8.1 Proposal Requirements

Deadline – Time to Submit

Due to the complexities of the PPP, it is essential to grant to the bidders sufficient time for proper due diligence and analysis/assessment of the project and the contract from different points of view. Time is also needed for the preparation of a sound and high quality offer. Good practice frameworks provide for a general floor or minimum time to be granted, typically being at least 30 or 60 days.

In practical terms, at least 90 days is usually granted for open tender processes, but even that period may be clearly insufficient to properly prepare sound bids in the context of complex projects (where the period may be up to120 days). An even longer period is generally required for dialogue or interactive processes.

This item is discussed more extensively in chapter 6.1.

Validity

It is good practice to require the proposal to be valid (that is, binding on the bidder) for a specific time (that is, limiting the validity of the proposal), so that the bidders are protected from undue delays in evaluation and awarding. After that period (for example, 180 days), the proposal is no longer binding on the bidder. If the procuring authority has not yet awarded the contract but is continuing the tender process, the bidders will be asked to confirm their offers or they may choose to retire from the process at their discretion, without losing the bid bond (see below).

Proposal documents

Documents are typically presented in different envelopes: one for legal/administrative matters, one for the technical proposal, and one for the financial proposal. See box 5.24.

Legal/administrative documents are similar to those requested in a qualification stage (or a reconfirmation of those), but some additional documents or evidence will be requested, including the following.

Bid bond (see below). Insurance policies – it is good practice to request evidence of the policies/insurance being available, but it is not necessary to take out insurance until contract signature. Articles of association of the future SPV (it is not standard or good practice to request the establishment of the SPV until the contract is awarded).

In addition to legal/administrative matters, some processes (for example, those based on a staged evaluation approach – see chapter 6.9) differentiate between proposal documents related to purely objective criteria (only subject to numerical scoring) and documents linked to criteria subject to judgment (typically the technical proposal[74]).

The proposal documents required must be consistent with the evaluation criteria settled in the RFP. The rules for elaboration and presentation of the documents have to be clear to allow for a proper evaluation.

A material lack of information or serious inconsistencies may result in the disqualification of the offer.

It is good practice to supply specific forms with the RFP for a number of documents and evidence such as certain statements (for example, committing equity investment) or guarantees to be constituted.

Bid bond or proposal guarantee

In the RFP, it is customary to request the submission of a guarantee with the bid package, so as to protect the public authority against the risk of the successful bidder failing to sign the contract. This guarantee is commonly known as bid bond, even when the instrument of the guarantee is not necessarily a bond. The bid bond is to provide a degree of commitment to the bid submission, that is, in the event that the bidder is awarded the contract and then decides not to proceed with the contract signature, the bond will be executed/called. Bid bonds may take different forms in different jurisdictions. The most typical are bank guarantees (sometimes in the form of a letter of credit) or insurance policy bonds, both of which have to be unconditional, irrevocable, and executable on demand or “first call”. The RFP should be clear as to what instruments or forms of guarantee will be acceptable. It is good practice to provide a sample/template for a guarantee to be regarded as valid.

The most typical amount of the bid bond is 1 percent of the “value of the project”, which typically is determined from the official estimate of Capex provided by the authority.

Financial model issues, financial package, and bid submission

One controversial issue (in EMDEs in particular) regarding bid requirements is whether or not a financial model and plan must be submitted by the bidder. This PPP Certification Guide advocates clearly that the financial model and plan should be a bid requirement. Financial sustainability of the PPP Company is something the government should be concerned about, and the financial model is a necessary tool for contract governance to regulate or govern multiple calculations that are needed during the life of the contract (contract changes and compensation negotiations and disputes concerning risk events).

The European PPP Expertise Centre (EPEC) guide on contract management provides further information about the financial model as a contract management tool. Chapter 8 also discusses the use of the financial model during the life of the contract.

It is good practice to include a template and/or “instructions to prepare the financial model” as an appendix/annex to the RFP so as to standardize the financial models to be submitted by each bidder. This should include the definition (for the purpose of submitting the financial offer) of certain assumptions (especially those of a macroeconomic nature, such as inflation) and other ratios and calculations.

In addition, all projects should request information on the financial package being assembled by the bidder. In some processes, the financing does not yet need to be fully arranged and any financing offers are not fully binding, while in other processes the RFP requires bidders to submit a definitive and fully arranged financial package. In either case, the information that is required includes the financial structure and amounts of debt (including the potentially different instruments and tranches), the financial terms agreed or under negotiations, letters from the lenders expressing their commitment to the project and the terms offered or agreed, and so on.