2.29 Departments and their advisers will need to make informed judgements on whether the benefits of holding a competition outweigh the risks. However, even when a department decides against insisting on a funding competition, it should seek to understand and monitor a preferred bidder's financing structure, to ensure that the unitary charge is minimised within the agreed risk allocation. Departments, with the help of their financial advisers, should also measure the finance costs of their projects against a set of benchmarks. These benchmarks should include all forms of financing to ensure that the best type of funding is being considered by contractors and their financiers.
2.30 Departments and their advisers should consider a range of approaches to incentivise bidders to achieve the best finance terms. Such approaches could include:
a The traditional method of relying on competitive tension in the procurement process to incentivise bidders to include the most attractive finance as part of their offer.
b As part of the bidding process, contractors could be allowed to propose that they will secure project funding via a competition, if appointed as preferred bidder. To do this the contractor and department would need to be confident that the project agreement was of sufficient quality to attract funding. In addition a department would have to assure bidders that such proposals would gain credit, as appropriate, during the evaluation process.
c Where a department requires a funding competition to take place after appointment of preferred bidder, it must agree the basis on which variations in terms of finance prior to financial close are either borne by it or the contractor. If the contractor takes some of the pricing risk a department will need to agree a suitable benefit sharing arrangement.