3.1.1. Type of service contract

A service contract may be purchased in two different ways:

• Global price - where specified outputs are defined. The service will be paid on the basis of the delivery of the specified outputs.

• Fee-based - where the output is unpredictable, or where the workload to achieve the specified output is impossible to quantify in advance. Therefore it is economically more advantageous to pay the services on the basis of time actually worked.

In most cases the whole contract is defined as either a global price contract or a fee-based contract.

Examples of global price activities:

Studies, evaluations, audits, organisation of events such as conferences, trainings. Studies include a variety of tasks like identification and preparation of projects, feasibility studies, economic and market studies, technical studies, drafting a legal document, evaluations and audits. Global price always specify the output, i.e. the consultant must provide a given product.

The tenderer should announce his intentions in terms of mobilisation of means in its tender. However during the implementation the technical and operational means by which the consultant achieves the specified output are not relevant for the method of measurement.

Examples of fee-based activities:

Project supervision, Resident Technical assistance, Facilitation in a multi-stakeholder process (depending of the complexity of the environment).

Technical assistance contracts often only specify the means, i.e. the consultant is responsible for implementing the tasks entrusted to it in the Terms of Reference and ensuring the quality of the services provided. The consultant should however contribute to improve the performance of the institution he is seconded to. A service consultant also has a duty of care under the contract: it must warn the Contracting Authority in good time of anything that might affect the proper implementation of the project.

But there may be cases where a mixed contract is needed (mix of global price and fee-based). In that case each item or each section of the contract should have a clear method of measurement and verification: global price or fee-based. It should be clear in the Terms of Reference and furthermore stipulated in the financial offer template.

An example of a mixed contract is a design and supervision contract which normally would consist of two sections: The design section is a collection of several global prices (geotechnical study, environmental study, economic study, etc.) whereas the supervision section would be fee-based.

A road supervision contract does indeed mainly consist of fee-based items, since the supervising engineer is affected by many factors which are beyond his control, like additional works, delays of various stakeholders including the contractor himself, the public authority, the donor. However, before the tender launch it is possible to single out tasks within the supervision duties, which can be treated as global price: For example, studies on technical alternatives which have to be studied by specialists outside the resident team. Once the number of expert days is agreed for the task the item will be accounted for as a global price.

Moreover, technical assistance projects may contain a mix of fee-based and global price for projects which are structured into different phases:

• A first critical phase can consist into a diagnostic, analysing institutions and stakeholders, assessing capacity, facilitating a joint process for defining precise actions and concrete outcomes. This can be a fee-based activity.

• A second phase would consist into the realisation of those specific actions. The individual output can be contracted as global price.

Useful indications are available in the Technical Cooperation Reform guidelines. See page 99 of the "The Guidelines on Making Technical Cooperation More Effective"¹⁶.

Increasing the use of global price contracts

The use of fee-based service contracts where Statements of Exclusivity and Availability (SoEA) are obligatory, is justified where the output of the contract is difficult or impossible to define in advance and/or the main objective of the contract is to give support on a continuous basis to e.g. the administration of a beneficiary country.

In other cases the use of global price service contracts could be considered as more appropriate.

The following features are comparative advantages of global price contracts:

1. Global price contracts may include where relevant a price breakdown based on outputs/deliverables against which partial payments can be made (e.g. the deliverables could be related to the progress inception report/interim report/final report or to the different parts of a study/report/event) depending on the project in question.

1. It is possible to have incidental expenditures also under a global price contract in exceptional circumstances, which would make it possible to use a global price contract for organisation of seminars where the number of participants and its financial implications are difficult to estimate for the tenderers to give an example. The tender dossier should be modified accordingly to foresee incidental expenditures.

1. The SoEA will as a general rule not be required in a global price contract. It will depend on the particularities of the project. If the SoEA is not deemed necessary, the Terms of Reference could instead include profiles which the tenderer will have to demonstrate in their offer that they have access to. The experts will be subject to approval by the Contracting Authority before they implement the services.

1. Tender procedures for global-price contracts for seminar or training sessions could include a "certification" process by which the experts proposed by the successful tenderer will be interviewed to check whether they are able to deliver as announced in the offer. As such a contract may include many experts; this "certification" may also take place during implementation of the contract.

1. The methodologies contained in the offers should include a workplan indicating the envisaged resources to be mobilised, allowing a better comparison of offers, and offering a basis for negotiation in case of amendment to the contract.

1. Global price contracts generate less micromanagement and verification of time sheets and incidental expenditures and therefore should free more time for working on operational and sector issues.

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