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Private Public Partnerships:

Sample Standard Bidding Documents for

Design-Build-Operate (DBO)for Solid Waste Management

Presented by Allan RotmanPresented by Allan RotmanSr. Environmental SpecialistSr. Environmental Specialist

Context for DBO for SWM in MNAContext for DBO for SWM in MNA

Initiated as part of the Solid Waste Initiated as part of the Solid Waste Management Strategy for METAP countries Management Strategy for METAP countries -- presented at Cairo conferencepresented at Cairo conference--May 2000May 2000METAP is Mediterranean Technical METAP is Mediterranean Technical Assistance ProgramAssistance ProgramFinanced by ESSD Norwegian Trust Fund Financed by ESSD Norwegian Trust Fund --multimulti--year program year program Work began on DBO documents in 2001Work began on DBO documents in 2001Endorsed for Endorsed for ‘‘pilot testingpilot testing’’ in 2002in 2002

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SWM Strategy for METAP SWM Strategy for METAP CountriesCountries

MNA Region needs approx. $2.5 MNA Region needs approx. $2.5 –– 3.0 3.0 billion over next 10 years: billion over next 10 years: •• 8% 8% -- Correction of Past/Current Problems Correction of Past/Current Problems •• 15% 15% -- Strengthen/Rationalise CollectionStrengthen/Rationalise Collection•• 12%12%--Legal/Institutional/IWM Legal/Institutional/IWM

Planning/Capacity Planning/Capacity StrengtheningStrengthening•• 65% 65% -- Facilities InvestmentsFacilities Investments

Why We Started on DBO in SWM ?Why We Started on DBO in SWM ?

Experience in Bank financed SWM projectsExperience in Bank financed SWM projectsDifficult to construct a SWM facility in 5 yrsDifficult to construct a SWM facility in 5 yrsMultiple procurements cause slow Multiple procurements cause slow implementationimplementation–– Feasibility contract Feasibility contract –– Environmental and Social Safeguards AssessmentEnvironmental and Social Safeguards Assessment–– Detailed engineering design contractDetailed engineering design contract–– Civil works contractCivil works contract–– Supervision of construction contractSupervision of construction contract–– Operations contract Operations contract

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Other Reasons for DBO in SWMOther Reasons for DBO in SWM

Overlaps lead to messy Overlaps lead to messy ‘‘handovershandovers’’Private sector likes DBOsPrivate sector likes DBOs

Can bundle with other activities (e.g. dump Can bundle with other activities (e.g. dump closure, transfer stations, access roads)closure, transfer stations, access roads)Uses the strong technical and project Uses the strong technical and project management skills of private sector management skills of private sector Allows municipalities to focus their limited Allows municipalities to focus their limited human resources on systemic SWM issueshuman resources on systemic SWM issues

More Reasons for DBO in SWMMore Reasons for DBO in SWM

Incentives for cost effectiveness PSD adapted Incentives for cost effectiveness PSD adapted to local conditionsto local conditionsOne private operator is responsible for design, One private operator is responsible for design, construction and environmental impacts (does construction and environmental impacts (does not own or lease land)not own or lease land)Prevents good landfills reverting to open Prevents good landfills reverting to open dumpsdumpsCan include other optional features: Can include other optional features: –– performance incentives (e.g. carbon finance, performance incentives (e.g. carbon finance,

recycling rates)recycling rates)–– Equipment purchase Equipment purchase –– Transfer of employeesTransfer of employees

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Approaches to PPPApproaches to PPP

2-30 yearsPrivatePrivatePrivatePublic and Private

Build-Operate-Transfer (BOT)

25-30 yearsPrivatePrivatePrivatePublicConcession

8-15 yearsSharedPublicPrivatePublicLease

55--8 years8 yearsPublicPublicPublicPublicPrivatePrivatePublicPublicDesign-Build-Operate

3-5 yearsPublicPublicPrivatePublicManagement Contract

1-2 yearsPublicPublicPublic/privatePublicService Contract

Contract Duration

Commercial Risk

Capital Investment

Operation & Maintenance

Asset Ownership

Approach

Characteristics of the DBOCharacteristics of the DBO

Intermediate step in PSDIntermediate step in PSDPublic sector financing and financial risksPublic sector financing and financial risksPrivate sector technical skills and technical risksPrivate sector technical skills and technical risksTypical duration is 8 years:Typical duration is 8 years:–– 1 year detailed design phase1 year detailed design phase–– 2 years construction phase2 years construction phase–– 5 years operations phase5 years operations phase

Can bundle with other SWM prioritiesCan bundle with other SWM priorities–– Examples: dump closure, training and outreach Examples: dump closure, training and outreach

Transitional step to full cost recovery by Transitional step to full cost recovery by municipalitymunicipality

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Again More Reasons for DBO Again More Reasons for DBO

After the DBO a municipality / utility still After the DBO a municipality / utility still has options:has options:–– Operate itself as public sectorOperate itself as public sector–– Continue with same private sector Continue with same private sector

operator (e.g. annual contract renewals)operator (e.g. annual contract renewals)–– Bid a new contract to the private sectorBid a new contract to the private sector

Key Features in the DBOKey Features in the DBODesigned for Bank loans Designed for Bank loans Follows Bank procurement guidelines Follows Bank procurement guidelines Classified as Classified as ““worksworks””–– based on Supply and Installation of Plant and based on Supply and Installation of Plant and

EquipmentEquipment

Innovations:Innovations:–– flexible preflexible pre--qualificationqualification–– performance based approach performance based approach

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Prerequisites to DBO for SWMPrerequisites to DBO for SWM1.1. Social and Environmental Safeguards Social and Environmental Safeguards

AssessmentAssessment2.2. Land acquisition completedLand acquisition completed3.3. Financing secured Financing secured

–– e.g. Bank loan for 5 yrs and central/municipal e.g. Bank loan for 5 yrs and central/municipal financing for 3 yrsfinancing for 3 yrs

4.4. Feasibility level site layout drawingsFeasibility level site layout drawings5.5. Transaction advisors Transaction advisors

–– (legal and technical) for first few transactions (legal and technical) for first few transactions for sample documentsfor sample documents

Key Features in the DBOKey Features in the DBOTwo Part ProcessTwo Part Process (not two stage)ot two stage)Part 1: PrePart 1: Pre--qualificationqualification–– SubSub--contractorcontractor’’s SWM technical and financial experience s SWM technical and financial experience

is eligible is eligible Part 2 : BiddingPart 2 : Bidding–– One Envelope Bid SubmittalOne Envelope Bid Submittal--both technical and financialboth technical and financial–– Unified Bid Evaluation ProcessUnified Bid Evaluation Process–– Technical Evaluation: Pass or fail evaluation based on Technical Evaluation: Pass or fail evaluation based on

substantially responsivesubstantially responsive–– Financial Evaluation: Pass or fail based on substantially Financial Evaluation: Pass or fail based on substantially

responsive responsive –– WINNER WINNER -- Lowest evaluated price of technically Lowest evaluated price of technically

responsive bids winsresponsive bids wins

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PrePre--Qualification IssuesQualification Issues

evaluation of applications based on solid evaluation of applications based on solid waste facility design, build and operations waste facility design, build and operations experience, financial position, personnel experience, financial position, personnel capabilities and litigation historycapabilities and litigation history

subcontractors experience may be subcontractors experience may be consideredconsidered

Key Features in the DBOKey Features in the DBO

NOT A DESIGN COMPETITONNOT A DESIGN COMPETITON–– BASIC CONCEPTUAL DESIGN SET OUT IN BIDBASIC CONCEPTUAL DESIGN SET OUT IN BID

Important role for Technical Evaluation Important role for Technical Evaluation CommitteeCommittee

1. Design1. Design--build criteriabuild criteria2. Operations criteria2. Operations criteria3. Staffing plan criteria3. Staffing plan criteria

–– DO NOT quantify above criteria (lesson DO NOT quantify above criteria (lesson learned) learned)

–– Assistance by transaction advisors and/or Assistance by transaction advisors and/or supervision consultant (lesson learned) supervision consultant (lesson learned)

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Key Features in the DBOKey Features in the DBOBid Price StructureBid Price Structure–– DesignDesign--Build services Build services –– flat monthly fee vs. flat monthly fee vs.

progress paymentsprogress payments(lesson learned (lesson learned -- no unit prices and quantities)no unit prices and quantities)–– Operations services Operations services -- monthly feemonthly fee–– Bottom line = total lump sum priceBottom line = total lump sum price

Role of Supervising ConsultantRole of Supervising Consultant–– technical evaluation advisor technical evaluation advisor –– acceptance of final designacceptance of final design–– progress paymentsprogress payments–– change orders change orders

Key Success and Lessons Learned in Key Success and Lessons Learned in Pilot DBOPilot DBO

SuccessesSuccesses–– Testing private sector reaction to DBO concept and Testing private sector reaction to DBO concept and

document structure (San Fernando City document structure (San Fernando City ––Philippines) Philippines)

–– Working across sectors and regions at Bank Working across sectors and regions at Bank –– Procurement can be innovative and flexibleProcurement can be innovative and flexible

Lessons Lessons –– For capacity building in the sectorFor capacity building in the sector–– When to use the DBO toolWhen to use the DBO tool–– Procurement process and contents of the bidding Procurement process and contents of the bidding

documents documents

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DBO Generic DocumentsDBO Generic DocumentsTab I Tab I –– PrePre--qualification Documentsqualification DocumentsTab II Tab II –– Bidding DocumentsBidding Documents

Annex A Annex A -- Draft ContractDraft ContractGeneral ConditionsGeneral ConditionsAppendices 1 to 11 to the General ConditionsAppendices 1 to 11 to the General Conditions

Annex B Annex B -- Various Bidding Documents and FormsVarious Bidding Documents and Forms(Bid Form, Bidders Price Form and Price Schedule,(Bid Form, Bidders Price Form and Price Schedule,Bid Security Form, Performance Security Form, Bid Security Form, Performance Security Form,

Bank Guarantee FormBank Guarantee Form--Advance Payment and Form of Advance Payment and Form of Curriculum Vitae)Curriculum Vitae)

DBO Generic DocumentsDBO Generic Documents

Appendices to the General ConditionsAppendices to the General Conditions

»» Appendix 1 Appendix 1 --Special Conditions of ContractSpecial Conditions of Contract»» Appendix 2 Appendix 2 --Terms and Procedures of Terms and Procedures of

PaymentPayment»» Appendix 3 Appendix 3 -- Technical SpecificationsTechnical Specifications

-- Appendix 3A Appendix 3A --DesignDesign--Build ServicesBuild Services-- Appendix 3B Appendix 3B -- Operations ServicesOperations Services-- Appendix 3C Appendix 3C -- Technical StandardsTechnical Standards

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DBO Generic DocumentsDBO Generic DocumentsAppendices to the General Conditions Appendices to the General Conditions

(continued)(continued)

»» Appendix 4 Appendix 4 -- SiteSite»» Appendix 5 Appendix 5 -- Service AreaService Area»» Appendix 6 Appendix 6 -- Contract Price AdjustmentContract Price Adjustment»» Appendix 7 Appendix 7 -- Incentive Compensation Incentive Compensation »» Appendix 8 Appendix 8 -- Liquidated Damages Liquidated Damages »» Appendix 9 Appendix 9 -- Existing Staff Existing Staff »» Appendix 10 Appendix 10 -- OperatorOperator’’s Personnels Personnel»» Appendix 11 Appendix 11 -- OperatorOperator’’s Bids Bid

Solid Waste Solid Waste –– DBODBOBaseline Procurement /Legal DocumentsBaseline Procurement /Legal Documents

PrePre--Qualification Qualification –– SourceSource–– SDB WorksSDB Works

General legal conditionsGeneral legal conditions-- SourcesSources-- FIDICFIDIC-- existing standard World Bank bidding existing standard World Bank bidding

documentsdocuments-- existing management and operating existing management and operating

contractscontracts

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Solid Waste Solid Waste -- DesignDesign--Build Operate Build Operate Bid EvaluationBid Evaluation

preliminary examination of bidspreliminary examination of bidstechnical aspects of each Bid evaluated with technical aspects of each Bid evaluated with respect to the following factors:respect to the following factors:

–– the Designthe Design--Build WorkplanBuild Workplan–– the Operations Workplanthe Operations Workplan–– the Staffing Planthe Staffing Plan

price evaluation to ensure substantial price evaluation to ensure substantial responsivenessresponsiveness

Solid Waste Solid Waste -- DesignDesign--Build Operate Build Operate Bid EvaluationBid Evaluation

award is to the Bidder whose Bid has award is to the Bidder whose Bid has been determined been determined to be substantially responsive and has to be substantially responsive and has the lowest evaluated Bid Pricethe lowest evaluated Bid Price

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Key Sector Lessons LearnedKey Sector Lessons Learned

Hard to insert DBO in existing Bank loansHard to insert DBO in existing Bank loansNeed to be very proNeed to be very pro--active with clients active with clients (beneficiary level and implementing (beneficiary level and implementing agencies)agencies)Use DBO cost savings for early transaction Use DBO cost savings for early transaction advisors (legal, procurement and technical)advisors (legal, procurement and technical)DBO process builds technical and DBO process builds technical and management capacitymanagement capacity

Key Procurement Lessons LearnedKey Procurement Lessons Learned

Start early with transaction advisors (legal, Start early with transaction advisors (legal, procurement and technical)procurement and technical)FrontFront--load the capacity building effort with all load the capacity building effort with all

inin--country stakeholderscountry stakeholdersDO NOT quantify technical evaluation criteria DO NOT quantify technical evaluation criteria ––follow ITB 5.5 and not performance criteria in follow ITB 5.5 and not performance criteria in 3A, 3B and 3C3A, 3B and 3CClearly define when designClearly define when design--build ends (DO build ends (DO NOT use unit prices and quantities)NOT use unit prices and quantities)Clearly define when operations beginClearly define when operations begin

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Next Steps Next Steps

Already on Bank Procurement (OPCPR) Already on Bank Procurement (OPCPR) web page as a Sample Editionweb page as a Sample EditionComments by eComments by e--mail to OPCPRmail to OPCPRBeing used in several Bank solid waste Being used in several Bank solid waste projects in Philippines, Argentina, Tunisia projects in Philippines, Argentina, Tunisia and Iran and Iran Easily adapted to solid waste carbon Easily adapted to solid waste carbon projects Considering advisory committee to projects Considering advisory committee to regional RPA/RPM and task teamsregional RPA/RPM and task teams