Procure:ment of Works€¦ · 3. It is expected that Invitations to Bid will be made in [month and year]. 4. Prequalification is open to firms and voluntarily forned joint ventures

11855STANDARD PREQtUALIFICATION DOCUJ MENTS

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Report No.:11855 Type: (PUB)Title: PROCUREMENT OF WORKS: MAJOR EQAuthor:Ext.: 0 Room: Dept.:BOOKSTORE APRIL 1993

Procure:ment of WorksMajor Equipment and Industrial Installations

The World BankWashington, D.C.

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April 1993

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STANDARD PREQUALIFICATION DOCUMENT,S

Procurement of WorksMajor Equipment and Industrial Installations

The World BankWashington, D.C.

April 1993

Standard Prequalification Documents iii

Preface

Procurement under projects financed by the International Bank forReconstruction and Development (IBRD), the World Bank, is carried outin accordance with policies and procedures laid down in the IBRDGuidelines: Procurement under IBRD Loans and IDA Credits',hereinafter referred to as the Procurement Guidelines.

ISince the procurement requirements of the IBRD and its affiliate, the InternationalDevelopment Association (IDA), are identical, this document can also be used forprocurement of works under projects financed by IDA. However, when draftingprequalification documents modeled on these standards, care should be taken tosubstitute "IDA" for "IBRD" and "credit" for "loan ", where appropriate.

The Standard Prequalification Documents in this publication havebeen prepared for use by Borrowers in the procurement of works,industrial plant and heavy equipment through international competitivebidding2 . The procedures they present are based on good internationalpractice, and they comply with the Procurement Guidelines, and theprocedures recommended in Procurement Technical Note (PTN) No.3.01, Qualification of Bidders.

2Note, however, that the text of the Standard Prequalification Documents refers only to"works" or construction contracts. This was necessary to simplify presentation. Forindustrial plant, heavy equipment, and other types of contract, the text should beadapted to the needs of the specific procurement.

At the end of this book, an Annex presents two explanatory sections,first, "Why Prequalification?", which explains the reasons for followingthis procedure and its advantages, and gives general guidance toEmployers and their consultants. It is followed by "Principles andProcedures", which gives the basis for seeking information fromapplicants, and the procedures for evaluation of their submissions.

Additional information on procurement under IBRD- or IDA-assistedprojects can be obtained from:

Procurement Policy and Coordination UnitOperations Policy DepartmentThe World Bank1818 H Street, N.W.Washington, D.C. 20433 U.S.A.

Standard Prequalification Documents v

Table of Contents

How to Use This Book vii

Invitation for Prequalification I

Instructions to Applicants 3

Letter of Application 15

General Information 19

General Experience Record 21

Joint Venture Summary 23

Particular Experience Record 25

Details of Contracts of Similar Nature andComplexity 27

Summary Sheet: Current Contract Commitments /Works in Progress 29

Personnel Capabilities 31

Candidate Summary 33

Equipment Capabilities 35

Financial Capability 37

Litigation History 39

Annex 41

Standard Prequalification Documents vii

How to Use This Book

1. These Standard Prequalification Documents are intended to guideprequalifying applicants wishing to bid for large building, civilengineering, large plant, heavy equipment, and certain types of supply anderect contracts under international competitive bidding procedures. Theyinclude a form for Invitation for Prequalification, Instructions toApplicants, and a Letter of Application and attached standard forms forapplicants to complete.

2. To simplify presentation, the text of the documents has been writtenfor construction contracts (the most common application of prequalificationprocedures). Care should be taken when preparing PrequalificationDocuments for issue in specific cases to ensure that the prequalificationcriteria are clear and explicit, and that they refer to the needs andcharacteristics of the specific procurement. Where appropriate, "works"should be substituted by, for example, "equipment" or "plant", as the casemay be, and "contractor" by "supplier" or "manufacturer" for example.The following directions should be observed when using these StandardPrequalification Documents:

* The forms will require adaptation to a greater or lesser degree to suitthe requirements of each proposed bid.

* Specific details, such as the names of the Borrower and the ExecutingAgency, and the addresses for inquiries and submission ofapplications, should be furnished in the spaces indicated by theitalicized notes within brackets.

* The italicized notes and footnotes in the Standard PrequalificationDocuments are not part of the text; they contain guidance andinstructions for the user. They should not be incorporated in actualprequalification documents.

* Where alternative clauses or texts are shown, the user should selectthose that best suit the particular contract and discard the alternativetext that is not used. Where carets are shown (< and >), deletions oftext, words, or letters may be in order.

Standard Prequalification Documents 1

Invitation for Prequalification

Date: [date of issuing notice]

Contract No<s>.:

I. The [name of the Bori-ower] has received <applied for> aloan <credit> from the International Bank of Reconstruction and Development3 , hereinafterreferred to as the IBRD, in various currencies towards the cost of

[name of the Pr-oject] and intends to apply a portion of the proceeds of this loan to eligiblepayments under the contract<s> for which this Invitation for Prequalification is issued.4

3Substitute "credit" jor "loan" and "IDA" for "IBRD", where appropriate, throughout these documents.

4I 221n projects cofinanced with other agencies, it may he necessary to insert suitable text that refers to the applicableprocurement procedures. This is particularly important where the allocation of funds from the various lenders is notwell defined before the prequalification process begins.

2. The [name of the Executing Agency], hereinafter "theEmployer"' intends to prequalify contractors <firms> for the following <works> <contracts>under this project:

______________________________________________________________________[general project description]6

5The Borrower and the Employer may be the same or different entities. The text of the Invitation for Prequalificationand the text of the other documents herein must be footnoted to indicate which agency will act as the Employer aftera contract is awarded.

6 Describe the Project in sufficient detail to identify the location, nature, and complexity of the works or contracts. Theinformation should be prepared for each contract "slice", if more than one contract is to be let concurrently as a"slice and package" procurement, based upon the estimated cost and duration of each slice.

The estimated cost should not be disclosed in this Invitation or in the Instructions to Applicants.

3. It is expected that Invitations to Bid will be made in [month and year].

4. Prequalification is open to firms and voluntarily forned joint ventures from eligible sourcecountries as defined in the Guidelines: Procurement under IBRD Loans and IDA Credits.<Applications may be made for prequalification for one or more of the above contracts.>

2 Invitation for Prequalification

5. Eligible applicants may obtain the prequalification documents by calling, writing, faxing, ortelexing: [name of the Employer and full address, including telephone,fax, and telex numbers, where the documents may be obtained].

6. The request must clearly state "Request for Prequalification Documents for[name of the Project]. The documents are available for a nonrefundable fee

of [amount and currency, and its equivalent in an internationally-traded currency, e.g., U.S.

dollars]7. The [name of the Employer] will promptly dispatch thedocuments by registered airmail, but under no circumstances will it be held responsible for latedelivery or loss of the documents so mailed.

j The fee chargeable should only be nominal, to cover reproduction and mailing costs only.l

7. A minimum requirement for qualification will be to have successfully carried out[minimum essential experience requirements, in accordance with the Instructions to

Applicants] .

8. Submissions of Applications for Prequalification must be received in sealed envelopes, whichmust be either delivered by hand or by registered mail, to:

[address]

not later than:[date]8

and be clearly marked "Application to Prequalify for[name of the Project and the contract name(s) and

number(s)]".

8The time allowed for preparation of the prequalification submission should be sufficient for applicants to gather allthe information required, preferably 60 days, but in any case not less than 45 days, after the later of the date whenthe documents are available or the last date of the advertisement. This period may be longer for very large projects,where time should be allowed for the formation of joint ventures and assembly of the necessary resources.

9. The [name of the Employer] reserves the right to accept orreject late applications.

10. Applicants will be advised, in due course, of the results of their applications. Only firms andjoint ventures prequalified under this procedure will be invited to bid.


Instructions to Applicants

[name of the Project]

[name of the Employer and/or Borrower]

Date: [date of issuing notice]

Contract No<s>.:

1. Scope of Bid 1.1 The __[name of the Executing Agency and

statement of its relationship with the Borrower]9 , hereinafter "the Employer",has received <applied for> a loan <credit> from the InternationalBank of Reconstruction and Development"0 , hereinafter referred toas the IBRD, toward the cost of

[name of the Project] and intends to apply a portion of the proceeds ofthis loan to eligible payments under the contract<s> for which thisInvitation for Prequalification is issued." Payments by the IBRD willbe made only at the request of

[name of the Bolrower] and upon approval by the IBRD and will besubject in all respects to the terms and conditions of the LoanAgreement. No party other than

[name of the Borrower] shall derive any rights from the Loan Agreementor have any right to the loan proceeds.

9The Borrower and the Employer may be the same or different entities. The text of theInvitation for Prequalification and the text of the other documents herein must befootnoted to indicate which agency will act as the Employer after a contract is awarded.

10 Substitute "credit" for "loan" and "IDA" for "IBRD", where appropriate, throughoutthese documents.

I In projects cofinanced with other agencies, it may he necessary to insert suitable textreferring to the procurement procedures that will apply. This is particularly importantwhere the allocation of funds from the various lenders is not well defined before theprequalification process begins.

4 Instructions to Applicants

1.2 The Employer intends to prequalify contractors for the following<works> <contracts> under the Project:

[general description of the

Project]1 2 . <Applications may be made to prequalify for one or moreof the above contracts.> It is expected that Invitations to Bid will bemade in [month and year].

12Describe the Project in sufficient detail to identify the location, nature and complexityof the works or contracts. The information should he prepared for each contract "slice",if more than one contract is to be let concurrently as a "slice and package" procurement,based upon the estimated cost and duration of each slice.

The estimated cost should not be disclosed in these Instructions or in the Invitation forPrequalification.

1.3 Prequalification is open to firms and voluntarily formed joint venturesfrom eligible source countries as defined in the ProcurementGuidelines. Domestic contractors may apply for qualificationindependently or in joint venture with foreign contractors.

1.4 General information on the climate, hydrology, topography, access tosite, transportation and communications facilities, medical facilities,Project layout, expected construction period, facilities, and servicesprovided by the Employer, and[other relevant data] is attached on a separate sheet. The contract will bea <unit price> <lump sum> <turnkey> contract. The biddingdocuments will be modelled on the IBRD Sample Bidding Documentsfor <Procurement of Works> <Procurement of Works (SmallerContracts)> <Turnkey Contracts>, including their currency andsecurities provisions.


2. Submission 2.1 Submission of applications for prequalification must be received inof sealed envelopes, which must be either delivered by hand or byApplications registered mail, at

[address]

not later than[date]13

and be clearly marked "Application to Prequalify for[names of the Project and

contract(s), and any applicable number(s)]". The Employer reserves the rightto accept or reject late applications.

13The time allowedfor preparation of the prequalification submission should be sufficientfor applicants to gather all the information required, preferably 60 days, but in any casenot less than 45 days, after the later of the date when the documents are available, or thedate of the advertisement. This period may be longer for very large projects, where timeshould be allowed for the formation oJ joint ventures and assembly of the necessaryresources.

2.2 The name and mailing address of the Applicant shall be clearlymarked on the envelope.

2.3 All the information requested for prequalification shall be answeredin the [name of the language] 4

language by foreign applicants and joint ventures including foreignfirms. Where information is provided in another language this shall beaccompanied by a translation of its pertinent parts into

[same language]. This translation will govern andbe used for interpreting the information. Submissions by domesticfirms applying on their own may be written in

[local language].

14The language to be used shall be that in which the prequalification documents arewritten. English, French, or Spanish should be used in International Competitive Bidding.

2.4 Failure to provide information which is essential to evaluate theApplicant's qualifications, or to provide timely clarification orsubstantiation of the information supplied may result indisqualification of the Applicant.


The following paragraph should only be used if a clarification meeting is planned. Such meetings should normallybe called only for very large andlor complex contracts.

2.5 A clarification meeting will be held at[time, date, and place] at which prospective applicants may requestclarification of the Project requirements and the criteria forqualification.

The criteria outlined in the following paragraphs are typical of those used in works contracts. Different criteriashould be devised for the prequalification of suppliers or manufacturers of equipment and industrial plant, forexample. For the prequalification of contractors for contracts to be bid on a "slice and package" basis, capacitycriteria should be established for the smallest "slice", a range of likely combination of slices, and the whole"package"; applicants should be classified in accordance with their capacities, in respect of the number of slicesthey can contract for, or the total package.

3. Qualification 3.1 Prequalification will be based on meeting all the following rninimumCriteria pass/fail criteria regarding the Applicant's general and particular

experience, personnel and equipment capabilities, and financialposition, as demonstrated by the Applicant's responses in the formsattached to the Letter of Application (specific requirements for jointventures are given under paras. 4.1 and 4.2 below). The Employerreserves the right to waive minor deviations, if they do not materiallyaffect the capability of an applicant to perform the contract.Subcontractors' experience and resources shall not be taken intoaccount in determining the Applicant's compliance wvith thequalifying criteria."5

15 Exceptions mnay be made when highly specialized inputs (essential for executi on of'theContract but amounting to a relatively small pr-opolrtion of its total cost) aree requilredfi-omspecialist subcontractors.


3.2 General Experience. The Applicant shall meet the following minimumcriteria:

(a) average annual turnover (defined as billing for works in progressand completed) over the last five years of US$ 16

equivalent; and

(b) successful experience as prime contractor in the execution of atleast three projects'7 of a nature and complexity comparable tothe proposed contract within the last five years; this experienceshould include 18

16Usually not less than five times the estimated annual cash flow in the proposed contractor works. The coefficient may be smallerfor very large contracts.

17This criterion must be made more rigorous in projects requiring consiaerable specializedexperience (see Annex, para. 8).

18Indicate an annual production rate for the key construction activity (or activities) in theproposed contract or works, e.g., "One million m3 of rock placed in rockfill dams in oneyear". The annual rate should be a percentage (say 80 percent) of the expected peak r ateof construction for the key activity (or activities) in the contract or works.

3.3 Personnel Capabilities. The Applicant must have suitably qualifiedpersonnel to fill the following positions"9 . The Applicant will supplyinformation on a prime candidate and an alternate for each position,both of whom should meet the experience requirements specifiedbelow:

Position Total experience In similar works As manager of(years) (years) . similar works

(years)

Project manager............................................. ............................................ ............................................ ..............................................Altemate

Other position.................................. ............................ ............................................ ;......................

Altemate

19List only key management and specialist positions. Do not include all principals, headoffice personnel who are not key to the Project, and other nonspecialist personnel.


3.4 Equipment Capabilities. The Applicant should own, or have assuredaccess to (through hire, lease, purchase agreement, availability ofmanufacturing capacity, or other means), the following key items ofequipment in full working order, and must demonstrate that, based onknown commitments, they will be available for use in the proposedcontract20. The Applicant may also list alternative equipment whichhe would propose for the Contract, together with an explanation of theproposal.

Equipment type and characteristics Minimum number required

1.

2.

3.

20Para. 3.4 applies mainly to construction works. However, it may be adapted for someheavy engineering contracts, supply and erect, and other contracts requir-ing productioncapacity. Insert a list of the key equipment needs based on specific items or per formancecriteria, as appropriate. The items listed shall be limited to major items of equipmentcrucial to the proper and timely execution of the contract, and which applicants may notreadily be ahle to purchase, hire, or lease in the required time fi-ame.

3.5 Financial Position. The Applicant should demonstrate thatt he hasaccess to, or has available, liquid assets, unencumbered real assets,lines of credit, and other financial means sufficient to meet theconstruction cash flow for a period of months, estimatedas US$ equivalent21 , net of the Applicant'scommitments for other contracts.

2 1 Calculate the cash flow for a number of months, determined as the total time needed bythe Employer to pay a contractor' s invoice, allowing for (a) the time of construction, fi-omthe beginning of the month invoiced; (b) the time needed by the Engineer to issue themonthly certificate; and (c) the time needed by the Employer to pay the amount certified.The assessment may be based on a straight line projection of the estimated cash flowrequirement, neglecting the effect of any advance payments and retention monies.

Where the prequalification refers to more than one contractlworks to be awarded on a "slice and package" basis,paras. 3.1-3.5 should be expanded to list the requirements for the smallest "slice", any combination of slices, andfbr the whole "package".


3.6 The audited balance sheets22 for the last five years should besubmitted and must demonstrate the soundness of the Applicant'sfinancial position, showing long-term profitability. Where necessary,the Employer will make inquiries with the Applicant's bankers.

22 Firms owned by individuals and partnerships may not be r equilred to maintain auditedbalance sheets by the laws of their countries of origin. In such cases, the auditrequirement may be relaxed by the Employer.

3.7 Litigation History. The Applicant should provide accurate informationon any litigation or arbitration resulting from contracts completed orunder execution by him over the last five years. A consistent historyof awards against the Applicant or any partner of a joint venture mayresult in failure of the application.

4. Joint 4.1 Joint ventures must comply with the following requirements:Ventures

(a) Following are the minimum qualification requirements:

(i) The lead partner shall meet not less than [determineand insert the appropriate percentage which, exceptfor very large projects,shall be not less than 40 percent] percent of all the qualifyingcriteria given in paras. 3.2 and 3.5 above.23

23 Care should be exercised in drafting this requirement. In certain types of projects, jointventures are formed by assembling the specialist skills of various contractors (e.g., civil,electrical, mechanical, and industrial). In such cases, the provisions referring to the leadpartner and "other partners" (para. 4.1(ii)) must be tailored to the particularcircumstances of the Project.

(ii) The other partners shall meet not less than [determineand insert the appropriate percentage which, exceptJor veiy large projects,shall be not less than 25 percent] percent of all the qualifyingcriteria given in paras. 3.2 and 3.5 above.

(iii) The joint venture must satisfy collectively the criteria ofparas. 3.3, 3.4, and 3.5, for which purpose the relevantfigures for each of the partners shall be added together toarrive at the joint venture's total capacity. Individualmembers must each satisfy the requirements of paras. 3.6and 3.7 above.


(b) The formation of a joint venture after prequalification, and anychange in a prequalified joint venture, will be subject to thewritten approval of the Employer prior to the deadline forsubmission of bids. Such approval may be denied if (i) partnerswithdraw from a joint venture and the remaining partners do notmeet the qualifying requirements; (ii) the new partners to a jointventure are not qualified, individually or as another joint venture;or (iii) in the opinion of the Employer, a substantial reduction incompetition may result.

(c) Any bid shall be signed so as to legally bind all partners, jointlyand severally, and any bid shall be submitted with a copy of thejoint venture agreement providing the joint and several liabilitywith respect to the contract.

4.2 The prequalification of a joint venture does not necessarily prequalifyany of its partners individually or as a partner in any other joint ven-ture or association. In case of dissolution of a joint venture, each oneof the constituent firms may prequalify if they meet all the prequalifi-cation requirements, subject to the written approval of the Employer.

5. Public Sector 5.1 Majority publicly-owned enterprises domiciled in the host country mayCompanies be eligible to qualify if, in addition to meeting all the above

requirements, they are also:

(a) commercially-oriented legal entities distinct from the Employer,and are not a government department;

(b) financially autonomous, as demonstrated by requirements in theirconstitutions to provide separate audited accounts and return oncapital, powers to raise loans and obtain revenues through the saleof goods or services; and

(c) managerially autonomous.

6. Conflict of 6.1 The Applicant (including all members of a joint venture) must not beInterest associated, nor have been associated in the past, with the consultant

or any other entity that has prepared the design, specifications, andother prequalification and bidding documents for the Project, or thatwas proposed as Engineer for the Contract, over the last five years.Any such association may result in the disqualification of theApplicant.


7. Updating 7.1 Bidders shall be required to update the financial information used forPrequalifica- prequalification at the time of submitting their bids, to confirm theirtion continued compliance with the qualification criteria and verificationInformation of the information provided. A bid shall be rejected if the Applicant's

qualification thresholds are no longer met at the time of bidding.

If the 7% percent "works" preference for domestic bidders will apply in procurement for the Project, the followingparagraphs should be inserted.

These paragraphs may be used only where the domestic preference is expressly permitted by the Loan Agreement,at the request of the Borrower. Domestic preference is permitted only in countries with a per capita GNP belowthe threshold set by the International Economics Department (IEC) of IBRD. (The FY93 guideline, dated August24, 1992. set the threshold at US$635, 1991 values. This figure is adjusted annually by IEC.)

Do not use these paragraphs where the domestic preference does not apply, or for prequalification not involvingworks contracts. In cases where the domestic preference for "Goods" or the "Industrial Model" may apply, paras.8.1-8.3 must be suitably reworded.

8. Domestic 8.1 A 71/2 percent margin of preference for domestic bidders will apply inPreference bid evaluation. At the time of inviting bids, prequalified bidders will

be advised if they will, individually or as a joint venture, qualify forthe domestic preference.

8.2 To qualify for the preference, individual firms must:

(a) be registered in [name of the Borrower's country];

(b) have majority ownership by nationals of [name

of the Borrower's country];

(c) not subcontract more than 50 percent of the value of the contractto foreign contractors; and

(d) [The borrowing country and the Employer may add other criteria acceptable toIBRD. These additional criteria should not affect competition among potentialbidders.]

8.3 Joint ventures between domestic and foreign firms shall be eligible forthe margin of preference provided the domestic partner or partners:

(a) individually satisfy the above criteria of eligibility for thepreference;


(b) demonstrate a beneficiary interest of no less than 50 percent inthe joint venture, as demonstrated by the profit and loss sharingprovisions, if any, of the joint venture agreement;

(c) will, under the arrangements proposed, carry out at least 50percent of the works measured in terms of value (alwaysprovided that the domestic partner or partners are qualifiedto carry out the amount of work, in accordance with theprequalification criteria), including any services provided by thepartners and fees and expenses paid to the partners; and

(d) [The borrowing country and the Employer may add other criteria acceptable tothe IBRD. These additional criteria should not affect competition among potentialbidders.]

End of paragraphs applicable to domestic preference. Renumber subsequent sections if paras. 8.1, 8.2, and 8.3 arenot used.

9. General 9.1 Only firms and joint ventures that have been prequalified under thisprocedure will be invited to bid. A qualified firm or a member of aqualified joint venture may participate in only one bid for the contract.If a firm submits more than one bid, singly or in joint venture, all bidsincluding that party will be rejected. This rule will not apply inrespect of bids which include specialist subcontractors who are usedby more than one bidder.

9.2 Bidders will be required to provide bid security in the form of a bond,banker's guarantee, or other security acceptable to the Employer foran amount of 24, and the successful bidder will be required toprovide performance security <and domestic preference security2 5>.Examples of acceptable forms will be supplied with the biddingdocuments.

24 lnsert either a minimum percentage of the bid price or a figure based on theEmployer's cost estimate. The amount should be the equivalent of I percent of theestimated cost of the contract for very large contracts of over $100 million, ranging upto 3 percent for smaller contracts.

25If applicable.


9.3 The Employer reserves the right to:

(a) amend the scope and value of any contract<s> to be bid, in whichevent the contract<s> will only be bid among those prequalifiedbidders who meet the requirements of the contract<s> asamended;

(b) reject or accept any application; and

(c) cancel the prequalification process and reject all applications.

The Employer shall neither be liable for any such actions nor be underany obligation to inform the Applicant of the grounds for them.

9.4 Applicants will be advised in writing by fax or telex, within[number, usually 60-90 days] days of the date for submission ofapplications (para. 2.1 above), of the result of their application, andthe names of the prequalified applicants, without assigning any reasonfor the Employer's decision.


Letter of Application

[letterhead paper of the Applicant, or partner responsible for ajoint venture, including full postal address, telephone no., fax no.,

telex no., and cable address]

Date:................................

To: ........................................................

.......................................................

[name and address of the Employer]

Sirs,

1. Being duly authorized to represent and act on behalf of ................................... (hereinafter"the Applicant"), and having reviewed and fully understood all the prequalification informnationprovided, the undersigned hereby apply to be prequalified by yourselves as a bidder for thefollowing contract<s> under the .................................. [name of the Project] project:

Contract number Contract name

1.

2.

3.

4.

5.

<Note: The Applicant is to delete, in ink, any contract for which he does not wish to prequalift, and sign and date the deletion.>

*f the prequalification refers to only one contract, delete this note and spaces for additional contract references. I

16 Letter of Application

2. Attached to this letter are copies of original documents defining':

(a) the Applicant's legal status;

(b) the principal place of business; and

(c) the place of incorporation (for applicants who are corporations); or

the place of registration and the nationality of the owners (for applicants who arepartnerships or individually-owned firms).

3. Your Agency and its authorized representatives are hereby authorized to conduct anyinquiries or investigations to verify the statements, documents, and information submitted inconnection with this application, and to seek clarification from our bankers and clients regardingany financial and technical aspects. This Letter of Application will also serve as authorizationto any individual or authorized representative of any institution referred to in the supportinginformation, to provide such information deemed necessary and requested by yourselves to verifystatements and information provided in this application, or with regard to the resources,experience, and competence of the Applicant.

4. Your Agency and its authorized representatives may contact the following persons for furtherinformation2 :

General and managerial inquiries

Contact 1 Telephone 1


Personnel inquiries



For applications by joint ventures, all the information requested in the prequalification documents is to be providedfor the joint venture, if it already exists, and for each party to the joint venture separately. The lead partner should beclearly identified. Each partner in the joint venture shall sign the letter.

2 Applications by joint ventures should provide on a separate sheet equivalent information for each party to theapplication.


Technical inquiries



Financial inquiries



5. This application is made in the full understanding that:

(a) bids by prequalified applicants will be subject to verification of all informationsubmitted for prequalification at the time of bidding;

(b) your Agency reserves the right to:

* amend the scope and value of any contracts bid under this project; in such event,bids will only be called from prequalified bidders who meet the revisedrequirements; and

* reject or accept any application, cancel the prequalification process, and reject allapplications, and

(c) your Agency shall not be liable for any such actions and shall be under no obligationto inform the Applicant of the grounds for them.

Applicants who are not entitled to domestic preference in bid evaluation should delete para. 6, initial the deletion, andrenumber the subsequent paragraphs.

6. The undersigned confirm that the Applicant meets the eligibility requirements regardingdomestic preference, and request any bid made be assessed on this basis.

18 Letter of Application

Applicants who are not joint ventures should delete paras. 7 and 8 and initial the deletions.

7. Appended to this application, we give details of the participation of each party, includingcapital contribution and profit/loss agreements, to the joint venture or association. Wme alsospecify the financial commitment in terms of the percentage of the value of the <each> contract,and the responsibilities for execution of the <each> contract.

8. We confirm that in the event that we bid, that bid as well as any resulting contract will be:

(a) signed so as to legally bind all partners, jointly and severally; and

(b) submitted with a joint venture agreement providing the joint and several liability of allpartners in the event the contract is awarded to us.

9. The undersigned declare that the statements made and the information provided in the dulycompleted application are complete, true, and correct in every detail.

Signed Signed

..... ................................................................................................................ ...............................................................I..................................................................Name Name

For and on behalf of (name of Applicant or lead partner of a For and on behalf of (name of partner)joint venture)

Signed Signed

..q i ... ............................................................................................................... ....................................... ...........I.....................................I.........................................ame Name

For and on behalf of (name of partner) For and on behalf of (name of partner)

Signed Signed

................................................................................................................. ................................... ...........I................I................................................................Name Name

For and on behalf of (name of partner) For and on behalf of (name of partner)


APPLICATION FORM (1) PAGE _ OF PAGES

General Information

All individual firms and each partner of a joint venture applying for prequalification are requested to complete theinformation in this form. Nationality information to be provided for all owners or applicants who are partnerships orindividually-owned firms.

Where the Applicant proposes to use named subcontractors for critical components of the works, or for work contentsin excess of 10 percent of the value of the whole works, the following information should also be supplied for thespecialist subcontractor(s).

1. Name of firm

2. Head office address

..........................................................................................................................................................................................................................

3. Telephone Contact

4. Fax Telex

5. Place of incorporation / registration Year of incorporation I registraton

Nationality of owners'

Name Nationality

2.

3.

4.

5.

1 To be completed by all owners of partnerships or individually-owned firms.



General Experience Record

Name of Applicant or partner of a joint venture

All individual firms and all partners of a joint venture are requested to complete the information in this form. Theinformation supplied should be the annual turnover of the Applicant (or each member of a joint venture), in terms of theamounts billed to clients for each year for work in progress or completed, converted to U.S. dollars at the rate ofexchange at the end of the period reported.

Use a separate sheet for each partner of a joint venture.

Applicants should not be required to enclose testimonials, certificates, and publicity material with their applications; theywill not be taken into account in the evaluation of qualifications.

Annual tumover data (construction only)

Year Turnover US$ equivalent

1.

2.

3.

4.

5.

I


APPLICATION FORM (2A) PAGE _ OF PAGES

Joint Venture Summary

Names of all partners of a joint venture1. Lead partner

2. Partner

3. Partner

4. Partner

5. Partner

6. Partner

Total value of annual construction turnover, in terms of work billed to clients, in US$ equivalent, converted at the rateof exchange at the end of the period reported:

Annual turnover data (construction only; US$ equivalent)

Form 2 Year I Year 2 Year 3 Year 4 Year 5Partner page no.

1. Leadpartner

2. Partner

3. Partner

4. Partner

5. Partner

6. Partner

Totals


APPLICATION FORM (3) PAGE OF PAGES

Particular Experience Record


To prequalify, the Applicant shall be required to pass the specified requirements applicable to this form, as set outin the "Prequalifcation Instructions to Applicants".

On a separate page, using the format of Form (3A), each applicant or partner of a joint venture is requested to listall contracts of a value equivalent to USS ............... million, of a similar nature and complexity to the contract forwhich the Applicant wishes to qualify, undertaken during the last five years.' The value should be based on thecurrencies of the contracts converted into U.S. dollars, at the date of substantial completion, or for current contractsat the time of award. The information is to be summarized, using Form (3A), for each contract completed or underexecution by the Applicant or by each partner of a joint venture.

Where the Applicant proposes to use named subcontractors for critical components of the works, or for work contentsin excess of 10 percent of the value of the whole works, the information in the following forms should also be suppliedfor each specialist subcontractor.

IWhere applications are being invited for a number of contracts, suitable wording should be introduced, to allowapplicants to apply for individual contracts or groups of contracts.


APPLICATION FORM (3A) PAGE OF PAGES

Details of Contracts of Similar Nature and Complexity

Name of Applicant or partner of a joint venture|

Use a separate sheetfor each contract.

1. Number of contract

Name of contract

Country

2. Name of employer

3. Employer address

4. Nature of works and special features relevant to the contract for which the Applicant wishes to prequalify

...................................................... .................................................................. ...... _. ___. _._. .... .......... ....... ..... ..... .. .......... ............. ........................................ . ........................

...................................................... ......... .. ........ ................... ........ .... ._ .. ....... . .... ............................................................................................

5. Contract role (check one)0 Sole contractor 0 Subcontractor 0 Partner in a joint venture

6. Value of the total contract (in specified cunrencies at completion, or at date of award for current contracts).Currency Currency Curreicy

7. Equivalent value US$

8. Date of award

9. Date of completon

10. Contract duraton (years and onffhs)- years months

11. Specified requirements'

...................................... ...........................

......................................................... . ................................ ... ._... ... ......................................................

............................................................................................................................................................................................................................

I Insert any specific criteria required for particular operations, such as annual volume of earthmoving, undergroundexcavation, or placing concrete.

I



Summary Sheet: Current Contract Commitments / Worksin ProgressName of Applicant or partner of a joint venture

Applicants and each partner to an application should provide information on their current commitments on allcontracts that have been awarded, orfor which a letter of intent or acceptance has been received, orfor contractsapproaching completion, but for which an unqualified, full completion certificate has yet to be issued

Name of contract Value of outstanding Estimated,completionwork (current US$ dateequivalent)

2.

3.

4.

5.

6.



Personnel Capabilities

Name of Applicant

For specific positions essentid to contract implementation, applicants should provide the names of at least two candidatesqualified to meet the specified requirements statedfor each position. The data on their experience should be supplied inseparate sheets using one Form (5A) for each candidate.

1. TWie of position

Name of prime candidate

Name of altemate candidate

2. Tite of position


Name of alternate candidate

3. Title of position



4. Tite of position




APPLiCATION FORM (5A) PAGE _ OF PAGES

Candidate Summary

Name of Applicant

Position Candidate0 Prime 0 Altemate

Candidate 1. Name of candidate 2. Date of birthinformation

3. Professional qualifications

...........................................................................................................................................................................................................

Present 4. Name of employeremployment

Address of employer

......................................................................................................... .....................__._ .._...... =.............................

Telephone Contact (manager / personnel officer)

Fax Telex

Job title of candidate Years with present employer

Summarize professional experience over the last 20 years, in reverse chronological order. Indicate particular technicaland managerial experience relevant to the Project.

From To Company / Project / Position / Relevant technical and managementexperience

.......................... .......................... ..............................................................................................................................................................................

.......................... ... .................................. ... .....................................................................................................................................................................

.......................... ... ....................... ... ... ...................................................................................................................................................................... ......

.......................... ..... .......... .................................. .............................I....... ............................................................

.......................... ... ....................... ... ... ...................................................................................................................................................................... ......

.......................... ... ........................ .. ... .............................................................................................................................................................................

........................... ... .................................. ... .....................................................................................................................................................................


APPLICATION FORM (6) PAGE OF _ PAGES

Equipment Capabilities

Name of Applicant

The Applicant shall provide adequate information to demonstrate clearly that it has the capability to meet therequirements for each and all items of equipment listed in the Instructions to Applicants. A separate Form (6) shall beprepared for each item of equipment listed in para. 3.4 of the Instructions to Applicants, or for alternative equipmentproposed by the Applicant.

Item of equipment

Equipment 1. Name of manufacturer 2. Model and power ratinginformation

3. Capacity 4. Year of manufacture

Current status 5. Current location

6. Details of current commitments

....I......................................................................................................................................................................................................

Source 7. Indicate source of the equipmentO Owned 0 Rented 0 Leased 0 Specialiy manufactured

Omit the following information for equipment owned by the Applicant or partner.

Owner 8. Name of owner

9. Address of owner

...........................................................................................................................................................................................................

Telephone Contact name and tite

Fax iTelex

Agreements Details of rental / lease I manufacture agreements specific to the Project

..........................................................................................................................................................................................................

....................................................................................................................................... ...............................................


APPLICATION FoRM (7) PAGE _ OF PAGES

Financial Capability


Applicants, including each partner of a joint venture, should providefinancial information to demonstrate that they meetthe requirements stated in the Instructions to Applicants. Each applicant or partner of a joint venture must fill in thisform. If necessary, use separate sheets to provide complete banker information. A copy of the audited balance sheetsshould be attached.

Banker Name of banker

Address of banker

......................................................................................................................................................................................................... ...................I

Telephone |Contact name and title

Summarize actual assets and liabilities in U.S. dollar equivalent (at the rates of exchange current at the end of each year)for the previous five years. Based upon known commitments, summarize projected assets and liabilities in U.S. dollarequivalentfor the next two years.

Financial Actual: Projected:information in previous five years next two yearsUS$ equivalent 1. 2. 3. 4. 5. 6. 7.

1. Total assets

2. Current assets

3. Total liabilities

4. Currentliabilities

5. Profits beforetaxes

6. Profits aftertaxes

38 Financial Capability

Specify proposed sources of financing to meet the cash flow demands of the Project, net of current commitments(Instructions to Applicants, para. 3.5).

Source of financing Amount (US$ equivalent)1.

2.

3.

4.

Attach auditedfinancial statementsfor the lastfive years (for the individual applicant or each partner of a joint venture).

Firms owned by individuals, and partnerships, may submit their balance sheets certified by a registered accountant, andsupported by copies of tax returns, if audits are not required by the laws of their countries of origin.



Litigation History


Applicants, including each of the partners of a joint venture, should provide information on any history of litigation orarbitration resultingfrom contracts executed in the lastfive years or currently under execution (Instructions to Applicants,para. 3.7). A separate sheet should be usedfor each partner of a joint venture.

Year Award FOR Name of client, cause of litigation, and matter in Disputed amountor AGAINST dispute (current value,Applicant US$ equivalent)

........... ....... ......... .. ................ ........... ... ................................................................................................................I............... ..................................... ............................. .... ............................... .... ...... ...................................................................I................................................... .......... ...............................

.......................... ................................ ............ ...... ............................................................................................................... .................. ..........................

.......................... .... .............................I...... ...... .................................................................. .........I......................................... ...I.......... ............................

.......................... .... ............................... .... ...... ................................................................... ................................................... ........... ..............................

.......................... .... ............................... .... ...... ....................................................................................................................... .......... ..............................

........................... ................................ ........... ...... ................................................................................................................ ................. ..............I............

.......................... .... ............................... .... ...... ..............................................................I........................................................ ........... ..............................

.......................... .... ............................... .... ...... ....................................................................I............................ ..................... ............ .............................

.......................... .... ................................ ... ...... .................................................................................................. ..................... .......... ..............................

.......................... .... ............................... .... ...... ....................................................................................................................... .......... .............I.................

.......................... .. ................................. .. .... ........................................................................................................................... ...... ................................

.......................... .... ............................... .... ...... ....................................................................................................................... .......... ..............................

.......................... .... ............................... .... ...... ....................................................................................................................... .......... ..............................

.......................... ................................ .. .. .......... . ..... ...... ... ........................... ..... .................. ................... I.....

.......................... ............................. ................ ..... ............................................................................................................ .................. ..........................

.......................... ... ................................ ... ...... ........................................................................................................................ ......... ...............................

.............. ......... -. .... .......... ................................................................. . ...................................... b#


Annex

Why Prequalification?

Competitive Bidding for Construction Works

1. The successful execution of contracts for large buildings, civil engineering, supply and erectprojects, and major, custom-made equipment requires that contracts are awarded tocompetent contractors, usually on the basis of competitive bidding procedures. Largecontracts financed under loans from the IBRD (or IDA credits) are awarded, as a rule,through International Competitive Bidding (ICB).

The Requirement for Prequalification of Bidders

2. This document relates specifically to the selection of competent bidders, prior to the issueof the invitations to bid, a procedure known as prequalification. The Procurement Guidelinesrecommend prequalification of contractors "for large or complex works and, exceptionally,for custom designed equipment and specialized services" (para. 2. 10). Prequalification is alsodesirable in other circumstances, for example, in sector projects with a programmaticapproach, and when a large number of contracts are let on a "slice and package" basis.

3. The qualification of a bidder is a separate process from the bid evaluation procedure, whichconcentrates on the price and merits of the bid itself. For further details of the bid evaluationprocedure, refer to IBRD's Sample Bidding Documents-Procurement of Works (1991) orother relevant IBRD Sample Bidding Documents.

Benefits of Prequalification

4. The prequalification process is of advantage to bidders and Borrowers' alike.

5. The prequalification process enables bidders who may be insufficiently qualified on theirown to avoid the expense of bidding or to form a joint venture, which may give a betterchance of success. The well-qualified firms may also price their bids with the knowledge thatthey will be competing with other qualified bidders meeting realistic minimum competencecriteria. The assurance that inadequately qualified competitors will be excluded from biddingthus encourages leading contractors or suppliers to bid.

I "Borrower" denotes an IBRD or IDA borrower or the executing agency delegated by the Borrower to execute theproject.

42 Annex

6. Prequalification enables Borrowers to assess the interest generated by the project amongqualified firms, and to make any necessary adjustments in the procurement process(including, in particular, the conditions of contract-sharing of risk, payment terms,liquidated damages, or completion times, which may be perceived as onerous by potentialbidders) in the event that only a limited number of applications are received; to reduce theamount of work and time involved in evaluating bids from unqualified contractors orsuppliers; to encourage local firms to form joint ventures with other local or internationalfirms, thereby benefitting from their resources and experience; to assess the likelihood ofcontractors' or suppliers' eligibility for domestic preference in countries where this isapplicable; and to reduce significantly, if not eliminate, problems associated with low pricessubmitted by bidders of doubtful capability.

Basis for Prequalification

7. Under IBRD-financed projects, the loan recipient (the "Employer" in this document) isresponsible for preparing the prequalification documents and evaluating the applicants. Theprequalification documents should provide a clear basis upon which prospective bidders canbe evaluated, following an objective process based on fair and transparent criteria. Thedocumentation sought should always be relevant, clearly stated and, so that prospectivebidders are not deterred, not impose an excessive burden of preparation or paperwork.

8. Prequalification should be denied only to those prospective bidders who do not meet thespecified criteria. Thus, those who prepare prequalification documentation for a project areresponsible for ensuring that the criteria are drawn in accordance with the realistic needs ofthe project and that the criteria are sufficiently stringent to assure that only properly qualifiedfirms are included in the final list. Excessively "soft" criteria may result in an excess ofunsuitably qualified applicants and may lead to (a) deterring the better qualified firms frombidding and (b) obtaining a low bid from a marginally qualified contractor or supplier.

9. IBRD does not accept blanket "black listing" of contractors or suppliers. In principle, a firmthat did not perform well in a prior contract should be given a chance to mend its ways andimprove its performance if it shows that it has corrected the problems that originally causedits prior poor performance. The evaluation of applicants for prequalification must thereforebe based on the evidence submitted by the Applicant, and not on a black list, which may bebased on out-of-date information or irrelevant data. Current poor performance may be acriterion for disqualifying an applicant if suitable steps are not being taken to correct it. Suchaction would have to be reviewed by IBRD on a case-by-case basis.

10. Since prequalification is a preliminary stage in the process of awarding a contract to acompetent bidder, the Borrower must be able to verify the statements made by the applicantsand to retain the right to solicit information from their past employers and financialinstitutions. Because there may be many applicants at the prequalification stage, the extentof verification should be limited to significant issues, with applicants being afforded the


benefit of reasonable doubt. In subsequent stages of the procurement process, such doubtsmay be investigated if they remain relevant.

Principles and Procedures

Eligibility to Prequalify

1 1. The prequalification process should not be used to limit the number of bidders, and allprequalified bidders must be permitted to bid. Some countries maintain registers of firms thatmeet preset qualification requirements. Such registers are not a substitute for theprequalification process under International Competitive Bidding.

12. Prequalification in IBRD-funded projects is open to contractors or suppliers, and jointventures from eligible source countries, as defined in the Procurement Guidelines.

Advertisement

13. The prequalification of bidders should be advertised following the procedures for Notificationand Advertising specified in the Procurement Guidelines (paras. 2.8 and 2.9). Adequate timefor response should be allowed.

Prequalification Criteria to Be Preset

14. The Procurement Guidelines (para. 2.10) require that a clear statement of the requirementsfor qualification should be sent to all applicants who wish to be considered forprequalification. The Procurement Guidelines also require the Borrower, beforeprequalification is invited, to inform IBRD in detail of the procedure to be followed, and tointroduce such modifications in the procedure as IBRD reasonably requests2 .

15. Hence, the specific criteria, and the prequalification document as a whole, must beconsidered with care as early as possible in the procurement process. However, theprequalification documents should be issued only at such time as the preparation ofengineering designs and bid documents is well advanced, and the works are reasonably welldefined.

2 To facilitate the process of review by Bank staff, IBRD borrowers should state if, and to what extent, thesestandard documents have been used in the preparation of the prequalification documents when these are submitted to theIBRD for review.

44 Annex

Two-Envelope System

16. The evaluation of prequalification applications should precede the issue of invitations to bid.Procedures such as the "two-envelope system"-which entails submitting prequalification andbid documents at the same time, in separate envelopes-do not meet the requirements of theProcurement Guidelines and defeat one of the key objectives of prequalification-that ofsaving unqualified bidders the expense of bidding. The two-envelope system should not beused in International Competitive Bidding.

Cofinanced Projects

17. Individual contracts may be financed jointly by the IBRD and other lenders, only if thecolenders agree to apply the Procurement Guidelines. The procurement process is then thesame as in any project funded by the IBRD alone. The procurement documents should statethat IBRD procurement procedures will apply.

18. However, there is not always a full agreement among cofinanciers on the procurementprocedures to be followed. In such cases, specific discrete contracts are procured, followingthe respective cofinanciers' rules, under "parallel cofinancing" arrangements. Theprequalification documents must then address the requirements of the respective cofinanciersfor the contracts they finance.

19. In some cases, the cofinancing arrangements (including the extent of the participation of thevarious colenders, the allocation of their funds to the various discrete elements of the project,and the extent to which joint cofinancing will apply) may not have been determined at thetime of inviting firms for prequalification, and therefore the prequalification requirements forthe various elements of the project would not be known. The prequalification documentsshould make the position clear to the applicants and allow for possible subdivision of theproject into discrete elements for a potential parallel cofinancing arrangement. S,ee alsoOperations Policy Note 4.08, Procurement in Cofinanced Projects (to be replaced byProcurement Technical Note 1.5, same title).

Multiple Contracts

20. Where a project may be divided into separate contracts (slices) that may be combined intogroups of contracts (packages), applicants may be invited to prequalify for each specificcontract separately, or for a package of contracts which are essentially of a similar type andsize ("slice and package" procedure-see Procurement Guidelines, para. 2.5). Applicantsshould be asked to state for which "slices" or "packages" they wish to prequalify. Applicantsmay prequalify for a specific contract, any single contract, any combination of contracts, orthe entire package.


21. An applicant may be allowed to bid for any contract for which he is prequalified, and hemay be awarded more than one, depending on his capacity to carry out a combination ofcontracts. In such cases, awards are made by the Borrower on the basis of the "slice andpackage" procedure, based on the least cost for the entire project.

Subcontractors

22. The experience and financial resources of subcontractors may not be added to those of theApplicant for purposes of prequalification. In cases where a highly specialized process mustbe used, applicants should be required to specify the name and qualifications of such asubcontractor, if the particular process is not available in-house. Lack of such specializedsupport, essential in certain construction operations requiring, for example, chemical groutingor underwater repair work, could result in disqualification of the Applicant.

Joint Ventures and Other Forms of Association

23. The IBRD encourages the formation of joint ventures of contractors or suppliers from theBorrower's country with foreign contractors or suppliers, but does not accept conditions forprequalification or bidding which make such joint ventures mandatory.

24. When two or more firms apply jointly for prequalification, special considerations must bemet. The prequalification document must set out clearly the conditions applying to such jointventures, whether existing or proposed; to any change in the membership of the jointventures; or to the association of prequalified firms after prequalification. Each party of thejoint venture must submit the complete documentation required of an individual firmapplying for prequalification.

25. The requirements described for joint ventures apply to associations, partnerships, consortia,and other ventures in which firms associate with each other formally for the purpose ofcarrying out a contract jointly. Partners of a joint venture must confirm that, if prequalified,the joint venture bid will be submitted with a formal joint venture agreement and that allparties to that agreement will be legally bound jointly and severally for the bid and anyconsequent contract. The lead partner in the joint venture should also be designated, as wellas the individual with overall responsibility for the joint application, who will be theprincipal contact for communications. The requirements do not apply to subcontractarrangements.

26. A firn may apply for prequalification both individually and as part of a joint venture. It willnot, however, be permitted to bid for the same contract as an individual firm and as part ofa joint venture. In the event that it bids for the same contract as an individual firm and aspart of a joint venture, both or all bids by (or including) this firm will be rejected.

46 Annex

27. Formation or regrouping of joint ventures after prequalification will only be considered ifthe additional firms or joint ventures have already been prequalified. However, such newjoint ventures will not be approved if, in the Borrower's opinion, this would result in asubstantial reduction in competition.

Domestic Preference

28. At the time of inviting bids, prequalified bidders should be advised if eligible firms and jointventures will be entitled to be considered for domestic preference. The prequalificationdocuments should clearly indicate the criteria that must be met by bidders who, individuallyor in joint venture, qualify for the 7V2 percent domestic preference in bid evaluation forworks contracts and 15 percent domestic preference for goods. Under certain circumstances,the 15 percent "goods" preference may be allowed for parts of an industrial plant contract,power station, supply and erect contract for equipment and similar projects. The "IndustrialModel" may be applied in such cases, subject to consultation with the Regional ProcurementAdviser and OPRPR (Operational Directive 11.00, para. 72).

29. Where the domestic preference will apply in the comparison of bids, applications shouldspecify the proposed participation in profits and losses and the value of the share of the workof each partner, for purposes of determining the eligibility of the joint venture as a"domestic" enterprise.

Public Sector Enterprises

30. A majority publicly owned contracting enterprise may be eligible to prequalify in its owncountry, provided it meets the following criteria:

* The enterprise must be a commercially oriented legal entity distinct from the Borrower,and not a government department.

* It must be reasonably financially autonomous, as demonstrated by requirements forhaving separate audited accounts, producing a return on capital, being empowered toraise loans, and obtaining its revenues through sale of goods or services.

* It must be managerially autonomous, as demonstrated by the authority for decisionmaking granted to management, for instance, for contracting obligations and hiring andfiring of personnel.

* It must meet all the prequalification requirements in respect of financial, technical, andexperience criteria.


Clarification Meeting

31. Where circumstances warrant (usually for very large or very complex projects), aclarification meeting should be held to clear any doubts the potential applicants may haveabout the documents or the project. If such a meeting takes place, all firms that havewithdrawn prequalification documents should be sent, at least three weeks before thesubmission date, a copy of the minutes of the meeting, listing any changes made to theprequalification requirements or procedure as a result of the meeting.

Pass/Fail Criteria

32. Although there is no single method that the IBRD requires Borrowers to follow, the IBRDnonetheless very strongly advocates that bidders should be prequalified by meetingpredefined, precise minimum requirements. The preferred method entails the setting ofpass/fail criteria which, if not met substantially by the Applicant, results in disqualification.Other methods that entail the use of subjective criteria to evaluate firms3 have been foundto be flawed and have resulted in complaints from potential bidders who were unjustlydisqualified, or in serious delays in project implementation.

33. The criteria adopted must relate to characteristics that are essential to ensure satisfactoryexecution of the contract, and must be precisely stated. In essence, the criteria must bechosen so that only contractors who are well qualified to carry out the work are permittedto bid. The criteria must also be set so that they neither inhibit competition nor set apredetermined number of firms to be prequalified: all firms that meet the criteria should beinvited to bid. The prequalification criteria for joint ventures should be the same as those forsingle applicants.

Information to Be Sought

34. To enable potential bidders to be prequalified, it is necessary to seek only such informationas is essential for the Borrower to determine the Applicant's capabilities to perform thecontracts satisfactorily. These capabilities may be categorized under the headings ofexperience, personnel capabilities, equipment capabilities, financial position, and litigationhistory.

3For instance, the method that relies on the apportionment of "merit points". This system is better suited to theevaluation of consultants, or firms whose products are highly specialized services.

48 Annex

Experience

General Experience

35. The Applicant's general capabilities should be related to the availability of current, relevantexperience and the value of work undertaken. Minimum experience requirements should bestipulated as an annual value of the general construction work carried out over a statedperiod, e.g., five years.

36. The value of general construction work carried out should be presented as the annualturnover, in terms of invoices to clients for work carried out during the year, expressed inits equivalent in a specified international currency, such as the U.S. dollar. The value of eachcontract should be calculated at the exchange rate at the end of each year reported. Thecriterion for qualification should be set at a level that ensures that the potential contractorwill not be overwhelmed by the size of the new contract. For instance, the Applicant'sannual turnover should be not less than five times the expected annual cash flow of theproposed contract.

37. Testimonials and certificates are of doubtful value in assessing applicants' capabililies, andare not always available. Thus, applicants should not be required to submit such documentsas a condition of prequalification.

Particular Experience

38. Applicants should demonstrate that they have carried out work of a nature, size, value, andcomplexity similar to that of the project in question. There are two principal criteria forprequalification.

* First, the Applicant should have carried out similar work of at least a magnitudeapproximating that of the package of work for which prequalification is sought.Depending on the nature of the works to be bid, the criterion should be related to theApplicant having carried out one or more projects of a certain value referred to that ofthe proposed project4 over, e.g., the last five years.

* Second, the Applicant should have performed operations of a volume and quality similarto those required for the project. For example, where large-volume earthmoving,tunneling, or concrete placing is involved, the Applicant should demonstrate experiencein those operations, having performed them at the rates necessary to meet a percentage(e.g., 80 percent) of the peak annual rate required for the project.

39. Bidders should not be disqualified because they have not had direct experience in theBorrower's country or region.

4This figure should be no less than 80 percent of the value of the contract to be undertaken.


40. In some projects, specific environmental conditions may require bidders to have particularrelevant experience, such as experience constructing chip-sealed highways in hot, humidclimates, or experience working in remote areas.

41. Bidders should not be disqualified solely because they have not carried out the exact typeof project proposed if their experience is comparable. For example, a contractor who has notdone so before may be capable of constructing an airfield if he has adequate earthworks,paving, and building experience. On the other hand, it might be imprudent to prequalify anapplicant who lacks maritime experience for construction of an exposed seaport project, evenif he has built sheltered riverside wharves.

Personnel Capabilities

42. The managerial and technical competence of a contractor is largely related to his keypersonnel on site. The extent to which the Applicant should demonstrate having staff withextensive experience should be limited to those requiring critical operational or technicalskills. The prequalification criteria should therefore refer to a limited number of such keypersonnel, for instance, the project manager and those superintendents working under himwho will be responsible for major components (e.g., superintendents specialized in dredging,piling, tunnelling, or earthworks, as required for each particular project).

43. Applicants should normally be required to name a principal candidate and an alternate foreach key position. Criteria of acceptability should be based on:

* a minimum number of years of experience at a similar position; and

* a minimum number of years of experience and/or number of comparable projects carrieuout in a specified number of preceding years.

44. The requirement of specified education and academic qualifications is normally unnecessaryfor such positions, as contractors often employ competent staff who have learned theirprofession "on the job" and who lack formal qualifications.

45. It may be appropriate to specify that certain positions are filled by individuals who have heldposts of comparable authority for, say, three years with the Applicant. This is so that keystaff, in executive site positions, have sufficient knowledge of the Applicant's management,policy, procedures, and practices to act with confidence and authority within that framework.

50 Annex

Equipment Capabilities

46. An inventory of construction equipment represents a high capital cost overhead to acontractor. In consequence, not all competent potential bidders will maintain an inventoryof high-value items that are in suitable condition for major contracts. In most casesapplicants can readily purchase, lease, or hire equipment. It is thus usually unnecessary forprequalification to depend on the contractor's owning generally available items of equipment.The pass/fail criteria adopted should therefore be limited only to those bulky or specializeditems that are critical for the type of project to be implemented and which may be difficultfor the contractor to obtain quickly. Examples may include items such as heavy lift andpiling barges, dredges, and tunnel boring machines.

47. Even in such cases, main contractors may not own the equipment, but rather rely onspecialist subcontractors or equipment hire firms. The availability of the subcontractor andthe specified equipment should be subject to verification (at the time of prequalification, orat the time of bidding) in such cases.

48. Particular care is needed in setting pass/fail criteria for equipment because of the differentskill levels and techniques-some of which are innovative-that contractors bring toconstruction projects. For example, heavy lift capability may best be related to the need forplacing specified items or for constructing components in position, not simply for specifyinga crane rated at so many tons at its minimum working radius. Thus, performance-basedcriteria may be more relevant.

Financial Position

General Information

49. Because of differing international accounting practices and tax laws, published informationon the financial position of companies, and financial ratios derived therefrom do not providean equitable international basis for evaluating the financial standing of companies forprequalification purposes. Nevertheless, audited financial statements or balance sheets shouldbe sought as a general guide to the financial health of the Applicant. For example, thefinancial results over the last five years and the projection for the following two years shouldbe positive. Consistent losses or a risk of insolvency shown in the accounts may be causefor rejecting the Applicant.


50. Thus the Borrower should normally require applicants to provide the following backgroundinformation to support the presentation in the Application Forms:

* audited annual financial statements for the last five years supported by audit statementsor tax returns5; and

* names and addresses of the Applicant's banker(s), as well as the names and addressesof individuals familiar with their financial standing.

Cash Flow Capability Requirement

51. The Borrower must be satisfied that the bidders will, at the time of award, have the financialresources to implement the project satisfactorily. Thus, prequalification followed by updatinginformation with the bid, and verification prior to award of contract are necessary todetermine the financial capabilities of the potential contractor, with prequalification beinga preliminary stage in the process.

52. The cash flow qualifying criterion should be based on the means to finance fully theBorrower's estimate of cash flow for both local and foreign currency requirements for aspecified "critical" period. A suggested method of determining these requirements is basedon a straight line cash flow for the contract, neglecting any effects of the advance paymentsand retention monies. Calculating from the beginning of the month invoiced, the "critical"period would be determined by adding, say, two months to the time needed by the Engineerto issue the interim/monthly certificate and for the Borrower to pay the amount due.

53. The amount estimated from the above calculations should be stated in the prequalificationdocuments as the pass/fail criterion. Bidders should demonstrate having access to liquidassets, lines of credit, unencumbered assets, and other financial means sufficient to meet thespecified cash requirement, net of other known commitments at the time of award, andsubject to verification.

Litigation History

54. Borrowers should be on their guard against contractors or suppliers who resort to excessiveclaims and litigation as a means to increase income after an award of contract. However, insome countries, resorting to claims is an established business practice.

55. Applicants with a consistent and significant history of excessive contract arbitrations andlitigation resulting in awards or decisions against them should not be qualified to bid. So

5 Firms owned by individuals and partnerships may not be required to maintain audited acconts by the laws of theircountries of origin. In such cases, their balance sheets should be certified by a registered accountant, and supported bytax returns.

52 Annex

that the litigation history may be evaluated, applicants should be required to list all contractsover a stated number of years6 that resulted in litigation or arbitration proceedings, with anindication of the matters in dispute, the parties involved, and the amounts in dispute.

56. The criterion for rejection should be one of numerous arbitral awards or court decisionsagainst the Applicant; for instance, the occurrence of one or two cases over five years, fora contractor handling on average ten construction jobs simultaneously should not be a causefor rejection. Under the best of circumstances, some projects "go sour" for causes such asclash of personalities or incompetent management by the Employer. On the other hand, iflitigation is found relatively frequently in the business of the Applicant, it may indicate anattitude of the management of the firm which could be dangerous for the Employer if theApplicant were awarded the contract.

Updating Prequalification Information

57. Because circumstances may change in the period between prequalification and thesubmission of bids, contracts must be awarded only to bidders who continue to meet therequirements for prequalification. The bid documents should specify which essential itemsof the information submitted with the prequalification document should be updated with thebid. In particular, the Borrower should be satisfied that bidders continue to have the requiredfinancial capability.

58. The Borrower may harbor reasonable doubts about the veracity of statements made by abidder. If a perceived weakness could materially affect the bidder's capability to perforn thecontract satisfactorily, then the prequalification information should be verified.

Prequalification Report

59. The Borrower should evaluate the applications received and prepare a report to be submittedto the IBRD for review. The report should address each of the pass/fail criteria set in thedocuments. Disqualification of applicants who marginally fail to meet the criteria should beexplained. The IBRD may ask the Borrower to justify the evaluation and obtain furtherinformation or clarification.

Notification of Prequalification

60. After the Borrower has processed and evaluated the prequalification submissions, andreceived the IBRD's "no objection" to the results of the evaluation, the Borrower shouldnotify the applicants of the decision.

6 Normally the last five years.


61. In all cases, the notification should indicate that prequalification will be followed byverification at the time of bidding, and that bids shall be rejected by the Borrower, at itsdiscretion, if the verification is unsatisfactory or if the bidder is unable to confirm thespecified requirements.

62. Applicants should be advised that only firms and joint ventures that have been prequalifiedunder this full process will be eligible to bid.

Invitation to Bid

63. Invitations to bid should follow as soon as possible after prequalified bidders have beennotified. The bid documents should be issued only to prequalified firms, and should refer tothe need to provide specified updated information and any pre-award verificationrequirements.