NATIONAL ECONOMICS UNIVERSITY EXCELLENT EDUCATIONAL PROGRAM BACHELOR’S THESIS Topic BIDDING ACTIVITIES IN VIETNAM AIRLINES JSC’S PROJECTS DURING 2013 TO 2015 Student Ta Huu Vu Major Investment Class I[.]
Definition and roles of bidding
Definition of bidding
When an entity or individual has demand to purchase goods, hire consultants or construct a building, it (called as buyer) could implement the contractor selection in 2 methods: the buyer directly contacts to goods or services providers in the market (called as suppliers) about its requirements and negotiate to reach the agreement on price and quality In this case, buyer simultaneously is the owner of the fund for procurement, therefore, it has the full authority in selecting supplier and price In the second method, the buyer organizes a contest in order to attract suppliers not only domestically but also internationally to participate in Based on the proposals of suppliers, buyer will implement the evaluation to select the most suitable bidder The organization of this contest have to comply with the regulation and the control of the authority In this case, buyer usually is a proxy organization and not the owner of the fund for the procurement Therefore, the final decision in supplier selection must be based on the approval from the capital owners.
According to Paragraph 12, Article 4 of Law on Bidding No 43/2013/QH13, bidding is defined as follows: “Bidding means the process of selecting a bidder to sign and implement contract of providing of consulting services, non-consulting services, procurement of goods, construction and installation; selecting an investor to sign and implement contract of investment project in form of public-private partnership, investment project with land use on the basis of ensuring competitiveness, fairness, transparency and economic efficiency.”
In a broad sense, bidding could be understood as a supplier (of goods, services or construction) selection method, in which, buyer and suppliers must comply with the regulations set by capital owners who provide the fund for the procurement In narrow sense, bidding is understood as supplier selection method applied when the fund is from state budget The entity who implement the selection process could be state agencies or state-owned companies, while the suppliers could be from any economic sector
There are 2 parties which directly participates in bidding activities, includes: buyer (or called as bidding entity) and suppliers (or called as bidders) The information about the procurement’s requirements and other related information is provided by bidding entity to bidders in a document called bidding document After receiving the bidding document the bidders will study these requirements and submit their solution in a document named as bidding proposal.
Roles of bidding
Firstly, bidding allows the buyers to approach new potential suppliers instead of traditional suppliers In almost every sector of the economy, appearance of new suppliers is continuously happening domestically and internationally These new suppliers usually have some competitive advantages comparing to old suppliers, meanwhile, the buyers are not always updated with these new supplier’s information. When participating in bidding, in bidding proposal, the information about bidders’ performance would help buyers to gain a better insight about the current market’s situation.
Secondly, thanks to bidding, buyers would have chance to grasp the most up-to- date technology As the object of bidding could be goods, service or construction, in order to provide these products, every bidder can produce or implement in different technological methods Therefore, despite of having a mutual purpose, products made by different bidders could carry different features and are varied in quality These technology and unique features of the product are mentioned in the bidding proposal. With the bidding proposal evaluating process, buyer will be provided with the detailed information about bidders’ technology, product, to evaluate the pros and cons of each technology and also grasp the trend of technology development.
Thirdly, bidding help the buyer to improve their professional qualifications and build up their prestige in the market The result of bidder selection depends not only on the qualifications but also the ethic of buyer’s personnel To select the suitable bidder, buyer needs to understand about the target of bidding (service, goods or constructions). Beside, using state budget could easily lead to high wastefulness due to buyers’ consciousness or not Therefore, buyer will be highly appreciated if it could conduct a good bid This is also a favorable condition to buyer to implement next steps of bidding process well.
At first and foremost, bidding creates an opportunity for bidders to approach with buyers – new customer and new requirements for their products Instead of having to look for new customers, by the information about purchasing demand of the buyers,some of which are new customers, bidders can directly approach to these customers to grasp the new requirements and also the trend of the product’s demand in the market.
Secondly, bidding also allows the bidders to confront to other competitors, which could be old or new rival in the market, evaluate more accurately about their own competitiveness and simultaneously cooperate with other bidders Each bidder has its own competitive advantage, therefore, beside the competition between each other, cooperation is another alternative to survive and develop in the following bids To new bidder in the market, due to the limitation in experience and prestige, the likelihood of winning is not high Therefore, cooperation with experienced and prestigious bidders in the market is essential when taking part in bidding Bidders can take part in as an independent bidders or in a bidding partnership Bidding partnership is formed from the cooperation of 2 or more independent bidders and submit only one bidding proposal The competencies of bidders in partnership may not equal, new bidders usually be responsible for simpler tasks Partnership with the experienced and competent bidders will help new bidders to accumulate more professional experience, management and create premise for bidding as an independent bidder in the future.
Thirdly, bidding helps bidders to improve knowledge about bidding regulation of a nation or international organizations One of the capital sources managed by government is ODA borrowed from international organizations or other countries’ fund Therefore, in order to win a bid, besides of supplying a reasonable product, bidders have to comply with the related regulations from the capital owner, especially, international organizations.
Fourthly, bidding motivates bidders to improve There are many subjective factors can influence to the bidding result like product quality, price, supplemental services, experience of bidders or quality of bidding proposal… After each unsuccessful bid, bidders will find out the causes, correct the mistakes and find out a better solution for the upcoming bids.
Fifthly, bidders can position itself and improve its prestige in the market when participating in bidding and win This will help bidders to get new contracts, stabilize the operation and make a momentum for development in a highly competitive market.
Bidding create a competitive environment for enterprises, encourages creativity of the manufacturers and service providers, as a result, the economy could be benefited with more high quality products with reasonable price According to many countries’ statistics, bidding help government saving a considerable amount of capital because contract price is usually lower than estimated price The bidding efficiency is considered in two aspects, social effectiveness and economic effectiveness Economic effectiveness is demonstrated by saving time, cost and improving service or product quality Social effectiveness is shown by factors like environment protection, domestic producing safeguard, employing domestic personnel, prioritizing women… To utilize the bidding effectiveness, government have to combine these two benefits harmoniously in public bidding activities Accordingly, bidding could be considered as one of the regulating measure of the government
Accordance with the current international integration trend, there are more and more foreign bidders’ participation in bidding This would motivate domestic bidders to improve, also bring opportunities to cooperate and allow domestic bidders learn from their foreign partners In fact, in Vietnam, in 1990s period, mainly traffic constructions namely and in infrastructure constructions generally, were conducted by foreign bidders, while Vietnamese bidders was only sub-contractor However, in recent years, number of domestic bidders being main contractor is increasing gradually, many enterprises have positioned itself in domestic and regional markets like VINACONEX, LILAMA, HUD
To developing countries, foreign source of capital, especially ODA is very important for many projects If bidding is implemented efficiently, it would not make the capital become wasteful, contribute to the economic growth and improve the country’s prestige worldwide Vietnam is one of the countries that being considered as using the ODA efficiently through implementing efficient bidding activities and building the trust from sponsors As a result, the pledged ODA has been increasing in the recent years.
Principles of bidding
Competition
In the theory perspective, competition in bidding is that all favorable conditions are created for any bidders to participate in the bid; if having willingness to join the bid, any technological and financial competent bidder all have the right to the part in the bid; the more bidders participating in the bid, the more choices to select the best bidder the buyer has.
However, in reality, this principle is not always applicable due to some objective causes Firstly, because the organization structure of the enterprises (bidders) mainly are joint stock companies If bidders are the shareholder of each other, when participating in a bid together, the competitiveness of the bid will be affected The owners of capital need to carefully investigate the current situation in order to issue specific regulations about the condition of participation in the bidding for the bidders. Secondly, bilateral ODA sponsors usually require the borrowing countries to use service, goods of the lending countries In order to implement this obligation, sponsors only accept bidders from the borrowing countries and lending countries, while bidders from other countries are not eligible despite of satisfactory competencies and willing to participate in the bid Although the competition principle is partially complies due to the considerable number of bidders from both sides, with the gap in technological level between lending countries and borrowing countries, in majority of bids, the winner is the bidder of the lending countries
The competition of the bid is demonstrated by the regulations about the condition of participation in the bidding for bidders written in bidding documents.
Fairness
Fairness is that all bidder participating in the bid have the same rights and responsibilities: However, in the reality, there are cases that a group of certain bidders is prioritized more than other For instance, in international bid with the participation of the both domestic and foreign bidders, the domestic ones always have more priorities The purpose of the priority is to creating the favorable conditions for the domestic bidders to have higher wining chance, contributing in the improvement of technology level and financial competency of the bidders This priority policy for domestic bidders is applied in many countries in international bid The priority level is demonstrated in detailed in the bidding documents.
The Fairness principle also shown through providing the bid’s information to bidders: information disclosing time, quantity and quality of information are the same between bidders.
Openness
Openness in bidding can be understand as information of the bidding activities(who organizes the bid, when, bidding about what, the scope the bid, who win the bid,who violated the regulation, solutions for issues during the bid…) will be announce widely and fully on the suitable means of communication so that organizations and individuals who are interested can reach the information timely The identification of scope, means and the promoting time will take significant roles to the stakeholders. For instance, broadcasting on television or radio is one of the means of public communication, however, it is rarely used in bidding because of its publicity, and the filtering information in television or radio is not convenient This means can be used as a supplement for other means like newspaper and internet.
Openness should not be stick to strictly Some information in bidding need to be remain confidentiality like the content of bidding proposal, recorded bid evaluating results, or the detail of the contract… This information is recorded by the buyers, and not provide to bidders or unauthorized organizations or individuals.
Transparency
Transparency is the most difficult to control principle in the bidding activity in specific and economic activities in general Transparency is understand that information like decisions made by subjects related to the bidding activity (includes buyer, bidders, and owners of capital – state authorities) must be provided fully, precisely and based on scientific foundation, objectivity, law…) Transparency have the close relationship with openness: to implement openness, the transparency need to be implemented first.
According to Transparency International, the lack of transparency in the economy(mainly is the lack of disclosure) lead to the state of corruption This organization also found out that the lowest transparency index is in developing countries where the corruption has occurred through many years.
Procedure of bidding
One-stage single-envelope
Bidding proposal of each bidders includes 2 components: the technical content (or technical proposal) and financial content (or financial proposal) The technical proposal is a description of the implementing procedure, applied technology, personnel allocation plan, progress, transportation plan, maintenance, training for technology transfer, labor safety, fire prevention and extinguishment, sanitation… Financial proposal includes information about the currency of payment, payment method and price.
In bidding, envelop is understood as the bag that contains documents of the bidding proposal When applying this procedure, the buyer will require the bidders to submit both of financial and technological proposals within a sealed envelope In the bid opening, buyer announces each bidder’s conditions of bidding participation Including the bid price Therefore, the bid price of every bidder is disclosed before evaluating bidding proposals.
This procedure is suitable for bids that require uncomplicated technology, or not have many technological alternatives to implement, therefore, the bidders can only compete to each other in price.
One-stage two-envelope
Different from the previous procedure, when applying this procedure, bidders seal each proposal in separate envelope and can submit them at the same time or in different time depending on bidding proposal evaluating procedure of the buyer. Therefore, in the bid opening buyer do not announce the information about the financial proposal of the bidder These information completely is kept in confidential during the time buyer evaluates technological proposal If buyer want to evaluate the financial proposal of the bidder that satisfied the technological requirement, buyer will ask every bidder to submit both of the proposals at the same time The bidder who does not meet the requirement about technology will have the sealed financial proposal back If buyer want the bidder that provides the best technological proposal to submit the financial proposal, only this bidder submit the financial proposal after buyer finish evaluating technological proposal, and other bidders do not have to submit.
One-stage two-envelope procedure usually applied to bids that require complicated technology and encourage the bidders to offer the optimized technological proposal.
Two-stage single-envelope
To apply this procedure, buyer and bidders will implement as follows:
Every bidder submits the general technical proposal (in some cases, there are general financial proposal attached depending on the buyer’s requirement) Because the financial proposal only on the general level, bidders do not have the sufficient establishment to issue the detailed financial proposal Buyer evaluates the general technological of bidders and disqualifies the proposals that lack of feasibility Bidders continue to complete the technical proposal and prepare the detailed financial proposal.
Bidders submit the completed technical and detailed financial proposal in a single sealed envelope Buyer implement the next tasks as one-stage single-envelope procedure.
In conclusion, there are a fundamental difference between one-stage procedures and two-stage procedure that: with one-stage procedures, bidders only prepare bidding proposal once (in completion), while with the two-stage procedures, the preparation is twice (one in general and one in completion) The two-stage procedures are suitable for the complicated civil works, goods producing and supply or EPC bidding package,having many different technological alternatives to implement.
Two-stage two-envelope
This procedure basically is the same as the two-stage single-envelope, however, in the second stage, bidders submit the proposals as the one-stage two-envelope procedure
In reality, consulting package does not apply two-stage single-envelope procedure.
Methods of bidder selection
Open bidding
Pre-qualification is the selection of the competent bidders to participate in the bid, and this task is performed before the bidder selection Pre-qualification usually is applied in cases that the bid has complex requirement about technology or large scale. The role of pre-qualification is to save time and cost for both buyer and bidders in the bidder selecting and bid participating process Unqualified bidders will not incur any extra cost to establish bidding proposals, meanwhile, to qualified bidders, pre- qualification will increase the attractiveness of the bid.
All bidders can participate in the pre-qualification and only qualified bidders are selected to participate in the official selection Number of bidders participating in pre- qualification and number of the qualified bidders is not limited To ensure the transparency principle, list of qualified bidders will be disclosed in the suitable public media before organize the bidder selection.
Open non-pre-qualification bidding
When applying this method, buyer will no limit the number of bidders participating in the bid All bidders who have willingness and satisfy the fundamental requirement can receive the bidding document provided by buyer This method is chosen as the bid has uncomplicated technological requirement, medium and small scale and there are many bidders in the market can implement This is the bidding selecting method that capital owners and managers encourage to apply.
Shopping
This method is applied to bids that supply goods with simple requirements,available in market and have low value, e.g supplying and install working desks, air- conditioners, personal computers, medicine, medical equipment… The implementing process of this method is simpler than process to implement open method in bidding preparation and bidding proposal evaluation.
Limited bidding
Limited bidding is the bidder selecting method that buyer only allows some specific bidders to participate in the bid Number and name of bidders are identified before bidding The list of these bidders is called as the short list When making the short list, buyer need to consider based on the conditions such as the bid’s specifications, competencies and willingness of bidders.
To identify the specifications of the bidding package applying this method, there are two cases The first case: the bidding package that many bidders can implement but only few of them want to Therefore, these bidding package cannot require the bidder to have high financial and technological competencies, however, the benefit might be low or the package is implemented in difficult conditions (e.g location, natural conditions, weather, time…) The second case: the bidding package is wanted by many bidders, but not many bidders have satisfactory competencies - a package the that requires high level in technology or large scale Besides, in large bidding package using the bilateral ODA, the received country have to implement the promise that applies the limited bidding – only bidders from the sponsored country and received country are allowed.
As can be seen, this method partially affects to the competition principle in bidding In reality, the short list making will lead the buyer into some difficulties. Firstly, information about the bidders which is usually collected by buyer, could be lack of accuracy or not up-to-date Secondly, the pressure from the relationship to choose which bidder for the short list To ensure the competition in a limited extent, the capital owner will restrict the minimum number of bidders in the short list including bidders having both willingness and competencies to participate in the bid.
To ensure the transparency and openness in bidding, the short list will be announced publicly in suitable media before organizing the bidder selection.
Direct appointment
This bidder selecting method is based on the pre-determined bidder that was selected by bidder to implement the bidding package, therefore, there is no competition between bidders This method is applied to ensure the capital usage efficiency even though the bidding principles are not followed This method is applied to bidding package that carry high risk, threaten to the lives of whom implement them,therefore, there are few organizations are authorized or want to do these activities (e.g.locate and defuse mines and bombs after war) Moreover, government top secret projects’ bidding packages or small scale, difficult bidding packages that cannot easily find willing or trustful bidders to implement also have to apply this method Thank to this method, the purpose of bidding – social and economic effectiveness are guaranteed.
Repeat order
In the project implementing phase, some problems may arise, for instance, a certain bidding packages of the project which is completing, incur new work quantity compared to plan In this case, to prevent extra cost and time, the buyer will assign the bidder who are currently implementing the package to carry out the extra work if the conditions are not affected compared to the signed contract (about price, payment method…)
Occasionally, a new project would have similar bidding packages to the completed package from another project of the same investor In this case, investor can pick the previous bidder to implement the new package if its financial and technological competencies still satisfies the requirement of the new package and other conditions mostly remain constantly Applying this method will save the investor time and cost to organize a new bidding This method is mainly applied in available-in-market goods supplying package.
Force account
In a project, there are some tasks that investor itself can be the bidder with the most suitable competencies or there is no capable bidders in the market Therefore, if investor itself implements these tasks, cost and time for bidding would be saved For example, an enterprise in construction consulting industry is assigned to be investor of its own office constructing project As a result, consulting tasks will be carried out by the enterprise if the professional level is satisfied, while other tasks like civil works or goods will be provided by other bidders because these are not belongs to the enterprise’s professional field.
Bidding process
Preparation for bidding
A project consists of many bidding package with different characteristics, therefore, the staff participating in the bidder selection process for the bidding package also be different in number and professional knowledge The staff is formed in three ways: mobilized from the other business units of investor, or a professional bidding consulting company hired by investor, or the combination of both prior ways. Whichever the way to select bidding staff is, the staff needs to meet these following requirements: having suitable professional knowledge accordance with the bidding package’s characteristics, bidding activities in general and specific regulation of the capital owner in this package.
The main role of the staff includes: preparing the short list (in case of pre- qualification) and bidding documents, organizing the bidder selecting process, negotiating the contract with chosen bidder.
To the large scale or complex technological projects, the frequent applied management model is establishing the project management unit In these cases, project management unit is representative of the investor in monitoring every activities of projects in the project implementing phase, including bidder selection for the bidding packages.
1.5.1.2 Preparation of short list or pre-qualification
These tasks’ shares the same purpose that is to choose the bidders that have satisfactory competencies and willingness to participate in the bid but were applied in different methods.
To the bidding packages required pre-qualification, buyer implement these following tasks: preparing invitation for pre-qualification, announcing and issuing invitation for pre-qualification, receiving and evaluating the dossiers of pre- qualification participation, and announcing the result The invitation for pre- qualification has a simple format, mainly including brief information and requirements for bidders to provide the information related to technological, financial competencies and experience of the bidders Based on the pre-qualification, buyer evaluates and select the bidet that meet the requirements and only these bidders can participate in the next steps The number of bidders participating in and passing the pre-qualification is not limited by buyer, therefore, in reality, the number of bidders passing the pre- qualification may even higher than the number of bidders participating in the bidding packages that are applied open bidding method.
To the limited bidding method, buyer make a short list of bidders that is eligible to participate in the bid – bidders that have both competencies and willingness The number of bidders in the short list should not be too small, which may affect the competition principle, but not too large that could affect the focus of this selecting process.
Buyer could choose to organize a pre-qualification or limited bidding to bidders that have large scale or complex technology Each selection may has its own benefits and shortcomings, therefore, in a specific case, buyer need to carefully consider he characteristics of the bidding package and bidders available in the market to make the optimized decision.
Bidding document is the document that contains all of information related to a bidding package, each bidding document is made for only a bidding package The quality of bidding document has vital role to the bidder selection In some perspective, bidding document is described as “questions” of a contest and the success of this contest highly depends in the quality of the questions Consequently, this task requires buyer to carry it out carefully and accurately The bidding document preparation’s duration depends on the characteristics of the bidding package and professional of the staff.
To ensure the quality of bidding document, the prepared bidding document need to be evaluated The evaluation will be implemented by individual or organization according to the regulation of capital owner for bidding package.
Review of bidding proposal
Invitation of bids have a significant role to bidders when buyer applying the open bidding or shopping, because invitation of bids contains brief information of the bidding package Based on these information, bidders will make decision whether to participate in the bid or not.
To ensure that as much as possible bidders could access the bidding package’s information, buyer needs to choose the suitable media and timing The media must allow the bidder to record and store the information for a certain time, therefore, newspapers and websites are considered as more convenient means than television and broadcast.
Information in invitation for bids needs to be precise, accurate and sufficient so that bidders have adequate foundation to make bid participating decision These information includes: name of the bidding package, estimated price, source of capital, information of investor and other information related to time, participation expense.
With the limited bidding method or pre-qualification, buyer send the invitations directly to the bidders listed in the short list or pre-qualification passing list The purpose of the invitation in these cases is to bidders grasp the information about time and expenses related to the bidding package, not for bidders’ decision about participating in the bid anymore.
The bidding issuance is implemented after buyer finishes announcing the invitation for bids The issuance time need to be long enough that bidders could receive the bidding document.
There are different opinions about the price of bidding document One opinion state that the price need to be low so that the bidders will not need to consider that after buy the bidding document, if they decide to participate in or do not win the bid, this expense will not be a burden Another opinion is that the price of bidding document need to be high so that bidders will consider before buying buy and on the other hand, it will limit the number of bidders and the bidder’s choice will focus more. However, to ensure the competition principle in bidding, price of bidding document must not be a “barrier” to limit the participation of bidders.
Time for bidding proposal depends on the complexity of the bidding package and the bidder selecting method Bidding packages that have complex technological requirement or international bidding usually has bidding proposal preparation time longer than other bidding packages The deadline for the bidders to submit the bidding proposals is called bid closing To ensure the fairness principle, bidding proposals submitted after bid closing will not be accepted.
Bid opening has an important role to ensure the fairness and transparency principle in bidding Bid opening is when buyer announce the brief information in bidding proposals of participated bidders before the evaluation Bid opening usually implemented with the attendance of all bidders and other related organizations Time for bid opening depends on the quantity of submitted bidding proposal The content of bid opening will be recorded in bid opening minutes.
Bid evaluation is a complicated task and frequently takes the most of time in bidding process The bid evaluating method is based on the characteristics of biding package.
The bid valuation and bidder selection are usually carried out by the staff who making bidding document after bid opening Each individual of the staff will work independently and the final result will be consolidated based on the whole team result. Evaluating time depends on the characteristics of the bidding package, procedure of bidding and method of bidder selection.
The bidder selection considered as successful is when a bidder win and vice versa, a failure when there is no bidder qualified In both cases, buyer announces the result in writing to all participated bidders.
The eligibility of a bidding proposal is the duration from bid closing till buyer announce the bid result To a specific bidding package, this duration is regulated in the bid document Therefore, bid result announcement must be sent to bidders before the end of bidding proposal eligibility In the bidding proposal evaluating process, if there are factors that make the buyer cannot announce the bid result in time, the buyer need to adjust this duration by recommend bidders to extend the eligibility of bidding proposals.
Finalization or negotiation and signature of the contract
The bidding package’s contract is signed by investor and the winning bidder,however, in case bidding entity and investor are separate entities, bidding entity will implement the finalization or negotiation with bidder before investor signs the contract The process of finalization or negotiation is based on the requirement of bidding document, proposal of bidding proposal and other foundation In case the finalization or negotiation does not reach an agreement, the investor will continues to contact the second ranked bidder or reorganize the bid if needed The bidding process is finished by the contract signature.
Current bidding performance of Vietnam Airlines JSC from 2013 -
General information
Vietnam Airlines is the flag carrier of Vietnam Founded in 1956 under the name Vietnam Civil Aviation, the airline was established as a state-owned enterprise in April
1989 Vietnam Airlines is headquartered in Long Bien District, Hanoi, with hubs at Noi Bai International Airport and Tan Son Nhat International Airport The airline flies to 47 destinations in 20 countries.
- Company name: Vietnam Airlines JSC.
- Headquarter: No 200 Nguyen Son Str., Long Bien Dist., Hanoi city, Vietnam.
- Type of company: Joint Stock Company.
- Business registration No.0100107518 issued for the first time by Hanoi Department of Planning and Investment on 30/6/2010 and amended for the 2nd time on 06/12/2013.
- Owning 94 fleets, with average 308 daily departures, 15 million annual passengers(includes 0.7 million frequent flyer members).
The history of Vietnam Airlines
Vietnam Airlines was established by the government in January 1956, under the name
"Vietnam Civil Aviation" following the nationalization of Gia Lam Airport It was instituted after the government signed the Decree No 666/TTg The airline was created as part of the air force for civilian purposes with support from both the Soviet Union and China; beginning of a small fleet with 05 propeller aircraft of IL 14, AN 2, Aero 45 This was due to an embargo that prohibited the airline from leasing and buying American technology or components After that, the first domestic service was introduced in September, 1956.
The airline's development and expansion was seriously hampered by the Vietnam War (1954–1975) Following the war, its first international destination was Beijing, followed by Vientiane in 1976 During that year, the airline was known as General
Department of Civil Aviation in Vietnam, and began full operations; it carried around
21,000 passengers, one-third of whom were on international flights, and 3,000 tons of cargo In 1978, another important destination of Vietnam Airlines was added, with flights offered to Bangkok The late 1980s and early 1990s saw the expansion of the network to Hong Kong, Kuala Lumpur, Manila and Singapore.
The airline became the flag carrier of Vietnam in 1993, after having completed a restructuring program that was started four years earlier In that year, the airline split from the Civil Aviation Administration of Vietnam (CAAV) and became a state-owned enterprise
In February 1994, US President Bill Clinton lifted the trade embargo to allow Vietnam Airlines the ability to acquire Western-built aircraft Consequently, Vietnam Airlines announced in April of the same year that it would be phasing out its inefficient Soviet planes At this time the route network comprised 14 domestic destinations and 16 international destinations.
On 27 May 1995, the airline, along with a number of other aviation-related businesses, were incorporated to establish Vietnam Airlines Corporation In September 1996, Vietnam Airlines started offering business class services and in 1999, the airline launched its frequent-flyer program, Golden Lotus Plus
A new livery was introduced in early 1998, initially unveiled on a Boeing 767 In December 2001, Vietnam Airlines signed a historic agreement with Boeing for the acquisition of its first ever US-built aircraft, signaling the start of trade under the Bilateral Trade Agreement between the two countries Then on 4 September 2003, a landmark ceremony celebrated the airline's receipt of its first Boeing 777-200ER purchased outright from Boeing.
In 2006, Vietnam Airlines was admitted to join International Air Transport Association (IATA) As part of the move, Vietnam Airlines had to meet the association's IATA Operational Safety Audit (IOSA) safety standards.
In 2009, Vietnam Airlines and the Government of Cambodia established a joint- venture, having 49% and 51% stockholding, respectively, with the goal of boosting tourism in Cambodia The joint-venture was a new Cambodian national airline named Cambodia Angkor Air, which started flying in July the same year, using ATR-
72 equipment; an Airbus A321 joined the fleet in September In addition, Vietnam Airlines launched a new bilingual website in October to simplify bookings and adopted a new passenger service system designed by IT provider Sabre Airline Solutions
In February 2012, Vietnam Airlines boosted its stake in the low-cost carrier Jetstar Pacific Airlines to 70%, with Qantas holding the balance The Vietnamese flag carrier was the major shareholder in Vietnam's second largest airline, but its stake had been transferred to the Ministry of Finance, and subsequently to the Vietnamese State Capital Investment Corporation (SCIC)
Vietnam Airlines received its first Airbus A350-900 in late June 2015, becoming the second operator of the type worldwide after Qatar Airways In August 2015, the airline's first Boeing 787-9 entered the fleet By 3 rd quarter of 2015, Vietnam Airlines became the first airlines operating the 2 most modern aircrafts in the Asia Pacific area.
11/4/2014, Vietnam Airlines sold 49,009,008 shares with the average price of 22,307VND per share, received 1,093 billion VND in its Initial Public Offering (IPO) After that, at 1/4/2015, the first annual shareholders meeting was held and Vietnam Airlines has operated as a joint stock company since then.
Lines of business
The lines of business are defined in the Company Charter, based on current operations as regulated in Decision No.172/QD-TTg dated January 16, 2013, Decision No.183/2013/ ND-CP dated November 15, 2013, Certificate of business registration, and several additional auxiliary lines of business, as follows:
Air transport for passengers and cargo (luggage, goods, parcels, letters)
Supporting services of air transport: general flights (for aerial photography,geological surveys; extended flight route calibration; repair and maintenance of high voltage lines; oil and gas service; afforestation; environmental monitoring; search and rescue; emergency medical service; missions serving political, economic, social, security and defense purposes), other specialized flights, commercial services such as tourism,hotels, duty free sales in isolated area of international terminal, in-flight and ground services, ground engineering services, services in the passenger area and cargo terminal, and apron services at the airport)
Repair and maintenance (aircraft, engine, spare parts, aircraft equipment, equipment for the ground engineering business and other technical equipment)
Manufacture of measuring, testing, navigating and controlling equipment (manufacturing spare parts, aircraft materials, technical and other equipment in the industry; supplying technical services and spare parts for domestic and foreign airlines).
Other supporting services relating to transport (Freight forwarding; investing and operating airport infrastructures, including passenger areas, cargo terminal, technical infrastructure and synchronization services in the aviation transport chain; multimodal transport);
Production of aircraft, spacecraft and related machinery (Exports and imports of aircraft, engines, spare parts and aviation equipment) and other items prescribed by the State.
Production, imports and exports of equipment to serve the air transport chain; hire, lease, purchase and sale of aircraft, engines, spare parts, aviation equipment, training devices and other equipment to serve the aviation transport chain.
Vocational education (Only when government authorities permit);
Restaurants and catering services (Production, exports and imports of food and beverages).
Wholesale, exports and imports of solid, liquid, and gaseous fuels and other relating products (Gasoline supply, aviation grease including fuels, lubricants and special liquids and other gasoline in airports)
Brokerage and auction agency (retail gasoline dealer; agency services for airlines, aircraft manufacturers, engine, equipment and aircraft spare parts producers, transportation companies, domestic and international tourism)
Management consulting services, including investment, capital management, and manufacturing; offshore investment, merger and acquisition; capital contribution and equity transfer.
Printing services (except documents prohibited by the government).
Architectural business and related technical consulting (construction consulting does not include business design).
Supply and management of labor force, including labor supply (excluding brokerage, referral, employment and labor supply for businesses with labor export and import function or managing workers abroad); Export and import of labor as per government authority’s permission.
Other professional, scientific and technological activities.
Trading real estates and land property rights.
Other supporting service businesses: e-commerce, connecting flights.
Travelling business including travelling services, tourist accommodation, tourist transport, resorts and attractions development, travel agencies and other services;
Other businesses according to the Certificate of business registration.
The structure of Vietnam Airlines
Vietnam Airlines’ organizational structure: organizational structure includes aHeadquarter in Hanoi with 16 departments; 32 branches and overseas representative offices; 14 dependent units In addition, it also invests in 16 subsidiaries and 9 associates.
Figure 2.1 The diagram of Vietnam Airlines’ organizational structure.
* The Board of Management (BOM): is the authorized representative of shareholders and be decided by the General Assembly of Shareholders in accordance with operational requirements in each period From that, Chairman of the BOM will be elected The members of BOM includes:
Mr Pham Viet Thanh - Chairman
Mr Pham Ngoc Minh - Member - President &CEO
Mr Luu Van Hanh - Member
Ms Nguyen Thi Thanh Van - Member
Mr Nguyen Huy Trang - Member
* Supervisory Board: elected by the General Meeting of Shareholders to supervise and evaluate independently all of business activities, management and financial position of Vietnam Airlines, and are legally accountable for the performance of their assigned tasks included 3 members:
Mr Pham Ngoc Minh – President and CEO: is the legal representative of the company and is in charge of daily operations in accordance with the objectives, plans, resolutions and decisions of the Board of Management and with the corporate charter, prevailing laws and regulations
Mr Phan Xuan Duc - Vice President
Mr Trinh Hong Quang – Vice President
Mr Duong Tri Thanh – Vice President
Mr Trinh Ngoc Thanh – Vice President
Mr Nguyen Ngoc Trong - Vice President
Mr Le Hong Ha - Vice President
Mr Tran Thanh Hien - Chief Accountant
* The Committees: are established by the Board of Directors for assistance, including Strategy and Investment Committee, Compensation Committee, Internal
Audit Committee The specialized departments will assist those committees formed by the BOM in accordance with their functions.
* Corporate Departments: Consists of advisory and functional departments with the function of advising and assisting the Board of Management, President and CEO in management and administration There are 16 departments in total, included:
- General departments: Human Resource Dept., Training Dept., Legal Dept.,
Planning and Development Dept., Information Technology Dept., Finance & Accounting Dept., Investment & Procurement Dept., Safety-Quality & Security Dept., Party & Youth Union, Corporate Affairs.
- Commerce division: Sale & Marketing Dept., Cargo Planning & Marketing Dept.
- Ground services division: Marketing Services Dept.
- Technical division: Technical Dept., Material & Supply Dept.
- Flight Operation Division: Operation Control Center.
Subsidiary companies: Till 4/2015, Vietnam Airlines (VNA) had 16 subsidiaries, included:
- Vietnam Air Petrol Company, Ltd.
- Vietnam Airlines Engineering Company, Ltd.
- Abacus Global Distribution Systems (Vietnam), Ltd.
- Noi Bai Catering Services JSC.
- Noi Bai Cargo Terminal Services JSC.
- Aviation Information and Telecommunication Solution JSC
- Aviation Information and Telecommunication Solution JSC.
- Tan Son Nhat Cargo Services and Forwarding Co., Ltd.
- Noi Bai Airport Services JSC
- Aviation Labor Supply and Import-Export JSC.
Characteristics of Vietnam Airlines JSC.’s bidding packages
Every year, Vietnam Airlines plans and implements many different projects in varied different aspects of the company These projects include bidding packages with the varied scale The package would ranges from providing the necessary equipment for the office to remodeling a million dollar aircraft For instance, in purchasing a photocopier, the bidding package’s value could only around 50 million VND In contrast, to aircraft remodeling bidding package, the value could be more than 200 billion VND
In addition, as majority of Vietnam Airlines’ equity is owned by state and its projects is implemented for the company’s development, therefore, according to the Point b, Paragraph 1, Article 1, Law on Bidding No 43/2013/QH13, the bidding activities of the company is considered as public procurement and comply with Law on Bidding No 43/2013/QH13’s regulation In some case, with bidding packages using ODA capital source, the company also has to satisfy the additional requirements from the capital owners.
On the other hand, to meet the demand of expansion, the company has implemented many projects covering many different aspect of its investing activities These activities could be constructing a new training facilities, upgrading capacity of the luggage warehouse or purchasing equipment for aircrafts. Therefore, bidding packages in Vietnam Airlines consist every type of bidding package from consulting services, goods procurement to civil works packages
With all of the mentioned characteristics, bidding packages of Vietnam Airlines could be applied many different methods of bidder selection and bidding procedures In methods of bidder selection, depending on the characteristics of bidding packages the bidding methods applied are diversified However, the main bidding methods applied but not limited to are open bidding, limited bidding, direct appointment and shopping Furthermore, as requirement of airline operation, some specific customized products that domestic companies do not have capability to produce Therefore, there are not only domestic bidding packages but also international ones On the other hand, about bidding procedures, Vietnam Airlines only chooses to apply one-stage single-envelope or one-stage two-envelope Even though the technological requirement of the bidding packages in airline is complicated, these technology is standardized and not completely new in the market, In order to save time and resources for bidding, the company only choose to apply one-stage methods.
Decentralization in bidding management of Vietnam Airlines
According to Article 74 of Law on Bidding No 43/2013/QH13, investor play a significant role of bidding process: approving the tenor of bidder selection process including bidding plan, short list or invitation for pre-qualification, biding document, bidder ranking list and the result of bidder selection; signing or deputing buyer to sign and monitor the contract implementation of contractor Therefore, the bidding of bidding packages is varied, as the project that they belong to is under different investor’s authorities There are mainly 2 levels of authorities in Vietnam Airlines that have responsibilities to take the role of investor in bidding packages: Board of Management (BOM) and CEO Depending on the characteristics and scale of the package that it is belonged to one of the two positions’ responsibility.
Board of Management: According to the internal regulation of Vietnam Airlines, the BOM has authority to act as investor to the most important projects as follows: aircrafts (or engine) acquisition and remodeling projects; project have invested capital that equals to or more than 100 billion VND; projects that are new investment or to improve the Core Application System and Core Infrastructure System of Vietnam Airlines with the planned invested capital equals to or higher than 5 billion VND The Board of Management could depute partly the investor’s responsibilities to CEO in project management and bidder selection depending on specific cases.
CEO: CEO takes the investor’s responsibilities deputed by the BOM and have to report to BOM about the progress of these tasks He is not allowed to depute these responsibilities to the lower levels Besides, CEO also is in charge of investor’s role in the projects that he has authority to make investment decision as follows: project have invested capital lower than 100 billion VND, excludes the projects belonged toBOM’s authority; projects that supplement or improve the Core Application System and Core Infrastructure System of Vietnam Airlines with the planned invested capital lower than 5 billion VND To these projects, CEO whole be responsible to implement investor’s role in project management and bidder selection.
Procedure of bidding of Vietnam Airlines JSC
When any department or subsidiary has the need of new investment for its development, it will propose a new project to CEO or BOM depending on the scale of the project In the new project proposal, there is usually an attached bidding plan giving the main information about the bidding packages of the project, included: number of bidding packages in the project, name of bidding packages, estimated price, capital source, method of bidder selection, bidding procedure, bidder selection duration, type of contract and contract implementation schedule
With each project, a project team is formed with the responsibility to prepare and implement the project Therefore, the bidding plan is written by this project team as a part of project proposal After the proposal is completed, project team will submit it to Investment & Procurement Department for the appraisal Because the main responsibility of this department is to evaluate the project in bidding related activities’ aspect, Investment & Procurement Department also asks other departments’ opinions to conclude the final appraisal result The final result will be delivered to the CEO for approval.
Time for getting approval for the bidding plan must be within 5 working days since the receipt of the appraisal report according to Point a, Paragraph 1, Article 12 of the Law on Bidding No 43/2013/QH13 After the project and bidding plan are approved, the bidding process will move to next step – bidding preparation.
After a project is appraised, Investment & Procurement Department submits an appraisal report to the CEO In this report, there will be a proposal from this department about whether establishing an expert group or deputing the subsidiary(in case the project is from this subsidiary) to carry out the remained bidding process, depending on the characteristics and scale of the project The expert group often is formed by the representatives from Legal Department, Finance &Accounting Department, Investment & Procurement Department and theDepartment which proposed the project Therefore, the project team members usually also the expert group member due to their understandings about the project and bidding packages However, in some project proposed by a subsidiary, the expert group establishment will be decided by that subsidiary’s director if the project’s bidding packages are not complex or large in value and the subsidiary’s staff is qualified for organizing bidding process
The number of expert’s group is limited to 5 members, but this can be more in some exceptions depending on the projects’ difficulty The staff employed for the bidding process must meet a require that: 100% of staff directly organizing the bidding process must have bidding certificate issued by the authority and have at least 3 years of experience in bidding The personnel for the bidding staff whether is selected from the departments of the holding company by the project team’s leader or is chosen by the director of the subsidiary The list of expert group’s members does not need to get the approval from the CEO.
Preparation of short list or pre-qualification
Vietnam Airlines does not applies the pre-qualification in open bidding because the number of bidders in the market is not large and the company also does not want to add an extra step in the bidding process Therefore, the short list is only appeared in the bidding packages that is applies the limited bidding method.
With the limited bidding, expert group selects at least 3 bidders who have adequate competency and willingness to participate in the bidding The list of these bidders is sent to Investment and Procurement Department for appraisal After rechecking the eligibility to apply the limited bidding method and whether the list of bidders is accurate or not, this department submitted a report to the investor approval for the list After having approved, the short list is posted on the national bidding network according to Article 8, Law on Bidding No 43/2013/QH13.
The bidding document is prepared only when the conditions stated in Paragraph
1, Article 7 of the Law on Bidding No 43/2013/QH13 are met Its preparation is based on government and Ministry of Planning & Investment’s regulation in Circular No 01/2015 about composing the bidding document for consulting service bidding packages, No.03/2015 about composing the bidding document for civil works packages and No 05/2015 about composing the bidding document for goods procurement.
After the expert group is formed, its members would discuss and conclude the content of the bidding document After having been completed, the bidding document will be sent to the investor (Board of Management or CEO) for the approval The investor authorize Investment & Procurement Department to appraisal this document before approving it During the appraisal process, the Investment & Procurement Department also send a request attached the bidding document to ask other related department After the opinions are collected, the Investment & Procurement Department summarizes all of these opinions with its feedback These feedback will be sent back to expert group to correct if needed. The result of the appraisal will be reported back to investor If there is no correction needed, the bidding document will be approved by the investor before being disclosed on the media.
Invitation for bids: In open bidding method, after having the official approval from investor for bidding document, the invitation for bids will be disclosed on national electronic bidding system, Dau Thau newspaper and other media like Lao Dong newspaper, Vietnam News… In the limited bidding or pre-qualification open bidding or shopping method, the invitation for bids only is sent to the bidders in the short list to announce about the information of the next step To the direct appointment or repeat order, a dossier of requirement is sent in place of bidding document to the bidder to give them the information about the bidding packages.
Issuing biding document: After 3 working days since the disclosure of invitation for bids on national electronic bidding system and Dau Thau newspaper, the bidding document is issued to bidder at the specific place stated in the invitation for bids In case of partnership bidder, it only needs one member of partnership to buy the bidding document even though the partnership is not yet formed During the time from the issuance of bidding document to 3 days (in case of domestic bidding) or 5 days (in case of international bidding) before the bid closing, bidders could send request to buyer to clarify the some content of bidding document according to Point c, Paragraph 2, Article 14 of Decree No 63/2014/ND-CP about detailing the implementation of several provisions of the Law on Bidding regarding the selection of bidder.
Receiving bidding proposals: The duration from when bidding document is issued to bid closing will be accordance with Paragraph 1, Article 12 of Law onBidding No 43/2013/QH13 and depends on bidding package’s characteristics.
Expert group is responsible for receiving the bidding proposals, until the bid closing time Any bidding proposal submitted after the bidding closing will be disqualified.
Bid opening: In the bid opening, some information of received bidding proposals will be disclosed to all representatives of bidders who submitted the proposals to ensure the openness principle Within 1 hour after the bid closing, the expert group held the bid opening In the bid opening, the expert group requests the bidders to confirm whether they have discount letter or not, checks the seal of the bidding proposal, discloses some information about the name of bidders, number of original copies, validity of bidding proposals, bidding package implementing time At the end of bid opening, representatives of bidders and expert group sign in the bid opening bid minute In one-envelope procedure, there is only 1 bid opening. However, with the two-envelope procedure, there are 2 bid openings, one for opening the technological proposals, and the second for opening financial proposals of bidders who pass the technological evaluation.
Bid evaluation: After bid opening, the expert group starts to evaluate the bidding proposals based on stated criteria from bidding document The evaluation process includes 4 main parts: prerequisite conditions, capacity and experience assessment standards, technological evaluation and financial evaluation Bidders have to pass each part before proceeding to the next one.
The result of this evaluation process is the bidder ranking list, in which, the bidder who has the highest score ranks first and is followed by lower-score bidders. Next, the expert group makes a report about the evaluation process attached with the bidder ranking list to Investment & Procurement Department for appraisal After appraised by this department, the ranking list will be approved by the investor and the bidder with the highest score will have a meeting with expert group to negotiate about the terms of the contract When the negotiation reach to an agreement from both parties, once again, the expert group submit a report about the bidder selecting result to Investment & Procurement Department for the appraisal If the bidder selection result is agreed, Investment & Procurement Department will ask the investor to make the bidder selecting decision.
Examples of a specific project
2.5.1 “Procurement of 150 ULD 2-level shelves” bidding package
ULD shelf is aviation specialized equipment used to place ULD 1 , arrange ULDs in an identical standard and proper order – it is convenient to control and unload ULDs for use Moreover, when ULD is placed on shelf, its bottom does not contact directly to the ground floor, it would keep the ULD in the better condition, increase its useful life, therefore, save the expenses to maintain, repair or replace ULD.
The bidding package “Procurement of 150 ULD 2-level shelves” is only bidding package of the project - “Investment of 2-level shelves”, which is an investment for Tan Son Nhat International Ground Service Ltd (TIAGS), a Vietnam Airlines’ subsidiary According to Vietnam Airlines’ internal regulation, the investor of this project is the CEO of Vietnam Airlines The capital used for this project is originated from the company’s owner’s equity source with the estimated total of 10,543,720,000 VND included:
+ Advertisement on Dau Thau Newspaper
The bidding process started as its project was approved on May 12 th , 2014 by the CEO.
1 ULD (unit load device): a specialized container used in aviation, to load luggage, freight, and mail on wide-body aircraft and specific narrow-body aircraft.
According to responsibility assigned by the CEO, on March 27 th , 2014, project team finished and submitted the project proposal of “Investment of 2-level shelves” project, including bidding plan to Investment & Procurement Department for appraisal
As in this bidding plan, the estimated price for the bidding package was set at 10,543,500,000 VND (VAT, expenses incurred by shipping and installment at TIAGS included) The capital source of this package is come from the Vietnam Airlines’ equity The method of bidder selection applied for this package is domestic non-qualification open bidding, while the procedure of bidding: one-stage two-envelope Duration for bidding process is planned to be within 90 days Finally, the contract type of this package is lump-sum contract and the contract is scheduled to be implemented in 2 phases:
+ Phase 1: 100 shelves, supplied within 90 days.
+ Phase 2: 50 shelves, supplied within 60 days.
Staff preparation: After having evaluated the bidding plan, Investment &
Procurement Department submitted the result and recommended the investor, in this case, the CEO to depute the authority to establish the expert group to TIAGS’ director After the bidding plan was approved, on May 21 st , 2014, the director make the list of expert group’s members, who will be in charge of organizing remain tasks of bidding process The members was chose from different departments of TIAGS, included: Planning & Sales Department, Ramp Services Center and Accounting Department The member of the group must need to meet to the requirement that is: having understand about the bidding package’s target - ULDs and is certified to organize the bidding process.
Preparation for bidding document: After the expert group was formed, the expert group composed the bidding document and then submitted it to the CEO andInvestment & Procurement Department for the appraisal on June 19 th , 2014 Due to this bidding package’s characteristics, the Investment & Procurement Department forwarded the bidding document and asked for the opinions from 5 departments,included: Legal Department, Finance & Accounting Department, Marketing
Services Department, Cargo Planning & Marketing Department and Safety- Quality
& Security Department After received the responses from other departments, Investment & Procurement Department summarized with its own opinion into a feedback for TIAGS From this feedback, the TIAGS corrected and completed the bidding document before sent it back to Investment & Procurement Department. After having checked the corrected bidding documents, Investment & Procurement Department sent the statement including the result of bidding document appraisal process to CEO to get his approval for the official bidding document This statement also had the recommendation from this department about assigning TIAGS’ director to implement organizing the bidder selection process, evaluate the bidding proposals and report the bidder selecting result to the CEO; deputing TIAGS’ director to sign transacting dossiers with bidders (Invitation for bidding, clarifying bidding document, requiring to clarifying bidding proposal, answering bidders’ questions ) during bidding process.
After the CEO approved the bidding document of “150 ULD 2-level shelves” package of TIAGS, expert group posted the bidding invitation on the Dau Thau Newspaper issue No 178 on September 9 th , 2014 with the follow content:
Box 2.1 “Procurement of 150 ULD 2-level shelves” bidding package’s invitation for bids
Bidding package: Procurement of 150 ULD 2-level shelves.
Funding source: Vietnam Airlines JSC’s capital
Bidding entity: Vietnam Airlines JSC.
Method of bidder selection: Domestic open bidding.
Time of selling bidding documents: from 8:00 am, September 12 th , 2014 to 9:00am, October 10 th , 2014 (during working hour)
Place of selling bidding documents: Department of Marketing Service –
Vietnam Airlines JSC, 200 Nguyen Son, Long Bien District, Gia Lam, Hanoi, Vietnam.
Price of bidding documents: 2,000,000 VND
Bid closing time: 9:00 am, , October 10 th , 2014
Source: Dau Thau Newspaper, issue No 178.
3 working days after the bidding invitation was announced, expert group issued the bidding document from 8:00 am, September 12 th , 2014 to 9:00am, October 10 th ,
2014 at the price of 2,000,000 VND each There are 5 bidders that bought the bidding document, included: A41 Aircraft Repairing Company; Tan Phuong Phat Producing and Trading Co., Ltd.; Viet Mechanical Co., Ltd.; Hung Phat Producing and Trading Co., Ltd and Tien Dat Material Trading Co., Ltd At the time of bid opening (9:00 am, October 10 th , 2914),there are 3 bidders submitting the bidding documents, included: A41 Aircraft Repairing Company; Hung Phat Producing and Trading Co., Ltd and Tien Dat Material Trading Co., Ltd.
At the bid opening, there were the attendance of expert group’s members and representatives of 3 bidders who submitted bidding document In this event, expert group opened the sealed envelope of technical proposal and disclose the followed information in the bid opening: number of original copies, number of scanned copies, letter of bidding, expiration of technical proposal, contract implementation schedule, value and expiration of bid security The bid opening ended at 9:30 on the same day and its meeting was signed by the attendees.
At first, expert group implemented to evaluate the bidders’ prerequisite conditions and technological proposals from October 10 th , 2014
About prerequisite conditions of bidding document’s evaluation, expert group evaluated the bidding proposals in accordance with the conditions that was stated in the issued bidding document Accordingly, expert group concluded that: Hung Phat Producing and Trading Co., Ltd and Tien Dat Material Trading Co., Ltd were disqualified because they did not meet the prerequisite conditions that are:
- Commit to provide the report recorded the technical standards and indicators of ULD shelves in inspection test before transferring to the buyer
- Commit that newly produced ULD shelves will be checked, tested by the authorities in accordance with the current standards and conditions in Vietnam before transferring to the buyer.
Only A41 Aircraft Repairing Company that could met all prerequisite conditions and the capacity and experience assessment standard of bidding document.Therefore, it was qualified for the next evaluation – technical evaluation From
October 17 th , 2014 to November 19 th , 2014, expert group required the bidder - A41 Aircraft Repairing Company to clarify some content in technological proposal. After getting the response, the expert group checked that the technological proposal was eligible and started to evaluate technological proposal using merit point system as stated in bidding document with passing score is 75 points As can be seen from observing the evaluation result from Appendix A, A41 Aircraft Repairing Company’s score (94 points) is higher than the technological proposal’s passing score.
The result of the technological evaluation was sent to the CEO and Investment
& Procurement Department for appraisal step Once again, in order to get feedback for this result Investment & Procurement Department forwarded the result to other 5 departments, included: Legal Department, Finance & Accounting Department, Marketing Services Department, Cargo Planning & Marketing Department and Safety - Quality & Security Department
On December 5 th , 2014, an appraisal meeting about the result of bid evaluation was held by Investment & Procurement Department with the attendance of expert group and related departments In this meeting, feedback and inquires of the departments were responded by expert group When the final agreement was reached, the final result was concluded as follows: the bidder - A41 Aircraft Repairing Company satisfied the technological requirements and would be evaluate financial proposal The list of bidder qualified for technological requirement was approved by the CEO on December 23 rd , 2014 In this list, A41 Aircraft Repairing Company ranked first and also the only bidder.
Assessment of Vietnam Airlines’ bidding activities from 2013 - 2015
During the period of 2013 to 2015, Vietnam Airlines had implemented the bidding process for many bidding packages The number of these bidding packages is presented in the following chart.
Source: Consolidated data from Vietnam Airlines’ bidding reports during 2013 - 2015.
Figure 2.2 Number of Vietnam Airlines’ bidding packages from 2013 – 2015
Table 2.4 Bidding package types from 2013 to 2015
Source: Consolidated data from Vietnam Airlines’ bidding reports during 2013 - 2015.
In general, from 2013 – 2015, total number of Vietnam Airlines’ bidding packages tends to fluctuate with the increase from 81 packages in 2013 to 130 packages in 2014, then, slightly decrease to 128 packages in 2015 Among types of bidding packages, the goods procurement always kept the largest portion with approximately 63% of total number of bidding packages Moreover, the goods package quantity increased gradually from 63 packages to 68 packages, then to 82 packages in 2013, 2014, 2015 respectively The dominance of goods procurement bidding packages in number due to the important role of goods procurement to Vietnam Airlines’ operation These packages provide equipment for every aspect of Vietnam Airlines, from tangible assets like trucks, lifter… to intangible assets like office software, information system… from office equipment like photocopier, fax machine… to aircraft’s component like engine, seats…
Meanwhile, although civil works packages only take a small portion of total number of bidding packages but is increasing rapidly both in the number and portion From 2013 to 2014, the number of civil works’ bidding packages increases sharply from 4 packages to 12 packages, by threefold Then, from 2014 to 2015, this number go up to 15 packages, increased by 25 percent The increase in civil works of the company is to construct and maintain infrastructures for training and office as one of the base for company’s development in the future period Some of notable projects in the 2013 – 2015 period are Airlines City, Flight Training Center’s expansion in Ho Chi Minh City, Area C warehouse’s upgrade…
According to Paragraph 13, Article 129, Decree No 63/2014/ND-CP about detailing the implementation of several provisions of the Law on Bidding regarding the selection of bidder, the company have to submit a report about its bidding performance to the authority However, only since Official Letter No. 10984/BKHDT-QLDT from Ministry of Planning and Investment on December
14 th , 2015 about bidding implementation report in 2015, in the Form 1 of this document, the non-consulting service is reported separately for the first time. Therefore, the data of this bidding package type only available for the year 2015. There are only 5 bidding packages of the company is classified as non-consulting service type and also this type of bidding package take the smallest portion in total number of bidding packages These packages are the supporting packages such as transporting bidding package in goods procurement projects or insurance bidding packages for construction projects.
Finally, consulting services packages always had the second smallest in number of bidding packages compared to others and fluctuates greatly within the period.
From 2013 to 2014, the number increases steadily from 14 packages to 50 packages, however, declines to 26 packages in 2015 The consulting services bidding packages of Vietnam Airlines is consisted in construction project, mainly are survey and making of pre-feasibility study report, feasibility study report, preparation of dossiers of invitation for expression of interest, dossiers of requirements, assessment of dossiers of expression of interest, dossiers of pre-qualification participation, bid dossiers, dossiers of proposals; appraisal; audit
2.6.1.2 Applicated procedures of bidding and methods of bidder selection
As an airline company, Vietnam Airlines has many projects that requires complicated technology, especially in aircraft related projects However, the technology of these projects could be evaluated based on international standards In bidding, the bidding packages of these projects do not need a second stage. Therefore, Vietnam Airlines does not have any bidding package organized in two- stage procedure Therefore, the applicated bidding procedure in Vietnam Airlines only is one stage with one-envelope or two-envelope.
Applicated methods of bidder selection
Table 2.5 Methods of bidder selection
Source: Consolidated data from Vietnam Airlines’ bidding reports during 2013 - 2015.
From 2013 - 2015, Vietnam Airlines did not apply the force account and limited bidding in bidding process and only had 1 bidding package that applied the repeat order method
In brief, the most frequently applicated methods of bidder selection in Vietnam Airlines includes: open bidding, direct appointment and shopping Among this three methods, shopping is applied the most in throughout the period In 2013, 39 bidding packages was applied this method domestically and 7 packages internationally, took more the half of total bidding packages of Vietnam Airlines In 2014, the number of bidding packages applied the shopping methods increases to 50 packages in total, account for 38% of total bidding packages The number keeps increasing to 62 packages with approximately of 48% The reason why the shopping bidding packages take the majority of Vietnam Airlines (approximately 47.5% in average) is number of simple bidding packages in the companies is large These bidding packages usually are consisted in projects for the procurement of office or airlines equipment which do not have complex technological requirements like photocopiers, office software, cargo scale… Moreover, as the process to apply the shopping method is simpler than open bidding packages, the companies prefers to apply it frequently to save the resources used to organize bidding process.
Rank the second place in the number of bidding packages applied during the period is the direct appointment methods With 25 packages applied in 2013, account for 30.87% of number of bidding packages, direct appointment only ranks after shopping in this year In 2014, the number of bidding package applied this method, increased sharply to 61 packages with 46.92% of the total, make it become the most popular method in this year However, the number decrease to 40 packages in 2015, with 31.25% packages applied this method In Vietnam Airlines, the direct appointment is usually applied to the civil works and consulting services bidding packages According to Article 54, Decree No 63/2014/ND-CP about detailing the implementation of several provisions of the Law on Bidding regarding the selection of bidder, these bidding packages (usually in small construction and maintenance projects) has bid price under 500 million VND for consulting services packages and under 1 billion for civil works ones Therefore, these packages usually is applied the direct method in order to save bidding expenses for Vietnam Airlines
Finally, the open bidding has the smallest portion in the bidding packages applied through the period In 2013, the method only is applied in 11 packages account for 13.58% of the total number As in 2014, the number increase gradually to 18 packages (13.85% of the total) By 2015, it keeps increasing to 26 bidding packages with the portion of 20.31% over the total of bidding packages In Vietnam Airlines, the open bidding is applied for bidding packages required bidders to provide equipment with customized features, or complex technology, especially the bidding packages of aircraft project From the figures, it could be observed that, even though still take the small portion in number of bidding packages applied, open bidding is gradually becoming more and more popular in Vietnam Airlines bidding activities.
For the 2013 - 2015 period, Vietnam Airlines strictly complied with the Law on Bidding No 43/2013/QH13 and its supplemental Decrees as a guidance for bidding process implementation As for the bidding staff, Vietnam Airlines requires everyone who directly participates in the bidding process must have the bidding certificate and relevant experience about the bidding packages About the bidding certificate, the company has ensured that 100% personnel of Investment and Procurement Department (exclude new recruits) and staff from other related departments and subsidiaries are certified Moreover, the company also make the project team become expert group to ensure the staff understanding about both the project and bidding packages On the other hand, the timing of steps in bidding process always does not exceed the maximum timing regulated in Article 12, Law on Bidding No 43/2013/QH13 Moreover, the application of bidding methods is also accordance with the guidance in the Decree No 63/2014/ND-CP for each specified method Thanks to this compliance, Vietnam Airlines always have a clear process for bidding and also the baseline to adjust its bidding performance.
Table 2.6 Saving portion due to bidding from 2013 - 2015
Source: Consolidated data from Vietnam Airlines’ bidding reports during 2013 - 2015.
From 2013 to 2015, thanks to the competition between bidders in bidding process, the difference between the estimated price and contract price is 16.87% in average In 2013, the procurement is set at 496.09 billion VND, while the contract price is 399.06 billion VND with 19.55% reduction In 2014, the estimated price is 820.43 billion VND and after the contracts are signed, the price is reduced by 16.65% to 683.81 billion VND Finally, in 2015, while the total estimated price of all bidding packages in this year is 763.89 billion VND, the contract price is 653.78 billion VND, reduced by 14,41% On one hand, the result indicate that bidding process allowed Vietnam Airlines to pick the bidders so that the company could save a considerable amount from estimated price for the bidding packages. However, on the other hand, this results could be originated from the inaccuracy in estimating the value of bidding packages when composing the project If the value of bidding is overestimate from the beginning of the bidding process, the contract even is the reduced price but may not be the most optimized for the buyer.
2.6.2 Current limits and main causes
Firstly, one of the main problems in Vietnam Airlines’ current bidding performance is the delay in the bidding process Even though the company complies strictly with the state regulations about the timing of each step in the bidding process, it still would take a longer time to implement the process than the duration which was scheduled in the bidding plan Consequently, it would lead to delay in the whole project, influencing the performance of the company’s investment activities This problem can originated from:
- The argument arisen within the expert group in evaluation and ranking bidders.Because each member of the group could come from different departments, they could have different perspectives of the same issue The conflict would occur at any step of the bidding process and lead to a longer time needed to reach the final agreement Besides, in international bidding, due to the limited and differentEnglish fluency, the bidding staff have difficulty in composing the bidding document and understanding bidding proposal thoroughly On one hand, the bidding document quality is not ensured to communicate the requirements of bidding packages to the bidders efficiently On the other hand, the difference in English literacy may lead to different understand of bidder’s bidding proposal.Consequently, the result may be different between members of expert group,between departments participating in the appraisal process Therefore, more problems arises and delayed the delivery of final result.
- The compliance with the company’s internal procedure is also one of the cause to the problem As in the normal bidding process, there is no additional step for getting other departments’ opinions before investors approves any document of the bidding process However, this step is necessary to Vietnam Airlines as its unique characteristics of airlines’ bidding packages: Bidding packages must be implemented at the highest quality to ensure the passenger’s safety and satisfaction. Therefore, the issuance of bidding document and evaluation must be put in careful consideration As a result, the bidding process is extended longer than normal one due to the extra time for the appraisal process On the other hand, getting opinions from other departments for the approval would also lead to a further delay to the whole bidding process Besides giving opinions for the documents of bidding process, each department also has its own functional tasks to fulfill Therefore, the tasks related to bidding activities would be neglected and the responses back to Investment and Procurement Department would be late if there is no constant prompt from this department Moreover, as opinions are came from different department, the conflict between opinions are unavoidable Consequently, more time was needed for settling the conflict and correcting the bidding documents to meets with other departments’ requirements.
- The lack of personnel capacity in Vietnam Airlines would be one of the factor lead to the decrease in bidding efficiency As Vietnam Airlines is expanding, more and more new bidding packages with new technology appears It demands the bidding staff to keep updating their knowledge However, it is not the easy task that could be achieved in a short time Moreover, as the company expanding, the number of bidding package keeps growing However, the staff for bidding is not expanded at the same pace As a result, it leads to an issue that one person of Investment & Procurement Department has to be in charge of participating in expert group or evaluating 5, 6 bidding packages at the same time As a result, this consequent could distract their concentration in the bidding packages and decrease their productivity.
The second problem in bidding of Vietnam Airlines also could be observed in
2013 to 2015 period is the lack of competitiveness when applying bidding method.