Module 16: Tendering and Procurement

16.3. What is procurement documentation?

The procurement documentation will depend on the type of contract that has been selected. In most cases, the following documentation will be required:

1. Invitation to tender letter

2. Instructions to bidders

3. Bid data sheet

4. Standard forms for technical and financial proposals

5. Terms of reference

6. Draft contract

7. Specification

8. Drawings

9. Bills of quantities and schedule of rates

Invitation to tender letter

A brief letter inviting pre-qualified firms or consortia to submit technical and financial bids for the PPP arrangement.

Instructions to bidders

This document provides bidders with the general guidelines and formal rules governing the tender process. The rules of tender add clarity and transparency in order to clarify bidders’ questions prior to the beginning of the formal tender process. It is usually preferable to submit the financial and technical proposals in separate sealed envelopes; evaluation should be a two-stage process, with only the bidders that are qualified technically proceeding to the financial evaluation. This process should be outlined clearly in the instructions to bidders.

Bid data sheet

The bid data sheet provides clarifications on the general information contained in the instructions to bidders, including: scheduling, submission deadlines, evaluation procedures, logistic support, regulations and so on. Bidders may be required to include in their technical proposal elements such as:

– an understanding of local conditions;
– an understanding of the requirements of the contract;
– information on the equipment and technologies to be used;
– a schedule of activities to reach any performance targets;
– information on the experience and skills of key management and technical staff to be assigned; and
– staffing and staff development plans.

There are several alternative selection criteria that may be used to evaluate financial proposals:

– lowest tariff or volumetric fee;
– value of investments to be made by the bidder, given a pre-set tariff;
– fixed fee;
– incentive compensation for the achievement of pre-defined targets; or – a combination of the above.

Standard forms for technical and financial proposals

In order to ensure that bids are both responsive to the terms of reference (TOR) and easy to compare and evaluate, the tender documents commonly include a set of standard forms that all bidders must use in submitting their proposals. These typically include:

– bid forms and price schedules;
– a bid security form;
– a form of contract agreement;
– performance security forms; and
– a bank guarantee form for advanced payment.

Terms of reference (TOR)

The terms of reference may include general background information on the service area and sector, as well as the specific scope of work of the private operator. This document protects the government at a later stage during the transaction closing process by supplying much of the information required by the bidder. It thus prevents bidders from claiming that they did not have knowledge of certain circumstances during the bid or negotiation phases. Much of the work in the closing of a transaction can be done more efficiently if the information provided in the terms of reference has been properly researched, assessed and written. Bidders also appreciate a full TOR, as it enables them to assess quickly the potential merits of a project from their home offices.

Draft contract

A draft contract may be included in the tender documents; if so, it will greatly reduce the time required carrying out negotiations with the preferred bidder. A draft contract is an extremely detailed legal document, which covers the following:

– it ensures that all of the many legal protections are met, including representations, warranties, indemnifications, terms and all applicable laws and regulations;
– it ensures that all proposals address all aspects of the project that are important to the government, such as financial structures, social guarantees, investment guarantees and so on;
– it ensures all investors submit proposals in the same format to make them clearly comparable for evaluation purposes; and
– it makes the tender process, the proposal evaluation process and especially the negotiation process most efficient.

The draft contract is extremely important if negotiations are to begin with baseline conditions that are acceptable to the government. If contractors are allowed to propose their own agreements and conditions first, it is much more difficult to later negotiate and change an agreement.

In addition to the above, tender documents for PPP arrangements commonly include as annexes:

Specification

The specification defines the standard of workmanship and materials required by the government for completion of the project. It may include a description of the works, site conditions, access to the site, site establishment, supply of materials and so on. The contractor is obliged to meet these specifications. The statement of specification must be precise and unambiguous in interpretation. A specification may set out how all the work may be done, or just certain aspects, leaving the rest to the contractor’s experience.

Drawings

A list of drawings showing the title, number of the drawing and revision number should be provided with the invitation to tender letter or with the specifications. Maps should show the proposed location for works, possible pipeline routes, crossings and so on.

Bills of quantities and schedule of rates

A bill of quantities specifies the quantity of materials and the labour input that the work will incur. It may be in just one document or divided into several documents to suit sections of work. It is normal procedure to include sections on “Method of Measurement” or “Notes on Pricing”.

These sections will enable the bidder to define what exactly is to be included in the individual rates and prices. Standard documents have been published providing guidelines on measurement methods, but these may not be adequate for every possible situation or work item. Thus, there is always a need for some modifications to standard methods. Standard methods that have been used, the edition and any amendments that have been made must always be specified. These instructions should be included in the “Notes on Pricing”. It is preferable to supply a bill of quantities rather than a schedule of rates. It is more difficult for the government to evaluate whether the bidders’ pricing is fair and reasonable if quantities have not been specified. Inclusion of a schedule of rates with a tender for a lump-sum contract is justified where the rates are purely for evaluating any variations in the work that may arise.

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