Tendering Documents
Selecting the management company through competitive bidding
The success of a management contract depends not only on getting the general contract design and individual provisions of the contract right, but also on devising an appropriate method for awarding the contract.
Management companies are usually drawn from the same industry as the enterprise that needs their services. Depending on the country where the public monopoly operates, there may not be a wide choice of companies available to provide management services for a bus transport enterprise. Some international transport and logistic companies regard management contracts as a business in their own right. An internationally competitive bidding process may help to attract these kinds of companies.
Competitive bidding is not the only method that can be used by a public monopoly to engage the services of a management company. But there are three main reasons why it’s usually the best approach.
- Competitive bidding ensures transparency, fairness and accountability in the award of the contract. These are especially important considerations if the transport authority wants to reduce public criticism of its choice of management company.
- Competitive bidding provides an element of competition in the award of the contract. It’s generally accepted that there are essentially two basic types of direct competition in the urban bus transport market — competition for the market and competition in the market.
Since by necessity a public monopoly has no direct competitors in terms of the urban bus transport services it provides, the only element of competition will be in the award of the management contract.
- Competitive bidding is usually mandatory. Most countries have public procurement rules in place which mandate competitive bidding for the award of public contracts.
These rules, generally established by a law, are either of general application (all government contracts, including those to be entered into by a public body such as the transport authority), sector specific or both. In 1994, UNCITRAL adopted a Model Law on Procurement of Goods, Construction and Services.
Tendering procedures
The tendering of a management contract, by way of competitive bidding, can be a complicated process. It requires substantial time and effort from the transport authority and the bus operators bidding for the contract.
Under a competitive bidding process, tendering generally involves the following:
- Public notification by the transport authority of its intent to enter into a management contract, with a request for expressions of interest.
- Distribution of information memoranda, bidding documents and a draft management contract to potential bidders.
- A formal process for pre-qualifying potential bidders.
- A formal public process for presenting and evaluating proposals, and selecting the winner.
Within this broad framework there may be important design differences on, for example:
- Whether and how to pre-qualify bidders.
- How bids will be structured and evaluated.
- How offers will be presented and awarded.
It’s impossible to discuss all the rules, general or specific, that govern tendering by way of competitive bidding because there are many variations.
When national legislation mandating competitive bidding for public contracts in general or bus services in particular exists, such legislation may provide a general framework for the transport authority to rely on.
When no such legislation exist, or when it sheds no light on procedural matters, the transport authority should try to conform with established best practices. See, for example, the World Bank procurement guidelines.
