NATIONAL TREASURY PPP MANUAL - GTAC

1 NATIONAL TREASURY PPP MANUALMODULE 5: PPP PROCUREMENTNATIONAL TREASURY PPP PRACTICE NOTE NUMBER 06 OF 2004In accordance with section 76(4)(g) of the Public Finance ManagementAct, 1999 (PFMA), NATIONAL TREASURY may issue instructions to institutionsto which the PFMA applies in order to facilitate the application of thePFMA and the regulations promulgated under the NATIONAL TREASURY PPP Practice Note Number 06 of 2004 'PPPP rocurement' applies to departments, constitutional institutions, publicentities listed or required to be listed in schedules 3A, 3B, 3C and 3D to thePFMA, and subsidiaries of such public entities. module 05/Contents 7/28/04 2:45 PM Page IIIPPP MANUAL module 5: PPP Procurement module 05/Contents 7/28/04 2:45 PM Page IIExtract from TREASURY Regulation 16 to the TREASURY approvals: IIA and Prior to the issuing of any procurement documentation for a PPP to any pros-pective bidders, the institution must obtain approval from the relevant treasuryfor the procurement documentation, including the draft PPP The TREASURY approval referred to in regulation shall be regarded asTreasury Approval: The procurement procedure (a) must be in accordance with a system that is fair, equitable, transparent,competitive and cost-effective.

2 And(b) must include a preference for the protection or advancement of persons, orcategories of persons, disadvantaged by unfair discrimination incompliance with relevant After the evaluation of the bids, but prior to appointing the preferred bidder,the institution must submit a report for approval by the relevant TREASURY ,demonstrating how the criteria of affordability, value for money and substan-tial technical, operational and financial risk transfer were applied in theevaluation of the bids, demonstrating how these criteria were satisfied in thepreferred bid and including any other information as required by the The TREASURY approval referred to in regulation shall be regarded asTreasury PPP agreements TREASURY Approval.

3 After the procurement procedure has been concluded but before the accountingofficer or accounting authority of an institution concludes a PPP agreement,that accounting officer or accounting authority must obtain approval from therelevant TREASURY (a) that the PPP agreement meets the requirements of affordability, value formoney and substantial technical, operational and financial risk transfer asapproved in terms of regulation or as revised in terms of ; (b) for a management plan that explains the capacity of the institution, and itsproposed mechanisms and procedures, to effectively implement, manage,enforce, monitor and report on the PPP; and(c) that a satisfactory due diligence including a legal due diligence has beencompleted in respect of the accounting officer's or accounting authority andthe proposed private party in relation to matters of their respectivecompetence and capacity to enter into the PPP The TREASURY approval referred to in regulation shall be referred to asTreasury Approval: asNational TREASURY PPP Practice Note Number 06 of 2004 III module 05/Contents 7/28/04 2.

4 45 PM Page IIIIVPROJECT PREPARATION PERIODPROJECT TERMPPP PROJECT CYCLEINCEPTIONFEASIBILITY STUDYPROCUREMENT Register project with the relevant TREASURY Appoint project officer Appoint transaction advisorPrepare a feasibility study comprising: Needs analysis Options analysis Project due diligence Value assessment Economic valuation Procurement plan Design a fair, equitable, transparent, competitive,cost-effective procurement process Prepare bid documents, including draft PPP agreement Pre-qualify parties Issue request for proposals with draft PPP agreement Receive bids Compare bids with feasibility study and each other Select preferred bidder Prepare value-for-money report Negotiate with preferred bidder Finalise PPP agreement management planReflecting TREASURY Regulation 16 to thePublic Finance Management Act, 1999 NATIONALTREASURY Measure outputs,monitor andregulateperformance,liaise effectively.

5 Settle disputes Report progressin the AnnualReport Scrutiny by theAuditor-GeneralDEVELOPMENTDELIVERYEXI TPPP MANUAL referenceModule 1 module 2 module 5 module 6 module 7 module 8 module 9 module 1 module 2 module 4 module 5 module 6 module 7 module 8 module 9 module 1 module 2 module 4 module 6 module 7 module 8 module 9 module 1 module 2 module 3 module 6 Phase VIPhase VPhase IVPPP agreement signedTreasury Approval: IIIT reasury Approval: IIBT reasury Approval: IIAT reasury Approval: IPhase IIIP hase IIPhase I module 05/Contents 7/28/04 2:45 PM Page IVVABOUT THIS MODULEM odule 5: PPP Procurementdetails the procurement processes of a PPP. TreasuryRegulation 16 to the PFMA states that it is the responsibility of the accountingofficer/authority to design and manage the procurement process in a way thatmeets the regulation s requirements.

6 This means that this module is notprescriptive, but rather establishes best practice as it has been developed inNational TREASURY -regulated PPPs to date. Given the newness of PPPs in SouthAfrica, it is expected that each project will further refine the procurement processand add to the pool of best practice knowledge. The case studies produced at theend of this procurement phase are an important part of tracking best TREASURY will continue to update NATIONAL TREASURY s PPP MANUAL , and todevelop sector-specific toolkits to provide further procurement of PPPs goes through distinct stages: pre-qualification request for proposals best and final offer, where appropriate negotiations financial is different from a conventional tender process.

7 A conventional tender process hasa single stage when an offer is made which an institution can accept or 5: PPP Procurementexplains how to proceed through the stages, with afocus on getting the documentation right. Follow the outlines of suggestedcontents for the various documents closely to ensure that the institution providesthe correct and complete information for getting TREASURY approvals IIA, IIB, andIII (TA:IIA, TA:IIB and TA:III) in terms of TREASURY Regulation 16 to the note module 05/Contents 7/28/04 2:45 PM Page VVIPPP MANUAL module 5: PPP Procurement module 05/Contents 7/28/04 2:45 PM Page VICONTENTSINTRODUCTION1 LINKS TO THE FEASIBILITY STUDY4 CRITICAL CONSIDERATIONS FOR THE PROCUREMENT PHASE9 STAGE 1: THE RFQ19 STAGE 2: THE RFP26 Part 1: Bidder participation in preparing the final RFP26 Part 2: The final RFP document27 STAGE 3.

8 CHOOSE THE PREFERRED BIDDER42 Critical considerations for managing the bid process42 Part 1: Evaluate the bids45 Part 2: BAFO51 Part 3: The value-for-money report56 STAGE 4: NEGOTIATIONS59 STAGE 5: TA:III62 STAGE 6: THE CLOSE-OUT REPORT AND CASE STUDY65 ANNEXURES71 Annexure 1: The payment mechanism72 Annexure 2: Code of conduct for bid evaluation panel members81 Annexure 3: Template declaration of interest statement85issued asNational TREASURY PPP Practice Note Number 06 of 2004 VII module 05/Contents 7/28/04 2:45 PM Page VIIPPP MANUAL module 5: PPP Procurement module 05 7/28/04 2:46 PM Page 1 INTRODUCTIONN ational TREASURY s Standardised PPP Provisions(Standardisation) have a very specificand well-consulted risk profile.

9 The provisions are intended for use on limited recoursetype projects1with a unitary payment made by the procuring institution to the private is obligatory to use the standardised provisions when preparing procurement docu-ments for projects with these characteristics. The only exception is where institutionssatisfy the relevant TREASURY that alternative provisions provide better value for money. It isimportant that all the PPP procurement documents (including the request for proposals(RFP) documents and the draft PPP agreement) reflect the same risk profile as establishedin projects that do not have the characteristics of a PPP subject to Standardisation,the provisions should be applied to all procurement documents in so far as they areapplicable to the noteissued as NATIONAL TREASURY PPP Practice Note Number 06 of 200411.

10 See also module 9: An Introduction to Project Finance. module 05 7/28/04 2:46 PM Page 12 PPP MANUAL module 5: PPP ProcurementEvaluate RFQ responsesPossible expressionof interestPossible investors conferencePrepare RFQ documentsRFQ responsephasePrepare draftRFP documentsConsultation with biddersIssue RFQ documentsAppoint pre-qualified biddersIssue final RFP documentsFeasibility studyPrepare final RFP documentsContinuing and completing land acquisition and EIA processes, legislative or regulatory processes to enableproject, third party agreementsCompleted institutiondue diligenceTA:IIA for RFQ4 to 8 weeks3 to 6 weeks4 to 16 weeksBid submissiondateInstitution selects preferredbidder or decides on BAFOI nstitution selects preferred bidderBAFO optionalBid evaluationBid preparationBAFO evaluationBAFO preparationBAFO documents6 to 20 weeks3 to 8 weeks5 to 10 weeks2 to 3 weeksTA:IIBTA:IIA for BAFOTA:IIA for RFPPROCESS AND TIMELINES FOR TA:II APROCESS AND TIMELINES FOR TA:II BTA:ITA:IIA for RFPI ssue final RFP documentsPrepare value-for-money report for TA:IIBI ssue draft RFP documentsTA:IIA for draft RFPF igure : Stages of PPP procurement with indicative timelines module 05 7/28/04 2.