Progress Towards: New Sample Standard Bidding

Documents for Design-Build-Operate (DBO)for Solid Waste Management

Context for DBO for SWM in MNAContext for DBO for SWM in MNA

Initiated as part of the Solid Waste Initiated as part of the Solid Waste Management Strategy for METAP countries Management Strategy for METAP countries - presented at Cairo conference-May 2000- presented at Cairo conference-May 2000

METAP is Mediterranean Technical METAP is Mediterranean Technical Assistance ProgramAssistance Program

Financed by ESSD Norwegian Trust Fund - Financed by ESSD Norwegian Trust Fund - multi-year program multi-year program

Work began on DBO documents in 2001Work began on DBO documents in 2001 Endorsed for ‘pilot testing’ in 2002Endorsed for ‘pilot testing’ in 2002

SWM Strategy for METAP SWM Strategy for METAP CountriesCountries

Guiding Principles for SWM in MNAGuiding Principles for SWM in MNA

Tackle immediate problems first:Tackle immediate problems first:– inadequate collection & degradation by dumpsinadequate collection & degradation by dumps

Treat systemic causes of problems:Treat systemic causes of problems:– public awareness and institutional issues public awareness and institutional issues

Begin to manage waste as a resource:Begin to manage waste as a resource:– reduce, reuse, recycle (3Rs), economic reduce, reuse, recycle (3Rs), economic

incentives incentives

SWM Strategy for METAP SWM Strategy for METAP CountriesCountries

Immediate MeasuresImmediate Measuresa.a. close and rehabilitate dumpsclose and rehabilitate dumpsb.b. strengthen MSW management strengthen MSW management c.c. strategic investments in SWM facilities strategic investments in SWM facilities

Structural/Systematic MeasuresStructural/Systematic Measures– legal framework, institutional, cot recovery legal framework, institutional, cot recovery

and sustainable financing, etc.and sustainable financing, etc. Continuous/Permanent ActivitiesContinuous/Permanent Activities

– 3Rs, monitor environmental impacts, 3Rs, monitor environmental impacts, monitor performance of public and private monitor performance of public and private sectorsector

SWM Strategy for METAP SWM Strategy for METAP CountriesCountries

MNA Region needs approx. $2.5 – MNA Region needs approx. $2.5 – 3.0 billion over next 10 years: 3.0 billion over next 10 years: • 8% - Correction of Past/Current Problems 8% - Correction of Past/Current Problems

• 15% - Strengthen/Rationalise Collection15% - Strengthen/Rationalise Collection

• 12%-Legal/Institutional/IWM 12%-Legal/Institutional/IWM Planning/Capacity Planning/Capacity StrengtheningStrengthening

• 65% - Facilities Investments65% - Facilities Investments

Role of Private Sector in SWMRole of Private Sector in SWM

Improve efficiency and lower costsImprove efficiency and lower costs– well-focused performance objectiveswell-focused performance objectives

– financial and managerial autonomyfinancial and managerial autonomy

– hard budget constraint hard budget constraint

Transfer new ideas, technologies, skills Transfer new ideas, technologies, skills Take-on technical risks Take-on technical risks Maybe? - mobilize investment fundsMaybe? - mobilize investment funds

Role of Public Sector in SWM Role of Public Sector in SWM Make clear separation between service (i.e. Make clear separation between service (i.e.

operational) and regulatory functionsoperational) and regulatory functions– Strengthen capacity for technical supervisionStrengthen capacity for technical supervision

– Set clear client service and quality levels Set clear client service and quality levels

– Strengthen management capacity Strengthen management capacity

– Improve regulation of private operatorsImprove regulation of private operators

Reduce environmental and health impacts Reduce environmental and health impacts (externalities)(externalities)

Establish cost-recovery and financial Establish cost-recovery and financial sustainability frameworksustainability framework

Public Sector Institutions in SWM Public Sector Institutions in SWM Urban areas should manage wastes better to Urban areas should manage wastes better to

become good “environmental citizens” become good “environmental citizens” – decentralize collection servicesdecentralize collection services– centralize disposal operations where possiblecentralize disposal operations where possible– focus on cost recovery and self financingfocus on cost recovery and self financing– enlist support of private sectorenlist support of private sector– adopt landfill as backbone of integrated systemsadopt landfill as backbone of integrated systems

Central governments should assist urban areas Central governments should assist urban areas – develop national policy and regulatory frameworkdevelop national policy and regulatory framework– provide technical support and access to financingprovide technical support and access to financing– consider matching grants for disposal externalitiesconsider matching grants for disposal externalities

Why We Started on DBO in SWM ?Why We Started on DBO in SWM ?

Experience in Bank financed SWM projectsExperience in Bank financed SWM projects Difficult to construct a SWM facility in 5 yrsDifficult to construct a SWM facility in 5 yrs Multiple procurements cause slow Multiple procurements cause slow

implementationimplementation– Feasibility contract Feasibility contract – Environmental and Social Safeguards AssessmentEnvironmental and Social Safeguards Assessment– Detailed engineering design contractDetailed engineering design contract– Civil works contractCivil works contract– Supervision of construction contractSupervision of construction contract– Operations contract Operations contract

Other Reasons for DBO in SWMOther Reasons for DBO in SWM

Overlaps lead to messy ‘handovers’Overlaps lead to messy ‘handovers’ Private sector likes DBOsPrivate sector likes DBOs Can bundle with other activities (e.g. dump Can bundle with other activities (e.g. dump

closure, transfer stations, access roads)closure, transfer stations, access roads) Uses the strong technical and project Uses the strong technical and project

management skills of private sector management skills of private sector Allows municipalities to focus their limited Allows municipalities to focus their limited

human resources on systemic SWM issueshuman resources on systemic SWM issues

More Reasons for DBO in SWMMore Reasons for DBO in SWM

Incentives for cost effectiveness PSD adapted to Incentives for cost effectiveness PSD adapted to local conditionslocal conditions

One private operator is responsible for design, One private operator is responsible for design, construction and environmental impacts (does construction and environmental impacts (does not own or lease land)not own or lease land)

Prevents good landfills reverting to open dumpsPrevents good landfills reverting to open dumps Can include other optional features: Can include other optional features:

– performance incentives (e.g. carbon finance, performance incentives (e.g. carbon finance, recycling rates)recycling rates)

– Equipment purchase Equipment purchase – Transfer of employeesTransfer of employees

Characteristics of the DBOCharacteristics of the DBO

Intermediate step in PSDIntermediate step in PSD Public sector financing and financial risksPublic sector financing and financial risks Private sector technical skills and technical risksPrivate sector technical skills and technical risks Typical duration is 8 years:Typical duration is 8 years:

– 1 year detailed design phase1 year detailed design phase– 2 years construction phase2 years construction phase– 5 years operations phase5 years operations phase

Can bundle with other SWM prioritiesCan bundle with other SWM priorities– Examples: dump closure, training and outreach Examples: dump closure, training and outreach

Transitional step to operational costs assumed by Transitional step to operational costs assumed by municipalitymunicipality

Again More Reasons for DBO Again More Reasons for DBO

After the DBO a municipality / utility still After the DBO a municipality / utility still has options:has options:

– Operate itself as public sectorOperate itself as public sector

– Continue with same private sector Continue with same private sector operator (e.g. annual contract renewals)operator (e.g. annual contract renewals)

– Bid a new contract to the private sectorBid a new contract to the private sector

Key Features in the DBOKey Features in the DBO Flexible pre-qualification to attract local Flexible pre-qualification to attract local

and international companies (e.g. joint-and international companies (e.g. joint-ventures) ventures)

Follows Bank procurement guidelines:Follows Bank procurement guidelines:

– base is Standard Bidding Document base is Standard Bidding Document Supply and Installation of Plant and Supply and Installation of Plant and Equipment (Nov 1997)Equipment (Nov 1997)

Designed for use in Bank loans by Designed for use in Bank loans by BorrowersBorrowers

Prerequisites to DBO for SWMPrerequisites to DBO for SWM1.1. Social and Environmental Safeguards Social and Environmental Safeguards

AssessmentAssessment2.2. Land acquisition completed Land acquisition completed3.3. Financing secured Financing secured

– e.g. Bank loan for 5 yrs and central/municipal e.g. Bank loan for 5 yrs and central/municipal financing for 3 yrsfinancing for 3 yrs

4.4. Feasibility level site layout drawings Feasibility level site layout drawings5.5. Transaction advisors Transaction advisors

– (legal and technical) for first few transactions (legal and technical) for first few transactions for sample documentsfor sample documents

Key Features in the DBOKey Features in the DBO Two Part ProcessTwo Part Process (not two stage)ot two stage) Part 1: Pre-qualificationPart 1: Pre-qualification

– Sub-contractor’s SWM technical and financial experience Sub-contractor’s SWM technical and financial experience is eligible is eligible

Part 2 : BiddingPart 2 : Bidding– One Envelope Bid Submittal-both technical and financialOne Envelope Bid Submittal-both technical and financial– Unified Bid Evaluation ProcessUnified Bid Evaluation Process– Technical Evaluation: Pass or fail evaluation based on Technical Evaluation: Pass or fail evaluation based on

substantially responsivesubstantially responsive– Financial Evaluation: Pass or fail based on substantially Financial Evaluation: Pass or fail based on substantially

responsive responsive – WINNER - Lowest evaluated price of technically WINNER - Lowest evaluated price of technically

responsive bids winsresponsive bids wins

Key Features in the DBOKey Features in the DBO

NOT A DESIGN COMPETITONNOT A DESIGN COMPETITON– BASIC CONCEPTUAL DESIGN SET OUT IN BIDBASIC CONCEPTUAL DESIGN SET OUT IN BID

Important role for Technical Evaluation Important role for Technical Evaluation CommitteeCommittee

1. Design-build criteria1. Design-build criteria2. Operations criteria2. Operations criteria3. Staffing plan criteria3. Staffing plan criteria

– DO NOT quantify above criteria (lesson learned) DO NOT quantify above criteria (lesson learned) – Assistance by transaction advisors and/or Assistance by transaction advisors and/or

supervision consultant (lesson learned) supervision consultant (lesson learned)

Key Features in the DBOKey Features in the DBO Bid Price StructureBid Price Structure

– Design-Build services – flat monthly fee vs. Design-Build services – flat monthly fee vs. progress paymentsprogress payments

(lesson learned - no unit prices and quantities)(lesson learned - no unit prices and quantities)– Operations services - monthly feeOperations services - monthly fee– Bottom line = total lump sum priceBottom line = total lump sum price

Role of Supervising ConsultantRole of Supervising Consultant– technical evaluation advisor technical evaluation advisor – acceptance of final designacceptance of final design– progress paymentsprogress payments– change orders change orders

Key Success and Lessons Learned in Key Success and Lessons Learned in Pilot DBOPilot DBO

SuccessesSuccesses– Testing private sector reaction to DBO concept and Testing private sector reaction to DBO concept and

document structure (San Fernando City – document structure (San Fernando City – Philippines) Philippines)

– Working across sectors and regions at Bank Working across sectors and regions at Bank – Procurement can be innovative and flexibleProcurement can be innovative and flexible

Lessons Lessons – For capacity building in the sectorFor capacity building in the sector– When to use the DBO toolWhen to use the DBO tool– Procurement process and contents of the bidding Procurement process and contents of the bidding

documents documents

DBO Generic DocumentsDBO Generic Documents

Tab I – Pre-qualification DocumentsTab I – Pre-qualification Documents Tab II – Bidding DocumentsTab II – Bidding Documents

Annex A - Draft ContractAnnex A - Draft Contract

General ConditionsGeneral Conditions

Appendices 1 to 11 to the General ConditionsAppendices 1 to 11 to the General Conditions

Annex B - Various Bidding Documents and FormsAnnex B - Various Bidding Documents and Forms

(Bid Form, Bidders Price Form and Price (Bid Form, Bidders Price Form and Price Schedule,Schedule, Bid Security Form, Performance Security Bid Security Form, Performance Security Form, Form, Bank Guarantee Form-Advance Payment and Bank Guarantee Form-Advance Payment and Form of Form of Curriculum Vitae)Curriculum Vitae)

DBO Generic DocumentsDBO Generic Documents

Appendices to the General ConditionsAppendices to the General Conditions

» Appendix 1 -Special Conditions of ContractAppendix 1 -Special Conditions of Contract» Appendix 2 -Terms and Procedures of Appendix 2 -Terms and Procedures of

PaymentPayment» Appendix 3 - Technical SpecificationsAppendix 3 - Technical Specifications

-- Appendix 3A -Design-Build ServicesAppendix 3A -Design-Build Services-- Appendix 3B - Operations ServicesAppendix 3B - Operations Services-- Appendix 3C - Technical StandardsAppendix 3C - Technical Standards

DBO Generic DocumentsDBO Generic DocumentsAppendices to the General Conditions Appendices to the General Conditions

(continued)(continued)

» Appendix 4 - SiteAppendix 4 - Site» Appendix 5 - Service AreaAppendix 5 - Service Area» Appendix 6 - Contract Price AdjustmentAppendix 6 - Contract Price Adjustment» Appendix 7 - Incentive Compensation Appendix 7 - Incentive Compensation » Appendix 8 - Liquidated Damages Appendix 8 - Liquidated Damages » Appendix 9 - Existing Staff Appendix 9 - Existing Staff » Appendix 10 - Operator’s PersonnelAppendix 10 - Operator’s Personnel» Appendix 11 - Operator’s BidAppendix 11 - Operator’s Bid

Key Sector Lessons LearnedKey Sector Lessons Learned

Hard to insert DBO in existing Bank loansHard to insert DBO in existing Bank loans Need to be very pro-active with clients Need to be very pro-active with clients

(beneficiary level and implementing (beneficiary level and implementing agencies)agencies)

Use DBO cost savings for early transaction Use DBO cost savings for early transaction advisors (legal, procurement and technical)advisors (legal, procurement and technical)

DBO process builds technical and DBO process builds technical and management capacitymanagement capacity

Key Procurement Lessons LearnedKey Procurement Lessons Learned

Start early with transaction advisors (legal, Start early with transaction advisors (legal, procurement and technical)procurement and technical)

Front-load the capacity building effort with all Front-load the capacity building effort with all in-country stakeholdersin-country stakeholders

DO NOT quantify technical evaluation criteria – DO NOT quantify technical evaluation criteria – follow ITB 5.5 and not performance criteria in follow ITB 5.5 and not performance criteria in 3A, 3B and 3C3A, 3B and 3C

Clearly define when design-build ends (DO Clearly define when design-build ends (DO NOT use unit prices and quantities)NOT use unit prices and quantities)

Clearly define when operations beginClearly define when operations begin

Next Steps Next Steps

Post DBO Bid Documents on Bank Post DBO Bid Documents on Bank Procurement (OPCPR) web page as a Procurement (OPCPR) web page as a Sample EditionSample Edition

Comments by e-mail to OPCPRComments by e-mail to OPCPR Considering technical guidance note on Considering technical guidance note on

performance specifications (Appendixes 3a, performance specifications (Appendixes 3a, 3b, 3c)3b, 3c)

Considering advisory committee to regional Considering advisory committee to regional RPA/RPM and task teamsRPA/RPM and task teams