6 - How we do business / Procurement
In order to obtain a good overview on UNDP' s procurement practices, companies are encouraged to look at our Procurement Manual (pdf). It provides information on how we source suppliers, what procurement methods we use and how we evaluate offers. Additionally, it explains our internal review framework and UNDP' s general considerations of contracting.
What is Procurement
Procurement is the overall process of acquiring goods, civil works and services which includes all functions from the identification of needs, selection and solicitation of sources, preparation and award of contract, and all phases of contract administration through the end of a services’ contract or the useful life of an asset.
UNDP procurement principles
UNDP manages procurement activities by adhering to the following general principles:
- Best Value for Money
- Fairness, Integrity, Transparency
- Effective International Competition
- The Interest of UNDP
UNDP Procurement is based on competitive bidding. Depending on the type, complexity, size and value of the project and its procurement elements, commonly used methods of solicitation include:
Request for Quotation (RFQ)
An RFQ is an informal invitation to submit a quotation, usually for goods/services/civil works at a value between US$2,500 and $100,000.
Prices, and other commercial terms and conditions are requested and award is made to the lowest priced technically acceptable offer.
Invitation to Bid (ITB)
An ITB is a formal invitation to submit a bid, usually associated with requirements that are clearly and concisely defined, with an estimated procurement value of US$100,000 or more. Normally price is the sole determinant in making an award. Where all technical criteria are met, award is made to the lowest bidder.
Request for Proposal (RFP)
An RFP is a formal request to submit a proposal, usually associated with requirements for services, which can not be clearly or concisely defined, with an estimated procurement value of US$ 100,000 or more. Price is only one of several factors comprising the evaluation criteria. Award is made to the qualified bidder whose bid substantially conforms to the requirement set forth on the solicitation documents and is evaluated to be the lowest cost to UNDP.
In some cases, exceptions to competition are being made and direct contracting is used. This usually happens when a Long-Term Agreement (LTA) is in place, either globally (IAPSO or HQ) or locally (at country office level).
For values less than US$2,500, country offices may engage in local shopping.
Evaluation of offers
Depending on the procurement method, different factors take on the key role in the evaluation process.
When evaluating RFQs and ITBs, the price is the most important element. In contrast to this, and RFP requires a technical evaluation. The technical component primarily determines whether the proposal will be accepted or declined. Additionally, UNDP evaluates its products and services based on the following criteria:
- Meet technical specifications
- Environmentally sound
- Quality Assurance
- Accuracy of documentation
- Speed of response
- Customer service
- Provides Technical Solutions
Contract modalities/Types of contract
UNDP has several contract modalities, amongst others:
- Lump Sum (Fixed Price Contract)
- Time and Material Contract
- Retainer Fee contract
- Percentage Contracts
- Long Term Agreements (Call off through contracts)
Long-term agreements (LTA) reduce administrative efforts by a single tendering exercise over the life of the arrangement. They are awarded on a 1-year renewable basis and exist on the country level as well as globally, administered by HQ.
- quality assurance and legal requirements will have been dealt with at the outset the supplier benefits in terms of planning stock levels and continuity of supply
- a mutually beneficial longer-term working relationship can be established
Conditions of contract
In order to be a future supplier for the United Nations Development Programme, you have to accept our General Terms and Conditions. Depending on your deliverables, the following applies:
- General Terms and Conditions for Goods
- General Conditions of Contract for Professional Services
- UNDP General Conditions for Purchase Orders
- Supplier Code of Conduct
- General Conditions for Individual contractors
70% of UNDP' s procurement expenditures are spent for services. These could be executed by companies or individuals. At the country office level, the first step in selecting Suppliers is often market research, particularly if the product or service has not previously been procured. Business Units may source Suppliers through an expression of interest for commonly procured goods, registration of prospective Suppliers at UNGM and/or business seminars, where applicable.
Every country office establishes and manages its own supplier database. Once a roster of potential qualified Suppliers has been generated, Business Units evaluate each Supplier' s capabilities and resources to successfully perform on a contract, if awarded. The key parameters, which guide Supplier appraisal, include:
a. Technical capacity to deliver the goods and/or services as per schedule;
b. Financial strength, where the quick ratio is the most widely used test of a company's financial strength and liquidity.
c. The commitment of management to comply with UNDP General Terms and Conditions; and
d. Evidence of meeting national or international quality standards for the product offered; or evidence of national and international acceptance of its services;
e. Production capacity to provide after-sales-service for the goods or services provided;
f. Environmental compliance (i.e. ISO 14000 Certification) ; and
g. Participation in the UN Global Compact.