The government needs to evaluate the proposals received, to rank the proposals and select the preferred bidder. The criteria for doing so typically include the technical merit of the proposal, and some measure of their cost-given the overall aim of achieving value for money, or the optimum combination of costs and benefits. There are two, broad options for how proposals will be evaluated and the preferred bidder selected:
• Selection based on financial criteria-one approach is to undertake the evaluation in two stages, with the final selection based on the financial bid variable(s). Under this approach, technical proposals are evaluated first, on a pass-fail basis-only bidders that pass the technical evaluation proceed to the financial evaluation. The winning bidder is selected on the basis of the best financial proposal, among those that passed the technical evaluation
• Selection based on financial and technical criteria-in some cases, proposals are evaluated based on a weighted combination of financial and technical criteria. This more closely encapsulates the idea of maximizing value for money. On the other hand, defining appropriate, quantitative criteria and how they will be weighted can be difficult and rely on subjective judgment by the evaluation team, which can undermine transparency of the tender process.
The following resources further describe these options, with examples:
• PPIAF's Toolkit for PPPs in Roads and Highways, in its 'Concessions: Main Steps in competitive bidding' section, describes evaluation rules, financial evaluation criteria, and the multiple-parameter approach. This section also presents the evaluation criteria for 13 Latin American road concessions
• Kerf et al Guide to Concessions [#169, pages 118-123] has sections on technical and financial proposal evaluation. These describe choice of technical criteria and of financial criteria, and the pros and cons of a combined score approach, with examples in each case
• The World Bank Technical Note on Procurement of Management Contracts [#278, pages 22-28] describes evaluation options-from least cost selection, to quality-based selection, and provides guidance on how criteria can be set and weighted in each case.
The best option, and the specific financial and technical criteria, may depend on project characteristics. It may also depend on the capacity of the public sector to undertake more complex evaluations, or on the risk of corruption, or perceived corruption, which could make transparency the most important objective.
Many governments allow either approach to be used. For example, the PPP Guidelines for Mauritius [#182, Section 8.6, pg. 67-68] allows the project procurement team for evaluations of both the technical and financial considerations, or on price alone with pass/fail criteria for the technical evaluation. In Brazil, both the Federal Concessions Law (for user-pays PPPs) [#33 Article 15] and the Federal PPP Law (for government-pays PPPs) [#34 Article 12] allow both approaches. In all cases, the approach and criteria should be set in advance, and clearly communicated to potential bidders. Section 3.5.4: Managing the Bid Process provides more guidance and resources on selecting the specific evaluation criteria.