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Body of Knowledge:
Structuring and Drafting the Tender and Contract
Risk allocation is implicit in the revenue regime of the contract and in the scope of the obligations. The private party shall construct in the form and time defined (by the contract or as committed to in its proposal), and it shall provide the service as prescribed in the contract (the performance...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
The project should have been sounded out during the Appraisal Phase (see chapter 4.9.1).
It is good practice to conduct further market testing during the Structuring Phase to collect reactions, suggestions, and concerns from the industry (investors, contractors, and lenders following the options...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
The objective of a qualification process is to set a minimum bar of capability for the bidder company or group of companies (bidding consortium[63]) entering into the PPP contract. Setting qualification criteria will reduce the risk of project failure caused by a lack of capabilities and capacity....
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
Legal qualification relates fundamentally to the legal conditions that must be satisfied for a bidder to submit a bid according to the local/market or country’s common regulations.
Therefore, legal qualification refers to the formal regularity of the bidder, particularly with respect to its legal...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
Financial or economic capacity criteria are intended to guarantee that the company or group of companies (consortium) that are candidates for the project have a healthy financial situation. The criteria provide evidence that they will be capable of meeting the financial needs of the project, which...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
The technical capacity or experience criteria are essential for project success. Many projects fail because the successful bidder lacks the skills and experience required to manage the challenges and complexities of the particular infrastructure project. Failure can also occur if the successful...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
In some projects, the pre-qualification process is accompanied by the selection of a short list from the pre-qualified bidders. The pre-qualifying bidders are ranked on the strength of their pre-qualification responses, and a limited number of the highest ranking bidders are short listed to proceed...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
The RFP governs the bid requirements (what documents must be presented and how, which is developed further in section 8.1 below), the evaluation (rules and methods to evaluate and select – section 8.2), and other relevant matters such as protection for the government (for example, the right to...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
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...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
Evaluation criteria
Broadly speaking, there are two main types of processes in terms of evaluation criteria.
Processes based only on price (also referred to as least cost selection) in which the technical factors are evaluated on a pass/fail basis. This is sometimes called an auction; however it...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
Where and when used. Dialogue and interactive processes
Dialogue types of procurement and other negotiated and/or interactive processes are an option in some jurisdictions (for example, in the EU in general) and are the standard in some others (for example, in Australia, New Zealand, and the UK)....
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
Sections 4 and 5 of this chapter have extensively described financial and risk structuring matters. The defined structure (that is, all features related to risk allocation and risk treatment) and features related to the financial structure (means of compensation when there is more than just the...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
The structure of the contents of the contract document may vary significantly from country to country, and even depending on the authority or level of government within the same country. It is preferable that the structure of the contents, the nomenclature, and the treatment of many commercial...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
Performance requirements may be considered a part of the broader concept of "technical requirements" or "technical specifications", which in general terms refers to the specifications in the contract for what is requested of the private partner in terms of quality and/or quantity. Performance...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
Section 9.2 has shown how payments are linked to service performance through availability payment mechanisms, so that deductions or abatements are made from the payments commensurate with any failure to meet set service standards or target levels of service. The price paid is therefore adjusted to...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
When a compensation event occurs, the private partner has the right to claim compensation to offset the loss suffered or that will be suffered, or part of the loss suffered in shared risk events. The loss may include forgone revenues (for example, revenue lost due to a delay in construction, where...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
Chapter 1 introduced a number of topics that are typical considerations for the public partner. These are related to the financial structure of the project contract and should be documented in the contract. See section 0.7.3, especially the following.
The problem of leverage and requirements for...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
A sound framework should encourage proactive information disclosure of both the project contract and the project’s performance. This is done in order to promote transparency and gain an acceptance of the PPP model by the general public as well as allowing for performance auditing of the PPP program...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
As noted, the contract must have flexibility built in to enable changing circumstances to be dealt with as far as possible within the contract. In this sense, the contract should consider and permit certain potential changes (which may be subject to limits in quantity or the law may provide those...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
As in any complex contract, especially those of a long-term nature, it is not possible to foresee every event that may happen and affect a PPP contract. Therefore, changes will happen and this can often lead to disputes.
Also, it is logical that some provisions in the contract may require...
