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

1. 1
Nordic PPP Forum 2008
Stockholm, 28th - 29th October 2008
Presentation by:
Ir. P.J.A. Peekel, Project Manager

2. 2
PPP Procurement Process
Public Infrastructure Planning Process
DBFM Infrastructure Projects

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
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

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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

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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

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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

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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
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

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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

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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
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

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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

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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

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Combining Processes
• Sequential approach of processes;
• Fully interwoven processes;
• Semi-interwoven processes;
Infrastructure Planning and Procurement

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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

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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

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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

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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

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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

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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

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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

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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”

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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)

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Interweaving
of
PPP Procurement
and
Public Infrastructure Planning
Processes
For more information:
Paul J.A. Peekel
+31 30 240 7896
paul.peekel@strukton.com
DBFM Infrastructure Projects
Nordic PPP Forum 2008