PART II:
Procurement Procedures

Article 4: Public Bidding

     This is the basic method of public procurement used unless there are circumstances that justify the use of other specific procedures. Under this procedure, individuals, companies, enterprises, joint venture or international enterprises which are legally constituted and are capable of supplying goods or works sought shall be given an equal opportunity of submitting bids in accordance with Article 17 of these Implementing Rules and Regulations.

     Public bidding involves the following procedures:

     • Tender documents : Tender documents must contain all the information necessary to enable a bidder to prepare complete and proper documents and to make an informed decision on whether or not to participate in the procurement procedure. The tender documents must be written in terms that are clear and precise. Generally, tender documents include: invitation to submit proposals; instructions to bidders; bid evaluation and selection criteria; bid forms; contract sample; general and specific conditions of contract; specifications and drawings; list of goods or bill of quantities; time of delivery or of completion and other necessary attachments, such as samples of required bid security. The basic principle in evaluating and selecting the lowest evaluated and qualified bid shall be clearly described in the general instructions and/or specific instructions to bidders. Tender documents shall be sold at a reasonable price covering the costs of printing, delivering and other necessary expenses. Best practice standard bidding and evaluation documents shall be developed by Ministry of Finance, Procurement Monitoring Office. The use of these documents when approved shall be mandatory by all procuring entities or project owners.

     •  Bid security the procuring entity may require bidders to furnish a bid security in a lump sum amount not less than 2% of the estimated contract amount or as stipulated in the bid documents. Where the tender documents stipulate that a bid security is required, the bid security shall be in accordance with the form in the tender document and underwritten by a local or foreign bank or as stipulated in the tender documents and its period of validity shall exceed the duration of the bid validity by 30 days. If the bid security shall be nominated in the currency of the bid or in other freely convertible currency, the exchange rate should be from the Bank of Lao PDR at the buying rate seven (7) days prior the bid opening date. The bid security shall be refunded to unsuccessful bidders within seven (7) days after the contract is signed and submission of the performance security by the successful bidder; or not later than seven (7) days after expiration of the bid security, whichever is earlier. The procuring entity or project owner will return the bid security to the successful bidder at the time of the signing of the contract. If the successful bidder fails to sign the contract and submit the required performance security, the procuring entity or project owner may call the bid security and proceed to the second lowest evaluated and qualified bidder to conclude a contract. In case bid security is not required in the tender documents, and the successful bidder withdraws or modifies its bid during the period of validity or fails to sign the contract or to submit the performance security within the prescribed deadline, the bidder shall pay to the procuring entity within 7 days a penalty of 2% of the bid price, failing which the bidder shall be debarred by the Ministry of Finance Procurement Monitoring Office for a period of up to one year.

     •  Bid validity bidders shall be required to submit bids valid for a period specified in the tender documents, which shall be sufficient to enable the comparison and evaluation of bids and obtain the necessary approvals so that the contract can be awarded within that period. An extension of bid validity, if justified by exceptional circumstances, shall be requested and approved by the Ministry of Finance, Procurement Monitoring Office. Any such request shall be made in writing, from all bidders before the expiration date of the bid validity. The extension shall be for the minimum period required to complete the evaluation, obtain the necessary approvals, and award the contract. In the case of fixed price contracts, request for second and subsequent extensions will be permissible only if the request for extension provides for an appropriate adjustment mechanism of the quoted price to reflect changes in the cost of inputs for the contract over the period of extension. Whenever an extension of bid validity period is requested, bidders shall not be requested or permitted to change the quoted price or other conditions of the bid. Bidder shall have the right to refuse to grant such as extension without forfeiting their bid security, but those who are willing to extend the validity of their bid shall be required to provide a suitable extension of bid security.

     •  Notification / Invitations to bid shall be published through the mass media and may be sent to individuals or firms interested to participate in the procurement procedure in accordance with Article 14 of these Implementing Rules and Regulations.

     •  Issue of tender documents : The tender documents should be ready at the date of notification for sale unconditionally to interested individuals or firms at a set price (tender documents' cost price only).

     •  Time limits : Bidders must be given adequate time to prepare and submit their bids. The minimum time limits must be the same for all bidders as set out under Article 14 of these Implementing Rules and Regulations. Where a bidder requires clarification, it must be requested in writing and the procuring entity must expeditiously give a written response that is sent together with a copy of the request to all bidders. The time limit shall include, if required, the time for site visits and pre-bid meeting necessary for the preparation of bids.

     •  Pre-bid meeting : In some cases, such as in  complex or large procurement, it may be necessary to arrange a pre-bid meeting to advise and address concerns of bidders and enable them to achieve detailed and proper understanding of the tender documents.   When pre-bid meeting is required, the date, time and venue of the meeting shall be indicated in the tender documents. If pre-bid meeting is not indicated in the tender document, and if requested by several of the potential bidders, a time will be set by the procuring entity that gives adequate time for potential bidders to attend.

     •  Bid submission : Bids must be submitted within the stated time limit and in the manner specified in the tender documents. They must be delivered by hand, courier, messenger or by registered post in sealed envelopes to the addressee and must be marked “Confidential, DO NOT OPEN BEFORE …… ”. Any bid received after the deadline shall be rejected and returned immediately unopened. Subject to Article 26 after the public opening of bids, information relating to the examination, clarification, and evaluation of bids and recommendations concerning awards shall not be disclosed to the bidders or other persons not officially concerned with the process until the successful bidder is notified of the proposed award of contract.

     •  Bid Opening : All bids must be opened in public immediately at the deadline set for the bid submission at the date, time and place stipulated in the tender documents. Bids shall be opened in public, that is, the bidders or their representatives or members of the public may attend the bid opening. The Tender Committee shall announce the names of the bidders and the price offered by each bidder. A record of the bid opening will be prepared and will contain the names of the bidders, bid prices, discounts and the names of persons in attendance and the organizations they represent.

     •  Bid Examination : Following the bid opening, the bids will be examined individually to determine, (i) the eligibility of the bidders in accordance with the provisions of Article 17, (ii) the substantial compliance of the bids with the terms and conditions set out in the tender documents, (iii) the responsiveness of the bids to the technical specifications and (iv) where the tender documents require the existence of a business license, the furnishing of a bid security or the signature by the proper authority, the Tender Committee shall verify and record whether the requirements were met in full. In the event that no bid satisfies the above conditions, the Tender Committee may decide that there are no responsive bids and follow the provisions of sub-paragraph (n) below;

     •  Clarification : After the bid opening, any negotiations with bidders on fundamental aspects of the bids which affect the principal of equal treatment, in particular on prices, are prohibited. When clarification is required by the Tender Committee, such clarification shall be sought in writing from the concerned responsive bidders.

     •  Bid Evaluation : All responsive bids as defined under Article 28 will be evaluated according to the provisions of Article 29. The evaluation process shall be completed within 15 days. For major and/or complex contracts, where more than 15 days is required for a comprehensive bid evaluation, the Tender Committee should specify the time for bid evaluation in the tender documents accordingly.

      •  Contract Award : The bidder submitting the lowest evaluated and responsive bid meeting the qualification requirements specified in the tender documents shall be awarded the contract and notified. Following the award of the contract and acceptance by the successful bidder, the procuring entity shall notify the unsuccessful bidders within 7 days.

      •  Rejection of bids : In the absence of any responsive bid in accordance with sub-paragraph (j) or any suitable bid in accordance with this sub-paragraph, any or all bids may be rejected. However, lack of competition shall not be determined solely on the basis of the number of bidders. Where all bids are rejected, the procuring entity or project owner must review the contract's terms and conditions, designs and technical specifications, and make improvements before proceeding in re-bidding. Where all the bids are rejected due to ineffective competition and if such rejection was due to the absence of substantial responsiveness from the part of all bidders to the conditions stipulated in the tender documents, a new public bidding may be announced. If there is only one bid and if such bid exceeds the allocated budget, the Tender Committee shall identify the causes for the excess and propose to proceed with re-bidding. Alternatively the procuring entity may negotiate with the bidder submitting the lowest evaluated bid to try to obtain a satisfactory contract through a reduction in the scope and/or reallocation of risk and responsibility, which can be reflected in a reduction of the contract price. However, substantial reduction in the scope or modification to the contract document requires re-bidding and prior review and approval from Ministry of Finance, Procurement Monitoring Office.
 

Article 5: Limited Bidding

     This procedure is applied in case of low contract value as specified in Article 13 or where there are a limited number of suppliers and contractors. Procuring entities and project owners shall invite bids from a list of potential suppliers or contractors broad enough to assure competitive prices and with sufficient capacity in accordance with provisions of Article 14. Limited bidding procedure follows the procedure outlined in Article 4(a) to (n) except (d), that is, in all respects other than advertisement Public Bidding procedures shall apply. The tender documents shall be sent to the bidders with the notification.
 

Article 6: Price Comparison

      Price comparison comprise of national or international shopping procedures.

(1) National Shopping

      Under this procedure the procuring entity or project owner compares the prices obtained from at least 3 qualified domestic companies or individuals and awards the contract to one of those suppliers. National shopping procedure comprises the following steps:

     • Quotations are invited from at least 3 domestic suppliers or contractors indicating the required quantities, specifications and contract conditions; and

     •  The offers are evaluated, compared and the contract is awarded on the basis of the lowest evaluated responsive bid.

(2) International Shopping

     Under this procedure the procuring agency or project owner compares the prices obtained from at least 3 qualified companies or individuals from at least 2 countries and awards the contract to the lowest evaluated responsive bid. International shopping includes the following steps:

(a) Quotations are invited from at least 3 qualified suppliers or contractors in at least 2 countries. The required quantities, specifications and contract terms and conditions are included with the invitation;

(b) Quotations submitted by other suppliers or contractors who were not invited may also be considered; and

(c) The offers will be evaluated and compared and the contract will be awarded on the basis of Article 29.
 

Article 7: Direct Contracting

     Subject to the requirements of Article 8 (4) below, this procedure allows the procuring entity or project owner to negotiate the terms and conditions of procurement directly with one supplier or contractor.

Direct contracting is carried out as follows:

     • For goods, works and services below the specified thresholds in Article 13, the procuring entity or project owner may purchase directly with one supplier or contractor. The invitation will include the required quantities, technical specifications, contract terms and conditions;

     • The quotations received will be reviewed for conformity with the specifications and contract terms and conditions contained in the invitation;

     • The offers complying with the above will be reviewed by the procuring entity or project owner to determine whether the price is fair and competitive. If the prices offered exceed the allocated budget, the procuring entity or project owner may negotiate a price reduction.

     • The contract will be awarded on the basis of conditions provided under Article 29.
 

Article 8: Conditions for Use of Procedures

(1) Limited bidding

     This procedure may be used subject to prior approval specified in Article 8 (4) when:

     • The value of goods or works does not exceed the threshold values in Article 13, or

     • There are a limited numbers of suppliers/contractors, or

    • There is insufficient time to apply the public bidding procedure, but the urgency has not been caused by the procuring entity's delay and it is still possible to seek competition without resorting to the direct contracting procedure of Article 7.

(2) National Shopping

     This procedure is used for the purchase of goods which are subject to frequent purchase and for which the aggregate value does not exceed the values in Article 13.

(3) International Shopping

     This procedure is used for the purchase of goods or works which aggregate value does not exceed the threshold values in Article 13.

(4) Direct Contracting/Purchase

     This procedure may be used subject to the approval on a case by case basis where:

     • For reasons connected with the protection of industrial or intellectual property rights and in the absence of an agent, the contract must be awarded to a single supplier or contractor;

     • Goods are required to replace parts of an existing equipment or repair such equipment;

     • In case additional works of similar nature are required to existing works under an ongoing contract, previously procured, and where it is unlikely to obtain lower prices through a further procurement procedure. The value of the additional works shall not exceed 20% of the original contract's value;

     • For emergency operations such as natural disasters or for un-foreseeable events or due to delay not caused by procuring entity, the time limitation does not allow to follow the public or limited bidding procedure;

     • The project and site is remote/isolated area, has local features or poor access.

     The direct contracting and limited bidding under Article 8(1) and 8(4) may be used when approved on a case by case basis by:

     • At the central level, by the Minister or his/her assignee;

    • At the level of Vientiane Capital or Provinces, the Governor or his/her authorized assignee.

Article 9: International Competitive Bidding

     The procurement procedures defined in Article 4 to Article 12 will apply to foreign companies or individuals where their value exceeds the thresholds in Article 13.

     When international procurement is used, invitations must be sent to suppliers and contractors both from Lao PDR and other countries. Notification shall be carried out in accordance with Article 14. In the case of international price comparison, the invitations to bid shall be sent to suppliers and contractors of at least 2 countries.

     In international competitive bidding (ICB) where notification is made to other countries, the award of the contract shall be in accordance with Article 29. A bidder may be a domestic company or an international company.

Domestic Preference:

     In International Competitive Bidding and International Comparison to promote the local enterprises and products a margin of preference may be provided in the evaluation of bids for:

(a) goods manufactured in Lao PDR when comparing bids offering such goods with those offering goods manufactured abroad; and

(b) works when comparing bids from eligible domestic Contractors with those from foreign firms.

     Where preference for domestically manufactured goods or for domestic Contractors is allowed, the methods and stages set forth below shall be followed in the evaluation and comparison of bids and shall be set forth in the tender documents. The Terms EXW, CIP, DDP are in accordance with the latest Incoterms.

Preference for domestically manufactured goods

     1. A margin of preference shall be granted in the evaluation of bids to bids offering certain goods manufactured locally, when compared to offering such goods manufactured elsewhere. In such cases, Tender Document shall clearly indicate the preference to the granted to the manufactured goods and the information required to establish the eligibility of a bid for such preference. The nationality of the manufacturer or suppliers is not condition for such eligibility. The methods and stages set forth hereunder shall be followed in the evaluation and comparison of bids.

     2. For comparison, responsive bids shall be classified in one of the three groups:

      • Group A: bids offering goods manufactured locally if the bidder satisfactory establishes that (i) local labor, raw material and components will account for more than 30% of EXW price to the product offered, and (ii) the production facility in which those goods will be manufactured or assembled has been engaged in manufacturing/assembling such goods at least since the time of bid submission.

      • Group B: all other bids offering, local gods.

      • Group C: bid offering the goods from abroad and to be directly imported.

     3. The price quoted for goods in bids of Groups A and B shall include all duties and taxes paid or payable on the basic materials or components purchased in the domestic market or imported, but shall exclude the sales and similar taxes on the finished product. The price quoted for goods in bids of Group C shall be on CIP (place of destination), which is exclusive of customs duties and other import taxes already paid or to be paid.

    4. In the first step, all evaluated bids in each group shall be compared to determine the lowest bid in each group. Such lowest evaluated bids shall be compared with each other and if, as a result of this comparison, a bid from Group A or Group B is the lowest, it shall be selected for the award.

     5. If as a result of the comparison under paragraph four above, the lowest evaluated bid is a bid from Group C, the lowest evaluated bid from Group C shall be further compared with the lowest evaluated bid from Group A after adding to the evaluated price of goods offered in the bid from Group C, for the purpose of this further comparison only, an amount equal to 15 percent of the CIP bid price. The lowest evaluated bid determined from this last comparison shall be selected.

     6. In the case of single responsibility or turnkey contracts for the supply of a number of discrete items of equipment as well as major installation and/or construction services no margin of preference shall apply. Such contracts may be invited and evaluated on the basis of DDP (named place of destination) prices for goods manufactured abroad.

Preference for Domestic Contractors

     For contractors for work to be awarded on the basis of ICB, a margin of preference may be granted of 7.5% to domestic contractors, in accordance with, and subject to the following provisions:

     1. Domestic contractors applying for such preference shall be asked to provide, as part of the data for qualification, such information, including details of ownership, as shall be required to determine whether, a particular contractor or group of contractors qualifies for the above domestic preference. The tender document shall clearly indicate the preference and the method that will be followed in the evaluation and comparison of bids to give effect to such preference.

     2. After bids have been received and reviewed, responsive bids shall be classified into the following groups:

• Group A: bid offered by domestic contractors eligible for the preference.

• Group B: bid offered by other contractors.

     For the purpose of evaluation and comparison of bids, and amount equal to 7.5% of the bid amount shall be added to bids received from contractors in Group B.

      In the case of large-scale, technically complex and high value projects, the suitability of bidders shall be assessed by the Tender Committee. The pre-qualification process shall be carried out as a potential public bidding procedure with the pre-qualification documents indicating the criteria and conditions to all companies who are interested in bidding. Such companies are required to submit documents for pre-qualification to the Tender Committee. Companies meeting the criterion and conditions set out in the pre-qualification documents will then be invited to submit bids.
 

Article 11: Two-Stage Bidding

      In two-stage bidding, suppliers or contractors submit initial offers in first stage without specifying the price. The procurement entity may request suppliers or contractors to define the parameters of the subject matter of the procurement. The second stage is a limited bidding for selected bidders and may be preceded by negotiations between the procuring entity and potential bidders. Two-stage bidding may be used when one of the following circumstances occurs:

• it is not possible to determine in advance the specific technical characteristics and quality features of the deliveries, services or construction being procured;

• negotiations with suppliers or contractors are necessary because of the special nature of the deliveries, services or construction;

• the subject matter of the procurement is research, experiment, preparation of a scientific opinion or performance of other specialized services;

• the procurement concerns complex construction design and works.

     The procuring entity may negotiate with each supplier or contractor the content of the submitted initial offer, keeping confidential the content of conducted negotiations. For the final offer, the procuring entity may modify the technical and quality requirements set forth in the initial specifications, as well as modify the criteria for evaluating the offers.

      In the invitation to submit final offers, the procuring entity shall inform suppliers or contractors about any modifications made in the initial specifications.

     For the second stage of the bidding, the procuring entity selects suppliers or contractors whose initial offer satisfies the requirements of initial specification. The qualified suppliers or contractors are requested to submit bids. The place, time period and deadline for submission of final bids shall be specified in the invitation. Suppliers or contractors shall provide bid security when entering the second stage of bidding.
 

Article 12: Procurement Financed by Foreign Grant or Loan/Credit

      In the case of foreign grants, loans or credits, when a treaty or other form of an agreement is entered into by the Lao PDR with the concerned donor, where such an agreement does not require adherence to separate procurement procedures, these Implementing Rules and Regulations will apply. Otherwise, the procurement procedure of the donor take precedence over any conflicting provision in Decree No. 03/PM dated 9 January 2004 or these Implementing Rules and Regulations.
 

Article 13: Threshold Values

(1) Levels

     The procurement procedures described in Articles 4 to 9 above are used for contracts whose estimated value, before any taxes and duties, is as follows:

(a) In the case of domestic procurement in Kip

* Limited bidding is subject to prior approval as per Article 8 (4) and also possible for higher estimated contract amounts as per Article 8(1) (b) and (c).

** For the purchase of equipment for medical purposes.

*** Usually for day to day expense otherwise subject to Article 8 (4)

(b) In the case of International Competitive Bidding

(2) Revision of thresholds

      The threshold values of sub-paragraph (1) above should be reviewed every two years by the Ministry of Finance. The threshold values should normally be increased in relation with to the consumer price index.

     Threshold values shall increase when such index increases 25% and the Ministry of Finance shall adjust the threshold values accordingly to the most appropriate figure. Each revision shall be published in the mass media and the content of Article 13(1) of these Implementing Rules and Regulations shall be amended accordingly.

(3) Splitting of Contracts

     Contracts for the supply of goods and the construction of works shall not be split into smaller contracts to reduce the value of a contract below a threshold. For the purpose of calculating threshold values, the value of a transaction shall be as follows:

      • In the case of works, the total value of works and civil engineering activities are taken together to fulfill an economic and technical function;

     • In the case of supplies which are awarded over a given period of time by means of a series of contracts awarded to one or more suppliers and which may be renewed, the total aggregate value of the contracts with similar characteristics to be awarded within 12 months following the first award or the total value of the contract where its term is longer than 12 months.

(4) Lots

       According to sub-paragraph (3) above, the procuring entity may separate a transaction into a series of contracts (lots) according to the qualifications or criteria of the suppliers and contractors. However, for the purposes of this Article, the value of such lots must be aggregated to calculate the total value of the contract in accordance with the procurement procedure to be used. The lots will then be evaluated and awarded following such procedure. In any public bidding procedure, the procuring entity or project owner may indicate the existence of lots and that suppliers or contractors may select lots for bidding. Lots will be considered appropriately. The overriding principle for lots is that the aggregate value determines the thresholds to be used.
 

Article 14: Notification/Announcement

(1) Invitations to bid covered by these Implementing Rules and Regulations shall be notified as follows:

     • Domestic public bidding: in a Lao language newspaper and notices to each ministry, province or district depending on the value of the procurement.

     • International public bidding: in Lao language and English language newspapers published in Lao PDR or, in the case of large-scale and important project, in an international English language newspaper, such as the UN Publication Development Business (the online version) or professional magazines according to the characteristics of the project and notices are sent to foreign diplomatic missions in Lao PDR.

     • Limited bidding: invitations to bid shall be sent to suppliers or contractors selected by the procuring entity or project owner in accordance with Part IV and sent (all invitations sent at the same time) by registered mail.

     • Direct contracting and price comparison: The procuring entity or project owner may negotiate directly with suppliers or contractors from whom it has solicited quotations in accordance with paragraph 4 of Article 8.

(2) Time limits used by the procuring entity or project owner for the submission of bids shall be reasonable and take into account the nature of goods, services or works sought. Sufficient time should be given to allow all bidders to prepare their bids. The following minimum time limits shall be observed:

* Must be justified on a case by case basis

** Or by mutual agreement in cases falling within Article 8(4) (d)

(3) Notification shall include reference to:

     • The identity of the procuring entity

     • A summary of the works, goods or services sought, address to obtain tender documents and further information related to the submission of bids;

     • Bid security, if required;

     • Cost of tender documents;

     • Procedural requirements;

     • Final date and address for submission of bids.