5.1.1 Prolonging the competitive process by obliging other shortlisted bidders to keep full bid teams in place, when the reality is that the procurer has internally decided on a preferred bidder, is unreasonable to the unsuccessful bidders. It exacerbates the costs of bidding, ties up resources that might otherwise have been aimed at winning business elsewhere, and it does not foster the good faith implicit in delivering successful public private partnerships. It also risks contravening procurement law.
5.1.2 A well conducted competition, with a realistic timetable set at the outset which is achieved, should minimise the need for extended negotiations with multiple tenderers. However, public sector experience, especially of some of the early PFI deals, has shown that some key contractual negotiation issues have arisen after appointment of preferred bidder, introducing potential difficulties on the way to contract signature. Elsewhere, this guidance suggests that most of these issues should be resolved before selection of preferred bidder. Nevertheless, some procurers might feel that their negotiating position during this critical phase could be weakened without an alternative arrangement to fall back on in exceptional circumstances.
5.1.3 Having used other methods of protection against "deal drift", such as a clear negotiating line marking out the limit of any concessions before the deal ceases to be good value for money relative to alternatives, as an exceptional fall-back option the practice of appointing a reserve bidder can meet both public and private sectors' needs. Under such a system, at the time that a preferred bidder is appointed, the next favoured bidder in terms of meeting scored criteria, can be invited to be a reserve bidder. Reserve bidder status would mean that should negotiations with the original preferred bidder fail to reach financial close, the procuring entity could offer the reserve bidder the opportunity for further negotiations leading to a signed PFI contract, but would not allow any attempts to reopen previously agreed issues in order to improve its position.
5.1.4 At the time of being selected, a preferred bidder should be told of the existence of a reserve bidder. The procurer should strongly consider setting key negotiating deadlines for reaching agreement, after which date it would reserve the right to invite reserve bidders to participate. Reserve bidders should be kept in touch with key developments in negotiations in order to minimise delays if they are subsequently brought into play. Legal advice should be taken when considering the use of a reserve bidder to ensure that the procedure for reinstatement is understood and that this approach is viable for the project in question.
5.1.5 Within the scope of the agreed contract terms and price, the impact on value for money of any changes which are proposed after the preferred bidder has been appointed should be assessed. Further guidance on the assessment of value for money can be found in Treasury Taskforce Policy Statement No. 2 " Public Sector Comparators and Value for Money " and in the forthcoming Technical Note No. 5 " How to Construct a Public Sector Comparator".
5.1.6 Following appointment, a preferred bidder may develop advantages (eg building up a relationship with a local planning authority) which would make introducing a reserve bidder later on a difficult proposition. Procurers should also bear in mind that reserve bidders will soon have other projects to work on and may be reluctant to incur further significant costs to develop their existing bids, without some sort of contribution towards these costs. Procurers should assess whether, in very exceptional circumstances, the costs of any contribution are outweighed by the potential increase in value for money by having the reserve bidders refine their proposals.