A recent post provided an overview of RFQs (requests for qualifications). This week we’ll look at the single most important thing an RFQ response needs to do—prove the team can submit a competitive bid (RFP response) and, if selected, perform successfully.
Scope complexity in large AFP projects
Alternative financing procurement (AFP) projects, such as public private partnerships (P3s), typically require the proponent to create a new corporation comprised of joint venture (JV) partners, called a special purpose vehicle (SPV) or ProjectCo. The SPV, together with various subcontractors, will design, build, finance, operate and maintain (DBFOM) the asset (highway, bridge, hospital, etc.), and then hand it back in a specified condition at the end of the operating term. NOTE: Many competitions involve a subset of DBFOM activities.
Therefore, unlike straightforward design-build competitions, DBFOM projects require the proponent (SPV) to also prove a wider range of capabilities—and to demonstrate the likelihood of survival as an entity for the operating term of 20 or more years.
Selecting reference projects
Here’s where the puzzle part comes in. Proof of capability involves linking team members (consortium partners) and key individuals to a common set of reference projects. Many issuers ask proponents to identify up to 10 recent projects (called reference projects) like the one on offer, and then to base their response on those projects only.
Identifying 10 representative projects completed in the past 5 or 10 years and with heavy overlap of SPV member companies and the proposed key individuals can be challenging—especially since they need to demonstrate expertise in creating and managing an SPV, as well as designing, building, financing, and operating and maintaining the asset.
Many projects have special characteristics that further limit the choice of reference projects. These include archeological and/or ecological sensitivity, First Nations and other stakeholder needs and extreme weather conditions, among others.
Finally, a strong local partner with a positive reputation and track record in the project jurisdiction is a must-have feature for consortiums hoping to get shortlisted.
For our recommended approach to solving this puzzle, see this post on how to manage RFQ reference projects. See also these two posts on selecting key individuals for proposals and recommended practices in proposal key individual resumes.
Creating and maintaining alignment
Because consortiums typically pursue RFQ projects, there is an ever-present danger of partners dropping out. The consortium leader needs to explain how it will keep the SPV together and aligned. More on this in an upcoming post.