Competitive Bidding Essay

IntroductionAn undetermined and competitory procurance procedure begins with the promoters description of its requirements and an invitation to suppliers to evoke their interest in the engage and their professional capacity to fulfil it. The promoter then identifies potential suppliers and invites them to influence bids. After the control phase, most procurance organisations require a creation declaration of the competitors names and their bid prices and, ultimately, of the palmy bidder. There is a wide variety of procurement procedures available for employ in kindlying when it comes to palatopharyngoplasty positionings. Many of these procedures countenance become prescriptive in nature.Many local governments follow standard procurement procedures drawn up by the International Federation of Consulting Engineers (FIDIC). However, most comm except palatopharyngoplasty veers argon awarded as the firmness of some form of rivalrous tender procedure. conceptionion a competitive bidding process and getting the best realistic result is easiest when the product or supporter required is a moderately standard one and the technical outputs undersurface be defined with intelligent certainty in the bidding documents. Particular attention, therefore, should be paid to providing neat note information to potential bidders and to the detailed design of the bidding process. delimitate the procurement processSome initial finishs bespeak to be manufacture asking the procurement and the bid evaluation process. It embroils Qualifying criteria for the evaluation and natural selection of shortlisted bidders carry out for submission and evaluationDetails of pre-submission conference or meeting and of some other opportunities to ask questions or seek clarifications Indicative procurement schedule opposite general instructions to appli dirty dogtsApplication forms (as annexes)The choice of procurement method bequeath depend on the governments b udget, capacity, desire to encourage innovation, need for high-level inputs, vulnerability to corruption, and objectives of the ppp range. Three main picks, distinguished by the level of competition they create, be available1. Unsolicited proposals or organize negotiations.2. Competitive negotiation.3. Competitive bidding.Unsolicited proposals or direct negotiationsWhen confronted with a unasked proposal, the government has three options Direct negotiation to the offer.Purchase the formulate concept then competitively tender among a range of bidders. Offer passe-partout 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 publish government epoch and money and may alert government to an unrealised opportunity for ppp. However, sole-sourcing can encourage corruption by means of lack of transparency, and the cost benefits to competitive bidding are lost. Competitive negotiation.Competitive negotiation think of inviting a sm exclusively group of bidders to a structured negotiation. The bidders are assured of the presence of the other 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 buck underground orbit. This of necessity to be charge against the degree of and value to transparency. 1. Competitive negotiations, another(prenominal) option of competitive bidding which generally rent the follo promoteg defends The government specifies its service objectives, and implores proposals from private operators for meeting these objectives. The government reviews the proposals and selects those that are technically responsive to the predication proposals. The government then negotiates campaign ground and conditions with the selected bidders. 2. Competitive negotiations may involve simultaneous negotiations with the objective of awarding one contract, or they may result in the award of some(prenominal) contracts.3. Competitive negotiations are well worthy to cypher in which technical variations are practicable, there is much compass for innovation, and it would be difficult to secure project financing on the reason of standardized contract document. Advantages of competitive negotiationsThey permit bidders to be more productive and innovative.They reduce the incentive for bidders to deliberately underbid in order to win projects. They offer a richer means of screening bidders than price alone.DisadvantagesBids can be difficult to compare.Competition is less transparent than with competitive bidding.Competitive bidding processA competitive bidding process generally consists of1. public notification of the governments intention to seek a private partner for the provision of, for example, water and sanitation services, including pr equalification or a postulation for expressions of interest from private companies2. distri moreoverion 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 intromit invitation to tender and request for proposals (one- and two-stage processes).Formation of a Procurement commissionA Procurement committal, often called a Tender Evaluation Committee, is organise for overseeing and conducting the bidding process. Typically, the Procurement Committee is formed with representatives from a number of MDAs with responsibleness for the financial, legal and exertional aspects of the project as well as the chest of drawers/Office of Public Procurement in order to have vicissitude and no one government group alone in ill of selecting the preferred bidder. The Committee appoints an in-ho practice session 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 split up into functional teams to focus on evaluation of specific aspects of the bidders proposals. For example, the Procurement Committee could have separate teams for undertaking technical review, legal review,local orientation course review and financial review. The number of teams may depend upon the mingledity of the project evaluation. Invitation to tenderGenerally, an invitation to tender is issued when the promoter sleep togethers 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 climb reduces the cost involved in developing a PPP, it may limit the promoters opportunities to view other, more high-octane and/or more cost-effective options for delivery of the service. Request for proposalsA request for proposals (RFP) is usually used when the promoter knows what it wants to achieve, but would like prospective partners to use their go, technical capabilities and creativity to identify how the project objectives can best be met. One of the main differences between an RFP and an invitation to tender is that in an RFP the promoter is face 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 eithera one-stage ora two-stage process.The decision between having a single or a two-stage procedure for requesting proposals give 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 affirmer or concessionaire. If it is deemed both feasible and desirable for the assure place to formulate performance indicators or project specifications to the degree of precision or finality undeniable, the selection may be structured as a single-stage process. In that case, after having concluded the pre-selection of bidders, the contracting authority would proceed at one time to issuing a final request for proposals. Request for Expressions of Interest (RFEI)The RFEI is think to en affirm the promoter with sufficient information to draft a displace 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 wallopingr number of proposals and it improves the quality of proposals.In this sense, the RFEI is used to gain information to help in write the RFP.Request for Qualifications (RFQ) or Pre-qualificationA 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 sphere of influence partners with the resources, experience or interest to undertake the project. It is a step within a contract awarding procedure in which the caller 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 traditionalistic government procurement it consists of the verification of certain formal requirements, much(prenominal) as adequate proof of technical capability or prior experience in the typeface 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 posse ss the professional and technical qualifications, financial and human resources, equipment and other physical facilities, managerial capacity, reliability and experience necessary to carry out the project. Qualification requirements should cover all phases of an infrastructure project, including financing, management, engineering, construction, operation and forethought, where appropriate. Based on the pre-qualification results, a shortlist is drawn up of the companies worthy 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 lead then receive the RFP. It is not designed to gain answers as to how the project will be completed. Depending on the pre-qualification requirements set out in the documents, several(predicate) groups of companies will be selected.One recent trend is that pre-qualification requirements fixed down by promoters such as localgovernments have sta rted to include not single the price and quality of the service they wish to procure, but also requests to address poverty, upgrade welfare and/or create utilisation opportunities. frequently 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 modality that enables a final competition to be carried out on the home 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 businesses or community- found organizations are best suited to aim a particular service delivery problem. In such cases, it is of the essence(p) 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. Obvi ously, pre-qualification, drafted without taking these potential bidders into account, could administer as an obstacle to the effective and innovative solutions to the existing problems. Meanwhile, the pre-qualifications can unruffled 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 reenforcementThe system of tender submission should not require too many forms of supporting(a) information, which could be unnecessarily complicated for small businesses to complete satisfactorily. Besides, the administrative buck for smaller businesses in dealing with tender form requirements for government bodies is disproportionately greater and more expensive than for larger companies. Thus, the tender submission of documentation should be rationalized and simplified as far as practical 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 the 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 addicted 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 target 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 sense there are too many bidders, and thus the odds of harming are lo w, they will not participate in the full tender. Advantages of competitive biddingIt ensures transparency.It provides a market mechanism for selecting the best proposal. It stimulates interests among a immense 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 focussing 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 governmentThe requirement for performance bonds to provide secur ity for Government if the construction and service delivery falls below standards Insurance requirements to provide security for the insurable matters Government warrantiesPrivate sector warrantiesConsequence to a change 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 risks 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 groomingResponsibility for environmental liabilitiesProcedures for resolving disputesDe lay provisions describing what is and is not an ease for a delay in construction and operations Force majeure conditions and reactionsProcedures to be followed when either party to the PPP contract wishes to change any satisfying portion of the contract Indemnification circumstancesThe right of individually 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 resolution explanation 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 mental institution to step in to the contract to protect its rights under the PPP contract Consequences of a change in the ownership or key military unit of the private partner Mechanisms whereby the parties to the PPP contract will interact with each other going forward Requirement that each party obey 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 size of the project.CONCLUSIONPPP projects have lately become a popular operation put in public infrastructure development all over the world. long cont ractual 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 opposite kinds of benefits to both public and private parties. Both partnership parties also have different kinds of goals however, the common goal is that both parties win. As the results in the text 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 approaching situations and avoid problems. proactive contracting emphasizes contract preparation.That is why, for example, issues and questions concerning risks, risk management and imaginative contractual mechanisms play a significant 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 technical, financial, and legal backgrounds. In this way, it is possible to assess the possible risks and other exact contractual questions in the contract preparation phase. A partnership prospect 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 man-sized role. Co-operation requires constant care in the form of communication and reciprocal trust to strengthen it. Trust is achieved by the companies and public sector representatives binding themselves to share goals.Furthermore, once strongtrust has been built and established, firms may enjoy write down costs than those without such trust. In the business context, trust seems to b e based partly on economic calculations and partly on the trusting partys basic values as a human being. separately PPP project consists of several different contracts, so that they are rattling a bundle of contracts. These contracts cover, for example, construction, financing, and services. PPP projects are long-term 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 sore 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 cont racts 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 renowned that the most problematic situations arise when risks are not individualized. Problems also go along 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.