1. Iain Menzies The World Bank St. Petersburg - 23 May 2008
Selection of Bidders
Iain Menzies
The World Bank
St. Petersburg - 23 May 2008

2. What will we learn?
What CRITERIA can we use to evaluate the Operator and his Proposal
How can we SELECT the best Operator? What PROCUREMENT approach?
How can we SELECT the best Operator? What PROCUREMENT approach?
How do we make sure we have the most economic and sustainable project?
How do we deal with a continually changing situation in the bidding period and in the longer term?
Management Contract for
Jordan Valley Authority,
Irrigation Water Supply, may be
the first of its kind.
What do we have to do to MANAGE the bid process, from sounding out market interest right through to selecting the successful Operator and awarding the contract

3. Selecting Bidders SELECTION METHOD PART 1 SELECTION CRITERIA
MANAGING BIDS
OTHER ISSUES

4. Part 1 - Selection Method
“ Choice of method for selecting an Operator who will provide the required services at best value for money”
SELECTION METHOD
In this section we look at the PROCUREMENT process, and also review the three basic SELECTION methods :
Competitive Bidding
Competitive Negotiation
Direct Negotiation
SELECTION CRITERIA
MANAGING BIDS
OTHER ISSUES

5. Selection Method – Procurement Issues
“ Choice of method for selecting an Operator who will provide the required services at best value for money”
Four characteristics of a good Procurement Process:
Clear and transparent.
Transaction:
- objectives should be explicit
- selection criteria well-defined.
- tender and decision making processes understandable by all
Robust.
Process:
- resilient to procurement problems
- not open to challenge by losing bidders
Fair.
Procurement:
- undertaken on a level playing field
- all bidders competing on equal terms.
Cost-effective and timely.
Cost and bid time:
- appropriate for potential rewards of winning.

6. Selection Method - Options
“ There are three basic methods of Operator selection…..”
Competitive Bidding
Competitive Negotiations
Or..
Direct Negotiation
Or..

7. Selection Method – Competitive Bidding
Government notifies public that it seeks Operator and seeks expressions of interest
Formal screening process results in list of qualified bidders
Bid documents are distributed
Formal, public process used to present and evaluate bids, and select winner

8. Part 1 - Selection Criteria
“ The Contracting Authority needs to determine early on the objective methods it will use to select the best bidder”
SELECTION CRITERIA
MANAGING BIDS
OTHER ISSUES
SELECTION METHOD
In this following section we look at the ways to choose between different bidders, reviewing the specific Criteria for bid evaluation:
Technical evaluation
Financial Evaluation
Relationship between Technical and Financial
Finally we review possible Bidding processes:
Prequalification, 2 Envelope
2 Stage Bid Process
SELECTION CRITERIA

9. Selection Criteria - Prequalification
“ This is one of the most commonly used selection systems……. ”
Pre- Qualification
Technical Evaluation
Financial Evaluation
Interested firms, consortia, or SPVs submit experience and financial capacity details
Contracting Authority assesses these details
Short list with three to six firms
Only short-listed firms can submit a proposal
Bidders submit proposals

10. Selection Criteria – Technical Evaluation
“ This is one of the most commonly used selection systems……. ”
Pre- Qualification
Technical Evaluation
Financial Evaluation
Bidders submit Technical Proposals, showing how they would run the contract
Bidders provide information on Financial and technical ability
Proposals assessed using ‘technical evaluation criteria’
Bidders have to pass a ‘technical threshold’ to be eligible for selection (e.g. scoring at least 80 percent on technical evaluation criteria)

11. Selection Criteria – Financial Evaluation
“ This is one of the most commonly used selection systems……. ”
Pre- Qualification
Technical Evaluation
Financial Evaluation
Financial proposals only assessed for those bidders who have been evaluated against technical criteria and have passed the ‘technical threshold’
Financial Criteria can be very simple, as following examples:
Bidder asking for lowest tariff (Concession, lease-affermage, BOT etc)
Bidder asking for Lowest Fee (Management Contract)
Bidder with best financial proposal awarded the contract

12. Selection Criteria – Summary
“ This is one of the most commonly used selection systems……. ”
Pre- Qualification
Technical Evaluation
Financial Evaluation
The Contracting Authority decides whether to follow this or some other approach. The right selection procedure is crucial to get the right Operating partner.
It sets the technical and financial mechanisms and scoring procedures.
It decides the relationship between technical and financial evaluation and the weight given to results of technical and financial bids.
Evaluation processes and scoring principles and weightings have to be developed before the bidding process starts
The broad principles of the evaluation framework have to be communicated to the bidders
Training should be provided to staff reviewing the bids, to ensure consistency

13. “ We need to manage the bidder selection process effectively”
Part 2 – Managing Bids
“ We need to manage the bidder selection process effectively”
In this following section we look at the BID MANAGEMENT process, and review the five basic process steps :
Market Sounding
Public Notification and Prequalification
Evaluation of Prequalification Responses
Bidding
Evaluation of Bids
Negotiation when necessary
SELECTION METHOD
SELECTION CRITERIA
MANAGING BIDS
MANAGING BIDS
OTHER ISSUES

14. Managing Bids – Process Steps
“ The Operator Selection Process involves 5 key steps, and a clear Bid Management Structure needs to be established to implement these”
Market
Sounding
Notify +
Prequals.
Bidding
Bid
Evaluation
Negotiation

15. Market Sounding
Bid
Evaluation
Market
Sounding
Notify +
Prequals.
Negotiation
Bidding
“ Talks with potential bidders at an early stage about structure and scope of the project is a good idea. Typically these are informal soundings , based on a project briefing, a consultation paper or a pre-bid road show”
Benefits :
Gaining ideas about structure and scope of proposed project, and their
acceptability to bidders
Potential bidders welcome involvement; they voice commercial concerns,
It increases bidder interest and increases overall procurement effectiveness
Early consultation can also involve other stakeholders (Module 3)
Form of Market Sounding:
Can vary from request for comments on original briefing, to a structured
process with questions testing market response to specific ideas
Can involve ‘road show’ or meetings with selected potential bidders
Points to be aware of :
To avoid bidders seeking collectively to influence the transaction to their
advantage, make use of experienced advisers to ensure suggestions are well
founded
Early canvassing of range of opinions helps to avoid accusations of bias in the
formal procurement process

16. Public Notification
Bid
Evaluation
Market
Sounding
Notify +
Prequals.
Negotiation
Bidding
“ The formal procurement process is likely to start with Public Notification of the tender opportunity.
Some issues include:
Public notification can be through electronic or traditional
means
The advertisement goes through Government channels
(national and international) and media outlets.
Form and content of advertisement may reflect needs of
procurement law
The advertisement generally includes:
general description of the project
invitation to suitably qualified companies, groups or
consortia to participate in the tender process
Companies responding to the invitation are sent to the
prequalification documentation
Following advertisement, contact between the contracting authority and
potential bidders needs to be managed for fairness & transparency

17. Prequalification (a)
Bid
Evaluation
Market
Sounding
Notify +
Prequals.
Negotiation
Bidding
“Prequalification ensures that bidders have technical and financial capability and a track record in performing similar tasks”
PUBLIC NOTIFICATION
PRE- QUALIFICATION
a. Purpose & Documentation

18. Prequalification – Purpose & Documentation
Bid
Evaluation
Market
Sounding
Notify +
Prequals.
Negotiation
Bidding
“Prequalification ensures that bidders have technical and financial capability and a track record in performing similar tasks”
Prequalification can also:
Reduce overall cost and complexity of the bidding process
Increase interest of short listed bidders (as chances of win are higher)
Bring clarity to bid process, as key project characteristics are defined.
Prequalification documentation typically includes:
Project Information Memorandum – provides background information
of the proposed arrangement
Instructions to Tenderers – outlines the bid process and the selection
criteria for bidders
Prequalification Questionnaire – lists information required from firms
seeking prequalification

19. Prequalification (b)
Bid
Evaluation
Market
Sounding
Notify +
Prequals.
Negotiation
Bidding
“ Prequalification information is required to be able to assess parties against the Prequalification Criteria”
PUBLIC NOTIFICATION
PRE- QUALIFICATION
a. Purpose & Documentation
b. Criteria & Submission

20. Prequalification – Criteria & Submission
Bid
Evaluation
Market
Sounding
Notify +
Prequals.
Negotiation
Bidding
“ Prequalification information is required to be able to assess parties against the Prequalification Criteria”
Information typically collected includes:
Geographic presence
Size of existing customer base (population served)
Financial standing
Finance raising capacity
Experience or track record on similar contracts
Type of financing intended to raise if private financing is required
Staff and resources.
Legal status of the bidding entity.

21. Prequalification – Nadex
Bid
Evaluation
Market
Sounding
Notify +
Prequals.
Negotiation
Bidding
Nadex PQ requirements included:
Experience in urban rail projects – design, construction, rolling stock supply, operation and maintenance
Reference Projects:
Project size > Euro 200m
Service frequency > 4 trains per hour
Ridership > 1 million passengers per year
2 projects implemented in last 10 years, or
1 project implemented in last 5 years
Experience in raising non-public finance for PPP projects
Projects raising > Euro 75m (debt/equity)
Projects implemented were PPP and in operation 2 years+
Completion of PQ questionnaire
Financial information on urban rail projects and PPP projects
Financial information on bidders (consortium/SPV members)

22. Prequalification (c)
Bid
Evaluation
Market
Sounding
Notify +
Prequals.
Negotiation
Bidding
“ The Prequalification Documents should get the bidders to demonstrate credentials using a standardized framework, allowing rapid comparison and evaluation”
PUBLIC NOTIFICATION
PRE- QUALIFICATION
a. Purpose & Documentation
b. Criteria & Submission
c. Evaluation of Responses

23. Prequalification – Evaluation & Responses
Bid
Evaluation
Market
Sounding
Notify +
Prequals.
Negotiation
Bidding
“ The Prequalification Documents should get the bidders to demonstrate credentials using a standardized framework, allowing rapid comparison and evaluation”
Scoring:
Define predetermined scoring matrix
Define scales for marking each criterion
How many bidders?:
Decide how much the process should narrow field of bidders
Bidders prefer smaller shortlists, and may withdraw if shortlist is too long
particularly if more than five bidders
Designing Prequalification Rules:
Define a prequalification threshold – All bidders who pass a
threshold qualify to bid. May result in too few or too many bids
Define the number to be short-listed – Specify the number to be
listed, and select that many firms starting with the highest ranking. May
exclude some high quality bidders
Hybrid – Combine the two methods, five meeting threshold, or the
three top ranked if threshold not achieved by enough bidders.

24. Prequalification – Nadex Selection
Bid
Evaluation
Market
Sounding
Notify +
Prequals.
Negotiation
Bidding
Maximum 5 prequalified bidders specified in City Regulation
Two phase evaluation process
1. compliance with general and minimum requirements
2. (if more than 5 submissions) assessment of qualification, professional and business qualities
6 prequalification submissions received
5 bidders prequalfied

25. Bidding
Bid
Evaluation
Market
Sounding
Notify +
Prequals.
Negotiation
Bidding
“ Following prequalification, bidders will be invited to submit proposals”
The Contracting Authority will need to:
Provide Information
The better the available information, the better the bidders will have a common understanding and be able to provide a responsive, comparable bid. Also, increases fairness and transparency
The more relevant information available, the less risk bidders will factor in to price.
Information on legal, technical, and commercial aspects is required, and future plans
Principle information sources:
Bidding documents, Information memorandum
A data room
Meetings with management & staff of the utility

26. Bidding
Bid
Evaluation
Market
Sounding
Notify +
Prequals.
Negotiation
Bidding
“ Following prequalification, bidders will be invited to submit proposals”
The contracting Authority will need to:
Bidders and their financiers generally welcome dialogue on form of contract to be adopted
Bidder feedback should be incorporated in the design process, resulting in better, compliant and more affordable bids
Two main approaches to Bidder Feedback:
Bidder Conferences
Arms length Consultation ( & 2 stage bidding)
Interact with Bidders

27. Bidding
Bid
Evaluation
Market
Sounding
Notify +
Prequals.
Negotiation
Bidding
“ Following prequalification, bidders will be invited to submit proposals”
PROPOSAL FORM & CONTENT
Technical Proposal:
Information requested should only relate to the
evaluation criteria, including firms capability.
Information required should match the type of
contract arrangement envisaged
Each bid should detail the bidders proposals
for meeting obligations and service levels
Financial Proposal:
Information requested to be necessary for financial evaluation, such as fees, subsidy or investment, to meet evaluation criteria
Financial models (eg spreadsheet format) may be required for the more complex contract forms:
Other requirements: Bid bonds; Signed legal, acceptance of the bid process; Copy of contract signed at bid stage.
Specify proposal form & content

28. Bidding
Bid
Evaluation
Market
Sounding
Notify +
Prequals.
Negotiation
Bidding
“ Following prequalification, bidders will be invited to submit proposals”
PROPOSAL FORM & CONTENT
Technical Proposal:
Information requested should only relate to the
evaluation criteria, including firms capability.
Information required should match the type of
contract arrangement envisaged
Each bid should detail the bidders proposals
for meeting obligations and service levels
Financial Proposal:
Information requested to be necessary for financial evaluation, such as fees, subsidy or investment, to meet evaluation criteria
Financial models (eg spreadsheet format) may be required for the more complex contract forms:
Other requirements: Bid bonds; Signed legal, acceptance of the bid process; Copy of contract signed at bid stage.
Specify proposal form & content

29. Nadex Bid Proposals
Bid
Evaluation
Market
Sounding
Notify +
Prequals.
Negotiation
Bidding
For Nadex there will be 3 parts to the bid submission:
Technical part (delivery of Performance Specification – construction, rolling stock, operations)
Legal part (mark-up of draft PPP Agreement with commentary)
Financial part (finance plan, model and capital grant/ availability payment)
Details of form and content of each part of the bid are set out in the City Regulation Section 3 and associated annexes – currently being completed

30. Bid Evaluation
Bid
Evaluation
Market
Sounding
Notify +
Prequals.
Negotiation
Bidding
“ The evaluation approach is set at the start of the selection process.”
Here we review 4 steps in a two-envelope evaluation, to look at practical issues:
Compliance
Technical Evaluation
Technical Evaluation (Envelope1):
Technical and Financial envelopes are often evaluated separately, with financial proposals only considered after the technical evaluation, to avoid price issues affecting technical marking

31. Bid Evaluation
Bid
Evaluation
Market
Sounding
Notify +
Prequals.
Negotiation
Bidding
“ The evaluation approach is set at the start of the selection process.”
Here we review 4 steps in a two-envelope evaluation, to look at practical issues:
Compliance
Financial Evaluation (Envelope 2):
Financial envelope may be returned unopened if the Technical
proposal is non-compliant, or fails to exceed threshold score
Financial proposal opening options:
In Private: e.g. Sofia, financial package opened and
evaluated in secret. May raise questions about
transparency
In Public : e.g. Manila and Bucharest concessions,
projected onto screen at public meeting.
Opening in Public maximizes transparency, and can allow
rapid identification of winning bid.
Opening in Private can allow confidentiality if another round of
bidding is envisaged
Technical Evaluation
Financial Evaluation

32. Bid Evaluation
Bid
Evaluation
Market
Sounding
Notify +
Prequals.
Negotiation
Bidding
“ The evaluation approach is set at the start of the selection process.”
Here we review 4 steps in a two-envelope evaluation, to look at practical issues:
Compliance
Technical Evaluation
Financial Evaluation
Selection of preferred Bidder
Having completed technical and financial evaluations, a
preferred bidder can be selected
If a Technical threshold approach was used, the
preferred bidder is the one with the best financial offer
Select Preferred Bid

33. Other Issues – Winner’s Curse & Lowballs
“ There are several other issues that may have to be dealt with when deciding how to select a Bidder, including:”
If the winning bid is too low (e.g. through bidder error) it may be unsustainable, and the contract and services may be disrupted later.
There is a risk of underbidding as often the bid information is inaccurate or missing
Care can be taken in designing bid selection procedures to reduce these risks, through consultation and other measures.
Winners Curse & Lowball bids

34. Other Issues – Variant Bids
“ There are several other issues that may have to be dealt with when deciding how to select a Bidder, including:”
Winners Curse & Lowball bids
In complex bids a variant ‘service-price’ bid may offer the Authority better value for money than a base bid.
For evaluation purposes, the Bidder has to demonstrate the differences from a base bid.
Variant Bids

35. Other Issues – Complaints & Appeals
“ There are several other issues that may have to be dealt with when deciding how to select a Bidder, including:”
Winners Curse & Lowball bids
Variant Bids
An effective complaints and appeals procedure may reduce the risk that an unsuccessful bidder may try to overturn the preferred bid.
Complaints & Appeals

36. Other Issues -
“ There are several other issues that may have to be dealt with when deciding how to select a Bidder, including:”
Winners Curse & Lowball bids
Variant Bids
Complaints & Appeals
The issue of re-bidding at the end of the Arrangement period needs to be addressed, and the matter of flexibility in future bidding of any follow on arrangement
Flexibility & Future Rebidding

37. Selection of Bidders - Review
SELECTION METHOD
Procurement Issues
SELECTION CRITERIA
Winners
Curse
Variant
Bids
Appeals
Flexibility & Rebids
Bidder Pre-
Qualification
Bidder –
Tech.Evaluation
Financial
Evaluation
Competitive
Bidding
Negotiation
Direct
MANAGING BIDS
OTHER ISSUES
Choice of Bid Process
Bid
Evaluation
Market
Sounding
Notify +
Prequals.
Negotiation
Bidding

38. Selection of Bidders - Summary
Choosing the selection method:
Consider relative importance of transparency, speed, cost, and innovation
Choose a selection method: competitive bidding; competitive negotiation or;
direct negotiation
Setting the selection criteria for competitive bidding
Set technical evaluation criteria for prequalification
Set technical evaluation criteria for bidding
Set financial evaluation criteria
Determine how the technical and financial criteria will be combined:
weighted average, technical threshold, best financial or fixed price, best
quality
Manage the stages in bidding
Initial market sounding to determine operate interest and concerns
Public notification and prequalification to bidders on the short list
Specify the contents of bids and detailed bidding process
Evaluate
Negotiate or allow bidders to further improve their bid, if necessary
Dealing with other issues
Relationship between information required in proposals, evaluation criteria, and contractual obligations
Avoiding underbidding
Variant bids
Appeals and complaints
Maintaining flexibility for future re-tendering

39. Selection of bidders THANK YOU !!! Iain Menzies The World Bank