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Guidance on Shopping

June 8, 2000
Guidance Procurement Note on Handling Procurement Under Shopping Method


1. This note gives guidance on the use of shopping as a procurement method. It was prepared at the request of several procurement staff, and elaborates on paras. 3.5 and 3.6 of the Guidelines of January 1995, revised in January and August 1996, September 1997, and January 1999. Shopping is intended to be a simple and rapid procurement method. Shopping is one of the least competitive procurement methods and may be abused unless it is carried out in compliance with the legal agreements, and observing a minimum of formality in the process, and with appropriate record keeping for verification and audit. In fact, the Bank has recently discovered cases of abuse that have culminated in declaration of misprocurement.

When is Shopping Appropriate?

2. Shopping may be used:

(a) To procure small amounts of off-the-shelf goods or standard specification commodities for which more competitive methods are not justified on the basis of cost or efficiency.

(b) In emergency projects or for urgent relief-type operations including re-establishment of vital services like utilities, communications, shelter, and vital supplies which stem from disasters or conflict. These emergency contracts may involve one or several activities in supply of goods, installation and commissioning, and very urgent minor civil works. In the case of civil works or supply involving substantial installation, the term shopping is not used but referred commonly as "price comparison".

Because of the risk of abuse in procurement under shopping, the use of this method is restricted to cases when the justification for it is beyond contention. Borrowers may not use shopping only as an expedient to by-pass more competitive methods or fraction large procurements into smaller ones solely to allow the use of shopping.

When the nature of the specifications is complex or the type of procurement requires an elaborate, detailed evaluation system (i.e., efficiencies, delivery times, etc.,) that needs substantial documentation, a formal bidding process instead of shopping is used. Shopping is not appropriate in these cases, because it is a method that should not require complex documentation or all the formalities of a bidding process.

Setting Thresholds

3. Generally, the threshold for shopping does not exceed $100,000 equivalent for low risk implementing agencies1 but project teams set lower thresholds when the implementing agency is considered as a medium or high risk one in administering procurement. The loan/credit agreement establishes the threshold below which shopping may be used for individual contracts and the maximum aggregate amount that cannot be exceeded for each project, unless the aggregate amount cannot be estimated in advance. When the need for shopping arises during project execution and the loan agreement does not set the thresholds below which shopping is permitted or when changes in the existing arrangements are required, the project team clears their proposal with the RPA and the country lawyer before the client is notified of the acceptance by the Bank of the loan agreement amendments or waivers, as necessary. The threshold for shopping in emergency projects or relief operations may, with the clearance of the RPA be set above $100,000 to allow for quick restoration of vital services or for protection of life or critical assets.

Number and Origin of Quotations to be Compared

4. Interpretation of paras. 3.5 and 3.6 of the Guidelines requires the purchaser to obtain and compare at least three quotations to establish reasonableness of price. Comparison of two quotations is justified only when there is evidence satisfactory to the Bank that there are only two reliable sources of supply (national or foreign as the case may be). It is possible that not all the suppliers invited will respond to the request for quotations. To minimize the risk of getting only one or two quotations, clients are advised to initially request more than three quotations. Clients may also at the time of the request, verify whether those being invited will make an offer or not. When there is more than one source for the goods, at competitive prices, in the country of the borrower, the purchaser may use national shopping, but must obtain at least three quotations. If this is not the case, then international shopping is used. Under international shopping, borrowers request quotations from suppliers from at least two different countries, including the Borrowers'. Quotation for foreign goods located in the Borrower country and offered by a firm located in the Borrower country, are considered as quoted from abroad for purposes of satisfying the "two different countries" rule. This is applicable, for example, to items such as computers, vehicles, etc., that are normally imported by dealers of the foreign manufacturers who are also able to provide after sales services.

Firms to be Invited

5. The borrower exercises due diligence to satisfy itself that the firms invited to quote are reputable, well established, and are suppliers of the goods or services being purchased as part of their normal business. In case the borrower receives unsolicited quotations, these may be accepted after carrying out a similar due diligence exercise to verify the nature and reputation of the firms.

Form of Requests

6. The purchaser requests quotations by letter, fax, telex, electronic messaging, etc., (with proof of receipt and record keeping). The request includes the description and quantity of the goods, as well as the required delivery time and place for the goods or services, including any installation requirements, as appropriate. The request indicates the date by which the quotations are needed. In extremely urgent cases, described in para. 1 (ii) (restoration of vital services), quotations for civil works may be requested in the form of unit rate prices (if work quantities are available with a reasonable degree of reliability), "cost plus fee" arrangements (when quantities cannot be reasonably determined in advance) or in the form of a lump sum based on cost estimates carried out by the borrower, or if not possible, by the contractors.

Prices and Currencies

7. Prices for goods supplied from within the country (including previously imported items) are requested to be quoted EXW (ex works, ex factory, ex warehouse ex show room or off-the-shelf, as applicable), including all custom duties and sale and other taxes already paid or payable on the raw materials and components. For goods offered from abroad (i.e., not previously imported), prices are requested CIF or CIP. However, if the purchaser wishes to invite quotations on DDP basis, the Bank will not object. Staff should note that the use of DDP may pose an undue burden on foreign suppliers for estimation of custom duties and internal transport for relatively small purchases. Prices for civil works are requested, inclusive of all taxes and duties payable by the contractor. Prices can be quoted in any currency of the Bank-member countries.

Submission of Quotations

8. Suppliers submit their quotations in writing, i.e., by fax, telex, letter, or electronic messaging (copies to be kept for the records). No bid or performance securities are required. There is no requirement for strict time and date for submission of quotations and for public opening, but normally requests for quotes indicate the expected date of submission of quotes, within one or two weeks of the initial request. In other cases, if the purchaser has not received at least three quotations within the time set, it verifies with the missing suppliers whether they intend to do so and how soon. Unless there is extreme urgency or there are already three or more quotations available, the client may give a reasonable amount of additional time, say three more days, to get additional quotations. At this point the client may proceed with the comparison of the proposals received.

Comparison of Quotations

9. Quotations are compared after adding to the quoted price for goods, the estimated cost of inland transportation and insurance, if any, to the final destination. For purposes of comparison, prices are converted into local currency at the exchange rate on the day of invitation of the quotes or the day of comparison. The lowest priced offer is selected. Purchasers may exercise discretion in selecting a quotation that is not the lowest priced, as far as there is a good justification. For example, a slightly higher price may be justified for faster delivery or immediate availability in cases of extreme urgency, when late delivery may result in heavy consequences for the purchaser. In such cases, the intention should be indicated in the request for quote.

Record of Award

10. The client documents the award decision and its rationale and keeps it for review and audit by the Bank, as needed. The record contains also the list of firms invited and the list and value of the quotations received and documents clearly that the award is based on sound economic criteria.

Currency of Payment

11. Purchase orders specify the currency of payment which is the currency of the quote. The Bank accepts payments in any currency of the member countries.

Purchasing from UN Agencies Instead of Shopping

12. Borrowers may purchase goods that otherwise would qualify for shopping under paras 3.5 and 3.6 of the Guidelines directly from UN agencies. This is a preferable approach when the risk of abuse of the shopping method is high.

Review Requirements

13. Because of the small value and nature of contracts, procurement under shopping is normally subjected to the Bank's ex-post review instead of prior review. However, because of the risk of abuse, shopping needs close supervision. The project team conducts ex-post review of contracts during the Bank supervision missions. Third party procurement audits should also include a representative sample of procurement carried out under shopping.


14. Any questions on use of the shopping method should be addressed to the concerned RPA.

The procurement risk assessment is done at the time of project appraisal for the implementing agency.