Effective Procurement Process in Public-Private Partnerships

1. Procurement in PPPs February 27, 2009

2. When do you start thinking about procurement? Choosing between public funding and PPP Choice between Public funding and PPP Preliminary Scoping & teaming Viability assessment Choosing the structure of the PPP arrangement Identify and allocate risks Select the contract type Procurement Define implementation structure Plan and manage procurement

3. What should you achieve with procurement? • Process promotes healthy competition, not speculation • Award is controversy free, publicly defendable and is transparent • Process assures level playing field and attracts available competition

4. Tendering stage is not end of all • A good tendering process cannot salvage lapses in • Project preparation and structuring • Contract design • Negotiations • Dispute resolution mechanism

5. Designing the procurement process Procurement Procurement process Define all of these… Procurement method Procurement steps … to design the procurement process Bidding parameter Qualification parameter (s)

6. EoI/ RFQ Pre bid meeting Financial bid opening Queries/ Response Amend bid documents Financial evaluation Shortlisting Two cover submission Issue of LoI Issue of RFP Technical shortlisting Negotiation and contract signing

7. Bidding parameter should flow from the contract • Service improvement that we want to achieve should be reflected in the contract • Bidding parameter should ideally be the cost of service • Possible bidding parameters • Cost of bulk water supplied • Tariff per KL • Viability gap in Rs crores • Lease payments to Government • Avoidable • Return on equity • Level of service • Amount of investment operator would make

8. Selection criteria should be a single objective parameter • Preferable to have a financial parameter • Better not to combine two or three parameters into one score, for e.g • 70% weightage for tariff • 30% weightage for coverage • No carry forward of technical evaluation • 80:20 does not work in PPP procurement • Technical ranking or scores not to be carried forward into final selection • Results should be obvious to anyone the moment bids are opened

9. Best technical evaluation is a Go/ No Go stage • Marking or scoring of technical proposals is complex and is open to subjectivity • Best to define minimum standards that a proposal should meet • Best to identify proposals that meet this requirement • Qualify all proposals that meet the minimum threshold

10. Final proposals can go for a toss if pre-qualification is compromised • The only place to disqualify poor bidders is in the pre-qualification stage • Once that bidder is pre-qualified • Other bidders fear rogue bidding/ speculation • Faith in level playing field goes down • It is difficult to eliminate that bidder in technical proposal

11. Pre-qualification evolves with the sector • In the initial stages of PPP, one should be open to a wide variety of participants • International players with relevant experience • Domestic players with relevant experience • Domestic contractors/ suppliers in the same sector • Domestic players with similar skills in other sectors • Financially strong domestic players with an international partner • Best to look for a consortium that provides • Technical experience • Financial capability • Treat international experience (or) domestic presence factually and rationally • No need to over depend or over emphasise either of them

12. Depend on simple documents and criteria • The simpler and open the process is, the results will be more sustainable • There should be enough confidence to make all documents publicly available • Bid documents • Evaluation reports

13. What should you achieve with procurement? • Process promotes healthy competition, not speculation • Award is controversy free, publicly defendable and is transparent • Process assures level playing field and attracts available competition

14. Thank You sramanujam@crisil.com +91 99202 28448

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