Transparent, Neutral and Non-Discriminating Selection
GOVERNANCE CHALLENGE There is a gap in capacity to organize competitive tenders, especially at the local level, and a public perception of inadequate transparency in awarding PPP deals, and the lack of adequate administrative procedures for competitive tendering that, for example, exclude SMEs. |
Principle 5 - The selection of the bidder should be undertaken following a transparent, neutral and non-discriminatory selection process that promotes competition and strikes a balance between the need to reduce the length of time and cost of the bid process and, acquiring the best proposal. Along these lines, corruption should be penalized as well.
Transparency, Neutrality and Non-Discrimination Defined Transparency refers to the openness of procurement policies and practices. The basis for proposal evaluation should be made public. Neutrality refers to clear, specific and predictable rules that do not provide scope for discretion and prevent any conflict of interest and provide a means of complaint and monitoring the implementation of the rules. Non-Discrimination refers to all fair and equal treatment of all economic entities, public and private, foreign and domestic in the competition for PPP contracts. |
Transparency can be achieved by information sharing…
Transparency in PPP procurement means ensuring that information about the PPP procurement and contractual administration regime and individual PPP opportunities are made available to all interested parties (and particularly to potential suppliers and service providers). It also entails the right of access to that information. At the same time, transparency calls for procurement policies and practices that are seen to be fair in all respects, with full information openly provided. Transparency encourages open and competitive procurement regimes thereby helping the government agency and the private sector entity achieve economic benefits. Supplier evaluation and contract award criteria should be made known to all interested competitors in advance for each individual project. Any changes relating to individual PPP opportunities should be made known to all participants.
…Details of procurement decisions should be made known after the contracts have been awarded…
Detailed records of individual contract award processes should be kept. Interested parties such
Accountability can go even further. Increasingly the providers - be they public or private - must take into account what the beneficiaries want and need. Yet by increasing choice, governments can create incentives to providers to improve services and performance as as the media, individual citizens, trade unions, investors, etc. should be able to become acquainted with the contents of the contract. This will improve the involvement of stakeholders and make monitoring of the procedures possible. …And the method of procurement chosen should be the most transparent possible. In general, the fundamental guiding principle is to ensure that principles and objectives are established to maintain transparency in the procurement process. There is, however, a need to ensure secrecy of the bid, especially as certain information contained in the bid could benefit a competitor. It may also be important to maintain secrecy in some cases where the procurement involves the protection of patents and copyrights, or for national security reasons. | In Canada, the use of 'fairness and process auditors' - third party independent experts - provides a level of assurance to government sponsors, bidders and the public that the procurement process was fair, equitable, and appropriate. |
It is important that the operation of the entire procurement and award process is, and is seen to be, both neutral and fair…
For example, enough time must be given to potential suppliers and service providers to prepare and submit their bids. Selection and award criteria must be neutral and non-discriminatory and should eliminate any scope for discretion. Thus, any technical specification relating to the service being procured should be drafted so as not to favour particular projects.30
…While at the same time recognising that providing only this framework of rules is insufficient.
There must also be a means to enforce the rules and hold the parties accountable: Firstly, the potential supplier should have the right to complain to an independent domestic tribunal if they believe that the PPP procurement has been handled inconsistently with the law. That tribunal should have the authority to order the correction of an infringement or compensation for the loss or damages suffered by a supplier. And pending the outcome of the challenge, it must be able to provide rapid interim measures, including the suspension of the tender process, to correct infringements and preserve commercial opportunities. | For example, a small local authority in Denmark implemented a new PPP financing system where public assets were sold to private enterprises and then rented back. No Danish community up until that time had been able to offer such high standards of service through public funds. However, following a newspaper investigation it was alleged that companies had given money to the soccer club in return for obtaining contracts from the local authority - and the mayor was a shareholder of the company and chairman of the soccer club set to play in the new soccer stadium. |
• Secondly, an independent monitoring authority - with powers to self-initiate investigations into the PPP procurement practices - can play an important role in monitoring the implementation of the rules by individual procuring entities. The institutional framework should differentiate between those who carry out the procurement function and those who have oversight responsibilities. In this regard it is now generally advisable to establish an agency, which has responsibility for overall procurement policy formulation in the PPPs and the authority to exercise outright oversight regarding the proper application of the procurement rules and regulations.
• Thirdly, the independent auditor must have no ties to either the public or the private parties involved. It should get involved early on so that it can develop a thorough understanding of the project in order to maintain a complete and unbiased audit of the programme.
• Finally, there must be no conflict of interest in the selection procedure. The contracting authority should be completely independent of the projects and the companies involved in the bidding, in order to avoid a conflict of interest. These issues may be under the surface and not readily apparent during the selection procedure; but since any instance of corruption can tarnish both the public and the private sectors' reputations, it is crucial to be as cautious as possible regarding conflicts of interest.
Moreover, non-discrimination also plays an important role…
It is very important that procedures offer opportunities for all companies irrespective of the country of origin. Non-discrimination is usually achieved through the creation of rules specific to this issue, as well as more general requirements not to act in a manner which could reduce competition. A sign of success of the operation of this principle is apparent in the extent to which foreign companies win bids. At the same time, while governments should welcome bidders from other countries, this openness should be on the proviso that other countries are correspondingly open in their approach. Additionally, it is not just foreign bids that should not be discriminated against. Bids from SMEs should also be encouraged and treated in a non-discriminatory fashion.
…While sanctions against corruption must also be considered within the context of international rules.
There are numerous models of best practice in creating open procedures for tendering, based on international and regional agreements. In 1994 the UN Commission on International Trade Law adopted the UNСITRAL Model Law on Procurement of Goods, Construction and Services. The objectives of the UNCITRAL Model Law include promoting competition among suppliers and contractors, providing for fair and equitable treatment of all suppliers and contractors and achieving transparency in procurement procedures.
Within the European Union (EU), strict rules for open government procurement apply. Several European Commission (EС) directives deal with public procurement of supplies and works, including the construction and the telecommunication sectors. The EC has the authority to impose sanctions for breach of EU competitive tendering rules in public sector procurement and construction. In addition, beneficiaries of EU funds must comply with EU competitive tendering rules when contracting third parties for the performance of projects financed under such funding. The main purpose of the EU directives is to set a standard procedure for the award of public sector contracts in order to stimulate competition. Under EU legislation, in principle, public tendering is mandatory for contracts with a value over EUR 200,000. Within the EU, such directives must be transformed into national legislation.
The World Trade Organization's General Agreement on Trade in Services is the first multilateral agreement, which establishes rules regarding trade in services. Currently, the question of whether rules on government procurement should be added to the General Agreement is under discussion. An Agreement on Government Procurement is already available but it covers only a limited number of services, including construction, environmental services, computer services and value-added telecommunications services.
…And national best practices in PPP Procurement should be considered.
The following describes in detail the practices of three countries, the Netherlands, UK and the US in PPP procurement:
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30 Under a neutral system, evaluation of tenders is usually done in two stages (which may nevertheless take place concurrently). First, tenders are checked to assess whether they meet all the eligibility requirements. Does the project provider have any required qualifications? Also, do they have the financial and technical capability to fulfil a contract? These eligibility requirements must have been made known in advance and should not be changed during the course of the tender. Then all the eligible candidates are evaluated according to the criteria, which have been set down in the tender notice or documents.