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2008/SOM3/GPEG/SEM/012
The Value for Money Non Binding Principle in Peru’s Government Procurement: Implementing Appropriate Procurement Methods
Submitted by: Peru
/ Seminar on Implementation of the Value for Money Non Binding Principle in Government ProcurementLima, Peru
13-14 August 2008
THE VALUE FOR MONEY NBP IN PERU’S GOVERNMENT PROCUREMENT: IMPLEMENTING APPROPRIATE PROCUREMENT METHODS
MARIO F. ARTEAGA
International Affairs Official
CONSUCODE – PERU
Initially, this presentation was intended to let you know a global vision about how the value for money non-binding principle has been implemented in Peru. However, taking into account both the wide variety of elements regarded to this topic, and the reduced time assigned by the Project Overseer, I will focus on the most important, basically on those regarded to the design and/or adaptation of appropriate suppliers’ selection methods and procedures.
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In this sense, after referring to some aspects that reflect the Peruvian government’s will directed towards the implementation of the APEC Non-Binding Principles, especially the Value for Money, we will review the main features of the mechanisms that any of the two thousand seven hundred thirty (2,730) Peruvian Public Sector Agencies —from national, regional and local levels of government— should or could follow or choose for selecting the best supplier of the goods or services they need to fulfill their functions. Among this mechanisms or procurement methods we have:
· General Procedure,
· Reverse Auction,
· Commodities Market,
· Framework Agreement,
· Corporative Purchases,
· Commission to other Agency.
Lastly, I will let you know what are we working on as well as our pending agenda.
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As the Vice minister /and/ CONSUCODE’s CEO said, it is important to point out that, textually, the main objective of the new GP Law is: “to maximize the value for money of taxpayers”. In this sense, its regulations will include a series of measures aimed to improve the assessment of needs and the identification of desired outcomes, as well as to achieve the best ways for suppliers’ qualification and offers evaluation, among other goals.
At the same time, similar importance has the incorporation of additional principles into the legislation. This is the case of the Environmental Sustainability and Human Development principles which, added to others like the APEC Non-Binding Principles on Government Procurement, have as purpose to guide the performance of all actors in GP processes, including procurement staff of public sector agencies; administrative, judicial and arbitration authorities, as well as tenderers, contractors and suppliers in general.
Another measure that deserves to be mentioned is the góvernmental decision of applying the Indicators elaborated by the Organization for Economic Cooperation and Development (OECD) to evaluate the Peruvian GP System. The results of this evaluation will allow the correction of all those aspects that still differ from international standards.
Finally, it is necessary to highlight the establishment of the Public Purchases Central Agency (PERU-COMPRAS) whose main functions are to develop Corporative Purchases and Framework Agreements, following the procedures that we will describe later on.
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Now then let’s begin with the presentation by making a remark. In general terms, every Peruvian government procurement procedure is developed through three phases or stages:
1. The phase for Planning and Preparatory Actions;
2. The phase for Supplier’s Selection; and
3. The phase of contractual execution.
The first one involves:
· The mandatory inclusion of every purchase into the respective Annual Procurement Plan;
· The definition of requirements and technical specifications, as a result of the corresponding Marketplace Research developed by the permanent procurement staff;
· The designation of a special Purchasing Committee, composed by three specialized officials or independent experts; and
· The elaboration of tender documentation.
The Selection Phase has as an only objective: to identify the supplier who offers the best tender. This is the phase in which the elements of my presentation are located. I would like to take this moment to tell you that in Peruvian GP System, practically the whole procurement procedures are public and open to any interested supplier, local or foreign; it is only necessary to be registered at the National Register of Suppliers that CONSUCODE manages. Solely when the referential cost of one procurement is under Fifteen thousand dollars in average, it is possible to impose limits to the participation of excessive number of suppliers.
Lastly, the third phase begins once the contract is signed and fínalizes when the object (good, service or work) has been delivered in accordance with the technical specifications and under the compliance of the buyer agency.
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5. GENERAL PROCEDURE
Regarding the general procedure that public sector agencies should follow, we can say that it gathers the conditions and commitments endorsed by international agreements, and contains a series of steps that mandatorily should be fulfilled.
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6. SELECTION PHASE
The general procedure is composed of six stages:
The first one is the notice of intended procurement, which publication should be done by the Internet, through a single window of the Electronic System of Government Procurement (SEACE), to which any interested supplier, local or foreign, could access.
The second stage is the necessary registration of suppliers interested in participating in the procurement. The requirements they should fulfil are two:
1. To be registered at the National Register of Suppliers; and
2. To pay a registration fee, eqüivalent to the cost of photocopying the tender documentation.
Registration gives suppliers the right to make consultations and remarks on the tender dócumentation, as well as to submít tenders.
At the stage of Consultations and Remarks, the registered suppliers can formulate questions about the tender documentation and/or ask for correction of this because they consider that the tender documentation goes against the procedure established by law, or favours a particular supplier, product or country of órigin. In these cases, the Procurement Committee could accept the remarks, consequently modify the tender documentation, or it could deny the remarks, in which case the entire procurement file is sent to CONSUCODE for the final decision. The responses to both questions and remarks are notified by the SEACE to any supplier, authority or citizen.
After the tender documentation becomes the definitive procurement rules, interested suppliers can submít their respective tenders in two énvelopes: one containing their technical offer, and the other the economic one. Generally, this submission of tenders is developed in a single act, at the place, day and time established in the notice of intended procurement.
It is necessary to mention that, by the way, the terms between the publication of the notice of intended procurement and the submission of tenders can not be less than 30 calendar days.
At present, it is not possible to submit consultations, remarks and tenders through the Internet, except in Electronic Reverse Auction. However, we are working hard to implement and use it very soon.
The next stage is the suppliers’ qualification and tenders evaluation, according to the criteria and factors established in the tender documentation. It is important to mention that in the evaluation of goods and services produced in Peruvian territory, there is a 20% bonus over the total score obtained, whichever is the nationality of the supplier.
Finally, the contract is awarded to the supplier who has submitted the best offer. This result as well as the ponctuation given to each tender, among other aspects like disqualification of suppliers or refused tenders, is notified through the SEACE for public and general knowledge.
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7. REVERSE AUCTION
Reverse Auction is a procurement method that has been adapted and endorsed for the acquisition of goods and services respect to which it is possible to discuss only their price, permitting to achieve the best value for money in the procurement, because this modality allaws agencies to obtain the best price available, in addition to a considerable reduction of terms.
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8. (Cuadros de Subasta Inversa)
In this sense, governmental agencies should compulsorily use the reverse auction modality when the requirement is included into the Register of Common Goods and Services managed by CONSUCODE and publicized at the SEACE, unless they prove that there is another method that permits to achieve the most value for money in the acqüisition.
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9. COMMON GOODS AND SERVICES
As I said before, Basic or Common Goods and Services are all those respect to which it is possible to discuss only their price, due to their technical specifications have been endorsed priviously. For example, this is the case of products called commodities —from mineral or agricultural órigin—, as well as commercial goods and services standardized into the market or by the government.
Until now, 744 common goods and services have been included into the list. Among them we have, for example:
· Rice;
· Diesel;
· Címent;
· Paper.
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10. (CLASES DE SUBASTA INVERSA)
In Peruvian GP, there are two kinds or versions of reverse auction: In Presence and Electronic, which are chousen by each purchasing agency, according to its technical keypabilities and infrastrúcture as well as to the marketplace features.
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11. PRESENTIAL REVERSE AUCTION
Regarding the first one, it involves that the suppliers should be present at a public act in order to participate in the procurement.
In contrast to the general procedure, this modality only has three stages: on one side, the publication of the notice of intended procurement and the inscription of participants —both developed in the same way that general procedure—; and, in the other one, the public act of submission of tenders, additional bids and the contract award.
Forthermore, it is necessary to mention that in reverse auction it is not ápplicable the bonus punctuation to offers of goods and services produced in the Peruvian territory.
In fact, in both kinds of reverse auction, the terms between the publication of the notice of intended procurement and the submission of tenders can not be less than 10 calendar days.
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12. ELECTRONIC REVERSE AUCTION
Regarding the electronic version of reverse auction, I will just say that it has similar stages than the first one, and that it is based entirely on the Internet and by the use of a computer program especially adapted to our government procurement system. Thus, it is perfectly possible for suppliers to participate in a reverse auction from their offices, homes or from one of the Internet public cabins, from anywhere.
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13. COMMODITIES MARKET
In spite of the existence of the reverse auction, the government has endorsed an alternative mechanism that allaws the public sector agencies to acquire some products at commodity marketplaces, which can be located in Peru or abroad.
Anyway, for the use of this method it is necessary that the procurement staff sustain their decision in the possibility to obtain most benefits than using another one available.
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14. GP THROUGH COMMODITIES MARKET
For going to a commodity market, the governmental agencies need an intermediary agent (stock broker or products exchange agency), which will look for the seller of the required product on the basis of the instructions received, such as amaunt, minimum features and maximum price.
Once the supplier is chousen, the transaction will have place following the rules of the commodity market, which are supervised by the Supervising National Commission of Securities (CONASEV) as well as by CONSUCODE.
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15. FRAMEWORK AGREEMENTS
Another efficient method endorsed for government procurement in Peru involves framework agreements, which allaws public sector agencies to acqüire certain goods and services directly from the suppliers, without developing a selection process by them but the Central Public Purchasing Agency (the CPPA).
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16. PROCEDURE
The procedure is very simple:
On the basis of the information contained in Annual Procurement Plans and taking into account the features of the market, the CPPA identifies a good or service commonly acquired by the most of public sector agencies, and decides to develop a general procedure in order to select to the suppliers that fulfill a set of minimum technical specifications and administrative conditions required.
Once identified the best offers, the CPPA subscribes the correspondent framework agreement with each one of the suppliers. Then, the distínctive characteristics of the good or service offered are included in dossiers that contain the Framework Agreements Catalogue, publicized through the Government Procurement Electronic System (SEACE).
Thus, when a public agency requires a good or service included into the Frameworks Agreements Catalogue, it just should chose the best option and acqüire it directly from the respective supplier.
Up to, in the Catalogue there are Framework Agreements referred to the acqüisition of:
· Office supplies (233 items) ;
· Papers in general (223 items);
· Printers (191 items); and
· Air travel tickets provision (122 routes).
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17. CORPORATIVE PURCHASES
Now, let’s see the Corporative or Joint Purchases.
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18. (Gráfico CC)
Through Corporative Purchases, several public sector agencies gather in order to acquire goods or contract services in a joint way, having as target to take advantage of big scale economy and the reduction of transaction costs by developing a single selection procedure and not so many as the amount of participant agencies.
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19. (Gráfico: Kinds of CC)
In Peru there are two kinds of Corporative Purchases: Voluntary and Mandatory.
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20. VOLUNTARY CORPORATIVE PURCHASES
The voluntary ones have their órigin at an interinstitutional agreement subscripted by a group of public sector agencies, which voluntarily joint to procure the same good or service all they need in common. In this sense, they agreed how many agencies will participate at the joint purchase, which are the technical specifications of the purchase object, as well as which is the agency that will develop the selection procedure.