Implementation – Tendering & Procurement
16.2 What are the procedures for procurement?
An open and competitive procurement procedure begins with the
promoter’s description of its requirements and an invitation
to suppliers to indicate their interest in the contract and their
professional capacity to fulfil it. The promoter then identifies
potential suppliers and invites them to submit bids. After the
bidding phase, most procurement systems require a public declaration
of the competitors’ names and their bid prices and, ultimately,
of the successful bidder.
There is a wide variety of procurement procedures available
for use in tendering when it comes to PPP arrangements. Many
of these procedures have become prescriptive in nature. Many
local governments follow standard procurement procedures drawn
up by the International Federation of Consulting Engineers
However, most commonly PPP contracts are awarded as the
result of some form of competitive bidding procedure. Designing
a competitive bidding process – and getting the best possible result – is
easiest when the product or service required is a fairly
standard one and the technical outputs can be defined with
reasonable certainty in the bidding documents. Particular attention,
therefore, should be paid to providing good quality information
to potential bidders and to the detailed design of the bidding
A competitive bidding process generally consists of:
- 1. public notification of the government’s intention
to seek a private partner for the provision of, for example,
water and sanitation services, including prequalification
or a request for expressions of interest from private companies;
- 2. distribution of bidding documents and draft contracts to
- 3. a formal process for screening potential bidders and
finalising a list of qualified bidders; and
- 4. a formal public process
for presenting proposals, evaluating them, and selecting a winner.
Different procedures for procurement include invitation
to tender; and request for proposals (one- and two-stage
Invitation to tender
Generally, an invitation to tender is issued when the promoter
knows exactly what it wants and how it wants to achieve its
goals. Most often, the tender is issued and the lowest bidder
is awarded the contract.
Although this approach reduces the cost involved in developing
a PPP, it may limit the promoter’s opportunities to view
other, more efficient and/or more cost-effective options for delivery
of the service.
Request for proposals
A request for proposals (RFP) is usually used when the promoter
knows what it wants to achieve, but would like prospective
partners to use their experience, technical capabilities and
creativity to identify how the project objectives can best
One of the main differences between an RFP and an invitation
to tender is that in an RFP the promoter is looking for value
(that is, operating efficiency, cost-saving measures, innovations
and so on), rather than the lowest bid.
The request for proposals can be issued through either:
- a one-stage; or
- a two-stage process.
The decision between having a single or a two-stage procedure
for requesting proposals will depend on the nature
of the contract, on how precisely the technical requirements
can be defined and whether output results (or performance
indicators) are used for selection of the contractor or
concessionaire. If it is deemed both feasible and desirable for
the contracting authority to formulate performance indicators
or project specifications to the degree of precision or finality
necessary, the selection may be structured as a single-stage
process. In that case, after having concluded the pre-selection
of bidders, the contracting authority would proceed directly
to issuing a final request for proposals.
A one-stage RFP may be appropriate for a local government in
the following circumstances:
- parties are known to the local government to have the
capability to be successful partners;
- only a limited number of suppliers have the resources and capabilities
to be a successful partner;
- the project must be implemented under a tight timeframe; and/or
- the local government is not able to spend a large amount of
funds on the process.
The promoter should use the two-step process in the following
- the project is large and complex or of a special nature;
- the required proposal will be time-consuming and expensive
for the proponent to prepare;
- qualified firms would not take the time and expense of preparing
a response to an RFP if there were too many other firms
- there is an advantage to initially inviting a large number
of firms and then narrowing the field to those most qualified;
- the RFP process will involve the divulgence of information
that is sensitive or even confidential (with a
limited number of firms receiving the RFP, the number of people
with access to this information can be limited and monitored).
The two-stage RFP process involves an initial stage
that screens potential partners. Generally, this first
stage involves the issuance of a Request
for Expressions of Interest (RFEI) or a Request
for Qualifications (RFQ).
This screening allows the project team and the evaluation
committee a chance to consider a wide range of proponents
initially and then to narrow the field to those most
Request for Expressions of Interest (RFEI)
The RFEI is intended to provide the promoter with sufficient
information to draft a clear RFP in cases when the local
government has identified its objectives, but may not have
fully defined the project or service to be delivered. The use
of an RFEI can assist in two ways:
- it reduces the time and expense involved in evaluating a larger
number of proposals; and
- it improves the quality of proposals.
In this sense, the RFEI is used to gain information to help
in drafting the RFP.
Request for Qualifications (RFQ) or
A RFQ is used in situations where the promoter
and the project team have amore defined project, but do not know
if there are any private sector partners with the resources, experience
or interest to undertake the project. It is a step within
a contract awarding procedure in which the party inviting the
tenders selects the companies to participate in competitive
bidding for the contract. To this end, potential participants
in the competition are requested to submit information
on their companies.
The RFQ document is more specific than the RFEI document.
In traditional government procurement it consists of the
verification of certain formal requirements, such as adequate
proof of technical capability or prior experience in the type of
PPP, so that all bidders who meet the pre-selection criteria are
admitted automatically to the tendering phase. Bidders should
be required to demonstrate that they possess the professional and
technical qualifications, financial and human resources, equipment
and other physical facilities, managerial capacity, reliability
and experience necessary to carry out the project.
Qualification requirements should cover all phases of an
infrastructure project, including financing, management,
engineering, construction, operation and maintenance, where
Based on the pre-qualification results, a shortlist is drawn
up of the companies eligible to compete. The bidders
answer the RFQ with Expressions of Interest.
The RFQ process is used as a "shortlisting" method to
pre-qualify selected potential partners who will then receive the
RFP. It is not designed to gain answers as to how the project will
Depending on the pre-qualification requirements set
out in the documents, different groups of companies will
be selected. One recent trend is that pre-qualification
requirements laid down by promoters such as local governments
have started to include not only the price and quality
of the service they wish to procure, but also requests
to address poverty, upgrade welfare and/or create employment
opportunities. Often the bidding companies need to prove
their recent experience with a previous assignment similar
in nature and outcomes.
Thus, the purpose of this stage is to enable the contracting
authority to formulate its requirements in a manner that
enables a final competition to be carried out on the
basis of a single set of parameters. Put simply, this is
an opportunity to ensure that in the final evaluation, the
contracting authority is able to compare "apples to apples" rather than "apples
Often local small businesses or community-based
organisations are best suited to resolve a particular
service delivery problem. In such cases, it is important
not to leave them out of the bidding process. One of
the means through which this can be achieved is to
simplify the tender documents. Obviously, pre-qualification,
drafted without taking these potential bidders into
account, could serve as an obstacle to the effective
and innovative solutions to the existing problems.
Meanwhile, the pre-qualifications can still be an effective
mean pre-define the bidders for the RFP, when the criteria
are correctly specified and weighted according to their
value to the PPP project.
Simplification of tender documentation
The system of tender submission should not require too
many forms of supporting information, which could
be unnecessarily complicated for small businesses to complete
satisfactorily. Besides, the administrative burden for
smaller businesses in dealing with tender form requirements
for government bodies is disproportionately greater and more
expensive than for larger companies.
Thus, the tender submission of documentation should
be rationalised and simplified as far as possible to make
it easier for small contractors to deal with the paperwork
involved. However, this simplification of the documentation
should not influence negatively the essence of the contract
and the contractual obligations.
Levels of competitive bidding
Competitive bidding can take place between local/national
entities, or between interested international companies.
National competitive bidding
(NCB) is utilised when:
- domestic production or construction facilities are available
at reasonable cost, are efficient and adequate in terms
of prompt delivery;
- the government has specifically requested the adoption of local
- the local competitive bidding does not preclude participation
by foreign bidders; and/or
- the advantages of international competitive bidding are clearly
outweighed by the administrative or financial burden
NCB may also be the most efficient and economical way of
procuring goods, services or works which, by their
nature or scope, are unlikely to attract foreign competition.
In this case, the promoter does not expect foreign bidders to be interested
- the contract values are small;
- works are scattered geographically or spread over time;
- works are labour-intensive; and/or
- the goods or works are available locally at prices below those
of the international market.
Publication of a general procurement
notice in international journals is not necessary
for NCB, and advertising may be limited to
the local press or official gazettes.
For international competitive bidding (ICB)…
objective is to provide a wide range of choice in selecting
the best bid from competing suppliers/contractors and to give to
all prospective bidders adequate, fair and equal opportunity to
bid on the goods, services and works which are to be procured.
Whenever procurement is being done under multilateral development
bank loans, certain requirements are put in place for ICB. In this
case, the government must observe certain guidelines in preparing
bidding and contract documents and must follow certain procedures
in advertising bid invitations and in accepting, opening and
evaluating bids. In addition in such cases, draft bidding documents,
bid evaluation reports and proposed awards of contract are subject
to prior review and approval by the lender according to its stipulated