Procurement 20 th March 2012 Warwick Max Brooker BSc(hons), MBA, AMIMechE, MAPM Partner – OTB...
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Transcript of Procurement 20 th March 2012 Warwick Max Brooker BSc(hons), MBA, AMIMechE, MAPM Partner – OTB...
Procurement
20th March 2012Warwick
Max BrookerBSc(hons), MBA, AMIMechE, MAPM
Partner – OTB Engineering LLPO: 020 7099 2608 M: 07799 765 286
Agenda Topics
• EU Procurement Approach
• Competitive Procurement
• Procurement Procedures
• Conventional vs PPP Procurement
• Risk Allocation
• Case Example – Aspects of PPP Procurement
Public Procurement ProcessEU Approach
Procurement Authority – Major Projects – Competitive Procurement
Requirements Definition Feasibility/Business Case/Budget Planning Advertise for Expressions of Interest (EOI)
Pre-Qualification Questionnaire (PQQ) – Long List of Bidders Outline Proposals (OP)
Clarifications/Risk Workshops Select - Shortlist Bidders
Costed Final Proposals (FP) Competitive Dialogue
Select Preferred Bidder (PB)Negotiate Contract Terms Award Contract
(see www.businesslink.gov.uk)Crossrail TBM
Competitive Selection ProcessesEU Approach
See “Official Journal of the EU” (OJEU)
• Open Procurement – any interested parties may tender
• Restricted Procurement – only selected bidders are invited to bid (PQQ)
• Competitive Dialogue – on major projects (unique or complex) a complex dialogue process is undertaken
• Negotiated Procedure – Procurement Authority negotiates the terms of the tender
UK Procurement Threshold Levels for 2012Information Note 10/11
(www.cabinetoffice.gov.uk)
• Services & R&D– £347,868 All Sectors
• Works– £4,348,350 All Sectors
• Small Lots– £69,549 Supplies & Services– £869,670 Works
Example – The Utilities Contracts Regulations
EU Procurement Processes Overview
Complexity ?
Subm
it OJE
U A
ward N
otice within 48 days
Aw
ard
con
tract a
llow
ing
for 1
0 d
ay S
tan
dstill P
erio
d
Eva
lua
te Te
nd
ers a
ga
inst A
wa
rd C
riteria
Re
ceip
t of Te
nd
ers
Issue Invitation to TenderRestricted
Sh
ortlist S
ubm
itted Expressions o
f Interest against
qualification criteria (m
inimum
of 5 bidders)
40 Days*
OJEU Process ChartOJEU NOTICENormal
OJEU NOTICEElectronic
OJEU NOTICEPIN
OJEU NOTICEPIN Electronic
OJEU NOTICEUrgent
OJEU NOTICEUrgent Electronic
37 Days
37 Days
30 Days
30 Days
15 Days
10 DaysIssu
e PQ
Qs
22 Days*
10 Days
* Times indicated with an asterisk can be reduced by 5 days where “unrestricted and full access by electronic means” to contract documents
Pre
pa
re S
pe
cificatio
n
Subm
it OJE
U A
ward N
otice within 48 days
Aw
ard
con
tract a
llow
ing
for 1
0 d
ay S
tan
dstill P
erio
d
Eva
lua
te Te
nd
ers a
ga
inst A
wa
rd C
riteria
Re
ceip
t of Te
nd
ers
CompetitiveDialogue
Inv
ite sh
ortlist to
p
articip
ate
in d
ialo
gu
e
Co
nd
uct d
ialo
gu
e(in
succe
ssive sta
ge
s if ne
cessa
ry)
Co
nclu
de
dia
log
ue
an
d in
vite su
fficien
t ten
de
rs to e
nsu
re
com
pe
titionOJEU NOTICE
Normal37 Days
30 Days
Sh
ortlis
t Su
bm
itted
Exp
ressio
ns o
f Inte
rest a
ga
inst
qu
alifica
tion
criteria
(min
imu
m o
f 3 b
idd
ers)
OJEU Process Chart
OJEU NOTICEElectronic
Pre
pa
re S
pe
cificatio
n
Developing The Procurement Strategy
• Requirements Definition• In-House or Buy-in• Competitive/Non-competitive• Expertise & Scale of Project Packages – WBS/OBS• Delivery Partner/Programme Management • Market Expectation• Private Public Partnership (PPP) vs Conventional• Risk Allocation & Budgeting for Cost Exposure• Procurement Planning• Selection Criteria
Competitive Procurement SelectionAdjudication Criteria
• PQQ – 6 to 12 Long List of Bidders– Capacity & Experience– Quality
• Shortlist of Bidders – 4 Bidders– Project Management & Quality– Design & Construction– Cost & Risk
• Final Bids – 2 Bidders– 20% - Requirements Compliance (Ts & Cs of Contract)– 30% - Technical– 50% - Cost (Value for Money)
Risk AllocationConventional vs PPP Procurement
Design Private Private Private Private
Construction Private Private Private Private
Operate Authority Private Authority Private
MaintenanceAvailability Authority Private Authority Private
Finance Authority Authority Private Private
Demand Authority Authority Authority AuthorityRisk
D&B BOT DBFT DBFOForm of Contract
PPP Risk AllocationPublicAuthority
PrivateCompany
Tunnelling Projects ProcurementContract Forms
• CTRL – PPP• Dartford Crossing – PPP SOPC• M25 – PPP SOPC4• Crossrail Tunnels - NEC3• Thames Tideway – NEC3
The New Engineering Contract (NEC) form was developed to improve team-working, co-operation and trust between the Employer, the Consultant and the Constructor. It includes a risk sharing approach aimed to deliver the project on time, at cost and to quality. It has Options A to F.
New Engineering Contract (NEC3) Options
• Option A – Priced contract with activity schedule – a “lump sum” contract
• Option B – Priced contract with bill of quantities – the quantities are re-measured
• Options C & D – Target cost with activity schedule or bill of quantities, respectively pain/gain above a target (tendered or negotiated) is shared between the parties in a flexible way as defined by the Employer
• Option E – Cost reimbursable• Option F – Managed contract
Case StudyAspects of PPP Procurement
Public Sector Procurement & the PPP Option
• Why choose the PPP Option for public infrastructure development?– Leverage private sector capital and accelerate economic
development– Gain private sector innovation and efficiencies– Transfer risk of service delivery to the private sector– Long term Public/Private contracts– Only pay when service is available and to performance– Fiscal accounting advantages (PSBR)– Emerging market support funding available– ...
Generic Structure of PPP Deals
ProcurementAuthority
BanksEquity
HoldersSpecial Purpose
Company
Asset Provider Service Company
UnitaryCharge
Principal &Interest
Subordinated Debt & Equity
Dividends, Principal& Interest
SeniorDebt
Capital ExpenditureCAPEX
Operational ExpenditureOPEX
UsersUsage
Payments
Cash Flow Viewpoint
NEC3
Example Thames TunnelPPP Option Structure
WaterConsumers
Water UtilityProcurement
Authority
ISPProject Co Ltd
Secretary of StateDEFRA
RegulatorOFWAT
EnvironmentAgency
IPC
Lending Banks
ISP Project Agreement
Facility Agreement
ConstructorsE, C, W
DesignE, C, W Operator Maintainer
ISPShareholders
Shareholders Agreement
Main Contracts
Direct Agreement
Licence
Licence
Thames WaterShareholders
EU Urban Waste Water Treatment
Directive
£ rates
PPP Project Timescales
FinancialModel
Cash Flow:-REVENUECAPEXOPEXFinancing
2 years
3 to 5 years
25 to 35 years
Project Agreement Lifecycle
Design & Build CAPEX
Pre-contract
Operate & Maintain - OPEX
TransversalHand-back
Payment Mechanism
Revenue
Financial Close
Operational Date
PPP Market Size & Segmentation
• Market Segmentation – business focus– World Bank: PPP Infrastructure Resource centre: Energy, Water,
Transport, Telecoms & ICT– Infra News: Transport, Social, Environment & Renewables– Geographic Regions: Language, Finance, Legal Framework, Maturity,
UK, EU, USA, SA, Canada, SEA, ME, Australia, Russia, China, Korea ...– Business Functional: Roads, Rail, Airports, Sea Ports, Hospitals,
Schools, Prisons, Courts, Power Stations, Water & Wastewater, Waste ...
– Private Sector Opportunities: Project Co (SPV), Construction, Operations, Consulting (Legal, Financial Technical), Insurance
PPP Market Size & Segmentation
• Market Size Factors: business potential– Demand for infrastructure development– Procurement Authority maturity and Legislative
Framework– Seed-corn Funding and deal Finance available– Project Feasibility, Business Case & Bankability– Bank Lending Market appetite– Design, Construction & Operations Teams– ...
Summary of Key Points
• Why governments go for PPP procurement – leverage.• Procurement options & risk transfer – conventional to PPP.• EU Procurement processes – negotiated soln/competitive
dialogue.• EU Procurement processes.• NEC 3 Options.• Risk Allocation and Procurement Strategy.• Structure of PPP deals – debt finance and cash flow.• Market Segmentation and Size.
Thankyou for your attention
Any Questions