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Sector: State Highway  |  Module 2: Work through the PPP process

Choosing the best-suited procurement method

Design of the procurement process

Before the project sponsor can prepare the procurement plan for a competitive bidding process it has to finalise two essential components of the procurement process. These are:

  • Basis for bid evaluation: Quality-cum-Cost-Based Selection (QCBS), Quality Based Selection, or Least Cost Method
  • Type of procurement process: Single-stage bidding, or multi-stage bidding
Basis for bid evaluation

The final selection of the preferred bidder is based on the evaluation of the bids. This can be on the basis of:

  • Quality cum Cost-Based Selection (QCBS) – Evaluation based on the cost committed by the bidder and the technical qualification of the bidder
  • Quality-Based Selection (QBS)Evaluation based on the technical qualification of the bidder
  • Least Cost Method (LCM) – Evaluation based on the cost of the completed asset or cost of service committed by the bidder

Quality cum Cost Based Selection (QCBS) is typically preferred for International Competitive Bidding.

QCBS is suitable for transport infrastructure projects and contracts for rolling stock in urban transport PPPs (such as BRTS), where it is desirable that the bidders possess a certain amount of technical skills and previous construction or operational experience. For the roads and urban transport sectors the project team should by default consider the QCBS approach for selection.

Quality Based Selection (QBS) is suitable specifically in situations where the technical input required is highly specialised and the concern for technical quality dominates the concern for lowest cost.

The Least Cost Method (LCM) is suitable specifically in situations where the requirement is basic or of a commodity nature or is highly standardised, with limited requisite technical input and nothing to differentiate the quality of competing developers. LCM might be used for basic services like cleaning and maintenance.

Type of procurement process

There are a range of procurement processes that can be implemented by the project team. The choice is essentially between a single stage process or a multi-stage process.

Single Stage Process

A single stage process comprises a Request for Proposal (RFP) only. An RFP document is issued to interested bidders inviting them to participate in the bid process. The RFP is the formal bid document issued by the Sponsor and includes the project details and draft concession agreement.

A single-stage process is appropriate for smaller projects when there is a well known and relatively small group of private entities that are likely to bid, and when the project scope and service delivery options can be clearly specified in advance.

Multi Stage Process

A multi-stage process has distinct Request for Qualification and Request for Proposal stages to short-list bidders and to seek their financial quotes. The Ministry of Finance, Government of India has mandated the adoption of a two-stage bidding process for central sector PPP projects. A multi-stage process can have the following stages:

  • Expression of Interest (EOI) stage – to identify a list of interested firms
  • Request for Qualification (RFQ) stage – to identify a shortlist of qualified bidders
  • Request for Technical Proposals (RTP) - Only in case of exceptionally complex projects where the sponsor  determines that the bidders must submit their technical proposals/ plans at the RFQ stage, either along with the initial applications or at an intermediate stage preceding the RFP stage.
  • Request for Proposals (RFP) stage – to invite comprehensive technical and financial proposals from shortlisted bidders and to select the preferred bidder.

The RFP may be preceded by an Expression of Interest (EOI), a Request for Qualification (RFQ) or sometimes both. The choice of whether to include EOI and / or RFQ depends on how much uncertainty there is about the project definition and about the bidders that are likely to be interested and qualified.

The important criteria that should be considered when choosing among the options for the procurement process are shown in the table below.

Factors to consider when choosing a procurement option

Procurement options Factors to consider
  How well defined is the project? How well defined are the bidders? How much work will proposals require?
Single-stage: RFP Project scope is clear
Service options have been well-defined
Number of interested bidders is limited
Potential bidders are known and identified
In this case it is not necessary to identify interested bidders or to reduce their number
Multi-stage option 1:
RFQ + RFP (with or without RTP)
Project scope is not clear, extensive discussions are needed to finalise the service option Potential bidders are known and identified, but
Number of interested bidders is large
Considerable effort required by bidders to submit proposals
In this case RFQ is useful to reduce number of bidders.
Multi-stage option 2:
EOI + RFP (with or without RTP)
Project scope is not clear, extensive discussions are needed to finalise the service option Number of interested bidders likely to be limited, but
Potential bidders not yet well known or identified
Considerable effort required by bidders to submit proposals
In this case EOI is useful to identify interested bidders.
Multi-stage option 3:
EOI + RFQ + RFP (with or without RTP)
Project scope is not clear, extensive discussions are needed to finalise the service option Uncertainty about the level of interest in the project – unknown if interest is limited or large
Potential bidders not yet well known or identified
Considerable effort required by bidders to submit proposals
In this case EOI is useful to identify interested bidders and level of interest; RFQ is useful to reduce the number of bidders if necessary.

 

An EOI is used to identify firms that are interested in bidding and that are available to bid for a project. It is a ‘market sounding’ exercise that can be used by Sponsoring Authorities to test the level of interest and availability of potential partners and to identify a preliminary list of firms who will be sent RFQs or RFPs. Typically no evaluation is carried out on an EOI.

The result of the EOI stage is a list of all interested firms.

An RFQ is used to narrow down the list of qualified firms that will be invited to bid. A key difference from an EOI is that the RFQ submissions are evaluated and firms are eliminated on the basis of pre-determined qualifying criteria. The aim is to reduce the number of potential bidders to only those who are technically and financially qualified and those possessing requisite skill sets for implementation of the project.

The result of the RFQ stage is shortlist of bidders. These potential bidders are then invited to submit their proposals for the project at the RFP stage.

An RFP invites technical and financial proposals from interested entities (in case it follows an EOI) or qualified entities (in case it follows an RFQ) or from the market in general (in case of a single stage process).

 

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