WORLD BANK

Prequalification
Seminar on Procurement of Goods, Works and
Consultancy Contracts financed from World
Bank Loans and IDA Credits,
February 27 - March 3, 2006, Zagreb, Croatia

Prequalification

Definition
Capability assessment of firms to carry out a
particular contract prior to being invited to
submit a bid is a process called
prequalification

Prequalification

SPECIALLY SUITABLE FOR

Large or complex civil work
Custom designed equipment
Industrial plant
Specialized services
Complex information technology
Turnkey,design and build, management
contracting

PQ Why do it?
ADVANTAGES
Enhances participation of serious contractors
(since unqualified bidders are excluded)
Reduces high cost of bidding
Gives early warning of competition potential
Reduces complaints of disqualified bidders
Gives Peace of Mind to Employers

Prequalification
MORE ADVANTAGES
Borrower able to assess interest of qualified
firms
Identifies potential conflict of interest
(contractors with business association with
consultants)
Reduces time in evaluating bids from
unqualified bidders
Reduces potential for controversy
Early Detection of Employers capacity to
manage procurement
5

Prequalification

DISADVANTAGES
Increases procurement lead time (minimized
by undertaking prequalification while preparing
bidding document)
Review of all application is mandatory whereas
post-qualification requires review of only
winning bid (BUT VERIFICATION OF INFORMATION
SUBMITTED IS NOT REQUIRED FOR THE PQ EXERCISE)

Possibility of collusion
ADVANTAGES OUTWEIGH
DISADVANTAGES

PQ If you meet the Criteria

you may enter in contest!

Every firm or JV that meets the PQ criteria,

which is always Pass or Fail, does become prequalified. Employer can not modify the criteria
to increase or decrease the number of prequalified firms during evaluation.
The worst problems in civil works usually arise
from contractors lacking knowledge, means,
funds, equipment or personnel.

PQ CRITERIA

(Slide 1 of 3)

History of Non-Performing Contracts. The

Employer must ensure that the prospective
Contractor doesnt have a history of litigation an
non-performance.
Failure to Sign Contract Not being under
execution of a Bid Securing Declaration.
Pending Litigation All pending litigation shall in
total not represent more than [insert number ]
%, [insert percentage in words] of the Applicant's
net worth and shall be treated as resolved
against the Applicant.

PQ Criteria

(Slide 2 of 3)

Financial Requirements

Sound position; long term profitability.

Cash Flow (on hand) of about 4 months (to

finance work unpaid) Straight line calc.

Annual turn-over for a number of years of no

less than 2 times annual disbursement of
contract. (used to be 10 and then 5, 3, and
now 2) This reduces chance of contractor
going broke on your job! Borrowers may use 3
which
is more
conservative.
We
will see
an example
of how to calculate these
figures later in this presentation!

PQ criteria

(Slide 3 of 3)

Construction Experience

Completed one or 2 Contracts of similar type

and value (80%) during last 5 years.

Executed similar work of same key items of BOQ

in similar periods, at a 80% of the rate required.
Including peak periods if needed.
We will see an example of this later in this
presentation!

10

11

Prequalification

(& the new PQ

document)

REVISED PREQUALIFICATION DOCUMENT

DESIGNED TO
Simplify Employers preparation time
Reduce Applicants preparation time
Simplify evaluation of applications by
Employer
Minimize Banks review time

12

Prequalification PQ
Document

PART I -APPLICATION PROCEDURES

Section I:Instructions to Applicants(ITA)
Specifies procedures to be followed by
the Applicants
No modifications permitted in Section I
Section II- Application Data Sheet (ADS)
Provisions specific to given package
Section III -Qualification Criteria
Section IV- Application Forms
13

Prequalification

PART 2: WORKS REQUIREMENT

Section V
Briefly describes scope of works, time for
delivery and completion, technical
specification ,etc.
EMPLOYER REQUIRED TO FILL ONLY
SECTION II - Application Data Sheet
SECTION III- Qualification criteria
SECTION V - Scope of work
USERS GUIDE Not a part of
prequalification document
14

Prequalification

IMPORTANT CLAUSES OF INFORMATION

TO APPLICANT (ITA)
Source of Fund
Corrupt Practices
Eligible Applicant
What comprises PQ Document
Procedure for preparation of application

15

Prequalification Important
Clauses in ITA (Information to
Applicants)

Submission of application( deadline,late

application ,etc.)- Late applications to be
returned unopened

Procedure for evaluation of application

(clarifications,domestic preference,
specialist subcontractor ,etc..)

Evaluation and notification

16

Prequalification

QUALIFICATION CRITERIA
ELIGIBILITY CRITERIA
No conflict of interest, government owned
entity restrictions, Nationality,Bank
ineligibility, UN Resolution,etc. (each
partner of Joint Venture to meet each
eligibility criteria)

17

Prequalification

EXPERIENCE CRITERIA

(a) General Construction Experience-normally 5 years or

more; 3 years under special circumstances to allow new
entities (Each partner of JV must also meet this criteria)
(b) Specific construction experience: similar contracts
based on physical size,complexity, methods/technology,
etc. (1 to 3.. normally 2); Applicant to have completed or
substantially completed one or more contracts of a
value(not less than 80%) of the proposed contract over
the stated period say five years
key construction activity( earthwork, concrete
etc);Applicant to demonstrate experience ;example
pouring or placement of rock or concrete of 80% of
peak monthly or annual rates expected under
proposed contract over stated period say 5 years

18

Prequalification

FINANCIAL CRITERIA

(a) Applicant to establish financial soundness and

long term profitability for last 5 years (exceptionally 3
years) each Joint Venture partner must meet this
requirement
(b) Minimum cash-flow for specified amount
(c) Average Annual Construction Turnover within last
five years or more (three years exceptionally) for not
less than twice the estimated annual turnover of
proposed contract(may be reduced to 1.5 for
contracts over US$200 million);for JV each partner
must meet a percent (say 25%) and one partner
must meet a percent (say 40%) of requirement

19

Prequalification
Criteria for historical contract non-performance
and pending litigation
Pending litigation not to exceed 50% of
Applicants net worth( each partner of JV to
meet this requirement)
OTHER IMPORTANT ASPECTS
Employer to set pass/fail criteria
Joint Venture must satisfy collectively specified
qualification requirement in full, in addition to
each partner meeting specified minimum

20

Prequalification

Verification of liquid asset/line of credit,key

personnel and equipment at time of award
Multiple Contracts: Qualification criteria to
be indicated for each contract and
applicants to be qualified for one or more
contracts
Basis for multiple contract awards:consider
combination of bids offering lowest
evaluated cost to Employer for all contracts
21

22

23

24

25

26

27

Prequalification

Will need to Address the Slice and Package:

size of package , preferably to be similar and
number of slices not to exceed 4 complexity
of evaluation increases with more numbers
Conditional Prequalification ( examples,
provision of additional critical information,
revision of preliminary JV Agreement, proposal
for subcontracting specialized elements,
questionable ability to undertake subject
contract along with pending contracts)

28

Prequalification

No upper limit on numbers: all firms that

meet criteria must be prequalified
Notify each disqualified Applicant giving an
indication for reasons for disqualification
Invite all qualified Applicants to bid
Changes in structure or formation of
Applicant after prequalification : requires
prior written approval of Employer/Bank
Re-verify critical qualification information at
time of award
29

vs. Postqualification !

Only for selected bidder

Criteria (Goods)
Eligibility
Experience of supply of similar items over a
specified period
Manufacturers authorization to supply
Production capacity

30

Postqualification

Production capacity
Technical capability
Financial resources
Spare parts and service
Past performance

31

Postqualification

Criteria (works)
Eligibility
Past experience (size/complexity)
Personnel resources
Equipment resources
Financial capacity
Litigation/arbitration history

If there was prequalification, confirm that

bidders status is substantially the same as at
prequalification

32