2. 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

References

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