PROCUREMENT

1. 8Write procurement category(8)

 Goods
 works,
 service
2. 4 Bid invitation letter is not part of bid document false
3. 4Which one is not procurement pre evaluation criteria
a) Verification:.
b) Eligibility:.
c) Bid/Proposal Security:
d) Completeness of Application/Bid/Proposal:
e) None
4. 4FOB incoterm is used only Sea and Waterway Transport .true(FAS,FOB,CIFand C&F used only
Sea and Waterway Transport)
5. 4Theissuing bank fails to honor, confirming bank must pay to the beneficiary. True(4)
6. 4An incoterm that the Seller bears cost, risk and responsibility for goods until made available to
buyer at named place of destination. Seller clears goods for export, not import. Circle his incoterm
DAT
DAP
DDP
7. 8Write at list fourprocurement cycle:
6.1. Recognition of need(Receiving and analyzing purchase requisitions)
6.2. Description and transmission of the need
6.3. Determination and analysis of possible sources of supply(Selecting suppliers)
6.4. Determination of prices and terms(Determining the right price.)
6.5. Preparation and placement of the purchase order(Issuing purchase orders)
6.6. Following up to ensure delivery dates are met
6.7. Receipt and inspection of materials(Receiving and accepting goods)
6.8. Clearance of the invoice and payment to supplier(Approving supplier’s invoice for
payment.)
6.9. Maintenance of records
8. 4 Incoterm groups divided in to four E,F,C,& D describe one of each group

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Answer
1. Group E – Departure(EXW – Ex Works)EXW – Ex Works (named place) - the seller makes
the goods available at his premises, the buyer is responsible for all charges
2. Group F – Main carriage unpaid (FCA – Free Carrier, FAS – free alongside Ship, FOB –
Free On Board,)
3. Group C – Main carriage paid(C&F – Cost and Freight, CIF – Cost, Insurance and Freight,
CPT – Carriage Paid To, CIP – Carriage and Insurance Paid to)
4. Group D – Arrival(DAF – Delivered At Frontier, DES – Delivered Ex Ship, DEQ –
Delivered Ex Quay, DDU – Delivered Duty Unpaid, DDP – Delivered Duty Paid)
9. 8Write at list four procurement principles:
 Transparency
 Accountability
 Integrity
 Fairness
 Value of money/economy
 Encourage local suppliers
10. Bribery is act of offering, giving, receiving, or soliciting of any item of value to influence the
actions of an official
11. 4 Liqudation damage is a "genuine pre-estimate" of the anticipated loss……..daily /weekly

• There are 4 Methods of Payment-

1. Cash in Advance
2. Open Account
3. Documentary Collection
4. Documentary Credit
 Letter of credit
The letter of credit is a commitment by the buyer’s bank on behalf of the buyer (importer) to effect
payment to the seller (exporter) / beneficiary subject to fulfillment of certain conditions by the
seller.
 Types of Letter of Credit

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1. Irrevocable letter of credit : Irrevocable LC. This LC cannot be cancelled or modified without
consent of the beneficiary (Seller). This LC reflects absolute liability of the Bank (issuer) to the
other party.
2. Revocable letter of credit This LC type can be cancelled or modified by the Bank (issuer) at the
customer's instructions without prior agreement of the beneficiary (Seller). The Bank will not have
any liabilities to the beneficiary after revocation of the LC.
3. Stand-by LC. This LC is closer to the bank guarantee and gives more flexible collaboration
opportunity to Seller and Buyer. The Bank will honour the LC when the Buyer fails to fulfill
payment liabilities to Seller.
4. Confirmed LC. In addition to the Bank guarantee of the LC issuer, this LC type is confirmed by the
Seller's bank or any other bank. Irrespective to the payment by the Bank issuing the LC (issuer), the
Bank confirming the LC is liable for performance of obligations.
5. Unconfirmed LC. Only the Bank issuing the LC will be liable for payment of this LC.
6. Transferable LC. This LC enables the Seller to assign part of the letter of credit to other party(ies).
This LC is especially beneficial in those cases when the Seller is not a sole manufacturer of the
goods and purchases some parts from other parties, as it eliminates the necessity of opening several
LC's for other parties.
7. Back-to-Back LC. This LC type considers issuing the second LC on the basis of the first letter of
credit. LC is opened in favor of intermediary as per the Buyer's instructions and on the basis of this
LC and instructions of the intermediary a new LC is opened in favor of Seller of the goods.
8. Payment at Sight LC. According to this LC, payment is made to the seller immediately (maximum
within 7 days) after the required documents have been submitted.
9. Deferred Payment LC. According to this LC the payment to the seller is not made when the
documents are submitted, but instead at a later period defined in the letter of credit. In most cases
the payment in favor of Seller under this LC is made upon receipt of goods by the Buyer.
10. Red Clause LC. The seller can request an advance for an agreed amount of the LC before shipment
of goods and submittal of required documents. This red clause is so termed because it is usually
printed in red on the document to draw attention to "advance payment" term of the credit.
 Parties To A Letter Of Credit
1. Applicant: means the party on whose request the credit is issued. (The buyer, or customer, is the
Applicant.)

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2. Beneficiary: means the party in whose favor a credit is issued( The seller of the goods or the
provider of the services.)
3. Issuing Bank is the bank that issues a letter of credit at the request of an applicant or its own
behalf. Issuing bank undertakes to honor a complying presentation of the beneficiary without
recourse.
a. The Issuing Bank’s credit replaces the buyer's credit.

Risks to the Issuing Bank-

– Insolvency of the Applicant
– Fraud Risk, Sovereign and Regulatory Risk and Legal Risks

4. Advising Bank: Advising bank is the bank that advises the credit at the request of the issuing
bank. An advising bank that is not a confirming bank advises the credit and any amend mend
without any obligation to honor.
-----The Advising Bank is an agent of the Opening Bank.
a. Verifies the authenticity of the Opening Bank.
5. Nominated Bank:Nominated bank is the bank with which the credit is available or any bank in
the case of a credit available with any bank.
Risks to the Nominated Bank -has made a payment to the Beneficiary against documents that comply with
the terms and conditions of the Credit and is unable to obtain reimbursement from the Issuing Bank
6. Confirming Bank: Confirming bank is the bank that adds its confirmation to a credit upon the
issuing bank's authorization or request.
This decision is up to confirming bank only.
once it adds its confirmation to the credit confirming is irrevocably bound to honor or
negotiate as of the time it adds its confirmation to the credit. Even if the issuing bank fails to
honor, confirming bank must pay to the beneficiary.
--The Confirming Bank is usually the Advising Bank, but it confirms that the credit exists.
--It can negotiate the documents, and can accept the letter of credit the Opening Bank will not pay.
7. Reimbursing Bank :Reimbursing Bank shall mean the bank instructed and/or authorized to
provide reimbursement pursuant to a reimbursement authorization issued by the issuing bank.

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 INCOTERMS AND THE EXPORTER

 International Commercial Terms, known as “Incoterms”, are internationally accepted terms
defining the responsibilities of exporters and importers in the arrangement of shipments and the
transfer of liability involved at various stages of the transaction.
1. Rules for Sea and Inland Waterway Transport:
1) FAS - Free Alongside Ship: Risk passes to buyer, including payment of all transportation and
insurance costs, once delivered alongside the ship (realistically at named port terminal) by the
seller. The export clearance obligation rests with the seller.The seller must place the goods
alongside the ship at the named port. The seller must clear the goods for export; this changed in
the 2000 version of the Incoterms. Suitable for maritime transport only
2) FOB - Free On Board: Risk passes to buyer, including payment of all transportation and
insurance costs, once delivered on board the ship by the seller. A step further than FAS.The
classic maritime trade term, Free On Board: seller must load the goods on board the ship
nominated by the buyer, cost and risk being divided at ship's rail. The seller must clear the
goods for export. Maritime transport only.
FOT – Free On Truck
FOR – Free On Rail
3) C&F - Cost and Freight: Seller delivers goods and risk passes to buyer when on board the
vessel. Seller arranges and pays cost and freight to the named destination port. A step further
than FOB.The supplier is responsible for export customs clearance, delivering the goods to the
named port of destination
 CIF - Cost, Insurance and Freight: Risk passes to buyer when delivered on board the ship. Seller
arranges and pays cost, freight and insurance to destination port. Adds insurance costs to CFR.Cost,
Insurance and Freight - Responsibility of supplier to arrange export customs clearance, delivery of
goods to named port of destination and insurance of goods.
2. Rules for Any Mode or Modes of Transportation:
1. EXW - Ex Works: Seller delivers (without loading) the goods at disposal of buyer at seller’s
premises. Long held as the most preferable term for those new-to-export because it represents the
minimum liability to the seller. On these routed transactions, the buyer has limited obligation to
provide export information to the seller.Under Ex-works the seller minimizes his risk by only

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making the goods available at his own premises. Ex-works represents the minimum involvement of
the supplier and the maximum involvement of the buyer in the arrangement of the transportation of
the goods from the premises of manufacture to their premises.
2. FCA - Free Carrier: Seller delivers the goods to the carrier and may be responsible for clearing the
goods for export (filing the EEI). More realistic than EXW because it includes loading at pick- up,
which is commonly expected, and sellers are more concerned about export violations
Free Carrier (named place) The seller hands over the goods, cleared for export, into the custody of
the first carrier (named by the buyer) at the named place. This term is suitable for all modes of
transport, including carriage by air, rail, road, and containerized / multi-modal transport.
3. CPT - Carriage Paid To: Seller delivers goods to the carrier at an agreed place, shifting risk to the
buyer, but seller must pay cost of carriage to the named place of destination.The general
/containerized/ multimodal equivalent of CFR, The seller pays for carriage to the named point of
destination, but risk passes when the goods are handed over to the first carrier.
4. CIP - Carriage and Insurance Paid To: Seller delivers goods to the carrier at an agreed place,
shifting risk to the buyer, but seller pays carriage and insurance to the named place of
destination.The containerized transport/multimodal equivalent of CIF, Seller pays for carriage and
insurance to the named destination point, but risk passes when the goods are handed over to the
first carrier.
5. DAT - Delivered at Terminal: Seller bears cost, risk and responsibility until goods are unloaded
(delivered) at named quay, warehouse, yard, or terminal at destination. Demurrage or detention
charges may apply to seller. Seller clears goods for export, not import. DAT replaces DEQ, DES.
6. DAP - Delivered at Place: Seller bears cost, risk and responsibility for goods until made available to
buyer at named place of destination. Seller clears goods for export, not import. DAP replaces DAF,
DDU.
7. DDP - Delivered Duty Paid: Seller bears cost, risk and responsibility for cleared goods at named
place of destination at buyers disposal. Buyer is responsible for unloading. Seller is responsible for
import clearance, duties and taxes so buyer is not “importer of record”.It means that the seller pays
for all transportation costs and bears all risk until the goods have been delivered and pays the duty.
Also used interchangeably with the term "Free Domicile"
12. Group E – Departure(EXW – Ex Works)

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1. EXW – Ex Works (named place) - the seller makes the goods available at his premises, the
buyer is responsible for all charges
13. Group F – Main carriage unpaid(FCA – Free Carrier, FAS – free alongside Ship, FOB – Free
On Board,)
1. FCA – Free Carrier (named place)The seller hands over the goods, cleared for export, into the
custody of the first carrier (named by the buyer) at the named place. This term is suitable for all
modes of transport, including carriage by air, rail, road, and containerized / multi-modal
transport.
2. FAS – free alongside Ship (named loading port)The seller must place the goods alongside the
ship at the named port. The seller must clear the goods for export; this changed in the 2000
version of the Incoterms. Suitable for maritime transport only.
3. FOB – Free On Board (named loading port)The classic maritime trade term, Free On Board:
seller must load the goods on board the ship nominated by the buyer, cost and risk being divided
at ship's rail. The seller must clear the goods for export. Maritime transport only.
FOT – Free On Truck
FOR – Free On Rail
14. Group C – Main carriage paid(C&F – Cost and Freight, CIF – Cost, Insurance and Freight,
CPT – Carriage Paid To, CIP – Carriage and Insurance Paid to)
1. C&F – Cost and Freight (named destination port)Seller must pay the costs and freight to bring
the goods to the port of destination. However, risk is transferred to the buyer once the goods
have crossed the ship's rail. Maritime transport only.
2. CIF – Cost, Insurance and Freight (named destination port)
Exactly the same as CFR except that the seller must in addition procure and pay for insurance
for the buyer.Maritime transport only.
3. CPT – Carriage Paid To (named place of destination)
The general /containerized/ multimodal equivalent of CFR, The seller pays for carriage to the
named point of destination, but risk passes when the goods are handed over to the first carrier.
4. CIP – Carriage and Insurance Paid to (named place of destination)
The containerized transport/multimodal equivalent of CIF, Seller pays for carriage and
insurance to the named destination point, but risk passes when the goods are handed over to the
first carrier.

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15. Group D – Arrival(DAF – Delivered At Frontier, DES – Delivered Ex Ship, DEQ – Delivered
Ex Quay, DDU – Delivered Duty Unpaid, DDP – Delivered Duty Paid)
8. DAF – Delivered At Frontier (named place)It can be used when the goods are transported by rail and
road. The seller pays for transportation to the named place of delivery at the frontier. The buyer
arranges for customs clearance and pays for transportation from the frontier to his factory. The
passing of risk occurs at the frontier.
9. DES – Delivered Ex Ship (named port)Where goods are delivered ex ship, the passing of risk does
not occur until the ship has arrived at the named port of destination and the goods made available for
unloading to the buyer.The seller pays the same freight and insurance costs as he would under a CIF
arrangement. Unlike CFR and CIF terms, the seller has agreed to bear not just cost, but also Risk and
Title up to the arrival of the vessel at the named port. Costs for unloading the goods and any duties,
taxes, etc… are for the Buyer. A commonly used term in shipping bulk commodities, such as coal,
grain, dry chemicals - - - and where the seller either owns or has chartered, their own vessel.
10. DEQ – Delivered Ex Quay (named port)It means the same as DES, but the passing of risk does not
occur until the goods have been unloaded at the port of destination.
11. DDU – Delivered Duty Unpaid (named destination place)It means that the seller delivers the goods to
the buyer to the named place of destination in the contract of sale. The goods are not cleared for
import or unloaded from any form of transport at the place of destination. The buyer is responsible
for the costs and risks for the unloading, duty and any subsequent delivery beyond the place of
destination. However, if the buyer wishes the seller to bear cost and risks associated with the import
clearance, duty, unloading and subsequent delivery beyond the place of destination, then this all
needs to be explicitly agreed upon in the contract of sale.
12. DDP – Delivered Duty Paid (named destination place)It means that the seller pays for all
transportation costs and bears all risk until the goods have been delivered and pays the duty. Also
used interchangeably with the term "Free Domicile"

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Summary of terms
For a given term, "Yes" indicates that the seller has the responsibility to provide the service included in the price. "No" indicates it is the buyer's responsibility.
If insurance is not included in the term(for example, CFR) then insurance for transport is the responsibility of the buyer or the seller depending on who owns
the cargo at time of transport. In the case of CFR terms, it would be the buyer while in the case of DDU or DDP terms, it would be the seller.
Load Exportduty Transport to Unload from Landing Transport to Landing Unload onto Transport to InsuranceEntry - Entry -
to payment exporter's truck at the charges at import's port charges at trucks fromthe destination Customs Duties
truck port origin's port origin's port importer's importers' port clearance and
port Taxes
EXW No NoNo No
No No No No
No No No No No
No No No No
No No No No No
FCA Yes Yes
Yes YesYes Yes No No No No No NoNo No No No
No No NoNo No No
FAS Yes Yes
Yes YesYes Yes Yes Yes
No No No No NoNo No No No
No No No
No No No
FOB Yes Yes
Yes Yes
Yes Yes Yes Yes
Yes No Yes No NoNo No No No
No No No
No No No
CFR Yes Yes
Yes Yes
Yes Yes Yes Yes Yes Yes No YesNo No No No
No No No
No No No
CIF Yes Yes
Yes Yes
Yes Yes Yes Yes
Yes Yes Yes No YesNo NoNo No
Yes No No Yes No
CPT Yes Yes
Yes Yes
Yes Yes Yes Yes Yes Yes No YesNo NoNo No
No No No
No No No
CIP Yes Yes
Yes Yes
Yes Yes Yes Yes Yes Yes No YesNo NoNo No
Yes No No
No Yes No
DAF Yes Yes
Yes Yes
Yes Yes Yes Yes Yes Yes No YesNo NoNo No
No No No
No No No
DES Yes Yes
Yes Yes
Yes Yes Yes Yes
Yes Yes Yes No YesNo NoNo No
Yes No No
No Yes No
DEQ Yes Yes
Yes Yes
Yes YesYes Yes
Yes Yes Yes Yes YesNo YesNo No
Yes No NoNo Yes No
DDU Yes Yes Yes
Yes YesYes Yes
Yes Yes Yes Yes YesYes YesYes Yes
Yes No Yes
No Yes No
DDP Yes Yes
Yes YesYes YesYes Yes
Yes Yes Yes Yes YesYes YesYes Yes
Yes Yes Yes
Yes Yes Yes

Factors in Selecting Suppliers

1. Technical ability. Does the supplier have the technical ability to make or supply the product
wanted? Does the supplier have a program of product development and improvement? Can the
supplier assist in improving the products? These questions are important since, often, the buyer will
depend upon the supplier to provide product improvements that will enhance or reduce the cost of
the buyer’s products. Sometimes the supplier can suggest changes in product specification that will
Improve the product and reduce cost.
2. Manufacturing capability. Manufacturing must be able to meet the specifications for the product
consistently while producing as few defects as possible. This means that the supplier’s
manufacturing facilities must be able to supply the quality and quantity of the products wanted. The
supplier must have a good quality assurance program, competent and capable manufacturing
personnel, and good manufacturing planning and control systems to ensure timely delivery. These
are important in ensuring that the supplier can supply the quality and quantity wanted.

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3. Reliability. In selecting a supplier, it is desirable to pick one that is reputable, stable, and
financially strong. If the relationship is to continue, there must be an atmosphere of mutual trust and
assurance that the supplier is financially strong enough to stay in business.
4. After-sales service. If the product is of a technical nature or likely to need replacement parts or
technical support, the supplier must have a good after-sales service. This should include a good
service organization and inventory of service parts.
5. Supplier location. Sometimes it is desirable that the supplier be located near the buyer, or at least
maintain an inventory locally. A close location help shorten delivery times and means emergency
shortages can be delivered quickly.
6. JITcapabilities. Companies competing in a just-in-time (JIT) environment depend on suppliers to
quickly deliver small quantities of product. Modern companies operate with very little inventory of
raw materials and require accurate, on-time Deliveries from their suppliers. JIT suppliers who
simply keep extra inventory to meet these demands will soon have increased costs and pressures to
increase their prices. Buyers in a JIT environment need suppliers who value their new relationship,
working in partnership to remove waste from the system. As a result, JIT suppliers need to Have in
place information and delivery systems that allow them to quickly ship exactly What the customer
needs without increased cost or effort.
7. Other considerations. Sometimes other factors such as credit terms, reciprocal business, and
willingness of the supplier to hold inventory for the buyer should be considered.
Purchasing Vs. procurement
 The scope of purchasing is restricted merely to include all activities which are necessary to buy the
materials; The term“ procurement “is broader in scope as compared to purchasing. It means acquisition of
material by any method whatsoever and is a part of materials management. The distinction between
purchasing and procurement is elaborated further in the following paragraph.
 “purchasing” is the process of identifying the need of materials, locating and selecting a supplier,
negotiating terms and prices, buying and follow-up to ensure delivery in time. On the other
hand,“procurement“is the acquisition of goods and services and the payment of the accepted price for
them. Thus, in an effort to procure something, a purchase may be made. Procurement of materials is
concerned with its acquisition (getting it), possession (having it on hand) and conversion (making it fit for
consumption or sale). It comprises, in addition to purchasing, the acquisition of an entrepreneur by

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whatsoever method. In other words, procurement includes both extraction from once own plants and
purchase. Broadly speaking, the procurement function covers wide areas and may include the duties
performed by purchasing as well as function of materials control and management such as inventory
control, traffic, receiving, inspection and salvage operation.
The six rights of purchasing /basic objective for goods procurement/
(Quality, Quantity, Supplier, Time, Service, Price and place)
1 The right quality in general can be stated as the whole set of features and characteristics of a product or
service that are relevant to meeting requirements. It is" the totality of features and characteristics of a
product or service that bear on its ability to satisfy a given need." It also means "fitness for a purpose'
or ' suitability.'
2 The right quantityrefers to the number of units of the required materials to be purchased to continue the
operation of the organization without interruption.
3 The right supplierrefers to a vendor who is reliable and will meet its commitments to providethe right
quality at the right time and place with a desirable service.
4 The right timeThe achievement of delivery on time is a standard purchasing objective.
5. The right serviceThe right service is the totality of additional values that the supplier provides to the
buyer before and after the sale of materials or services.
6. The right price …………………….
Steps/procedures in the Purchasing System
1) Recognition of need(Receiving and analyzing purchase requisitions)
2) Description and transmission of the need
3) Determination and analysis of possible sources of supply(
4) Determination of prices and terms
5) Preparation and placement of the purchase order
6) Follow upon and /or expediting the order
7) Receipt and inspection of materials
8) Clearance of the invoice and payment to supplier
9) Maintenance of records

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1. Receiving and analyzing purchase requisition. Purchase requisitions start with the department or
person who will be the ultimate user. In the material requirements planning environment, the planner
releases a planned order authorizing thePurchasing department to go ahead and process a purchase
order. At a minimum, the purchase requisition contains the following information:
• Identity of originator, signed approval, and account to which cost is assigned.
• Material specification.
• Quantity and unit of measure.
• Required delivery date and place.
• Any other supplemental information needed.
Electronic requisition systems are now widely used and are often part of enterprise resource planning
(ERP) software. The minimum requisition information is still required, and the system can supply much of
the details and control of the information.
For example, the requisitioner can enter the desired part number and the system database will provide the
appropriate description, specification, suggested vendors, shipping instructions, and so on. The system will
then forward the requisition for the Appropriate approvals with controls in place for account number and
spending limits. Once all the approvals have been completed, the requisition is sent to the purchasing
department to produce the purchase order without reentering all the information. For items of small value
(‘c’ items covered in Chapter 9) that are ordered frequently, the system may send an electronic release of
material directly to the approved supplier. The benefits to the company are ease of entry for the
requisitioner, reduced paperwork, decreased turnaround time of requisitions, and improved accuracy of
information.
2. Selecting suppliers. Identifying and selecting suppliers are important responsibilities of the
purchasing department. For
routine items or those that have not been purchased before, a list of approved suppliers is kept. If the item
has not been purchased
before or there is no acceptable supplier on file, a search must be made. If the order is of small value or for
standard items, a supplier can probably be found on the Internet, in a catalogue, trade journal, or directory.
3. Requesting quotations. For major items, it is usually desirable to issue a requestfor
quotation. This is a written inquiry that is sent to enough suppliers to be sure competitive
and reliable quotations are received. Itis not a sales order. After the suppliershave

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completed and returned the quotations to the buyer, the quotations are analyzedfor price,
compliance to specification, terms and conditions of sale, delivery, and payment terms. For
items where specifications can be accurately written, the Choice is probably made on price,
delivery, and terms of sale. For items where specifications cannot be accurately written, the
items quoted will vary. The quotations must be evaluated for technical suitability. The final
choice is a compromise between Technical factors and price. Usually both the issuing and
purchasing departments are involved in the decision.
4. Determining the right price. This is the responsibility of the purchasing department and is
closely tied to the selection of suppliers. The purchasing department is also responsible for
price negotiation and will try to obtain the best price from the
supplier. Price negotiation will be discussed in a later section of this chapter.
5. Issuing a purchase order. A purchase order is a legal offer to purchase. Once accepted by
the supplier, it becomes a legal contract for delivery of the goods according to the terms and
conditions specified in the purchase agreement. The purchase
Order is prepared from the purchase requisition or the quotations and from any other additional information
needed. A copy is sent to the supplier; copies are retained by purchasing and are also sent to other
departments such as accounting, the originating
department, and receiving.
6. Following up and delivery. The supplier is responsible for delivering the items ordered on
time. The purchasing department is responsible for ensuring that suppliers do deliver on
time. If there is doubt that delivery dates can be met, purchasing
must find out in time to take corrective action. This might involve expediting transportation, alternate
sources of supply, working with the supplier to solve its problems, or rescheduling production.
The purchasing department is also responsible for working with the supplier on any changes in delivery
requirements. Demand for items changes with time, and it may be necessary to expedite certain items or
push delivery back on some others. The
buyer must keep the supplier informed of the true requirements so that the supplier is able to provide what
is wanted when it is wanted.
7. Receiving and accepting goods. When the goods are received, the receiving department
inspects the goods to be sure the correct ones have been sent, are in the right quantity, and

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have not been damaged in transit. Using its copy of the purchase order and the bill of lading
supplied by the carrier, the receiving department then accepts the goods and writes up a
receiving report noting any variance. If further inspection is required, such as by quality
control, the goods are sent to quality control or held in receiving for inspection. If the goods
are received damaged, the receiving department will advise the purchasing department and
hold the goods for further action. Provided the goods are in order and require no further
inspection, they will be
sent to the originating department or to inventory.
A copy of the receiving report is then sent to the purchasing department noting any variance or discrepancy
from the purchase order. If the order is considered complete, the receiving department closes out its copy of
the purchase order and advises
The purchasing department. If it is not, the purchase order is held open awaiting completion. If the goods
have also been inspected by the quality control department, they, too, will advise the purchasing
department whether the goods have been accepted or not.
8. Approving supplier’s invoice for payment. When the supplier’s invoice is received, there
are three pieces of information that should agree: the purchase order, the receiving report,
and the invoice. The items and the quantities should be the same
on all; the prices, and extensions to prices, should be the same on the purchase order and the invoice. All
discounts and terms of the original purchase order must be checked against the invoice. It is the job of the
purchasing department to verify these and to resolve any differences. Once approved, the invoice is sent to
accounts payable for payment.
Purchase order should include the following data:
 Number,
 Quantity ordered,
 Description,
 Delivery and shipping instructions,
 Billing and terms,
 Prices, Miscellaneous clause
Follow-up and Expediting
Follow–up is the routine tracking of an order to assure that the vender is able to meet delivery promises.

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Expediting is the application of pressure on vendors to get them either to meet the original delivery
promise or deliver a head of schedule. It may involve a threat of order cancellation or withdrawal of future
business if the vendor cannot meet the agreement.
The main methods of follow-up/expediting are:
1. Performa or standard letters 3. Personal visit
2. Personal letters 4. Telex
Procurement Specific activities usually included in the procurement process are:
1) Participation in the development of material and service requirements and their specifications
2) Conduct of materials studies and management value analysis activities
3) Conduct or more extensive materials market studies
4) Conduct all purchasing function activities
5) Management of supplier quality
6) Management of investment recovery activities (salvage or surplus and scrap)
 The procurement plan contain the following:-
1) The Procurement number,
2) Description of The procurement
3) Quantity of the procurement
4) Procedures to be followed in the execution of the procurement
5) The schedule of main activities to be carried out to complete the procurement
6) The budget and source of finance of the procurement
7) The Type of contract appropriate to the procurement,
8) The roles of main parties involved in the procurement
9) Other matters which are important
10) depending on the nature of the Public Body
Definitions
1. “Procurement” means a reception mechanism of goods, construction sector works, consultancy and
other services in the form of rental or any other similar agreements. Procurement » mean obtaining
goods, works, consultancy or other services throughpurchasing, hiring or obtaining by any other contractual means;
2. “Goods” means a raw materials, tangible product, instrument/equipment and commodity found in the
form of solid, liquid or gas.

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3. “Product specification” means a detailed condition that describes the content and form of goods or
services.
4. “Service procurement” means any procurement except goods, construction and consultancy services.
5. “Consultancy service” means a mental service that is given by consultants based on their professional
skills in aspects of research design, preparing different projects training consultancy service.
6. “Construction work procurement” means a procurement that involves new construction, demolishing,
maintenance or repair activities related to building, road or other infrastructural development.
7. “Bid” means a stage in the procurement process extending from advertisement of or invitation to bid
up to signing of contract.
8. Bidding Documents » mean a document prepared by the public body as a basis for preparation of
bids; which contains a specification of the desired object of procurement;
9. «Bid Proposal» mean a document submit- ted by bidders to participate in a bid on the basisof the bid document prepared
by a publicbody in respect of that procurement;
10. “Local Bid” means a written advertisement that invites competitive local suppliers to supply the
required goods and services to the nearest places according to the timetable set by the organization.
11. “Prospective competitors” means an individual person or trade organization who/which is invited or
personally applied to participate in ORDA procurement.
12. “Bid Bond/bid security” means a guarantee bond submitted to the organization as a protection in case
the bid winner fails the signing of the agreement
13. “Performance bond” means a CPO a bank guarantee paid immediately while requested to
compensating loses it may encounter if the supplier fails to abide by the agreement.
14. “Advance payment” means a prepaid payment made by the agreement offerer/ buyer to the
contractor/supplier to which a gradual decrease of the money is done so long as the contractor
advances in the amount of work executed gradually. Advance payment does not include the amount
money paid for the agreement
15. “Advance payment bond” means a written instrument issued by a bank as CPO or insurance
company to assure the fulfillment of the obligation of the supplier. Suppliers shall submit advance
payment security in an amount equal to the advance payment they receive in the form of a certified
cheque

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16. «Supplier » mean a natural or juridical person under contract with a public body to supply goods,
works or services;
17. «Candidate » mean a natural or juridical person invited to take part in public procurement or seeking
to be so invited;
18. «Bidder » mean a natural or juridical person submitting a bid;
19. “Technical Specification’’ means document describing the quality, type and standard with which the
required goods, services, works or consultancy services should comply.
20. Total Price” means payment made by public bodies in respect of a particular procurement which
includes taxes and all other incidental costs.
21. «Person » mean a natural or juridical person;

Any Authority and execution of Procurement must comply with the following Principles:-
(professionalism,economy,efficiency,fairness and transparency)
1) Achieve maximum value for money in procurement. i.e. insure economy, efficiency and
effectiveness.
2) No Candidate Shall be discriminated or excluded from participating in public procurement on the
ground of nationality or other reasons which are not related to the evaluation criteria except in
accordance with the rule of preference provided in the proclamation.
3) Support the country’s economic development by ensuring economy, efficiency and effectiveness in
the execution of public procurement.
4) Any criteria applied in making procurement decisions and decisions taken on each procurement
must be made transparent to all concerned parties.
5) Ensure accountability for decisions made and measures taken in the execution of public
procurement.
6) Encourage local producers, companies and small and micro- enterprises which support the national
economy through the application of preferential treatment granted by the Proclamation and this
Directive.
Any form of procurement shall fulfill the following objectives
1. Justifying economical, implementation efficiency, quality and result oriented practices
2. Conducting procurement based on plan

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3. Nepotism based on the manufacturers’ and suppliers’ nationality and other similar factors is
forbidden. At time when the foreign and local products are equal priority shall be given to the local
product
4. The criteria used for procurement decision and the decisions made on each procurement should be
clear to all that concern the matter.
 Anyone who seeks procurement should satisfy the following preconditions before submitting
Purchase Requisition (PR)
1. As the needed goods is not available in the store
2. If the need could be satisfied with the product available in the market or if the product is
abundantly available in the market
3. Preparing periodic clear and detailed specification.
4. Proving the availability of sufficient budget As far as possible the current proposed market price
should be cited
 The following points should be considered in procurement planning
1) Procurement description /analysis
2) The amount of the procurement
3) The time when the goods or services are needed
4) Source and amount of the budget needed for the procurement
5) Organs to participate in the procurement and the levels of their participation.
 Procurement methods/modes

1) Open bidding 5) Request for quotations /Pro forma

2) Shortlisted /Restricted bidding 7. Single source/ direct procurement
3) Double phased Two stage bidding 8. Piking procurement
4) Request for proposal 9. Pre-certification bid

1. Open bid: is a procurement method in which all suppliers or service providing organizations are
equally invited through newspapers, Television, Radio, Website, Internet, Advertisement etc…
and the winner is determined in a manner which is useful to the organization.
2. Shortlisted/Restricted bid: is a type of procurement in which goods or service providing
organizations/suppliers are selected out of the list of suppliers and invited to participate in the bid.
Most of the time, it is similar to open bid procedures.

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a) Purchase of construction sector service up to Birr 2,000,000.00 (Two Million Birr)

b) Purchase of goods up to Birr 1,000,000.00(One Million Birr)
c) Consultancy Service up to Birr 300,000.00(Three hundred thousand Birr)
d) Machinery rental up to Birr 2,000,000.00 (Two Million Birr)
e) Purchase of transport service up to Birr 1,500,000.00 (One Million five hundred thousand Birr)
f) Agricultural inputs up to Birr 800,000.00 (Eight Hundred Thousand Birr)
3. Double phased bid/two stage bidding : it is a type of procurement that is implemented both by the
organization and the suppliers in which both are involved to prepare technical specification as a
result of the complexity of the technology.

“Double Phased Bid/Two-stage bidding” means an invitation of bidders to submit their technical
proposal and price separated in two stages.

Call upon suppliers to submit, in the first stage of the two-stage bidding proceedings, initial tenders
containing their proposals without a tender price. The solicitation documents may solicit proposal
relating to the technical, quality, or other characteristics of the goods, works or services as well as
the contractual terms and conditions of supply and where relevant, the professional and technical
competence and qualification of the supplier.
In the second stage of the two-stage tendering proceedings, public body shall invite suppliers whose
bids have been accepted to submit final tenders with price with respect to a single set of
specifications.
4. Request for Proposal: is a type of procurement in which the procurement unit procures
consultancy services based on a request for proposal. it is carried out when the speculative/expected
amount of money used for the procurement is not more than Birr 300,000.00 (Three hundred
thousand Birr)
5. Pro forma/Request for Quotations: is a type of procurement which is not encouraged. However, it
is used at times when it is not possible to utilize other procurement methods or at times when there
is urgent need of the goods or services which are not incorporated in the plan earlier./
6. Direct purchase: is a type of procurement in which goods or services are purchased from registered
or unrequested suppliers of the organization; from government institutions and development
organizations, to satisfy the urgent need of the goods or services or at times when unable to conduct

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the procurement using others methods or when it is found that the supplier is sole. However
procurement price should proportionate with the available market price./“Direct purchase” means a
mechanism of purchasing goods/services from suppliers at any time or place without requiring a pro
forma or bid. The following points should be fulfilled to conduct direct procurement of goods and
services
a. If goods or services are found in one particular supplier only or if the supplier has a sole right to
supply the goods or services and when the goods or services have no sufficient alternative or
replacement.
b. When the goods and services are required to be submitted urgently and when other procurement
methods cannot be used due to natural or human made crises.
c. When the procurement is of a short duration and when the goods or services are very useful to the
organization and are understood to be supplied by suppliers who are not engaged permanently in
procurement.
d. Procurement of goods and services similar in kind and price can be conducted from the previously
bid winner won with pro forma or open or restricted bid if conducting of purchases in new method
of purchase has no a special value for the organization. This can be done within the effective date of
the previous agreement or if the supplier is willing purchase order can be given to the supplier six
months after the completion of the agreement.
e. When spare parts of the goods that the organization uses are proved to be available in the hands of
the previous supplier only.
 Conditions to be fulfilled in open bid procurement method
1. Preparing bid document
2. Bid Invitation
3. Amendments on Bid Documents.
4. Bid Opening
5. Bid Evaluation and Determination of the Winner
6. Conditions to Reject Bidders from the Bid
7. Bid Bond/bid security
8. Bid evaluation
9. Rejecting the criteria set for the supply of goods and services/Rejecting the proposal

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10. The minimum effective date of the bid and issuing a second Bid
1) Preparing bid document
For any purchase needs to be conducted through open bid should contain the following points under the bid
document
1. Guidelines to Bidders
2. Sampling
3. Detailed specification of goods and services
4. Price Offer Table
5. Contract terms and conditions

1. Guidelines to Bidders
Should incorporate the following basic points:
1. The suppliers should submit a renewed Business License in the sector, Business Registration
Certificate and Tax Identification Number (TIN). If the bid is Birr 200,000.00 and above the
suppliers should be registered for Value Added Tax (VAT).
2. Detailed list of goods or services to be supplied by the bidders.
3. As it is not possible to change and/or amend prices after the bid document is opened.
4. Place and time of reception
5. Bid submission time, bid opening date and time
6. Opinion of the bidders for competition, type of the goods, name of the manufacturer, country of
production, year of production and other relevant information.
7. The time to take the bid document
8. Bidders should submit their signature, full name and their addresses with the bid document.
9. The right of the organization to decrease or increase the amount of goods to be purchased up to
30% as it deems it necessary during selecting the bid winners
10. The bid to be submitted in one or two envelops and the manner of the sealing
11. The right of the bidders to raise explanation or amendment questions on the bid document to the
organization
12. If advance payment is to paid a mention must be made on the amount of the advance payment
and the type and necessity of advance payment bond.
13. The right of the bidders to raise grievances against the bid modality.
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14. The right of the organization to reject all or part of the bid
15. The winner supplier should made an agreement within 7 days after the notification of the award
and submit a CPO worth 10% of the agreed sum of money as a performance bond. But, if the
supplier does not submit the performance bond on time the bid bond will be forfeited
16. If the first winner does not enter into agreement, the bid bond shall be confiscated by the
organization and it shall give the opportunity to the second winner if the organization does have
a trust on the second winner.
17. Effective date of the price of the bid, explanation of the technical need, samples to be submitted
to the procurement, the nature of the agreement and other similar matters could be included.

Bid Invitation
In an aim of addressing many bidders bid invitation should be announced on newspapers or mass media.
Bid invitation advertisement should incorporate the following points
1. The name and addressof the organization and the donor
2. The criteria to be satisfied by the candidates, who can participate in the bid,
3. The place where the bidding documents can be obtained
4. The price of the bid document and the means of payment
5. The amount of the bidding security
6. Amount and type of goods or services required and the place where goods or services are received.
7. The time limit of the supply of goods and services
8. The type of currency to be filled in the bid document
9. The first and the last date as to where bid document is received in addition to the place where the bid
document is submitted.
10. The place, date and time of the closing and opening of the bid
11. The invitation to bid shall be prepared in the language in which the bid proceeding is to be
conducted
12. The right of the organization to reject all or part of the bid
4.Bid Opening
1. The bid will openly opened in the place and time specified in the bid invitation.
2. The bid will be opened in the presence of the bidders or their legal representatives

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3. If bidders do not report on bid opening day the opening of the bid will not be affected.
4. The chairperson of the procurement committee shall open the sealed bid document presented by each
bidder and read out openly the name of the bidder, attached certificates and prices. The secretary shall
write the minutes of opening procedures. The minutes and the bid document shall be signed in the
presence of the committee.
5.Bid Evaluation and Determination of the Winner
1. The submitted bid document shall only be acceptable when it satisfies the criteria set forth in the bid
2. The bidder shall be a winner as follows
a. If the bidder is proved to have submitted the lower price to the goods and services specified in the
bid and if proved to be ready to supply the goods and services based on the required quality
provided in the specification.
b. If the bidder is proved to be able to supply the goods and services specified in the place and time
provided in the bid.
3. At times when technical and financial evaluations are required in the open bid the technical evaluation
and the financial evaluation document shall be prepared separately and in the evaluation result 80%
shall be assigned for the technical evaluation and 20% for the financial evaluation. If the bid
necessitates technical evaluate the winner shall only be determined based on the price. The criteria to
select the committee that evaluates the technical concept is established by the Head of the section that
initiated the service procurement and the purchasing manager. However, the result of the evaluation
shall be presented by the procurement initiator with a covering letter.
4. If the criteria of the competition are indicated in the bid document the winner shall be determined
accordingly.
6.Conditions to Reject Bidders from the Bid
1. If bidders do not fulfill what is required in the bid document.
2. If bidders do not submit the bid bond
3. If the bidder is proved to show fraudulent acts in the bid document.
7.Bid Bond/bid security
1. Bid bond shall be returned to the bidders once the winner is determined. The bid bond of the bid
winners shall be returned when the performance bond is submitted.

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2. Purchasing organs at various levels of the organization are expected to give orders to bidders to supply
2% bank CPO or irrevocable warranty from bank insurance for each open and restricted/shortlisted
purchase requisition document.
8.Bid evaluation
1. If the organization needs to assess and evaluate the bid it shall have the right to seek explanation on the
bid document presented except matters related to price.
2. Bidders who do not fulfill the least quality standard will not be acceptable
9.Rejecting the criteria set for the supply of goods and services/Rejecting the proposal
1. The organization can at any time reject bids, the supply of goods and services or proposed construction
competition and pro forma before procurement agreement is made between the concerned organs.
2. When bid is rejected the proposed criteria for the supply of goods for the supply of goods and services
(proforma) is rejected and this rejection must be notified to the prospective bidders in an internal notice.
3. If the decision of the rejection is passed before the closing date of the bid, the bid documents shall be
returned to the bidders unopened.

10.The minimum effective date of the bid and issuing a second Bid

1. When preparing a bid document the organization should determine the last date on which the proposed
bid competition is presented to the organization. However, the minimum floating period of the tender is
as following.
a. 7-15 consecutive calendar days for local purchase(restricted tender)
b. 20 consecutive calendar days for local purchase(open tender)
c. 30-45 consecutive days for an international purchase.
2. Rejection of Bids

Bids will be rejected on the following grounds

a. If the bid document does not competently explain as the goods and services can satisfy the standard
required by the organization.
b. If the price indicated in the bid document fails to satisfy the competitive market price.
c. When the bidder is only one and if conditions specified in this guideline do not satisfy the detailed
systems that allow solely bidders.

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 Points to be fulfilled to participate in supplying:

1. Submitting renewed business license and business registration certificate
2. Payment of the required current tax
3. Have taxpayer’s identification number
4. If the procurement is over Birr 200,000.00(Two handrud thousand Birr) the supplier should
produce a certificate of Value Added Tax (VAT) registration certificate
5. If the supplier is to compete with the name of an organization that does not belong to him/her,
shall submit a legal delegation
 Negotiation with the suppliers
 The following conditions may allow or prohibit negotiations with the suppliers.
1) When suppliers require explanation on points which are not clear in the bid document the
organization is to give clear explanation before the bid document is returned.
2) Requiring or allowing a change in the competition proposal submitted by the bidders is not
permitted after the bid is closed and when the winner is not yet determined.
3) Unless giving explanation in the vague points related to the bid proposal the organization will
not ask or allow the bidders to change prices or basic points after the bid is opened.
Local Bid
1) Local bid is a mechanism of procurement by inviting suppliers by written advertisement to supply
local goods or services in the time table to be set by the organization. To that effect the following
should be fulfilled to implement local procurement.
2) The written advertisement must be posted in a place which is accessible to the bidder and shall stay
on board for 7consecutive days.
3) Financial limit for local bid
up to Birr 1,000,000.00 (one million Birr)
4) In an advertisement invitation at least three bidders must respond. If the number of bidders is less
three in the first invitation a second time invitation deems necessary. If the number of bidders is less
than three in the second invitation selection shall be made from the available bidders.
International Bid
1. When international bidders are not manufactures they have to present a letter of agency from the
manufactures when they are requested to furnish the same.

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2. The following precondition should be fulfilled during international procurement.

a. When the goods or services to be purchased by the organization are not available locally.
b. Even if the goods or services are available locally, if goods and services to be purchased from
abroad are proved to be better in terms of time, price and quality than those to be purchased
locally.
3. In addition to the local procurement modality of open bid international open bid procurement
should include the following.
1. Bid invitation advertisement and bid document shall be prepared in English
2. Bid invitation must be made in a newspaper that has a wide coverage and be able to invite
international bidders to participate in the bid.
3. Need assessment to be prepared should satisfy the local standard and internationally acceptable.
4. The bid and bid bond price should be made in a currency which is freely exchanged or
internationally acceptable.
5. At times when an international bidder uses local input the amount of the agreement price in Birr
should separately be indicated in the pro forma.
6. Unless international agreements contradict with the procurement rules of the country the
agreement words and conditions should satisfy the international guidelines and procedures.
7. Unless specially permitted by the agreement disputes arising out of the agreement shall be resolved
according to the laws in Ethiopia.
Article 11: Shortlisted /Restricted Bid
11.1. The mechanisms employed for limited bid shall follow the modalities of open bid
11.2. To implement the modalities of limited bid the following criteria need to be considered and fulfilled
11.2.1. The purchaser needs to prove the unavailability of factors that prohibit the invitation of bid, amount
and type of performance bond and other factors that prohibit prospective bidder from participating
in the bid.
11.2.2. When the procurement unit is assured that those who are engaged in the field are willing to
participate in the restricted bid.
11.2.3. If the goods or services are available only in the hands of limited suppliers the bid invitation letter
should be sent to suppliers in their respective addresses or be given by hand.

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11.2.4. If the participants of the bid are many in number they should be selected out of the registered
suppliers list which includes manufactures, importers, development organizations and cooperatives
based on their previous performances without any form of favoritism.
11.2.5. When an open bid advertisement has been floated for at least twice consecutively and no bidder has
reported or when the reported bidders do not satisfy the criteria set by the organization.
11.2.6. When the goods or services due to its nature is found in the hands of limited suppliers
11.2.7. The prospective competitors are selected based on their renewed business license, those who have
paid the current tax and have Taxpayers Identification Number. Also, the prospective competitors
should have an excellent reputation in their previous supply of goods and services. Hence, the
organization should at least choose five competitors and should get a response at least from three
competitors.
11.2.8. Information must be given as restricted bid document is not sold and the names of the participants
in restricted bid are not made known to other bidders.
11.2.9. Participants of limited bid should submit the appropriate bid bond and once they became winners
they have to submit performance bond. If such modality is not allowed by their organization the
case will be referred to higher authority to get an approval.
11.2.10. If all bidders invited for limited bid present their bid document before the bid floating time
the procurement unit shall decide on the opening of the bid without waiting for the completion of
the time allotted for bid opening. To that effect the purchaser should decide on the bid opening day
and shall invite the entire bidder to avail themselves on the specified date.
11.2.11. The purposes of utilizing limited bid are to minimize the expenses and the time required to
examine and evaluate the documents or and when the price of the goods, services and construction
works do not match with the minimum price expected and when the total price is found to be not
more than the following.
a. Purchase of construction sector service up to Birr 30,000,000.00 (thirty Million Birr)
b. Purchase of goods up to Birr 60,000,000.00(sixty Million Birr)
c. Consultancy Service up to Birr 10,000.00 (Ten Million Birr)
d. other Service up to Birr 5,000.00 (five Million Birr)
11.3. The technical and financial evaluations documents should be prepared separately as it deems it
necessary and is the evaluation result 70% will be allotted to the technical and the remaining 30% to

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the financial evaluation. When the bid does not need technical evaluation the winner shall only be
decided by the price.
Article 12: Double phased bidding / Two stage bidding procurement
12.1. To fulfill the conditions needed for double phased bidding procurement the process of procurement
is only possible if the following conditions are met.
12.1.1. When it is not possible to furnish sufficient information on the goods and service at the level of the
organization or when it is not possible to describe the nature of the goods or services and when the
needs of procurement unit are sufficiently to be fulfilled.
a. When there is a need to implement the different supply of bid, goods and services in an aim of
employing different methods.
b. When there is a need to negotiate with the suppliers or contractors on the nature of goods or
services to be purchased.
c. Unless including the size of the produced goods to be brought to the market or unless replacing
the expenses incurred for research and development the procurement unit should enter into an
agreement for the materialization of research, testing study and developmental endeavors.
12.1.2. When bid is floated and bidders do not report or when the reported bidders are rejected or when it is
doubtful to get another bidder even if a second invitation is advertised.
12.2. The procurement of double phased bid shall follow the pattern used for open bid.
12.3. If procurement is made according to double phased bidding, bidders shall be invited to present an
initial bid document without including prices
12.4. Bidders of double phased bidding whose document has not been rejected must be identified and are
required to submit prices. The modality of implementing this process should be based on the
following points.
12.4.1. The bid invitation should clearly indicate as the bid is double phased bidding
12.4.2. Prospective bidders are not required to submit bid bond in the first cycle of bidding.
12.4.3. The bid document prepared for the first cycle of bidding should generally explain the need of the
purchaser and the objective is to prepare detailed description according to the suggestion forwarded
by prospective bidders. The document should contain the needed questionnaires.
12.4.4. Bidders should avail themselves during the first cycle of the bid but the technical evaluation
document prepared the bidders shall be opened according to guidelines set in the bid invitation.

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12.4.5. The evaluation conduct according to this article, sub-article 12.4.3, should examine the opinion
forwarded by the prospective bidders, the need assessment of the 2 nd round and the identification of
the bidders to participate in the bid.
a. During evaluation the purchaser can negotiate with all or limited or with one special
prospective bidder as it deems it necessary.
b. The negotiation as provided in ‘a’ above should target on obtaining clear opinions from the
prospective bidders and to generate better opinion on the matter.
c. The negotiation made according to “a” above, the purchaser should notify the prospective
bidders on what they are required to fulfill for the second cycle bid.
12.4.6. A bid document to be prepared for the second cycle should fulfill the modality set for open bid and
bidders selected for the second cycle bid should in addition be required to submit a calculated bid
bond.
12.4.7. Prospective bidders accepted in the first cycle shall be invited for the second cycle with a written
letter.
12.4.8. In addition to the letter the document prepared for the second cycle should either be sent to the
bidders or the bidders themselves shall collect the same.
12.4.9. According to what is provided in sub-article 12.4.8 above, an invitation extended to prospective
competitors should clearly specify what prospective competitors are required to fulfill.
12.5. To determine the winners of double phased biding the technical evaluation and competition are
based on the points specified in the bid document
12.6. Prequalification of Bid
12.6.1. The need for prequalification bid is necessary when the procurement is complicated. Hence, the
implementation shall follow the points mentioned hereunder.
a. According to the special nature of the procurement and if the purchaser believes to screen out the
competency of the competitors well in advance open or international bid may be issued depending
on the type of the procurement.
b. Procurement that needs prequalification justification should at least contain any one of the
following.

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 When a procurement involves a very high value or a complicated design, manufacturing and
installing, construction, manufacturing or an information technology that is to be completed by
one organization
 When the goods or machinery to be supplied have a high quality and high demand or includes an
installation service or
 When the procurement demands a high expense to prepare a bid document and when it is believed
to invite competent bidders to participate in the competition.
12.6.2. When preparing a bid invitation according to this article and to determine the competent bidders
it must be explained that the invitation is a prequalification justification invitation.
12.6.3. The bid document prepared to evaluate the prequalification should stem out from
prequalification selection document prepared by the Bureau. Though the criteria to be used for
prequalification selection may vary according to the type and nature of the procurement the
information justification that the competitive organization are required to submit may include the
following.
a. The experience of the organization is similar work or manufacturing of goods.
b. The status of the organization in aspects of human power, machinery, number of production
machinery and condition of infrastructure to enable it to produce the required work or goods.
c. About the type of the construction in which the organization is engaged or the number of
machineries available at hand.
d. If the organization has sufficient account of money, .good name and reputation to complete the
agreement obligation
e. The evaluation of the bidders is based on the criteria of prequalification justification prepared
by the purchaser.
f. All the bidders who applied for prequalification competition shall participate in the competition
without any form of restriction so long as they fulfill the evaluation criteria
g. The procurement unit should allow the participants of the prequalification competition to
compete in groups or partnership.
h. Competitors who individually passed the prequalification competition shall not submit the bid
document in groups or partnership unless believed by the purchaser in aspects of creating
pressure on the bid process.

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i. Without prejudices to what is provided in sub-article 8 the bidders who passed the
prequalification examination and were selected for the second competition in groups or
partnership will not be allowed to participate individually.
j. Once the prequalification evaluation is known and accepted by the purchaser the result must
equally be communicated to those who passed or failed in the competition.

Financial limits for a pro forma based procurement

a) Purchase of construction sector service up to Birr 10,000.00 (Ten Million Birr)

b) Purchase of goods up to Birr 20,000,000.00(twenty Million Birr)
c) Consultancy Service up to Birr 3,000.00 (Three Million Birr)
d) other Service up to Birr 3,000.00 (Tow Million Birr)

Article 14: Direct Procurement

The following points should be fulfilled to conduct direct procurement of goods and services
A. If goods or services are found in one particular supplier only or if the supplier has a sole right to
supply the goods or services and when the goods or services have no sufficient alternative or
replacement.
B. When the goods and services are required to be submitted urgently and when other procurement
methods cannot be used due to natural or human made crises.
C. When the procurement is of a short duration and when the goods or services are very useful to the
organization and are understood to be supplied by suppliers who are not engaged permanently in
procurement.
D. Procurement of goods and services similar in kind and price can be conducted from the previously
bid winner won with pro forma or open or restricted bid if conducting of purchases in new method
of purchase has no a special value for the organization. This can be done within the effective date of
the previous agreement or if the supplier is willing purchase order can be given to the supplier six
months after the completion of the agreement.
E. When spare parts of the goods that the organization uses are proved to be available in the hands of
the previous supplier only.

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