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4. Starting the Procurement

P3 procurements typically proceed using a two-step, "best value" procurement process after the project has been identified. The first step of the procurement involves development of a "shortlist" of firms that will be asked to submit proposals, and the second step involves selection of the concessionaire based on technical and price proposals submitted by the shortlisted firms. This process can be summarized as follows:

STEP 1: Issuance of a RFQ, receipt of Statements of Qualifications (SOQs), and establishing a shortlist of qualified proposers based on review of the SOQs.

STEP 2: Issuance of a RFP to the shortlisted proposers, receipt of proposals, possibly entering into discussions and requesting proposal revisions, selection of a preferred proposer, possibly entering into limited negotiations with the preferred proposer, and award of a contract.

This chapter provides guidance on activities and considerations relevant to the development of procurement documents through the end of Step 1. Chapters 5 through 7 discuss issues, actions and strategies relevant to Step 2 of the procurement process.

Table 8 presents the key activities and goals for the procurement phase through the end of Step 1.

Table 8. Goals and Activities - Start of Procurement through Request for Qualifications

Goals through RFQ Issuance	Activities
Structure the procurement process	Conduct Procurement Strategy Workshop Develop evaluation structure and procedures Develop procedures to ensure full, fair and open procurement Develop organizational Conflict of Interest policies Develop policies to ensure full, fair and open procurement that minimizes conflicts of interest
Determine Request for Qualifications terms and basis for shortlisting	Determine RFQ terms and basis for shortlisting Develop and Issue RFQ Evaluate and shortlist proposers based on SOQ submitted
Seek necessary approvals	Update management and stakeholders and obtain necessary approvals to issue the RFQ

4.1. Establishing Procurement Strategy

4.1.1. Procurement Strategy Workshop

Once the agency has decided to use a P3 delivery strategy and has assessed the procurement options available under applicable law, it should develop a procurement strategy for the project. Since the P3 project finance model is designed to be highly leveraged, debt provides a majority of the financing required for the project. Sound structuring of the procurement process is hence key to the financial feasibility of the project.

Initial decisions regarding procurement strategy are often made in the context of an initial workshop focusing on project goals and objectives and how such goals and objectives can be met through different alternatives. In addition to setting an overall procurement strategy, the workshop should include a discussion regarding the selection methodology and evaluation criteria. Workshop attendees should include agency decision-makers as well as individuals on the agency's team with detailed knowledge about the project and the available alternatives. As the workshop will involve sensitive procurement information, attendees should be advised to keep the discussions confidential. Agencies often require all individuals participating in the workshops, including agency staff, to execute confidentiality agreements, to emphasize the need for confidentiality. The recommendations from the workshop are often subject to review by an executive steering committee that includes high-level agency officials and sometimes are subject to review by the agency's governing board.

Following this initial workshop, the agency should hold regular procurement team meetings involving the same individuals to discuss issues that arise during the pre-procurement period. These meetings will likely involve reconsideration of at least some of the strategic decisions made at the first meeting, as the agency further develops project concepts and obtains input from proposers and third parties.

During this stage of the procurement process it is critical for the agency to start developing its detailed procurement schedule that includes significant procurement milestones. From the proposers' perspective, how the agency manages the procurement and the schedule of procurement activities will provide a good indication of how the agency will manage the project.

4.1.2. Alternative Selection Approaches

Best Value

As noted above, use of a best value selection approach is one means of assuring project quality and has been proven to be a successful practice for P3 projects. Most transportation P3 projects in the United States and Canada have proceeded using a best value process.

Use of a best value process creates certain complexities for the procurement, requiring the agency to determine how to evaluate cost relative to technical criteria and to determine the relative importance of the technical evaluation factors and subfactors. The evaluation factors and major subfactors, and their relative importance, should be identified in the procurement package to ensure transparency in the selection process-providing assurance to proposers and the public that the competition will be fair and enabling the agency to justify its selection decision in the event of a protest. ⁸² If point scoring is used, the total number of points in a category can be allocated among subfactors, if so desired by the agency. Another alternative is to list the subfactors in order and state that they are listed in equal or descending order of importance.

Agencies considering use of a best value approach have a number of alternatives from which to choose. The tradeoff approach is the method of choice for Federal agencies using a best value selection approach and has also been used by numerous State and local agencies for design-build and P3 procurements. FTA's Best Practices Procurement Manual (BPPM) ⁸³ includes an extensive discussion regarding this approach. The underlying premise is that it is appropriate and in the best interests of the agency for the selection official to exercise his or her judgment to determine the relative advantages offered by the proposals following a review of the evaluation ratings and prices. The BPPM describes the rationale for using tradeoffs as follows:

"Some agencies have employed a quantitative approach of assigning scores to both technical and cost proposals, thereby compelling a source selection that is basically mathematically derived. Proponents of this method usually argue it is the most "objective," and, therefore, the fairest approach to determine a winner. On closer examination, however, all approaches are, to one degree or another, subjective. The decision regarding what score to assign any given factor is subjective and any formulas employed after the initial scoring cannot make the process an "objective" one. Furthermore, recipients must have flexibility to make sound, factually-based decisions that are in their agency's best interests. Any approach that assigns a predetermined numerical weight to price, and then seeks to "score" price proposals and factor that score into a final overall numerical grade to automatically determine contract award, can result in unintended and adverse consequences. Rather, agencies should evaluate the prices offered but not score the price proposals. Prices should be evaluated and brought alongside the technical proposal scores in order to make the necessary tradeoff decisions as to which proposal represents the best overall value to the agency. Agencies should carefully consider the technical merits of the competitors and the price differentials to ascertain if a higher price proposal warrants the award based on the benefits it offers to the agency as compared to a lower price proposal. This is a subjective decision-making, tradeoff process.

The difficulties in trying to assign a predetermined weight to price and then scoring price proposals is that no one can predict in advance how much more should be paid for certain incremental improvements in technical scores or rankings (depending on what scoring method is used). For example, no one can predict the nature of what will be offered in the technical proposals until those proposals are opened and evaluated. Only then can the nature of what is offered be ascertained and the value of the different approaches proposed be measured. It is against the actual technical offers made that the prices must be compared in a tradeoff process. Agencies cannot predict in advance whether a rating of "Excellent" for a technical proposal will be worth X dollars more than a rating of "Good," or whether a score of 95 is worth considerably more or only marginally more than a score of 87. It is what is underneath the "Excellent" and the "Good" ratings, or what has caused a score of 95 versus a score of 87, that is critical. The goal is to determine if more dollars should be paid to buy the improvement, and, equally important, how many more dollars those improvements are perceived to be worth. It could well be that the improvements reflected in the higher ratings are worth little in terms of perceived benefits to the agency. In this case, the recipient does not want to get "locked into" a mathematically derived source selection decision. This may very well happen when price has been assigned a numerical score and the selection is based on a mathematical formula instead of a well- reasoned analysis of the relative benefits of the competing proposals.

Some agencies have recognized the pitfalls of using arithmetic schemes to make source selection decisions. They have opted not to use numerical scores to evaluate technical proposals and they have shifted to adjectival ratings instead, e.g., "Unacceptable," "Marginal," "Acceptable," "Highly Acceptable," "Outstanding." They have also heavily emphasized the need for substantive narrative explanations of the reasons for the adjective ratings and the source selection official then focuses on the narrative explanations in determining if it is in the agency's best interest to pay a higher price for the technical improvements being offered. In this scenario price is evaluated and considered alongside technical merit in a tradeoff fashion using good business judgment to choose the proposal that represents the best value to the agency." ⁸⁴

Notwithstanding the considerations discussed in the BPPM, many practitioners use point scoring rolled up into a formula, with best value determined based on total points. Most P3s in the United States and Canada have adopted a formulaic approach. ⁸⁵ This appears to be due to a general agency preference for formulas combined with a strong industry preference for use of formulas. However, it should be noted that the Maryland Transit Administration, which received four highly competitive proposals for the Purple Line project, used the tradeoff approach in selecting the concessionaire.

The decision to use tradeoffs or a formula only affects the top level of the selection process. Regardless of which approach is used, the evaluators are responsible for reviewing the proposals and providing either recommended ratings or scores.

Another issue to be considered by the agency in establishing its evaluation process concerns use of point scoring, adjectives, or other means of rating the proposals. When a formula is used, the evaluators may nevertheless be asked to provide adjectival ratings, which are later converted to points. This approach is generally considered to facilitate the process of differentiating one proposer from another, since numerical ratings tend to remain within a relatively narrow range. The individuals providing the recommendations are usually not advised regarding the precise approach to conversions, which is typically determined by the selection committee. Regardless of which approach is used (qualitative ratings or scores), the evaluators should provide narrative justifications of the ratings.

Another method that may be considered to enable evaluators to differentiate one proposal from another is to establish a minimum level that must be achieved for a proposal to "pass," with the evaluation rating based solely on aspects of the proposal that exceed the minimum. This can help mitigate the tendency to rate all proposals within a narrow band of passing marks, which might result in selection of a proposer whose technical approach, although acceptable, does not provide the best value to the agency.

Low Bid Approach

Some agencies have elected to award P3 contracts to the lowest bidder (or highest bidder, for revenue positive projects) providing a technically acceptable proposal. For these procurements, agencies generally determine the "bid amount" with reference to a net present value calculation that applies a discount factor to payments owing over time, resulting in a lump sum amount that can easily be evaluated. This approach has been used for P3s in Alberta and for highway P3s in British Columbia. Although many jurisdictions prefer the additional quality assurance provided by a best value approach, a low bid approach may be the only option available to some agencies under their enabling legislation and can be justified based on the premise that the structure of the P3 and a pass/fail technical evaluation sufficiently assures project quality. This approach also places additional emphasis on the RFQ process to ensure that all proposers invited to respond to the RFP are highly qualified to successfully deliver the project. This can become problematic if only a limited number of proposers respond to the RFQ and, in an effort to maintain the desired competitive tension, a proposer is shortlisted that is not adequately qualified to deliver the project.

4.1.3. Evaluation Criteria and Submittal Requirements

P3 evaluation criteria and their relative weightings should be determined at the agency's executive level based on project-specific information, consistent with the agency's goals and objectives. Staff and technical and financial advisors typically provide recommendations regarding weighted evaluation criteria based on an assessment of project needs and review of RFPs for comparable projects. In order to ensure that proposers understand what the agency is looking for, it is advisable to include language in the evaluation section of the procurement document indicating how the criteria are tied to the agency's goals and objectives and making it clear that proposals will be evaluated based on how well they meet those goals and objectives.

RFQs and RFPs also include pass/fail criteria representing minimum requirements that proposers must meet to be considered for shortlisting or award (as applicable). These minimum requirements should incorporate standards used by the agency to determine contractor responsibility for its other procurements, as well as project-specific requirements. In determining the pass/fail criteria, it may be useful for the agency's procurement team to review requirements included in procurement packages for comparable projects.

Submittal requirements are normally developed by the agency's procurement team to match the evaluation criteria and must also be coordinated with the contractual requirements. Usually the legal team, working with the agency's contracting officer, develops the pass/fail and administrative requirements, which typically include matters such as non-collusion declarations and forms providing relevant information about the proposer's organization. The technical team develops submittal requirements for the technical proposal, and the financial team develops requirements for the financial proposal. To ensure that all requirements are appropriately identified and to avoid duplication, it is advisable for at least one member of each team to review the entire request.

Some pass/fail submittal requirements and evaluation criteria are relatively consistent across P3 projects. For example, because of the importance of ensuring that the contracting entity has an incentive to reach commercial close, many P3 RFPs, including those for the NTE and Purple Line projects, require the submittal of proposal security. (See additional discussion regarding proposal security in section 5.1.11.) Both projects also required the proposal to include information demonstrating the proposer's financial capability to complete, operate, and maintain the project over the long term, and to provide commitments from sureties that will issue payment and performance bonds covering design and construction of the project.

Some RFPs also include more project-specific pass/fail submittal requirements and evaluation criteria. As discussed in greater detail in Appendix B, for the NTE project, the Texas Department of Transportation (TxDOT) had a large project scope with limited available public funds. Because it was essential that proposals not exceed the available public fund amount, that requirement was included as one of the RFP pass/fail criteria.

As the procurement proceeds and additional information becomes available, the agency should periodically review the evaluation criteria and relative weightings to determine whether any changes should be made.

4.1.4. Other Issues

Relative Weighting of Financial and Technical Evaluation Factors

Decisions relating to assignment of relative weightings to financial and technical evaluation factors are the subject of extensive debate for many projects. The finance team generally prefers price to receive a higher weighting while the technical team may recommend an approach that either gives a higher weighting to the technical rating or gives both proposals equal weight.

As discussed in section 4.1.2, the tradeoff approach involves a balancing of the added value provided by a proposal against the additional cost associated with that proposal, and in that respect the financial and technical proposals can be viewed as having equal weight in the evaluation. The instructions to proposers (ITP) for the Purple Line stated that the financial proposal would be given "slightly greater weight."

Where a formula methodology is used, the likelihood increases that price will be given significantly greater weight than technical ratings. Recent examples of a formula methodology include the Virginia DOT's Transform 66 Outside the Beltway P3 procurement, which allocated 70 points to the financial proposal and 30 points to the technical proposal, and the Florida DOT's I-4 Ultimate Managed Lanes procurement, which allocated 60 points to the technical proposal and 40 points to the financial proposal, as follows:

For the Transform 66 Outside the Beltway project, financial proposals were evaluated based on a formula that normalized the prices by subtracting the best price from the proposer's price, dividing the result by 10, and subtracting the quotient from 70. The RFP included detailed information regarding scoring of the technical proposal, including a breakdown of various subcategories within the following high-level categories:

• Project Schedule: 10 percent.
• Design and Construction: 40 percent.
• Traffic Operations, Operations and Maintenance, and Long-Term Partnership: 50 percent.

For the I-4 Ultimate project, 35 of the 40 financial proposal points were allocated to financial price and 5 to financial feasibility. The 60 technical points were allocated to the following sub-categories:

• Technical Proposal Qualitative Assessment: 35 points (with further subcategories).
• Baseline Construction Period: 5 points.
• Inclusion of Direct Connection Proposal: 5 points.
• Project Technical Enhancements: 15 points.

For the NTE project, TxDOT gave much greater weight to the financial proposal than to technical. The RFP allocated 80 points to the financial proposal, 10 points to technical, and 10 points to the proposal for the PDA portion of the project. The financial score included 70 points for the base scope and 10 points for the ultimate scope.

Agencies using a normalized point scoring process may wish to consider normalizing the technical scores as well as price scores, since the highest price automatically receives the highest number of points available, while the best technical score will probably receive less than the maximum number of points available.

For procurements that allow the proposers to set the completion schedule, the agency may wish to adopt an "A+B" approach to allow schedule acceleration to be evaluated in conjunction with the financial proposal. ⁸⁶

Upset Limits

A number of the RFPs for transportation-related P3s in the United States include affordability (or upset) limits requiring the maximum price (or portion thereof) provided in the financial proposal to not exceed the specified limit. This approach requires proposers to focus on ways to match the agency's cash flow and makes it clear that financial proposals exceeding the stated parameters may be rejected.

As an example, TxDOT's RFP for the NTE project specified that a maximum amount of public funds ($600 million) was available to fund the initial scope of the project, which included a specified mandatory scope as well as up to nine optional improvements that proposers could include in their proposals. Because the goal for TxDOT was to get as much project as possible for the specified maximum public funds amount, any proposals that sought funds in excess of the specified amount would be rejected. In contrast, for I 635, the scope of the project was specifically set forth in the RFP and, while the RFP for the project specified an affordability limit of $700 million for the public funding component, proposers had the option of submitting a proposal that exceeded the available public funds amount. TxDOT reserved the right to request proposal revisions from any proposer that submitted a proposal that exceeded the maximum public fund amount.

Upset limits are a common feature in FDOT RFPs. Its RFP for the I 4 Ultimate project included annual upset limits ranging from $99 million to $121 million for the proposed maximum availability payment, but gave FDOT discretion to accept a proposal that exceeded the limit if all of the proposers submitted financial proposals that exceeded one or more of the upset limits.

Options

Whenever a procurement asks for separate pricing for a "base" project and elements that the agency has the option to include in the scope, the agency must consider how to factor the options into the selection process. Generally, option pricing is given less weight than the base project pricing. ⁸⁷ FTA requires the agency to undertake a market value comparison before exercising any option and limits rolling stock options to 7 years following contract award. ⁸⁸

Agencies also must consider the conditions associated with the options, including the last date for exercise of the option, technical submittal requirements relating to the options, and whether the concessionaire will finance the cost of the option or the agency will pay on an "as-you-go" basis.

The NTE procurement required pricing for a number of potential options for "ultimate scope" improvements that the proposer was unable to accommodate within its price for the base scope. As noted above, the evaluation formula included 10 points allocated to the ultimate scope pricing and 70 points to pricing for the base scope. In fact, the successful proposer included some of the options within its base scope, leaving three options for different capacity improvements to be included in the as-awarded contract.

The Eagle P3 project, a light rail project in the Denver, Colorado metro area, included priced options for rolling stock, a storm sewer project, a grade separation project, and a bridge project. The option pricing received 2 points out of the 60 points allocated to the financial proposal. The concession agreement specified a five-year deadline for exercising the rolling stock option.

The Purple Line P3 agreement included priced options for rolling stock, subject to escalation, with a seven-year outside deadline for exercising the options. The price for the option vehicles was included in the net present value calculation used for evaluation purposes, with adjustments based on assumptions regarding the payment period and price escalation, and applying an uncertainty factor. The box above includes an excerpt from the proposal form for the Purple Line project identifying requirements relating to option pricing for vehicles.

4.2. Ensuring Full, Fair, and Open Competition

This section discusses steps that agencies should consider taking to ensure that the P3 competition meets requirements for full, fair, and open competition for both federally funded projects, as well as to comply with similar State law requirements.

FTA's BPPM summarizes the "full and open competition" requirement applicable to FTA-funded procurements as follows:

"Except as permitted by Federal law or regulations, recipients of Federal assistance must use third party procurement procedures that provide full and open competition. See FTA's enabling legislation at 49 U.S.C. § 5325(a), FTA Circular 4220.1F, Chapter VI, paragraph 1 - Competition Require, and CFR § 200.319, Competition.

Full and open competition is the guiding principle of Federal procurement requirements and practices. Lack of advance planning is not an acceptable justification for use of noncompetitive procurement procedures. Recipients must constantly seek to permit and encourage meaningful interest and offers from all qualified entities and limit or rule out offerors only for business reasons that generally include cost, quality, and delivery. Because it is often easier to deal with fewer familiar contractors than potential new offerors/contractors, recipients must vigilantly cultivate ways to increase competition at reasonable expense.

The principle of full and open competition has one primary and two secondary purposes. The primary purpose is to obtain the best quality and service for the least cost. In other words, the objective is for recipients to obtain the best buy. The secondary purposes are to guard against favoritism and profiteering at the public's expense, and to provide equal opportunities for all qualified offerors to participate in public business opportunities." ⁸⁹

FHWA's statutory and regulatory requirements for design-build in 23 U.S.C.112 and 23 CFR part 636 provide for transparent and competitive procurement procedures.

4.2.1. Preserving Competitive Interest

Agencies interested in using P3s should be aware that, in most cases, the number of firms potentially interested in proposing for a P3 contract is significantly less than the number of firms likely to respond to a DBB procurement or even a DB procurement. The pool of potential proposers is diminished due to numerous factors, including:

• High level of complexity and long-term nature of P3 projects.
• Transfer of risk to the private sector.
• Requirements for equity investment and borrowing.
• Limitations on bonding capacity.
• Level of investment required to propose.
• Other opportunities available to the proposers, including other major procurements.

Limiting Competition to Most Qualified Teams

Practitioners generally recommend limiting the number of proposers participating in the process by shortlisting no more than four firms and selecting a single team for limited negotiations after review of initial proposals. The FHWA's Design-Build Rule ⁹⁰ states that the maximum number of shortlisted teams may not exceed five unless the agency determines that a higher number is in the agency's interest Limiting the number of shortlisted teams provides assurance that only the most highly qualified teams participate in the procurement, thus raising the quality of the proposals, and reduces the cost of the procurement for both the private and public sectors.

As the market has matured, the number of firms interested in pursuing P3 projects has increased, making shortlisting a meaningful exercise. For example, in 2014 the Maryland Transit Administration received six SOQs for the proposed Purple Line project, then estimated to have a total project cost of $2.2 billion, with the private sector expected to invest between $500 and $900 million. ⁹¹ Even though six may seem like a relatively small number of competitors, for a project such as the Purple Line it would not have been advisable for Maryland Transit Administration to invite all of the teams to submit proposals, for a number of reasons. Due to the high cost of proposing for a P3 project, if proposers believe there are too many competitors, it is likely that one or more firms might drop out of the competition. In order to keep the most qualified firms interested in the procurement, it is therefore in the agency's interest to evaluate the teams' qualifications and short-list only the teams that are most qualified. This provides assurance that the agency will receive high quality proposals while preserving competitive tension in pricing the job. Reducing the number of proposers involved in the process also benefits the agency as it reduces the costs associated with time spent dealing with the proposers and evaluating proposals, and reduces the total value of stipends owing to unsuccessful proposers as discussed in more detail below. In some cases, legislative authority allowing use of P3s dictates use of a shortlisting process and limits the number of proposers that can be shortlisted.

The FHWA's Design-Build Rule recognizes that an "open" competition does not require the agency to allow all qualified firms to compete. By inviting firms to submit SOQs, the competition is both full and open. The rule indicates that it is preferable to have at least three teams in the competition, but no more than five, stating:

"Normally, three to five firms are short listed, however, the maximum number specified shall not exceed five unless you determine, for that particular solicitation, that a number greater than five is in your interest and is consistent with the purposes and objectives of two-phase design-build contracting." ⁹²

Most agencies prefer to strike a happy medium, shortlisting either three or four teams. For the Purple Line project, the agency opted to shortlist four teams and received proposals from all four of them. As the procurement proceeds, the shortlisted firms will continue to assess their chances of success and one or more of the firms might decide to drop out of the competition. Factors outside of the procurement process may also affect the team's ability to compete, including changes in policy by senior management and organizational changes, among others. Some agencies, concerned about the possibility that they might end up with only one or two proposers down the line, elect to shortlist four or five teams instead of three.

Maintaining Confidentiality of Proposer Information

As noted in section 3.1.5, the ability to maintain confidentiality of proposer information is of crucial importance to P3 procurements. Non-disclosure is particularly critical with respect to ATCs and AFCs submitted by individual teams. Such submittals involve a significant investment by the proposers but are justified by the competitive advantage the team gains if the agency agrees to accept the concept. The agency's commitment to confidentiality should be expressed both in the RFQ and the RFP, and measures should be implemented within the agency to prevent information leakage.

It should be noted that, under some circumstances, the agency may be compelled to disclose information relating to ATCs. For example, for one design-build project, one of the proposers submitted an ATC to modify the scope of the project to avoid Section 4(f) impacts without affecting its functionality. Since Section 4(f) prohibits impacts that can be avoided, the agency was required to modify the project description for all proposers. The FHWA amended the Design-Build Rule in 2014 to reflect this requirement. ⁹³

One-on-One Meetings

The one-on-one meetings held during the pre-proposal period, as described in section 5.4 and 5.5.1, serve to enhance competition, as they provide an opportunity for the proposers to gain a better understanding of the agency's goals and project needs, improving the quality of proposals received. Holding such meetings also helps to level the playing field for firms that have not previously had an opportunity to work with the agency. Benefits to the agency also include the ability to improve the quality of the procurement package based on comments from proposers, and to gain a greater understanding of how proposers view the project requirements and risks.

Stipends

Due to the nature of a P3 project, regardless of whether a best value or low bid selection process is used, proposals for P3 projects require a significant commitment of resources by the proposers to submit a cost and date certain proposal with committed financing. Recognizing the level of investment required to propose on P3 projects, the agency typically offers payment of a stipend to unsuccessful proposers submitting proposals that meet specified criteria, and in exchange receives the right to use technical and financial concepts and other intellectual property included in the proposal.

The amount of stipend depends on the size and complexity of the project and may be a specified amount or based on the value to the agency of the work product included in the proposal or the cost of proposal preparation. Stipends provided by the agency typically cover only part of the cost of an unsuccessful bid and range from 0.15 percent to 0.48 percent of the total contract cost with the average amount being around 0.25 percent. ⁹⁴ Proposals also include certain fixed costs that do not correlate to project size, which may justify use of a slightly higher percentage in determining the stipend amount for projects on the lower end of the cost spectrum. The agency's agreement to pay a stipend recognizes that the cost of submitting a P3 proposal is very high relative to other delivery methods, and that potential proposers are more likely to participate in a P3 procurement if they recoup a portion of those costs. Proposers often use the stipend to pay for "out of pocket" costs paid to team members such as design-related costs associated with the proposal. These payments are needed to ensure that technical members of the team can afford to participate in P3 procurements, as the level of effort required for preparation of a P3 proposal is often much greater than the level of effort required to respond to a non-P3 procurement involving essentially the same compensation as the P3 project.

Proposers are highly concerned about the possibility that they will incur significant expense responding to a procurement that might be canceled prior to the proposal due date, or that the agency might cancel the procurement after selecting a proposer who has incurred even greater expense to be prepared to close the transaction. In some cases, agencies have agreed to pay a reduced stipend if the procurement is canceled prior to the proposal due date, and to pay the entire stipend to a proposer who is selected but fails to close the transaction due to no fault of its own.

In some cases, the agency may agree to pay a stipend to the successful proposer, presumably resulting in lower payments under the P3 agreement. Some procurements include an "early works agreement" allowing payment to the successful proposer for work performed during the period between selection of the concessionaire and award of the P3 agreement or between commercial and financial close.

The Texas, Maryland, and Colorado projects identified in Appendix B offered stipends to unsuccessful proposers. For the Purple Line project, the initially proposed $2 million stipend was increased to an amount not to exceed $2.5 million when there was an unforeseen procurement delay of several months due to political reasons. The stipend was payable only to proposers that signed a stipend agreement and provided a complete and compliant proposal, and the amount payable was tied to the value of the work product, requiring proposers to provide evidence of costs incurred if requested. By agreeing to pay the stipend, the agency obtained the right to use any of the concepts included in unsuccessful proposals. In fact, the agency elected to use one of the concepts submitted by an unsuccessful proposer, involving a shift in the light rail alignment to achieve a resulting reduction in project cost of approximately $32 million.

Other Measures

The agency should monitor the level of proposer interest over the course of the procurement and consider implementing additional measures to maintain competition if it becomes apparent that one or more of the shortlisted teams is unlikely to propose. This situation could arise due to changes in the marketplace, issues that are specific to members of particular teams (such as a merger between firms on different teams), a proposer's belief that it is not likely to succeed, or a proposer's determination that the documents require the concessionaire to assume risks that it is unwilling to take on after the proposer has asked for revisions that the agency has failed to make. Steps that an agency may wish to consider include increasing the stipend amount or modifying the procurement requirements, commercial terms, or technical requirements. However, the agency should be careful not to change the scope of work or other basic requirements so as to fundamentally alter the nature of the procurement, and thereby avoid the potential for protest by firms that chose not to provide qualifications under the previous terms, but might now have interest in the project under its current terms. The agency should keep in mind that changes made to the RFP for the purpose of keeping a single firm in the competition will apply to all firms. Depending on the circumstances, the agency may be better off not making the change and ending up with a shorter, but still competitive, list of proposers.

4.2.2. Ensuring Fairness and Transparency

Concerned about the high cost of proposing on P3 projects as well as the potential for bias in the selection process, proposers are interested in obtaining as much detail about the project and the selection process as possible. As discussed in section 4.3, agencies can (and should) adopt measures to avoid bias in the evaluation process by ensuring that individuals involved in drafting the solicitation documents or participating in the evaluation process are vetted to ensure that they are not subject to potential organizational conflicts of interest that might influence the solicitation. Agencies should also provide information about the project and selection methodology to enable proposers to understand what the agency is looking for and to provide their best offers in response to the RFP. However, agencies should recognize that if too much information is provided to proposers about subfactor weightings, the proposers are likely to focus on the criteria that have a significant effect on scoring, ignoring lower weighted criteria. ⁹⁵

FHWA's rule regarding construction manager/general contractor procurements requires the following information to be included in solicitation documents to ensure fairness and transparency:

1. A clearly defined scope of services.
2. A list of evaluation factors and significant subfactors, including their relative weight of importance that will be used in evaluating proposals.
3. A list of required deliverables.
4. An indication of whether interviews will be conducted before establishing the final rank.
5. A sample contract form(s). ⁹⁶

It appears appropriate to apply these same guidelines to P3 procurements, subject only to the caveat that the scope of services for certain P3 projects-especially PDAs-may not be well-defined.

4.2.3. Public Access to Information or Open Records

For many P3 procurements in the United States, agencies elect to disclose the RFQ and RFP documents to the public, even though information provided by the private sector remains confidential until after award. As examples, the TxDOT and VDOT websites include copies of procurement packages as well as the signed contracts. Some agencies do not make documents available on their websites, although they will provide copies in response to a public records request.

During the period prior to issuance of the RFP, agencies typically limit distribution of the industry review documents to the shortlisted proposers, only posting the procurement package after it is formally approved.

4.3. Organizational Conflicts of Interest

As discussed in section 3.1.5, FTA and FHWA requirements include taking appropriate steps to avoid organizational conflicts of interest (OCI), including perceived conflicts of interest, with respect to the procurement. State OCI requirements may also apply.

OCI typically involve issues relating to bias, where a proposer has competing interests that may impair, or be perceived to impair, the proposer's performance or judgment, and unfair competitive advantage, where a proposer has access to relevant information not available to other proposers. The solicitation documents should include requirements for proposers to disclose any such potential conflicts and identify measures to mitigate them. Failure to comply may lead to disqualification. Some agencies provide the proposers with a list of firms that are not permitted to join proposer teams, but each proposer must ascertain whether a potential conflict exists and propose measures to mitigate any such conflict.

If potential OCI issues arise that affect a procurement, it may be useful to review the OCI regulations applicable to Federal agency procurements and case law interpreting such regulations. ⁹⁷

4.3.1. Developing an Organizational Conflicts of Interest Policy

Developing an OCI policy is highly important to the success of a P3 project procurement, serving to assure the agency that procurement advice provided by its advisors is reliable, to improve confidence of the proposers that the procurement will be fair, and to promote public confidence in the integrity of government procurements.

4.3.2. Policy Decisions

One important policy decision to be made by the agency in setting its OCI policy for P3 projects concerns the extent to which existing agency consultants may be allowed to participate on proposer teams. This presents issues for consultants (who may be reluctant to work on small projects for the agency if such work will preclude them from a more significant role during project development), for proposers (who may be unable to find highly qualified consultants for their teams), and for agencies (who want to engage highly qualified firms to assist in project planning and design and also want to encourage formation of highly qualified teams). FHWA's Design-Build Rule addresses this issue by prohibiting firms that assist in preparation of an RFP document from participating on proposer teams unless the agency determines participation does not create a conflict because the following requirements are met:

(i) The role of the consultant or sub-consultant was limited to provision of preliminary design, reports, or similar "low-level'" documents that will be incorporated into the RFP, and did not include assistance in development of instructions to offerors or evaluation criteria, or

(ii) Where all documents and reports delivered to the agency by the consultant or sub-consultant are made available to all offerors. ⁹⁸

If the agency plans to conduct multiple procurements, it should consider whether any of the consultants who have access to confidential program information through their work on an existing project should be precluded from joining proposer teams for other projects. If the agency does not want to prohibit the consulting firm from working on other projects, the agency may wish to consider whether conflict of interest concerns may be adequately resolved by requiring the firm to establish an ethical wall between the personnel who have access to the confidential program information and the personnel who join proposer teams for other projects.

Special requirements apply to consultants working on NEPA documents to ensure that decisions made under NEPA are not influenced by a consultant's interest in future work on the project. FHWA's Design-Build Rule includes the following requirements:

(c) If the NEPA process has been completed prior to issuing the RFP, the contracting agency may allow a consultant or subconsultant who prepared the NEPA document to submit a proposal in response to the RFP.

(d) If the NEPA process has not been completed prior to issuing the RFP, the contracting agency may allow a subconsultant to the preparer of the NEPA document to participate as an offeror or join a team submitting a proposal in response to the RFP only if the contracting agency releases such subconsultant from further responsibilities with respect to the preparation of the NEPA document. ⁹⁹

The agency's conflict of interest (COI) policy should also address disclosure requirements for proposers and provide a process for the agency to make determinations regarding conflicts and mitigation measures.

4.3.3. Additional Considerations

Issues Relating to Proposer Organization

Proposers should be aware of the potential consequences of failing to take appropriate steps to identify OCI. For one recent design-build procurement, all four of the bidders were rejected due to their failure to comply with OCI requirements in the RFP.

In addition to being aware of issues associated with firms on their teams, proposers should also be vigilant in asking individual team members to identify prior assignments relating to the project as well as business and personal relationships with individuals who are part of the agency's team for the project. That information should be disclosed to the agency so it may determine whether an OCI or personal conflict of interest exists. The adverse consequences of a failure to disclose potential conflicts can be seen in a recent situation involving an OCI resulting in a decision by the selected firm to withdraw from a $220 million contract because "a design-firm manager involved in the bid had formerly been assigned to [the procuring agency]." ¹⁰⁰

Issues Relating to Agency Team Members

Organizational conflicts of interest or personal conflict of interest can arise as the result of agency team member relationships with members of the proposer teams. Problems can be avoided by requiring each agency team member to review a list of firms identified as proposer team members and to disclose any business or personal relationships. Examples of potential problems include:

• Agency team member who is married or otherwise related to an individual employed by one of the proposer team members.
• Agency team member formerly employed by a proposer team member whose retirement plan owns stock in the company.
• Agency team member married to a consultant who works for one of the proposer team members.

If this information is timely and properly disclosed, the agency will have the ability to remove the agency team member from the solicitation process, thus avoiding the conflict, or to implement other measures to mitigate the apparent conflict.

4.4. Developing Evaluation Structure and Procedures

This section addresses steps that should be taken early in the procurement to set the stage for SOQ and proposal evaluations. Section 6.3 provides additional details regarding the proposal evaluation process. Although there are numerous ways agencies can structure and procure a P3 contract, perhaps the most important rule is to define and document the process to be used and then follow it. If changes to the process need to be made over the course of the procurement, both the changes and the reasons for the changes should be clearly documented.

4.4.1. Evaluation Teams

Agencies evaluating SOQs and proposals for P3 projects typically set up separate evaluation teams that may be considered as subcommittees of the selection committee. The evaluation teams:

1. Perform pass/fail evaluation of SOQ/proposal compliance with administrative requirements.
2. Review technical elements of SOQs/proposals including a pass/fail review as well as a qualitative evaluation.
3. Review financial elements of SOQs/proposals including a pass/fail review as well as a qualitative evaluation.

The nature of the project and the details of the procurement process have a significant influence on the makeup of the proposal evaluation teams, which typically include advisors as well as public employees.

The evaluation teams are all subject to appropriate oversight by the leadership. Many agencies have found it helpful to have a team of facilitators onsite who can answer questions about the evaluation process, coordinate any matters involving communication with evaluators on different teams, and advise evaluation team members regarding technical, financial, and legal aspects of the RFP.

All individuals involved in the evaluations are required to sign confidentiality commitments and disclose any financial or other interests and relationships that could present conflicts of interest. Ideally, the evaluation subcommittees will be chaired by public employees. However, due to limited availability of agency staff as well as the need for specialized expertise, the evaluation subcommittees often include advisors. Some agencies limit the role of advisors to providing advice to the voting team members.

The proposal compliance team reviews the proposal for compliance with administrative and legal requirements on a "pass/fail" basis. This team typically includes at least one attorney to ensure an understanding of legal compliance issues. The technical and financial evaluation team members are selected to provide specialized expertise needed for review of proposals.

4.4.2. Selection Committee and Selection Official

Proposal evaluations for P3 projects using a best value selection process typically include use of a selection committee, sometimes called a management committee. This committee is responsible for overall proposal evaluation, including both the technical and financial proposals. The selection committee receives reports and detailed evaluation information from the evaluation subcommittee chairs and decides whether to accept the ratings recommended by each subcommittee.

In some cases, the selection committee may include one or more of the subcommittee chairs. Given the selection committee's role, it is advisable for the committee to include members with knowledge of both technical and financial aspects of project development and operations. Selection committees are almost always exclusively staffed by agency employees. If for some reason the agency wishes to include a consultant on the selection committee, the agency should be especially careful to check for organizational conflicts of interest to avoid protests, the possibility of voiding the procurement, and the possibility of unauthorized disclosure of confidential information.

For the Purple Line project, the selection recommendation was made by a management committee comprising public employees who had an understanding of both technical and financial aspects of project development and operations. The selection decision was made by an executive committee comprised of a total of five individuals, with three individuals representing MDOT executive leadership, one individual representing Montgomery County, and one individual representing Prince George's County.

4.4.3. Evaluation Manuals

The review process for the evaluation should be described in an evaluation manual developed well in advance of receipt of SOQs/proposals. Ideally the evaluation manual would be developed prior to issuance of the RFQ or RFP, but it may be advisable to defer development, particularly for an agency's first P3 project, to avoid the need to modify the manual when addenda are issued. In addition to explaining the process to be followed in evaluating proposals, identifying the evaluators, specifying a protocol for communications among evaluation team members, and including other pertinent information about the procurement, the manual should include checklists of submittal requirements and forms to be used by evaluators during the review of the SOQs/proposals. However, each evaluator should be aware that the forms might sometimes need to be modified to address issues that only become apparent as the evaluator is reviewing the RFQ/proposal and related SOQ/RFP requirements. The manual should contemplate the possible need to deviate from the stated procedures and include a process for approving changes and documenting such modifications.

The manual should be labeled as a confidential document and treated as such throughout the evaluation process. Copies of the manuals should be kept in a secure location and accounted for once the evaluations are complete, so as to ensure that the contents remain confidential.

In many cases, the evaluation manual is developed by a procurement management team that is also responsible for training evaluators and ensures that confidentiality and disclosure forms are received. The procurement management team members can also act as facilitators during the evaluation process, making themselves available to answer questions about the evaluation process, coordinate any matters involving communication with evaluators on different teams, and advise evaluation team members regarding technical, financial, and legal aspects of the RFP.

4.4.4. Evaluation Training

Evaluation training is critical to a successful evaluation and procurement process. The schedule for evaluating SOQs and proposals should include a training session that occurs before the start of the evaluation process. Due to the number of people involved in the evaluation process, and constraints on access to information, it is important to ensure that everyone associated with the evaluation understands the rules of the game. Even if an individual has previously participated in a similar evaluation process, he or she should be encouraged to attend the training session.

Recognizing that the evaluators' time is valuable, typically the training session is scheduled to occur in the space set aside for evaluations, shortly before or after receipt of the SOQs or proposals. Upon completion of the presentation or receipt of the SOQs/proposals, whichever occurs later, evaluators are permitted to start the review process. Sometimes, due to timing constraints and the inability to get all of those involved in the evaluation process to attend a single training session, agencies may provide for at least one alternative/make-up training session.

The training should provide an overview of the procurement, identify the purpose of the evaluation process, walk through the evaluation manual, discuss the process to be followed in rating the submittals, and emphasize the importance of maintaining confidentiality.

4.4.5. Communications with Proposers

The solicitation document (RFQ or RFP) will typically identify an agency representative responsible for acting as the point of contact for communications with proposers. That same individual remains responsible for communications with proposers relating to evaluation of SOQs and proposals.

If in the process of reviewing an SOQ or proposal the evaluator determines that it is necessary to ask the proposer to clarify its submittal or provide additional information, the request should be issued by the agency's designated representative Usually the evaluator who discovers the need for additional information discusses the issue with the evaluation team chair, and if the chair agrees it is appropriate to submit a request, the evaluator drafts the question and submits it to a facilitator, who puts it in proper form, obtains approval from the designated representative, and sends the request out. It may be necessary to consult with counsel to verify that the request is permissible under the terms of the solicitation and applicable law. The request should specify a deadline for submittal of a response, allowing a reasonable amount of time for the proposer to submit its response while ensuring that the evaluation team will be able to review the response without delaying the evaluation timeline.

4.4.6. Document Control

Due to the confidential nature of SOQs and proposals, it is essential for the agency to maintain a stringent document control system throughout the evaluation process. The documents should be kept in a secure facility and reviewed by evaluators within that facility. In some cases, the evaluation takes place within an existing agency facility, but it may be necessary for the agency to rent space for the purpose.

Although most agencies still require proposers to submit multiple hard copies of their proposals, certain proposal elements (including the financial model, price proposals, and other financial information) are commonly provided in electronic form, allowing the evaluators to search for and verify information more easily, and avoiding the need to manage numerous volumes of hard copy proposals. Some agencies ask for an electronic copy of the entire proposal, but usually also ask for at least one hard copy original, which serves as the control or master file in the event of discrepancies. If the evaluation process includes review of electronic copies, the agency should consider requiring evaluators to use computers supplied by the agency, to ensure that proposal information does not leave the facility. If electronic documents are accepted or required, they should be provided on a USB/flash drive/CD, which will be subject to the same strict document control procedures as hard copy documents.

The documents should be kept in a locked room when not under review. If the evaluation schedule is tight, the agency may need to arrange for access to materials outside of business hours. In some cases, the agency may permit documents to be reviewed outside of the secure facility, but should ensure that the evaluators understand the importance of maintaining control of the materials, locking them up when they are not being reviewed, and returning them to the appropriate location when the evaluation is complete. However, absent unusual circumstances, all evaluators should expect to spend the evaluation period at the designated evaluation facility, reviewing the documents in that space.

The agency should decide how many copies of the SOQ and proposal to retain. Since evaluators may want access to SOQs during proposal evaluations, it is generally advisable to retain all of the SOQ copies until after proposal evaluations are complete. Once the contract is awarded, the agency may elect to destroy extra copies of the documents, but should retain an archived set for record purposes. If a protest is filed, the agency should consult with counsel before taking any action to destroy documents.

4.5. Developing the Request for Qualifications

Ideally the RFQ will only be issued after the agency has developed its overall procurement strategy for the project. In some cases, agencies may issue an RFQ earlier, with the goal of accelerating the procurement process. In that situation, once the procurement strategy is set, the agency should consider whether it might benefit from re-starting the process, based on a review of the RFQ process and updated information about the project.

The main objective of the RFQ step is to identify proposers who are interested in participating in the process and who have assembled highly qualified teams to perform the services and obtain financing. The RFQ also serves to communicate key project information and information about the procurement process to the market and to obtain initial feedback from industry through outreach meetings and written comments. The agency may also hold industry meetings to solicit early private sector input prior to issuance of the RFQ (see section 3.2.9).

The RFQ identifies the evaluation criteria for determining which teams are most highly qualified and will be permitted to submit proposals. As discussed in section 4.1, such criteria are typically set by senior management during the planning stages of the procurement process, but may be revisited over the course of the procurement.

4.5.1. Key Considerations

In drafting the RFQ, it is necessary to understand the agency's reasons for shortlisting as well as the motivations of private sector participants.

From the agency's perspective, in addition to serving to enhance competition (as discussed in section 4.1), the agency views the RFQ as a means of assuring quality in the performance of services and obtaining a team that understands the agency's goals and objectives, which typically include reducing agency costs, assuring quality and accelerating project delivery:

• Quality. The traditional means of assuring quality (that is, by controlling the design, inspecting construction, and retaining responsibility for operations and maintenance) is not an option for P3s. Instead, the agency must focus on the quality of the proposer teams and their proposals, and rely on the P3 structure itself and the contract terms and conditions to give the P3 contractor incentives to provide a high-quality project and perform operations in a way that meets public needs.
• Cost and Accelerated Delivery. Public sector goals for P3 projects generally include a desire to minimize the expenditure of public funds and to accelerate the delivery schedule. These goals compete with each other and are interrelated with the goal of achieving high quality. For P3 projects where the concessionaire supplies financing, the concessionaire has significant incentives to determine the most cost-effective way to develop the project. Where the financing is based on revenue that is contingent on project completion, the concessionaire has significant incentives to complete the project as early as possible. Use of a best value selection approach enables the agency to consider cost and schedule, as well as quality, in determining the successful proposer.
• Track Record. Most RFQs require proposer teams to provide information about their prior experience and safety record, with higher ratings given to teams with a track record of successfully delivering projects of comparable complexity, scope, and size and with a history of successfully working together. One consideration that is somewhat unique to P3 projects is that firms with relevant P3 experience may have only minimal experience on other projects within the State. In such cases, agencies may want to include evaluation criteria in the RFQ encouraging teaming with local firms that have worked on projects in the area, understand the agency's policies and practices, and have knowledge of the local market, particularly as it relates to labor, suppliers, and other subcontractors critical to executing a project. The agency may also be willing to accept comparable project experience in nearby States or other similar jurisdictions.

At the RFQ phase, the private sector's primary motivation relates to profitability. Proposers will only become involved in the procurement if they perceive a good chance of being awarded a profitable contract. As discussed in section 4.2.1, use of a shortlisting and industry review process increases proposer interest in the competition as it increases the odds of winning the contract and offers the opportunity to engage in a dialog with the agency during the pre-proposal period.

Development of the Request for Qualifications

The content of the RFQ should be developed using established methods that will determine the key qualifications of the proposers and their potential ability to provide the best value in the delivery of the project. The RFQ content should include clear and complete description of:

• The goals and objectives of the project and the procurement.
• Relevant information about the background, development and funding status.
• The procurement process, including the schedule for major procurement milestones.
• Procurement rules, including communications, conflicts of interest and confidentiality.
• Submittal requirements.
  • Technical qualifications.
  • Financial qualifications.
• Evaluation criteria.
• Protest procedures and debriefings.
• Required forms.

Evaluation Criteria for Statements of Qualification

The SOQ evaluation criteria should be disclosed in the RFQ. The evaluation criteria for RFQs typically include:

• Administrative criteria, including "must-meet" conditions.
• Technical criteria, including organizational capacity and past performance of team members and key personnel.
• Financial criteria, including financial capacity of the proposer and past financial performance.

As described below with the CDOT and VDOT examples, the evaluation can be staged to progressively screen proposers first based on administrative criteria before advancing to a review along technical and financial aspects. However, in order to expedite the review process, it may be advisable to conduct concurrent reviews for administrative compliance and qualitative evaluation. Table 9 provides a summary of technical and financial criteria that can be used for evaluating SOQs.

Table 9. Technical and Financial Criteria for SOQ Evaluation

Criteria Category		Evaluation Parameters
Technical Criteria	Organizational Capacity	Project team organization. Key team members and their qualifications. Key subcontractors and their qualifications. Staff/resource capacity and availability. Specialized capabilities (design / construction / operations / maintenance) relevant to the project. Quality assurance and quality control organization and approach. Approach and understanding of project. Understanding of local context.
	Past Technical Performance	Experience with P3 projects. Experience with similar types of projects. Specialized expertise in risk mitigation and management on other P3 projects or projects of comparable complexity. Quality performance. Safety record. Experience working with the procuring agency and/or local subcontractors. References.
	Project-specific	Technical approach. Understanding of project and local context.
Financial Criteria	Financial Capacity	Financial capacity of the proposers (ability to incur debt and raise equity). Bonding record or proof of bonding capability. Legal and financial disclosures.
	Past Financial Performance	Past performance on awarded contracts (completion, liquidated damages, quality, claims, fines, schedule). History of performance (unsubstantiated claims, fines, suits, quality, accuracy, schedule).
	Project-specific	Financial approach.

4.5.2. Communicating Requirements to Proposers

There is no single preferred form for the RFQ. However, in order to facilitate SOQ evaluations, it is advisable to include requirements in the RFQ ensuring that all SOQs will provide required information in the same order, subject to reasonable page limits. This also makes it easier for proposers to confirm that their submittals are complete.

The document should include background information relevant to proposers interested in responding, such as information about the agency, the procurement process, requirements related to organizational conflicts, the scope and status of the project, the plan of finance, and anticipated contract requirements (including applicable Federal requirements), as well as information regarding SOQ contents and submittal requirements and the evaluation and shortlisting process. The private sector will be particularly interested in understanding enough about the project requirements to ensure they have assembled a team that can deliver the entire project scope. It is preferable to identify a broader scope of requirements and allow teams to then pare themselves down as the procurement evolves and the public and private sector responsibilities become better defined. Late changes to a team's composition could result in the agency having to reevaluate the team in the context of shortlisting decisions to maintain the integrity of the procurement process.

As discussed above, technical and financial submittal requirements should be developed by the agency's technical and financial teams to match the evaluation criteria. The RFQ typically requires information to be provided about the proposer team's management and organizational structure, key personnel, key subcontractors and suppliers, and relevant experience. Reference information is usually required for key personnel and for projects identified in the experience section of the SOQ. The RFQ may require the SOQ to include a discussion regarding project understanding and/or anticipated approach to the project. On the financial side, the RFQ will likely require information regarding the proposer's plan of equity investment, performance security, financing experience, plan of finance, and copies of financial letters of support and equity member financial statements.

The RFQ will include standard forms relevant to a proposer responsibility determination and enabling evaluators to ascertain whether the proposer team meets minimum legal and administrative requirements. The RFQ forms also typically include a letter to be signed by the proposer including representations and acknowledgments regarding the SOQ. It should be noted that P3 concessionaires are often organized as special purpose entities (SPEs) and may plan to defer formation of the actual contracting entity until after the shortlist is announced. If the agency is willing to accommodate this approach, the RFQ will need to require signatures by equity members of the future SPE. In that case the "proposer" will likely be a consortium instead of the actual contracting entity. In order for the evaluation team to verify that the planned structure is consistent with the project concept, the RFQ should ask for copies of organizational and teaming documents. For additional information regarding issues relating to SPEs, refer to section 5.1.10.

RFQs also typically include protest procedures, as the agency's standard procedures normally do not cover a shortlisting process. They also usually include a list of rights reserved to the agency with respect to the procurement.

4.5.3. Rules of Engagement

The RFQ must advise proposers regarding basic rules to be followed throughout the procurement so as to avoid organizational conflict situations and improper contacts that could lead to protests or render the procurement invalid.

Teaming

As proposers are highly concerned about unauthorized disclosure of information, the conditions for joining a team usually include an exclusivity agreement. However, situations may arise where related firms are on different teams, particularly where a corporate merger or acquisition occurs after teams have formed. When this occurs, the agency and the teams will need to consider what action to take. In some cases, the agency may determine that the affiliated entities are sufficiently separate so that both teams will be allowed to proceed, or it may require one of the teams to withdraw or re-form with a different entity. If the relationship creates an organizational conflict, the OCI rules will be relevant in determining the solution. For the Purple Line procurement, a corporate acquisition resulted in a potential organizational conflict when a subconsultant on one of the teams became affiliated with the agency's procurement consultant, resulting in reconfiguration of the proposer's team.

One question that often arises for P3 projects, particularly where there is only a limited number of potential subcontractors or suppliers in specialty areas, is whether a particular subcontractor or supplier may be a member of multiple teams. Allowing different teams to share the same members gives rise to the concerns about information leakage and collusion. This represents a greater concern at the proposal stage than at the SOQ stage. The SOQ for the Purple Line project included the following provision establishing rules to be followed to avoid problems:

"After submittal of SOQs, no Proposer or any of its team members may communicate with another Proposer or its team members with regard to the RFP or either team's Proposal; provided, however, that subcontractors that are shared between two or more Proposer Teams may communicate with their respective team members so long as those Proposers establish reasonable protocols to ensure that the subcontractor will not act as a conduit of information between the teams (contact among Proposer organizations is allowed during informational meetings organized by the Contracting Officer)."

A related concern is associated with the possibility that one of the proposers may require a critical subcontractor or supplier to have an exclusive relationship with that proposer's team, thereby limiting the number of teams able to meet minimum qualifications requirements. This may be addressed by excluding specialty suppliers from the qualifications requirements in the SOQ, or by including a prohibition in the SOQ on exclusive arrangements. As an example, the RFQ for the Los Angeles World Airports Automated People Mover (APM) project advised proposers not to identify operating system suppliers in their SOQs. Instead, the agency planned to hold a separate "Eligibility Determination Process" and provide a list of eligible suppliers to the shortlisted proposers.

Rules of Contact

The RFQ should identify the agency's point of contact and require each proposer to identify a point of contact to receive addenda and other information. In order to avoid giving any proposer access to information that might give rise to an unfair competitive advantage, potential proposers should be prohibited from contacting any agency representatives regarding the RFQ, other than the designated point of contact. In order to avoid opportunities for collusion, the rules of contact for the RFQ should also prohibit proposers from contacting each other to discuss the project. Failure to adhere to these rules could lead to proposer disqualification.

The RFQ may also include a prohibition on contacting stakeholders such as Federal, State, and local agencies; utilities; and railroad operators. In addition to helping to keep the playing field level for all proposers, the prohibition on stakeholder contact also helps to avoid multiple calls to stakeholders from different proposers asking questions about the project. If the agency believes that it is in the project's interest for proposers to receive information from particular stakeholders, the agency may wish to set up a joint meeting that includes stakeholder as well as proposer and agency representatives.

In order to avoid questions from the proposers about permitted contacts, it may be advisable to include a provision in the RFQ stating that proposers are not restricted from engaging in communications for matters unrelated to the project, and that they are allowed to participate in public meetings and formal meetings set up by the agency.

Footnotes

⁸² FHWA's Design-Build Rule (23 CFR Sec. 636.209(a)) specifically states that, for Federal-aid procurements, "[a]ll factors and significant subfactors that will affect contract award and their relative importance must be stated clearly in the solicitation." See also Conducting Procurement for Public-Private Partnerships (P3s), available at: https://www.fhwa.dot.gov/ipd/pdfs/fact_sheets/p3_toolkit_06_conductingprocurement.pdf. [ Return to note 82. ]

⁸³ Federal Transit Administration, Best Practices Procurement & Lessons Learned Manual, FTA Report No. 0105 (Washington, DC: 2016). Available at: https://www.transit.dot.gov/sites/fta.dot.gov/files/docs/funding/procurement/8286/fta-best-practices-procurement-and-lessons-learned-manual-2016.pdf. [ Return to note 83. ]

⁸⁴ Federal Transit Administration, Best Practices Procurement & Lessons Learned Manual, "4.3.3 Competitive Proposal Evaluation Mechanics," FTA Report No. 0105 (Washington, DC: 2016), pp. 84-85. Available at: https://www.transit.dot.gov/sites/fta.dot.gov/files/docs/funding/procurement/8286/fta-best-practices-procurement-and-lessons-learned-manual-2016.pdf. [ Return to note 84. ]

⁸⁵ As an example, all of TxDOT's procurements have been based on points and a "blind price" grading approach where price and technical proposals are submitted separately and evaluated by different subcommittees without knowing which proposer submitted which price. [ Return to note 85. ]

⁸⁶ For information regarding A+B bidding (also known as "cost plus time" bidding), refer to S. Scott et al., NCHRP Report 561: Best-Value Procurement Methods for Highway Construction Projects (Washington, DC: Transportation Research Board of the National Academies, 2006), pp. 37-38. Available at: https://www.nap.edu/download/13982. [ Return to note 86. ]

⁸⁷ Federal Highway Administration requirements for change orders are set forth in its Contract Administration Core Curriculum Manual, FHWA-NHI-134077 (Washington, DC: 2014), pp. 151-158. The full document is available at: https://www.fhwa.dot.gov/programadmin/contracts/cacc.pdf. For FTA's requirements concerning change orders, see, Best Practices Procurement & Lessons Learned Manual, "5.1 Contract Changes," FTA Report No. 0105 (Washington, DC: 2016), pp. 114-118. Available at: https://www.transit.dot.gov/sites/fta.dot.gov/files/docs/funding/procurement/8286/fta-best-practices-procurement-and-lessons-learned-manual-2016.pdf. [ Return to note 87. ]

⁸⁸ 49 U.S.C. 5325(e). FTA's requirements for evaluating options are set forth in FTA Circular 4220.1F, "Third Party Contracting Guidance," Chap. VI, Sect. 7.b. (Rev. 4, Mar. 18, 2013). The full document is available at: https://www.transit.dot.gov/sites/fta.dot.gov/files/docs/Third%20Party%20Contracting%20Guidance%20%28Circular%204220.1F%29.pdf. [ Return to note 88. ]

⁸⁹ Federal Transit Administration, Best Practices Procurement & Lessons Learned Manual, "2.4 Competition Requirements," FTA Report No. 0105 (Washington, DC: 2016), p. 21. Available at: https://www.transit.dot.gov/sites/fta.dot.gov/files/docs/funding/procurement/8286/fta-best-practices-procurement-and-lessons-learned-manual-2016.pdf. [ Return to note 89. ]

⁹⁰ 23 CFR part 636. [ Return to note 90. ]

⁹¹ See "Private-Sector Teams Shortlisted for Purple Line P3," Maryland Transit Administration (press release), Jan. 8, 2014. Available at: https://www.mta.maryland.gov/private-sector-teams-shortlisted-purple-line-p3. [ Return to note 91. ]

⁹² 23 CFR § 636.207. [ Return to note 92. ]

⁹³ 23 CFR § 636.209 (b)(2). [ Return to note 93. ]

⁹⁴ National Council for Public-Private Partnerships, The Procurement Process & P3 Contract Administration. Available at: https://www.ncppp.org/wp-content/uploads/2017/02/The-Procurement-Process-and-Contract-Administration-FINAL.pdf Available at: https://www.ncppp.org/wp-content/uploads/2017/02/The-Procurement-Process-and-Contract-Administration-FINAL.pdf. [ Return to note 94. ]

⁹⁵ S. Scott et al., NCHRP Report 561: Best-Value Procurement Methods for Highway Construction Projects (Washington, DC: Transportation Research Board of the National Academies, 2006), pp. 37-38. Available at: https://www.nap.edu/download/13982. [ Return to note 95. ]

⁹⁶ 23 C.F.R § 635.504. [ Return to note 96. ]

⁹⁷ The OCI requirements applicable to Federal agency contracts, and cases relating to OCI rules, are discussed in K. Szeliga (2006), "Identifying and Mitigating Organizational Conflicts of Interest," Public Contract Law Journal 35, No. 4. [ Return to note 97. ]

⁹⁸ 23 CFR § 636.116(a)(1). [ Return to note 98. ]

⁹⁹ 23 CFR § 636.116(c) and (d). [ Return to note 99. ]

¹⁰⁰ P. Reina, "How a Conflict Issue Forced CH2M to Cede Big Rail Job to Bechtel," Engineering News Record, May 5, 2017. Available at: https://www.enr.com/articles/41953-how-a-conflict-issue-forced-ch2m-to-cede-big-rail-job-to-bechtel?v=preview. [ Return to note 100. ]

¹⁰¹ Scott Van Voorhis, "'Overlooked' Conflict-of-Interest Rule Created Confusion on Big Light-Rail Bid," Engineering News Record, February 8, 2018. Available at: https://www.enr.com/articles/43939-overlooked-conflict-of-interest-rule-creates-confusion-on-big-light-rail-bid?v=preview. [ Return to note 101. ]

 

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