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Project Management
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The procurement phase commences with thepublication of the procurement notice andends with the financial close, the point at
which project activities (beginning withdetailed design and construction) can start.
It has been broken down for convenience intotwo stages: (i) the bidding process and (ii) theperiod from the selection of the preferredbidder to financial close.
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Bidding Process
The Project bidding process involves a series
of steps.
The goal of the bidding process is to maximize
incentives through a competitive process for
the award of the long-term Project contract.
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During the bidding process, sufficient
attention should be placed on the key good
procurement principles of transparency and
,
legitimacy of the Project and its acceptance by
stakeholders.
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These good procurement principles must be
respected from the time the formal tendering
process begins.
place before the process formally begins (this
is particularly important in respect of large
projects).
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For example, while keeping in mind thatachieving a level playing field amongst potentialbidders is the eventual goal, the Authority may
organize information days, technical briefings,ear y pu c re ease o ec n ca ocumen s anso on.
As soon as the procurement notice is published,
all potential bidders must be given equaltreatment and a careful audit trail of all contactswith potential bidders must be kept.
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equal treatment principle dictates that
information provided to one potential bidder
should be made available to the other
.
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Procurement notice
Publication of the public procurement notice
marks the start of the formal procurement
process.
necessary requirements.
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Procurement notice (cont..)
It is good practice to also publish the
procurement notice in one or more
newspapers.
enable interested companies to demonstrate
their qualifications (also known as the
submission of an expression of interest).
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Prequalification
The purpose of prequalification is to includeonly those bidders that appear to be capableof carrying out the project in an adequate
manner. The wording of the brief project description
contained in the notice should be broadenough for it not to need to be subsequentlychanged (which might then require the noticeprocess to start all over again).
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Typically, interested parties that respond to an
initial notice are sent a short statement of
information about the project and instructions
.
These form the basis of a qualification
submission that such parties must make to
demonstrate their ability to implement theproject.
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The invitation to prequalify (or prequalificationquestionnaire, as it may be called) should containat least the following:
The broader context of the project ,
intended allocation of major risks and envisagedresponsibilities of each party
A list and summary of the major studies that willbe made available to bidders concerning theproject
The intended procurement process
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The qualifications that companies can putforward (e.g. parent or subsidiary companiesqualifications)
The criteria and tests that will be used toevaluate the prequalification statement (butnot necessarily the precise details to be usedin any scoring or ranking since that could leadto some manipulation by the candidates)
A timetable.
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It is standard practice for the Authoritys legal
advisers to draft both the procurement notice
and the prequalification questionnaire.
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The aim of the bidding process is to maximize
competition, not the number of bidders.
The presence of too many bidders on the
participating and cause good bidders to drop
out.
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In some cases the public sector has sought toencourage candidates to bid by agreeing inadvance to make a payment to each losing
bidder that would partially reimburse it forthe costs of bid preparation.
Such payment could be made from moneythat the Authority would receive from the
winning bidder (once again, specified inadvance).
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The size of the payment has to be calibrated
to discourage frivolous bids.
Practice varies widely between countries. T e Aut or ty s ou as t e r a v sers a out
current market practice in the relevant sector
and jurisdiction.
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In evaluating the qualification submission, the
Authority will focus on the technical capability,
business capability and financial position of
.
In line with public procurement legislation,
these capacities must be, in principle,
demonstrated jointly, rather than individually,by the members of a consortium.
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The prequalification submission will usually be required todescribe the following:
The business activities of the consortium (e.g. how many
projects of a similar nature, the consortium has implemented
over a specified number of years)
Financial information (e.g. thresholds involving turnoverand net worth);
Legal information about the consortium, including any
relevant litigation involving the companies; and
The quality of personnel to be involved in the project.
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The first step of the prequalification and
shortlisting process is often to determine
which consortia have passed the thresholds in
. . .
Most of the criteria (e.g. company revenue)
are expressed in terms of clear and objective
thresholds.
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If this results in a number of consortia that
exceed the maximum number pre-specified
for the shortlist, then a systematic and
should be used to narrow down the list to
arrive at a shortlist.
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Sometimes shortlisting is done partly on thebasis of responses that are submitted to a setof open-ended questions about how the
companies would address certain key issues ifthey were to win the contract.
For example, in the competitive dialogueprocedure, initial shortlisting can be based
partly on an assessment of the outline orindicative solutions given by the candidates.
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At the end of the process, a well-substantiated
prequalification report should be prepared to
provide a good audit trail.
.
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Invitation to the Tender
Preparation of the tender documents will
usually have begun during the last steps of the
project preparation phase but to be time-
,
the prequalification period.
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The invitation to tender documentation
should contain all the information that bidders
will need to bid.
time and effort to develop the documentation
in enough detail to ensure comparability of
the bids and reduce the need for debate andclarification before the contract is signed.
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The tender documentation, which is usuallyextensive in detail and volume, will normallyinclude (but not be limited to) information suchas:
project
a summary of the key commercial principles,including the obligations of each party and risk
allocationdetailed output specifications and the minimum
required technical design and technical features;
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a full draft contract (which, in some countries,
would be based on mandatory standard contract
terms or on required guidelines of some kind);
information they must submit and the detailed
procedures for submission;
the evaluation criteriarequirements for bid bonds or equivalent
security.
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Interaction with the bidders
the nature and level of communication
permissible with bidders will be determined
by the procurement procedure chosen.
maximum value for money, it is critical to
manage the bid process well.
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shortly after issuing the invitation to tender itis usual to hold a bidders conference toexplain issues and take questions from the
bidders. Written clarifications should beprovided to all bidders
it is typical to provide for a data room opento bidders, where they can access detailed
documents concerning all aspects of theproject.
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The complexity of large Projects will normallyrequire a high degree of interaction betweenthe Authoritys project management team and
the bidders. The terms and conditions for an interactive
process, including the procedures, protocolsand rules, should be included in the broader
set of conditions, rights and obligations towhich bidders consent.
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The objective of developing this iterativeprocess is to improve the quality of theproposals by:
fosterin innovative solutions from differentbidders
clarifying any technical, financial andcommercial issues
providing timely, direct and specific feedbackto all bidders on key aspects of their bids.
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The Authoritys project management team has
to take particular care to protect each bidders
commercial in-confidence material and
.
More generally, the project management
team will have to consider probity principles
and rules as part of the implementation of theinteractive process.
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Evaluation of tenders and selection
of the preferred bidder Once the tenders are submitted, they must be
evaluated to arrive at the selection of the
preferred bidder.
number of pass/fail criteria before the single
preferred bidder is decided on.
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even if the evaluation score is not based on atechnical evaluation, a determination must be
made that the technical solution proposed by abidder is feasible, deliverable and robust, that it isbased on reliable technologies, that it meets allminimum technical requirements set and that the
costs and financial structure are consistent withe ec n ca so u on
it is important to look at the proposed projectmanagement: the bidding consortium must come
across as a cohesive entity rather than just acollection of companies put together for biddingpurposes.
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A key issue is the choice of the criteria for theevaluation and scoring of alternative bids.
Occasionally, only one bidder will submit a
tender des ite the Authorit havin issued theinvitation to tender to several shortlistedcandidates.
Should that happen, in good procurementpractice, the question of how to proceedshould be considered case by case.
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If it appears that bidder interest was low
because of deficiencies in the tender
documents (including the project
can realistically be remedied, then the best
solution might be to repeat the tender
procedure this time on a better footing.
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If it appears that the bid was made in the biddersbelief that there would be a good level ofcompetition (and this should be supported by theAuthoritys advisers carrying out benchmarking ofcosts and in some cases b insistin on actualmarket testing of the costs of the majorsubcontracts), then the best solution might be tocontinue with the procurement and consider thesole bidder to be the winner, provided that thetender is fully compliant and meets all pass/failevaluation criteria
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A minimum standstill period of 10 days is
required between the contract award decision
and the actual conclusion of the contract to
review and decide whether they want to
challenge the award.
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more importantly, an aggrieved bidder can bringan action to have the contract renderedineffective if the Authority contravenedprocurement rules in a serious manner.
,bidder could seek was to be awarded monetarycompensation, but nowadays an aggrieved biddercould seek cancellation of the contract.
How the various rights and obligations of theparties will be determined in this case is left tonational law.
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The finalization of the arrangements, leading to commercial
and financial close, involves a series of steps.
The activities involved in these steps often deal withdetailed fine-tuning matters.
Close interaction between the Authority, Company, itssponsors an its inanciers is essentia .
This stage requires thorough organization and managementfor it to proceed efficiently.
It should be planned carefully, generally making use of
experienced advisers. Many projects have experienced lasting difficulties as a
result of a lack of adequate planning or expert adviceduring this critical stage.
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Finalize the contract
The different procurement procedures imply
varying forms/ intensity of discussions once
the preferred bidder has been selected.
,
received and a preferred bidder has been
selected, the final adjustments to the contract
should be limited to clarifications andconfirmation of commitments.
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The final discussions with the preferred bidder
are often referred to as final negotiations
(even if they are not strictly negotiations
.
At the start of this phase, the Authoritys
negotiating team and the preferred bidder will
need to agree on a framework for finaldiscussions/negotiations.
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This framework will typically include issues
such as:
the discussion timetable;
t e e n t on o t e rema n ng ssues; an
the recording of agreed matters.
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Conclude the financing agreements
Projects are normally financed in whole orpart through project finance arrangements.
Insofar as possible, the Authority should
re uire bidders to secure full committedfinancing packages along with their bids.
This will ensure that the finalization of thefinancing agreements can take placesimultaneously with or shortly after thesigning of the contract.
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In difficult financial market conditions (e.g.
reduced liquidity),fully committed financing
packages may be difficult to obtain at the time
.
This may mean that the financing agreements
will not be concluded immediately once the
contract is signed.
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Prior to the credit crisis, Project financings for
major transactions were usually provided
through syndication arrangements, whereby
financing of the project and re-sold it to a
syndicate of banks after financial close.
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Most Project projects are now funded through
club deals: each bank assumes it will hold its
stake of project debt to maturity.
,
only be concluded after the appointment of
the preferred bidder (the so-called post
preferred bidder book-building ).
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The strength of the financiers commitment to
fund the PPP project at the bidding stage will
depend on the particular project and market.
bidders provide evidence of a reasonably
deliverable financing plan in their proposals
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Bidders should demonstrate that the debt, theequity and, where applicable, the grant providershave reviewed and accepted the broad design of
the Project and the major contractual provisionse.g. e propose r s a oca on .
A funding commitment from the lenders willoften be conditional since they will generally not
be in a position to complete their detailed duediligence and approval process until a few weeksbefore financial close.
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Once the lenders have carried out their detailed reviewof the project documentation and their detailed duediligence, they will sometimes require changes to theProject contract.
will be limited, as changes to the Project contract willgo against good procurement principles.
Before signing the financing agreements, the lenders
will also need to review and be satisfied with the fullset of project contracts the Company will enter into
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