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14102008 - Nordic Ppp Forum Presentation Pja Peekel Final


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Presentation given at Nordic PPP Forum in 2008. It concerns ways and means to combine public planning and tendering procedures;

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14102008 - Nordic Ppp Forum Presentation Pja Peekel Final

  1. 1. 1 Nordic PPP Forum 2008 Stockholm, 28th - 29th October 2008 Presentation by: Ir. P.J.A. Peekel, Project Manager
  2. 2. 2 PPP Procurement Process Public Infrastructure Planning Process DBFM Infrastructure Projects
  3. 3. 3 PPP Procurement Process • Introduced for public sector contracts in EU Directive 2004/18/EC; • Entered into force in April 2004; EU member states were required to formally adopt the Directive before 1st January 2006; • In the Netherlands first applied, prior to formal adoption, to Second Coentunnel Project (start September 2005); • Complements the Open and Restricted Procedures (which require detailed specifications and award criteria to be drawn up in advance); • Intended to be a preferred alternative over the Negotiated Procedure; Introduction Competitive Dialogue Procedure
  4. 4. 4 PPP Procurement Process • Contracting authorities are permitted to use this procedure: • Where the nature of the works or services that they are procuring or the risks related to them are such that prior overall pricing is not feasible; and/or • In case of a services contract (e.g. most PPP contracts) where the specifications cannot be drawn up with sufficient precision to allow pricing prior to the request for tenders; and/or • Where there is a need for the contracting authority to discuss all aspects of the proposed contract with candidates; • Negotiated Procedure remains for truly exceptional circumstances; Application of Competitive Dialogue
  5. 5. 5 PPP Procurement Process • Typical steps in the process: 1. Prequalification Phase (economic/financial standing, technical and/or professional ability); 2. Plan of Approach Phase (short-listing to 3 bidders); 3. Consultation Phase (discuss contract, requirements, etc); 4. Dialogue Phase (develop solutions; prepare Dialogue Products e.g. Management Plan, Document Management System, Performance Monitoring System, project planning, risk allocation, etc; Resolve commercial and prizing issues; 5. Freeze documents and call for Final Tenders; Receive bids; 6. Clarifications, followed by appointing Preferred Bidder; Structure of Competitive Dialogue
  6. 6. 6 PPP Procurement Process • After submitting final tenders, • Authority may only request clarification and fine-tuning or confirm commitments contained in the tender; • No negotiation on price or other substantial changes in scope can be agreed after appointing Preferred Bidder; • Preferred Bidder must the candidate with Most Economically Advantageous Tender (MEAT); • MEAT is determined on the basis of the prior award criteria laid down in the Tender Guidelines; • Quality requirements are translated to MEAT criteria; • Tenders allow focus on quality and price; Key characteristics of Competitive Dialogue
  7. 7. 7 PPP Procurement Process • Quality worked into price: (1) List Risks and (2) Wishes • List Risks: • Predefined key risks of critical importance to Project; • Risk allocation choice determines for each risk the bid price mark- ups and the bid ceiling price adjustments: • Wishes: • Solutions the Client desires but not necessarily requires; • Each wish has a bid mark-up value; Competition on highest quality/price ratio Ceiling unchangedPart price mark-up onlyShare risk with Client Ceiling decreasedFull price mark-upLeave full risk for Client Ceiling increasedNo price mark-upTake full risk Ceiling unchangedPart price mark-up onlyShare risk with Client Ceiling decreasedFull price mark-upLeave full risk for Client Ceiling increasedNo price mark-upTake full risk Mark-up pro rataWish partially fulfilled Full price mark-upWish not fulfilled No price mark-upWish fully fulfilled Mark-up pro rataWish partially fulfilled Full price mark-upWish not fulfilled No price mark-upWish fully fulfilled
  8. 8. 8 PPP Procurement Process • MEAT = Lowest [Bid Price + Mark-upRisks + Mark-upWishes] • Strategy is typically: To create distinctive / unique solutions that: -Minimize consequences of risks and enables you to take the risks; -Maximize the fulfillment of wishes at minimum cost; • This typically requires widening the boundaries of the specifications during the Consultation Phase; Consortium tender strategies under Competitive Dialogue Plan of Approach Phase Consultation Phase Dialogue Phase ProcurementProcess
  9. 9. 9 PPP Procurement Process • A tender procedure which can be used in case of complex projects where solutions and specifications and estimated price cannot be defined up front; • A procedure which therefore allows development of requirements and solutions during the procurement process in a dialogue with the candidates, while maintaining competition; • Consortium tender strategies tend to focus on the creation of alternatives that add most value for the best possible price. This often calls for flexibility in specifications and relaxation of tightly defined solution constraints. Competitive Dialogue summarized
  10. 10. 10 Infrastructure Planning Process • Well structured and highly regulated process to determine optimal routing of line infrastructure (railway, road); • Takes due account of: • Desired functional requirements; What problem to be solved; • Advantages and disadvantages of all possible solutions; • Technical, economical and environmental impact factors; • Requirements and wishes of project and public stakeholders; • Objective decision making process which includes public consultation (interaction with public stakeholders); Characteristics of public Infrastructure Planning Process
  11. 11. 11 Infrastructure Planning Process • Structure is typically similar for railway and road projects; • Significant similarity of process structures between different EU countries; • Time frames: • Rail project Sweden (e.g. Citybanan Stockholm): 4-5 years • Road project in The Netherlands (typical): 5-6 years • Longer periods for complex projects are not uncommon; Structure and timeframe
  12. 12. 12 Infrastructure Planning Process Similarity Swedish and Dutch Planning Processes Final Route Decree Järnvägsplanen Plan Study Phase part 2 (Draft Route Decree phase); Work out in detail the preferred route; Update EIA; Establish land acquisitions; Establish costs and planning; Tillåtlighetsprövning "Standpunt"; Decision by Minister of Transport for preferred route; Järnvägsutredning + MiljöKonsekvens Beskrivning (MKB) Plan Study Phase part 1 ("Trajectnota/MER Fase"); Study selected route options and carry out Environmental Impact Assessments (EIA); Förstudien Exploration Phase ("Verkenningsfase"); Define problems and explore feasible options that could solve them; Planeringsprocess (Banverket) Sweden Route Decree Process The Netherlands √ Såmrad √ Såmrad √ Såmrad √ Inspraak √ Inspraak √ Inspraak
  13. 13. 13 Infrastructure Planning Process • Starting with many potential alternative options; • Ending up with a well defined single alternative; • Very limited (if any) degrees of freedom remain for a design process in the tender of the project or in project execution; • Selected detailed solution is often also described in agreements with public authorities; • Details by which solution is fixed are often more stringent than the law calls for; Converging to a single solution Feasibility Alternatives / EIA Detail selected route / EIA Route Decree PlanningProcess
  14. 14. 14 Infrastructure Planning Process • A well structured and highly regulated process, bound by formalized decision making and significant public stakeholder involvement; • Aims to develop a single best alternative out of many options that may be available at the start of the process; • Tends to rigorously tie down that ultimate single solution in a detailed Route Decree and by means of one or more stakeholder agreements; Characteristics summarized
  15. 15. 15 Combining Processes • Sequential approach of processes; • Fully interwoven processes; • Semi-interwoven processes; Infrastructure Planning and Procurement
  16. 16. 16 The sequential approach • Procurement Process begins after Planning Process has been completed: • Final design (selected and well defined alternative); • Route Decree (formal governmental decision); • Public stakeholder agreements signed; • Tends to limit variety in solutions and in risk allocations offered; • Results in competition on price only rather than quality + price; Planning Process à Procurement Process Feasibility Alternatives / EIA Detail selected route / EIA Route Decree Plan of Approach Phase Consultation Phase Dialogue Phase Possibilities offered in Consultation Phase are often severely limited by prescribed details in Route Decree and by constraining clauses in Stakeholder Agreements. Solutions (possibly with considerable added value to the Client) cannot be accommodated Sub-Optimum Solution awarded PlanningProcess ProcurementProcess
  17. 17. 17 Fully interwoven processes • Tender starts after Feasibility Stage (i.e. after Förstudien); • Tender solutions are injected in Planning Process; • Preferred Bidder solution = Route Decree solution; • Dutch infra project where being applied: A2 Maastricht project; Start tender very early in Planning Process Feasibility Alternatives / EIA Work out in detail selected route / EIA Route Decree Plan of Approach Consultation Phase Dialogue Phase MEAT solution awarded (conditionally to Route Decree) A B C A’ B’ C’ A”’ A’ B’ C’ D (public) Tender Solutions Preferred Bidder Solution (MEAT) > Route Decree Solution A’’ B’’ C’’ PlanningProcessProcurementProcess
  18. 18. 18 Semi-interwoven processes • Tender starts after “Standpunt” (i.e Tillåtlighetsprövning); • Tenders are variations to publicly preferred solution; • Preferred Bidder solution = Route Decree solution; • Dutch infra project where applied: Second Coentunnel project; Start tender about halfway in Planning Process Feasibility Alternatives / EIA Work out in detail selected route / EIA Route Decree Plan of Approach Consultation Phase Dialogue Phase BAFO A’ B’ C’ A’’ B’’ C’’ A B C PlanningProcessProcurementProcess
  19. 19. 19 Interweaving of processes Key to success • Concurrent timing of decisions in both processes; • Integrity of each process individually must be maintained; • Exchange of information between processes must take account of public transparency and procurement confidentiality requirements; Example of major “decision knot”: • Decision to conditionally award “Voorlopige Gunning” AND (at the same time) • “Standpunt” Tillåtlighetsprövning
  20. 20. 20 Transaction time and costs • Competitive Dialogues tend to be long and can be costly; • When interweaving, tender process increases in duration, but intensity of effort varies in time; • When interweaving, the necessity to adhere to a tendering timescale will reduce public decision making delays; • When fully interwoven, design cost compensation given by tendering authority should consider that some of the public activity (i.e. working out alternatives) is done by the bidders; • Semi-Interweaving doesn’t automatically mean that more attractive solutions are possible, because sometimes public agreements turn out to have completely restrained all degrees of freedom; Competitive Dialogue and Interweaving
  21. 21. 21 Dutch experience • Total value: EUR 630 mln; • Contract type: DBfM (small F!); • Infrastructure + urban area development; • Tender started Q4 2006; 5>3 bidders; • 3 bidder plans > public hearings; • Planned Contract Close: August 2009; Fully interwoven: A2 Maastricht
  22. 22. 22 Dutch experience • Total value: EUR 600 mln; • Contract type: DBFMO; • 6 + 24 yrs concession; • Maintenance from Contract Close; • Infrastructure (tunnel + roads); • Very innovative bidder solutions; • Costly procedure: both Base Case and Alternatives were progressed; • Innovative solutions could ultimately not be accommodated (too many constraints build into Public Agreements); Semi-interwoven: 2nd Coentunnel
  23. 23. 23 Interweaving described • Jointly developed between Ministry of Transport and representatives from the Private Sector; • General principles; Do’s and Don’t; Advantages and disadvantages of various interweaving models; • It’s a Guideline > project specific fine-tuning is possible; Manual available (in Dutch) Translation: “Guideline concerning the interweaving of Route Decree / EIA procedure and tendering procedure for infrastructure projects”
  24. 24. 24 Lessons for Nordic Region • Adopt Competitive Dialogue Procedure for DBFM tenders; • When Route Decree Planning Procedure is interwoven with DBFM tender procedure, the possibility exists that due to competition very innovative solutions are developed with significant added value to Client and the public at large; • Do not restrict innovative alternatives by converging in the Route Decree Planning Procedure to a single and narrowly defined preferred alternative; • Do not constraint (more than absolutely necessary) the degrees of freedom for alternatives in Public Stakeholder Agreements; • When still in Route Decree Planning Procedure, the Client and the Preferred Bidder should work in Partnership (Alliance); And continue working like that throughout project execution!! For PPP infrastructure projects (roads, rail, incl. light rail)
  25. 25. 25 Interweaving of PPP Procurement and Public Infrastructure Planning Processes For more information: Paul J.A. Peekel +31 30 240 7896 DBFM Infrastructure Projects Nordic PPP Forum 2008