The government will want assurance that bidders are able to complete the project. This will be dependent in part on their ability to obtain finance. Three options are available:
a. Bidders are not required to provide evidence of committed finance.
b. Bidders provide commitment letters from providers of both debt and equity. This would give the government comfort that funds are available, although it should be recognised that these commitments generally provide an opportunity for financiers to withdraw from the project under certain conditions.
c. Bidders provide evidence of fully underwritten finance.
In cases (a) and (b), bidders should be required to provide performance bonds which are not returned until the winning bidder has obtained finance or has provided evidence of fully underwritten finance, or has started construction and has incurred expenditure at least equal to the size of the bond.
If performance bonds are required under (a) and (b), then the three options are effectively equivalent from the government's point of view. Bidders could be given the opportunity to choose between these options.
Further work is being undertaken to enable us to provide definitive guidance on this issue.