10.

Negotiation with a "Preferred" Bidder

A major difference between procurement approaches in different countries is in the extent
to which the government enters into negotiations with the preferred (but not yet
successful) bidder following the evaluation process, but prior to the award of the contract.

The need for post-bid negotiation can arise for a range of reasons, including those listed
below.

The RFP requirements or draft contract may not have been clear, but this may not
have been identified during the RFP clarification process. This may arise if a bidder
thinks the RFP is clear but they have interpreted it differently from governments
intention.
The RFP requirements or draft contract may not have been acceptable to bidders
and their lenders (in particular, with respect to the proposed risk allocation).
The wording in the draft contract may have assumed that bidders would meet the
RFP requirements in a particular way, but the preferred bidder may have chosen a
different solution that nevertheless meets the RFP requirements. For example, the
RFP may allow the equity to be invested in the form of share capital or subordinated
debt, but the contract may have been drafted on the assumption that the equity only
consists of share capital. Therefore, some negotiation may be required to ensure
relevant clauses in the contract appropriately apply to subordinated debt.
The bidders proposal may have been sufficiently clear for the purposes of the
evaluation, but some details that were not material to the evaluation may be unclear
or poorly worded, and the government may wish to negotiate clearer, more precise
wording.

In each of these situations, negotiation can enable the parties to reach a mutually agreeable
position. It also reduces the risk of issues arising later in the life of the project due to a lack
of clarity in the documentation or a lack of consistency between the bidders proposal and
the contract. However, negotiating at any stage can be challenging, and negotiation creates
a risk of reducing the transparency of the bid process.

The challenge can be even greater once a preferred bidder has been identified, as the
preferred bidder will consider itself to be in a strong position in the negotiations, even if a
reserve bidder is maintained as a fall-back option. For this reason, care should be taken
during the structuring of the tender and the contract to ensure that the documents are clear
and the risk allocation will be acceptable to bidders see chapter 5.

If negotiations are required, and are allowed under the applicable framework, the
negotiation process must be carefully managed to ensure that legitimate issues are resolved
without the preferred bidder gaining a better position at the expense of the government.

Due to the risks associated with negotiation, some governments do not allow negotiation of
the terms of the contract at any stage of the process (although room for negotiation on
bidders proposals may remain).
Once any negotiations have been completed, it is good practice to require the preferred
bidder to resubmit its proposal, amended to reflect the negotiations. It is also good practice
for the government to assess whether the proposal, as updated, retains Value for Money,
and whether it remains appropriate to award the contract to the preferred bidder.

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6Tendering and Awarding the Contract

 Introduction
1. Where We are in the Project Cycle
2. Objectives of this Phase
3. Special Characteristics of the PPP Tender Process
4. Overview of the Phase
5. Time to Prepare and Submit Offers: Requirements for Proper Assessment and
Preparation by the Prospective Bidders
6. Managing Matters during the Bid Submission Stage in Open Tenders
7. Qualification Matters
8. Specific Matters on Managing Dialogue and Interactive Processes: Managing the
Dialogue Period and One-on-One Meetings
9. Evaluation of Proposals
10. Negotiation with a "Preferred" Bidder
11. Award
12. Contract Signature
13. The Financial Close
14. Oversight / Integrity of the Tender Process
15. Outcomes of this Phase
References
Special Appendix on Private Side Needs: Preparing and Submitting a Bid and Raising
Finance

Introduction

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Foreword
About the PPP Guide
Acronym List
Glossary
Acknowledgements
Disclaimer

1PPP Introduction and Overview

1aPPP Introduction and Overview - Appendix A - Project Finance

1bPPP Introduction and Overview - Appendix B - Sharia Finance

2Establishing a PPP Framework

 3Project Identification and PPP Screening

3AProject Identification and PPP Screening - Appendix A: Screening Report Example of

Outline

4Appraising PPP Projects

4aAppraising PPP Projects - Appendix A - Procurement Procedures

5Structuring and Drafting the Tender and Contract

5aAppendix Structuring and Drafting the Tender and Contract - Describing Main Risks

6Tendering and Awarding the Contract

o Introduction
o 1. Where We are in the Project Cycle
o 2. Objectives of this Phase
o 3. Special Characteristics of the PPP Tender Process
o 4. Overview of the Phase
o 5. Time to Prepare and Submit Offers: Requirements for Proper Assessment and
Preparation by the Prospective Bidders
o 6. Managing Matters during the Bid Submission Stage in Open Tenders
o 7. Qualification Matters
o 8. Specific Matters on Managing Dialogue and Interactive Processes: Managing the
Dialogue Period and One-on-One Meetings
o 9. Evaluation of Proposals
o 10. Negotiation with a "Preferred" Bidder
o 11. Award
o 12. Contract Signature
o 13. The Financial Close
o 14. Oversight / Integrity of the Tender Process
o 15. Outcomes of this Phase
o References
o Special Appendix on Private Side Needs: Preparing and Submitting a Bid and
Raising Finance

6aAppendix Bid Preparation and Submittal the private sector perspective

7Strategy Delivery and Commissioning

7AStrategy Delivery and Commissioning - Appendix A: Case Studies

8Operations and Handback

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