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Operational Procurement Review

Thailand

Prepared by Raghavan Srinivasan

November 18, 1999

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OPERATIONAL PROCUREMENT REVIEW

THAILAND

Part 1. Preface, Methodology, and Issues within the Bank

Preface

1. A portfolio improvement exercise carried out in late 1998 identified procurement as one of the important areas that needed improvement, and listed the following four factors as apparent causes for poor procurement in Bank projects, deserving a detailed study: (a) conflicts between Government Procurement Regulations and Bank Guidelines, (b) weak implementing agencies including language problems, (c) cumbersome procedures causing inordinate delays, and (d) inadequate support in the field office to the task managers based in the field. The Portfolio Improvement Plan (PIP) report recommended an immediate Operational Procurement Review (OPR) to update an earlier review conducted in 1994, and a full-fledged CPAR under the new OCSPR guidelines later in 2000 when the financial "crisis" would have been substantially addressed. Annex 4 of the report provided a detailed Terms of Reference (TOR). The Fiscal Policy ofice in the Ministry of Finance was informed of the proposed OPR in February 1999 and posed no objection. The PIP was followed by a Country Portfolio Performance Review in June 1999 and a set of recommendations to improve portfolio performance entitled "Thailand-Improving Bank's Quality of Supervision" (TIBQS), dated June 22, 1999. Annex 3 of this report repeated the PIP recommendation and TOR for the OPR review.

Content and Objectives of the OPR

2. The purpose of an OPR, as succinctly stated in para. 5 of the attachment to the OCSPR circular of June 1, 1998, on "New CPAR Procedures," is to assess the acceptability of national procedures for use in Bank project procurement and to make judgments about appropriate supervision arrangements, as opposed to a full CPAR, which would address the public procurement regime in the country and not limit itself to Bank operations only. The objective is to update the 1994 review and examine whether any further measures are required to improve procurement in Bank operations.

The Team

3. The team comprised the following:

Raghavan Srinivasan, former Chief of Procurement, World Bank, and Consultant Precha Kulapongse, former irrigation engineer with GOT and with ADB, and

Consultant Chinnakom Chantra, Bank staff in Bangkok Oithip Mongolsavat, Bank staff in Bangkok Darayes Mehta, Consultant to staff in the Bank office in Bangkok

Methodology Followed

4. Mr. Kulapongse assisted by Mr. Chantra and Ms. Mongolsavat reviewed the current Thai Regulations as amended since 1994, in comparison with the latest Bank Procurement and Consultant Guidelines, SBDs, and the attachment to the Junel, 1998, OCSPR memorandum outlining criteria for acceptability of local procedures for Bank- funded NCB. Mr. Kulapongse also compared the Thai Regulations with the ADB Guidelines, which could prove useful in the future, and discussed issues and problems in procurement with some implementing agencies. His report is attached to the main report as part 3.

5. Mr. Srinivasan visited Bangkok in April 1999 to start the review and again in AugustISeptember to complete it. On both occasions, he met with the Principal Secretary in the Office of the Prime Minister, which issues and supervises the Government Procurement Regulations, the Director in the Fiscal Policy OEce, senior officials in the Budget Bureau, the Attorney General's Office and the Public Prosecutor's Office. Mr. Srinivasan conducted two seminars during his August trip, the first one on "Public Procurement" attended by about 20 very senior officials, which proved useful to lay the ground for a full-fledged CPAR later, and the second on "Procurement in World Bank Projects" attended by about 40 working-level staff handling procurement in Bank projects and representatives from supervising ministries, which provided valuable feedback on the perceptions, practices, and problems at the working level.

6. Mr. Mehta coordinated the activities.

Conclusions and Recommendations

7. The OPR. The main report dealing with the OPR is attached in part 2.

8. Field Office Capability. One of the issues raised in the TOR was "inadequacy of procurement support for field-based task managers, who will be increasingly involved in the Bank's current and future portfolio." Currently, procurement work is supervised by Mr. Mehta, who devotes only part of his time, and is assisted by Mr. Chantra and Ms. Mongolsavat. Recently Mr. Paul Blanchet has joined the field office, as the full-time Principal Procurement Specialist. This move substantially strengthens local capacity, both in terms of staffing and expertise, and has thus addressed the issue. A detailed study of the workload and quality of supervision has not yet been made because of time

limitations. This is best carried out after at least six months when the new staff member settles down.

9. Terms of Reference (TOR) for a Full CPAR Annex 3 to the TIBQS also requested production of a detailed TOR for the full-fledged CPAR to be conducted later. The OCSPR memorandum of June 1, 1998, on CPAR is in itself a comprehensive TOR for the guidance of staff and consultants who carry out the CPAR. The memorandum, however, is essentially addressed to Bank staff and Bank consultants. When approaching the government for its concurrence for a CPAR, instead of sending the memorandum, it would be better to send a letter incorporating the relevant parts of the memorandum explaining the purpose, objective, and scope of the CPAR and the type of support expected from the government.

OPERATIONAL PROCUREMENT REVIEW

THAILAND

PART 2. THE REPORT

Summary

1. The purpose of the Operational Procurement Review (OPR) is to assess the acceptability of national procedures for Bank project procurement and, if there are unacceptable features, either to get them rectified or to add a side letter to the loan agreement to exclude those features in Bank-funded procurement. The OPR should also look at other problems that hamper project procurement and suggest solutions.

2. The last such review was carried out in 1994, which while acknowledging that the Thai Regulations required "compliance with Guidelines of the Donor" observed that agencies had a tendency to disregard this and follow local procedures. The report went on to highlight the areas of conflict. The Bank forwarded the report to the government seeking a dialogue to improve project procurement and urging the government to improve the time-consuming review and approval process and training. Since then, the GOT has amended the Thai Procurement Regulations three times; some of amendments address some of the recommendations. Since 1994, the Bank also revised its Procurement and Consultant Guidelines-in 1995 and 1997. The result is that the conflicts between the two have been narrowed.

3. In any case, the Regulations permit the application of Bank Guidelines and other loan conditions for the procurement of goods, works, and consultant services in Bank projects. In the case of International Competitive Bidding (ICB), the exemption is clear and categorical, and Bank Guidelines and mandatory Standard Bidding Documents (SBDs) are followed by all agencies. Though there are problems now and then, these are not due to any confusion as to which guidelines apply. In the case of National Competitive Bidding (NCB), the exemption is there to follow the lender's procedures but the Bank has not issued detailed procedures or SBDs, but rather traditionally reviews and accepts local procedures but after deleting the unacceptable features if any.

4. While negotiating the recent Social Investment Project in 1998, the Bank decided to put this in a legal framework and added a side letter addressing the unacceptable provisions in the Regulations, so that they are excluded in Bank procurement (and similarly employment of consultants). These have been incorporated in the Thai sample bidding documents for NCB issued by the government, which have been cleared by the Bank. The side letter is adequate and should be retained in all future loans, and the

new NCB documents should continue to be used in all future operations until the Regulations are further modzped to address the conflicts.

5. The Regulations as a whoIe, however-beyond the conflicting provisions--could be and need to be improved, both in substance and in their presentation to bring them closer to internationally accepted norms. We should work towards this objective and not the mere removal of the conflicts. This can be effectively addressed only when the Bank takes up a full-fledged CPAR and provides advice on public procurement in general. The advice can also assist the government in addressing recommendations in public procurement from the APEC and WTO, in which Thailand is a member. The Bank should seek the GOT'S agreement for an early CPAR.

6. Procurement staff in government departments are not yet fully familiar with the recent amendments to the Thai Regulations and are not very conversant with Bank Guidelines and the use of Bank SBDs. This results in a tendency to follow local procedures, such as negotiation with the lowest bidder if the price exceeds budget estimate, even though it is not permitted in Bank procurement. Second, their general understanding of public procurement concepts and their rationale are poor. Intensive and sustained training should be launched, particularly to the staff in the softer sectors, keeping in view their poor English language capabilities. Procurement training should be institutionalized.

7. There is substantial delay in contract award because of the poor delegation of authority and consequent need to refer to the ministry even for small value contracts and secondly by the intervention of the Budget Bureau in the review and approval process at more than one stage. The Bank should recommend that the GOT increase the delegation of powers to departments and ministries, and also review the approval process to make it more efficient.

The Regulations

Background

8. Since 1978, the Office of the Prime Minister has issued "Regulations of the Office of the Prime Minister on Procurement," which lay down the procedures to be followed by all government departments for all procurements funded by government budget and external loans and grants. Government enterprises have full autonomy for framing their procurement procedures. The Regulations are periodically reviewed and revised to address the changing environment. Revised Regulations were issued in 1983, 1984, 1985, 1986, and 1988. Conflicts between the Regulations and the requirements of the Bank (as well as ADB, USAID, the OECF, and so forth) have always been a problem in project implementation. In 1984 the Bank, together with the ADB, USAID, and OECF, persuaded the government to issue a separate set of procedures applicable to procurement funded by external agencies, which was drafted by a committee comprising representatives from the government and the World Bank, ADB, USAID, and OECF. These Regulations were issued by the Ministry of Finance because they dealt with

PART 3. PROCUREMENT ASSESSMENT REPORT: COMPARISON OF THAI ~ G U L A T I O N S AND BANK GUIDELINES

Prepared by Precha Kulapongse, Consultant and Chinnakorn Chantra, World Bank staff

Background

1. The Bank reviewed "Regulations of the Office of the Prime Minister on Procurement B.E. 2535 (1992)" in December 1994 and highlighted a number of Government procurement procedures and practices that were in conflict with the Bank's Guidelines. Major issues include the practice of price negotiations with the lowest evaluated bidder and the mandatory joint ventures between foreign and local firms for consulting services. As a result, the Bank suggested that:

(i) the 1992 Regulations be revised to reflect the Bank's Guidelines for Procurement;

(ii) the Bank's Standard Bidding Documents (SBDs) shall be used for all Bank financed projects; and

(iii) the officials of government agencies be trained in the use of the Bank's SBDs and Guidelines for Procurement.

2. Since then the Government has amended the Regulations in 1995, 1996 and 1998 and the current procurement rules and procedures of the Government have incorporated many of the Bank's suggestions.' The Regulations now permit use of Bank's Guidelines for international competitive bidding (ICB) and there has been no problem in ICB. However, in the national competitive bidding (NCB) the Regulations are unclear and in practice implementing agencies tend to apply them for Bank financed NCB. The Bank has revised its Procurement and Consultant Guidelines in 1995 and 1997, respectively and some changes have removed the conflicts. Also the 1995 and 1997 Guidelines mandate the use of Bank-issued SBDs and Standard Requests for Proposals (RFPs) for ICB and Consultant Selection. This leaves very few areas of conflict essentially in NCB.

3. During the course of project implementation the Bank staff have tried to help officials of the implementing agencies solve a number of procurement issues that cropped up

1 The 1992 Regulations are called Volume 1 and the Amendments in 1995,1996, 1998 and 1999 (under processing) are called Volume 2, 3,4, and 5, respectively.

mainly from misinterpretation of the Bank's Guidelines and the 1992 Regulations. The Bank staff have regularly trained officials of implementing agencies in procurement procedures and in the use of the Bank's SBDs. The training will be repeatedly carried out by the Bank staff until such time that the officials concerned have gained experience in Bank's procurement practices.

4. There are a few practices practiced by the implementing agencies (in NCB or ICB also) which differ from the Bank's Guidelines and the SBDs. This Report attempts to identify some of the differences as shown in the subsequent paragraphs and in Annex 1. The acceptability checklist of the Government procurement procedures for national competitive bidding is shown in Annex 2. The steps in processing a procurement for goods, works, and consulting services, and the delays in some selected cases are shown in Annex 3.

Government Departments

Procurement Regulations

5. The Procurement Regulations stipulate the rules and procedures in purchasing, contracting for works and the engagement of consultants. The use of the 1992 Regulations is mandatory to all government agencies that use the government budget, loan and grant. The 1992 Regulations have been amended thrice. The first amendment was taken in December 1995 in response to the need to update the contract thresholds for determining the procurement methods and contract approval authority. The second amendment was done in August 1996 requiring the implementing agencies to prepare the procurement plan and to proceed in accordance with such plan. Major variations were carried out in the third amendment in December 1998 taking into account the comments made by the Bank and other donors and the effort to make procurement process more transparent, economic and efficient. A further amendment is under processing in 1999, but this only covers some definitions and other minor aspects. Any further amendments to the Regulations need the review of the Committee in Charge of Procurement (CCP) in the office of the Prime Minister and Cabinet's approval.

Organization

6. The Government departments (GDs) use the Regulations. The responsibility for procurement of goods and services rests with the head of the department (Director General or DG). With the approval of the line ministry, each department may elaborate the existing rules, and issues instructions in the form of departmental orders to provide working flexibility for its department. DG may delegate certain authorities and functions to other officers such as deputy directors, regional heads, division heads and section heads or its field office head. In case of a Bank financed project, DG normally appoints one of his deputies or a high ranking official to act as Project Director and delegates all or part of his authority to implement the project including procurement matters.

Thai Sample Bidding Documents

7. The sample bidding documents annexed to the 1992 Regulations include:

(i) Sample Bidding Documents for Procurement of Goods in local language to be used for NCB; (ii) Sample Bidding Documents for Civil Works in local language to be used for NCB; (iii) Sample Bidding Documents for Procurement of Goods in English for ICB; and (iv) Sample Bidding Documents for Civil Works in English for ICB.

8. Sample forms of contract are also annexed to the 1992 Regulations.

9. GDs will prepare the bidding documents in accordance with the sample bidding documents or the bidding documents that have been cleared by the Public Prosecution Department. Each department may develop the standard bidding documents for its own use and sometimes for use in projects financed by other donors, such as the Asian Development Bank (ADB) and the Overseas Economic Cooperation Fund (OECF) of Japan.

10. The Regulations permit the use of Bank's Guidelines for ICB as stipulated in the Loan Agreement. The use of Bank's SBDs is mandatory for all Bank-financed procurement under ICB and the implementation of which is no longer a problem. All discussions below explain the difference between the Regulations and the Bank's Guidelines in respect of NCB.

11. In 1998, in the context of the Social Investment Project, the Bankstaff have reviewed the Regulations and sample bidding documents for NCB as annexed to the Regulations, and introduced a number of provisions in line with the Bank's acceptability criteria for NCB through a side letter to the loan agreement and during the review of the documents all of which have been accepted by the Government of Thailand. The model documents with these changes, for procurement of goods and for civil works by NCB are now available for use for Bank financed projects.

12. The Regulations stipulate that prequalification is permissible to limit the bidders to qualified ones. and this provision is compatible with Bank Guidelines.

13. Each agency develops the selection criteria similar to the Bank practices, tiking into consideration experience and past performance on similar contracts, capabilities with respect to personnel, equipment, manufacturing facilities and financial position. Selection will be based on fail-pass minimum requirements. Most agencies maintain an active list of qualified contractors, categorize them into different classes for NCB, and update the

list every year. The Bank encourages the use of approved list of qualified contractors provided it is continuously updated.

Advertisement of Bids

14. The Regulations give GDs the options for advertisement for NCB. GDs may advertise the bidding through the radio andlor publish in the newspapers. Some implementing agencies have opted for advertisement through radio only because they don't have budget. The Bank requires the invitation to bid to be published in the national press.

Time for Bid Preparation

15. The minimum time required for preparation and submission of bids after issuance of bidding documents is only 14 working days. The Bank requires that minimum time for bid preparation is 30 days for NCB.

Bid Submission

16. According to the Regulations, NCB rules permit submission of bids only by hand and do not permit submission by mail. The Bank's Guidelines do not permit the restriction. The bidder has the option to deliver the bid by hand or by mail.

Bid Opening

17. It is mandatory that the bids must be opened on the stipulated time and date in the presence of bidders' representatives who wish to be present. There are only two committees in the bidding process, namely the bid receiving and opening committee and the evaluation committee. The bid receiving and opening committee will receive and record all the sealed bids, check the required bid securities and all supporting documents, open all sealed bids and read aloud in public. A report on bid receiving and opening will then be prepared and submitted to the bid evaluation committee. The procedures are similar to the Bank practices.

Bid Evaluation

18. After examining the qualification of the bidders, bid prices, supporting documents, the bid evaluation committee will compare all responsive bids and recommend contract award to the bidder whose bid is substantially compliant and lowest evaluated.

Price Negotiation

19. The Regulations require price negotiations with the lowest bidder if the bid price exceeds the budget, medium price or estimated price. This is in contradiction to the Bank's Guidelines. The Bank allows price negotiations only as an alternative to rebidding if the lowest evaluated bid is substantially above estimates. The implementing agency may negotiate with the lowest evaluated bidder to try to obtain a satisfactory contract

through a reduction of scope and or reallocation of risk and responsibility which can be reflected in a reduction of the contract price.

Contract Award

20. Based on the recoxbendation of the evaluation committee, DG has full authority to approve a contract up to 50 million Baht or $ 1.3 millions equivalent. However, in all case of procurement the Department has to submit the recommendation to the Budget Bureau for fund commitment before awarding of contract. The process for a normal case of procurement would take about 90 days provided the project fund is available under the Annual Budget Appropriation Plan.

2 1. For a larger contract value exceeding the authority of DG, the review process prior to awarding contract has proved to be complex and time-consuming. DG has to submit his recommendation to the Budget Bureau for prior review, and to the line ministry for review and approval by the Permanent Secretary or the Minister. If there is a need for a change in the approved Annual Budget Appropriation Plan, prior review of the Budget Bureau and Cabinet approval is always req~ired.~

Contract Payments

22. Payments on civil works contracts normally provide for mobilization or advance payments, progress billings and a 10 percent retention. An advance payment can be made against a bank guarantee at a maximum of 15 percent of the contract value and is deductible from progress payments. Retention money can be replaced by a performance security upon acceptance of works. Payments for imported goods are usually by irrevocable letter of credit payable upon presentation of bill of lading, and may also include advance and progress payments.

23. The Regulations require the contract price on a fixed basis. The contract for goods or works does not include price adjustment formula or the payment of interest to a supplier or contractor for late payments by the implementing agency. If it is justified in case of crisis, the Government may issue price adjustment formula to counter inflation and currency devaluation.

Settlement of Contractual Disputes

24. A suit for enforcing the arbitration award can be in the Civil Court in Bangkok. The sample bidding documents for works annexed to the 1992 Regulations establish that,

In case of ICB for civil works of the Highways Department, the whole review and approval process would take about 180 to 270 days (see Annex 3). The 1994 Operational Procurement Review (OPR) had raised this issue and recommended that the time between bid evaluation and contract award should be shortened to an acceptable period of 90 to 120 days.

disputes will be settled in accordance with the " Rule of Arbitration of the Ministry of Justice's Arbitration Office".

Employment of Consultants

Policy

25. The Regulations stipulate that the Government agencies must employ Thai-registered consultants whenever expertise is available. The joint ventures are permitted provided that the Thai consultants must be engaged for not less than 50 percent of the staff-months of the total input. Foreign individuals or firm may be engaged if local expertise is not available in the required field, but approval of the Committee in charge of Procurement is required. However these provisions in clauses 75 and 76 do not apply to Bank projects as both clauses state as follows;

26. Clause 75 states that the engagement of juristic consultants, except in the engagement under the grant aid or loans from sources which specify to undertake by other methods, the government agency shall engage Thai consultants as the leading firm.

27. Clause 76 states that in order to be in accordance with Clause 75, the engagement of foreign consultants of government agency, excluding the engagement of consultant under grant aid or from loans from sources which specify to undertake by other methods, Thai personnel shall be engaged to work with at least 50 percent of staff-month of total number consultants.

Direct Negotiation Method

28. The engagement of consultants by direct negotiation method is suitable for a small and simple assignment contract, an extension of existing contract or a contract when speedy selection is required. This is in line with the Bank's Single-Source Selection method. However, the Bank will use this method in exceptional cases only.

Short List of Consultants

29. The implementing agencies will prepare a long list of consultants by obtaining the list from international financial institutions, or international organizations, or local professional associations and institutions, the agency's own files or other government agencies, or by advertising in the newspapers. The long list of Thai consulting firms can be obtained from the Thai Consultancy Data Center. The numbers will be brought down to a short list with a maximum of six firms through the process of screening, and those in the short list will be invited to submit the proposals.

Selection Method

30. The Selection Method is the same as the Bank's Quality-Based-Selection method requiring the short-listed firms to submit a technical proposal only (without the financial proposal), or both technical and financial proposals at the same time. The selection will be based on the quality of service only. The Regulations do not contain detailed selection procedures and allow the selection committee to develop the evaluation criteria. As a result, each agency uses its own selection criteria and procedures.

ModiJied Selection Method

3 1. The Modified Selection Method is appropriate to selection of consultants for assignments of uncomplicated works where well established practices and standards exist and expertise are widely available. The short-listed firms will be invited to submit both technical and financial proposals at the same time. After evaluation of technical offers, only three firms, ranking the first to the third, will be considered for financial offers, and the lowest priced firm will be selected and negotiated. This method is similar in some respect to the Bank's Least-Cost Selection method.

Payments to Consultants

32. Payments to consultants normally provide for mobilization or advance payments, progress billings and retention money (about five to ten percent). An advance payment can be made against a bank guarantee at a maximum of 15 percent of the contract value and is deductible from progress payments. Retention money can be replaced by a bank guarantee. Withholding consultants' fees as retention money is not recommended by the Bank.

Consulting Service for Detailed Design and Construction Supervision

33. The implementing agencies may engage service providers (individual consultants or consulting firms) to carry out the detailed engineering design and construction supervision in accordance with the practices adopted by local engineering and architectural associations. The selection will be based on the quality of services or Quality-Based Selection (QBS). As a normal practice, a service fee of 1.75 to 2 percent of the project cost will be applied for design work and the same rate will be applied for construction supervision. This is practice is inconsistent with Bank policies which do not permit imposition of a standard or for that matter maximum rate or price which should arrived at by competition or free negotiation between the parties.

Government Enterprises

34. The Government enterprises (GEs) are established under administrative and financial Acts. Their procurement rules are also based upon the Prime Minister Office's Regulations (1992), but with freedom to adapt them. Hence, there is no conflict of rules

in the course of loans to GEs, such as EGAT and PEA. They follow Bank's Guidelines and requirements. The Governor of the enterprise is responsible for all procurement. The highest administrative authority on matters of procurement is the Board of the enterprise.

35. The procurement process of GEs is more efficient. In the course of implementation of projects financed by the Bank and others donors, GEs have gained experiences in handling major ICB contracts and in the engagement of international consultants. For example, EGAT has refined the 1992 Regulations in line with the Bank's Guidelines. One of these is the use of Quality- and Cost-Based Selection (QCBS) method in the engagement of consultants. Most GEs have trained their staff in procurement practices and developed their technical capabilities in their fields of expertise. As a result, GEs are efficient in bidding and contracting of goods, works and consultants.

36. GEs have lesser review bodies and administrative layers. The review and approval of contracts normally take much shorter time as compared with GDs. Based on the Governor's(equiva1ent to the CEO) recommendation, GE's Boards have full authority to approve all contracts using their own funds and the Bank's loans.

Others

ADB Procurement Guidelines

37. The policies, practices and procedures applicable to ADB financed procurement are derived from the principles set forth in the ADB Charter, from the experience of the ADB and other multilateral financing institutions including the Bank, and from generally accepted rules and sound commercial practice. The basic principles underlying the ADB's ICB procedures are similar to those of the Bank such as economy, efficiency, fair and equal opportunity for bidders from all member countries, well defined eligibility criteria in relation to bidders, the suppliers and the goods, and rational and fair decision making consistent with criteria disclosed in the biding documents. Recently, ADB has added a provision of ethics and corruption, similar to the Bank, in its procurement guidelines requiring its borrowers, as well as bidders, suppliers, contractors under its financed projects, to observe the highest standard of ethics during the procurement and execution of such contracts.

38. ADB's and World Bank Guidelines for ICB are very similar and there are no important differences except for membership and hence eligibility (see Annex 4). The use of SBDs is mandatory for Bank-financed projects while ADB provides sample bidding documents, relevant handbooks (on bid evaluation, and on problems in procurement), and a guide on prequalification of civil works contractors. In the case of NCB, ADB reviews the local procedures during appraisal and have accepted them in Thailand without any changes for NCB contracts.

external loans and grants. Since 1984, both sets of Regulations existed, one for normal government procurement funded by local budget and the other for projects funded by the external lenders and donors, thus resolving the problem of major conflicts. The existence of two sets of procedures, however, resulted in some confusion and came in for criticism. In 1992 the government decided to merge them and issued the "Regulations of the Office of the Prime Minister 1992," eliminating the separate set issued by the Ministry of Finance. In this exercise, the government addressed many recommendations from the Bank and other donors and introduced some good procedures and practices. It also reduced conflicts with donor guidelines, but some, for example, "negotiation if the price of selected bid is above budget estimate," still persisted. In order to facilitate loanlgrant Jinanced procurements, the 1992 Regulations authorized departments to apply the procedures of the loan source for procurements funded by them, but instead ofputting this clause up fiont, the Regulations introduced it at various places, creating some confusion.

9. In 1994 the Bank carried out a CPAR (an OPR by present definition) and reviewed the 1992 Regulations, as well as the practices at the working level. It also ascertained the views of the business community. The study observed that even though the Regulations permitted "compliance with donor guidelines," departments often tended to follow the established local procedures, in particular, "negotiation." The report went on to identify the areas of conflict between the Bank Guidelines and the 1992 Regulations, suggesting that the Regulations be made compatible with Bank Guidelines. The report also commented on the lengthy processing time caused by the multiplicity of committees. The study noted that the problems were mostly with government departments. Government enterprises utilized the flexibility afforded to them and adopted procedures that were fully compatible with Bank Guidelines, and they also had competent and well-trained procurement staff. The report was forwarded to the government by the Vice President in a letter dated December 2, 1994, suggesting a dialogue to overcome problems and suggested simplifying the review process and initiating more effective training programs in the use of Bank SBDs.

Present Review

10. Subsequent to 1994, the GOT issued three amendments to the Regulations in 1995, 1996, and 1998, respectively. These amendments, particularly the one issued in 1998 have incorporated many of the suggestions made by the Bank since 1994, though not all. As mentioned earlier, however, Bank-funded procurement is exempted from the application of the Regulations. But the exemption is stated in a number of clauses (clauses 22, 3 1,45, 75 and 76) causing some confusion and misinterpretation by government staff and Bank staff alike. A simple statement up front in clause 6 dealing with application of the Regulations would have been much preferable and would have eliminated some confusion and the misinterpretation that the waiver applies only to ZCB; in fact, it applies to all loan-fundedprocurement. In the meeting with the Principal Secretary, the team suggested this amendment to clear the air.

1 1 . The Bank has clear detailed procedures in the Guidelines for ICB and besides has mandated the use of Bank-issued SBDs for ICB; hence, procurement through ICB has not posed any problem or conflict with local procedures. The Bank has not laid down detailed procedures or SBDs for NCB, however, but conventionally accepts local procedure or regulations, albeit with appropriate modifications. The OCSPR memorandum of June 1, 1998, on "New CPAR Procedures," Annex H, provides guidance to staff on the acceptability of local procedures. Incidentally, these procedures are more stringent than the earlier guidelines in the Bank's Operational Directive (OD) 1 1.0. The main unacceptable provisions in the Regulations are the absence of mandatory advertising in the newspaper (Regulations permit advertising through radio as an alternative), inadequate time for bidding (Regulations provide for 14 days instead of a minimum of 30 days), the requirement to negotiate whenever the selected bid price is above the budget estimate (the Bank does not permit such routine negotiation), and two-envelope bid opening for complex procurements (the Bank does not permit this). While negotiating the recent Social Investment Project, a side letter was included which addressed these issues, and the Thai sample bidding document for NCB issued by the GOT (attached to the Regulations) were modified to delete the unacceptable provisions and introduce a few other desirable provisions that did not exist in GOT bidding documents. The government has agreed to use these modified documents for all Bank-financed NCB procurement. Similarly, the side letter also included a provision that the Bank Consultant Guidelines shall be adhered to, because of the poor wording in clauses 75 and 76 of the Regulations permitting this.

12. Since 1994, Bank has revised its Guidelines for Procurement in 1995 and its Guidelines for Consultants in 1997. These revisions have removed conflicts in one or two other areas addressed in the 1994 review.

13. The detailed comparison of the current Regulations with Bank Guidelines and requirements (as well as ADB Guidelines) may be seen in the attached report.

14. To summarize, the Regulations permit use of Bank Guidelines for all Bank fimded procurements and employment of consultants and the agreements reached for NCB and consultant selection through the side letter has removed any ambiguity in this respect and standardized NCB documents. The side letter should bee retained in future loans until the Regulations are further modified to make the side letter redundant.

15. It needs to be emphasized, however, that the Regulations do need considerable improvement, both in presentation and in substance, not just the removal of the few conflicts with Bank Guidelines which, apart from enhancing their efficiency, fairness, transparency, value for money, and compatibility with international practices, would enable acceptance of the local procedures without challenge by donors for local procurement and eventually for ICB as well.

16. Thailand is a member of the APEC as well the WTO. The GOT is under pressure from the APEC to revise and modernize its government procurement regulations and

introduce a set of guiding principles adopted by the organization. Similarly, the GOT is under pressure from the WTO to accept the recently circulated "Transparency, Openness and Due Process in Government Procurement" or the "Government Procurement Arrangement (GPA)," already part of the Uruguay Round. Both APEC and the WTO seek competition, nondiscrimination, value for money, transparency, and accountability in the government procurement procedures, the very principles sought by the Bank as well. The Office of the Prime Minister is grappling with these demands and could use expert advice and help. This will be an opportune time to launch the full-fledged CPAR, a major component of which is precisely to modernize the public procurement regime.

Cumbersome Procedures Resulting in Delay

17. Annex 3 to the attached report in part 3 provides a table indicating the processing time in selected contracts. If the prices are below budget estimates and the contract is within the powers of the Director General (DG), the processing time is short and reasonable. If the price of the selected bid is higher than the estimate indicated in the detailed budget, the department is required to negotiate the price (except in Bank projects), and if the final proposed award price is still above the budgeted price, but within 10 percent, a reference has to be made to the Budget Bureau for its approval, and if not, the contract must be rebid. This requirement applies to each item in a bill of quantities even if the total price is within the budget. Second, if the contract value exceeds the powers delegated to the DG and must go the ministry or cabinet, the papers must be processed through the Budget Bureau besides the line ministry. These practices, both the negotiation and the approval by the Budget Bureau are well entrenched for decades. In some instances, the draft contract has also to be cleared by the Audit Council or the Attorney General's office. These processes add up to delays in large-value contracts, in particular for civil works. The delegation of powers to the DGs need to be substantially increased; this should be recommended to the government. There is also an urgent need to review the approval processes to cut down the processing time. It should be recognized, however, that these, particularly the Budget Bureau clearances, are practices that have been in place for decades, and a mere recommendation to eliminate or simplify them would produce little result. One needs to ascertain the rationale for these interventions and find alternative solutions. The government should be advised to initiate this exercise to ensure award of the contract in a timely manner.

Weak Implementing Agencies

18. The staff handling procurement in government departments, as well as those reviewing the proposals in the ministries, have poor understanding of public procurement concepts, the Bank Guidelines and SBDs. This is particularly true of staff in social sectors, such as education and health, and of local authorities who implement many social sector projects. Many of them are not yet familiar with the recent amendments to the Government Regulations, which clearly exempt Bank procurement and often tend to apply the Regulations, particularly the routine negotiation when prices are above estimates. The government with Bank assistance should launch an intensive training

program to this group of staff, using training materials in both languages, recognizing the language problem. Bank should assist the GOT to institutionalize the training in selected government training centers by providing resources for the preparation of training materials tailored to the local environment, by providing expert trainers initially, and then by training trainers and so forth. This reform will eventually generate a qualified procurement cadre in the Bank and GOT should encourage universities to include courses in public procurement and related commerce and law in the undergraduate courses on commerce, business, and engineering.

Recommendations

19. The strategy is to urge recommendations that are beneficial to the entire gamut of public procurement and not merely facilitate procurement In Bank operations. This can be most effectively achieved through a full CPAR addressing public procurement in general from the national point of view. This needs a dialogue with the government.

Recommendations for the Government

20. Conduct intensive training on Bank Procurement Guidelines and SBDs focusing on staff handling procurement in softer sectors in Bank projects.

21. Initiate regular training programs in procurement tailored to various levels of staff and officials in government training institutions on all aspects of procurement in the national and international context, including the concepts in public procurement, national procurement regulations, the requirements of lenders and donors, and organizations such as APEC and WTO.

22. Review and revise of the delegation of powers to department heads and ministries, consistent with current market prices and the need for efficiency.

23. Review the review and approval processes for large contracts to reduce the number of layers and make them more efficient.

24. Seek expert assistance to modernize the Regulations and make them compatible with internationally accepted principles and practices advocated by the World Bank and other IFIs, as well as by the APEC and WTO, in which Thailand is a member.

Recommendations to the World Bank

25. Assist the government in the training initiative-through financial and technical resources-in planning courses, developing training material, training trainers, and providing experts.

26. Pursue launching a full CPAR to assist the government in modernizing the public procurement regime and make the regime compatible with international norms.

ADB Engagement of Consultants

37. The World Bank in its recent Guidelines published in 1997 adopts QCBS as its standard procedures except that for complex assignment, QBS as selection basis on quality and negotiations with highest ranked firm is permitted for complex assignments. World Bank also explain other methods, such as Single Source and Least-Cost, for given circumstances. ADB guidelines prescribe QBS only other than Single Source, and do not permit cost as a factor of selection.

Review of Government Regulations on Procurement of Goods and Works and Engagement of Consultants

Government Regulations

I. General

The current procurement rules and procedures of the Government are presented in "Regulations of the Office of the Prime Minister on Procurement B.E. 2535 (1992)" as amended in 1995, 1996 and 1998. The Regulations are applicable to all government agencies that use the government budget, loan and grant (Clause 6). Further amendments to the Regulations need the review of the Committee in charge of Procurement or CCP and the approval of the Cabinet (Clause 12).

In general, the head of the government agency is responsible for carrying out the procurement under the Regulations. He may delegate his authority to other officers who hold appropriate positions and responsibility (Clause 9). In case of loan or grant financed project, the head of the agency may appoint an officer to act as Project Director and assign him the task to act under the Regulations (Clause 9 as amended in 1996).

Methods of Procurement

The nature of goods or works and the size of contract determine the method of particular procurement. The Regulations outline five different methods, namely (1) price agreeing or direct negotiations; (2) price inquiry or price quotation or shopping; (3) competitive bidding; (4) special procurement; and (5) special case (Clause 18).

The price agreeing and price inquiry methods are used for small contracts. The ceiling amount of the price agreeing method is 100,000 Baht. The price inquiry method is for the contract amounting between 100,000 to 2,000,000 Baht (Clauses 19 and 20). The contract with an estimated bid price exceeding 2 millions Baht has to be carried out

Comparison with the Bank's Guidelines

The Bank reviewed the 1992 Regulations in late 1994 and highlighted a number of Government procurement practices that were in conflict with the Bank's Guidelines. The problem has been minimized since 1994 when the Government adopted the Bank's Guidelines and used the Bank Standard Bidding Documents (SBDs) for international competitive bidding (ICB) as stipulated in the loan agreement. However, the problem still remains when the implementing agencies conduct the national competitive bidding (NCB). For example, the practice of "price negotiations with the lowest evaluated bidders when the bid price exceeds the budget provision" still continues.

The Government has made three amendments to the Regulations in an attempt to incorporate some of the Bank comments, but mainly to protect against irregular practices and promote local industry. The 1999 amendment is under processing, but it is minor in nature.

The Bank encourages the use of competitive bidding as it is considered to be the most economic and efficient method of procurement. The price agreeing, special procurement and special case methods are direct contracting without competition.

The Bank's Guidelines stipulate the use of international and national shopping. This procurement method is based on comparing price qudtations obtained from several suppliers, usually at least three, to assure competitive prices, and is appropriate method for procuring readily available off-the-shelf goods or standard specification


through competitive bidding (Clause 21).

There are two special provisions. First, the head of the agency may raise the ceiling amount of price agreeing or price inquiry method if he considers it appropriate. Second, for procurement funded by loan or grant, the head of the agency is authorized to follow the procurement procedures specified in the loan or grant agreement (Clause 22).

There may be situations in which procurement through price quotation or competitive bidding may not be suitable such as land purchase, emergency needing, proprietary procurement, etc. the agency may use special procurement method through direct negotiations with the suppliers. The special case method is used only when there are Government instructions to buy directly from the Government- owned manufacturers or enterprises.

Procurement Committee

There are seven procurement committee namely: (1) price inquiry envelope-opening committee; (2) bid- receiving and bid-opening committee; (3) bid evaluation committee; (4) committee in charge of purchasing by special procurement method; (5) committee in charge of hiring by special procurement method; (6) materials inspection and acceptance committee; and (7) works inspection and acceptance committee (Clause 34).

Procurement Request

The procurement officer concerned will submit a request to the head of the agency or delegated person indicating: (1) the reason for purchase or hire; (2) details of goods or works; (3) standard prices or previous prices or present estimates; (4) annual budget provision including sources of funding; (5) time required; (6) method of procurement and its justification; and (7) other proposals such as committee members and notification, and advertising for price quotation or bidding (Clause 27).


commodities that are small in value. International shopping shall ask for quotations from at least three suppliers in two different countries. National shopping may be used where the desired goods are ordinarily available in the country at competitive prices.

Direct contracting is allowed by the Bank under special circumstances, such as extending an existing contract for additional goods or works, additional purchase of equipment or spare parts where standardization is a prime concern, the required equipment is proprietary and obtainable from one source, and in response to natural disasters.

Only two committee are involved in competitive bidding process namely, bid-receiving and bid- opening committee, and bid evaluation committee.

The Bank shall review the procurement arrangements proposed by the implementing agencies, including contract packaging, applicable procedures, and the scheduling of the procurement process, for its conformity with the guidelines and proposed implementation program and disbursement schedule.


Prequalijication of Suppliers or Contractors

Prequalification is used to limit the number to qualified suppliers or contractors. When there is a need for prequalification, the officer concerned will submit a request through the procurement officer for approval by the head of the agency or delegated person indicating: ( I ) the reason for purchase or hire; (2) budget provision, sources of funding and details of goods or works; (3) qualification of supplier or contractor indicating minimum requirements, such as experience and past performance on similar contracts, capabilities with respect to personnel, equipment, manufacturing facilities, and financial position; and (4) selection criteria (Clause 30).

Notification for prequalification should contain the following information and requirements: (1) details of goods or works; (2) experience and past performance on similar contracts; (3) capabilities with respect to personnel, equipment, manufacturing facilities; (4) financial position; (5) selection criteria; and (6) places where prequalification documents are available (Clause 3 1).

The first notice should indicate the place and the time to receive and open the prequalification proposals. The notice should be given in sufficient time (at least 30 days for local bidding) to enable prospective bidders to respond to the invitation. To encourage wider participation, the notice should be broadcast through the radio, published in local newspapers, sent to prospective bidders, or carried out by other means (Clause 3 1).

In case of prequalification for international bidding, the notification should be carried out; (1) at least 60 days prior to the closing date for receipt of proposal; and (2) in accordance with the guidelines as stipulated in the loan or grant agreement (Clause 3 1).

The head of the agency will appoint a five-member prequalification committee to evaluate the proposals within the specified time (Clause 32).


The implementing agencies adopt the Bank's Guidelines for prequalification of bidders for ICB. Prequalification shall be based entirely upon the capacity and resources of prospective bidders to perform the particular contract satisfactorily, taking into account their (i) experience and past performance on similar contracts, (ii) capacity with respect to personnel, equipment, and construction or manufacturing facilities, and (iii) financial position.

In practice for NCB, some implementing agencies invited all qualified contractors in their standing list to participate in the bidding.

Normally, not less than six weeks from the date of the invitation to bid or the date of availability of bidding documents whichever is later shall be allowed for ICB.


11. Competitive Bidding

Bidding Documents and NotiJcation

The procurement officer concerned will prepare the bidding documents and the notice for bidding. The bidding documents will be prepared in accordance with the sample bidding documents approved by CCP or the bidding documents that have been cleared by the Public Prosecution Department.

The notice for bidding contains the following information; list of goods or works, qualification of bidders, date and time for acceptance and opening of bids, place and time at which the documents would be made available for free or at minimal cost, and source of funds and eligible source countries in case of international competitive bidding (Clause 44).

The prospective bidders should be informed in advance about the bidding not less than 7 working days before issuance of bidding documents by posting the notice at the agency concerned, advertising through radio and/or newspapers, and sending the information to the Department of Public Relations and the Mass Communications Organization for dissemination. The notice and the bidding documents should also be sent to the Bidding Information Center, Office of Auditor General or Provincial Office of the Auditor General. In addition, the agency may adopt other means of advertising or send the notice directly to prospective bidders (Clause 45).

In case of international competitive bidding in which the contract financed in whole or in part by loan or grant, the agency has to follow the guidelines stipulated in the loan or grant agreement (Clause 45).

The agency should provide an easy access to interested parties and should prepare the bidding documents in sufficient numbers. Every party should be able to obtain one set of the documents. The bidding documents should be made available for at least 7 working days. Adequate time at least 7 working days should be allowed for the preparation


The implementing agencies adopt the Bank's Guidelines and use the Bank's SBDs for ICB. The Regulations are more applicable to NCB.

Recently, the Government has given assurance to the Bank (under the loan for Social Investment Project) that: (i) Each national competitive bidding opportunity shall be advertised in the national press, and bidders will be given no less than thirty (30) days to prepare their bids; (ii) Foreign suppliers and contractors from eligible countries shall be allowed to participate in bidding for contracts under the Project, if interested, without being subjected to any prior requirement to be associated with local firms; (iii) Explicit bid evaluation criteria shall be clearly stated in all bidding documents; (iv) Contracts shall be awarded to the lowest evaluated responsive bidder at the quoted bid price and contract terms; (v) Contractors should not be required to accept additional work under an existing contract until they have agreed on the applicable rates; (vi) For contract of works, prior registration, licensing andlor other governmental authorizations or approvals shall not be required for participation in bidding competitions; and (vii) The Bank's Consultants Guidelines shall be adhered to far the procurement of services of consultants, nongovernmental organizations and trainers.

In addition to the above, the Bank has reviewed the Government Sample Bidding Documents for NCB and has incorporated a number of new provisions, such as: (i) removing relevant clauses on shipment through Thai vessels; (ii) adding a clause on Termination of Contract for Purchaser's Convenience; (iii) setting up the ceiling for liquidated damages;


and submission of bid. For a more complex and larger contact, CCP may give more time for bid preparation as appropriate. For rebidding, the previous bidders may use the original set of documents or obtain a new set for free (Clause 46).

The agency may issue additional notice and extends the deadline for submission of bids if it considers necessary to provide more details to prospective bidders. The project may require major variations in details of works and the need for prebidding conference and for site inspection. Additional notice should contain the new deadline for receipt of bids and the date when supplemental bidding documents are available (Clause 47).

Bid Opening

It is mandatory that the bids must be opened on the stipulated time and date. Delivery of bids by registered mailed is not allowed unless it is ICB (Clause 48). The committee on bid-receiving and bid-opening will receive and record all the sealed bids, check the required bid securities and all supporting documents such as, sample materials, catalogues and drawings, open all sealed bids and read aloud in public, and prepare a report on bid receiving and opening to be submitted to the bid evaluation committee (Clause 49).

Bid Evaluation

The committee on bid evaluation will examine the qualification of the bidders, bid prices, supporting documents such as sample materials, catalogues and drawings and select those bidders whose bids substantially comply with the requirements. Minor deviations should not be rejected outright if such deviations do not cause any disadvantage to the other bidders. The committee may inquire any bidder for clarification, but do not allow any change in the content of the bid. The committee will recommend the award of contract to the bidder whose bid is substantially complied and lowest evaluated (Clause 50).


(iv) removing the use of cash for bid security or performance security except for small contract; and (v) modifying the method of payment for unit cost contract.

The Bank does, not allow restrictions on means of delivering bids, for example by hand, even for NCB.

In examining the bids, the implementing agency shall ascertain whether the bids (i) meet the eligibility requirements specified in the Bank's Guidelines, (ii) have been properly signed, (iii) are accompanied by the required securities, (iv) are substantially responsive to the bidding documents, and (v) are otherwise generally in order. If a bid is not substantially responsive, that is, it contains material deviations from or reservations to the terms, conditions, and specifications in the bidding documents, it shall not be considered further.


Those complying bidders who submit the same lowest bid price are required to submit the new bids (Clause 50).

If the committee consider appropriate to award the contract to the lowest evaluated bidder whose bid price is higher than the budget provision (or loan provision or estimated price, whatever is available), they may proceed with price negotiations in accordance with Clause 43. The lowest bidder is requested to lower the bid price through direct negotiations. The contract award could be made if the new bid price is within 10 percent above the budget provision. If negotiations fail, the committee will ask all responsive bidders to propose the new bids within the specified time. The new lowest offer will be considered for contract award if the new bid price is within 10 percent above the budget provision. If the above attempt is unsuccessful the committee must submit a report to the head of the agency to consider: (1) scope reduction; (2) budget increase; or (3) bid cancellation and rebidding. This practice is in line with Clause 13 as revised in 1996 requiring the agency to prepare the procurement plan and proceed in accordance with such plan.

Sole Bid

In general the bidding will be canceled for lack of competition if there is only one bidder or there are many bidders, but only one is considered responsive. However, if the committee consider it appropriate, they may recommend the contract award to the sole bidder (Clause 5 1).

Cancellation of Bids

If no one responds to the bidding or if all bids are considered nonresponsive the committee will recommend the head of the agency for bid cancellation and rebidding. However, if the head of the agency considers that rebidding may not be advantageous, he may decide to adopt the special procurement method through a direct invitation and negotiations (Clause 52).


"Price negotiations with the lowest evaluated bidder" allow by the Bank as an alternative to rebidding if the

, lowest evaluated bid is substantially above the estimates. The implementing agency, after consulting the Bank, may negotiate with the lowest evaluated bidder to try to obtain a satisfactory contract through a reduction of scope and/or relocation of risk and responsibility which can be reflected in a reduction of the contract price.

In accordance with the Bank's Guidelines, rejection of all bids is justified when there is lack of competition, or all bids are not substantially responsive. However, lack of competition shall not be determined solely on the basis of the number of biders.


After bidding, but before contract signing, the head of the agency reserves the right to cancel all the bids if there is a need to alter the conditions of the bidding documents which may cause advantages or disadvantages among the bidders (Clause 53).

Two-Envelope Bidding

For more complex works or services that require special considerations on the qualifications of suppliers or contractors or that require special technologies, it would be difficult to prepare details of works or services that will allow the evaluation of bids on the same basis. It would be more practical to adopt a two-envelope bidding process in which the bidders will submit the technical and price or financial proposals separately. The bidding documents should spell out the criteria in selection and bid evaluation (Clause 54).

The head of the agency will appoint the evaluation committee to open the proposals and evaluate the bids. The committee will consist of a technical and a financial expert. The committee, (1) first consider the technical proposals and other related matters and select only those who meet the requirements, (2) ask the bidders for clarifications, if necessary, and (3) open the price proposals of those selected bidders and carry out the evaluation in accordance with the practice adopted for competitive bidding in Clause 50.

Domestic Preference

The Government has set up Thailand Institute Standard Industrial (TISI) in the Ministry of Industry to control the quality of local products. The bidding documents should not contain any restriction against the local products and should contain only the specifications of the local products that have been registered with the Ministry of Industry. Clearance from the Ministry of Industry is required if other specifications are used. Price preference (about 3 to 7 per cent) over other products would be given to the products that (1) pass TISI standards, (2) manufactured by certified quality control factories,


Bank's Guidelines do not permit such two envelope procedure for procurement of goods or works for ICB or NCB, but only a "two step" procedure (i.e., unpriced technical proposals received, clarified, and adjusted first followed by submission of priced bids.

In ICB the Bank permits domestic preference, at the Borrower's option, if provided for in the Loan Agreement. For bid comparison, 15 percent, or import duty, whichever is lower, will be added on CIF of imports. Domestic competing goods must have at least 20 percent domestic value added.

For NCB the Bank does not automatically allows this. Competition with foreign bidders is not expected to arise, but if so, bid comparison is made on delivered price inclusive, if any, of prevailing duties.


and ( 3 ) registered with the Ministry of Industry.

In case the procurement is funded by loan or grant and the agency cannot negotiate with the donor to adopt the above procedures, the agency should try to promote the Thai products as much as possible.

Contract Approval Authority

The authority to approve a contract rests with the following persons and thresholds (Clause 65):

(1) Head of agency up to 50 million Baht ($ 1.3 million)

(2) Permanent Secretary 50 to 100 million Baht ($ 1.3 to 2.6 million)

(3 ) Minister over 100 million Baht (2.6 million)

Only half of the above thresholds is applicable to the special procurement and special case methods (Clause 66).

111. Engagement of Consultants

The Thai Consultancy Data Center has been set up under the Ministry of Finance to promote and develop local consulting services. The Center, (1) set up the principle and procedures for registration, (2) registers the Thai consultants, (3) collects and updates data relating to Thai consultants, and (4) disseminates and provides data relating to Thai consultants to the government agencies concerned (Clause 74).

For the engagement of a joint venture firm, the agency must engage Thai consulting firm as a lead firm unless it is confirmed by the Center in writing that the local expertise is not available in the required fields. The composition of Thai consultants must not be less than 50 percent of the total staff- months. This provision is not applicable to the engagement of consultants funded by loan or grant (Clauses 75 and 76).


Other preferences are not acceptable to the Bank unless they are justified on sound economic grounds.

The restriction on the composition of Thai consultants shall not apply to the engagement of consultants financed by the Bank.

Subject to the Bank's review, the short list may comprise entirely national consultants, if the assignment is small, a sufficient number of qualified firms are available, and competition including foreign consultants is not justified.


Unless it is specified under this section (Engagement of Consultants), the procurement rules and procedures specified by CCP will be used for the engagement of local individual consultants.

If the local expertise is available, but the agency decides not to use local consultants, the approval of CCP is required.

The engagement of consultants can be done through (1) direct negotiations and (2) selection method (Clause 79). A five-member committee (price negotiations committee or selection committee) will be appointed for each engagement method. In case of engagement of consultants funded by loan or grant, a representative from Fiscal Policy Office will be appointed as a committee member (Clause 80).

The direct negotiation method is suitable for a small and simple assignment contract, an extension of existing contract or a contract when speedy selection is required (Clauses 82 and 83). Other types of contract have to follow the selection method.

The procurement officer concerned will submit a request to the head of the agency indicating, (1) the reason and the need for engagement, (2) Terms of Reference, ( 3 ) qualification of consultants, (4) estimated cost, (5) period of engagement, (6) method of engagement and its justification; and (7) other proposals, if any (Clause 78).

The officer concerned will prepare a long list of foreign firms by obtaining the list from international financial institutions, or international organizations, or local professional associations and institutions, the agency's own files or other government agencies or by advertising in the newspapers. The long list of Thai consulting firms can be obtained from the Thai Consultancy Data Center. The numbers will be brought down to a short list with a maximum of six firms through the process of screening and those in the short list will be invited to submit the proposals. This screening process is not required if the agency has adequately qualified firms in its files (Clauses 85 and 86). This provision is not applicable to the

Comparison with the Bank's Gurdelines

Single-source selection of consultants does not provide the benefits of competition in regard to quality and cost and lacks transparency in selection, and could encourage unacceptable practices. The Bank will consider this selection under special circumstances when competitive process is not practical.

The implementing agency shall follow the Bank's Guidelines.


engagement of consultants hnded by loan or grant.

The agency may invite the short-listed firms to submit the proposals and the selection is based on: (1) two-envelope proposal which considers consultant's qualifications and price, or (2) single envelope proposal which considers only consultant's qualifications, if the agency consider appropriate (Clause 87).

The selection committee will carry out the following steps (Clause 88):

( 1) Set up the selection criteria. (2) Evaluate and rank the technical proposals. (3) Open the financial envelope of the first-ranked

firm and negotiate to obtain the best price. If negotiations fail, the committee will open the financial envelope of the next ranked firm and negotiate for the best price. In case of a single envelope proposal, the committee will invite the first-ranked firm to submit the financial offer and negotiate for the best price. If negotiations fail, the committee will invite the next ranked firm to submit the financial offer and negotiate for the best price.

(4) If successful, consider and negotiate the terms and conditions of the contract.

(5) Prepare an evaluation report and submit the recommendations through the procurement officer concerned to the head of the agency for approval.

The above selection procedures are also applicable to the contract financed by a grant through the Department of Technical and Economic Cooperation.

For the engagement of consultants which involves uncomplicated assignments and the expertise is widely available, the agency may adopt quality- and- cost-based competitive selection. The selection committee will carry out the following steps (Clause 89) :

(1) Request the short-listed consultants to submit the


The Regulations are in line with the Bank's Quality- Based Selection method requiring the short-listed firms to submit a technical proposal only (without the financial proposal), or both technical and financial proposals at the same time.

The invitation documents should contain the selection criteria.

If the consultants were requested to provide financial proposals initially together with the technical proposals, safeguards shall be built in to ensure that the price envelope of only the selected proposal is opened and the rest returned unopened, after the negotiations are successfully concluded.

This selection method is not the Quality- and Cost- Based Selection (QCBS) as stipulated in the Bunk's Guidelines. It is a Modified Least-Cost Selection where the lowest priced firm shall be selected. However, the Least-Cost Selection does not allow negotiations with the lowest offer.


technical proposal and financial proposal, separately.

(2) Evaluate and rank the technical proposals. (3) Open the financial proposals of the first, second

and third ranked consultants and negotiate with the lowest priced consultant.

(4) If negotiations with the lowest priced consultant fails, then negotiate with the second lowest priced consultant, and so on.

(5) If successful, negotiate and finalize the contract in accordance with the procedures adopted in Clause 88.

Engagement of Individual Consultants (Clause 90)

For the engagement of an individual consultant which does not require a technical proposal, the agency may follow the procedures for short listing, ranking and negotiating as outlined in Clauses 86 and 88.

Consulting Service for Detailed Design and Construction Supervision

The implementing agencies may engage service providers (individual consultants or consulting firms) to carry out the detailed engineering design and construction supervision in accordance with the practices adopted by local engineering and architectural associations. As a normal practice, a service fee of 1.75 to 2 percent of the project cost will be applied for design work and the same rate will be applied for construction supervision.

The engagement of service provider can be done through direct contracting if the estimated construction cost is less than 2 millions Baht (Clause 97). The competitive selection of service providers is required if the construction cost exceeds 2 million Baht (Clause 100). If the project cost exceeds 5 million Baht, the implementing agency must engage a consulting tirm to perform the task through competitive process (Clause 104).

For each project, the service providers will propose the scope of work, the names, qualifications, past


Standard prefixed rates are not acceptable in Bank- financed projects.


experiences and past work outputs of engineers and architects who will carry out the design and construction supervision. In case of consulting firms, the qualifications and past performance of the personnel and the firms will be considered. The selection committee will review the proposals and recommend the award of contract to the best qualified service provider or firm.

Contract Approval Authority

The persons and thresholds for approval of a consulting service contract are the same as the authority given to the supply and construction contracts (Clause 9 1).


Summary Checklist of Acceptability of the Government Procurement Procedures for National Competitive Bidding P C B )

Checklist comparing National Competidive Bidding Procedures

Common issues in procurement procedures 1 . Are there eligibility

restrictions based on nationality of bidder and/or origin of goods (other than primary boycotts)?

2. Are there primary boycotts which are established by law?

3. Are bidding opportunities advertised in the local press?

4. Are prospective bidders allowed at least 30 days for bid preparation (except for commodities and small goods contracts)?

5. Are contractors and suppliers prequalified for large or specialized contracts?

6. Are minimum experience, technical and financial requirements (for pre-or postqualification) explicitly stated in the documents?

and World Bank Policy Government procurement

procedures for NCB No, foreign firms may participate, but they need to be registered.

No boycotts.

Advertisement in the local press is optional.

X

No, only 14 working days from issuance of bidding documents and 2 1 days from advertising.

X

Prequalification is normally required for large civil works contracts, but is permissible for goods as well.

Yes, see clause 30.

Bank policy OCSPR memo of l Jun 98

Not allowed.

Only primary boycotts are acceptable.

Required.

Required.

Required.

Required.

7. Is an invitation to prequalify advertised for each procurement involving large or complex potential contracts?

8. Are joint ventures with local firms required for foreign firms7 eligibility?

9. Are joint venture partners jointly and severally liable?

10. Are there set limitations to the number of firms who can bid for a contract?

1 1. Are parastatals allowed to bid?

12. Are bidders required to register with a local or federal authority as a prior condition for bidding?

13. Are extensions to bid validity allowed?

14. Are there restrictions on the means of delivery of bids?

Yes.

Not required.

Not mention in the rule, but it is required in practice.

No, number is not limited.

Yes

Foreign firms to be registered, but not precluded from competing.

Yes, if required.

Delivering bids permitted by hand only.

X

Required.

Not allowed.

Required.

Not allowed.

Acceptable only if they (i) are financially autonomous, (ii) operate under commercial law, and (iii) are independent from the borrower and its purchasing and contracting authority.

Should be discouraged. Acceptable only if registration criteria, process, and cost are reasonable or efficient, and qualified foreign firms are not precluded from competing.

Acceptable only if justified by exceptional circumstances

Not allowed, except when bidders have to submit physical samples. Then they can be required to deliver bids by mail, by courier, by hand, and so forth.

15. Is preference given to suppliers or contractors based on region or locality of registration, small size, ethnic ownership, etc.?

16. Are there restrictions on sources of labor and material?

17. Is public bid opening required? Does it occur immediately or closely following the bid submission deadline?

18. Is a "two envelope" bid opening procedure permitted for procurement of goods or works? 1

19. Is automatic rebidding required if too few bids are received?

20. Is "bracketing" used in bid evaluations?2

2 1. Is award made to lowest evaluated qualified and responsive bidder?

22. Are price negotiations conducted with "winning" bidders prior to contract signature?

No. Preference is given for domestic product and Thai Institute Standard Industrial (TISI) certified product to promote higher quality.

No restrictions.

Required.

Yes, for complex procurements.

X

No provision, sole bidder considered, if justified.

Not allowed.

Required

Negotiation to reduce the price is allowed when bids exceed the budget. However, in practice, most of Government entities still negotiate the price with the lowest evaluated bidder

X

Not allowed.

Not allowed, except for unskilled labor, if available locally.

Required.

Not allowed.

Acceptable, provided all responsive bidders are allowed to bid, the process is efficient and no serious delays result.

Not allowed.

Required

Not allowed, except where the bid price is substantially above market or budget levels and then only if negotiations are carried out to try to reach a satisfactory contract through reduction in scope and/or reallocation of risk and responsibility which can be reflected in a reduction in Contract Price. (See Guidelines para. 2.60)

1 23. Are price adjustment provisions generally used?

24. Are the terms and conditions used in goods and works procurement generally appropriate for the size and nature of contract intended?

25. Are contract scope and conditions modified during implementation?

Not required, however, due to the economic crisis, the Government issued price adjustment formula for all civil works contracts to counter inflation and currency devaluation. Yes.

Normally not the practice.

Not required, but recommended for works contracts of 1 year or more in duration when domestic inflation rate is high

Required (to be acceptable they should be balanced, reasonable and clearly address the most important issues that lead to problems during performance, e.g. risk allocation, payment, inspection, completion or acceptance, insurance, warrantees, changes, contract remedies, force majeure, governing law, termination, etc.)

Acceptable, but advance Bank approval of changes subject to prior review needed if required under the Loan Agreement.

Notes. 1. All technical envelopes are opened first and, after review, price envelopes of all or only qualified and responsive bids are opened in the second round. 2. Rejection of bids outside a range or "bracket" of bid values.

ANNEX 3 Steps in Processing Procurement for Goods, Works, and Consulting Services

A. Procurement for Goods and Works

Universities Science and Engineering Education Project ICB Procurement of Goods (Education Equipment)

Contract FTI (5 packages) FT2 (6 packages) FT3 Contract value in US$ eauivalent 10.063 million 14.043 million 14.676 million Activities Date Days Date Days Date Days Drafting bidding documents 12-Oct-97 15-Aug-98 2 1 -Dec-98 Clearance by Bank (NOL) Advertisement/issue of bidding documents Prebid conference

Evaluation report Clearance by DG Clearance by Permanent Secretary

Cabinet approval Clearance/approval by Minister

Cabinet approval Clearance by Bank (NOL) Letter of Intent Contract signing

1 8-NOV-97 20-NOV-97

Not applicable 16-Feb-98 27-Apr-98

Not applicable 30-Jun-98 6-Aug-98

Not required 3 0-Jun-98 26-Jun-98 17-Aug-98

98 18-Dec-98 158 22-Feb-99

Not applicable

223 17-Mar-99 259 5-Apr-99

Not required 223 19-Mar-99 2 19 20-Apr-99 27 1 22-Jun-99

3-Feb-99 9-Feb-99

10-Mar-99

23-Apr-99 14-Jul-99

Not applicable 19-Jul-99

19-Aug-99 Not required 16-Aug-99 20- Aug-99

Not yet signed

Highwqys Department Fifth Highways Project--Civil Works (ZCB)

Contract Khon-Ken-Nampong U-Bol-Mukdaharn Ban Na-Nakorn Nayok Contract value in US$ equivalent Activities Issue bidding documents Bid opening Evaluation report

Clearance by DG Clearance by Bureau of Budget Clearance by Line Ministry Cabinet approval

Clearance by Bank (NOL)

Letter of Intent Contract signing

1 1.95 million Date Days

4-May-98 0 19-Jun-98 46

26-Aug-98 114 28-Sep-98 147 19-Oct-98 168 1 5-Jan-99 247 27-Jan-99 259 17-Feb-99 280

9.55 million Date Days

23-Sep-97 0 21-NOV-97 59 3 1-Mar-98 189 29-May-98 249 20-Jul-98 300 11-Sep-98 353 16-Sep-98 358

Not available

1 9-NOV-98 422 24-NOV-98 427

6.29 million Date Days

20-0ct-97 10-Jun-98 0

26-Aug-98 77 6-NOV-98 149 30-NOV-98 173 18-Jun-99 3 73 29-Jun-99 3 84

Not available

16-Jul-99 40 1 Not yet signed

Bangkok Metropolitan Administration (BUA) Social Investment Project (1Vational Competitive Bidding)

Contract Pavement School Renovation Training Materials Contractor Koompha Eng. Co. Kriengkrai Top Line collection Co. Contract value in US$ equivalent 488,125 Karnyotha 76,852

40,476 Preparation of bidding documents I 1 -Mar49 0 5-Mar-99 0 10-Feb-99 0 Clearance by Bank (NOL) 19-Mar-99 9 19-Mar-99 1 5 Not available Advertisementlissue of bidding 30-Mar-99 20 26-Mar-99 23 23-Feb-99 13 documents Bid opening 18-May-99 69 30-Apr-99 59 30-Mar-99 48 Evaluation report 23-Jun-99 104 4-Jun-99 94 3-May-99 82 Approval by Regional Director or Not Not Not available Secretary available available Clearance by Bank(N0L) 2-Jul-99 113 9-Jun-99 100 10-May-99 89 Contract signing 9-Aug-99 151 9-Jul-99 130 26-Jul-99 166

B. Engagement of Consultants

Economic Management Implementation Assistance Project Engagement of Consultants for Government Payment System,

Comptroller General's Qflce by QCBS Activities Date Davs Short list of consultants Clearance by Bank (NOL) Issuance of the Request for Proposals Receipt of proposals Evaluation of technical proposals Clearance by Bank (NOL) Combined quality and cost evaluation Clearance by Bank (NOL) Draft contract Clearance by Bank (NOL)

16-Dec-98 7-Jan-99

Not available Not available

30-Mar-99 30-Apr-99 20-Apr-99 1 8-May-99 28-Jun-99 1 -Jul-99

Contract signing 3-Sep-99 261 Financial Sector Implementation Assistance Project

Engagement of Consultants for FRA Liquidation Process by QCBS Activities Date Days Short list of consultants Not available Clearance by Bank (NOL) 28-May-99 0 Issuance of the Request for Proposals 1 8-Jun-99 2 1 Receipt of proposals Evaluation of technical proposals Clearance by Bank (NOL) Combined quality and cost evaluation Clearance by Bank (NOL)

Not available 22-Jun-99 25 22-Jun-99 25

Not available 27-Jun-99 3 0

Contract signing 10-Aug-99 74 EGAT-Promotion of Electricity Energy EfJiciency (DSW

Engagement of Consultants for DSM Evaluation Program by QCBS Activities Date Days Short list of consultants Not available Clearance by Bank (NOL) Not available Issuance of the Request for Proposals 24-Oct-98 0 Receipt of proposals 15-Dec-98 5 2 Evaluation of technical proposals Not available Clearance by Bank (NOL) 'Not available Combined quality and cost evaluation Not available Clearance by Bank (NOL) 9-Mar-99 84 Contract signing 22-Apr-99 134

Note: EGAT = Electricity Generation Authority of Thailand; NOL = No-Objection Letter; and QCBS = Quality- and Cost-Based Selection.

ANNEX 4

Comparison of the World Bank and ADB Guidelines for ICB

ADB Guidelines

Should be open to all ADB member countries

Not mentioned

Required for general notice and specific notices to be published in Development Business and ADB Opportunities Required, at least in one English language newspaper Notification of ADB members' embassies and trade representatives is required Technical magazines or trade publications, or in newspapers of wide international circulation may require for all large or specialized contracts English and local

60 days for supply contracts 90 days for civil works contracts

Required for most civil works

Common issues in procurement procedures 1. Eligibility

1.1 Exclusion of participants

1.2 Boycotts

2. Advertising 2.1 Insertion in Development Business

2.2 Local press

2.3 Notification of IBRD members' embassies and trade representatives 2.4 Specialized technical journals

2.5 Language of advertisement

2.6 Time period for bid submission from invitation or appearance of advertisement

3. Pre- and Postqualification 3.1 Use of prequalification

World Bank Guidelines

Not acceptable; should be open to all Bank member countries, Switzerland, and Taiwan, China, subject to boycott provisions Only primary boycott acceptable (see Procurement Guidelines)

Required for general notice; encouraged for specific notices

Required

Required

Optional; preferable for all large complex projects

Either English, French, or Spanish; also local, at borrower's option, with certified translation for contracts awarded to local firms (see item 4.3) Normally not less than 45 days, or 90 days for large, complex contracts

Requires if so stipulated in

Common issues in procurement procedures procedures

3.2 Basis of evaluation

3.3 Method of prequalification

3.4 Joint ventures between foreign and local firms

3.5 Number to be accepted

4. Bidding 4.1 Mandatory prior registration of bidders with local authorities, institutions, etc. 4.2 Local agent or intermediary required

4.3 Documents only in local language

4.4 Bid security, if specified, only through local bank 4.5 Restrictions on means of


Loan Agreement. Advisable for large, complex works and processing plans, and exceptionally for custom- designed equipment and specialized services Experience, capacity, and financial status; minimum requirements should be explicitly described in prequalification document Individual advertisement for each procurement Should not be mandatory; final agreements nat required at time of prequalification; intent of parties and their contribution to be indicated; joint and several responsibilities of firms required No limit to number; rejection only of those clearly not qualified

Not acceptable; restricts competition

Not acceptable

Not acceptable; should be either English, French, or Spanish; but at borrower's option, may also be in local language with certified translation for contracts awarded to local firms Not acceptable (see SBDs)

Not acceptable

ADB Guidelines

contracts, turnkey contracts and contracts for fabrication of expensive and technically complex items

Same as the Bank

Same as the Bank

Not mention

No limit to number

Not acceptable, should open to all eligible bidders

Not acceptable

English only

Not acceptable

Not acceptable

Common issues in procurement procedures delivering bids (e.g., "by hand only ") 4.6 Bid validity extension

4.7 Currency of bid

4.8 Currency of payment 4.9 Domestic Preferences 4.9.1 Bank: Goods (general)

4.9.2 Bank: Goods (regional) 4.9.3 Bank: Works

4.9.4 Other borrower preferences 4.10 Restrictions on sources or transportation and insurance 4.1 1 Restrictions on sources


Acceptable only if justified by exceptional circumstances; Bank to be notified Expected local expenditures in local currency; expected foreign requirements in bidder's own, or in currency of country of origin of inputs, or in international currency specified by borrower As for item 4.7 above

Acceptable at borrawer's option, if provided for in Loan Agreement; 15 percent or import duty, whichever is lower, on CIF price of imports. Domestic competing goods must have at least 30 percent local content. Not applicable Acceptable at borrower's option, if provided for in Loan Agreement; 7 '/z percent for qualifying domestic firms in eligible borrowing countries; qualifying criteria for firms should be prescribed, preferably in prequalification documentation Not acceptable

Not acceptable

Not acceptable, except for

ADB Guidelines

Acceptable only if justified by exceptional circumstances

Expected local expenditures in local currency or in an international trading currency specified in the bidding documents

As for item 4.7 above

Same as the Bank

Not applicable Same as the Bank

Not acceptable

Not acceptable

Not acceptable

Common issues in procurement procedures of labor and material

4.12 Public bid opening 4.13 "Two envelope" bid opening (i.e., all technical envelopes opened first and, after review, price envelopes of all or only qualified and responsive bids opened in the second round 4.14 "Two step" procedure (i.e., unpriced technical proposals received, clarified, and adjusted first, followed by submission of price bids 4.15 Automatic rebidding if less than prescribed minimum number of responses

4.1 6 "Bracketing" in works bid evaluation, i.e., rejecting bids outside a range or bracket of bid values 4.17 Award to lowest evaluated responsive bidder 4.18 Price negotiations with bidders prior to contract

5. Contract Implementation 5.1 Performance security goods contracts restricted to bank guarantees issued by local banks 5.2 Performance security on works contracts in form of bank guarantee only

5.3 Price adjustment provisions for long-duration contracts


unskilled labor if available locally Mandatory Not acceptable

Permitted

Not acceptable; single or lowest evaluated bid should be evaluated for award of contract Not acceptable; it is an arbitrary criterion unrelated to the capacity and experience of bidders Mandatory

Not acceptable, except as provided in Procurement Guidelines

Acceptable

Not acceptable; at bidder's option, may be in farm of a bond issued by insurance ar bonding company or bank guarantee. Surety must be acceptable to the botrower. Required normally for contracts over 18 months' duration, preferably by

ADB Guidelines

Mandatory Acceptable, but when technical modifications are required, the price proposals will be returned unopened to the bidders concerned and resubmitted within a specified period

Available, but the use must be agreed upon

Not acceptable

Same as the Bank

Mandatory

Not acceptable

Acceptable

Same as the Bank

Same as the Bank

Common issues in procurement procedures

5.4 Settlement of disputes by local courts or local arbitration procedures

5.5 Material modifications of contract scope and conditions during implementation


formula; sources of indices to be linked to sources of contract inputs and currencies Acceptable, but strongly recommended that international arbitration be used for disputes involving foreign suppliers and contractors (IICC, LINCITRAL, ICSID--see SBD: Worh Requires Bank's prior approval as stipulated in Loan Agreement procurement schedule (see Procurement Guidelines, A ~ ~ e n d i x 1 >

ADB Guidelines

Same as the Bank

- -

Same as the Bank

Acronyms and Abbreviations

ADB APEC BB CCP CPAR DG EGAT GD GE GOT GPA ICB IF1 NCB NOL OCSPR OECF OPR QB s QCBS RFP SBD TIBQS TOR UNCITRAL US AID WTO

Asian Development Bank Asia Pacific Economic Cooperation Budget Bureau Committee in Charge of Procurement Country Procurement Assessment Report Director General Electricity Generation Authority af Thailand Government department Government enterprise Government of Thailand Government Procurement Arrangement International Competitive Bidding International financial institution National Competitive Bidding No-Objection Letter Operational Core Services (Procurement) Overseas Economic Cooperation Fund Operational Procurement Review Quality-Based Selection Quality- and Cost-Based Selection Request for Proposals Standard Bidding Documents "Thailand-Improving Bank's Quality of Supervision" Terms of Reference United Nations Commission for International Trade Law U.S. Agency for International Development World Trade Organization

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