12.1  Evaluating Expressions of Interest

The objective of evaluation of EOIs is to determine whether the parties have the financial capacity, technical capability, demonstrated understanding of government requirements and resources to deliver the project. Responses to an invitation for EOI do not normally require any indication of price.

The key evaluation criteria to be applied to EOIs generally include:

•  General:

understanding of project objectives and the government's requirements for the project;

understanding of the key project issues and challenges, and identification of proposed solutions;

experience and capability in managing project interfaces including with government and key stakeholders;

•  Experience & Capability:

experience and capability of the sponsor in leading PPP projects;

experience and capability in successfully designing, constructing, financing, maintaining and operating major infrastructure (this may be local or international experience);

the experience of the consortium members in working together;

•  Commercial & Financial:

proposed commercial structure, intra-consortium risk allocation and financial support provided by parent company, associates or financial institutions;

proposed funding structure;

demonstrated understanding and acceptance of the proposed risk allocation and commercial principles;

financial capacity to meet the likely contractual obligations associated with the project;

•  Other:

confirmation of no conflict of interest.

Some of the specific issues associated with the above criteria that should be considered as part of the evaluation include:

•  Understanding of the project. The invitation for EOI should call for bidders to outline indicatively and briefly their proposed approach to delivery of the project and services over the life of the contract. The EOI response should be reviewed and an assessment made as to whether it demonstrates an understanding of project objectives and the service delivery outcomes required, as well as any key issues that should be considered.

It is important that the opportunity to demonstrate ability and to ensure scope for innovation is defined. Bidders must not be induced to spend significant sums in preparing a response to an invitation to express interest. The EOI document should express a limit on what is expected.

The invitation for EOI usually allows or encourages bidders to propose innovative solutions to the service delivery objectives. Accessing good ideas is a key objective of PPPs and innovative approaches with the potential to deliver improved value for money or improved service outcomes should be regarded positively. However, while an innovative approach may prima facie deliver high value, the risks associated with its implementation should also be evaluated.

•  Experience.  The bidder's experience and track record in delivering projects of a similar nature (recognising that a number of parties are likely to be involved in each bidding consortium for the project). This assessment criterion needs to take into account not only the bidder's ability to deliver against the physical aspects of the project (for example, development of a hospital facility) but, importantly, its ability and track record in delivering outputs under long-term contractual arrangements.

However, track record should not be narrowly defined nor over-weighted to the extent that it is a barrier to the development of smaller firms, unnecessarily reducing competition. Track record should also not be limited to local experience, instead allowing evidence of overseas experience for similar scope of projects to be considered.

A lack of demonstrated track record in delivering projects of this nature does not necessarily mean that a bidder should not be considered. However, in the absence of a specific track record, it is particularly important to consider the organisation's broader experience, wider track record and management team and form a view on its ability to structure, deliver and service a PPP arrangement.

•  Composition of consortium. The composition of the consortium proposing to deliver the project is important. The EOI responses should clearly define the roles of each participant and demonstrate how the relationships between the parties are proposed to operate. To the extent that the proposed organisations have not worked together previously, the evaluation team should particularly consider how the members of the consortium will collaborate to deliver the necessary outcomes.

•  Financial position and financing. PPP projects normally require the successful bidder to finance a substantial capital cost for the project. It is therefore important to consider the ability of the private party to secure this finance. This requires an examination of the financial position of the members of the consortium and consideration of financiers' perception of the organisations and the risks associated with their operations generally. There is little point in inviting a bid from a private party with marginal profits and a weak balance sheet, as it is unlikely that the required finance could be secured on competitive terms or terms acceptable to government.

Consideration of the financial position should also take into account the bidder's ability to support the contractual arrangements over the term. Financing the initial development of the project is clearly critical, but it is just as important that the private party's financial outlook is sufficiently robust to give government comfort that the service delivery requirements and government's rights under guarantees can be supported over time.

The evaluation process should also have regard to the indicative financing structure reflected in the EOI, which should be reviewed to assess its deliverability and the likely economic outcomes. For example, an EOI for a rail project may propose debt finance to be provided by CPI-linked bonds. However, if the nature of the project cash flows or the market for bonds at the time are not considered likely to support the bond issue, government should examine the fallback financing strategy, being aware, however, that the financing structure identified at this stage is indicative only.