Once a preferred bidder has been identified, governments may then enter into post-bid negotiation-that is, further dialogue with that bidder to finalize the PPP contract. If negotiating with a preferred bidder-even if a reserve bidder is maintained as a fallback option-the implementing agency can no longer rely on competitive tension to ensure value for money. For this reason, most governments limit the extent of post-bid interaction to clarification and fine-tuning of proposals; some do not allow it at all, particularly where transparency of the process is a primary concern. Table 3.3: Examples of PPP Procurement Procedures provides some examples.
The need for post-bid negotiation typically arises for two reasons: because the RFP requirements or draft contract were not clear, or because they were not acceptable to bidders and their lenders (in particular, with respect to the proposed risk allocation). For either reason, bidders may incorporate changes in their proposals, meaning the proposals no longer fully meet the government's requirements. Some legal frameworks mitigate this issue by mandating that conditional proposals will be excluded.
The following resources provide more guidance on the problems with post-bid negotiations, and whether and to what extent to allow for negotiation or dialogue with a preferred bidder:
• EPEC's Guide to Guidance [#83, page 31] briefly describes what matters should and should not be subject to negotiation post-bid, and the typical elements of a negotiation framework
• Yescombe [#295] also describes on the risks of post-bid negotiations, and why they typically arise
• Kerf et al's Guide for Concessions [#169, page 123] focuses on the importance of limiting the extent of negotiation in the post-bid phase, and how this can be achieved.
The best way to avoid the need for post-bid negotiation is to prepare a clear and comprehensive RFP and draft contract. Market sounding and pre-RFP consultation with bidders, as well as hiring experienced advisors, can help ensure the contract structure is acceptable to investors. For particularly complex contracts, the competitive negotiation procedure described above could be the best alternative.