In many cases, both public and private sector entities choose to or may be required to procure developers, financing providers, contractors and service providers through competitive tender mechanisms. Many public sector entities have legislative or regulatory frameworks in place within their jurisdictions, which require that certain types and sizes of procurements use competitive tender (and within certain procedural guidelines). In other cases, as one of the conditions for certain types of International / Development Finance institution (IFI/DFI) financing, guarantee or other support, procurements of goods and services related to a supported project, industry or sector may need to utilize competitive tender, subject to the IFI/DFI's procedural standards. There are many examples of circumstances where private developers/sponsors may need to conform with local procurement laws, DFI/IFI procurement guidelines or both. In other cases, public or private sponsors may simply wish to implement an international competitive tender simply because they believe it is the best means of attaining the best value.
Tender processes can be relevant in the case of competitive PPP/P3 procurements, or public or private sector procurements of individual or aggregated contracts. Competitive PPP/P3 project tenders may be structured as one-stage or multi-stage processes. The most common, and strongly preferable PPP/P3 competitive project tender approach is where a companies or consortia of companies need to bid on all life-cycle project services (which may include development and construction, operations & maintenance and potentially decommissioning, in the case of generation assets). This one-stage approach requires bidders to price-in all life cycle elements of the project in their bid, and bear all performance risk over the term of the PPP/P3 contract. In some cases, given specific circumstances of a project, it may not be practical or possible for bid consortia deliver a single one-stage bid. In these cases, it may be desirable to implement a a two-stage or multi-stage tender process, where at the first stage a investor / sponsor / developer may be selected (either through a competitive process or on a negotiated / sole-sourced basis). In the second stage (or subsequent stages) of the tender, services such as project design and construction, operations & maintenance (O&M), long-term maintenance, etc. may be procured through competitive tender. This two-stage or multi-stage approach is an alternative that should only be considered as a last resort, as there is usually significant value lost due to the de-linkage of life-cycle risk allocation and pricing.
DCS provides expert advisory services related to tender structuring and management. For any client who is required to, chooses to or may be considering to undertake a competitive tender, we can assist the client in optimally structuring the tender within the relevant guidelines. When structuring competitive tenders for the development and construction of projects, or rehabilitation/renewal projects, and for services, we generally advocated using a net present value (NPV) whole life-cycle bid evaluation approach. In order to This whole-life evaluation approach should also include impacts of different financing (in particular in the case of bidder-arranged financing such as Export Credit Agency / Export-Import Bank "ECA/Ex-Im" financing or vendor financing), guaranteed performance levels and risk allocation. In many cases we will structure a competitive tender whereby (for example, under an EPC/EPCM/DB tender), competing bidders would be evaluated and rewarded for bringing favorable ECA/Ex-Im, vendor or other low-cost financing from their home jurisdiction(s).
To the extent possible, we generally encourage our clients to combine development and construction services with the long-term operations and maintenance of projects or assets. This generally requires both a long-term project agreement structure (such as a long-term concession or offtake agreement, and the tender requirement that development and construction providers (such as EPC/EPCM/DB contractors) and O&M & long-term, cyclical maintenance providers for a consortium or joint-venture and bid their combined services. This tender structure allows for a superior evaluation of the true life cycle costs of the asset, as higher cost development and construction costs may be offset by lower O&M costs and superior asset performance over the service life of the asset. In many cases, this may also introduce competition/commercial issues such as whether all participants may need to be exclusive or whether particular contractors may be free to bid with multiple bidding groups. The exclusivity/non-exclusivity requirements imposed on bidders is always circumstance specific and we are accustomed to analyzing this and advising as to the most appropriate and optimal structure.
In our role as the Tender Structuring and Management consultant, we will assist our client through the entire process of structuring the tender (which, in most cases will also entail our complementary workstreams such as Transaction Structuring, Risk Allocation Analysis, Financial Modeling, Debt and Equity Capital Fundraising) and managing and executing the tender until completion. In many cases, a tender will involve sequential steps where interested bidders may first be (or may not be) required to submit expressions of interest (RFEIs). The optional RFEI is then followed by a formal request for qualifications (RFQ) and request for proposal (RFP) process. The following provide a summary of a typical competitive tender process:
DCS advisors are able to provide Tender Structuring & Management services on a stand-alone basis on behalf of public and private sector clients who are pursuing a PPP/P3, Project Financing or M&A/privatization transaction. In certain cases, as Transaction Structuring advisory will be only one element of a larger project delivery program, DCS will also be providing other complementary transaction advisory services in relation to other transaction elements. Our preference is always to provide such comprehensive Transaction Advisory Services and coordinate all elements of the transaction, including project financing on behalf of our clients.
Under any Tender Structuring & Management advisory mandate, DCS will draw from our vast global network of veteran industry expert advisor affiliates and our relationship consultants in order to assemble the most appropriate team to match the specific needs of the transaction at hand. This will always include leadership of DCS affiliate experts who possess decades of global public and private sector experience related to the specific sector and transaction type. In any Tender Structuring & Management advisory service mandate, our preferred role is always to serve as the lead project/program manager. Within this role we are also able to assist in the selection and procurement (or subcontracting) and management of other advisors, including local and international legal, tax, technical, commercial advisors or other specialized advisors, as the specific transaction may require. To the extent that other third-party advisors are required, there are many value added advantages of allowing DCS to assist in the procurement of these advisors. First, DCS expert affiliates themselves possess many of the legal, commercial skill sets and we are best positioned to determine which additional outside third-party skill sets are required and which firms or individuals should be hired in these roles. Secondly, competitive tender processes are often very complex undertakings, requiring the management and coordination of many simultaneous workstreams. DCS advisors are experts in project and program management services and are ideally suited to manage and coordinate a multi-dimensional advisory team most efficiently and effectively.
Complementing our Tender Structuring and Management advisory services, DCS advisors offer the following complementary advisory services that may be applicable, dependent on the specific transaction situation.
DCS experts provide Tender Structuring and Management advisory services in the following sectors that we specialize in. Please click on the below links to learn more about the sectors that we cover:
DCS experts provide comprehensive Tender Structuring and Management advisory services to the following categories of clients: