Public Procurement & Government Contracts 2022

Last Updated April 07, 2022

Pakistan

Law and Practice

Authors



Ali Khan Law Associates currently operates in Karachi, Lahore and remotely in Islamabad and Quetta, with a team of seven lawyers. The firm focuses exclusively on projects, infrastructure and energy matters, providing extensive expertise in the public procurement legal framework. In this niche sector, the firm offers end-to-end service to clients, catering to their bespoke needs. Its expertise in public procurement is also evident through its involvement in all major public-private partnership projects being implemented in Pakistan, including water, power, mining, road and special economic zones projects. The firm also assists the federal and provincial governments of Pakistan and corporate giants in the clear and unequivocal interpretation of procurement laws, to avoid any ambiguity and minimise potential hindrances to the project or any liabilities for clients.

There are five procurement regimes in Pakistan: one federal and four provincial.

The Procurement Laws (as defined below) under these regimes provide a legal and regulatory framework for public procurement by way of establishing an authority to regulate the public procurement of goods, services and works in the public sector, and by providing the rules and regulations governing procurement procedures.

At the federal level, the key legislation for procurement includes the Public Procurement Regulatory Authority Ordinance, 2002 (XXII of 2002) and the Public Procurement Rules, 2004. The following regulations were also made by the Public Procurement Regulatory Authority:

  • the Public Procurement Regulations, 2008;
  • the Public Procurement Regulations, 2009;
  • the Procurement of Consultancy Services Regulations, 2010;
  • the Public Procurement Regulations, 2011;
  • the Regulations for Procedure of filing and disposal of Review Petition under Rule 19(3), 2021; and
  • the Redressal of Grievances Regulations, 2021.

These procurement laws apply to all procurements made by the procuring agencies of the federal government within or outside Pakistan.

At the provincial level, the four provincial governments have their own procurement laws, whereby they have established respective public procurement authorities to regulate the procurement of government contracts made by the procuring agencies of the respective provincial governments.

The provincial laws are as follows (collectively the Procurement Laws).

  • Sindh Public Procurement Regulatory Authority:
    1. Sindh Public Procurement Act, 2009;
    2. Sindh Public Procurement Rules, 2010; and
    3. Regulations for Procurement of Works.
  • Punjab Procurement Regulatory Authority:
    1. Punjab Procurement Regulatory Authority Act, 2009; and
    2. Punjab Procurement Rules, 2014.
  • Balochistan Public Procurement Regulatory Authority:
    1. Balochistan Public Procurement Regulatory Authority Act, 2009; and
    2. Balochistan Public Procurement Rules, 2014.
  • Khyber Pakhtunkhwa Public Procurement Regulatory Authority:
    1. Khyber Pakhtunkhawa Public Procurement Regulatory Authority Act, 2012; and
    2. Khyber Pakhtunkhwa Public Procurement of Goods, Works and Services Rules, 2014.

The Procurement Laws provide the legal and regulatory framework for public procurement by way of establishing an authority to regulate the public procurement of goods, services and works in the public sector, and by providing rules and regulations governing procurement procedures. They apply to all procurements made by the relevant "procuring agencies", which are subject to the respective federal or provincial procurement regulation in relation to all procurements of goods, works and services made by them.

Procuring agencies have been defined by the Procurement Laws to include departments or offices of the respective federal or provincial government – ie, the government of Punjab, the government of Sindh, the government of Khyber Pakhtunkhwa (KPK) or the government of Balochistan, or any authority, corporation, body or organisation that is established by law or owned or controlled by the relevant federal or provincial government (as applicable).

Therefore, if any such procuring agency wishes to carry out procurements of goods, works and/or services, they may do so in accordance with the respective procurement regulation.

In general, contracts related to all procurements for goods, works or services, including consultancy services, carried out by all procuring agencies on the federal or provincial level are subject to procurement procedures. For purposes of clarity, goods, works and services are defined as follows:

  • goods include articles and objects of every kind and description, including raw materials, products, equipment, machinery, spares, scraps, waste material, commodities, etc, in any form, as well as all types of assets and services incidental thereto;
  • services include physical, maintenance, professional, intellectual, consultancy, advisory services, etc, but not services such as the appointment of an individual to a post or office, advertisement, arbitration, conciliation or mediation services, the services of an advocate in a court case, etc; and
  • works include any construction work consisting of the erection, assembly, repair, renovation or demolition of a building or structure or part thereof.

However, there are certain exceptions to the procurements for goods, works and services within the Procurement Laws, including petty purchases, requests for quotations, direct contracting, negotiated tendering, force account, direct contracting with state-owned entities, repeat orders, etc.

It is pertinent to note that the minimum threshold requirements differ slightly within the various Procurement Laws in terms of monetary values. However, similar minimum thresholds entailing two tiers – ie, petty purchases and limited requests for quotations – exist within all legislative domains.

  • Federal:
    1. for petty purchases: up to PKR100,000; and
    2. for requests for quotations: from PKR100,000 up to PKR500,000.
  • Sindh:
    1. for petty purchases: up to PKR100,000; and
    2. for requests for quotations: from PKR100,000 up to PKR300,000.
  • Punjab:
    1. for petty purchases: up to PKR75,000; and
    2. for requests for quotations: from PKR75,000 up to PKR200,000.
  • Balochistan:
    1. for petty purchases: up to PKR50,000; and
    2. for requests for quotations: from PKR50,000 up to PKR100,000.
  • KPK:
    1. for petty purchases: up to PKR50,000; and
    2. for requests for quotations: from PKR50,000 up to PKR100,000.

The regulated contract award procedure is undertaken through either the national competitive bidding process or the international competitive bidding process. The determination by the procuring agency of the type of bidding to be undertaken is based on multiple factors, including the technical complexity and financial value of the proposed project.

Participation in the regulated contract award procedure is based on the specific legal frameworks. By way of example, the Sindh Public Procurement Rules, 2010 (as amended) expressly bar the participation of international firms in a National Competitive Bidding process, which is not the case under other procurement frameworks. The Sindh Public Procurement Rules, 2010 (as amended) also provide for specific criteria to be considered to ascertain the national and international bidding requirements. However, other procurement frameworks only specify a variation in the response time for national and international bidding, of 15 and 30 days respectively.

The openness of participation is also subject to other legal requirements, beyond the requirements of the Procurement Laws. By way of example, in order to undertake engineering works, the Pakistan Engineering Council (PEC) requires entities undertaking such work to procure a licence from the PEC. Furthermore, as per PEC laws, international entities are either required to have a PEC licence or to enter into a joint venture arrangement with a local partner that has a PEC licence.

In light of the above, it is clear that participation is not completely open to all participants; it is subject to the various restrictions stated above, and also to the following:

  • satisfaction of the eligibility criteria laid down in the request for proposal;
  • other restrictions as a matter of law or official regulations;
  • prohibition from exercising commercial relations within the interested party’s country;
  • if the participating entity is blacklisted; and/or
  • if the participated entity is debarred by the procuring agency.

The key obligations under the Procurement Laws can be divided into two categories:

  • the obligations of the procuring agencies; and
  • the obligations of the bidders.

Details of these obligations fare stipulated below, but it is critical to highlight that the Procurement Laws are skewing towards a greater obligation for the procuring agencies.

Obligations of the Procuring Agencies

The procuring agencies are required to abide by the “principles of procurements”, which require them to ensure fairness and transparency, value for money and efficiency. They are also required to undertake various procedural obligations as part of the bidding process.

The procedural obligations begin with the preparation of procurement plans. Under the Procurement Laws, each procuring agency is required to plan the procurement for each succeeding year, and are then required to procure the approvals of the competent authorities for such procurement plans.

In executing the approved procurement plans, the procuring agencies have to undertake extensive work even before such procurement is advertised. The preparation of the bidding documents is a critical part of the obligations of the procuring agency, which requires the procuring agency to not only assess all legal, technical and financial aspects of the procurement but also to prepare bidding documents that include evaluation criteria for prospective bidders.

Following the preparation of the bidding documents, the procuring agency is also responsible for the advertisement of the bid, the provision of clarifications to prospective bidders, the acceptance of the bids, the technical and financial evaluation and the award of the contract to the most responsive bidder (in light of the evaluation criteria).

Obligations of the Bidders

The bidders are required to ensure that the minimum eligibility criteria and the requirements of the bidding process, as detailed in the request for proposal, are met.

The Procurement Laws mandate the prior advertisement of regulated procurement contract awards. However, it is crucial to note that such advertisements have various financial thresholds, which vary at the federal and provincial levels.

Financial Threshold and Relevant Publication Requirement

Federal level

At the federal level, all procurements of between PKR500,000 and PKR3 million are advertised on the Public Procurement Regulatory Authority’s website, while all procurement opportunities above PKR3 million are advertised on the authority’s website and in other print media or newspapers with wide circulation. These advertisements must also appear in at least two national dailies – one in English and the other in Urdu.

Sindh

In Sindh, procurements of between PKR100,000 and PKR1 million are advertised by timely notifications on the Sindh Public Procurement Regulatory Authority’s website, while all procurement opportunities above PKR1 million are advertised on the authority’s website as well as in the newspapers, as prescribed. The advertisement in the newspapers shall appear in at least three widely circulated leading dailies in the English, Urdu and Sindhi languages. If the procuring agency has its own website, it shall also post all advertisements concerning procurement on that website.

KPK

In KPK, procurements of between PKR100,000 and PKR2.5 million shall be posted on the procuring entity’s website or the KPK Public Procurement Regulatory Authority's website, or both. These procurement opportunities may also be advertised in print media, if doing so is deemed necessary by the procuring agency, in at least one national English and one Urdu daily newspaper with nationwide circulation, along with advertising the same on either the procuring entity's website or the authority's website, or both.

Punjab

In Punjab, a procuring agency must advertise procurements of between PKR200,000 and PKR3 million on the website of the Punjab Procurement Regulatory Authority. Any procurement exceeding PKR3 million shall be advertised on the website of the authority and the website of the procuring agency, and in at least two national daily newspapers of wide circulation, one in English and one in Urdu. However, the requirement for advertisement shall be removed if the proposed procurement pertains to national security and the information is of such a proprietary nature or falls within the definition of intellectual property.

Balochistan

In Balochistan, procurements of between PKR200,000 and PKR2 million are advertised by timely notifications on the Balochistan Public Procurement Regulatory Authority’s website. These procurement opportunities may also be advertised in print media. All procurement opportunities over PKR2 million are advertised on the authority’s website and published in at least two widely circulated leading dailies in the English and Urdu languages.

Non-exhaustive Contents of the Advertisement

According to all Procurement Laws, the advertisement must contain the following common elements:

  • the notice inviting tender containing the name, postal address, telephone number(s), fax number and e-mail address of the procuring agency;
  • the purpose and scope of the project;
  • the schedule of availability for the bidding documents and the submission and opening of bids, with mention of the place from where bidding documents would be issued, submitted and opened;
  • the amount and manner of payment of the tender fee and bid security; and
  • any other information that the procuring agency may deem appropriate to disseminate at this stage.

There is no mandatory requirement under the Procurement Laws for the awarding authority to carry out preliminary market consultations before launching the contract award procedure. However, it is market practice for the technical adviser of the procuring agency to conduct a feasibility study to ascertain pricing to benchmark the bid prices with the market prices.

The general process of a public tender under the Procurement Laws is as follows.

Procurement Planning Stage

All procuring agencies devise a mechanism for planning all proposed procurements in detail, determining the requirement of the procuring agencies within their available resources, and prepare comprehensive plans detailing the procurement methods applicable for specific procurements.

Pre-qualification of Contractors/Bidders

Pre-qualification is an assessment made by the procuring agency of the experience and capacity of the firms expressing interest in undertaking a particular contract, prior to the issuance of invitations to bid through the publication of a pre-qualification notice, the receipt of submissions and the evaluation of submissions against pre-defined criteria. A decision on whether or not to use pre-qualification may be made at the procurement planning stage.

Advertisement

Procurements above a certain identified financial value must be advertised on the authority’s website and in other print media or newspapers with wide circulation, as applicable (see 2.1 Prior Advertisement of Regulated Contract Award Procedures).

Bidding Documents

The procuring agency must provide the bidding documents to all interested bidders in accordance with the procedures and requirements specified in the notice inviting tender.

Clarification and Modification of Bidding Documents

An interested bidder who has obtained bidding documents may request clarification of the contents of the bidding document in writing, and the procuring agency shall respond to such queries in writing.

Submission/Opening of Bids

The deadline for the submission of bids is mentioned in the bidding documents. The procuring agency may extend the deadline for the submission of bids in accordance with the procuring regulation. Bids are submitted according to the place, date and time specified in the tender notice and bidding documents, and in the manner specified therein. The date for the opening of bids and the last date for the submission of bids is the same.

Evaluation of Bids

All bids are evaluated in accordance with the evaluation criteria and other terms and conditions set forth in the bidding documents.

Publication of the Award of Contract

Within a defined number of days, a procuring agency must publish the results of the bidding process on the website of the relevant authority and on its own website (if such website exists), identifying the bid through the procurement identifying number (if any) and the following information (as applicable):

  • Evaluation Report;
  • Form of Contract and Letter of Award; and
  • Bill of Quantities or Schedule of Requirement.

Award of Contract

A procuring agency may undertake limited negotiations with the highest ranked bidder regarding the methodology, work plan, staffing and special conditions of the contract. If such negotiations fail, the procuring agency may invite the second ranked consultant as per the evaluation report. There shall be no negotiations with the bidder who entered the lowest evaluated bid or any bid other than as allowed under the Procurement Laws.

Under the procurement legislation, the principal method of procurement utilised by the procuring agencies for the procurement of goods, services and works is open competitive bidding, which is further divided into two tiers: national competitive bidding, and international competitive bidding.

The Procurement Laws provide for more than one tender procedure, especially with regards to the bidding process, but the choice of procedure is not at the sole discretion of the awarding authority. In fact, such procedures are subject to the fulfilment of certain conditions, as described below.

  • Single stage – one-envelope procedure: this is ordinarily the main open competitive bidding procedure used for most procurements. Therefore, it is used as the standard bidding procedure for the procurement of goods, works and services of a simple and routine nature and where no technical complexity or innovation is involved.
  • Single stage – two-envelope procedure: this procedure is generally used where the bids are to be evaluated on technical and financial grounds, and price is taken into account after technical evaluation.
  • Two-stage bidding procedure: this procedure is often adopted in large and complex contracts where technically unequal proposals are likely to be encountered or where the procuring agency is aware of its options in the market but, for a given set of performance requirements, there are two or more equally acceptable technical solutions available to the procuring agency.
  • Two-stage – two-envelope bidding procedure: this procedure comes into play where alternative technical proposals are possible, such as certain types of machinery, equipment or manufacturing plant.

The Procurement Laws do not impose any obligations as to the timing for the publication of any or all of the procurement documents. However, they generally state that the procuring agency may decide the response time for the receipt of bids or proposals (including proposals for pre-qualification) from the date of publication of an advertisement or notice, keeping in mind the complexity, availability and urgency of the individual procurement.

Additionally, all advertisements or notices shall expressly mention the response time allowed for that particular procurement, along with the information for the collection of bid documents, which shall be issued until a given date, allowing sufficient time to complete and submit the bid by the closing date.

Some specifications with regards to minimum time thresholds have been provided in the Procurement Laws. For example, under Punjab, KPK, Balochistan and the federal legislation, the response time cannot be less than 15 days for national competitive bidding and 30 days for international competitive bidding. In Sindh, the response time to notifications and advertisements must not be less than 15 days for national competitive bidding and 30 days under Rule 18 of the Sindh Public Procurement Rules. Moreover, the Sindh procurement regulations allows not less than 45 days for international competitive bidding and between 60 and120 days for procurements of large works or complex items.

Similar time provisions exist for the publication of awards on the websites of the relevant authorities and the procuring agency’s own website, but these are subject to variations within the different legislative domains.

A request for expressions of interest shall be advertised, giving adequate notice, keeping in mind the underlying principle that the applicants must be given adequate time for the preparation of bids.

The procuring agency may decide the response time for the receipt of bids or proposals from the date of the publication of an advertisement or notice, keeping in mind the complexity of the procurement, availability and urgency, but in no circumstances can the response time be less than 15 days from the date of publication of the advertisement or notice for national competitive bidding, or 30 days for international competitive bidding. However, in Sindh and Balochistan, the response time should not be less than 45 days from the date of publication of the notice inviting tender in the case of international competitive bidding.

Apart from the participation restrictions vis-à-vis international competitive bidding and national competitive bidding under the relevant Procurement Laws, the following requirements restrict the eligibility of participants:

  • a declaration by the respective government (under specific Procurement Laws) as a matter of law or official regulations, prohibiting commercial relations with the bidder’s country;
  • the bidder being blacklisted or debarred by the procuring agency; and/or
  • if the bidder is a government-owned enterprise or institution that falls under the definition of "government" under the relevant Procurement Laws.

Moreover, for the hiring of a consultant for an assignment, the procuring agency needs to ensure that there is no possibility of any conflict of interest. If a consultant has been engaged by the procuring agency to provide goods or works for a project, it shall be disqualified from providing consulting services for the same project. Furthermore, a consultant should not be hired for any assignment that, by its nature, may be in conflict with another assignment of the consultant.

The implementation of a pre-qualification process is used to restrict participation in the procurement process. Pre-qualification is an assessment made by the procuring agency of the experience and capacity of bidders expressing interest in undertaking a particular contract, prior to the issuance of invitations to bid. The basic aim of the pre-qualification is to eliminate unrealistic, unqualified or disreputable contractors that are not suitably qualified to perform the contract. This is achieved through the publication of a pre-qualification notice, the receipt of submissions and the evaluation of submissions against pre-defined criteria. However, its use is not mandatory under the Procurement Laws. A decision on whether or not to use pre-qualification may be made at the procurement planning stage.        

A procuring agency may engage in the pre-qualification of bidders in the following cases:

  • in contracts for large and complex works and services, or in any other circumstances in which the costs of preparing detailed bids are high;
  • in contracts to be let under turnkey, design and build or management contracts; or
  • in the procurement of expensive and technically complex civil and mechanical works, to ensure that invitations to bid are extended only to those who have adequate capabilities and resources.

Basis for Shortlisting

The pre-qualification of prospective bidders shall be based entirely upon their capability and resources to perform the particular contract satisfactorily, which shall be evaluated in terms of the criteria set forth in the notices or bidding documents, taking the following into account:

  • experience and past performance on similar assignments;
  • capabilities with respect to construction or manufacturing facilities;
  • financial capability;
  • capabilities with respect to personnel, equipment and plant;
  • appropriate managerial capability; and
  • any other factor that is relevant to the capability, competence and resources required for the accomplishment of the assignment.

Minimum Number of Qualified Bidders

Even though the Procurement Laws do not mention the minimum number of qualified bidders, there are provisions that (subject to certain conditions) allow for a single bidder to be pre-qualified. However, departmental guidelines have been developed to cater to this issue. By way of example, the Planning and Development Department of the Government of Punjab allows for the shortlisting of at least three individual consultants, firms or companies for each area of expertise, with such list to be uploaded on the authority’s website.

Evaluation Criteria

The evaluation criteria are developed by the procuring agencies as part of the procurement planning and in view of the specific requirements for each procurement. They are an express and integral part of the bidding documents and, as such, failure to provide unambiguous evaluation criteria in the bidding documents amounts to mis-procurement. All bids are evaluated in accordance with the evaluation criteria and other terms and conditions set forth in the bidding documents.

It is important to highlight that the specific evaluation criteria are developed with the technicality of the procurement in mind. By way of example, the evaluation criteria will be more stringent for a transaction adviser being sought for a mega road project than for a simple stationery supply contract.

Determination of Winner

The winner of the procurement procedure is determined using a detailed evaluation against the criteria set out for each procurement. The procuring agency (either on its own or through a transaction adviser) is required to seek clarifications (if any), to prepare and publish a detailed evaluation report specifying the deviations and/or compliance with the evaluation criteria for each bidder, and to specify the preferred bidder in each case. The preferred bidder is then notified of the outcome and the procuring agency proceeds to finalise the procurement through the issuance of a letter of award to the preferred bidder (subject to no other issues arising).

Obligation to Disclose Criteria or Other Elements of Evaluation Methodology

The Procurement Laws are clear and require not only the disclosure of the unambiguous evaluation criteria in the bidding documents issued to prospective bidders but also that the bidding documents include instructions for preparing bids, the manner and place of the submission of bids, the method of procurement used, the manner in which tender price is to be assessed and computed, etc.

Over and above the specific obligations relating to the disclosures of selection in the Procurement Laws, the procuring agencies include various other disclosures in their bidding documents, such as minimum eligibility requirements, the grounds for blacklisting and/or exclusion and complete evaluation methodologies, allowing a reasonable opportunity for bidders to take account of the methodology when preparing their submissions.

The evaluation criteria are arithmetic in nature – ie, they provide for how each credential is marked against a pre-determined number. By way of example, a typical legal advisory evaluation criterion would stipulate a maximum number of marks for a post-graduate qualification of the applicant and a lower mark for an applicant that has an undergraduate degree only.

Timing of Disclosure

Since disclosure requirements are part of the bidding documents, the timing of the disclosure is the same as the timing of the publication of bids. Even though an initial evaluation criterion is published as part of the bidding documents, the procuring agency may use bidders’ queries as part of market sounding and use their discretion (subject to procedural requirements under the Procurement Laws) to amend the criteria.

Under the Procurement Laws, the procuring agency is required to publish a detailed evaluation report incorporating a detailed evaluation for each bidder and containing the reasoning for the acceptance and/or rejection of a bid.

Based upon the procedure adopted for the respective procurement, the procuring agency must also announce the result of a bid evaluation, in the form of a final evaluation report giving justification for the acceptance or rejection of bids, at least 15 days prior to the award of the procurement contract at the federal level. A similar criterion for informing rejected bidders exists in Punjab, but the minimum notification period is ten days prior to the award of the contract.

In Sindh, procuring agencies must announce the results of a bid evaluation in the form of a report giving reasons for the acceptance or rejection of bids. The report must be posted on the websites of the authority and the procuring agency (if such website exists) and communicated to all bidders at least seven days prior to the award of the contract. A similar criterion for informing rejected bidders exists in KPK and Balochistan, but the minimum notification periods are, respectively, ten days and three days prior to the award of a contract.

Furthermore, under the procurement rules in Sindh, a bidder may ask the procuring agency for the reasons for non-acceptance of their bid and may request a debriefing meeting. The procuring agency shall give the reasons for such non-acceptance, either in writing or by holding a debriefing meeting with such a bidder. However, the requesting bidder shall bear all the costs of attending such a debriefing.

The evaluation report is published on the relevant procurement website and on the website of the procuring agency.

Additionally, upon the request of any bidder, the procuring agency must communicate the grounds for its rejection of all bids or proposals, but it is not required to justify those grounds.

In order to notify bidders of the contract award decision, procuring agencies must announce the results of the bid evaluation in the form of a report giving reasons for the acceptance or rejection of bids. The report must be posted on the websites of the authority and of the procuring agency (if such website exists), and communicated to all the bidders. The same criteria exist throughout the legislative domains in Pakistan, but the minimum notification period varies slightly under each domain.

There is no standard “standstill period” under the Procurement Laws.

For federal procurement laws, an aggrieved bidder may lodge a written complaint within seven days of the announcement of the technical evaluation report and within five days of the issuance of the final evaluation report.

In Sindh, there is no specified time period for grievance redressal.

In Punjab, the complainant must challenge the decision within ten days of the bid evaluation report being published.

The relevant procuring agency must constitute a committee with the appropriate powers and authorisation to address the complaints of bidders that may occur prior to the entry into force of the procurement contract. Any bidder that is aggrieved by a decision of the procuring agency may lodge a written complaint. Upon receiving a complaint, the complaint redressal committee may reject the complaint or reverse the decision, provided that the complaint redressal committee does not make any decision to award the contract; the procuring agency shall award the contract after the decision of the complaint redressal committee. Any bidder that is not satisfied with the decision of the committee may file an appeal in the relevant court of jurisdiction. However, there are certain matters that are not subject to appeal or review, including the following:

  • the selected method adopted by the procurement committee; and
  • the decision by the procuring agency to cancel the bidding process.

A breach of the procurement legislation is treated as mis-procurement. In the case of a material violation of the provisions of the procurement legislation, orders, instructions or any other law relating to public procurement, the authority may take notice of such violation and declare the case to be one of mis-procurement if such violation has been established. Upon the declaration of mis-procurement, the head of the department or the relevant authority must refer the case to the competent authority for the initiation of disciplinary proceedings against the officials of the procuring agency responsible for the mis-procurement, and may also refer the matter to the anti-corruption establishment concerned for initiating action against such officials. The person responsible for such breach shall be liable under the relevant law.

In the case of a complaint filed to the complaint redressal committee as described in 4.1 Responsibility for Review of the Awarding Authority's Decisions, the procuring agency shall award the contract after the decision of the complaint redressal committee. However, the mere fact of a complaint having been lodged shall not warrant the suspension of the procurement proceedings.

Any bidder that is aggrieved by a decision of the procuring agency may lodge a written complaint with the complaint redressal committee, which may take several measures as provided in the procurement legislation. However, the complaint redressal committee shall not make any decision to award the contract.

The Procurement Laws state that, based upon the procedure adopted for the respective procurement, the procuring agency must also announce the result of the bid evaluation, in the form of a final evaluation report giving justification for the acceptance or rejection of bids, within the following timeframes:

  • at least 15 days prior to the award of the procurement contract at the federal level;
  • at least ten days prior to the award of the contract in Punjab;
  • at least seven days prior to the award of the contract in Sindh;
  • at least ten days prior to the award of the contract in KPK; and
  • at least three days prior to the award of the contract in Balochistan.

The timeframe for challenging the awarding authority’s decision commences upon the announcement of the procuring agency’s result of the bid evaluation in the form of a final evaluation report, and expires when the relevant time period between such announcement and the award of the contract runs out. For instance, in Punjab the complainant must challenge the decision within ten days of the final evaluation report being published.

The actual length of proceedings cannot be strictly determined. However, the Procurement Laws provide for certain guidelines, which are as follows:

  • for federal procurement, the grievance redressal committee shall investigate and decide upon the complaint within ten days of receipt thereof;
  • for Punjab, the grievance redressal committee shall investigate and decide upon the complaint within 15 days of the receipt thereof; and
  • for Balochistan, the grievance redressal committee shall investigate and decide upon the complaint within 15 days of the receipt thereof and communicate the decision to the bidder and the procurement authority within three days.

The exact number of procurement claims each year cannot be ascertained since it is not public information. Official sources claim that more than 1,000 claims are filed each year. However, the resolution rate is only about 10–15%.

Typical costs cannot be determined since the costs are dependent upon a number of factors, including the technicality of the challenge, the involvement of legal/financial/technical experts and the length of proceedings.

The Procurement Laws do not provide for the unfettered modification of contracts following the finalisation of a successful bidder, but they do provide for limited negotiations of contracts.

The Procurement Laws generally state that, without changing the cost and scope of work or services, the procuring agency may negotiate with the successful bidder on the methodology, work plan, staffing and special conditions of the contract. The authority may determine the extent and types of negotiations on procurement by regulations.

However, the Sindh, KPK and Balochistan rules also provide non-negotiable aspects of the contract, including:

  • the substitution of key staff, unless both parties agree that an undue delay in the selection process makes such substitution unavoidable; and
  • changes in the rates quoted by the bidder.

If negotiations fail, the relevant procuring agency may invite the second ranked bidder as per the evaluation report.

The award of procurement contracts can generally be divided into four major categories:

  • petty purchases;
  • requests for quotations;
  • open competitive bidding (subject to the minimum threshold requirements); and
  • direct contracting.

The interplay between the utilisation of petty purchases, requests for quotations and open competitive bidding and the circumstances under which each category may be utilised are stipulated in the Procurement Laws.

However, the legislation also provides for a fourth category, by which contracts may be awarded directly. Under direct contracting, procurement may be conducted from a single source without competition. This method is subject to certain limitations, including:

  • if the procurement concerns the acquisition of spare parts or supplementary services from the original manufacturer or supplier, provided they are not available from alternative sources;
  • if the required item is of a proprietary nature and can only be obtained from one source, provided that the proprietary nature of the item(s) to be procured is certified;
  • where a change of supplier would oblige the procuring agency to acquire material with different technical specifications or characteristics, which would result in incompatibility or disproportionate technical difficulties in operation and maintenance, provided that the contract or contracts do not exceed the given time limitation in the law;
  • in case of an emergency;
  • when the price of goods, services or works is fixed by the government or any other authority, agency or body duly authorised by the government, on its behalf;
  • if the contractor responsible for a process design requires the purchase of critical items from a particular supplier as a condition of a performance guarantee;
  • where civil works are to be contracted and are a natural extension of an earlier or ongoing job and it can be ascertained that the engagement of the same contractor will be more economical and will ensure compatibility of results; and
  • for the purchase of locally manufactured motor vehicles from local manufacturers or their authorised agents at the manufacturer’s price.

Please note that this list is neither exhaustive nor specific to a certain jurisdiction; it merely aims to provide an overview of the possible circumstances under which direct contracting might take place.

The Procurement Laws often warrant judicial scrutiny due to a lack of natural justice, transparency and fairness in the procurement process. This leads to judicial intervention whereby the courts decide upon a principle within the procurement regime to bring clarity and fairness to the process.

A recent decision of the Islamabad High Court titled “National Institutional Facilitation Technologies (Pvt.) Limited v The Federal Board of Revenue" (PLD 2020 Islamabad 378) is of significant importance as it clarified the legal implications and scope of the governmental agency soliciting clarification from bidders upon submission of their bids.

The court was asked to determine the scope of powers a governmental agency can exercise vis-à-vis the submitted bid upon the receipt of clarifications from the bidder. It opined that, upon the receipt of clarifications from a bidder, a submitted bid may be modified to the extent that the “substance of the bid” is not modified.

Therefore, the High Court was of the view that even a correction of a clerical error, wherein the bidder misquoted the cumulative price of the bid by stating the price of stamps as “PKR0.731 per 1,000 stamps” instead of “PKR731 per 1,000 stamps”, would change the substance of the bid and provide an opportunity for the bidder to improve their bid. Hence, even the rectification of a misquoted amount in the financial bid is beyond the scope of the term “clarification” and the bidder was not permitted to rectify their clerical error as it would offend the principles of natural justice and transparency of the procurement process.

While the Procurements Laws have undergone extensive amendments during past years, there is no available information about currently contemplated amendments.

Ali Khan Law Associates

Office 402, 4th Floor, 186-C, Lane 3
D.H.A. Phase 8 Zulfiqar & Al Murtaza Commercial Area Phase 8 Defence Housing Authority,
Karachi
Pakistan

+922 13 534 6017

+922 13 534 6016

akla@akla.com.pk www.akla.com.pk
Author Business Card

Trends and Developments


Authors



Ali Khan Law Associates currently operates in Karachi, Lahore and remotely in Islamabad and Quetta, with a team of seven lawyers. The firm focuses exclusively on projects, infrastructure and energy matters, providing extensive expertise in the public procurement legal framework. In this niche sector, the firm offers end-to-end service to clients, catering to their bespoke needs. Its expertise in public procurement is also evident through its involvement in all major public-private partnership projects being implemented in Pakistan, including water, power, mining, road and special economic zones projects. The firm also assists the federal and provincial governments of Pakistan and corporate giants in the clear and unequivocal interpretation of procurement laws, to avoid any ambiguity and minimise potential hindrances to the project or any liabilities for clients.

Introduction

Public procurement is recognised as both a strategic tool and a mechanism enabling governments to implement policies for socio-economic development and transformation. Public procurement operates in an environment of increasingly intense scrutiny and accelerated changes driven by technology, programme reviews and political expectations. In Pakistan, procurement is of particular significance in the public sector and is being used as a policy-making tool in view of the practices of the past. Procurement is central to the federal and sub-sovereign governments’ service delivery systems and is typically used to promote social, industrial or environmental policies.

Historically, public procurement in Pakistan suffered from overly complicated systems, a lack of institutional capacity and a lack of adequately trained human resources against the backdrop of a legal system that often faltered in the wake of rapidly evolving global markets.

However, considering its importance in stimulating national, regional and local development, Pakistan’s federal and sub-sovereign governments are paying particular attention to strengthening and revitalising the public procurement regimes and mechanisms in Pakistan, with a specific focus on ensuring private sector participation and strengthening existing frameworks to cater for the same.

This article provides an overview of the developments, trends and changes in the public procurement framework in Pakistan, with a specific focus on the measures being implemented to ensure private sector participation.

Key Developments in Public Procurement Regimes regarding Public-Private Partnerships

Fiscal limitations have led to innovative approaches to the provision of infrastructure. In order to bridge the growing deficit between the cost of infrastructure and the resources available, and to achieve efficiency and effectiveness in the delivery of infrastructure services, public-private partnerships (PPPs) have emerged as a growing element of public sector procurement globally.

In 2002, following The World Bank’s assessment of Pakistan’s public procurement regime (as applicable at the time), the federal government established the Public Procurement Regulatory Authority (PPRA) through the promulgation of the PPRA Ordinance 2002 followed by the Public Procurement Rules, 2004 (the PP Rules), the Public Procurement Regulations, 2008 and the Public Procurement Regulations for Procurement of Consultancy Services, 2010 (collectively, the Federal Procurement Laws).

Based on international best practices, the Federal Procurement Lawsapplied to the procurement of goods, works and services by the federal government, state-owned enterprises and semi-autonomous organisations. Following the federal legislative regime, the provinces of Punjab, Sindh, Balochistan and Khyber Pakhtunkhwa also promulgated respective legislation to govern public procurement at the sub-sovereign level.

The PPRA Ordinance remains the principal legislation governing all matters related to public procurement, whereas the PP Rules constitute subordinate legislation, deriving their authority from the substantive law. The PP Rules, 2004 issued by the federal government also applied to provincial PPRAs. Owing to the diverse structures of the provincial governments in Pakistan, PPRAs (at the federal and provincial levels) are given discretionary authority to make changes to rules and to develop manuals and other procurement-related documents.

Until 2020, the PPRA Ordinance was applicable to regulate the public procurement of goods, services and works in the public sector and for overseeing public procurement, which was defined as the “acquisition of goods, services or construction of any works financed wholly or partly out of the public fund, unless excluded otherwise by the Federal Government”. This signified that the PPRA Ordinance and the subsequently issued rules were only applicable for PPP projects in cases “in which the Federal Government and the private party have joint equity or ownership through a corporate body, and procurement is made by such body”, and not to projects in which the federal government does not have any equity or ownership, and procurement is made by the private party.

It is pertinent to note that PPPs are governed by a special law, at the federal and provincial levels. However, in practice, there is a significant overlap between the laws governing PPPs and public procurements, as discussed herein.

At the federal level, Pakistan had no PPP legislation until March 2017 when the Public Private Partnership Act, 2017 (the Federal PPP Act) was promulgated by the Parliament. Pursuant to the Federal PPP Act, the newly established Public Private Partnership Authority (the PPPA) was tasked with establishing a regulatory framework to attract domestic and foreign private investment in the development of public assets and related services through fair, transparent and competitive bidding processes, thereby reducing transactional costs through the provision of appropriate regulatory controls.

In addition, the Federal PPP Act (as amended) has enhanced the role of the PPPA and aims to, inter alia:

  • establish a regulatory framework to execute PPPs in Pakistan so as to promote domestic and foreign private investment in development projects;
  • increase the availability of public infrastructure and service delivery, and improve the reliability and quality thereof to accelerate economic growth and achieve the social objectives of the government;
  • improve the efficiency of management and operations and the maintenance of development projects in the public sector by introducing modern technologies and management techniques; and
  • reduce transaction costs, ensure appropriate regulatory controls and promote transparency and accountability in carrying out development projects.

In addition, the PPRA Ordinance was amended by way of the PPRA (Amendment) Ordinance of 2020. One of the most significant amendments was the modification of the definition of public procurement to the “acquisition of goods, services or construction of any works financed wholly or partly out of the public fund”. The amendment also includes the disposal of public assets and commercial transactions between the procuring agency and the private party, in terms of which the private party is allowed to:

  • perform a procuring agency’s assigned functions, including operations and maintenance, on its behalf;
  • assume the use of a public asset; or
  • receive a benefit from either the budget or revenue of the federal government or from fees or charges to be collected by the private party for performing the procuring agency’s functions or any combination thereof.

Based on the above amendment, it is apparent that, since July 2020, PPP project structures – such as management contracts, operations and maintenance contracts and other forms of concessions (partly or fully financed by a public entity) where the private sector is involved – are envisaged to be guided by the PPRA Amendment Ordinance, thereby bridging an identified gap between the Federal Procurement Laws and the specific legislation governing PPP projects under the federal government.

Similarly, the PPP framework in Sindh is governed by the Sindh Public Private Partnership Act, 2010 (the Sindh PPP Act) (as amended), which aims to provide for an expansion in the provision of infrastructure services and improve the reliability thereof, toaccelerate economic growth and achieve the social objectives of the governments.

While the Sindh PPP Act lays down the substantive law vis-à-vis PPPs in Sindh, the authority and functions of the PPP Unit and the various forms of support available from the PPP Unit for PPP projects in Sindh, it is pertinent to note that procurement for PPPs in Sindh continues to be governed, procedurally and in large part, by Sindh’s public procurement laws.

To that effect, procuring agencies under the Sindh PPP Act are required to ensure that the Sindh Public Procurement Rules, 2010 are followed in letter and in spirit from the pre-qualification stage through bidding and contract signing. In all instances, the procedures are required to be “transparent with full disclosure of the procedures and results of the pre-qualification and bidding”.

Furthermore, the Sindh PPP Act has been amended to, inter alia, introduce the PPP Support Facility (PSF) mechanism, detail the financing elements of the existing Sindh PPP Act, and provide for the treatment and processing of unsolicited proposals.

In addition, the Sindh PPP Act elaborates in detail the various forms of government support for PPP projects, which include:

  • administrative support to the private party consistent with the private party’s responsibilities under the PPP agreement in obtaining licences and consents from the government;
  • asset-based support such as leasing, licensing or the grant of rights to use land and/or infrastructure facilities owned by the government or an agency to the private party;
  • financial assistance through the "Viability Gap Fund" for those projects that have not been approved by the PSF but are determined to be economically and socially important;
  • government guarantees for political risks under the government’s control, such as changes in policy, early termination of the PPP agreement with no fault of the private party, and expropriation; and
  • government guarantees for other risks such as force majeure, demand risk and default by implementing agencies on payments for works and services delivered by the private party.

Clarifications in the Public Procurement Laws

With the applicable legal frameworks continuously evolving to cater to the inclusion of additional processes, incentives and mechanisms, several resultant gaps in the relevant legislations have been observed.

Amendments to bid price

In accordance with the provisions of Rule 43 of the Sindh Procurement Rules, for the purposes of clarification, the relevant procuring agency shall not permit any bidder to change the substance or price of the bid. This prohibition is further substantiated through the Sindh Public Procurement Regulatory Authority’s Regulations on the Procurement of Works (the Sindh Regulations) in Clause 7.8 (Clarification of Bids), which states that no change in the price or scope of the originally offered bids shall be sought or accepted, except for the correction of the arithmetic error and to ascertain the bidder's intentions for a decision on its responsiveness.

It has been clarified that both Rule 43 and Clause 7.8 only restrict the bidder from changing the substance or price of the bid. However, the applicable laws do not prevent the relevant procuring agency from changing the substance or price of the bid for the purposes of the evaluation of the bids. This discretion provided to the relevant procuring agency is critical to allow for said agency to be compliant with the spirit of procurement laws, allowing for a fair assessment of true value for money.

Negotiations

Rule 83(1) of the Sindh Procurement Rules permits negotiations after the financial bids have been opened. The procuring agency may invite sealed revised financial bids from all qualified bidders or through open bidding where it has valid reasons, which must be recorded in writing, to believe that the financial offers are not providing best value for money or require changes.

Therefore, negotiations under Rule 83(1) are permissible if the following prerequisites have been satisfied:

  • the financial bids have been opened;
  • the procuring agency has valid reasons to believe that the financial offers are not providing best value for money; and/or
  • the procuring agency has valid reasons to believe that the financial offers need changes.

Upon the fulfilment of these conditions, the relevant procuring agency may invite sealed revised financial bids from all qualified bidders or through an open bidding.

Grounds for rejection of bids during the evaluation stage

By way of background, Rule 42(1) of the Procurement Rules read with clause 7.6 of the Sindh Regulations stipulates, in essence, that all bids shall be evaluated in accordance with the evaluation criteria and other terms and conditions set forth in the bidding documents issued by the procuring agency. Furthermore, during the evaluation stage, any bids that are found to be non-compliant with the commercial and technical requirements are eliminated.

The Sindh Procurement Rules read with the Sindh Regulations appear to differentiate between major and minor deviations in submitted bids when evaluating the same and deciding upon the acceptance or rejection of bids during the evaluation stage of a procurement process.

Major deviations are categorised as those deviations that, if accepted, would not fulfil the purposes for which the bid was requested, would prevent a fair comparison or would affect the ranking of those bids that are compliant with the bidding documents.

Minor deviations, on the other hand, are those deviations that may be permitted by the procuring agency and the bid may be adjusted for evaluation purposes by the procuring agency.

Introduction of the Concept of Unsolicited Proposals for PPP Procurements

One of the key developments in Pakistan’s legal framework vis-à-vis public procurements and PPPs in recent years has been the inclusion of unsolicited proposals in the relevant legislative frameworks, at both the federal and provincial levels.

By way of background, solicited proposals are projects selected by the government mainly from their priority public sector development programmes for PPP implementation in accordance with the relevant PPP laws and the overarching procedures delineated in the relevant public procurement legislation.

By contrast, unsolicited proposals are proposed by the private sector to the government as being worthy of consideration as a PPP project. Pursuant to Pakistan’s policy on PPPs, unsolicited proposals are considered by the governments on a case-by-case basis, and the governments’ evaluation is limited to proposals that demonstrate genuine and substantial innovation and are supportive of public policy.

Several amendments have been incorporated in the provincial legal regimes to cater for unsolicited proposals submitted by private participants. By way of example, Section 20 of the Sindh PPP Act (Unsolicited Proposals) provides that any person may propose a project to a procuring agency on its own initiative by submitting a project proposal, and said proposal will be subject to the procurement procedures as may be prescribed under the Sindh PPRA and any rules or regulations made thereunder.

Rule 15(A) (Unsolicited Proposals) of the Sindh Procurement Rules provides that, in the case of an unsolicited proposal for a PPP project, the procuring agency shall process the proposal through its technical committee to ascertain its viability and thereafter advertise the same for open competitive bidding, if found viable.

If the proposal is found viable, the procuring agency advertises the proposal for open competition without disclosing the name of the initiator, under Rule 15(A)(1)(b) of the Sindh Procurement Rules.

In addition to being exempt from the pre-qualification process, the initiator is also granted the right of first refusal and a 5% additional weightage on the combined score, both technical and financial, in the bid evaluation.

Rule 81(2), mentioned in Part-IV of the Sindh Procurement Rules, enables the rules of procurement of goods, works and services in Part II and III to apply mutatis mutandis to projects in which the design, financing and operations and maintenance will be undertaken.

The Federal PPP Act entails a non-obstante clause whereby it states that the Federal PPP Act and the rules and regulations made thereunder shall apply to all matters relating to PPP projects notwithstanding anything contained in any other laws, including the Federal Procurement Laws.

No complication can be identified upon a bare reading of this non-obstante clause, but it does result in uncertainty regarding the application of the procurement process in the absence of any rules under the Federal PPP Act (as amended).

Although the matter is yet to be clarified by way of express legislation to that effect, analogies may be drawn from several judicial precedents established by the courts in Pakistan, which suggest that in the absence of special rules to regulate matters the general rules would remain applicable until such time that the government notifies special rules.

Standardisation of Bidding Documents

While the public procurement framework with reference to PPPs in the country continues to evolve, it is imperative to note that efforts are being made, at both federal and sub-sovereign levels, to frame standard bidding documents so as to facilitate a standardisation of understanding and interpretation amongst different procuring agencies. Global practice is a testament to the fact that framework contracts/standardised bidding documents and agreements prove to be immensely useful and efficient, as they help reduce transaction costs and increase the efficiency of the system.

Ali Khan Law Associates

Office 402, 4th Floor, 186-C, Lane 3
D.H.A. Phase 8 Zulfiqar & Al Murtaza Commercial Area Phase 8 Defence Housing Authority
Karachi
Pakistan

+922 13 534 6017

+922 13 534 6016

akla@akla.com.pk www.akla.com.pk
Author Business Card

Law and Practice

Authors



Ali Khan Law Associates currently operates in Karachi, Lahore and remotely in Islamabad and Quetta, with a team of seven lawyers. The firm focuses exclusively on projects, infrastructure and energy matters, providing extensive expertise in the public procurement legal framework. In this niche sector, the firm offers end-to-end service to clients, catering to their bespoke needs. Its expertise in public procurement is also evident through its involvement in all major public-private partnership projects being implemented in Pakistan, including water, power, mining, road and special economic zones projects. The firm also assists the federal and provincial governments of Pakistan and corporate giants in the clear and unequivocal interpretation of procurement laws, to avoid any ambiguity and minimise potential hindrances to the project or any liabilities for clients.

Trends and Development

Authors



Ali Khan Law Associates currently operates in Karachi, Lahore and remotely in Islamabad and Quetta, with a team of seven lawyers. The firm focuses exclusively on projects, infrastructure and energy matters, providing extensive expertise in the public procurement legal framework. In this niche sector, the firm offers end-to-end service to clients, catering to their bespoke needs. Its expertise in public procurement is also evident through its involvement in all major public-private partnership projects being implemented in Pakistan, including water, power, mining, road and special economic zones projects. The firm also assists the federal and provincial governments of Pakistan and corporate giants in the clear and unequivocal interpretation of procurement laws, to avoid any ambiguity and minimise potential hindrances to the project or any liabilities for clients.

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