Selection of the right private partner in a scientific way for sustainable, effective and viable results is key to the success of a project, Sumit Barua explains in this two-part series that is especially useful for developers.
In public-private partnership (PPP) projects, one of the most impoÂrtant activities in the project devÂelopment cycle is the selection of private partner. In any PPP project, the basic objeÂctive is to deliver public utility service on a sustainable basis with the highest level of effiÂciency and cost-effectiveness for a reaÂsonÂably long concession period, 20-30 years or more. Hence, the selection of right kind of priÂvÂate partner with the requisite technical and financial capability is of utmost importance.
Unlike an EPC contractor, the PPP parÂtner is involved for the entire project life and it is like a “marriage” between pubÂlic and private entities. The selection process of PPP partner must ensure transpÂarency, competitiveness and fairness to secure the best value for money.
Bidding Stages
The bidding for PPP could be single or multi-stage. In such sectors where the sponÂsoring department has no prior experience in undertaking PPP, it is advisable to perÂform the initial market testing by issuing an Expression of Interest (EOI). The EOI would primarily indicate the basic details of the project along with technical and financial qualification expected from the prospective bidders.
The next stage of bidding could be conÂducted either through:
a) One Stage-Two Bid sysÂtem or
b) Two Stage-Two Bid system.
In this stage, the more advance bidding docuÂments such as Request-for-Qualification (RFQ), Request-for-Proposal (RFP), Project Information Memorandum (PIM) and Draft Concession Agreement (DCA) are released.
The bidders who have been short-listed in EOI are invited to participate in RFQ/RFP stage. However, in some cases bidders other than those short-listed, who fulfill the EOI conditions are also invited to partiÂcipate in RFQ/RFP stage.
The sectors or projects where the sponÂsoring deparÂtment has prior experiÂence, the EOI stage could be skipÂped. The bidding schedule is indicated in the bid docÂuments and it is advisable to conduct a pre-bid meetÂing to get the feedÂback on project and released bid documÂents.
Setting the bidding criteria
Depending on the nature, complexity and size of the proposed project, the project sponsoring department needs to narrow down the necessary and essential qualifiÂcations required from the PPP partner for successfully achieving the project delivÂeÂrables.
The criteria are primarily technical qualifications based on past relevant experÂience and financial strength required for undertaking such projects. The bidders may also be asked about their understanding of the project and approach and methoÂdology the bidder would apply for successful project delivery. A balance needs to be drawn in setting eligibility criteria so that on one hand, the numÂber of participants should be adequate for real competition and on the other hand, a large participation from non-seriÂous bidÂders may dampen the process.
Quantitative vs Qualitative
The best bid practices involve setting quantitative criteria which are measurable and verifiable. The quaÂlitative criteria genÂerally leave a room for manipulation and unfairness. In some cases, the criteria can be a combination of quantitative and quaÂlitative with maxÂimum marks (>= 90 per cent) for the former.
Data Verification
In the bid document, the bidders are instructed to support their technical and financial qualifications by certified/audited work orders, completion certificates, balÂÂaÂnce sheet etc. It is advisable to seek decÂlaration from bidders on correctness and authenticity of submitÂted documents. In exceptional cases, the facilities of seleÂcted bidder may be visited by team of experts after the bid process is complete.
The author is Public Private Partnership Expert, Asian Development Bank, Dehradun.
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