3.5.1 Deciding the Procurement Strategy

The first step in managing a PPP transaction is defining the procurement strategy. This includes defining the following key aspects of the procurement process:

• Pre-qualification-whether to use a pre-qualification process to select the firms or consortia that will participate in the bidding process

• Bid process-whether to use a single-stage process to select the preferred bidder, or a multi-stage process, in which proposals and the bidding documents may be reviewed and iterated

• Negotiation with bidders-to what extent discussions with bidders may lead to changes in the initial draft contract: either during the bidding process (with multiple bidders), or after final bids have been submitted

• Basis for award-whether to rank proposals and choose the preferred bidder based on a single financial or value-related criterion (after screening for technical merit), or some weighted evaluation of financial and technical criteria

This section briefly describes each of these aspects, with links to guidance, resources and examples in each case. An additional point for consideration, also described in this Section, is dealing with bid costs-whether to charge a fee or require a bond to participate in the bid process; or conversely whether to provide support with bid costs.

The overall goals of the procurement strategy, as described above, are both to find the best solution to the project's objectives (from a technical and value for money perspective), and to select a competent firm or consortium to implement that solution. This typically requires a fair, competitive, transparent, and efficient procurement process. However, the best procurement strategy to achieve these objectives may depend on the context. For example, allowing dialogue with bidders can lead to stronger proposals, as described below. However, it can also make the process less transparent-so may not be the right choice in a country where achieving transparency and minimizing the risk of corruption is the more important consideration. This means the best procurement process may depend on the country context, and the nature and capacity of the government institutions involved, as well as on the characteristics of the particular project.

There may also be some constraints in how the procurement strategy can be defined. Firstly, as described in Section 2.2: PPP Legal Framework, the procurement strategy for a PPP may be constrained by any laws or regulations on overall government procurement. Moreover, many governments choose to set PPP-specific procurement rules, in PPP laws, regulations or guidance material-that is, defining the procurement strategy for the PPP program as a whole, rather than on a project-by-project basis. Doing so can improve transparency of PPP procurements; although there are also advantages to retaining flexibility to adapt processes to the needs of particular projects. Table 3.3: Examples of PPP Procurement Procedures below provides examples of PPP procurement procedures as defined in national or international laws and regulations. Finally, where the project involves funding from a multilateral development bank or other agency, the procurement options may also be constrained by the procurement rules of the funding agency. For example, the World Bank publishes and regularly updates its Guidelines: Procurement of Goods, Works, and Non-Consulting Services [#283], which any project with World Bank funding must follow. The World Bank has not published specific guidelines for procurement of PPPs-Clause 3.14 of these guidelines states that for PPP projects, 'open competitive bidding procedures determined acceptable by the Bank' should be used.

Table 3.3: Examples of PPP Procurement Procedures

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1 The method of awarding the contract to the technically compliant bid that offers lowest price is only applicable when it is not possible to use points and percentage or cost-benefit criteria.