The Law Project
Balance between the State and
Business in state procurement
MOSCOW SCHOOL OF MANAGEMENT SKOLKOVO
Table of Contents
1.
2.
3.
4.
5.
6.
7.
8.
Working steps
Scope of work
Pain Points for FL №94: Analysis and Recommendations
The Problem of FL №94
The Team Goal
Step 1 and 2: Bid Price
Step 3: Pre-qualification Requirements
Step 4: Quality Criteria
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Working Steps
WEEK
1
3
5
7
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1. Analysis
• Analyze the 1st intake report and third party research (magazines, literature)
• Expert interviews: over 15 interviews conducted, 1 round table for PR
• Study of international government procurement procedures
2. Problem
• Defining problems for supplier, government worker and state
• Defining problems associated with e-auctions and electronic system
• Defining Pain Points to improve in the FL №94
3. Modeling
• Modeling of possible law changes and their effect on supplier,
civil servant and state
• Modeling of possible prequalification criteria
• Modeling of quality criteria for 3 sectors (PR, Audit and Appraisal)
4. Recommendations
• Recommendation to tackle paint point of FL №94
• Recommendation on transferable prequalification requirement
• Recommendation of quality criteria for 3 sectors (Audit, PR, Appraisal)
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Scope of work
FL №94
Analysis
Modeling
Pain Points
Quality criteria
Prequalification
Initial task assigned
to us by client
PR
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Audit
MOSCOW SCHOOL OF MANAGEMENT SKOLKOVO
Appraisal
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Pain Points for FL №94: Analysis and
Recommendations
1. Starting bid over or underpriced
- Overpriced starting bid to over-inflate the budget or show imaginary control of budget for personal gain
- Underpriced starting bid due to insufficient knowledge of market quotations on the given type of work
• Establishment of an average price per unit for all services in accordance with industry associations and the
statistical agency
2. Price as leading factor in the evaluation of proposals
- Supplier can win auction by simply lowering the price 20% - 40%
- Not enough evaluation of quality in auctions, quality in service sector correlates with price
• Lower weight of price in evaluation criteria down to 40%
• Raise weighting of quality
3. Price dumping
- Suppliers don’t calculate their costs accurately and are unable to finish their contract at all or with sufficient
quality or in time
• Recommendation to reject all proposals from suppliers when the sum of order is over 15%
of their annual revenue
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Pain Points for FL №94: Analysis and
Recommendations
4. Risk of failure by supplier for the state
- Suppliers are not able to stay within the first proposed budget
- Suppliers run out of money before finishing their contract
• Introduce mandatory detailed plan of working steps to be submitted by the supplier
• Payment is not done upfront and is instead done only after each completed working step
5. No differentiation in the procurement process regarding the size of the order
- Same procedures for an evaluation of a 100,000 Ruble contract as a 20 mln. rubles contract
• Introduce harsh pre-qualification requirements for tenders over 2 000,000 rubles
6. Qualitative evaluation of proposals by the civil servant missing the necessary classification of sectors and
sub sectors
- Classification of services is sometimes misleading in e- auctions
- Classification and scope of work not clarified in civil servants proposal
• Establishment of strict guidelines for proposals by the civil servant
• Establish a classification for services, sectors and subsectors
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Pain Points for FL №94: Analysis and
Recommendations
7. Board of control
- Under current law the board of control must consist of at least 5 people, however these people can be
employees of the contractor or civil servant
• Our recommendation is to include experts from industry associations onto the board of control
8. No protection against disregardful participants
- Currently only companies are listed in the register of disregardful market participants
• Our recommendation is to include disregardful individuals into register of disregardful participants and deny
them the opportunity to open new companies under their control
9. Lack of transparency and criteria for assessment of quality delivered by the supplier
- Access to information about the results of tenders, their detailed assessment and information about the
quality and result of work are restricted
• Need for transparency to public regarding results of a tender and the evaluation of quality criteria in auctions
• Need for transparency to public regarding the progress of work along each step of the job
•Ability to cancel contract by contractor and name no.2 at auction on each step
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The Problem of FL №94
Before the Law
Today
• Over inflation of Budget and corruption
• No or only Imaginary economy of budget
• High margins for contractor
• Economy of Budget by supplier
• Lack of quality in services
• No profits / looses for contractor
• Unqualified suppliers misuse the system
Must be optimal outcome when
there is a balance between the State
and Business interests in the state
procurement
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The Team Goal
3
Upper than
2 mln. rub.
1
Prequalification
Requirements
2
Forming
starting
Bid
4
Bid Price
Barrier
Auction
Quality
criteria
Up to
2 mln. rub.
4 steps to create the Evaluation System for Bidders
in the Field of Intellectual Services
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Step 1 and 2: Bid Price
1. Forming the starting bid
- Establishment of an average price per unit for all services in accordance with industry associations and the
statistical agency
-Establish a classification for services, sectors and subsectors to know the exact service to be purchased
2. Making the differentiation in the procurement process regarding the size of the order
-Introduce harsh pre-qualification requirements for tenders over 2 000,000 Rubles basing on the
statistical information industry professionals on the average market volume of a large contract
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Step 3: Pre-qualification Requirements
Criteria for orders > 2 000,000 Rubles
Revenue of supplier
The amount of a government order shall not exceed 20 % of the annual turnover,
which the company reached within the last financial year and which refers to the
business activities conforming to the subject of such order. To confirm the above
mentioned information the companies shall submit their bookkeeping balance sheet
for the last financial year drawn up according to FORM No. 1 and bearing the stamp
of the Federal Tax Service.
Work experience of supplier
Companies shall have experience in the field of government order no less than 3
(three) years or have at least 5 (five) staff experts, whose continuous employment in
the field of government order exceeds 3 (three) years and who have membership in
industrial self regulated organizations (SRO). To confirm this information, the
companies shall submit an extract from the Unified State Register of Legal Entities,
copies of the experts’ work record books, documents evidencing the relevant
education, academic degree, qualification, copies of the documents evidencing
membership in SRO.
Financial Capacity
Disclosure of financial figures: positive net assets at the end of the year, year-end
breakeven result. A company shall submit its bookkeeping balance sheet for the last
financial year drawn up according to Form No.1 and Form No.2 and certified by the
Federal Tax Service.
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•
Step 4: Quality Criteria for Bidders Evaluation
Criterion
description
1
Professional
experience
Maximum
score
Criterion
feature
At least 2 similar works accomplished for At least 2 similar works accomplished for
the previous 3 years in business field
the previous 3 years in business field
25 points
mandatory
At least one similar work accomplished
to satisfy municipal or state needs
At least one similar work accomplished to
satisfy municipal or state needs
25 points
mandatory
Appraisal
Audit
2
Professional
Certificates
Evaluators shall have specialty
certificates (RICS, CCIM,
IVSC,ASA,TEGOVA)
Evaluators shall have specialty certificates
(CIA, CFSA,CGAP,CCSA,CPA,CMA,ACCA,
CIMA)
25 points
mandatory
3
Team of experts
to be engaged
Resume of the experts’ team: experience, number of experts, qualification
Resume of the experts’ team: experience,
number of experts, qualification
25 points
mandatory
4
Accreditation
Accreditation, qualification granted by
leading Russian state-owned enterprises
5
Business Activity
Business activity –rise in company’s
annual turnover is 10% by estimate
Business activity –rise in company’s annual
turnover is 10% by estimate
10 points
optional
6
Certificates
ISO 9000 Certificate or an equivalent to ISO 9000 Certificate or an equivalent to
GOST standards and ISO 9001-2008
GOST standards and ISO 9001-2008
10 points
optional
10 points
Optional for
appraisal
(Initial Task assigned to the group by the Client)
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Our team
Fedor Sarokvasha
Alexey
Germanovich,
Public Projects
Director,
Professor of
Practice
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Mark Zotkin
Robert Bowen
Irina Ambartsumyan
MOSCOW SCHOOL OF MANAGEMENT SKOLKOVO
Boris Agababov
Arevik Sahakyan
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THANK YOU FOR
YOUR ATTENTION!
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