Experience Sharing & Workshop on Public-Private Partnership (PPP): Procurement Process

Edward Farquharson

James Ballingall

March 2011

The Procurement Process

2

Agenda

Procurement Process

• Principles

• Steps

• Best use of competition

• Evaluation

• Approvals

• Lessons

3

Principles

• Select a bid

• Maximize the benefits of competitive tension between bidders

• Deliver the best bid from the most competent bidder

• Minimize time and cost

• Stand up to scrutiny

=> balance these different objectives

4UNCLASSIFIED

Request for Final Proposals

Selection of Final / Preferred bidder

Financial Close

Number of Bidders

Depth ofInformation

flow

Project Launch

Negotiation/dialogue

Pre-qualification

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Competitive Dialogue Procedure

“a procedure in which any economic operator may request to participate and whereby the contracting authority conducts a dialogue with the candidates admitted to that procedure, with the aim of developing one or more suitable alternatives capable of meeting its requirements and on the basis of which candidates are invited to tender”

Public Contracts Regulations 2006 (SI 2006 No 5)

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Progressing through the process

• OJEU notice– Specify that competitive dialogue process will be used

– Intention to reduce the number of bidders at certain stages

– Needs and requirements (can also be included in a descriptive document)

– Pre qualification questionnaire issued (PQQ)

• Invitation to Participate in the Dialogue– 37 day clear days between despatch of OJEU to return date for expressions of

interest

– Minimum of three bidders that meet the PQQ selection period

– IPD: mature document which bidders can price. Need to have stakeholder support for its content

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Evaluation criteria example: PQQ Level 1

Weighting Minimum Pass Score

Legal/Eligibility n/a(Pass/Fail Only)

Pass/Fail

Technical Ability 75% 50%

Economic & Financial Standing

25% 50%

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Evaluation criteria example: PQQ Level 2Level 1 Criteria: TECHNICAL ABILITY 75 100Level 2 Criteria

Technical Capacity, Ability & Experience 60

Assessed through questions:C1, C2, C3, C4, C5, A11, A12, C6, C7, C8, C9, C10, C11

Level 2 Criteria

Experience of Working on Similar Projects 12

Assessed through questions:D1, D2

Level 2 Criteria

Method of Working 12

Assessed through questions:E1, E2, E3, E4

Level 2 Criteria

Quality Management, Environmental Management and Sustainability 6.5

Assessed through questions:G1, G2, G3, G4, G5

Level 2 Criteria

Health & Safety 6.5

Assessed through questions:H1, H2, H3, H4, H5, H6, H7, H8, H9, H10, H11

Level 2 Criteria

Equal Opportunities 3

Assessed through questions:I1, I2, I3, I4, I5, I6, I7

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Dialogue Phase

• Aim is to “identify and define the best means suited to satisfying [the contracting authority’s] needs

• Phase should continue until the contracting authority is satisfied that it has identified and defined its requirements with sufficient precision to enable Final Tenders to be submitted

• May be conducted in “successive stages” – no limit to the number of stages provided that at the end of the dialogue there are sufficient bidders to allow for a genuine competition (usually a minimum of two)

• Dialogue continues until the contracting authority identifies the solution or solutions to meet their needs

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Progressing through the process

• Call for final tenders

– Bidders to submit their tenders based on solutions identified in dialogue phase (comparable to submission of final ITN responses where no BaFO stage or a request for BaFO submission if this stage included)

– Suggest that request is submitted in writing. If the specification has been updated or revised then this should be issued

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Submission and evaluation of Final Tenders

• Must contain “all the elements required and necessary for the performance of the project”

• Final tenders can be “clarified, specified and fine tuned” provided that this “does not involve changes to the basic features of the tender or call for tender, variations which are likely to distort competition or have a discriminatory effect”

– e.g. pricing changes

• Issues should be resolved before Preferred Bidder stage

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Evaluation criteria example: Second StageCriterion Name at PQQ

Say 6 - 8

ISOS Weighting

say 3-4

ISDS Weighting

say 2

ISFT Weighting

1A Legal / Contractual 5.0% 10.0% 15.0%

A1 Legality 1.0% 2.0% 3.0%

A1.1 Legality 1.0% 2.0% 3.0%

A2 Contractual, Commercial Acceptability and Risk Transfer

3.0% 6.0% 9.0%

Etc

B Financial 15.0% 50.0% 50.0%

B1 Cost 5.0% 40.0% 40.0%

B1.1 Price 1.0% 30.0% 30.0%

B1.2 Payment Profile 1.0% 2.0% 2.0%

B1.3 Sensitivity Testing under Different Assumptions 3.0% 8.0% 8.0%

etc Financial Quality Criteria……. 10.0% 10.0% 10.0%

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Evaluation criteria example: Second Stage cont…

Criterion Name at PQQ

6 - 8

ISOS Weighting

3 - 4

ISDS Weighting

2

ISFT Weighting

1C Technical 62.0% 33.0% 28.0%C1 Technical Solution 32.0% 16.5% 14.5%C1.2 Performance against Targets 6.2% 3.2% 2.8%EtcC2 Operation and Contract Management

Systems etc etc5.0% 3.0% 2.5%

D Environment & Sustainability 15.0% 5.0% 5.0%D1 Environment 15.0% 5.0% 5.0%D1.3 Mitigation of Environmental Issues 5.75% 1.9% 1.9%

etc….E Bid Integrity 3.0% 2.0% 2.0%E1.1 Consistency of Technical, Financial, Legal

and Sustainability Proposals etc…..1.5% 1.0% 1.0%

100.0% 100.0% 100.0%

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Progressing through the process

• Appointment of Preferred Bidder

– Bidder offering economically most advantageous tender

– Criteria: Technical, Financial, Legal, other e.g. deliverability

• Key issues

– Methodology

– Informing Bidders

– Flexibility

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Approvals

• Staged Approach

– OJEU

– IPD

– PB

• Matters to consider

– Requirement (time, cost, performance)

– Affordability

– VfM

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Opportunity to Influence Project Outcome

Time

100%

Wh

ole

Lif

e E

xpen

dit

ure

Confirm StrategyConfirm

JustificationCompetitive Procurement

In-ServiceConfirm Benefits

Strategic Assessment

Contract Award

0%

Gate 0

Gate 1

Gate 2

Gate 3

Gate 4

Gate 5

ProcurementStrategy

InvestmentDecision

ReadinessFor Service

BenefitsEvaluation

BusinessJustification

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OGC GatewayReview 1

OGC GatewayReview 2

OGC Gateway Review 3

OGC GatewayReview 4

OGC GatewayReview 5

Lessons: Gateway Review ProcessLessons learned

Define Programme

ExecuteProgramme

CloseProgramme

Develop Business

Case

Develop Procurement

Strategy

CompetitiveProcurement

Award andImplement

contract

Manage contract

Closure

Business justification

Procurement strategy

Investment decision

Readiness for service

OGC Gateway Review 0Strategic

assessment

Repeat asnecessary

Contributes

Procurement projects

OGC Gateway Review 0

OGC Gateway Review 0

*

*

Benefits realisation

Policy ReviewPolicy MaintenancePolicy ImplementationPolicy Design

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Procurement Lessons: Gateway Reviews

• Effective stakeholder communication (approvals)

• Sound financial controls (affordability)

• Good Market knowledge and procurement advice

• Adequate skills and resources

• Clearly defined roles and responsibilities

• Robust business case

• Benefits realisation process

• Pre-agreed Critical Success Factors

• Ongoing risk management process

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Lessons Learnt: The Project Manager’s View• Plan ahead but be flexible – things inevitably change

• Set a prudent budget – investing at this stage can yield long term savings

• Advisers – name key personnel

• Advisers – fixed price for clearly defined work packages

• Things will change – look at potential for variations when assessing advisers fees and resources.

• Project Governance and approvals – communicate and manage expectations – shocks don’t go down well.

• Link back to the core business – good communication links

• Transition plan – knowledge transfer to contract management team

• Financial Close – it is not the end – it has only just begun!

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Lessons Learnt: The Advisers’ View

• An experienced project manager and a clear remit give confidence

• Too many advisers and advisers managing advisers leads to confusion on roles, increases costs, leads to delays

• Clients who are willing to listen often achieve best results

• Unrealistic timescales affect quality of service

• Suitable resources are not always readily available

• Best projects have experienced client fronting all bidder meetings

• Financials – advisers are there to make money

• Partnership ethos – advisers will often go the extra mile

• Reputation issues – future work

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Lessons Learnt: The Bidders’ View

• What does the client really want?• Who are the key decision makers and influencers?• Does the project have a deliverable solution?• Is there a level playing field in terms of competitors?• Can I offer a USP that differentiates my consortium?• What are the external stakeholder issues (planning)?• Level of approval to date (affordability, vires, etc)• Extent of risk transfer• Are the timescales realistic?• Forecast Bid Costs• Supply chain, local resource and inflationary pressures• New v mature market with standard procedures• Other projects in the market – which has best chance of success?

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Questions and Discussion