Bidding for Private Concessions - The Use of World Bank Guarantees

This Discussion Paper provides guidance on issues that need to be considered before and during the bidding process.

The report identifies the critical issues that are involved in the tendering and evaluation stages of bidding for private concessions. It draws on a survey of bidding experience in eight water and toll road projects in seven countries (China, Hungary, Mexico, Peru, Thailand, Turkey, and the United Kingdom). Although the information available from this survey was not comprehensive enough to establish any strong overall generic trends, either by industry sector or geographical region, it was observed that where the process of selecting of the concessionaire appears to have been handled more informally, it was difficult for the host government to be satisfied that it had achieved an optimum level of risk transfer from the public to the private sector.

The report also proposes an approach by which a World Bank guarantee can be effectively integrated in the bidding process with the aim of providing the optimal level of credit enhancement necessary to attract responsive and competitive bids. For partial risk guarantees this necessitates the government making up-front decisions about the risk and obligations it is willing to assume and then reaching agreement with the Bank on the extent of risk coverage under its guarantee.

This process may proceed in a structured manner, in which the guarantee terms are presented in the bid documents, or the bidders may be asked to propose the use of the guarantee and the scope of risk coverage.

For more on the World Bank's Guarantees Program, click here.

Ref: Bidding for Private Consessions