Under EU and national legislation most PPP projects are required to be procured under the Competitive Dialogue procurement procedure-see EU Procurement Directive (2004-18). Recent work of EPEC however, has shown significant concern amongst EU Member States as to the applicability of these procedures in the current market context. The reason for this is, as noted above, that the credit crisis has significantly impaired the bank market for long term debt, impacting volumes, pricing and appetite for risk. One of the consequences is that banks are currently unable (or unwilling) to provide firm financial commitments at tender stage.
This sits somewhat uneasily with the requirements of the Competitive Dialogue procurement procedure, in which final offers must contain "all elements required and necessary for the performance of the project" and after submission of their final offers, bidders may only be asked "to clarify aspects of the tender or confirm commitments . . . provided this does not have the effect of modifying substantial aspects of the tender".
Current practice for major PPP projects now generally consists of selecting a preferred bidder on the basis of conditional financial offers, and proceeding to financial close by running a "book building" exercise (or other form of funding competition) with the preferred bidder. Careful management of this process is required by public authorities and their financial and other advisors to ensure that the requirements of the Competitive Dialogue or other procurement procedures are complied with and the public sector maximises competition between funders. Additional guidance on this matter may be helpful.
The combined impact of the crisis on the supply of debt could, therefore, have a lasting impact on value for money and affordability of PPPs. For this reason, it may be particularly helpful to look at both the response to the crisis, and the general approach to PPPs, in other European countries.