Once bids are received, the contracting agency will evaluate those bids and select the preferred bidder. The contracting agency will negotiate with the preferred bidder any open issues (to the extent permitted the bid documents or by law), finalize the commercial and financial arrangements, award the project, sign the concession agreement and other key contracts (subject to the conditions precedent discussed below), and reach financial close. More than one preferred bidder may be selected for additional rounds of competition, for example through best and final offer (BAFO-see Box 4.6) or competitive dialogue (see Box 4.7, below). Additional rounds need to be carefully managed, to maintain transparency, avoid any perception of favouritism or corruption, and limit the added cost and delay such a process implies.
Lenders will not be finally committed to the project until financial close is achieved. Before financial close, lenders will want to confirm that the risk allocation for the project is "bankable", a general term referring to the level of comfort that a lender will require from a project given the context of the project (sector, location, size, etc.).25 The lenders will then agree with the project company and the Government a list of conditions precedent (CPs) that must be satisfied before the lending arrangements become final, and before first drawdown can be made.
| Box 4.6: BAFO |
| The contracting agency may choose to include additional stages of competition, for example reducing the competition to two bidders who will then be asked to further refine their bids and submit a best and final offer (BAFO), further to which the contracting agency chooses the preferred bidder. This process allows the contracting agency to use the available competitive pressure to further motivate bidders, and possibly obtain firm financing commitments. |
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25 See Delmon, rivate Sector Investment in infrastructure: Project finance, PPP projects and risk (2ed Kluwer International 2009).