Instructions of Implementing Governmental Contracts No. 2 of 2014 [PDF]

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Instructions of implementing governmental contracts No. 2 of 2014

Instructions of implementing governmental contracts No. 2 of 2014

According to the provisions of paragraph (1) in section 14 of the Dissolved Coalition Provisional Authority (CPA) Order No. 87 of 2004

We have issued the following instructions: No. 2 of 2014 Instructions of implementing governmental contracts

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Instructions of implementing governmental contracts No. 2 of 2014

Chapter One Validity of instructions provisions Article 1: First - the provisions of these instructions shall apply to: A- Contracts entered into by the official contractual parties are represented by Presidency of the Republic, the Council of Ministers, the House of Representatives, the Supreme Judicial Council and General Secretariat of the Council of Ministers, ministries and departments that not associated with the Ministry, the province and governorates that not organized in a region with the Iraqi and non-Iraqi authorities, to carry out general contracting, consulting projects and contracts and non-advisory service contracts and contracts of providing goods and services of the investment, ongoing and operational budgets. B- Public companies when implementing its projects listed in or the investment or current curriculum financed by the general budget.

Second - the provisions of these regulations will not apply to: A- Projects and contracts of government departments and public sector that financed by foreign countries, international or regional organizations or non-governmental organizations, that implemented on the basis of particular conventions or protocols, concluded with the Iraqi contractor and the provisions of these instructions shall be applied if there is no clause prevent the application the Convention. B- Public companies when implementing contracts referred to it by the official contractual parties as a contractor or supplier or consultant, adopting the regulations approved by the Board of Directors and certified by the President of the associated party to choose the appropriate contracting approach and hold price negotiations that does not contradict with the legislation and laws that regulate its activity. 2 of 25

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C- Both defense and interior ministries and civilian devices with regard to arming contracts and contracts of providing equipment, civil and military devices that are subject to the rules set by the competent Sector Committee in the Council of Ministers. Third - Adopt the authorities and duties stipulated in the rules of procedure that subject to the public companies law when implementing the contracts that are not subject to the instructions of implementing the public contracts, for example, marketing contracts and investment Contracts, taking into account the relevant legislation.

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Chapter Two Requirements before preparing the tender documents Article - 2: First: The Contracting party shall be committed to complete the following requirements prior to the preparation of tender documents for investment projects: A- Preparation of technical and economic feasibility or technical reports and studies of cost and benefit, designs and bills of quantities of the investment projects according to the instructions of the Ministry of Planning, including the speculative cost of the project accompanied with the project application form, when discussing inclusion it in the investment budget with the exception of the dismantling and treatment of devastating nuclear facilities projects and chemical residues. B- The concerned ministry shall not be entitled to include any project in the federal investment budget without obtaining authentication from Ministry of Planning about what provided in clause (a) of this article otherwise, the ministry and the requesting party shall be responsible. C- Identifying the implementing and the beneficiary party of the project when overture the Ministry of Planning. D- There is a speculative public updated cost for one or more project contracting prepared by a competent technical party based on the basis of market prices that prevailing in a comprehensive study when preparing it for the purpose of referral with the calorimeter schedule of quantities to be adopted as a measure to analyze the bids and the extent of balancing its paragraphs prices, with the exception of the regulations of the speculative cost of the contracts associated with global stock prices, taking into account regulations and circulars issued by the Ministry of Planning in this regard. E- Requirements and specifications and bills of quantities, maps … etc, shall be accurate to avoid changes or additions during implementation. 4 of 25

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F- Concerned parties approve the project site and allocate the required land or act on it before listing in the investment curricula of projects, the Contracting party shall obtain approvals of the concerned parties to implement the project, including the approvals of the concerned parties such as the environment, tourism and Antiquities and the civil defense and others. G- Resolving all the legal and fundamental problems (if any) in the site of location, the site shall be prepared to start the work. H- Taking any other procedures that are required by the nature of work or the required contract.

Second: The Contracting party shall complete the following requirements before preparing the tender documents of the two contracts financed by both current and operating budgets A- Existence of study for the necessity of the contracting or for providing service or goods to the Contracting party. B- Identifying requirements, goods or services of contracting according to technical report by co-ordination between the executing party and beneficiary party, and shall be according to the accurate technical specifications. C- Providing financial allocation for providing of goods, services and contracting shall be supported by Department of Finance of the contractor. D- speculative public cost determined by an updated specialized technical based on a comprehensive study of market prices prevailing when prepare the materials or the required services or the required labor to be a measure to analyze the bids and extent of its clauses tender balance and referral rates, taking into account the regulations and circulars issued by the Ministry of Planning in this regard.

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E- Obtaining formal approvals by the contractor to implement the contract restoration or providing of goods or services, taking into account the valid financial authorities.

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Chapter Three Methods of contracting Article 3: Head of Contracting party or any authorized person, proposed by the head of the administrative establishment of contracts, shall be adopt one of the following the methods to implement the public contracts with the exception of both one bid method and direct contracting, either nationally and internationally when the conditions are met, as follows: First: Public tender: this approach is implemented by announcing the public invitation to all who like to participate in the implementation of various contracts, those who meet the conditions for participation, that the procedures are characterized by generality and Competitiveness, justice, openness and transparency and taking into account the financial allocations mentioned in the federal budget implementation instructions when adopting this approach. Second: Limited tender: this approach is implemented when the goods or services, consulting or contracting of tender subject is available in limited entities in terms of jurisdiction for the purpose of submitting bids in accordance with the designs and conditions that prepared by the Contracting party and shall be announced to all who want to participate in the bids, those who meet the conditions for participation and pay the price, in accordance with the two following procedures: A- The first procedure: includes receipt of the documentation for the legal, technical and financial rehabilitation of participants in the tender in order to be evaluated by a specialized committee of Contracting party according to the terms of technical, financial and legal required qualification to select eligible to participate in the second procedure, the eligible shall not be less than three. B- The second measure: the Contracting party shall invite all eligible for free to provide technical and commercial bids for the purpose of study, evaluation and award, and in accordance with these instructions.

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Third: The public tender by technical qualification methods: implementation of this method is by announcing the tender to all who would like to participate in the bid to submit their technical and commercial bids in separate envelopes for a price, taking into account the following: A- Opening technical bids to be studied by the analysis committees of the Contracting party to determine the qualified bidders that met the required conditions. B- Opening the commercial bids of qualified bidders, not less than three to choose the best one by bid analysis committee, taking into account the financial authorities that adopted for the purpose of award in this regard. C- The envelopes of the commercial bidding of non-qualified bidders technically, shall be returned to the applicants without opening and then complete the analysis procedures, contracting, according to the adopted contexts in this regard. Fourth: The tender in two phases: this method shall be implemented by the following two phases it two phases, this measure may be preceded by implementation this technique prequalification, this method shall be used in the contracts that Contracting party cannot prepare its technical specifications or designs, the contracts with technological level complex and specialized contracts with advanced scientific nature, as follows: A- Phase I: by declaring public invitation to all those who like, for a price to provide their technical bids on the basis of preliminary designs and functional requirements or a general description of the phase of the implementation work to be studied by specialized technical committee for the purpose of selecting the appropriate tenders in accordance with the standards of technical, financial and legal rehabilitation and similar acts, Contracting party have to modify the first design or technical specifications and other requirements according to the technical amended bids after the technical negotiation, Contracting party have the right modify the speculative cost if necessary.

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B- Phase II: direct invitation for bidders that their technical bids were accepted according to the qualification criteria in the first phase to provide their commercial bids on the basis of the amended tender documents, then complete the contractual process in accordance with the procedures specified in these instructions. C- Fifth: direct invitation: This method is implemented by direct invitation for free, to at least three (3) contractors or suppliers or accredited consultants for their sobriety, ability and technical and financial competence to implement the projects or contracts of the official authorities, as well as providing one or more of the following justifications: (A) If the contract requires confidentiality in contracting and implementation procedures. (B) There will be security reasons requires that. (C) Emergencies and natural disasters. (D) Providing of medicines and medical equipment and supplies for life-saving. (E) Bidders should refrain from participating in public tenders as advertised for the second time, or if the received bids did not meet the conditions and specifications for the second time. (F) Specialized contracts that its regulations identified by department of public governmental contracts, in coordination with the competent sector committee in Council of Ministers. (G) Large strategic projects that require foreign expertise, which determined by the competent sector committee in Council of Ministers, in coordination with the Ministry of Planning and executed by reputable international companies has an experience in this specialty for a period not less than five (5) years and a similar actions not less than three (3) projects in this field.

Sixth: Single Bid (one offer only): directing free invitation to one competent; supplier, contractor or consultant to fulfill the contract with 9 of 25

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the approval of the Central Committee to review and ratify the referral if one of the following two cases is provided: (A) When the goods, advisory services or monopolistic contracting or available at one monopolistic party has patents, license or exclusive rights. (B) If the goods or contracting are required for maintenance or for the providing spare parts for previous contracts. Seventh: Direct Contracting: directing free invitation, to contract directly, to one party to implement this method with the consent of the competent sector committee in Council of Ministers on the recommendation of the Central Committee to review and ratify the referral of import or local contracts to provide non-monopoly goods or services that the following conditions are met: A- The contracts are related to the security and sovereignty of the state necessitated by the necessary conditions. B- Those contracts characterized by high technology technical or developed specifications, and may accept more sophisticated technical or standard specifications and offered by the party may be contracted after be supported by a specialized technical entity of the Contracting party. C- The party may be contracted shall be reputable, accredited and manufacturer of the required material and services. D- Providing a technical report illustrates the needs and specifications prepared by \ specialized technical party, certified by the Central Committee to review and ratify the referral. E- A tester reputable party was approved to ensure the accuracy of the required specifications and the extent of compliance with the required contracted conditions. F- The competent sector committee shall issue the decision within (14) fourteen days from the date of application registration, otherwise the approval shall be considered done implicitly.

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Eighth: direct purchase from the sober manufacturers: A- Public companies that had practiced import-profit commercial activity; public companies; direct purchase from sober manufacturers that contracts are subject to the Board of Directors' approval. B- Public companies have the right to negotiate about prices with parties that contracted through this method to implement their projects or contracts if the bid is more than the speculative cost that allocated for the contract.

Ninth: committees of procurement: this method is used for providing state departments of goods, services and business, according to the regulations contained in the Implementing Regulations of the federal budget for the concerned year.

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Chapter Four Price of the tender documents Article 4: First: (A) Price of one set of the tender documents (written or electronic) shall be commensurate with the cost of preparing and importance, and the price shall secure the serious participate in the tender; receipt of purchase shall be provided with the bid. (B) Foreign sober companies shall get tender documents for free for the purpose of participating in tenders. (C) The bidder, who has previously participating in the re-announcing tender, shall provide the former voucher of purchase with the reannouncing tender documents, in the case of modifying the purchase prices of these documents, the bidder shall bear the difference between the two prices, in the case of increasing the price, shall attach with the tender both first and second vouchers.

Second, contracting parties shall adhere to the regulations issued by the Ministry of Planning about the instructions for bidders in the tender documents of all contracts. Third: The contracting parties shall adhere to the regulations issued by the Ministry of Planning about the announcement of the public tender procedures and re-announcement of the tenders and the extension of the tender of all the methods contracting that mentioned in these instructions.

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Chapter Five Central Commission for review and ratification of referral Article 5: First: In formal contractual parties, a central committee shall be constituted, named (Central Committee for review and ratification of referral), headed by Prime Contracting party and the members shall be: deputy ministers, deputies of contractor, heads of legal and financial parties, contracts, and control and internal audit competent staff have the experience in the technical fields, determined by the Head of the Contracting party and adopted by a committee has a employment degree not less third degree. Second, the committee shall have the following duties: A- Review referral procedures, the amendment and ratification or noncompliance with the recommendations of the analysis committee, taking into consideration, the financial authorities that adopted for the purposes of the referral. B- The approval of the implementing a single bid method (one offer only). C- Recommending to the relevant sector committee of the Council of Ministers for implementing the contract by the official Contracting party through direct contracting method. D- Deciding on the requests to extend the period in excess of (25%) twenty-five percent of the duration of the contract according to the regulations issued by the Ministry of Planning. E- Deciding on the objections to the contractors’ decisions of extension issued by the authorized party of the official contractor in the in accordance with the regulations issued by the Ministry of Planning in this regard. F- Deciding on the requests of cancellation to withdraw the work according to the following: 13 of 25

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1. The disrupting contractor (Construction contracts, equipment and consultancy contracts) shall submit a request to cancel the decision of withdraw the work within a period of thirty (30) days from the date of notifying the President of the administrative formation of the contracts by contracted party to provide pledge to complete of the remaining paragraphs within a specific duration, that will be enhanced for offering detailed schedule certified by the technical party of the Contracting party, taking into account, the validity of the letter of guarantee of good execution. 2. The Committee shall decide about the request within a period of not more than thirty (30) days from the date of receiving the request and if no decision be taken within the specified period, the demand shall be rejected. 3. Continuation of deducting the delay penalties under the contract and valid instructions. G- Accepting a partner with the main contractor who meets the requirements and specifications that have been subject to the contract referral, at the request of the main contractor if that would achieve completion speed project with a commitment to the contract conditions. H- Other duties stipulated in these instructions. Third - the Commission is entitled to except sober international companies, that supplying of goods and services, of the providing primary insurances stipulated in these instructions, and standards of sober international companies creteria issued by the Ministry of Planning. Fourth - Committee is entitled to approve of providing performance bond through (21) and the twenty-one days from the date of signing the contract.

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Chapter six Committees of bid opening and committees of analysis and evaluation of bids Article 6: First - The Contracting party shall constitute the following: A- One competent experienced committee or more to open the bidding headed an employee has more than third degree and representative membership of all legal and financial departments, formations of contracts, competent professional officer rapporteur, his employment degree not less than the sixth degree. B- One committee or more to analyze and evaluate bids of the technical, financial and legal aspects, headed by an experienced and competent employee has employment degree no less than second and the members are number of the technical specialists, including legal, financial and rapporteur of committee has a employment degree no less than sixth. Second: the Committee is entitled to analyze and evaluate the tenders and use specialists experienced employees or competent authority. Third - the recommendations of the analysis and evaluation committees, are subject to the approval of the Central Committee to review and ratify referral decision by financial powers vested. Fourthly - It is not permitted to get both presidency and membership of opening of tenders committees, analysis and evaluation of the bids committees. Fifth - the committees mentioned in the forth clause (I) of this Article, shall fulfill the functions determined by the Ministry of Planning in accordance with regulations issued for this purpose.

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Chapter Seven Settlement of Disputes Article 7: First: each contractor shall form a central committee to consider objections submitted by the bidders about referral decisions, headed by an employee has employment degree no less than first and the members are number have an financial, legal, technical experience and decision determiner has employment degree no less than fourth. Second: The Committee shall study the written objections submitted by the objective bidders or their official agents who did not ask for withdraw the bid bond according to the following: A- Providing the objections during seven (7) working days from the date of notifications Letter of Referral. B- Objector shall provide a formal pledge certified by law duly to pay for the damage caused by delaying signing the contract for malicious or unjustified reasons, for the contractor. Third - the committee shall produce recommendation about the objection and its reasons within a period not more than (14) fourteen working days from the date of receiving the objection. Fourth: - Head of the Contracting party or authorized person shall decide on recommendation during seven (7) working days from the date of filing of recommendation in his office, the non taking decision shall make the objection is rejected after this duration. Fifth: - The Contracting Party has not to sign contracts until the resolution of the objections by the head of Contracting party as provided for in this Article. Article 8:First - the disputes shall be settled after signing the contract by consensus (amicably) through the forming a joint committee between the disputed parties (contractor and Contracting party) in accordance with the provisions of the law and regulations that concerned, and the clauses of 16 of 25

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the contract, minutes are prepared for that, agreement between the two parties ratified by the head of the contractor. Second: - In the event of failure to reach an amicable agreement, shall adopt one of the methods that stipulated in the contract as follows: A- Arbitration shall be according to the following: 1. National Arbitration: - shall be in accordance with the procedures specified in the tender conditions or Civil Procedure Law No. (83) 1969. 2. International Arbitration: - Contracting party shall choose international arbitration to settle disputes in cases of necessity, major strategic or important projects and if one of the parties is foreigner, that takes into account the following: (a) Selecting one of the international accredited cybernetic bodies. (b) Determining the location and language of the arbitration. (c) Adopting of Iraqi law as an applicable law. (d) Contracting party shall provide qualified worker to settle the disputes in this method.

B- Sending the dispute to the competent court in the subject to be settled. Third- Contract parties is committed to choose the best method of settling disputes caused by implementation according to one of the methods stipulated in this article in accordance with the agreed conditions of the contract and that should be mentioned in the beginning of tender documents.

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Chapter Eight Delay penalties, insurances, duration of the contract and the extension Article 9: First: A- Bid bond shall be a lump sum; at least (1%) one percent and no more than 3% three percent from the speculative cost that allocated for the purpose of referral the contracts of supplying the goods and services and various kinds of general contracting with taking into account the importance of this tender, the ratio shall be less when increasing the amount of the speculative cost. B- Insurances shall not be accepted by the bidders unless it is in the form of a letter of guarantee or a certified check or bank draft. C- Bid bond shall be provided by the bidder (or any of the shareholders in the participating companies under contract participating) for the benefit of Contracting party and the reference includes the name and tender number. D- Public companies shall be exempted from submitting the bid bond and guarantee letter good execution stipulated in these instructions. E- Bids providers who participating in the tenders that referred by the limited tender (Phase II) two-stage tender method, two-stage tender method, the direct invitation, the single offer (only one offer), direct contracting method or direct purchase method, shall be exempted from providing bid bond. Second:A- Performance Bond shall be provided in the form of letter guarantee of good execution of the contract (5%) five percent of the contract amount after notification of the letter of referral and before signing the contract.

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B- Foreign companies may submit the performance bond within (21) twenty-one days from the date of signing the contract after the approval of the Central Committee to review and ratify the referral. C- Performance Bond shall not be released except after the issuance the final acceptance certificate and clearing and may releasing some of the amount of a guarantee letter of good execution after the final receipt for those parts and issuance of acceptance, and what make it eligible to use. D- Parties provided for in paragraph (c) of article VII of Article (3) in these Instructions shall provide Performance Bond (Performance Bond) is (5%) five percent and in the case of providing any other guarantee, shall obtain the approval of the relevant sector committee in Council of Ministers. Third: A- Taking into consideration the regulations and instructions issued by the Central Bank of Iraq and the Ministry of Planning for the guarantee letter. B- The formula of guarantee letter shall be clear in terms of the amount (number and writing) and determine the party that be issued for, date of availability and conditions and the purpose of issuing, otherwise in accordance with the laws, regulations and instructions of bank. C- The contractor shall ensure the validity of the issuance of the letter of guarantee to renew or change the amount in the event of contract conditions shall be changed. Fourth: A- Ratio of delay penalties of the contractor shall not be less than (10%) ten percent and not more than (25%) twenty-five percent of the contract amount, the Contracting party shall list this percentage in contractual conditions of the tender documents and instructions of bidders. The following equation shall be applied in this penalty: -

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Contract amount (the original contract amount + - any change in the amount) The penalty per day = x ) % 52 -01 ( The total duration of the contract (the original contract period + - any change in the duration) B- Delay penalties are reduced according to the percentage of completion of contractual obligations specified in the platform of implementing the contract, which issuing the certificate of the first delivery of the fulfilled work, supplied goods or the required prepared service according to contract conditions and applying the equation as follows: The value of non implemented commitments Penalty per day = x )% 52 -01( The total duration of the contract C- (1) Delay penalties shall be deducted if the original contract is expire plus the additional period granted for the contractor when due in the fragmented contracts, according to the platform of work and the deduction shall be determined in the conditions of the tender and contract. (2) In the contracts that implementing according to a schedule or phases shall determine the cost and duration of each phase, then the delay penalties shall be deducted of each phases when the duration is expire. (3) Head of Contracting party may delay deducting delay penalties at the request of the contractor for two times that are deducted before the final advance payment is due. Fifth - the contract shall be extended through the decision of the Contracting party head if the mentioned conditions are available at the regulations issued by the Ministry of Planning.

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Chapter Nine Legal consequences arising from the breach of contract Article 10: First: A- The winning bidder shall be regarded in abstention, if one of the following cases are verified: 1- Winning bidder Refusal to sign the contract after being notified via Letter of Referral and after formal notification "to sign the contract within (15) fifteen days" from the date of notification and without legitimate excuse legally. 2- Illegally submits untrue statements and violating the terms of the bidding. 3- Failure to submit good performance bond. B- In case of bidder abstention, the following actions shall be carried out: 1- Confiscating the bid bond of the abstaining bidder. 2- Referring the bidding on the second candidate and the abstaining bidder shall bear the cost of difference allowances resulting from the implementation of the contract. 3- In case of abstention by the first and the second candidates, contractor shall refer the tender to the third bidder, and each of the first and second abstaining bidders shall bear the allowances difference according to their candidacy and confiscating the first and second candidates’ bid bond. 4- In case of abstention of the third candidate, his bid bond shall be confiscated, the tender shall be re-announced, and the three abstaining candidates shall bear the cost of allowances difference, according to the price submitted as well as confiscating the three abstaining bidders’ bid bond for. 21 of 25

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5- The procedures set forth in paragraph (b) of this article if an abstaining happened during the term of the tender bid, shall be applied to the abstaining bidders. Second: A- If the contractor is in breach during the final phases of the contract implementation, the Contracting party shall have the right to form a committee for the purpose of accelerating the implementation of the remaining business and the cost shall be on the contractor, and the Contractor shall be a representative as well as imposing the administrative costs stipulated in clause (3) of this Article. B- Directing an official warning to the disrupting contractor about the need to complete the work according to the agreed platform for action within (15) fifteen days from the date of notifying the warning. C- Issuing a decision to withdraw the work from the contractor if breached the conditions of the contract, and conduct the disrupting work on his account by another contractor with following one of the contracting methods that stipulated in Article (3) of these instructions. D- Confiscating performance bond for good implementation, or keep it in case of failing implementing the work assigned to the contractor and the percentage of completion is low relative to the agreed platform of the progress the work with the need to observe regulations issued by the Ministry of Planning. Third: The disrupting contractor shall bear the administrative costs with a rate of not more than (20%) twenty percent of the disrupting business cost in contracting contracts, the Contracting party shall determine this ratio in conditions of the tender as well as included in the contract. Fourth: In the event that the supplier of goods and services or consultant breach the contractual obligations, the Contracting party shall warn him officially and if he does not respond, implementing his disrupting obligations on his account according to one of the methods stipulated in Article 3 of these instructions when it is available, the disrupting 22 of 25

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contractor shall pay a compensation for the damage to the Contracting party because of this disrupting after contract ending.

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Chapter Ten Prohibition of contracting Article 11: Contracting party may request to include the violating contractors of their contractual obligations in the black list, taking into consideration the following: First - request to include Iraqi contractors or Iraqi contracting companies in the black list or removing them according to what is stated in the registration and construction of the classifying the companies and contractors, issued by the Ministry of Planning / Legal Department's Regulation (3) of 2009. Second - request to include, suspend or remove the non-Iraqi contractors, Iraqis and non-Iraqis suppliers and Iraqis and non-Iraqis consultants, from the blacklist according to what was stated in the regulations issued by the Ministry of Planning / Public Contracts Department. Third - request to include Iraqi and foreign contractors, suppliers and consultants in the list of lagging companies as stated in regulations issued in this regard by the Ministry of Planning / general government contracts department.

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Chapter Eleven General Provisions Article 12: First: The contracting party shall be committed to implement the conditions of construction of civil engineering works of 1987 and the conditions of contracting of the electrical, mechanical and chemical engineering work of 1987 or what replaced and considered as integral part of the contract. Second: Public contracts covered by these regulations are subject to Iraqi law and the mandate of the Iraqi judiciary. Article 13: First: The Contracting party shall coordinate the contractual plans (supplied by the beneficiaries of various executive bodies in the Contracting party and in coordination with the contracts department) with the Public Contracts Department at the Ministry of Planning and supplying them with the requested data for follow-up and technical supervision of the work on the performance of contractual configurations when direct contractual activities start. Second: The Contracting party shall commit to legislation associated to the governmental contracts including the federal budget law, the instructions of implementation related to the subject of contracts and powers entrusted for concerned parties when implementing the projects included in the budget. Article 14: First: Implementing Regulations of the general governmental contracts no. (1) of 2008, shall be canceled. Second: Instructions the contracts implementation issued by the Council of Ministers / The generalized Committee of Economic Affairs numbered (433) on 21/08/2006 and (924 on 18/10/2006 and (S. L./ 161) on 03/12/2006 and (S.L./1463) on 11/10/2007, shall be cancelled. Article 15: These instructions shall be implemented from the date of its publication in the Official gazette. Dr. Ali Yousef Shukri Minister of Planning 25 of 25