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The bidding process for PPP/PFI projects varies depending on the particular market sector, public sector Authority involved and from project to project.
The bidding process is invariably of long duration, typically two years or more, and is expensive for both bidders and public sector Authorities. This is perhaps not of great surprise given that proposals are being developed and contracts are being negotiated to deliver and operate complex and essential facilities for a 25-30 year concession period.
The private and public sectors work together through consultation to simplify the bidding process and reduce the bidding period. This, together with the development of standardised contracts and payment mechanisms, the standardisation of submission document requirements and the omission and/or paralleling of procurement stages is realising some efficiencies and improvements to the process, but more progress on this is still being targeted.
The following outlines a typical procurement process utilised in PPP/PFI and describes options where improvements may be made. The sums of money in the left-hand column of the diagram represent the approximate cost to Balfour Beatty of each stage of the bidding process for a typical project.
Qualifying PPP/PFI projects must be advertised in the Official Journal of the European Union (OJEU) by the relevant public sector Authority and are generally offered under the Negotiated Procedure option. Occasionally, Preliminary Information Notices (PIN) may be posted in OJEU by the public sector Authority to advise potential bidders of forthcoming projects.
Balfour Beatty actively evaluates and pursues developing projects several years prior to OJEU publication to select suitable investment opportunities and to develop relationships with potential public sector partners and also, where appropriate, potential consortium partners.
Following the formal OJEU notice publication, bidders are invited to submit an Expression of Interest to the public sector Authority. The public sector Authority may then issue an information memorandum about the project and invite potential bidders to submit a response to a Pre-Qualification Questionnaire (PQQ) which, through a number of standardised questions, aims to identify each potential bidder's eligibility, experience and ability to undertake the project.
The public sector Authority may then select a long list of typically 6 to 8 bidders to submit a response to a Preliminary Invitation to Negotiate (PITN) or Invitation to Submit Outline Proposals (ISOP) document. This submission requires bidders to develop outline proposals for the specific project, which may include outline design proposals and preliminary cost modelling.
To accelerate the bidding process and reduce associated costs, the public sector Authority may request bidders to submit a PITN/ISOP in parallel with their PQQ response. Alternatively, depending on a particular project's complexity and value, the number of PQQ responses received or the particular market sector involved, the public sector Authority may waive the requirement for a PITN/ISOP submission.
Following the required submissions, a shortlist of typically 3 to 4 bidders will then be invited to submit a response to a Final Invitation To Negotiate (FITN) or Invitation to Tender (ITT) prepared by the public sector Authority. This document comprises detailed descriptions of the project facilities and services required, expressed in the form of outputs to be delivered or achieved, as opposed to inputs as utilised in conventional contracting.
It is then for bidders to determine how such outputs are to be delivered efficiently and effectively, and for them to develop proposals that would provide a best value solution to the public sector Authority. The FITN/ITT process therefore requires bidders to develop detailed proposals covering all aspects including design, construction, operation, management, whole life cost, insurance and finance of the project. Detailed cost and financial models are constructed and optimised by each bidder and its advisers to ensure the most competitive, but deliverable bid is submitted.
Following FITN/ITT submission, the public sector Authority may request interviews with and presentations by bidders, and/or instigate complex question and answer procedures to ensure all aspects of a bidder's submission are understood as well as satisfy itself that the proposals will deliver the specified outputs in a manner acceptable to the Authority.
The public sector Authority may then invite two bidders to submit a Best and Final Offer (BaFO) or they may proceed straight to selection of a Preferred Bidder. The BaFO process usually refines the selected bids submitted at the previous procurement stage, but typically requires a higher level of commitment and certainty attached to them. Once a Preferred Bidder is selected, an intensive period of activity is required to deliver commercial and financial close to the project. This requires the final negotiation of all the contractual documentation needed to deliver the necessary finance, the mobilisation of the various parties and ultimately the delivery of the final project.
