Competitive Bidding Essay

IntroductionAn open and agonistic procurance part begins with the champions description of its requirements and an invitation to suppliers to indicate their interest in the tackle and their professional capacity to fulfil it. The relay transmitter then identifies potentiality suppliers and invites them to submit bids. After the control phase, most procurement schemes require a familiar declaration of the competitors names and their bid prices and, ultimately, of the successful bidder. There is a wide variety of procurement procedures procurable for use in tendering when it comes to palatopharyngoplasty musical arrangements. M some(prenominal) of these procedures have become prescriptive in nature.Many topical anesthetic political relations follow standard procurement procedures drawn up by the International Federation of Consulting Engineers (FIDIC). However, most commonly PPP contracts atomic number 18 awarded as the result of some form of competitory program li ne procedure. Designing a competitive bidding mold and getting the topper accomplishable result is easiest when the product or attend to undeniable is a fairly standard one and the technical tabuputs can be delineate with commonsensical 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 process. Defining the procurement processSome initial decisions need to be made regarding the procurement and the bid valuation process. It includes Qualifying criteria for the evaluation and selection of shortlisted bidders Process for submission and evaluationDetails of pre-submission conference or stiring and of opposite opportunities to ask questions or seek clarifications Indicative procurement scheduleOther general instructions to applicantsApplication forms (as annexes)The choice of procurement method go outinging attend on the governing bodys budget, capacity, desire to encourage innovation, need for high-level inputs, vulnerability to corruption, and objectives of the ppp advise. threesome main options, distinguished by the level of competition they create, argon available1. Unsolicited proposals or unionise negotiations.2. competitive negotiation.3. Competitive bidding.Unsolicited proposals or direct negotiationsWhen confronted with a unsolicited proposal, the government has three options come up to negotiation to the offer.Purchase the run across c oncept then competitively tender among a range of bidders. maintain original proponent a predefined advantage in recognition of the value of the original proposal(bonus system)and open up bidding. Entering into a sole-source process can save government time and money and may alarm system government to an unrealized opportunity for ppp. However, sole-sourcing can encourage corruption through lack of transp arncy, and the cost benefits to competitive bidding are lost. Competitive negotiation.Competitive negotiation entail inviting a small group of bidders to a structured negotiation. The bidders are aware of the presence of the former(a) bidders and there is pressure to obtain the best price. This arrangement is quicker and less expensive than full competitive process and can yield good prices. A time consuming procurement process may be seen as an opportunity cost to the backstage sector. This needs to be weighted against the degree of and value to transparency. 1. Competitive negotiations, a nonher option of competitive bidding which generally involve the following stages The government specifies its wait on objectives, and involves proposals from buck private operators for meeting these objectives. The government re apparent horizons the proposals and selects those that are technically responsive to the request proposals. The government then negotiates contract terms and conditions with the selected bidders. 2. Competitive negotiations may involve concurrent negotiations with the objective of awarding one contract, or they may result in the award of several(prenominal) contracts.3. Competitive negotiations are well suited to project in which technical variations are manageable, there is much celestial orbit for innovation, and it would be difficult to secure project financing on the basis of standardized contract document. Advantages of competitive negotiationsThey permit bidders to be more creative and innovative.They reduce the incentive for bidders to deliberately underbid in inn to win projects. They offer a richer means of screening bidders than price alone.DisadvantagesBids can be difficult to compare. aspiration is less transparent than with competitive bidding.Competitive bidding processA competitive bidding process generally consists of1. in the public eye(predicate) notification of the governments intention to seek a private abetter _or_ abettor for the provision of, for example, water and sanitation receiptss, including prequalification or a request for expressions of interest from private companies2. distribution of bidding documents and draft contracts to potential bidders3. a formal process for screening potential bidders and finalizing a list of dependant bidders4. 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 processes).Formation of a Procurement CommitteeA Procurement Committee, often called a Tender rating Committee, is formed for overseeing and conducting the bidding process. Typically, the Procurement Committee is formed with representatives from a number of MDAs with responsibility for the financial, legal and operative aspects of the project as well as the Bureau/Office of Public Procurement in cabaret to have diversity and no one government group alone in charge of selecting the preferent bidder. The Commi ttee appoints an in-house coordinator or an external consultant (Transaction Advisor) to manage the day-today aspects of the bidding process.However, the Procurement Committee itself (and not the coordinator or Transaction Advisor) is responsible for making the final determination of the preferred bidder. The Procurement Committee, in turn, could be divide into functional teams to focus on evaluation of specific aspects of the bidders proposals. For example, the Procurement Committee could have separate teams for toil technical review, legal review,local preference review and financial review. The number of teams may depend upon the mazyness of the project evaluation. Invitation to tenderGenerally, 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 progression reduces the cost elusive in developing a PPP, it may limit the promoters opportunities to view other, more efficient and/or more cost-effective options for deli genuinely of the service. Request for proposalsA request for proposals (RFP) is normally 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 be met. whiz of the main differences between an RFP and an invitation to tender is that in an RFP the promoter is spirit 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 everya one-stage ora 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 con tractor or concessionaire. If it is deemed both feasible and suited for the spotting authority to formulate performance indicators or project specifications to the degree of precision or conclusiveness necessary, the selection may be structured as a single-stage process. In that case, after having concluded the pre-selection of bidders, the espial authority would proceed directly to issuing a final request for proposals. Request for Expressions of Interest (RFEI)The RFEI is mean to provide the promoter with sufficient information to draft a clear RFP in cases when the local government has identified itsobjectives, 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 swelledr number of proposals and it improves the quality of proposals.In this sense, the RFEI is used to gain information to foster in drafting the RFP.Request for Qualifications (RFQ) or Pre-qualif icationA 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 fellowship 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 evidence 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 gen tle resources, equipment and other physical facilities, managerial capacity, reliability and experience necessary to carry out the project. Qualification requirements should expand all phases of an infrastructure project, including financing, management, engineering, construction, operation and maintenance, where appropriate. Based on the pre-qualification results, a shortlist is drawn up of the companies entitled 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 witness the RFP. It is not designed to gain answers as to how the project will be completed. Depending on the pre-qualification requirements come down 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 localgovernments have started to include not only the price and quality of the service they w ish to procure, but to a fault requests to address poverty, upgrade welfare and/or create employment opportunities. much 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 expression 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 to oranges. Often local small phone linees or community-based organizations are best suited to resolve a grumpy 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 documentationThe system of tender submission should not require too many forms of supporting information, which could be unnecessarily obscure for small businesses to complete satisfactorily. Besides, the administrative burden for smaller businesses in dealing with tender form requirements for government bodies is dispro mountainately greater and more expensive than for larger companies. Thus, the tender submission of documentation should be rationalized and simplify 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 t he contract and the contractual obligations. Evaluation of Applications and Shortlisting of BiddersThe applications are evaluated based on the technical and financial capabilities to implement the project as per the selection criteria given inthe RFQ. At this stage, the evaluation normally focuses on threshold criteria such that all proposals meeting the criteria are shortlisted for the next stage and all non-confirming proposals are rejected. A Pass/Fail approach is generally the preferred approach for evaluation of responses to the RFQ. However, a bespeak number (3-5) of shortlisted bidders is usually preferred in order to ensure sufficient competition but not at the same time overcrowd the bidding process, and therefore sometimes only the highest qualifying firms will pass on to the full tender phase. If firms feel there are too many bidders, and thus the odds of winning are low, they will not participate in the full tender. Advantages of competitive biddingIt ensures transpare ncy.It provides a market mechanism for selecting the best proposal. It stimulates interests among a broad range of potential partners. It works best where outputs are standardized and all technical parameters can be clearly defined. It may encourage underbidding if renegotiation is possible later.The contractRegardless of the option selected, the essential elements to be included in a contract are The parties to the agreement,Interpretation, sets forth the definitions of important terms and providing guidance on the interpretation of the contracts provisions The scope, territorial jurisdiction and duration of the agreement, The objective of the contract,Circumstances of commencement, completion, modification and termination of contract The rights and obligations of the contractorThe rights and obligations of the establishmentThe requirement for performance bonds to provide security for Government if the construction and service delivery falls under standards Insurance requirements to provide security for the insurable matters Government warrantiesPrivate sector warrantiesConsequence to a interpolate in lawService quality and performance and maintenance targets and schedules The identification of regulatory authorities if any and the extent of their roles and authority The responsibilities of the contractor and the Government with regard to capital expenditures The form of remuneration of the contractor and how it will be covered, whether from fixed fee, fixed fee plus incentives or another arrangement How key attempts will be allocated and managedThe contractors right and responsibility with regard to passing through or entering public or private property Reporting requirementsProcedures for measuring, monitoring and enforcing performance Procedures for coordinating investment prepResponsibility for environmental liabilitiesProcedures for resolving disputesDelay provisions describing what is and is not an excuse for a delay in construction and operations Force majeure conditions and reactionsProcedures to be followed when both party to the PPP contract wishes to change any material portion of the contract Indemnification shareThe right of each party to any intellectual property brought to the project or created during the project, including the steps to be taken to protect the intellectual property of third parties, such as information technology software manufacturers Conflict of interests and dispute resolutionDescription of the conditions under which either party may terminate the contract, the process to be undertaken in that regard, and the consequences to each party of a termination The circumstances that may permit either the Government or any financial institution to step in to the contract to protect its rights under the PPP contract Consequences of a change in the ownership or key personnel of the private partner Mechanisms whereby the parties to the PPP contract will interact with each other going forward Requirement th at each party comply with all laws pertaining to the project, including obtainable environmental, zoning, planning and other permits Conditions by which public sector employees are employed by the private sector contractor, including any restrictions on termination or redundancies for operational reasons and Conditions precedent describes any conditionsprecedent to be fulfilled by either party before the contract takes effect. This list is illustrative and does not capture every clause required in a contract. The final content of the contract will depend on the project scope, local legal requirement and precedent, and advice of legal advisors. It may include more elements as per demand of situation and surface of the project.CONCLUSIONPPP projects have lately become a popular operation model in public infrastructure development all over the world. Long-term contractual arrangements with PPPs change the traditional roles of the public and private sectors. Public sector bodies become clients and private sector bodies become service providers with a large responsibility of the project in question. PPP projects offer different kinds of benefits to both public and private parties. both(prenominal) partnership parties also have different kinds of goals however, the common goal is that both parties win. As the results in the schoolbookbook show, proactive law becomes relevant in contract law and contracting. Practicing proactive contracting requires more planning of legal relations. The goal is to prevent difficult future situations and avoid problems. Proactive contracting emphasizes contract preparation.That is why, for example, issues and questions concerning lucks, risk management and creative contractual mechanisms play a probative role. In business relations, proactive contracting invites and gathers different professions to participate in a new type of co-operation. A common language has to be found, for example, between the people in companies with techn ical, financial, and legal backgrounds. In this way, it is possible to assess the possible risks and other small contractual questions in the contract preparation phase. A partnership mindset is essential in PPP projects. A client and a project company form the main contractual relationship in terms of PPP projects. In addition to this, for example, a project company has several contracts with subcontractors. These partnerships are complex contractual relationships in which trust plays a big role. Co-operation requires constant care in the form of conference and reciprocal trust to strengthen it. Trust is achieved by the companies and public sector representatives binding themselves to shared goals.Furthermore, once strongtrust has been built and established, firms may enjoy lower costs than those without such trust. In the business context, trust seems to be based partly on economic calculations and partly on the trusting partys basic values as a human being. Each PPP project con sists of several different contracts, so that they are actually a bundle of contracts. These contracts cover, for example, construction, financing, and services. PPP projects are long-run and very complex contractual arrangements which require careful and time-consuming preparation and negotiations. Dozens of different risks exist as well. As regards risks with PPP projects, the proactive way is the only reasonable way to handle and allocate them. This requires investments from the parties. As the results in the text show, changing circumstances play a significant role in long-term contracts and, for instance, in PPP projects in terms of contract law. It is sensible for the parties to prepare for changing circumstances.This requires proactive mindset and actions. In practice, this means that parties have to create flexible contractual mechanisms for contracts so that they can respond to possible changing circumstances in the future. These mechanisms can be, e.g. clauses concerning changes in official regulations and legislation, hardship, renegotiations, and force majeure. As the results in the text show, in Finnish PPP projects and their contractual arrangements, tailored contract clauses, insurances, securities, and guarantees have been used as tools for managing and allocating risks. It has also been noted that the most problematic situations arise when risks are not individualized. Problems also occur when a risk is individualized but the risk-bearing party is not determined. Proactive law and risk management play significant roles in PPP projects. Moreover, tailored contract clauses and mechanisms also have a great significance.