Most governments have rules requiring some form of competitive bidding for procuring any private sector good or service. In addition, most international lending institutions and assistance organizations require the use of competitive bidding procedures as a condition of any associated loan or technical assistance. Competition is expected to provide transparency in the process and avoid corruption, and provide a mechanism for selecting the best-value proposal based on criteria set.
Of course, the advantages of competition are seen only if there is sufficient interest to generate multiple bidders. A failed auction is highly visible and an embarrassment to the government-another reason careful preparation is important.
The typical competitive bid process has the following activities:
• Public notification of tender
• Contacting/marketing to potential bidders
- preliminary information memorandum
- road show
- pre-bid conference
- bid document consultation
• Preselection
• Shortlisting or Prequalification
• Tendering
- selection of bid and evaluation process
- distribution of bid documents and draft contract
- interactions with bidders
- evaluation and selection
- negotiations and award
• Transition
- transition/handover strategy
- worker rights and payments.
The competitive bid process can either be one stage or two stages. In the single-stage process, technical and financial bids are submitted simultaneously in response to a request for proposals. In the two-stage process, a technical response is submitted first and comments are provided. In the second stage, a revised technical bid is submitted together with a financial bid.
Communication between the public and private sectors may be strictly limited or a degree of open (although structured) communication may be important to the success of a large-scale PPP.
Competitive bidding for basic operation, maintenance, and service contracts can be relatively straightforward as the scope of services is readily defined and often quantifiable. More complex PPPs like BOTs, concessions, and joint ventures are more challenging procurement processes because both the starting information and the result are often unclear. The typical information gaps, the length of time over which the contract is implemented, and the range of externalities all conspire to make it difficult to set finite targets and predict outcomes.
An example of a competitive bidding was the construction of Sydney's Orbital Motorway, see Box 16.
| Box 16: M7 Sydney Orbital Motorway (Australia) |
| The M7 Motorway is a 40-kilometer (km) toll road that circulates western Sydney and interconnects a number of other motorways and major roads. As a public-private partnership (PPP), its development involved three tiers of government (federal, state, and local), together with extensive community consultation and a competitive bid process against specified design criteria. A specific agency, the Roads and Traffic Authority, managed the PPP process. The road was constructed and is operated on a 34-year concession by a consortium which includes Transurban, Macquarie Infrastructure Group, and Leightons Holdings. Following the concession period, the motorway reverts ownership to the Government. The $2.3-billion project was delivered 8 months ahead of schedule and incorporates full electronic tolling technology. A parallel 40-km pedestrian and cycling facility was also constructed as part of the development. The motorway project included full environmental impact assessment as well as defined criteria for safety and maintenace performance. |
| Source: www.infrastructure.org.au. |