What are the views of respondents on the effectiveness of preferred bidder debt funding competitions? Could a wider application of debt funding competitions enable more effective access to the debt markets and what role should the public sector play in this, at a local or central level?

SFT considers that preferred bidder debt funding competitions are likely to have their place in an increasingly complex interplay of procurement and financing of projects during a period of financing market volatility. However, consideration must also be given to: 

a)  Opportunities to increase liquidity between bidders by removing or limiting the ability of sponsors to require exclusivity from financiers in order to support them at tender stage, recognising that there is commercial sensitivity at this stage but that it is an approach that has been applied in other jurisdictions; 

b)  The need to recognise the value of differential financeabilitiy between (in particular) different construction contractors, and the impact that the cost of different security packages that funders may require on overall value for money; 

c)  The value that can be brought through innovation when sponsors are required to arrange and price in competition a financing package can be substantial and may well be lost if finance is fitted after a preferred bidder is selected. 

Finally, it is not clear that procurement risk is avoided with a preferred bidder debt funding competition, as there could be a differential in the way that bidders would have approached any changes needed to the commercial structure of their offering given the requirements of financiers brought in through a separate competition.