Procurement & Bidding

The European Commission’s rules for public procurement state that public sector contracts above a certain financial threshold must be put out to competitive tender in the Official Journal of the European Union (OJEU). In the case of PFI in the UK, these rules allow government to choose a preferred bidder from tenders received, on the basis that it offers the most economically advantageous bid.

The first stage of bidding involves pre-qualification (PQQ), where potential sponsors and contractors are appraised for their suitability and given (or not) permission to bid. Those who pass PQQ are then invited by ITN (Invitation to Negotiate) to submit a proposal for assessment. The public sector client will chose from these a preferred bidder (PB) with whom the final details of the project and its funding are negotiated before signing contracts to ‘financially close’ the deal. Actually, two reserve bidders are usually also selected, in case negotiations with the PB break down before financial close (FC). Occasionally, the tender process can involve a Best and Final Offer (BAFO) stage and even a further Last and Final Offer (LAFO, very rare) stage before the preferred bidder is chosen, giving tight competition to enable the client to get the very best value for money (VFM). This usually occurs between just two bidders, who are both offering very competitive proposals.