Progress Towards: New Sample Standard Bidding Documents for Design-Build-Operate (DBO) for Solid Waste Management

1
Progress Towards New Sample Standard Bidding
Documents for Design-Build-Operate (DBO)for
Solid Waste Management

2
Context for DBO for SWM in MNA

• Initiated as part of the Solid Waste Management
  Strategy for METAP countries - presented at Cairo
  conference-May 2000
• METAP is Mediterranean Technical Assistance
  Program
• Financed by ESSD Norwegian Trust Fund -
  multi-year program
• Work began on DBO documents in 2001
• Endorsed for pilot testing in 2002

3
SWM Strategy for METAP Countries

• Guiding Principles for SWM in MNA
• Tackle immediate problems first
• inadequate collection degradation by dumps
• Treat systemic causes of problems
• public awareness and institutional issues
• Begin to manage waste as a resource
• reduce, reuse, recycle (3Rs), economic incentives
  

4
SWM Strategy for METAP Countries

• Immediate Measures
• close and rehabilitate dumps
• strengthen MSW management
• strategic investments in SWM facilities
• Structural/Systematic Measures
• legal framework, institutional, cot recovery and
  sustainable financing, etc.
• Continuous/Permanent Activities
• 3Rs, monitor environmental impacts, monitor
  performance of public and private sector

5
SWM Strategy for METAP Countries

• MNA Region needs approx. 2.5 3.0 billion over
  next 10 years
• 8 - Correction of Past/Current Problems
• 15 - Strengthen/Rationalise Collection
• 12-Legal/Institutional/IWM Planning/Capacity
  Strengthening
• 65 - Facilities Investments

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Role of Private Sector in SWM

• Improve efficiency and lower costs
• well-focused performance objectives
• financial and managerial autonomy
• hard budget constraint
• Transfer new ideas, technologies, skills
• Take-on technical risks
• Maybe? - mobilize investment funds

7
Role of Public Sector in SWM

• Make clear separation between service (i.e.
  operational) and regulatory functions
• Strengthen capacity for technical supervision
• Set clear client service and quality levels
• Strengthen management capacity
• Improve regulation of private operators
• Reduce environmental and health impacts
  (externalities)
• Establish cost-recovery and financial
  sustainability framework

8
Public Sector Institutions in SWM

• Urban areas should manage wastes better to become
  good environmental citizens
• decentralize collection services
• centralize disposal operations where possible
• focus on cost recovery and self financing
• enlist support of private sector
• adopt landfill as backbone of integrated systems
• Central governments should assist urban areas
• develop national policy and regulatory framework
• provide technical support and access to financing
• consider matching grants for disposal
  externalities

9
Why We Started on DBO in SWM ?

• Experience in Bank financed SWM projects
• Difficult to construct a SWM facility in 5 yrs
• Multiple procurements cause slow implementation
• Feasibility contract
• Environmental and Social Safeguards Assessment
• Detailed engineering design contract
• Civil works contract
• Supervision of construction contract
• Operations contract

10
Other Reasons for DBO in SWM

• Overlaps lead to messy handovers
• Private sector likes DBOs
• Can bundle with other activities (e.g. dump
  closure, transfer stations, access roads)
• Uses the strong technical and project management
  skills of private sector
• Allows municipalities to focus their limited
  human resources on systemic SWM issues

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More Reasons for DBO in SWM

• Incentives for cost effectiveness PSD adapted to
  local conditions
• One private operator is responsible for design,
  construction and environmental impacts (does not
  own or lease land)
• Prevents good landfills reverting to open dumps
• Can include other optional features
• performance incentives (e.g. carbon finance,
  recycling rates)
• Equipment purchase
• Transfer of employees

12
Characteristics of the DBO

• Intermediate step in PSD
• Public sector financing and financial risks
• Private sector technical skills and technical
  risks
• Typical duration is 8 years
• 1 year detailed design phase
• 2 years construction phase
• 5 years operations phase
• Can bundle with other SWM priorities
• Examples dump closure, training and outreach
• Transitional step to operational costs assumed by
  municipality

13
Again More Reasons for DBO

• After the DBO a municipality / utility still has
  options
• Operate itself as public sector
• Continue with same private sector operator (e.g.
  annual contract renewals)
• Bid a new contract to the private sector

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Key Features in the DBO

• Flexible pre-qualification to attract local and
  international companies (e.g. joint-ventures)
• Follows Bank procurement guidelines
• base is Standard Bidding Document Supply and
  Installation of Plant and Equipment (Nov 1997)
• Designed for use in Bank loans by Borrowers

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Prerequisites to DBO for SWM

• 1. Social and Environmental Safeguards Assessment
• 2. Land acquisition completed
• 3. Financing secured
• e.g. Bank loan for 5 yrs and central/municipal
  financing for 3 yrs
• 4. Feasibility level site layout drawings
• 5. Transaction advisors
• (legal and technical) for first few transactions
  for sample documents

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Key Features in the DBO

• Two Part Process (not two stage)
• Part 1 Pre-qualification
• Sub-contractors SWM technical and financial
  experience is eligible
• Part 2 Bidding
• One Envelope Bid Submittal-both technical and
  financial
• Unified Bid Evaluation Process
• Technical Evaluation Pass or fail evaluation
  based on substantially responsive
• Financial Evaluation Pass or fail based on
  substantially responsive
• WINNER - Lowest evaluated price of technically
  responsive bids wins

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Key Features in the DBO

• NOT A DESIGN COMPETITON
• BASIC CONCEPTUAL DESIGN SET OUT IN BID
• Important role for Technical Evaluation Committee
• 1. Design-build criteria
• 2. Operations criteria
• 3. Staffing plan criteria
• DO NOT quantify above criteria (lesson learned)
• Assistance by transaction advisors and/or
  supervision consultant (lesson learned)

18
Key Features in the DBO

• Bid Price Structure
• Design-Build services flat monthly fee vs.
  progress payments
• (lesson learned - no unit prices and quantities)
• Operations services - monthly fee
• Bottom line total lump sum price
• Role of Supervising Consultant
• technical evaluation advisor
• acceptance of final design
• progress payments
• change orders

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Key Success and Lessons Learned in Pilot DBO

• Successes
• Testing private sector reaction to DBO concept
  and document structure (San Fernando City
  Philippines)
• Working across sectors and regions at Bank
• Procurement can be innovative and flexible
• Lessons
• For capacity building in the sector
• When to use the DBO tool
• Procurement process and contents of the bidding
  documents

20
DBO Generic Documents

• Tab I Pre-qualification Documents
• Tab II Bidding Documents
• Annex A - Draft Contract
• General Conditions
• Appendices 1 to 11 to the General Conditions
• Annex B - Various Bidding Documents and Forms
• (Bid Form, Bidders Price Form and Price
  Schedule, Bid Security Form, Performance
  Security Form, Bank Guarantee Form-Advance
  Payment and Form of Curriculum Vitae)

21
DBO Generic Documents

• Appendices to the General Conditions
• Appendix 1 -Special Conditions of Contract
• Appendix 2 -Terms and Procedures of Payment
• Appendix 3 - Technical Specifications
• - Appendix 3A -Design-Build Services
• - Appendix 3B - Operations Services
• - Appendix 3C - Technical Standards

22
DBO Generic Documents

• Appendices to the General Conditions (continued)
• Appendix 4 - Site
• Appendix 5 - Service Area
• Appendix 6 - Contract Price Adjustment
• Appendix 7 - Incentive Compensation
• Appendix 8 - Liquidated Damages
• Appendix 9 - Existing Staff
• Appendix 10 - Operators Personnel
• Appendix 11 - Operators Bid

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Key Sector Lessons Learned

• Hard to insert DBO in existing Bank loans
• Need to be very pro-active with clients
  (beneficiary level and implementing agencies)
• Use DBO cost savings for early transaction
  advisors (legal, procurement and technical)
• DBO process builds technical and management
  capacity

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Key Procurement Lessons Learned

• Start early with transaction advisors (legal,
  procurement and technical)
• Front-load the capacity building effort with all
  in-country stakeholders
• DO NOT quantify technical evaluation criteria
  follow ITB 5.5 and not performance criteria in
  3A, 3B and 3C
• Clearly define when design-build ends (DO NOT
  use unit prices and quantities)
• Clearly define when operations begin

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Next Steps

• Post DBO Bid Documents on Bank Procurement
  (OPCPR) web page as a Sample Edition
• Comments by e-mail to OPCPR
• Considering technical guidance note on
  performance specifications (Appendixes 3a, 3b,
  3c)
• Considering advisory committee to regional
  RPA/RPM and task teams