Towards Programme Implementation Introduction to Procurement BFM/FPC February 2014

1. Towards Programme Implementation Introduction to Procurement BFM/FPC February 2014

2. Table of content (1/3)

3. Introduction to Internal Control

4. Who is responsible for Internal Control? Governing Bodies Provide oversight and direction Chief Financial Officer & Finance Officers Manage & ensure controls are effective Internal Oversight Service Reports on adequacy & effectiveness Director-General Internal Control System owner ADGs/Directors/ Managers Accountable for controlling their activities Staff Members Responsible for reliable exercise of internal controls Everyone has responsibility for internal control!

5. Internal Control Approach First Level of control Programme Specialist 2nd Level of control Approving Officer External Audit Internal oversight 3rd Level of control AO / BFM

6. UNESCO’s Contractual Framework

7. The Contractual Framework For-profit organization Not-for-profit organization Institution or legal entity such as a private company, grouping or corporate body recognized as such by national or international legislation Governments (represented by an organ or ministry), international or national organizations, non-governmental organizations, and other non-profit making bodies (e.g. university, research institute, National Commission for UNESCO) Individual consultant A recognized specialist contracted for services by UNESCO either in an advisory or consultative capacity or to provide the skills, expertise and knowledge needed to deliver a specific service or product. Such individuals shall have specialist skills and knowledge not available in UNESCO and for which there is a temporary and not a continuing need.

8. Contractual Framework What contract should be used? Contracts with individuals Financing activities contracts Contracts for services, goods and works Implementation partners agreements Contractors Individuals Profit Not for profit X X X X X X X Contractors deliver to UNESCO services: either in an advisory or consultative capacity or to provide the skills, expertise and knowledge needed to deliver a specific service or product. Project/programme objectives are UNESCO’s. Contractors deliver to UNESCO professional/intellectual services, goods (commodities, equipment, etc.) and works. Project/programme objectives are UNESCO’s. UNESCO transfers funds to a partner to implement a common programme or project. Project/programme objectives are shared. Deliverable: report indicating that the project activities have been implemented as jointly planned and agreed. Financial participation by UNESCO in the contractor’s activities. Project objectives are those of the contractor but fall within UNESCO’s mandate. The expected deliverables are financial statements & qualitative report. Intent

9. Contractual Framework Specificities Contracts with individuals Financing activities contracts Contracts for services, goods and works Implementation partners agreements Regular programme (RP), and extra budgetary (EXB) funds RP and EXB funds RP funds only Funding source RP and EXB funds The individual is responsible for the delivery of services, goods and work set in the contract. Objective remains with the contractor, UNESCO participates financially. Accountabilities The contractor is responsible for the delivery services, goods and work set in the contract. UNESCO remains accountable to the funding source. Maximum Duration Up to 11 months in any consecutive 12 months, with 1 month service break; delivery dates up to 12 months. The contract end date should not extend beyond the end of a biennium.  Irrespective of funding sources, except where specific limits have been set by the donor, which should be respected. Can only have one contract of any type with UNESCO at one time. RP funded: 12 months max within a given biennium, and the activity must begin before the end of that biennium and be completed not more than 3 months after that biennium. if RP funded: 12 months max within a given biennium, and the activity must begin before the end of that biennium and be completed not more than 3 months after that biennium. if EXB funded: activity start and end date must remain within the project time line agreed with the donor. Implementation agreements may be concluded for multi-year terms, as needed for the implementation of the agreed-upon activities. if RP funded, the duration should not exceed 3 months period after the closure of the biennium concerned

10. UNESCO Contractual Framework Selection of contractors is based on the provisions of the following Manual items: Contract for goods & related services Contracts for works Contract for services AM Item 7.2 and 10.2 – BFM/FPC Implementation partner AM Item 7.5 – BFM/FPC & BSP/CFS Financing Activities AM Item 7.3 – BFM/FPC Intergovernmental Body Allocation AM Item 7.6 –BFM/FPC • (Only used for specific purposes) Contracts with Individuals (consultants) HR Manual Item 13.10 – HRM/POL

11. Procurement Process

12. Principles & policies

13. Objectives To better understand • Procurement within the UNESCO contractual framework • Principles, policies and procedures related to procurement and selection of contractors • Procurement cycle i.e. different procurement activities: their relative importance to the timeliness and quality of project implementation.

14. Definition of procurement Procurement is the overall process of acquisition, by purchase or lease, of goods, works and/or services required by the Organisation, governed by the principles of: • Best value for money • Fairness, integrity and transparency (through competition) • Economy and effectiveness • Interest of UNESCO It spans over the whole cycle from the initial idea and description of needs through sourcing, solicitation, contracting and delivery, up to the end of useful life or completion of work or service.

15. Best value for money Ensuring best value for money is the core governing principle of UNESCO. The basis for “Best Value for Money” is effective competition when sufficient number of qualified independent companies are competing under fair and transparent conditions based on clear, neutral specifications /Terms of reference where the requirement is not overstated but corresponding to real needs. Based on requirements - as stated in the solicitation documents - UNESCO must achieve the best return and performance for the money being spent. Price is not the sole indicator of value.

16. Procurement ethics ‘Globally’ recognized public procurement values & principles: • Integrity [e.g. public trust cannot be compromised, no offers for personal gain] • Fairness [e.g. equal treatment of bidders, no advantage to anyone] • Transparency [e.g. advertisement of procurement notice, documentation/audit trail] • Conflict of interest [e.g. stand neutral, declare any potential conflict] • Due diligence [e.g. procurement actions done carefully & thoroughly] • Loyalty [e.g. being loyal to & within the organization, respect rules] • Avoidance of impropriety [e.g. be aware of how actions appear to an outsider] Ethical principles are outlined in: “Standards of Conduct for the International Civil Service” Confidential advice and guidance on ethics is provided by: UNESCO Ethics Office ethics@unesco.org

17. Delegation of procurement authority “Approval authority for awarding procurement contracts:” • When based on competitive bidding (AM 10.2) • Less than USD 150,000: Sector ADGs, Directors ofBureaux/Divisions/ Institutes, Directors or Heads of Offices i.e. DIR/UBO • USD 150,000 and above: Submission to HQ Contracts Committee (HCC) following compliance review by One-Stop-Shop (OSS) prior to award 2. When based on a waiver of competitive bidding (AM 10.2) • Less than USD 100,000: Sector ADGs, Directors of Bureaux/Divisions/Institutes, Directors or Heads of Offices i.e. DIR/UBO • USD 100,000 and above: Submission to HQ Contracts Committee (HCC) following compliance review by One-Stop-Shop (OSS) prior to award 3. When based on a LTA (AM 10.2) • All LTA’s regardless the value to be submitted to HQ Contracts Committee (HCC) prior to award, except those established by other UN Organizations

18. Contracts Committee (1/2) The scope and purpose of the Contracts Committee is to review high valued contracts: • Including all proposed contracts above given thresholds (i.e. IPA, IC, FAC & Procurement Contracts) bringing consistency in decision making and reducing administrative burden. • The role is not only to review compliance of procurement actions under a contract with the rules and policies in place. Also a a programmatic view has been added to the review of the Contracts Committee. • A compliance review will be submitted to the Contracts Committee by the ‘One-Stop-Shop’. Where the advice of the Contracts Committee is required, no contract can be awarded or amended before such advice is received.

19. Contracts Committee (1/2) • USD150,000 and above: All proposed contract(s), other than Individual consultant and other specialist contracts. • USD100,000 and above:Individual consultant and other specialist contract(s), proposed procurement contract(s) which is the result of a waiver of competitive bidding, proposed amendments and review of post-facto and retroactive situations. • USD50,000 and above: proposed contracts which generate income to the Organization • Any Long Term Agreement(LTA), with the exception of valid LTAs established by other United Nations Organizations • Cumulative total value USD150,000 and more : Contracts which modifies an existing contract, or constitutes arepeat order [series of contracts to one Contractor within the same calendar year] • Disposal of fixed assets with combined original acquisition value above USD50,000 Detailed scope of CC review reflected under AM Item 7.4 Para. 2.2

20. Mandate of One-Stop-Shop The “One Stop Shop” was established and responsible for : • Developing policies, providing guidance, training and technical assistance for all high-value contracts (those amounting to USD150,000 and above), “not only for the procurement of goods, works and services, but also for implementation partnership agreements, financing activities contracts and other forms of contractual agreements“. • “The technical guidance is widened to include advice and monitoring on selection, negotiation and contract management (monitoring and performance evaluation).” • “A more comprehensive approach to ensure compliance of all high value contracts with UNESCO’s Financial Rules and Regulations” and facilitating the “focus on high-value and hence high risk contracts” • With an aim to “reduce the administrative costs linked to procurement/ contracting activities”

21. The Contractual Cycle High valued draft contracts must be reviewed by CC and OSS:

22. The process

23. Procurement cycle

24. Procurement preparation/planning • Programme Specialist is responsible for defining the procurement needs, suggesting the procurement methods, type of competition and stipulating the timing of the procurement under the project. • Special focus for significant’ purchases (i.e. w/ high relative expenditure & difficult to source). • For high-value (USD 150,000 and above) or otherwise complex procurement, consultation with BFM/FPC. • Due consideration for establishment of a Long Term Agreement (LTA) or the use of existing UN LTA to avoid repetitive bidding for the service or commodity.

25. Procurement preparation/planning: checklist • Link between the request and an activity in the agreed work plans/prodoc • Cost estimates (i.e. realistic budget) • Assessment of capacities to implement the procurement component • Adequate purchase descriptions • Choice of appropriate solicitation method and type of competition • Justification for waiver of competitive bidding, if applicable • List of most potential contractors • Timeline and milestones of complete procurement cycle • Admin. requirements (relevant codes, budget allotments etc)

26. Requirement definition/assessment of needs A systematic approach to clearly define what is needed and will be procured. It will consist of the need to be covered, collecting information and identifying appropriate solutions, specifying these for goods, works and services: Specifications Goods & Equipment Professional Services Terms of Reference (TOR) For Civil & Construction Works Statement of Works (SOW)

27. Market research/sourcing The purpose of market research and sourcing is to gain understanding of the supply market for the product or services to be purchased, as well as to identify potential suppliers who could provide the products or services to be purchased. Normally a decision will be made based on the findings of the market research, on whether the procurement activity will be undertaken as an open tender, limited tender (short list), or as a waiver of competitive bidding.

28. Procurement thresholds Important procurement ‘thresholds’ • Contracts below USD 5,000 [direct contracting] • Contracts between USD 5,000 and 49,999 [informal competition] • Contracts between USD 49,999 and 149,999[formal competition] • Contracts USD 150,000 and more [formal with mandatory advertisement] Will determine the type of competition and the procurement method !

29. Types of competition & procurement methods 1. Selection of the type of competition: • Open International Competition (OIC) • Limited International Competition (LIC) • Local/National Competition (LNC) • Waiver of Competitive Bidding 2. Selection of the type of solicitation (procurement) method: • Direct Single Source / Shopping • Informal Price Request / Request for Quotation (RFQ) • Invitation to Bid (ITB) • Request for Proposal (RFP)

30. Types of competition Values $150,000 and more (or otherwise complex procurement case with limited market knowledge). Initiated by advertisement/notice through which any supplier may participate, consult BFM/FPC. Open International Competition (OIC) Values below $150,000. Based on shortlist of qualified suppliers selected in non-discriminatory manner. When above $150,000 advertisement and prior approval of the process by BFM/FPC. Limited International Competition (LIC)* Values below $50,000 (or values above $50,000 if justification as per Manual 10.2 exist). When above $150,000 advertisement and prior approval of the process by BFM/FPC. Local or National Competition (LNC)* * Under LIC and LNC, a shortlist of potentiel suppliers is established using form AM 10-13

31. Types of procurement methods Direct Single Source Any purchase below USD 5,000 & approved “waivers” Any purchase USD 5,000 - 50,000, where requirement is clear and specific - may be used for values below USD 5,000 as well Informal Price Request / Request for Quotation (RFQ) Form AM 10-9 Any purchase USD 50,000 and above, with requirements that cannot be expressed qualitatively and quantitatively (i.e. usually services) Request for Proposal (RFP) Form AM 10-10 Any purchase USD 50,000 and above, with standard and firm specifications expressed qualitatively and quantitatively (i.e. usually goods and works) Invitation to Bid (ITB) Form AM 10-12

32. Waiver of competitive bidding • Competition is the foundation of UNESCO procurement. The procurement process must allow potential contractors to compete for UNESCO business on a fair, equal and transparent basis. • The only possible cases in which a contract may be placed without competitive bidding are listed on AM 10.2 Para. 5.3. • Any waiver should be justified in writing using form AM 7-13 along with relevant supporting documentation (stored in DUO system and the records file) and approved at the appropriate authority level. • Since a waiver is based on direct contracting, evidence of reasonableness of costs should be provided in the waiver submissions ideally through a mandatory price benchmark, full records of previous bids…

33. Waiver conditions (1/2)

34. Waiver conditions (2/2)

35. Other considerations

36. Tips for supporting documents to be provided for each waiver condition

37. Procurement cycle

38. Solicitation process Solicitations documents are used to request bids, proposals or quotations (offers) from suppliers for the goods/works/services. Use of standard solicitation documents for values above USD50,000. The preparation of solicitation documents is one of the most important phases of the contracting process as it will constitute the “heart” of the future contract. Extreme care must be taken to ensure that the documents are not biased to favour a particular contractor. Identification of needs, evaluation factors, instructions to bidders, and time schedules must be developed with the idea of enhancing competition rather than restricting it.

39. Solicitation process After the requirements have been defined, the market research has been undertaken, and the type of competition and procurement method has been selected the next step is the solicitation of offers: * Two-envelope method for RFP requires completion of technical evaluation report and separate opening of qualified financial offers

40. Evaluation process The overall procurement process will not be successful without a correct, objective and fair evaluation process: * Two-envelope method for RFP requires completion of technical evaluation report and separate opening of qualified financial offers

41. Establishment of an evaluation team – under formal competitive bidding Responsibility: • Overseen & coordinated by responsible UNESCO staff member. Composition: • Two to five members, depending on the nature, complexity and value of the procurement activity (for cases above USD150K, minimum 3 members) • External expert may be included to assist in the evaluation process as one of the team members. • Representatives from the funding source or beneficiaries may participate only in exceptional cases (if required, as observers). • Identification of a winner always rests with UNESCO. Before starting the evaluation, the members should: • indicate immediately if they are in a potential conflict of interest situation with one of the bidders and ask to be replaced; • familiarize themselves with the evaluation criteria and how to assign scores; • understand that the deliberations of the evaluation committee are strictly confidential and they cannot discuss their content with colleagues and/or outsiders;

42. Evaluation of a RFQ & ITB For procurement of goods or works through RFQ or ITB the “best value for money” is primarily linked with obtaining the best prices that perfectly comply with the present specifications and quality standards... i.e. the award is given to the lowest priced offer determined to be compliant for all the issues specified in the RFQ or ITB (pass/fail evaluation) To establish the most adequate offer based on a Request for Proposal (RFP) for services, however, several other elements besides price and compliance with the terms of reference are likewise important and must be considered.

43. Evaluation of a RFP Proposals in response to a RFP are evaluated based on how well a firm/entity has understood the TOR and addressed it in their proposal and how capable they are of delivering the expected results. The following main principles apply to UNESCO RFP: Option 1. Lowest priced technically compliant (two envelopes) • the award is given to the lowest priced technically compliant offer selected based on a point system method with minimum threshold Option 2. Cumulative analyses / weight scoring (two envelopes) • the award is given to the offer that receives the highest score out of a predetermined set of weighted technical and financial criteria. Minimum 30 % of the weight is given to the financial proposal (max 70 % to the technical proposal) Through a RFP, UNESCO seeks a proposal (a “solution”) to meet our needs, where the price is not the overriding measure for the contract award.

44. Evaluation of a RFP Evaluation criteria is normally grouped into three main categories with a number of sub-categories or sub-criteria. The weight/number of points obtainable varies case-by-case and must be stated in the RFP documents. • Expertise of firm/institution submitting a Proposal • To include sub-criteria such as company background information, financial strength, experience in related services/projects, experience in the region/no of years etc. • Proposed work plan and approach • To include sub-criteria such as extent of understanding of project requirements, practicality of the proposed methodology, risk assessment and mitigation strategies, planning, implementation schedule, work plan, quality assurance measures etc. • Key personnel criteria. • To include sub-criteria such as individual qualifications of team members, level of education, key technical skills/expertise, key managerial skills, cultural knowledge etc.

45. Evaluation of a RFP Prior to opening of the proposals the evaluation team must agree on the detailed evaluation criteria / scoring scale, in accordance with the RFP document. - Any proposal that do not meet the mandatory criteria as stated in the RFP must be rejected from further evaluation/scoring (e.g. language, minimum experience etc). - Measurable criteria is e.g. xx no of points for year of experience or xx no of points per similar project in the region, - An example of a scoring scale criteria is: 100 % of the points = excellent evidence of ability to support & exceed requirements 90 % of the points = good evidence of ability to support & exceed requirements 70 % of the points = satisfactory evidence of ability to support requirements 40 % of the points = marginally acceptable/weak evidence to support requirements 10 % of the points = no evidence to demonstrate ability to comply with requirements 0 % of the points = no information submitted or unacceptable with requirements

46. Procurement thresholds and formality level of the process * For PCPD countries, higher thresholds have been set, please consult BFM/FPC for more information.

47. Quiz Quiz

48. Quiz: procurement planning/preparation Q.1 – Why is it important to estimate cost during procurement preparation stage? A – To identify the type of competition B – To align the available budget with identified requirements C – To determine the procurement method to be used D – All of the above

49. Quiz: procurement planning/preparation Q. 2 – What does the scope of a Procurement Plan depend upon? A – The value of the procurement B – The complexity and nature of the procurement requirements C – All of the above D – None of the above

50. Quiz: procurement planning/preparation Q. 3 – The budget of a procurement action is usually communicated to potential bidders. A – True B – False