Procurement of Works: Practice under Ukrainian Laws

1. Procurement of Works: Practice under Ukrainian Laws How to prepare bidding documents for procurement of works – requirements and peculiarities Kristina ARTEMENKO Kyiv, September 2012 EU Project "Harmonisation of Competition and Public Procurement Systems in Ukraine to EU Standards"

2. 1. Procurement in Construction • Works: design, construction of new facilities, expansion, reconstruction, capital repairs and restoration of existing production and non-production buildings and facilities, standardization-related work in construction, exploration, technical re-equipment of existing undertakings and related services, including surveying, drilling, seismic surveys, aerial and satellite photographing and other services normally included to the estimated cost of work provided the cost of such services does not exceed the cost of the work • Services: maintenance Bidders’ associations are unable to participate in the procurement unless bidders establish a legal entity (such as a consortium, general contractor or subcontractor etc.)

3. 2. Law of Ukraine “On Public Procurement” (PPL): scope of application • Works – UAH 1 million • Services – UAH 100,000 • Goods and services for construction (threshold set forth by PPL – UAH 300,000) - ? Exceptions set forth by PPL: demolition of facilities constructed without authorization in accordance to art.38 of Law of Ukraine “On regulation of town-planning activity”; services related to regulation and standardization in construction

4. 3. Procurement item in construction: definition • Works – based on a construction project with due consideration of Construction Cost Determination Rules DBN D.1.1-1-2000 and Institutional Construction Standards VBN G.1-218-182: 2006 Classification of Repairs of Public Roads • Maintenance services – based on a construction project subject to Construction Cost Determination Rules DBN D.1.1-1-2000 A construction project?

5. 4. Planning algorithm in procurement of works • Definition of a procurement item • Definition of the expected cost of a procurement item: - according to DBN based on the scope of work - it does not depend on budget assignments during the budgeting period or the amount assigned under the annual financial plan for the construction Note: When works are to be procured, the expected cost of the procurement item does not equal the construction cost presented in the overall estimate. • Choice of procurement procedure

6. 5. Procurement of works: procedures • Open bidding • Single-source procurement (when there are grounds set forth by PPL, Art. 39, Part II, including a need for additional construction work which was not covered by the original project but which became necessary for project implementation due to unforeseen circumstances provided a procurement contract shall be made with the contractor contracted for the previous work when such work is technically or economically related to the general contract) Additional contractual work -? • Two-stage bidding • Pre-qualification procedure

7. 6. Procurement of works: bidding documents (1) PPL general requirements to the contents of bidding documents (1)(Art. 22) 1) guidelines for the preparation of competitive bidding proposals 2)qualification criteria set forth by Article 16, requirements set forth by Article 17 of this Law and information about the method of documentary confirmation of participants’ compliance with the criteria and requirements set forth in accordance with the legislation 3) information on the necessary technical, qualitative and quantitative features of the procurement object, including the relevant technical specifications 4) place where the work is to be performed and the scope thereof 5) timeframe for performance of work 6) draft contract or basic terms and conditions to be included in the procurement contract 7) description of a lot (lots) provided bidders are allowed to submit competitive bidding proposals for a part of the procurement item 8) list of criteria and evaluation methods for competitive bidding proposals including information on the specific weight of such criteria

8. 7. Procurement of works: bidding documents (2) PPL general requirements to the contents of bidding documents(2)(Art. 22) 9) validity period of competitive bidding proposals (at least 90 days) 10) information about the currency used for the competitive bidding proposal price 11) information on the language to be used for presentation of competitive bidding proposals 12) method, place and deadline for submitting competitive bidding proposals 13) procedure for provision of clarifications in respect of competitive bidding documents 14) amount, type and conditions for provision of security for a competitive bidding proposal 15) amount, type and conditions of provision, conditions of return or non-return of the security for procurement contract performance 16) place, date and time for opening of competitive bidding proposals 17) full name, position and address of one or several procuring entity’s officials authorized to communicate with bidders Standard biding documents: requirements to execution and structure

9. 8. Procurement of works: bidding documents (3) Peculiarities of preparation of documents for procurement of works • Qualifying criteria for prospective contractors • Bidders are allowed to inspect the object (construction site or assigned land) • Ability / inability to subcontract other undertakings to perform certain types of work • Bid price calculation method for procurement of works • Technical specifications for works • Scope of works, design specifications & estimates

10. 9. Procurement of works: bidding documents (5) Bid price calculation methods for procurement of works: basic principles (1) • Procurement of works for construction of a facility: DBN D.1.1-1-2000 Construction Cost Determination Rules, Section 3, Subsection 3.2: Tender Bid Price • Procurement of design and exploration works: DBN D.1.1-7-2000 Rules for Determining the Cost of Design and Exploration Work for Construction to be Carried out in the Territory of Ukraine, Section 4: Peculiarities of Determining the Bid Price for Design and Exploration Work by the Bidder, Price Negotiation and Payment for Work Completed

11. 10. Procurement of works: bidding documents (6) Bid price calculation methods for procurement of works: basic principles (2) Equipment and construction - together or separately? • Regulatory documents on the possibility to procure equipment as a part of procurement of works • Additional requirements for prospective contractors • Procuring entity’s risks

12. 11. Procurement of works: bidding documents (7) Bid price calculation methods for procurement of works: basic principles (3) A ‘complicated’ procurement item: procurement of construction work, equipment, and commissioning Bid price: cost of construction and assembly work (a form of a contractual price) + cost of equipment (table of prices for equipment) + commissioning cost (a form of a contractual price)

13. 12. Procurement of works: bidding documents (8) Technical specification for procurement of works: Description of work, technical specifications, construction technology, measures to protect the environment, performance of work in accordance with the requirements of government building standards and other regulatory documents and technical regulations then in force in the territory of Ukraine, measures to ensure safe working conditions, fire safety requirements for the timing or milestones of works, quality assurance requirements etc.

14. 13. Procurement of works: bidding documents (8) Scope of work, designs & estimates To calculate the bidder’s price for construction of a project, the procuring entity shall provide the bidder (contractor) with the statement of scope of work to be done, statement of resources for such work with/without the relevant estimated prices or design specifications (DBN D.1.1-1-2000, paragraph 3.2.2: Construction Cost Determination Rules) Would the scope of work be enough to prepare a high-quality bid?

15. 14. Winner post-qualification A license to run construction business as a prerequisite to enter into a procurement contract (PPL, Art. 40) Amendment of the Procedure for Licensing of Economic Activities Associated with Architectural Development Economic activities in construction associated with architectural development subject to licensing: • Survey work for construction • Development of urban planning documentation • Architectural design • Construction and installation • Installation of utilities • Construction of transport facilities • Engineering in construction

16. Thank you very much for your attention!