Spain uses what it calls the "open competition model" for procurement of highway PPP projects. Effectively, the government issues a call for tenders, and interested parties submit binding proposals that comply with the call's project requirements and conditions. Respondents may offer up to three alternatives. Award criteria are typically technical qualities and economic conditions of the proposals. Other variables may be included on a project-by-project basis. An award is made on the basis of the most economically advantageous tender. Typically, a staff of about 20 civil servants handles multiple procurements simultaneously.
The Spanish government views this approach as competitive and efficient, but it also recognizes the importance of clearly delineating its expectations and terms for the project in its request for tenders.(b) Financial close is not required before contract award, primarily because the Spanish markets are quite familiar with the nature of the procurement process as well as its standard contract documentation.
Another rationale indicated for the open competition model is the transaction cost savings it affords. According to representatives in Spain, the cost of its tendering process to the private sector bidders averages €300,000 to €500,000. A study by the European Investment Bank and Polytechnic University of Madrid indicates that the total transaction costs of all respondents and the public sector as a percentage of project capital value of an open competition model versus a negotiated model is roughly 2 to 12 percent. A potential downside of this approach, however, is that it may attract too many bidders. Spain typically receives three to eight bids, but it has received as many as 20. While a reasonable number of bidders promotes fair competition, too many bidders can drive up transaction costs as well as discourage some qualified bidders from participating because the probability of success falls.