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Appraising PPP Projects - Appendix A - Procurement Procedures

4a1. Introduction to tender approaches

The procurement procedure is the process that will be followed by the government to assign the contract, and it will generally be referred to in this PPP Guide as the ‘tender process’.

As in any public procurement, the usual process should be a competitive process[1], in other words, there will be a tender to gather competitive bids to select an awardee among a number of candidates. The tender process should follow a published set of rules or guidelines described in the procurement framework (either in the form of policies or laws). Guidelines and standard procedures are important to smooth the process and present a consolidated approach to the market.

The ultimate design of the process will be determined (within the potential boundaries of the PPP framework) by a number of factors, such as the strategic significance of the asset, the potential time constraints for the tender period, the extent and nature of competition identified during the market testing, the complexity of the project or the requirements, the cost of the bid process, and so on.

There is a relatively long list of tender process approaches worldwide, but many of them contain the same basic features with small variations. Table 4A.1 at the end of this section describes the main types of tender processes being applied in different countries.

The process will be designed around a number of key features:

  • The approach to qualifications: The timing of the issue of the Request for Qualifications (RFQ) (in advance, or not, of issuing the Request for Proposal (RFP)) and whether to pre-select (short list) candidates or only apply pass/fail criteria;
  • The approach to the RFP: The timing of the finalization and issue of the RFP and the contract (whether after a period of dialogue and interaction, or allowing for no interactions and dialogue but only minor clarifications); and
  • The approach to bid submittal and evaluation: Whether negotiations and iterative proposals are allowed.

These features are introduced before presenting and explaining the main tender process types in Table 4A.1. Defining criteria and structuring the tender process is discussed in detail in chapter 4.

Another key aspect influencing the selection process is the evaluation criteria (sole price or other financial criteria versus combined financial and technical or other qualitative criteria). This is not addressed in this piece, as any approach may be used in any type of process from those described below.

Qualification Approach

The first differentiating factor when explaining different procurement procedures is how and when to define qualifications. A qualification is a sub-process or stage within the tender process by which the capabilities and capacity of the prospective bidders are assessed so as to ensure that the selected company or consortium is competent enough to deliver the project and service from both a financial and technical perspective.

This stage may be handled in advance of the invitation to propose, or it may occur after the bid is submitted (for example, qualifications are submitted together with the bid proposal). In the latter case, the RFP document includes the RFQ, that is, the requirements for the submittal of evidence of qualifications and the rules to be applied to qualify the candidates. These are called ’one-stage tender processes’.

When the decision is to first request qualifications in order to assess them in advance of issuing the RFP, the aim is to qualify candidates according to minimum criteria (pass/fail approach) or to select a maximum number of candidates. It is usually defined in the Request for Qualifications. This PPP Guide considers the former case as ‘pre-qualification’ and the latter as ’short listing’. The short listing of proposals is always applied by an ‘interactive or dialogued process’ and some ‘negotiated procedures’. These are regarded as ‘two-stage tender processes’.

Approach to RFP

The RFP is the document that establishes the rules for the submission of proposals and for their evaluation in order to select the awardee. The contract is typically an annex to the RFP.

As explained, the RFQ is integrated with the RFP in one-stage tender processes. The bidders submit the proposal together with their qualifications. Typically, each bidder will only submit one proposal which will usually be regarded as final and not negotiated in this tender approach.

However, in two-stage processes, the RFP will be issued after qualification submittal and evaluation. If there has been a short listing, the RFP will only be provided to those qualified bidders that have been short listed. This is particularly common in negotiated and most interactive procedures.

The contract issued with the RFP may be in a finalized form, or it may be subject or open to significant changes, considering the suggestions of the short-listed bidders during dialogue or interaction.

Approach to Bid Submission

Bidders may be requested to submit only one bid, (typically, this is the case in open tender processes), or consecutive/iterative bids depending on the design of the dialogue or interactive process. Furthermore, the process may allow for negotiation (negotiated process and some dialogue type of process) with a limited number of preferred bidders (final candidates to awardee) or with one preferred bidder.

 

[1] Direct awarding or direct negotiations might be appropriate only in very few circumstances. Most of the reasons commonly used to justify negotiating directly are considered spurious (World Bank Group Reference Guide, version 2.0, 2014, WBRG). Also, another route for procurement involves unsolicited proposals which may be closer to direct negotiations, or it may include competitive tension by tendering the project proposed by the private initiator. Unsolicited (or ‘privately initiated projects’) are discussed in chapter 2.

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