate!Handwriting! and