PREQUALIFICATION

GUIDANCE NOTE ON PROCUREMENT

JUNE 2018

ASIAN DEVELOPMENT BANK

PREQUALIFICATION
GUIDANCE NOTE ON PROCUREMENT
JUNE 2018

ASIAN DEVELOPMENT BANK

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© 2018 Asian Development Bank

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Publication Stock No. TIM189393-2
DOI: http://dx.doi.org/10.22617/TIM189393-2

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Contents

Tables, Figures, and Boxes iv

About This Publication v

Abbreviationsviii

Executive Summary ix

I. Introduction 1

II. Advantages and Disadvantages of Prequalification 3

III. Considerations When Using Prequalification 5

IV. Prequalification Process 14

V. Resources for Further Review 20

iv

Tables, Figures, and Boxes

TABLES

1. Advantages of Prequalification 3

2. Example Evaluation Score Definitions 9

for Scored Prequalification Criteria

FIGURES

1. Prequalification within the ADB Procurement Cycle 2

2. Example of the Use of Scored Criteria to Limit Bidders, 7

Using the Minimum Score Method

3. Example of Prequalification Using Packages 11

4. The Prequalification Process 15

5. Typical Prequalification Evaluation Criteria 16

BOXES

1. Circumstances Where Prequalification May Be Appropriate 2

2. Limiting Prequalified Applicants Invited to Bid 10

v

About This Publication

In April 2017, the Asian Development Bank (ADB) approved its new procurement
framework, the ADB Procurement Policy: Goods, Works, Nonconsulting and
Consulting Services (2017, as amended from time to time); and the Procurement
Regulations for ADB Borrowers: Goods, Works, Nonconsulting and Consulting
Services (2017, as amended from time to time). These replace the former Guidelines
on the Use of Consultants (2013, as amended from time to time) and Procurement
Guidelines (2015, as amended from time to time). The procurement policy and the
procurement regulations address the procurement activities of project executing
agencies and implementing agencies on projects financed in whole or in part by a
loan or grant from ADB, or by ADB-administered funds. ADB designed the 2017
procurement policy to deliver significant benefits and flexibility throughout the
project procurement cycle, as well as to improve project delivery through a renewed
focus on the concepts of quality, value for money (VFM), and fitness for purpose.

This note is part of a series of guidance notes published by ADB in 2018 to

accompany the 2017 procurement policy and the procurement regulations.
Each note discusses a topical issue for borrowers (including grant recipients),
bidders, and civil society under the new framework (see list below). The guidance
notes cross-reference each other frequently and should be read in conjunction.
All references to “guidance notes” pertain to these notes. The notes may be
updated, replaced, or withdrawn from time to time.

List of Guidance Notes for the 2017 ADB Procurement

Policy and the Procurement Regulations
1. Value for Money 14. High-Level Technology
2. Procurement Risk Framework 15. Quality
3. Strategic Procurement Planning 16. Bidding-Related Complaints
4. Procurement Review 17. Noncompliance in Procurement
5. Alternative Procurement Arrangements 18. Standstill Period
6. Open Competitive Bidding 19. State-Owned Enterprises
7. Price Adjustment 20. E-Procurement
8. Abnormally Low Bids 21. Framework Agreements for
9. Domestic Preference Consulting Services
10. Prequalification 22. Public–Private Partnerships
11. Subcontracting 23. Contract Management
12. Consulting Services Administered 24. Fragile, Conflict-Affected,
by ADB Borrowers and Emergency Situations
13. Nonconsulting Services Administered
by ADB Borrowers
vi About This Publication

ADB procurement reforms intend to ensure VFM by improving flexibility, quality,

and efficiency throughout the procurement cycle (see illustration below and the
Guidance Note on Value for Money). VFM is part of a holistic procurement structure
with three support pillars: efficiency, quality, and flexibility. The two key principles of
transparency and fairness weave across all elements of the structure.

Tra n s p a re n c y
Value for Money
The effective, efficient, and economic use of resources,
which requires an evaluation of relevant costs and benefits along
with an assessment of risks, nonprice attributes, and/or total cost
of ownership as appropriate

Efficiency Quality Flexibility

• Decreased transaction • Contract management • Open competitive
costs support bidding
• Increased skills • Prompt resolution of • Decentralization
• Increased high-level complaints • Accreditation
technology usage • Improved developing for alternative
• Improved member country procurement
procurement planning procurement process arrangements
• Support and • Improved • Principles-based
encouragement procurement planning decisions
of e-procurement • Governance • Improved
systems • Contracts with clear procurement planning
performance criteria • Delegation
• Minimal number of • Bids with weighted
complaints proposal
• Improved ADB criteria
processes

Fairness

Time
Time is an important element of VFM. When a project is delivered promptly or when a
process is completed rapidly, greater value is created for all stakeholders. For example, a
road project completed early provides economic benefit, security, or other value to the
community it serves. It increases the return on investment to the executing agency and
accelerates the project and payment cycle to the successful bidder. Likewise, a project
delivered late loses significant value.

When considering VFM in the context of procurement, pay attention to anything

that (i) shortens the procurement cycle time frame or (ii) accelerates delivery of the
development project.
About This Publication vii

Objective
This guidance note is intended to assist readers by elaborating on and explaining
ADB’s 2017 procurement policy and procurement regulations for borrowers
(including grant recipients).

This note identifies additional information for the reader to consider when applying ADB’s
procurement policy and procurement regulations to their circumstances.

Living Document
This guidance note is intended to be a living document and will be revised as required.

Be sure to check the ADB Business Center website for the latest version and updates,
https://www.adb.org/business/main.

The Reader
In many circumstances, readers are expected to use this guidance note in a manner unique
to their needs. For consistency throughout the suite of guidance notes, the following
assumption is made about the reader:

The reader is a professional involved in activities financed in whole or in part by an ADB loan
or grant, or by ADB-administered funds.

FAQs
Frequently asked questions, clarifications, examples, additional information, links to training,
and other useful resources will be made available on the ADB website.

Be sure to check the ADB Business Center website for more information,
https://www.adb.org/business/main.

Legal and Order of Priority

This guidance note explains and elaborates on the provisions of the Procurement
Regulations for ADB Borrowers: Goods, Works, Nonconsulting and Consulting Services
(2017, as amended from time to time) applicable to executing (and implementing) agencies
under sovereign (including subsovereign) projects financed in whole or in part by an
investment loan from ADB (i.e., excluding ADB results- or policy-based loans),
ADB-financed grant (excluding ADB-administered technical assistance and staff
consultancies), or by ADB-administered funds.

In the event of any discrepancy between this guidance note and the procurement
regulations, the latter will prevail. The financing agreement governs the legal relationships
between the borrower and ADB. The rights and obligations between the borrower and the
provider of goods, works, or services are governed by the specific procurement document
issued by the borrower and by the contract signed between the borrower and the provider,
and not by this guidance note.
viii

Abbreviations

ADB — Asian Development Bank

IFP — Invitation for Prequalification

PQD — prequalification document

PQER — Prequalification Evaluation Report

SPQD — Standard Procurement Document for

Prequalification of Bidders

VFM — value for money

ix

Executive Summary

This guidance note demonstrates the benefits of using a robust prequalification

process and shows how it may be applied in ADB operations. It distinguishes
between work required during the prequalification and bidding phases of the
procurement cycle. During the prequalification phase, the borrower (or grant
recipient) assesses the suitability of an applicant to work on a project before inviting
them to submit a bid.

The following features are new to the prequalification process:

• the ability to limit the number of qualified applicants that are invited to bid
and
• criteria for historical contract nonperformance.

A robust prequalification exercise may

Increase Efficiency and Reduce Procurement Time

• Ensures that only applicants who meet the requirements of the project—
including experience and capability—are invited to submit bids, while at the
same time allowing for healthy competition.

Ensure Quality
• The ability to limit the number of qualified applicants invited to bid (new
in this guidance note) leads to higher quality outcomes by reducing the
number of bidders to a manageable number of the most qualified applicants.

Reduce Risk and Improve Value for Money

• The provisions for handling historical contract nonperformance among
bidders reduce risk and improve value for money.
I. Introduction

1.1 This guidance note is intended to provide clarity on the circumstances

where it is appropriate to conduct prequalification—and the process to be
followed—in projects financed in whole or in part by a loan or grant from the Asian
Development Bank (ADB), or by ADB-administered funds. The Procurement
Regulations for ADB Borrowers: Goods, Works, Nonconsulting and Consulting
Services (2017, as amended from time to time) include prequalification as a
mechanism intended to ensure that only those applicants that have adequate
capabilities and resources submit bids for the supply of goods, works, and services.

1.2 Prequalification is a process associated with open competitive bidding

wherein the borrower (or grant recipient) assesses the suitability of applicants
to carry out a specific contract before inviting them to submit bids. Generally,
all applicants that meet the minimum prequalification criteria are invited to bid.
There are situations where the number of successfully prequalified applicants
invited to submit bids may be limited (section III of this guidance note).

1.3 The prequalification process is distinct from the bid process—which

concentrates on the technical and financial aspects of specific bids.

1.4 The prequalification procedure described in this guidance note applies

to the procurement of (i) goods; (ii) large and complex works; (iii) plant: design,
supply, and install; and (iv) design-and-build projects, among others, requiring
bidders (or a group of bidders) who are suitably experienced in the type of work and
construction technology involved in the contract to demonstrate their capacity.

1.5 In the case of consulting services, prequalification is included in the

context of the process of shortlisting firms and is considered in the Guidance
Note on Consulting Services Administered by ADB Borrowers. Prequalification of
nonconsulting services is considered in the Guidance Note on Nonconsulting Services
Administered by ADB Borrowers.

1.6 The prequalification process is optional and should be used on a “fit-for-

purpose” basis, i.e., where the nature and complexity of the contract are such that
the value of prequalification would create in the procurement process exceeds
the costs and its associated risks. Prequalification may be appropriate in the
circumstances described in Box 1.
2 Prequalification

Box 1
Circumstances Where Prequalification May Be Appropriate
• Large or complex works
• Custom-designed equipment
• Complex industrial plant
• Complex information and technology systems
• High-level technology
• Turnkey, design-and-build contracts
• Any contract where the high cost of preparing detailed bids may discourage participation
• Where the number of bidders likely to be qualified is high
• Where a “standing list” of prequalified bidders is to be established for groups of contracts
to be awarded over time
Source: Asian Development Bank.

1.7 Figure 1 illustrates where the prequalification process occurs in the ADB
procurement cycle.1

Figure 1: Prequalification within the ADB Procurement Cycle

Country Partnership
Strategy
Country and Sector/Agency
Procurement Risk Assessment

Feedback or Evaluation Project Conceptualization

Project Completion Report
Transaction Technical Assistance
Contract Close
Econ Procurement Risk Categorization
Lessons Learned
lity om
ua
Q
y
Tran

Procurement Planning
Efficiency

Implementation and Procurement Plan

PROCUREMENT
sparency

Contract Management Project Procurement Risk

Contract Management Plan
CYCLE Assessment
Project Administration Manual

M alu e s
V

ne
s

o n fo r
ey Fa i r
Contract Award Bidding
Bidding Documents

Bid Evaluation Prequalification

Evaluation Reports

Source: Asian Development Bank.

1
Prequalification may take place as early as the project conceptualization and processing stage.
II. Advantages and Disadvantages
of Prequalification

A. Advantages
2.1 Prequalification provides advantages to prospective bidders, as well as to
borrowers, some of which are listed in Table 1.

Table 1: Advantages of Prequalification

Prospective
Advantages Bidders Borrowers
Screens potential bidders for contract specific
requirements and capability
 
Prospective bidders avoid the expense of bidding if
not sufficiently qualified

Reduces or eliminates the need to evaluate bids
from unqualified bidders
 
Enables prospective bidders to understand
minimum requirements, providing them with the
 
opportunity to join with other prequalified bidders
to bid for the contract
Builds confidence that unqualified competitors
will be excluded from submitting unrealistically

low bids
Enables the sourcing strategy to be altered in
response to the level of interest from qualified

prospective bidders
Exposes potential conflicts of interest of
prospective bidders with other parties involved in
 
the prequalification
Enables identification of prospective bidders
eligible for a domestic preference, where this is
 
applicable

Source: Asian Development Bank.

4 Prequalification

B. Disadvantages
2.1 Potential disadvantages of prequalification include that

(i) it may increase the total procurement process time; and

(ii) it may facilitate corruption and collusion among applicants, since the
identification of prequalified applicants will be made public.
III. Considerations When
Using Prequalification

3.1 Several factors should be given special consideration when deciding to

conduct prequalification:

(i) limiting the number of bidders,

(ii) treatment of multiple “lots,” and
(iii) treatment of subcontractors.

A. Limiting the Number of Bidders

3.2 Generally, all applicants that meet the minimum prequalification
criteria should be invited to bid. However, the 2017 procurement regulations
(in Appendix 3, para. 19) allow the borrower to limit the number of prequalified
applicants to be invited to bid for the contract, provided

(i) any criteria used to limit the number of prequalified applicants to be

invited to bid are stated in the prequalification documents, and
(ii) doing this does not limit fair competition.

3.3 Limiting the number of prequalified applicants invited to bid should be

used sparingly and only in the following circumstances:

(i) Where the strategic procurement planning suggests that the executing
agency has capacity to administer the process effectively (refer to the
Guidance Note on Strategic Procurement Planning).
(ii) Where the relevant expertise cannot be identified from the standard
prequalification criteria, e.g., in projects that are highly specialized or
involve high-level technology (refer to the Guidance Note on High-
Level Technology).
(iii) Where the means of delivering the project outcomes require
innovation, or the project outcomes can be delivered in different ways.
(iv) Where the market assessment suggests there may be a large number
of applicants that are likely to be prequalified.

3.4 Limiting the number of prequalified applicants invited to bid is achieved

by using “scorable” prequalification criteria. These are criteria related to the special
requirements of the project that are scored against a predefined scoring scale so
that overall scores are calculated for each applicant for the purpose of comparison
of their relative capabilities. The scored prequalification criteria are used in addition
to the pass/fail prequalification criteria.
6 Prequalification

3.5 Two methods can be used to reduce the number of prequalified

applicants invited to bid:

(i) the minimum cut-off score methodology and

(ii) the score ranking methodology.

3.6 The minimum cut-off score methodology involves setting a minimum

score against the scored prequalification criteria that applicants must meet to be
prequalified. In this methodology, all applicants that have achieved the minimum
cut-off score must be invited to bid.

3.7 The ranking methodology involves selecting the top scoring applicants
to be invited to bid. The number of applicants to be invited to bid is required to be
stated in the prequalification document.

3.8 To ensure that applicants invited to bid are of a suitable quality, the
borrower may wish to combine the ranking and the minimum cut-off score
methodologies, stating in the prequalification document that a fixed number
(or range) of prequalified applicants will be invited to bid subject to meeting a
specified minimum cut-off score.

3.9 The choice of methodology used should be informed by the market

assessment and the nature of the contract. For example, if the assessment
shows a large number of applicants are likely to be prequalified, or the number of
applicants likely to be prequalified is unknown, the ranking approach may be more
suitable. If capability of bidders is the primary consideration, a minimum cut-off
score may be more suitable (if limiting prequalified applicants is still considered
appropriate in this circumstance). If the market assessment shows a small number
of applicants, the use of prequalification may not be an appropriate option. Instead,
postqualification should be used with the appropriate qualification criteria.

3.10 An example of a prequalification evaluation using pass/fail and scored

prequalification criteria to limit bidders, using the minimum cut-off score
methodology, is shown in Figure 2.2 Note that the scored prequalification criteria
and the scoring scale shown in the example are for illustration purposes only and
will vary depending on the nature of the contract, contract requirements, and the
borrower’s preferred scoring scale methodology.

3.11 In this example, a two-step evaluation process is used. In Step 1,

applications are assessed against the standard pass/fail prequalification criteria and
assessed as either “pass” or “fail.” In this example, Applicants C and D fail one or
more of the pass/fail criteria and, therefore, do not progress to the next stage of the
evaluation.

2
Note that, in this example, a minimum cut-off score of 80% was used.
Considerations When Using Prequalification 7

Figure 2: Example of the Use of Scored Criteria to Limit Bidders,

Using the Minimum Score Method
Prequalification Scoring Applicant Applicant Applicant Applicant Applicant Applicant Applicant
Evaluation Criteria Method A B C D E F G

Step 1: Pass/Fail Prequalification Criteria

Eligibility Pass/Fail Pass Pass Pass Pass Pass Pass Pass
Historical Pass/Fail Pass Pass Fail Pass Pass Pass Pass
Contract
Nonperformance
Financial Pass/Fail Pass Pass Pass Pass Pass Pass Pass
Situation
Average Annual Pass/Fail Pass Pass Pass Fail Pass Pass Pass
Turnover
Technical Pass/Fail Pass Pass Pass Pass Pass Pass Pass
Capacity
Experience Pass/Fail Pass Pass Fail Pass Pass Pass Pass
(contracts of
similar size and
nature)
Experience (key Pass/Fail Pass Pass Pass Pass Pass Pass Pass
activities)
Step 1 Result Pass/Fail Pass Pass Fail Fail Pass Pass Pass
Step 2: Scored Prequalification Criteria (Used for limiting bidders. Scored on a scale of 0 to 5.)
Experience Scored 4 3 Not Not 2 4 3
(number of scored scored
successfully
completed
contracts of
similar size and
nature in past 5
years in excess
of the minimum
requirement)
Demonstrated Scored 4 3 Not Not 2 5 5
Innovations Used scored scored
in Past Projects
Preliminary Scored 3 3 Not Not 3 5 3
Methodology for scored scored
the Project

continued on next page

8 Prequalification
Figure 2 continued

Prequalification Scoring Applicant Applicant Applicant Applicant Applicant Applicant Applicant

Evaluation Criteria Method A B C D E F G

Examples Scored 5 3 Not Not 2 4 4

of Quality scored scored
Management
Processes and
Systems Applied
to Past Projects
Risk Management Scored 5 3 Not Not 3 5 5
Processes and scored scored
Systems
Step 2 Result Average 84% 60% Not Not 48% 92% 80%
scored scored
Prequalification Outcome
Overall Score 84% 60% Fail Fail 48% 92% 80%
Prequalification
Result
Invite to Bid? Meets Yes No No No No Yes Yes
minimum
cut-off
score

Source: Asian Development Bank.

3.12 Applicants A, B, E, F, and G are evaluated against the scored prequalification

criteria, in this case using a scoring scale of 0 to 5 against each criterion. The Step 2
result is calculated by dividing the sum of the 5 criteria scores together and dividing
by the maximum possible score of 25 to arrive at an overall percentage score
(e.g., Applicant A’s overall Step 2 score = 100 x (4+4+3+5+5)/25 = 84%). This
calculation method implies equal weighting applied to each scored prequalification
criterion, but different weightings may be applied to reflect the relative importance of
the criteria.

3.13 In this example, a minimum cut-off score of 80% was set and
documented in the prequalification document. Applicants A, F, and G meet the
minimum score and so are selected to be invited to bid. Applicants B and E did not
meet the minimum score of 80% and so were not selected to be invited to bid.

3.14 Note that similar criteria can be used as pass/fail criteria and scored
prequalification criteria, if suitable. In the above example, one of the standard pass/
fail criteria in Step 1 is Experience, expressed as a minimum number of contracts
of a similar size and nature. The pass level may be three contracts of a similar size
and nature in the past 5 years. A similar Experience criterion is used in Step 2 as a
scored criterion, namely, “Number of successfully completed contracts of similar
size and nature in past 5 years in excess of the minimum requirement.” Utilizing
Considerations When Using Prequalification 9

a rating scale of 0 to 5, scores may be assigned based on the number of contracts

the applicant has performed in excess of the minimum requirement as illustrated
in Table 2.

Table 2: Example Evaluation Score Definitions

for Scored Prequalification Criteria
Criterion = Experience (Number of contracts performed in past 5 years in excess of the
minimum requirement)
Evaluation Score 0 1 2 3 4 5
Number of contracts 0 2 4 6 8 10 or
in excess of minimum contracts contracts contracts contracts contracts more
requirement contracts
(i.e., in excess of three)

Source: Asian Development Bank.

3.15 Using this method, an applicant that has performed a total of five
contracts, passes the Experience criterion in Step 1 having met the minimum
requirement of three contracts, and is given an evaluation score of 1 in Step 2
because it has performed two contracts in excess of the minimum requirement
of three.

3.16 Scored evaluation criteria that may be used to limit bidders may include

(i) management capability,

(a) risk management processes and systems,
(b) knowledge management and continuous improvement,
(c) quality management system and quality assurance processes, and
(d) workplace health and safety management systems;

(ii) project methodology and capability,

(a) project management capability, and
(b) preliminary project methodology;

(iii) innovation and high-level technology capability,

(a) innovative solutions supporting project objectives, and
(b) experience in the use of the high-level technology.

3.17 The use of scored prequalification criteria carries with it the risk that
subjectivity may be introduced into the prequalification process. In the above
example, the scored criterion “risk management processes and systems” is difficult
to evaluate with complete objectivity. A way of reducing subjectivity is to use
quantifiable criteria (e.g., the number of contracts of similar size and nature).
Even so, there may be some subjectivity in the interpretation of applicant responses
in determining scores and, therefore, sound professional judgment will be required
during the evaluation.
10 Prequalification

3.18 Another way to reduce subjectivity is to establish “score descriptors” prior

to issuance of prequalification documents, setting out evidence required to be
provided by applicants in support of the criteria at each score level. Table 2 shows
an example of the use of score descriptors. Score descriptors are used to guide
the evaluation panel and should be included in the prequalification document.
For more information on the use of score descriptors, refer to the Guidance Note
on Quality.

3.19 Where limiting the number of prequalified applicants invited to bid is to

be used, the prequalification documents shall specify

(i) the methodology to be used will be to limit bidders (i.e., minimum cut-
off score method or ranking method);
(ii) where the minimum score methodology is to be used—the minimum
cut-off score;
(iii) where the ranking methodology is to be used—the number of
applicants to be invited to bid;
(iv) the criteria to be used for evaluation; and
(v) the method for applying the criteria, including relative weighting.

3.20 In the case of the ranking methodology, the number of selected bidders
will depend on the project but should balance the efficiencies gained from limiting
the number of bids to be evaluated against the potential benefits of having a
greater number of responses (i.e., improving the probability of receiving suitable
bids, increasing competition).

3.21 A summary of this subsection is provided in Box 2.

Box 2
Limiting Prequalified Applicants Invited to Bid
• Limiting the number of successfully prequalified applicants that are invited to bid is
allowed under the 2017 procurement regulations.
• It should be used sparingly—only when the standard prequalification criteria are
not sufficient to identify suitable applicants or to reduce the number of prequalified
applicants to a manageable level.
• Scored prequalification criteria should be used to limit the number of qualified bidders.
• Two methodologies can be employed to limit bidders: minimum cut-off score method
and ranking method.
• Where limiting the number of prequalified applicants invited to bid is to be conducted,
the prequalification documents should specify
›› the criteria used to evaluate applicants,
›› the relative weighting of the criteria,
›› the methodology to be employed (minimum cut-off or ranking),
›› the minimum cut-off score (where the minimum score method is used), and
›› the number of bidders to be invited to bid (where ranking is used).
• The number of bidders to be selected should balance efficiency and competition.
Source: Asian Development Bank.
Considerations When Using Prequalification 11

B. Treatment of Multiple Contracts/Lots

3.22 Depending on the nature of the project, the scope may be divided into
separate “contracts/lots” as per the following example:

(i) Lot 1: Build road section A (60 kilometers [km]).

(ii) Lot 2: Build road section B (80 km).

3.23 The borrower may decide to conduct separate prequalification exercises

for each contract/lot, or for groups of contracts/lots (“packages”). In the latter case,
contracts/lots should only be grouped into packages in the same prequalification
exercise if such are of similar type, size, and scope. In the case of prequalification
exercises involving multiple contracts/lots, applicants should be instructed in
the prequalification documents to indicate the contracts/lots for which they
are applying.

3.24 It should be noted that when prequalifying applicants using multiple

contracts/lots grouped into a package, the objective of the exercise is to determine
whether applicants qualify for each contract/lot in the package separately
and whether the applicants have the capacity to perform all contracts/lots or
combinations of contracts/lots. In the example in Figure 3, applicants would be
prequalified for Lot 1 and Lot 2 individually. No opinion would be given on whether
applicants could perform Lots 1 and 2 combined. Aggregation of qualification
requirements is not done at the prequalification stage, but at the bid stage.

Figure 3: Example of Prequalification Using Packages

Prequalification for a Package Consisting of “Lot 1” and “Lot 2”

Prequalification Applications
Lot Description
Applicant A Applicant B Applicant C Applicant D Applicant E

Lots for which applicant Lot 1 Lot 1 Lot 1

has applied Lot 1 Lot 2
Lot 2 Lot 2 Lot 2

Experience pass/fail evaluation

Lot 1 Road Pass Pass Pass Did not

Section A Fail
apply
Road Pass Fail Pass Did not
Lot 2 Section B Pass
apply

KEY: Lot 1: Road Section A = 60 kilometers of road construction,

Pass = Passed qualification estimated value $30 million
Fail= Did not pass qualification Lot 2: Road Section B = 80 kilometers of road construction,
Did not apply = Did not apply for lot estimated value $40 million

Source: Asian Development Bank.

12 Prequalification

3.25 In this example, the package for which the prequalification process is
conducted consists of Lot 1, Road section A, comprising 60 km of road construction
with estimated value of $30 million, and Lot 2, Road section B, comprising 80 km of
road construction with estimated value of $40 million.

3.26 Applicants A, B, and C have applied for both Lot 1 and Lot 2. Applicant D
has indicated interest in Lot 1 only and Applicant E has indicated interest in Lot 2
only.

3.27 Applicants A and C pass the experience criteria for Lot 1 and Lot 2,
meaning that they have constructed roads of value equivalent to (or equivalent to
some specified percentage of) Lot 2, Road section B. Since they have passed the
experience criterion for Lot 2, they also pass the experience criterion for the smaller
Lot 1.

3.28 Applicant B met the experience requirement for Lot 1, but did not qualify
for the higher value Lot 2. Applicant D applied for Lot 1 but failed to show evidence
of past experience sufficient to perform Lot 1. Applicant E applied for Lot 2 only and
has provided evidence of past experience sufficient for it to pass the experience
criterion for Lot 2.

3.29 Applicants should not be disqualified if they have not provided unique
contract experience for each lot (for example, three contracts for Lot 1 and three
different contracts for Lot 2). In the preceding example, if Applicant A submitted
three contracts for $40 million each in support of its application for Lot 2, it is
deemed to have also qualified for Lot 1, even though it did not submit three other
contracts of $30 million supporting its application for Lot 1.

C. Treatment of Subcontractors
3.30 The prequalification of subcontractors should generally be avoided
at the prequalification stage, because it may lock applicants into subcontract
arrangements without the ability to change at the time of bidding. Instead,
subcontractors’ capabilities should be assessed during the bid. However,
if the nature of the project and key activities are such that prequalification of
subcontractors is warranted, qualification requirements should explicitly be
included in section 3 of the prequalification document. In addition, changing
subcontractors at bid submission should only be allowed in exceptional cases,
provided such requirements are clearly included in the prequalification documents
and with prior approval of the borrower or ADB.

3.31 Depending on the circumstances, the employer may not accept changes
in subcontracting arrangements at bidding stage if, because of reassessment,
the applicant is no longer compliant to the evaluation and qualification criteria
requirements or it may have implications on competition.
Considerations When Using Prequalification 13

3.32 In most circumstances, it is the experience of the applicant that is being

prequalified, regardless of how the role of the applicant was described at the time
that experience was obtained. Where applicants submit experience gained as
subcontractor, this may be viewed as equivalent to experience obtained as main
contractor subject to an assessment of the extent of the involvement, scope or
complexity, and nature of work and services provided by the subcontractor under
the previous contract. Before deciding, this should be carefully assessed on a
case-by-case basis.

3.33 Claiming experience of affiliated companies to satisfy qualification

requirements. The ADB Standard Procurement Document for Prequalification
of Bidders (SPQD) (in its Instructions to Applicants [ITA] clause ITA 25.4)
states that “unless permitted in the Application Data Sheet, the qualifications of
the other firms, including the Applicant’s subsidiaries, parent entities, affiliates,
subcontractors (other than Specialist Subcontractors in accordance with ITA 25.2)
or any other firm(s) different from the Applicant shall not be considered.” In the
default provision of the SPQD, it is the applicant who must meet the qualification
requirements. However, in exceptional circumstances, depending on the nature of
the project scope and market assessment, the applicant may claim the experience,
capability, and resources of its parent, subsidiary, and/or other affiliates3 (referred to
collectively as “affiliates”) for the purposes of meeting the minimum qualification
requirements for a specific application, provided such requirements were prior
reviewed, agreed by ADB, and included in the prequalification documents
before issuance. For further details on this topic, refer to the ADB User’s Guide to
Prequalification of Bidders (2018).

3
“Affiliates” is a broad term and would include, in addition to parent and subsidiary companies,
“sister” companies of an applicant—that is, companies that are owned directly or indirectly by
the applicant’s parent company.
IV. Prequalification Process

4.1 The borrower manages assessing the qualifications of prospective bidders.

Figure 4 shows the process flow for prequalification.

4.2 The main steps in the prequalification process are summarized in the
following subsections.

A. Step 1: Notification and Advertisement

4.3 Timely notification of procurement opportunities is essential in open
competitive bidding, providing applicants with enough time to prepare and submit
prequalification applications.

4.4 An Invitation for Prequalification (IFP) is required to be developed and

published by the borrower in accordance with requirements for notification and
advertising of bidding opportunities described in the 2017 procurement regulations
and the Guidance Note on Open Competitive Bidding.

4.5 Notification of a forthcoming procurement is required to be issued prior

to the issuance of an IFP through a procurement notice. In the case of advance
contracting, an advance contracting notice is required to be issued.

B. Step 2: Preparation and Issuance of

Prequalification Documents
4.6 Where prior review applies, the draft prequalification document (PQD)
and the IFP, before issuance, should be submitted to ADB for no-objection. For
details on review requirements, refer to the Guidance Note on Procurement Review.

4.7 Unless ADB otherwise agrees, the borrower should prepare the PQD
using the published version of the SPQD on the ADB website and without editing
Section 1—Instructions to Applicants. Information in sections 2–6 should be
provided and/or updated according to specific contract requirements.

4.8 The prequalification evaluation criteria selected must

(i) relate to qualifications essential to ensuring satisfactory execution of

the contract;
Prequalification Process 15

Figure 4: The Prequalification Process

Borrower ADB Applicant

Start

Submit draft PQD and IFP

using the SPQD to ADBa
Review draft IFP and PQD

Incorporate ADB comments and

resubmit draft PQD and IFP
Send
comments Documents
on the acceptable?
Advertise IFP in the following:b documents No
(i) ADB website,
(ii) a newspaper in general Yes
circulation in the borrower’s
country, and Issue no objection
(iii)an internationally known and letter to borrower
freely accessible website in English.
Purchase PQD
from borrower
(i) Promptly respond to requests
for clarifications.
(ii) Amend prequalification Request clarification
document as appropriate. from borrower
Note: Refer to prior review as necessary
requirements
Prepare and submit
application to borrower
Open applications and
prepare record of opening

Evaluate applications and Provide responses

seek clarification from applicants, to borrower’s
as necessary clarifications, if any

Finalize evaluation of applications,

and prepare and submit PQER
to ADB
Review PQER

Address ADB’s comments and/or

submit revised PQER
Send No
Document
comments
acceptable?
on the
documents
Yes
Notify all applicants of results
of prequalification results Issue no objection
letter to borrower

End

IFP = invitation for prequalification, PQD = prequalification document, PQER = prequalification

evaluation report, SPQD = Standard Procurement Document for Prequalification of Bidders.
a
This process flow shows the prequalification process following the prior review procedure.
For further details on review requirements, refer to the project procurement plan and the
Guidance Note on Procurement Review.
b
For requirements on advertising and notification, refer to section IV A and the Procurement
Regulations for ADB Borrowers: Goods, Works, Nonconsulting and Consulting Services (2017,
as amended from time to time).
Source: Asian Development Bank.
16 Prequalification

(ii) be chosen so that only applicants qualified to carry out the work are
prequalified and permitted to bid;
(iii) be tailored consistent with information on supply market
characteristics obtained from the market assessment (e.g., a
less mature supply market may lead to a lower level of minimum
experience being specified); and
(iv) be established so that they neither inhibit competition nor limit the
number of eligible applicants to be prequalified, as follows:
(a) overly “strict” or excessive criteria (i.e., those going beyond what
is strictly necessary for the needs of the contract) may seriously
hamper competition, and may lead to complaints; and
(b) overly “lenient” criteria may result in an excess of unsuitably
qualified applicants and may deter better qualified applicants
from bidding and allow low priced bids from underqualified
bidders.

4.9 The PQD must be clear about the information required of applicants for
each criterion.

4.10 The SPQD of ADB for large and complex civil works and technically
complex plant includes standard prequalification evaluation criteria. Such criteria
must be adapted to the project or contract in question but, typically will include the
criteria shown in Figure 5.

Figure 5: Typical Prequalification Evaluation Criteria

Eligibility

Experience Historical Contract

(key activities) Nonperformance

Evaluation
Criteria

Experience Financial Situation

(contracts of similar size
and nature)a

a
Depending on specific project requirements, other requirements like technical capacity may be
included either in experience or key activities.
Source: Asian Development Bank.
Prequalification Process 17

4.11 The eligibility and historical contract nonperformance evaluation criteria

are discussed below. For details on other aspects of evaluation criteria, refer to
the SPQD.

1. Eligibility

4.12 The SPQD specifies the criteria used to determine whether applicants are
eligible to participate in projects. An applicant will not be eligible under a project
that ADB finances, administers, or supports while under temporary suspension or
debarment by ADB, pursuant to the ADB Anticorruption Policy (1998, as amended
to date)4 and the ADB Integrity Principles and Guidelines (2015, as amended from
time to time),5 whether such debarment was directly imposed by ADB, or enforced
by ADB pursuant to the Agreement for Mutual Enforcement of Debarment
Decisions (2006).6 An applicant that has a conflict of interest, or is suspended
or debarred will be rejected. An application for prequalification from an ineligible
applicant must be rejected.7

4.13 State-owned enterprises are eligible to participate provided they meet the
requirements included in the prequalification documents. For further details, refer
to Guidance Note on State-Owned Enterprises.

4.14 Some borrowers maintain registers of contractors and suppliers.

Such registers cannot be used as substitute for the prequalification process under
open competitive bidding. Prequalification is open to all applicants who meet the
eligibility requirements as defined in the specific prequalification documents.

2. Historical Contract Nonperformance

4.15 Evaluation of historical contract nonperformance is new to the

prequalification process. This criterion seeks to identify applicants that have a
history of contract nonperformance. Refer to the SPQD for more information.

4.16 The preferred method for distribution of the prequalification document

is electronic. Where documents are distributed in hard copy, a nominal fee may be
charged.

4.17 Sufficient time should be allowed for the submission of applications—

from the date of publication of the IFP—to enable applicants to properly
prepare their applications. For less complex contracts, a minimum of 6 weeks for
internationally advertised contracts and 4 weeks for nationally advertised contracts

4
ADB. 2010. Anticorruption and Integrity. Manila. https://www.adb.org/sites/default/files/
institutional-document/31317/anticorruption-integrity-policy-strategy.pdf.
5
ADB. 2015. Integrity Principles and Guidelines (2015). Manila. https://www.adb.org/sites/default/
files/institutional-document/32131/integrity-principles-guidelines.pdf.
6
Available at: https://www.adb.org/sites/default/files/institutional-document/32774/files/cross-
debarment-agreement.pdf.
7
The Sanctions List is available at https://lnadbg4.adb.org/oga0009p.nsf/alldocs/AANA-
AAFBDE?OpenDocument.
18 Prequalification

are recommended. These periods may be reduced where electronic procurement is

used. Such periods should be shortened or lengthened appropriately depending on
the nature and complexity of contracts.

4.18 After issuance of the prequalification document, borrowers must

promptly respond to requests for clarifications from applicants and amend,
as needed, the prequalification document. Where prior review is required, the
prequalification document may be amended only with the prior approval of ADB
(for details on review requirements, refer to the Guidance Note on Procurement
Review).

C. Step 3: Submission and Evaluation of Applications

4.19 The borrower should perform due diligence on the qualifications of the
applicant, including rigorous and careful review of supporting documents, to be
assured of their eligibility and capabilities in relation to the contract at issue. During
the evaluation, the borrower must

(i) maintain strict confidentiality throughout the evaluation process,

(ii) reject any attempts or pressures to distort the outcome of the
evaluation and maintain the highest ethical standards, and
(iii) strictly apply only and all the qualification criteria specified in the
prequalification document.

4.20 After evaluating applications, borrowers should prepare a Prequalification

Evaluation Report (PQER). The report must be self-contained and should

(i) address each of the criteria set out in the prequalification document
and
(ii) explain reasons for any disqualification of applicants failing to meet
the criteria. For further information, refer to ADB’s Guide on Bid
Evaluation (2018).

4.21 The report should be submitted to ADB where prior review is being
applied. ADB may then ask the borrower to justify the evaluation and provide
further information or clarification.

4.22 In exceptional circumstances, where the prequalification exercise is found

to be flawed (e.g., the prequalification criteria were set such that no, or very few,
applicants were able to meet the requirements for prequalification, yet it is known
that the supply market has the capability to adequately perform the contract), the
borrower can either accept the result and move forward with the bid, or declare
the prequalification exercise void and progress to an open bid. Alternatively, the
borrower can revise the prequalification document and reconduct the exercise;
however, this should only be done where this will lead to improved competition
and improved project outcomes. Where prior review is required, ADB should be
consulted on the course of action.
Prequalification Process 19

D. Step 4: Notification of Applicants

4.23 The last step in the process is to inform all applicants, in writing, of the
outcome of the prequalification assessment. For each applicant, the outcome
can be

(i) applicant meets the criteria and has been prequalified or

(ii) applicant has not met the criteria and has not been prequalified.

4.24 Where applicants have been disqualified, specific reasons should be given
for the rejection of their application.

4.25 The borrower should publish the list of prequalified applicants, and invite
prequalified applicants to bid as soon as possible. ADB does not recommend
long gaps between the completion of prequalification and the start of the bidding
process. It also encourages the bidding documents to be made available to the
prequalified prospective applicant as soon as prequalification is completed,
generally within 6 months upon receipt of a no-objection notice from ADB.
A period longer than 6 months may require a fresh prequalification process or other
suitable options, with prior agreement with ADB.

4.26 The borrower should make clear to qualified applicants that verification of
the information provided during prequalification may occur at the time of bidding,
and that if the information is unable to be verified satisfactorily, the applicant’s bid
may be rejected at the discretion of the borrower.
V. Resources for Further Review

5.1 These resources may be consulted for further information related to

prequalification:

(i) Guide on Bid Evaluation:

https://www.adb.org/documents/guide-bid-evaluation
(ii) Standard Procurement Document for Prequalification of Bidders:
https://www.adb.org/site/business-opportunities/operational-
procurement/goods-services/documents#prequalification
(iii) User’s Guide to Prequalification of Bidders:
https://www.adb.org/documents/prequalification-bidders-users-guide
Prequalification
Guidance Note on Procurement

This guidance note discusses prequalification as a mechanism to ensure that only

qualified applicants submit bids for the supply of goods, works, and services, and
processes to be followed for projects financed in whole or in part by an ADB loan
or grant, or by ADB-administered funds. Under ADB’s 2017 procurement framework,
there are new features to the prequalification process, including the ability to limit
the number of qualified applicants that are invited to bid and criteria for historical
contract nonperformance. Prequalification is optional and should be used on a “fit-for-
purpose” basis, where the nature and complexity of the contract enable the value of
prequalification to exceed its costs and risks.

About the Asian Development Bank

ADB’s vision is an Asia and Pacific region free of poverty. Its mission is to help its
developing member countries reduce poverty and improve the quality of life of their
people. Despite the region’s many successes, it remains home to a large share of the
world’s poor. ADB is committed to reducing poverty through inclusive economic
growth, environmentally sustainable growth, and regional integration.

Based in Manila, ADB is owned by 67 members, including 48 from the region. Its main
instruments for helping its developing member countries are policy dialogue, loans,
equity investments, guarantees, grants, and technical assistance.

Asian Development Bank

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1550 Metro Manila, Philippines
www.adb.org