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Contracting
Set out an appropriate partnership
framework and engage an effective partner
Procurement Management
Make or Buy
PPP should be pursued only when it delivers Value-forMoney i.e. efficient and cost-effective delivery of
services (not goods.)
PROCUREMENT PROCEDURE
Core of the PPP process.
An efficient procurement procedure can generate VFM for
the public Authority.
The framework of Public Procurement procedure is provided by
the Agreement on Government procurement(GPA),
administered by WTO,to which most of the countries are parties.
SELECTIVE
PROCEDURE
LIMITED PROCEDURE
Various forms
Negotiated Procedure:
i)In case of complex contracts, where bidders may provide
Various Solutions for the service concerned and the basis of
bidding the overall pricing can not be specified in advance,
So requiring further discussions after bids are received.
Such clarification should not be however result in
Fundamental changes to the basis of the original bid
And also implies that detailed negotiations take place with all
Bidders.
Preferred Bidder:
ii)PA sometimes in PFI chooses a Preferred Bidder
(also known as preferred Proponent), often going
through a multistage bidding procedure
Three bidders may put in initial proposals and then
after final negotiation two of them are chosen to
Submit their best and Final offer- BAFO &there
may be final stage where bidders submit their
LAFO (Last and Final Offer).
Then often detailed & lengthy negotiation takes
place.
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Competitive Dialogue:
Following pre-qualification the PA discusses the form of
PPP contract and technical specifications of the Project with
pre-qualified bidders.
Tender documents are then issued.
PA can enter in to further discussions with bidders on any issue
that may arise on any contract, which may result in revisions
to the project requirements, before the Bidders
present their bids.
There is still provision for Clarifications of Bids
after they are presented.
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Tender Documents
There are variety of names for the tender document package,
Depending on the nature of bidding procedure:
Restricted Procedure
Invitation to Tender(ITT)
Invitation to Bid (ITB)
Request For Proposal (RFQ)
Negotiated Procedure
Invitation to Negotiate (ITN)
Project Brief
Competitive Dialogue
Invitation to Competitive Dialogue(ICD)
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Market sounding:
Principles of Procurement
Key considerations governing the award of public contract
Fairness
Equality of opportunity
Transparency
Integrity
Accountability
Efficiency
Compliance
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Why?
GOI-supported schemes such as VGF and IIPDF require that the private sector
company should be selected through a transparent and open competitive
bidding process.
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Stages
Pre-qualification
Bidding
Relevant documents
Model RFQ
Model RFP
Draft concession agreement
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First stage:
Request for Qualification (RFQ)
Eligible and prospective bidders are pre-qualified
Second stage:
Request for Proposal (RFP) or the bidding stage
Pre-qualified bidders submit their financial bids
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RFP- Response
The following aspects are to be covered in response:
Technology
Design and engineering
Construction programme
Details of work or services to be provided
Management structure for both construction/ Operation phases
Quality & Safety assurance procedures
Commercial viability( tariff & demand projections etc)
Operation & Maintenance policies
Insurance coverage
Project cost- with confidentiality
Financing strategy & structure
Proposal for the Tariff, tolls or other charges for the project
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Corrupt practice:
Fraudulent practice:
Undesirable practice:
Coercive practice:
Establishing contact with any person connected with, or employed or engaged by,
the authority, with the objective of canvassing, lobbying or in any manner
influencing or attempting to influence the bidding process
Having a conflict of interest
Restrictive practice:
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Government reserves the right to reject any bid which is non responsive
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Pre-qualification
stage
Bid stage
Financial evaluation
Selection of bidder
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Pre-qualification of
Bidders
Pre-qualification of bidders (RFQ stage)
Key
concepts
Content in
in this
this section
section is
is based
based on
on the
the
Content
Guidelines for
for pre-qualification
pre-qualification of
of bidders
bidders
Guidelines
published by
by Ministry
Ministry of
of Finance,
Finance,
published
Department of
of Expenditure
Expenditure (May
(May 2009)
2009)
Department
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Pre-qualification of Bidders
Purpose and process
Purpose:
To screen and identify applicants who will be required to submit their financial
bids at the RFP stage
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Pre-qualification of Bidders
Common arguments for shortlisting
Why not limit the numbers by raising the bar for prequalification?
Would still be prone to an unpredictable outcome (i.e. no. of
bidders may turn out to be too few implying inadequate
competition)
Comment: While limiting the number of pre-qualified bidders
might have some merits, such a practice should be applied after
due thought regarding its appropriateness in the given context or
sector
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Pre-qualification of Bidders
Eligibility conditions for shortlisting
TECHNICAL CAPACITY
Measures experience and
capacity in developing or
constructing infrastructure
projects in eligible sectors
To qualify an Applicant must:
Have requisite
construction or
development (PPP)
experience in projects in
eligible sectors
FINANCIAL CAPACITY
O&M EXPERIENCE
Pre-qualification of Bidders
How to evaluate the Technical Capacity?
Evaluating Technical Capacity of Applicants
Eligible
Experience
Eligible
Projects
Threshold
Technical
Capacity
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Pre-qualification of Bidders
How to evaluate the Technical Capacity?
Eligible
Experience
Development of
Eligible Projects
Eligible
Projects
Threshold
Technical
Capacity
AND/OR
Construction of
Eligible Projects
Project
Specific
Sector
Core
Sector
Project
Specific
Sector
Core
Sector
Category 1
Category 2
Category 3
Category 4
Eligible Experience for each category shall be measured only for Eligible Projects
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Pre-qualification of Bidders
How to evaluate the Technical Capacity?
Which projects qualify as the Eligible Projects?
Eligible
Experience
Eligible
Projects
Threshold
Technical
Capacity
* In case of projects with an Estimated Project Cost of INR 1000 crore or above,
this may be reduced but not less than 10% of Estimated Project Cost in any case
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Pre-qualification of Bidders
How to evaluate the Technical Capacity?
Which projects qualify as the Eligible Projects?
Eligible
Experience
Eligible
Projects
Threshold
Technical
Capacity
* In case of projects with an Estimated Project Cost of INR 1000 crore or above,
this may be reduced but not less than 10% of Estimated Project Cost in any case
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Pre-qualification of Bidders
How to evaluate the Technical Capacity?
What is the Threshold Technical Capacity?
Eligible
Experience
Eligible
Projects
Threshold
Technical
Capacity
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Pre-qualification of Bidders
How to evaluate the Financial Capacity?
Add: Reserves
Less: Revaluation reserves
Less: Miscellaneous expenditure not written off
Less: Reserves not available for distribution to equity shareholders
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Pre-qualification of Bidders
What about O&M experience?
Pre-qualification of Bidders
How to short-list applicants?
Factor *
Category 1
1.25
Category 2
1.00
Category 3
0.75
Category 4
0.50
The sum total of the Experience Scores for all Eligible Projects is the
Aggregate Experience Score of a particular Applicant
The Applicants are ranked on the basis of their respective Aggregate
Experience Scores and short-listed for submission of Bids
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Pre-qualification of Bidders
Who all can apply?
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Pre-qualification of Bidders
Additional requirements in case the applicant is a consortium
Commits consortium members to hold 51% equity for the same period
Includes a statement to the effect that all members of the concessionaire
shall be liable jointly and severally until financial close
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Pre-qualification of Bidders
When is an applicant considered to have a Conflict of
Interest?
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Pre-qualification of Bidders
Is the Technical Capacity & Net Worth of an Associate
eligible?
Who is an Associate?
An Associate is a person who, in relation to the applicant/
consortium member:
controls,
is controlled by, or
is under the common control with such applicant/consortium member
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Pre-qualification of Bidders
Is the Technical Capacity & Net Worth of an Associate
eligible?
Indirect holding
Direct holding
b%
Company X
Company A
a%
Layer above
>50%
c%
APPLICANT
Company Y
d%
>50%
Company B
Layer below
Company Z
When a %, b %, c % and d % are each > 50% of the equity in the
respective entity, Z would be an Associate of the Applicant
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Pre-qualification of Bidders
Class discussion: Associate company
Company A
Company B
Company C
Company D
Company A
100%
70%
20%
10%
Company B
0%
100%
60%
40%
Company C
0%
0%
100%
0%
Company D
0%
0%
0%
100%
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Pre-qualification of Bidders
Tests of responsiveness
Bid Stage:
Request for Proposal
Selecting the preferred bidder (RFP stage)
Key
concepts
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Bidding Process
An overview
Preferred bidder
Receive bids
Evaluate bids
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Market data
Technical features
Soil investigation/ geo-tech reports (if applicable)
Revenue sources
Includes a feasibility report and draft Concession Agreement.
A
well-defined selection process including criteria for bid
evaluation is in place.
Draft Concession Agreement/ contract document has been prepared.
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Feasibility report:
Provided only as a preliminary reference by way of assistance to the
bidders
Bidders expected to carry out their own surveys, investigations
Feasibility report shall not be binding on the authority nor confer any
right on the bidders
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Selected Bidder:
Provided that the bid has passed the test of responsiveness, the bidder
who offers the highest premium or (where no premium is offered by
any bidder) quotes the lowest grant requirement, will be declared
the Selected Bidder
or
Annul the bidding process
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4 bids are received, but only 1 bidder complies with all the
requirements prescribed by the tender documents
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Case Example
RFP
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Government of India
does not prefer noncompetitive approaches.
Best practice, too,
discourages their use as a
norm.
Competitive bidding
Direct negotiation
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Government of India
does not prefer noncompetitive approaches.
Best practice, too,
discourages their use as a
norm.
Administrative
Legal
Technical
Government of India
does not prefer noncompetitive approaches.
Best practice, too,
discourages their use as a
norm.
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Government of India
does not prefer noncompetitive approaches.
Best practice, too,
discourages their use as a
norm.
Source: Adapted from Caribbean PPP Training, Victoria Delmon, World Bank
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Government of India
does not prefer noncompetitive approaches.
Best practice, too,
discourages their use as a
norm.
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THANKS
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