The Trust went from three bidders straight to one preferred bidder which seems to have worked well in this procurement

2.19  To save time and costs the Trust elected to go from three bidders straight to a single preferred bidder without an intermediary step involving two final bidders. There was, however, some risk in applying this strategy while a new standardised contract was being negotiated and implemented for the first time. Any negotiations at preferred bidder stage would be carried out in an absence of competitive tension.

2.20 The Trust's approach can provide advantages for both bidders and procurers in the right circumstances. Bidders on this project all felt it was helpful since it led to lower bid costs. Although biddfers had to provide more information at an earlier stage than they would have with another round of bidding, avoiding the additional round reduced their overall costs. A faster selection of preferred bidder also allowed the Trust to get a better and clearer picture of the implications of the preferred bidder's design.

2.21 Safeguards need to be put in place to maintain competitive tension when using this approach. As the Trust did in this procurement, departments need to:

■  Obtain greater bid detail at an early stage;

■  Keep the main aspects of the deal constant in the closing stages. This may require discipline in deciding whether policy changes are sufficiently material to warrant a late change to the deal;

■  Be prepared to walk away from the preferred bidder and start again if required;

■  Make clear to bidders that this process is to be applied so that they know to put in their best bid;

■  Seek assurance to price and terms by the preferred bidder when selected, for example, by obtaining a preferred bidder letter (see paragraph 2.27);

■  Ensure there are no major open issues for negotiation at selection of preferred bidder stage, in particular, the payment mechanism should be agreed.

2.22  Where there are outstanding issues to be resolved this method is less appropriate, and moving from three to two final bidders is preferable. The Department has recently introduced new guidance aimed at speeding up the PFI procurement process. This means that schemes with a capital value of £60 million or less (which would have included West Middlesex) have the option of avoiding a preliminary invitation to negotiate (PITN) and can go directly from three bidders at final invitation to negotiate (FITN) to one preferred bidder. However, schemes valued at over £60 million go from four bidders at PITN, and two bidders at FITN prior to selection of a preferred bidder15.

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15  Improving PFI Procurement: Department of Health, March 2002.