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Appraising PPP Projects - Appendix A - Procurement Procedures

4a2. Main Types of PPP Tender Processes

Open Tender or One-stage Tender Process

In this form of open tender, the RFP is published at the same time as the contract, and launching implies the invitation to propose, with the tender open for bidding to any potential bidder. The proposal requirements also include the qualification requirements. It may be structured as one single document (less desirable) or as two separate documents (the RFP and the contract).

Open tender is the most common (and in some jurisdictions the only) method for procurement in many Latin American countries. This approach is also used in the Philippines for some projects.

This form of open tender is also called the ‘one-stage tender process’ by some practitioners and guides.

This process could, theoretically, allow for several/iterative bids and negotiations, but this is not commonly the case.

Open Tender with Pass/Fail Pre-qualification (or two-stage open tender)

It may be considered a variant of the former type of process (one-stage tender). The only difference is the timing of the issuance of documents, separating the RFQ and the RFP.

Therefore, there is an initial stage in which potential bidders are invited to pre-qualify (under an open basis) before the issuance of the RFP and contract (which will be directed to those bidders that have prequalified), but there is no short listing.

Issuance of the RFP implies invitation to propose, and usually there is only one round of bidding with no negotiations.

This is common in a number of Latin America countries, for example, in Mexico.

Restricted Procedure (short listing with one bid)

As with an open tender with pre-qualification, there is an initial stage in which potential bidders are invited to submit qualifications. Qualifying bidders (those that meet the pass/fail criteria) are ranked on the strength of their qualification responses, and a limited number of the highest ranking bidders are then short listed.

This short list of bidders will be invited to submit their bids, and they will be evaluated on the basis of their bids before the awarding decision is made.

This is a method used in a number of regions and countries, such as the European Union (EU) and India.

Negotiated Process (short listing with negotiations)

Following a short listing, bidders are invited to submit their bids, and negotiations are open to all of the short-listed bidders or with a limited number of candidates.

Bids are usually iterative, with either more than one bid submitted by each proponent during the bid process before calling for the final offer, although only the final bid may be evaluated. Negotiations may then be established with the preferred bidder. Alternatively, stage bids are evaluated so as to narrow the number of bidders.

This sub-type of process, quite common in some jurisdictions, is referred as the Negotiated Process with Best and Final Offer (BAFO). Similar to processes with a two-stage tender and a dialogue/interaction phase, the short-listed bidders (candidates) will present and discuss technical solutions during the course of the interaction. However, in a negotiated procedure this will be in the form of a binding technical proposal with a binding price. Two candidates are selected from the bid evaluation process (usually on the basis of pass/fail for the technical proposal and lowest bid for the price). After negotiations, the two selected candidates will submit new offers, their BAFO, on the basis of the risk allocation and technical terms that have been developed with the two candidates in parallel. The selection criteria to define the preferred bidder will normally only be price.

The negotiated process may be considered a variant of the former type, that is, a restricted procedure, because any negotiated process is usually a restricted process.

Dialogue or Interaction Process

In some countries, short listing is accompanied by a dialogue or interactive structured process. First, the RFQ is issued, with the intention to pre-select a short list of qualified bidders. Including basic business terms and project structure is customary. Then, dialogue or interaction takes place in conjunction with the RFP process. For example:

  • In the EU, after short listing the bidders, the RFP is published. It includes a draft contract for dialogue or negotiation purposes. After such dialogue, a definitive contractual framework is issued and bidders are invited to offer on the basis of this framework; and
  • In Australia and New Zealand, the RFP and contract are issued. The government then conducts interactive workshops with bidders as they develop their bids.

The EU’s process focuses on dialogue in relation to defining the final terms of the RFP and the contract. This results in changes to those documents to accommodate bidders’ feedback. In Australia and New Zealand, the dialogue focuses on the development of the bidders’ proposals and their interpretation of the RFP, ensuring that their bids address the RFP requirements. Hence the process in Australia and New Zealand influences the bids rather than the RFP. This generally does not result in major changes to the terms of the RFP and the contract.

Under the EU approach, it is not common to allow for negotiations. However, the procuring authority will usually request clarifications on the bid submitted. Under the Australian/New Zealand approach it is usual practice to have a final negotiation phase (with one or more bidders) after the initial evaluation of bids.

In the strict sense, only one final bid is submitted, but some processes (particularly in the EU) will consider consecutive bids, usually non-binding.

TABLE 4A.1: Main Types of Tender Process

Type and features

Qualification approach – Submission of Qualifications (SoQ)

Qualification approach – short listing

Time for closing and issuing Request for Proposal (RFP) and contract

Negotiations versus interaction or dialogue

Bidding and selection approach – submission of proposals

Country examples

Open tender or one-stage tender process

 

The SoQ are called and submitted together with proposals.

Request for Qualifications (RFQ) and RFP are integrated in one document.

No short listing.

The RFQ and RPF are integrated and closed together. Issuance of tender package at one time.

Negotiations and dialogue are not permitted after the tender is launched.

Request by the bidders for clarifications is allowed, and responses are public during the bid phase.

 

Only one bid and one straight-forward decision on awardee, with no negotiations.

Most countries in Latin America and Spain.

Quite common in the EU vis-a-vis competitive dialogue.

Open tender with pass/fail pre-qualification (or two-stage open tender)

 

The RFQ is issued in advance of the RFP to qualifying bidders, under pass/fail criteria.

 

No short listing.

The RFP is closed after the SoQ are received. The contract may be refined during the RFQ phase.

Not allowed, but clarifications request and response during the bid phase are permitted.

Only one bid and one straightforward decision on awardee, with no negotiations.

Columbia, India, Mexico, and some other countries in Latin America for some projects.

Restricted procedure (short listing with one bid)

 

As in pre-qualification, the RFQ is issued in advance of the invitation to propose to qualifying bidders.

 

The essential feature of this type: qualifying bidders are short listed (selection of a maximum number of bidders).

As in open tender with pre-qualification.

Not allowed, but clarifications are usual as in the former types.

One only bid and one straightforward decision on awardee, with no negotiations as in former types.

Considered an option under the EU regulations, but less commonly used than the former types.

Negotiated process (short listing with negotiations, or best and final offer – BAFO)

The SoQ is issued and assessed in advance, as in the restricted procedure.

Short listing as in the restricted procedure.

The RFP is commonly closed at the same time as the RFQ. The fundamental characteristics of the selection process and contract should be defined and explained in the RFQ.

Negotiations permitted by definition.

Consecutive or sequential bids are frequently used, commonly under a BAFO process.

Considered in the EU by legislation.

More marginal, yet traditional, method of procurement in the EU.

Dialogue process

The SoQ is issued and assessed in advance, as in the restricted procedure.

Short listing as in the restricted procedure.

The RFP may be refined during the RFQ phase, for example in the EU, or it may be also close at the same time as the RFQ. Fundamental characteristics of the selection process and contract should be defined and explained in the RFQ.

Negotiations are usually not permitted (EU), but the contract and some aspects of the RFP may be discussed and refined during the dialogue or interactive process.

The dialogue method typically considers only one bid after dialoguing, refining the contract, and some aspects of the RFP.

 

An option regulated by legislation in the Arab Republic of Egypt.

Regulated option by the EU legislation for specific types of projects meeting some features, mainly related to complexity.

Used in some states in the United States (US).

Interaction process

The SoQ is issued and assessed in advance as in the restricted procedure.

Short listing as in the restricted procedure.

The fundamental characteristics of the selection process and the contract should be defined and explained in the RFQ. The RFP is typically finalized following the completion of the short-listing process.

The RFP and contract are discussed during the interactive process and may be refined or clarified by the government, if necessary.

Final negotiations are usually conducted with one or more bidders after the initial evaluation of bids.

Following the issue of the RFP and contract, bidders refine their proposals through interactive workshops with the government. Bidders then submit a single complete proposal.

 

This is the standard approach used in Australia and New Zealand.

 

References

World Bank Group. 2014. Public-Private Partnerships Reference Guide. Version 2.0. Washington, DC: World Bank.

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