6.3.4 T ENDER D OCUMENTS

There are a variety of names for the tender document package, depending on the nature of the bidding procedure:

•

Restricted Procedure—Invitation to Tender (ITT), Invitation to Bid (ITB) or Request for Proposals (RFP);

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Negotiated Procedure—Invitation to Negotiate (ITN), or Project Brief;

•

Competitive Dialogue—Invitation to Competitive Dialogue (ICD).

The basic content of all these tender documents is the same; it is mainly the dialogue with bidders and procedures before and after they are issued, as discussed above, which differ.

The tender documents are accompanied with an information package which sets out, e.g.:

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general legislative and policy background;

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project raison d’être;

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service requirements;

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support to be provided by the Public Authority, either financial (cf. §13.4.3), or, e.g.

through building a connecting road (cf. §14.5.7);

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data on the market, e.g.traffic flows, for PPPs where usage risk is being transferred to the private sector;

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a draft PPP Contract, including risk-transfer provisions, performance specifications and proposed pricing formula (cf. §3.3);

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programme for site visits, bid meetings, and procedure for clarifications;

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the form of bid required;

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bid deadline;

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bid-evaluation criteria (cf. §6.3.6);

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overall project timetable.

The bidder’s response to the tender is likely to be required to cover issues (insofar as these have not been clarified in advance) such as:

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technology and design;

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construction programme;

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service standards and delivery;

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details of Subcontracts and Subcontractors;

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management structures for both the construction and service delivery/operation phases;

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quality- and safety-assurance procedures;

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commercial viability (e.g. traffic or demand projections for a Concession);

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insurance coverage;

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project costs (cf.§10.2);

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financing strategy and structure (cf.§9.3.3);

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qualifications or proposed amendments to the proposed draft PPP Contract;

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proposals for the Service Fees.

§6.3.5 C

OMMUNICATION WITH

B

^IDDERS

Whatever the bid procedure, the same information should be made available to all bidders, e.g.by:

•

holding bidder meetings and site visits which all attend, which can be helpful to flush out any major issues which bidders may have with the project; and

•

copying written answers to questions or issues raised by one bidder to all of them, without indicating who asked the original question.

Bidders should be given a specific point of contact within the Public Authority, and should not be allowed to make contacts elsewhere in the organisation.

Discussions with bidders may lead to modifications in the bid requirements: in such cases the bid schedule may have to be delayed to give bidders enough time to deal with these modifications. On the other hand, bidder confidentiality has to be respected, e.g.where there may be several different solutions to executing the project.

§6.3.6 B

ID

E

VALUATION

A method is needed to compare the bids with each other, and bidders need to understand clearly what they have to do to produce the best bid. There are various approaches for com- paring the bids:

Price comparison. If the bids can be submitted on virtually identical bases then the final decision may be a question of simply comparing the Service Fees, although it may be necessary to discount the amounts payable in future to an NPV to compare like with like. The choice of a discount rate for this purpose will obviously affect the result(cf. §5.3.2).

Adjustments may still have to be made to a simple comparison, however, for the cost of exceptions to the proposed terms of the PPP Contract or other differences in risk transfer, or bids that are considered to be over-ambitious in their projections of per- formance or financing plans.

This approach may be workable for a well-controlled Restricted Bid procedure for a process plant or, say, a road Concession, where all other issues have been clarified before the bid, but is unlikely to be the only basis for a decision in a project with a more complex payment structure such as a PFI-Model accommodation project (cf.

§13.5). Furthermore, even when considering cost alone, which appears simple in prin- ciple, one of the most difficult aspects of PPP bid evaluation is the trade-off between cost and long-term flexibility, especially where a low initial cost is produced by finan- cing structuring (cf. §11.3.4).

Contract term. An alternative approach, especially for Concessions, is to fix the Service Fees and then ask bidders to bid for whatever term of PPP Contract they require—

obviously the shortest bid wins (cf. §13.3.1). Variants on this approach are to leave the term open-ended, and terminate the PPP Contract when:

•

the rate of return required by bidders is achieved—here the lowest required rate of return wins the bid; or

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the NPV of revenues required by bidders has been reached—here the bidder with the lowest required NPV of revenues wins the bid (cf. §13.4.4).

But all these approaches raise similar issues to a simple price comparison.

Level of subsidy. Some tenders are not based on the basis of the price to be charged for the service, but the level of subsidy to be provided by the public-sector. This approach

§6.3 Procurement Procedures 81

is relevant if the bid relates to a Concession where it is known that Service Fees will not produce sufficient revenue to cover the funding required for the project (cf.

§13.4.3). Conversely, bids may include payments by the bidders instead of to them (cf. §13.3.6).

‘Most economically advantageous’ bid. A more complex system is based on

‘scoring’ different aspects of the bid—giving points for design, speed of completion, reliability, quality of service, risk assumption by the bidder (i.e. transfer of risk away from the public sector) and any other characteristics that are important to the Public Authority as well as the price, thus identifying the bid that is the ‘most eco- nomically advantageous’ to the project. The weight to be given to different factors should be set out in the ITT/ITN; there must inevitably be an element of subjectiv- ity, both in how these factors are weighted against each other, and how different aspects of the same factors are compared when these are non-financial. Weightings are obviously quite project-specific: e.g. if bidders are likely to rely on the same design or technology solutions, Service-Fee cost might be weighted 70%, but if there is much scope for innovative solutions, technical proposals might be weighted 70%.

The prequalification process should have already eliminated bidders for whom there are questions about financial capacity, technology, or ability to do undertake the project, so further fundamental qualitative comparisons of this nature should be limited in scope. However, the overall financing plan for the project does need to be examined (cf. §6.5.3), and bids must be submitted using common financial assumptions where this is appropriate (e.g.as to base interest and inflation rates—see Chapter 11). Similarly, the detailed feasibility of the construction and operation arrangements, including Subcontracts needs to be reviewed (cf. §6.5.2).