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The Privatization Projects Manual

English Translation of the Official Arabic Text

Issued by the Board of Directors of the National Center for Privatization Decision No. (2/5/2018) dated 03/08/1439H corresponding 19/04/2018G pursuant to the National Center for Privatization Regulation issued by the Council of Ministers Resolution No. (355) dated 7/6/1438H, and Council of Ministers Resolution No. (665) dated 8/11/1438H approving of the Rules of Conduct of the Supervisory Committees of Privatization Targeted Sectors.

Arabic is the official language of the National Center for Privatization

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Table of Contents

Letter from the Chairman of the Board of Directors of the National Center for Privatization 7

Chapter 1: Preliminary Provisions 9

Section 1: Definitions 9

Section 2: Scope of Application 10

Section 3: Purpose 10

Section 4: Compliance with the Provisions of this Manual 10

Section 5: Preamble 10

Chapter 2: The Privatization Process 11

Part One: Choosing Privatization 12

Section 1: Factors for A Successful Privatization Project 12

Section 2: The Preparation and Procurement Process 12

Part Two: Selecting the Right Candidate Projects 13

Section 1: Identifying Objectives 13

Section 2: Identifying Initial Projects for Consideration 14

Chapter 3: Project Preparation 15

Part One: The Preparation Process 16

Section 1: The First File 16

Section 2: The First File Factors 16

Section 3: First File Review and Evaluation 20

Section 4: Approval of the First File 22

Section 5: The Second File 23

Section 6: Factors of the Second File 23

Section 7: Second Review and Evaluation 27

Section 8: Approval of the Second File 29

Section 9: The Third File 29

Section 10: Sections of the Third File 30

Section 11: Third File Review and Evaluation 35

Section 12: Third File Approval 38

Part Two: Procurement Process 38

Section 1: Procurement Plan 39

Section 2: Procurement Plan Contents 39

Section 3: Final Procurement Plan Approval by the Supervisory Committee 40

Section 4: Market Engagement / Advertisement 41

Section 5: Process for Advertising and giving Notice of the RFQ 41

Part Three: Preparation and Issuance of Request for Qualification (RFQ) 42

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Section 1: Request for Qualification 42

Section 2: Project Description 42

Section 3: RFQ Instructions 43

Section 4: Statement of Qualifications 44

Section 5: RFQ Qualification Evaluation Criteria 45

Section 6: RFQ Notice and Posting 46

Section 7: RFQ Posting 46

Section 8: Administering the RFQ 46

Section 9: Pre-Qualification Conference 47

Section 10: Participants 47

Section 11: Preparation 47

Section 12: Presentation 48

Section 13: Procedure 48

Section 14: Debrief 48

Section 15: RFQ Evaluation and Creation of a Shortlist 48

Section 16: SOQ Evaluation 50

Section 17: Opening of SOQs 50

Section 18: Compliance Screening 51

Section 19: Reference Check and Pass/Fail Criteria 51

Section 20: Evaluation of SOQs 51

Section 21: Clarification of SOQs 52

Section 22: Transmittal of SOQ Evaluation Record to Supervisory Committee 53

Section 23: Approval of Shortlist 53

Section 24: Notification of Qualified Bidders 54

Section 25: Debriefing of Unsuccessful Bidders 54

Part Four: Preparation and Issuance of Request for Proposal (RFP) 54

Section 1: Request for Proposal 54

Section 2: Administrative Matters 55

Section 3: Draft RFP 55

Section 4: RFP Instructions 55

Section 5: Project Description 56

Section 6: Bids 57

Section 7: Bidder Conference(s) 58


Section 9: Preparation for the Conference 58

Section 10: Written Comments on RFP documentation 59

Section 11: Alternative Technical Concepts 60

Section 12: Final RFP 60

Section 13: Approval by Supervisory Committee to Release RFP documentation to Bidders 60

Section 14: Bidding 61

Section 15: Best and Final Offer 61

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Section 16: RFP Evaluation Criteria 61

Section 17: Evaluation of Bids 63

Section 18: Setting Up the Evaluation Team 63

Section 19: Clarification Meetings 66


Section 21: Preparation for the Clarification Meetings 66

Section 22: Conducting the clarification meetings 67

Part Five: Final Negotiations 67

Section 1: Preferred Bidder 67

Section 2: Final Negotiation(s) 68

Section 3: Preparation for Final Negotiation(s) 68

Section 4: Conducting Final Negotiation(s) 68

Part Six: Fourth File (Final Business Case) 69

Section 1: Preparation of the Fourth File 69

Section 2: Direct Agreements 70

Section 3: Approval of the Fourth File 71

Section 4: Debriefing of Unsuccessful Bidders 72

Part Seven: Signing the Privatization Contract 72


Section 2: Process 72

Section 3: Signing Prerequisites 72

Part Eight: Financial Close 73


Section 2: Preparatory Process 73

Section 3: Financial Close Process 73

Chapter Four: General Provisions 74

Part One: Stakeholders Communication 75

Section 1: Stakeholder Communication 75

Section 2: Stakeholders Identification 75

Section 3: Stakeholder Communication Plan 75

Part Two: Communication with the Private Sector 76

Section 1: Communication during Project Preparation (First File, Second File, Third File Stages) 76

Section 2: Communication during the development of the First File 77

Section 3: Communication during the development of the Second File 77

Section 4: Communication during the development of the Third File 78

Section 5: Communication after Third File approval, during RFQ and RFP up to Contract Award 78

Section 6: Single Point of Contact 79

Section 7: Communication after Award of the Contract 79

Part Three: Unsolicited Proposals 79

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Part Four: Conflict of Interest 83

Section 1: Conflict of Interest 83

Section 2: Avoidance of Conflicts of Interest 84

Section 3: Acknowledgement 84

Section 4: Education and Awareness 84

Section 5: Disclosure 84

Section 6: Conflict Official Record 85

Part Five: Exemption Requests 85

Section 1: Request for Deviation from This Manual 85

Section 2: Deviation Request Review 86

Section 3: Decisions by NCP on Deviation Requests 86

Part Six: Social and Environmental Assessments 86

Section 1: Social and Environmental Impacts 86

Section 2: Social and Environmental Impact Assessment 87

Section 3: National Regulations 88

Part Seven: Demand Analysis 88

Part Eight: Output Based Specifications 89

Section 1: Specifications 89

Section 2: Drafting Specifications 89

Section 3: Incorporation into Procurement Documents and Final Contract 90

Part Nine: Delegation of Authority to Advisors 90

Part Ten: Appeals Procedure 92

Section 1: Reviewing Authority 92

Section 2: Criteria for Filing an Appeal 92

Section 3: Eligible Appellants 92

Section 4: Grounds for Appeal 93

Section 5: Timely Appeals 93

Section 6: Receipt of Appeals 94

Section 7: Form of Appeals 94

Section 8: Validation of Appeals 94

Section 9: Consideration of Appeals 94

Section 10: Documentation of Decision 95

Section 11: Forms of Relief 95

Part Eleven: Risk Allocation and Payment Mechanism 97

Section 1: Risk 97

Section 2: Risk Allocation 97

Section 3: Payment Mechanism 99

Section 4: Default Risk Allocation and Payment Mechanism 101

Part Twelve: Value for Money 107

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Section 1: Assessing VFM 107

Section 2: VFM Potential – First File 107

Section 3: Qualitative Assessment – Second File 108

Section 4: Quantitative Analysis – Third File 109

Section 5: Develop the PSC 109

Section 6: Source of Data/Assumptions 110

Section 7: Term of the Projections 110

Section 8: Cost Analysis 110

Section 9: Impact of Energy and Utility Adjustment 111

Section 10: Income Analysis 111

Section 11: Funding Analysis 112

Section 12: Risk Analysis and Adjusted PSC 112

Section 13: Valuing the Risks 112

Section 14: Final PSC 113

Section 15: Construct Equivalent Privatization Option - Financial Case 113

Section 16: Source of Data or Assumptions 114

Section 17: Cost Analysis 114

Section 18: Income Analysis 115

Section 19: Funding Analysis 116

Section 20: Availability Payments from Privatization Option Cash Flows 116

Section 21: Project Management and Monitoring Costs of the Entity 116

Section 22: Final Privatization Option Cash flows 116

Section 23: VFM Analysis 117

Section 24: VFM Analysis – Revenue Share Structure 117

Section 25: Estimate Potential Impact on VFM from Project Risks – Sensitivity Analysis 118

Section 26: Comparison with the Preferred Bid - Fourth File 118

Templates 119

Part Thirteen: Insurance 121

Section 1: Required Insurances 123

Section 2: Specific Requirements 123

Section 3: Lender Requirements 123

Section 4: Retention of Advisors 124

Section 5: Insurance Issue Requirements 124

Section 6: Self-Insurance 124

Section 7: Insurer of Last Resort 124

Chapter 6: Publication and Entry into Force 125

Section 1: Publication and Entry into Force 125

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Letter from the Chairman of the Board of Directors of the National Center for Privatization

The Kingdom of Saudi Arabia has marked its Vision 2030 by the title: “Our Vision for the Kingdom’s Future”. The Vision is based on three pillars: a vibrant society, a thriving economy, and an ambitious nation. This Vision acknowledges that the Kingdom must create new tools in order to open investment avenues for our most promising economic sectors; and by doing so, the Kingdom can generate a more diverse economy and new employment opportunities for its people. The Vision also stresses that economic development and improving the quality of services requires the privatization of certain government services. Privatization will also lead to an improved business environment thereby helping to attract new talent and additional global investment to the Kingdom. Each of these initiatives will also serve to enhance the unique strategic location of the Kingdom as an interface between three continents.

Recognizing how important the privatization projects are to achieving the Vision’s objectives; both social and economic, it is incumbent that we expand the user base of the privatization model by applying the rules and procedures that would help relevant stakeholders (both within the public sector and the private sector) better understand how to engage and participate in these projects. The National Center for Privatization and PPP had been assigned the mandate of developing a comprehensive governance model for the Supervisory Committee’s works/functions and procedures to execute privatization projects pursuant to Council of Ministers Resolution No. (665) dated 8/11/1438H approving the Rules of Conduct of the Supervisory Committees for the Sectors Targeted for Privatization and its Tasks, and the Council of Ministers Resolution No. (355) dated 7/6/1438H, approving the organization of the National Center for Privatization and PPP.

The National Center for Privatization and PPP has started this mission by developing “The Rules Governing the Work of the Supervisory Committees, their Teams and Advisors” and that directive was adopted by the Board of Directors by its resolution No. (3/5/2018) dated 03/08/1439H corresponding 19/04/2018G.

Complementing the efforts to develop a governance model, the National Center for Privatization and PPP has prepared this Manual, which has been adopted and approved by the Board of Directors pursuant its resolution No. (2/5/2018) dated 03/08/1439H corresponding 19/04/2018G.

This Manual includes technical and specialized reference materials that privatization participants should utilize on all activities and work associated with the Privatization Program. The manual is specifically intended to provide necessary information to the Supervisory Committees, their work teams, and consultants on the most appropriate way for a team to define, qualify, evaluate and procedurally manage a proposed privatization project.

The Manual is designed to regulate all phases of a privatization project as detailed below:

1. Defining whether privatization is the most appropriate option for achieving the objectives of the proposed project.

2. Developing the proposed project for privatization implementation.

3. Approval of privatization projects.

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Due to its importance, the National Center for Privatization and PPP will keep this Manual under continuous review and make updates as needed in order to ensure it tracks with all international developments in the area of privatization and governance while also addressing the specific challenges and obstacles that are unique to the Kingdom’s initiative.

The National Center for Privatization and PPP is fully prepared to provide technical support and advice to stakeholders in all matters related to this Manual and its application. We stand prepared to answer and address any queries, comments or suggestions related to this Manual and its applicability to your efforts.

The National Center for Privatization and PPP can be contacted through any of the following means:

Visit the headquarters of the National Center for Privatization and PPP located in Riyadh, Tamkeen Tower, Floor 40.

The National Center for Privatization and PPP E-mail: [email protected]

Mohammad Mazyad Al-TuwaijriChairman of Board of Directors

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Chapter 1: Preliminary Provisions

Section 1: Definitions

The following terms and phrases, wherever mentioned in this Manual, shall have the meanings assigned thereto, unless the context requires otherwise:

Kingdom: The Kingdom of Saudi Arabia. Government: The government of the Kingdom of Saudi Arabia. CEDA: Council of Economic and Development Affairs. NCP: National Center for Privatization. Manual: The Manual for privatization projects issued by the decision of the Board of Directors of NCP No. (2/5/2018) dated 03/08/1439H corresponding 19/04/2018G. Supervisory Committee: Supervisory Committees formed by the Council of Ministers Resolution No. 665 dated 8/11/1438H. Rules: The Rules Governing the Work of the Supervisory Committees, their Teams and advisors issued by the decision of the Board of Directors of NCP No. (3/5/2018) dated 03/08/1439H corresponding 19/04/2018G. Rules of Conduct of Supervisory Committees: Rules of conduct of the Supervisory Committees for the sectors targeted for Privatization and tasks issued by the Council of Ministers Resolution No. 665 dated 8/11/1438H. Privatization: A term used to refer to SOA and PPP collectively, as defined in the Privatization Strategy for the Kingdom of Saudi Arabia promulgated by the Supreme Economic Council (Dissolved) Decision No. 1/23 dated 23/3/1423 AH corresponded to 4/6/2002. Work Team: A body formed in accordance with the Rules and functions of the Supervisory Committees and the Rules, and which includes the Preparatory Team, the Program Work Team, and the Project Work Team, and is intended in applying the provisions of this Manual the Program Work Team or the Project Work Team, as the case may be, according to the Rules. Registry: The central database managed by NCP which serves as the formal data repository for the Kingdom’s Privatization Projects, and all related work and decisions of the Supervisory Committees. Day: A working day in the Kingdom according to the official working days of NCP. Person: A natural and/or legal person. Entity: Any Government body including:

1. Governmental agencies and entities which regulations provide them with independent legal personality.

2. ministries and other governmental agencies. 3. government-owned company.

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Section 2: Scope of Application

A. This Manual shall apply to the current Supervisory Committees, as well as to the Supervisory Committees to be formed in the future in accordance with the Rules of Conduct of Supervisory Committees.

B. This Manual shall apply to the Privatization projects supervised by the Supervisory Committees based on the Rules of Conduct of the Supervisory Committees and other related legislation, including the projects commenced after the issuance of this Manual and projects that have started before the issuance of this Manual.

Section 3: Purpose

This Manual has been prepared to guide Entities and Supervisory Committees, and their Work Teams. on how to prepare and implement Privatization projects and to provide all relevant information beginning at preparation stage until the signing of the Privatization contract.

Section 4: Compliance with the Provisions of this Manual

The Parties concerned shall comply with the provisions of this Manual. If the provisions of this Manual are not complied with, the proposed Privatization project shall not be accepted and shall be rejected by CEDA, the Supervisory Committee or NCP, as the case may be.

Section 5: Preamble

The provisions of this Manual shall not prejudice the provisions of the applicable laws and regulations and the provisions contained in the Council of Ministers' Resolution No. 665 dated 8/11/1438H and the Royal Decree No. 52631 dated 15/11/1438H, and the provisions of this Manual shall be interpreted accordingly.

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Chapter 2: The Privatization Process Part One: Choosing Privatization

Part Two: Selecting the Right Candidate Projects

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Part One: Choosing Privatization Section 1: Factors for A Successful Privatization Project

Launching a successful Privatization project requires extensive preparation. Detailed analysis is performed, in an iterative fashion, to determine:

a) the ability to achieve the Government’s objectives for the project; b) achieving value for money; c) whether the project appears bankable and likely to attract private investors; d) the key risks and how they might best be allocated and mitigated; e) impacts on citizens and other stakeholders; f) whether privatization is the most suitable approach vis-à-vis traditional

procurement methods; g) any other factors determined by NCP at its sole discretion.

These analyses are also necessary to improve the probability of project success and avoid putting a poorly-prepared project out to bid, thus incurring increased risk, expense and delay, and potentially damaging the Kingdom’s reputation in the Privatization marketplace. As a result, this Manual implements a comprehensive set of requirements and checkpoints in the Privatization preparation process. If at any point this analysis demonstrates that no further exploration of the Privatization option is warranted, then the project may be suspended or considered for an alternative form of procurement, and no further resources will be applied towards exploring a Privatization solution. This process makes the Privatization preparation phase more efficient and cost-effective. Section 2: The Preparation and Procurement Process

This Manual introduces a three-phase Privatization preparation process, with three major checkpoints. This process is based on recommendations made to NCP by the World Bank in 2017, and further reflects international best practice. These phases are as follows:

1. The First File “Pre- Feasibility Study”. 2. The Second File “Partial Business Case”. 3. The Third File “Full Business Case”.

These phases are followed by the procurement phase, and subsequently, the Fourth File or “Final Business Case”. Thereafter, provided the Fourth File is completed in accordance with the requirements of the Rules and this Manual, the privatization project will move on to contracting, financial and commercial closure. The preliminary privatization preparation process can be displayed below:

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Part Two: Selecting the Right Candidate Projects Section 1: Identifying Objectives

The Supervisory Committees define the Privatization objectives of the applicable sector according to the Rules, proposed objectives for each sector must be approved by the pertinent Supervisory Committee, which will submit them in turn to CEDA for final approval.

Once a sector has established its approved objectives, these shall serve as a guide for identification of Privatization candidate projects. Supervisory Committees should ensure that proposed Privatization projects align with these objectives, and will contribute to their attainment. This alignment should be a direct and measurable relationship, which can be expressed in units relatable to one or more sectoral objectives. Where this is not possible, the Supervisory Committee should clearly identify how the project will make meaningful indirect contributions to the sectoral objectives.

The Supervisory Committees shall withhold approval for projects which do not demonstrably align with sectoral objectives.

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Section 2: Identifying Initial Projects for Consideration

The Supervisory Committee, after coordination with NCP, shall identify an initial list of potential Privatization projects for consideration. the Entity should consider a number of factors. These include:

Institutional capacity and funding: means to ensure availability of financing and obtaining necessary approvals on project’s budget, as well as financial and technical recourses necessary for conducting feasibility studies in accordance with the requirements set forth in this Manual and the Rules.

Contribution to sectoral objectives (policy alignment): means to consider the degree to which a project will contribute to achieving sectoral objectives, in prioritizing candidate Privatization projects.

Project size, complexity, and risk: Means to consider the size, complexity, an associated risks of the proposed project, when establishing the initial list of proposed projects.

Project Pipeline: Means a series of projects for a similar assets and services, helps create economies of scale which reduce project transaction costs and attract investors.

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Chapter 3: Project Preparation

Part One: The Preparation Process

Part Two: Procurement Process

Part Three: Preparation and Issuance of Request for Qualification (RFQ)

Part Four: Preparation and Issuance of Request for Proposal (RFP)

Part Five: Final Negotiations

Part Six: Forth File (Final Business Case)

Part Seven: Signing the Privatization Contract

Part Eight: Financial Close

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Part One: The Preparation Process Section 1: The First File

The “First File” or the Pre- Feasibility Study is the initial phase of the privatization project preparation process which examines at a high level the project’s service requirements and desired outcomes, and its potential, commercial, legal and financial structure. If the Work Team concludes that the results are sufficiently promising to warrant further analysis, the Work Team will recommend the project for advancement to the “Second File” and request the Supervisory Committee’s concurrence. The First File is subject to review and approval by the Supervisory Committee before approval will be granted to proceed to the Second File phase.

Section 2: The First File Factors

The First File must include, as a minimum, the following factors:

1. Executive Summary: (including summary of recommendation to proceed to Second File phase). The Executive Summary shall not exceed five pages in length, and should provide an overview of key aspects of the project, and a summary of why further consideration of this project as a Privatization is warranted.

2. Administrative Context: This section identifies the Entity proposing the project; the individual responsible for the First File development in the Program Work Team; the Program Work Team member who should be contacted with questions about the First File or requests for additional information, and their contact information; and the official name of the project. Note that the project name cannot subsequently be changed, as it will be used to track the project in the NCP Project Registry.

3. Project Rationale and Assessment of Need: The First File shall identify the needs the project seeks to address, and how the project addresses them. The First File shall also identify if there are alternative means of addressing this need.

This section shall explain:

a) The specific need that the project is intended to address, expressed in quantitative terms. and a discussion of how this need has been identified and quantified.

b) The relationship between the project need and the sectoral goals and objectives of Vision 2030 and/or the NTP, expressed in quantitative terms. Ideally, this relationship should be direct and measurable. If the relationship is indirect, a clear narrative rationale shall be provided explaining how this project will contribute to the Kingdom’s goals and objectives. If there is no clear relationship, the First File shall explain why this project should be considered a priority for Privatization.

c) The physical parameters of the project, i.e., the number and types of facilities that are expected to be constructed, expanded, or renovated. This shall include any ancillary or support works required for the project to achieve its purpose to enable an access road for users to reach to the facilities that are planned to be constructed or renovated.

d) Identifying the anticipated recipients of the project’s benefits -either directly or indirectly- and the benefits expected from the project. Direct benefits shall be expressed and quantified in the same units as the needs.

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e) Identify alternative ways of meeting the project need. Alternatives should not be excluded at this stage of the study even if they are anticipated to be higher-cost approaches than the proposed project.

4. Economic Benefits: shall include an initial identification of project benefits- tangible and intangible- anticipated from the project and each identified alternative, and shall be quantified according to the current market prices coupled with anticipated negative impacts that may result of the project outputs either for users or non-users.

5. Preliminary Financial Case: shall explore the financial case for the proposed project and the identified alternatives. For each of these, it shall include indicative implementation cost estimates even in the case provided by the government at no cost, that include:

a) Project preparation costs, such as preliminary design, feasibility study, impact studies, and procurement.

b) Land acquisition. c) Construction. d) Plant and equipment. e) Fixtures and fittings.

The First File shall also identify estimated annual costs associated with the operational phase of the project and each alternative.

Cost estimates shall be provided as financial values and no attempt should be made at the First File stage to make adjustments for opportunity costs. It is recognized that at this stage of project preparation there is generally no preliminary design so detailed item-by-item costing may not be possible; however, notionally estimates should nevertheless encompass all the elements of capital costs required to achieve the project’s purpose, with a goal of ± 20 percent accuracy. Metrics based on previous projects may be helpful, e.g., SAR per kilometer for construction of a similar road, or costs per square meter for operation and maintenance of a similar facility. Costs of any anticipated environmental mitigation measures or social costs that may prove necessary to implement operate the project shall also be included. These estimates shall then be summarized to provide:

a) Total estimated implementation costs (indicative only and in current prices) of the project and relevant alternatives, including the main technical variants of the reference project; and

b) Basis for the cost estimates.

For the project and each identified alternative, the First File shall also provide an initial identification of the financial viability of the project if implemented as a Privatization, considering what are the potential sources and broad scaling of revenue streams to private partner, i.e., budgetary payments from the Government, user fees from consumers of the project services, a combination of these sources, and/or other revenue sources. The objective of the financial viability assessment in the First File is to tentatively indicate the potential financial viability of the proposed project and scale the potential government support required, if any. This is to be done through a Net Present Value (NPV) calculation of the project cash-flows in accordance with the First File VFM Potential Assessment, as described in Part 12 of Chapter 4 of this Manual.

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6. Preliminary Assessment of Affordability: When the project or alternative will be funded

wholly or in part with Government funds, the First File shall identify: a) Adequacy of anticipated budgetary funding to cover the estimated preparation

costs of the contract administration and monitoring costs of the project. b) Adequacy of anticipated budgetary funding to cover the direct contract

payments, if these will be made by the Government. c) Potential actions required if anticipated budgetary funding is not adequate to

cover the estimated government obligations necessary to implement the project. d) Anticipated sources of funding apart from the budget. e) Further actions or decisions required during and following project preparation to

secure these additional funding sources, and possible timing. f) Adequacy of matching funding from local government or self-financing public

agencies, if any.

The First File shall also assess the potential reasonableness of service costs that will result from the project and the identified alternatives. To do so, it shall provide:

a) Estimated capital cost per end-user and/or estimated capital cost per unit of demand for the final service. This can be derived by dividing the capital costs estimate by the estimated number of end-users or the estimated demand for services, and is a useful metric for comparing alternatives; b) Unit cost comparisons with other similar, recently completed projects or existing service providers; c) Assessment of whether spending on the project is likely to represent a worthwhile use of public expenditure compared to alternatives (including doing nothing), given the available information on the balance between costs and potential benefits; d) Main risks and assumptions that could potentially affect the economic viability of the project and any risk mitigation measures that might be needed; and e) Project alternatives considered worthy of further study based on potential economic viability.

7. Privatization Rationale: The First File shall address whether it will be more advantageous

to pursue the project as a Privatization or through traditional public procurement. Execution of the project as a Privatization may be possible, but this does not necessarily mean it will be the optimal solution.

While final determination of the best implementation route will generally not be possible at the First File stage, it shall include an analysis that highlights any characteristics that would suggest that Privatization should be considered as a procurement option. These might include, for example, the potential for proper allocation of risk between public and private partners to improve project outcomes, or for private sector innovation in design solutions or operational practices to add value.

Complex projects for which private entities can provide design and management solutions are good candidates for Privatization procurement, as long as: outputs and quality can be defined and monitored in a clear way; user needs are stable over time; and the project is reasonably robust to policy changes. Conversely, projects with dynamic user requirements or subject to rapid technological change may be less attractive candidates for Privatization. Lack of fiscal space for a project which might be financed entirely by the private sector and paid for by user fees may be an argument for a Privatization solution.

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The First File shall set out a brief overview of the potential to achieve value for money, per the above criteria, as a Privatization as part of its assessment of the Privatization option versus other alternatives.

8. Initial Market Assessment: The First File shall document whether:

a) the required capabilities to execute the project are available in the private sector; b) there is a large enough market to generate competition; and c) there is experience with similar projects within the Kingdom, within the region or globally, and provide examples of those that have been successfully implemented, either in the Kingdom or elsewhere, and discuss their applicability. If no similar examples can be identified, the First File shall describe the envisioned Privatization model and explain why it is expected to be viable.

At the First File stage, it is not required that there be direct engagement with private entities to determine market capacity and interest; this may be conducted as a research effort. However, if the evidence is not conclusively in favour of existing market capacity, this shall be highlighted as an issue to be resolved at the Second File stage.

9. Issue Identification: The First File shall identify key issues which will need to be addressed for the project and each alternative. Categories of issues may include, but not be limited to:

a. Technical Issues. The First File shall document any technical issues that may be evident at this early stage. Examples of technical issues might include: need to apply untested technologies, rapidly changing technologies, need to develop new software, compatibility with existing systems, geologic or site concerns, etc. These issues will be subject to more detailed consideration at subsequent stages of the project preparation process. The consideration of technical issues shall specifically include project security, and any protective structures or measures which may be required.

b. Environmental Issues. The First File shall document any environmental issues that may be evident at this early stage. Examples of environmental issues might include existing environmental conditions at the proposed site which could create risks or increase project costs, or environmental effects produced by the project which may require mitigation. Greenhouse gas emissions are a potential consequence of certain projects; when this is the case, the First File shall take into account legal constraints on carbon emissions and consider the most appropriate mitigation measures when implementation and/or operation of the project is expected to generate an increase in emissions. These issues shall be subject to more detailed consideration at subsequent stages of the project preparation process.

c. Social and Stakeholder Issues. The First File shall document any social and stakeholder issues that may be evident at this early stage. Examples of social and stakeholder issues might include: a need to resettle residents displaced by the project; loss of income for residents misplaced by the project; need to displace existing public facilities or acquire privately-held land; increased noise, congestion, or commuting time in affected neighbourhoods; or stakeholder opposition to the proposed project. These issues shall be subject to more detailed consideration at subsequent stages of the project preparation process.

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d. Legal Issues. The First File shall document any significant legal issues that may be evident at this early stage. Examples of legal issues might include overall legal feasibility; the need to amend or rescind existing legislation to enable a project; the need to enact new legislation or take regulatory actions or where expropriation of private land is required, etc. The File shall also ensure that there is clear legal authority to undertake the project, land ownership of the project site is clear; the project will not be impacted by any ongoing litigation, etc. These issues shall be subject to more detailed consideration at subsequent stages of the project preparation process.

10. Project Plan: The First File shall include a plan for the development of the Second File, providing a time schedule, resources, and budget for completion of the Second File, developed with NCP participation and concurrence. 11. Summary and Recommendation: Based upon the information provided in the First File, and any additional explanatory or back-up data which the Work Team may wish to append, the First File shall make a recommendation on whether the project should proceed to the Second File phase, and identify unresolved issues or data requirements which will need to be addressed in the Second File (if applicable). Section 3: First File Review and Evaluation

a. Without prejudice to the provisions of Section 2 of this Chapter, the Work Team shall submit the First File to the Supervisory Committee to review and decide on, and shall respond to any questions or requests from the Supervisory Committee regarding the First File.

b. The Supervisory Committee shall determine, at its discretion, the minimum evaluation criteria to be answered by (Yes) within the First File Evaluation Checklist.

c. The Supervisory Committee evaluates the First File based on the following criteria:

Table 1: First File Evaluation

Evaluation Criteria Yes No

A. General

1. All the required sections of the First File are provided, and the information provided is in sufficient detail to enable the Supervisory Committee to fully evaluate whether the Project should proceed to the Second File phase.

2. It is clear which organization is implementing the Project and who will ultimately be responsible for delivering the Project on time and to budget.

B. Project Rationale and Assessment of Need

3. The problem or opportunity to be addressed is clearly demonstrated and the way in which the Project will help solve the problem or respond to the opportunity is explained and appears plausible.

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4. The description of the scope of the Project is sufficiently detailed for the First File stage and there are no obvious omissions of major components that could potentially jeopardize the achievement of the Project purpose or materially affect the cost estimates.

5. There is an urgent need, i.e., within the next 3 years, for the services of the Project as evidenced by one or more of the following:

A. existing demand for a facility close to the end of its economic life or technologically obsolescent;

B. a severe capacity constraint in existing facilities resulting in suppressed demand;

C. strongly growing demand, likely to outstrip the capacity of existing facilities in the near future;

D. demand for new services not previously provided; E. economic benefit from transfer of functions to private operation; or F. other valid strategic justification(s).

6. The Project will contribute to the achievement of relevant strategic goals and objectives as set out in Vison 2030 or the NTP and is aligned with the sectoral Privatization plan as approved by the sectoral Supervisory Committee.

C. Preliminary Economic Case

7. The proposed technical solution appears appropriate to the problem identified, and the cost estimates appear realistic, based on available information.

8. The postulated Project benefits appear plausible in the context of this Project.

9. On balance, there is good reason to believe that the proposed Project costs are likely to be exceeded by the potential benefits.

10. Alternative solutions have been considered and the more promising among them have been identified for inclusion in the Second File for further appraisal.

D. Preliminary Assessment of Affordability

11. Budgetary resources for the Project are available, or can reasonably be expected to be made available if the Project is approved.

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12. Benefits to users are likely to be achievable at an acceptable cost, for example, approximate capital costs per user or per unit of output are in line with comparable Projects and/or international experience.

E. Issue Identification

13. The First File appears to have identified the relevant technical, environmental social, and legal issues, which will require additional analyses if the Project concept is advanced to the Second File stage.

14. Mitigation measures can be foreseen for any potentially critical technical, environmental, social, or legal issues.

F. Project Plan

15. Is the Project Plan complete and realistic?

G. Summary and Recommendations

16. The recommendation to proceed to the Second File is supported by the information and analysis provided in the First File, which are fully compliant with all NCP requirements.

Section 4: Approval of the First File

A. After the completion of the review and evaluation of the First File, the Supervisory

Committee shall make one of the following decisions: 1. The Supervisory Committee agrees to move to the Second File phase if it found

that the project deserves further study for the purpose of Privatization, and that the First File has been completed in accordance with all the requirements contained in the Rules and this Manual. In its decision, the Supervisory Committee shall determine any additional terms or provisions relating to such approval.

2. If the project is deemed to require further review or the First File needs amendments or contains errors or omissions in the process or documents related to it, the Supervisory Committee shall identify such amendments or errors and direct the Work Teams to amend them, and resubmit the First File for further review.

3. The Supervisory Committee shall reject the First File if it found that the project or any proposed alternatives do not represent a good use of public resources or contains errors or omissions in the process or documents in relation to the First File, and that modification has not been possible at the discretion of the Supervisory Committee.

B. Decisions related to the First File shall not be submitted to CEDA.

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Section 5: The Second File

The Second File or Partial Business Case is the second phase of the privatization project preparation process. It provides a more mature picture of the project’s details and analyses project deliverability, including affordability, the capacity to pay for building, operating and/or maintaining the project (as applicable). The objective of the Second File is to narrow consideration to a single project concept which will be subject to final analysis and review. If the Work Team concludes that the results are sufficiently promising to warrant further analysis, the Work Team will recommend the project for advancement to the “Third File” and request the Supervisory Committee’s concurrence. This is after granting the approval from CEDA. Note that the approval of the Supervisory Committee and CEDA on the Second File is considered an approval to proceed to the Third File and shall not mean directly or indirectly the approval of executing the procurement process of the Privatization project.

Section 6: Factors of the Second File

The Second File must, as a minimum, contain the following sections:

1. Executive Summary: (including summary of recommendation to proceed to Third File phase). The Executive Summary requirement is the same as for the First File, except that all information and analysis shall be updated to reflect the project concept and alternatives considered by the Second File, and current information. The Work Team shall include an affirmative statement that all information is complete and up-to-date, to the best of its knowledge at the time of Second File submittal to the Supervisory Committee.

2. Administrative Context: The Administrative Context requirement is the same as at the First File, except that all information shall be updated to reflect the project concept and alternatives considered by the Second File, and current information. Note that the project name must be the same as that employed at the First File stage, as this is used to track the project in the NCP database.

3. Economic Benefits: The Second File shall provide an identification of project benefits, and meeting the project need. Benefits shall be identified using the same base year as costs, and the identification and enumeration of benefits should be provided for the same period of time. Differences in benefits between alternatives are an important consideration, as these will be critical to assessing whether cost differentials between alternatives may be justifiable. Tangible benefits shall be quantified, using current market prices. Intangible benefits should also be quantified where possible, and an attempt made to assign a realistic value to the Kingdom.

Negative impacts of the project and each alternative shall also be identified. These shall include any anticipated negative impacts for users or non-users of the project outputs, and for Saudi society at large.

4. Financial Case: The Second File shall explore the financial case for the proposed project and the identified alternatives. For each of these, the Second File shall include indicative implementation cost estimates for each phase of the project. The requirement for estimation of project construction costs is similar to that for the First File, except that all information shall be updated to reflect the project concept and alternatives considered by the Second File, and current information.

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Mitigation costs shall also be identified if there is likely to be a need to build mitigation measures into the project design, due to anticipated negative environmental or social impacts.

The Second File shall also include a more robust identification of costs associated with the operational phase of the project; these costs may include, as applicable:

a) Staffing for project operation, maintenance, management, and support, to include indirect support, such as accounting, human resources, and legal, etc. Staffing costs also include training, payroll and benefit costs.

b) Material and supplies. c) Utilities. d) Facility, plant, and equipment repair, renovation, and replacement. Assumptions

on repair, renovation, and replacement cycles should be clearly described, with supporting rationale.

e) Support contracts and insurance. f) Indirect costs, and g) Other costs.

For an alternative in which the project will be operated by a private party (as in a Privatization), the cost to the government of administering and monitoring the contract shall be included. The cost of the contract itself shall be presented not as an estimated lump sum, but as a total based on the categories of operational costs listed in the previous paragraph.

Operational costs shall be projected over the proposed life of the project/duration of the Privatization contract. Identical sets of assumptions (e.g., for inflation, consumer prices, currency fluctuation, energy costs, etc.) must be employed for each alternative, and each alternative must cover the same time period. Ultimately there should be a single, centralized source of such assumptions, issued by the government, to ensure accuracy and consistency across the various cost analyses which will be developed in each sector.

If an alternative will include asset transfer costs (e.g., at the end of the contract term, an asset will be purchased by the government from a private partner), an estimate of these costs shall be included, with supporting rationale.

For the project and each identified alternative, the Second File shall also provide an analysis of the financial viability of the project if implemented as a Privatization: what are the potential sources and value of revenue streams to private partner, i.e., budgetary payments from the Government, user fees from consumers of the project services, a combination of these sources, and/or other revenue sources.

At the Second File stage, an estimate of the revenue produced from each source shall be provided, with supporting rationale and/or identification of need for additional studies (e.g. traffic, ridership, or other demand related studies) to confirm an alternative’s estimates, and assess whether the estimated revenues are adequate to ensure the sustainability of the project. The Second File shall provide examples of similar Privatization projects that have been successfully implemented, either in the Kingdom or elsewhere, and discuss their applicability. If no similar examples can be identified, the File shall describe the envisioned Privatization model and explain why it is expected to be viable.

The Second File shall also include a comparison of the costs and benefits of the project and each alternative. A qualitative VFM assessment is required in the Second File, as described in Chapter 4 Section 12 of this Manual.

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5. Assessment of Affordability: The Assessment of Affordability at the Second File includes all of the elements required in the First File phase, and these data shall be updated to reflect the project concept and alternatives considered by the Second File, and current information. In addition, the Second File shall identify the total cost of the project and each alternative, including, at the Kingdom level or Entity level as appropriate, the alternative’s fiscal impact, budgetary impact, and their accounting treatment, to include on or off-balance sheet status. For a State-owned entity which is not included within the national budget, the impact of the project on that Entity’s budget and financial status shall be identified.

The Second File shall also identify and quantify, for the project and each alternative, all required contingent liabilities that would need to be assumed in order to make the project or alternative bankable, based on the anticipated project structure and Standard Heads of Terms. A contingent liability is a potential liability that may occur, depending on the outcome of an uncertain future event. For example, a Privatization contract may include a termination guarantee, which defines the government’s payment obligations in the event the government terminates the contract. The Second File shall also identify mitigation strategies for each contingent liability to reduce the government’s potential exposure.

6. Project Rationale and Assessment of Need and considered alternatives: The Project Rationale and Assessment of Need requirement is similar to that requirement for the First File, except that all information shall be updated to reflect the project concept and alternatives considered by the Second File, and current information. If additional project details are known at the time of Second File preparation, these should be reflected. Alternatives that were determined not to be feasible at the First File phase shall not be included. However, new alternatives may be introduced based upon the more advanced level of project definition; for example, implementation of identical project concepts in alternative locations. The status quo (i.e., taking no action to alter current conditions) shall always be included as an option.

The Second File shall also consider the time dimension of project need and benefits. The benefits may change over the term of the project, and a life-cycle quantification of benefits is required; for example, the number of persons to receive daily access to wastewater treatment services as a project outcome may be 100,000 in year one, and 140,000 people in year 20, due to projected population growth. Assumptions used in projecting benefit change (either positive or negative) over time shall be clearly described, with supporting rationale.

7. Market Assessment of the Project Concept and proposed alternatives: The objectives of the Market Assessment at the Second File stage are to gain a more detailed understanding of the market interest and capacity to undertake the proposed project. The Work Team may engage in limited interaction with the private sector to conduct this assessment, without any commitment, tacit or explicit, that the project may actually be pursued. Interaction may be conducted through issuance of Requests for Information and receipt of written expressions of interest and comments’, and/or by the conduct of online surveys or questionnaires. Based on this interaction, the Work Team shall document whether:

a) There is private sector interest in undertaking the project. b) There is private sector experience in similar projects, either in the Kingdom, regionally, or globally. c) There is available private sector capacity (financial, technical) to undertake the project.

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If the answer to any of these questions is negative, the Second File shall document the rationale for considering private sector performance. Limited private sector experience in a particular project type, for example, does not mean that the private sector is necessarily incapable of performing such a project, but does introduce a risk factor which must be considered and assessed. Lack of private sector interest, by contrast, may lead to restructuring certain aspects of the project, to make it more conducive to Privatization.

The Market Assessment may also identify private sector concerns about the project concept. For example, potential bidders may express concern about the level of certainty of traffic volume projections for a road project, or the proposed contract duration of a housing project. The Second File shall propose a specific remedy for each concern, and identify associated costs and risks.

8. Identification of issues related to the Project, including technical, environmental, social, stakeholder, legal and other issues related to the Project concept and the alternatives that have been considered: Based upon the Issues Identification conducted in the First File, and subsequent analysis, the Second File shall document the technical, environmental, social, stakeholder, legal, and any other applicable issues associated with the project and each alternative. For each issue, the associated risks and associated impacts shall be identified, and mitigation strategies and implementation costs projected and included in the Second File risk analysis and cost estimates. The Risk Identification shall also include a Stakeholder Index as described in Chapter 1 Section 4 of this Manual.

If any potentially significant social risks are identified, a Social Impact Assessment will be conducted as part of the Second File. Significant social risks may include, but are not limited to: imposition of new or increased user fees; resettlement; land acquisition from private citizens; demolition of existing facilities to make way for new construction, etc. The requirements for a Social Impact Assessment are discussed in Chapter 6 Section 4.

For each alternative involving a Privatization-based solution, the Second File shall also include a risk allocation model listing the project risks and how they will be allocated between the government and the private parties. Risks may be assumed by the government, assigned to the private party, or shared between the government and private party according to clearly-defined parameters. The costs of risk mitigation shall be included in the cost estimates. Note that public procurement alternatives will also entail risks (e.g., the risk of public procurement cost overruns) and these risks should be considered in projecting the cost and benefit of non- Privatization options.

9. Project Plan that includes a time schedule, resources and budget for completion of the Third File: A plan shall be provided for the development of the Third File, providing a time schedule, resources, and budget for completion of the Third File, developed with NCP participation and concurrence. The plan shall specifically identify all required studies necessary to complete the Third File (e.g., demand studies, resettlement analysis, social impact analysis, environmental impact, etc., as applicable) and associated costs.

10. Summary and Recommendation: Based upon the information provided in the Second File, and any additional explanatory or back-up data which the Work Team may wish to append, the Second File shall make a recommendation on whether the project should proceed to the Third File phase, and identify unresolved issues, data requirements, or required studies which will need to be addressed in the Third File (if applicable).

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Section 7: Second Review and Evaluation

a) Without prejudice to the provisions of Section 6 of this Chapter, the Work Team shall submit the Second File to the Supervisory Committee to review and decide on, and shall respond to any questions or requests from the Supervisory Committee regarding the Second File.

b) The Supervisory Committee shall determine, at its discretion, the minimum evaluation criteria to be answered by (Yes) within the Second File Evaluation Checklist.

c) The Supervisory Committee evaluates the Second File based on the following criteria:

Table 2: Second File Evaluation


A. General

1. All of the required sections of the Second File are provided, and the information provided is in sufficient detail to enable the Supervisory Committee to fully evaluate whether the project should proceed to the Third File phase. Any updates or revisions to the project concept are fully integrated across all Second File sections, and an affirmative statement on data accuracy and currency is included.

2. It is clear which organization is implementing the project and who will ultimately be responsible for delivering the project on time and to budget.


3. The problem or opportunity to be addressed is clearly demonstrated and the way in which the project will help solve the problem or respond to the opportunity is explained and appears plausible.

4. The description of the scope of the project is sufficiently detailed for the Second File stage and there are no obvious omissions of major components that could potentially jeopardize the achievement of the project purpose or materially affect the cost estimates.

5. There is an urgent need, i.e., within the next 3 years, for the services of the project as evidenced by one or more of the following:

a) existing demand for a facility close to the end of its economic life or technologically obsolescent;

b) a severe capacity constraint in existing facilities resulting in suppressed demand;

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c) strongly growing demand, likely to outstrip the capacity of existing facilities in the near future;

d) demand for new services not previously provided; or

e) Economic benefit from transfer of functions to private operation.

6. The project will contribute to the achievement of relevant strategic goals and objectives as set out in Vision 2030 or the National Transformation Plan and is aligned with the sectoral Privatization plan as approved by the sectoral Supervisory Committee.

C. Economic Case

7. The proposed technical solution appears appropriate to the problem identified, and the risk analysis and cost estimates appear realistic and complete, based upon available information.

8. The postulated project benefits and identification of potential negative impacts appear realistic in the context of this project.

9. Alternative solutions have been adequately considered, and the preponderance of evidence supports the conclusion that the preferred option is the most advantageous to the Kingdom.

10. On balance, there is good reason to believe that in the preferred option the proposed project costs are likely to be exceeded by the potential benefits.

D. Assessment of Affordability

11. Budgetary resources for the project are available, or can reasonably be expected to be made available if the project is approved.

12. Benefits to users are likely to be achievable at an acceptable cost, for example, approximate capital costs per user or per unit of output are in line with comparable projects and/or international experience.

E. Market Assessment

13. The market assessment demonstrates that there is private sector interest, experience, and capacity to undertake the project. If there are concerns about the adequacy of any of these factors, a plausible plan is presented to address the concern(s), and is considered in the relevant cost estimates.

F. Identification of Issues

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14. The Second File identifies the relevant technical, environmental social and legal issues, the associated risks, and the costs associated with mitigating those risks.

15. Affordable and practical mitigation measures are identified for all of the relevant risks.

G. Project Plan

16. The Project Plan is complete and realistic.

H. Summary and Recommendation

17. The recommendation to proceed to the Third File stage is supported by the information and analyses included in the Second File, which are fully compliant with all NCP requirements.

Section 8: Approval of the Second File

A. After the completion of the review and evaluation of the Second File, the Supervisory Committee shall make one of the following decisions:

1. The Supervisory Committee agrees to move to the Third File phase if it found that the project deserves further study for the purpose of Privatization, and that the Second File has been completed in accordance with all the requirements contained in the Rules and this Manual. In its decision, the Supervisory Committee shall determine any additional terms or provisions relating to such approval.

2. If the project is deemed to require further review or the Second File needs amendments or contains errors or omissions in the process or documents related to it, the Supervisory Committee shall identify such amendments or errors and direct the Work Teams to amend them, and resubmit the Second File for further review.

3. The Supervisory Committee shall reject the Second File if it found that the project or any proposed alternatives do not represent a good use of public resources or contains errors or omissions in the process or documents in relation to the Second File, and that modification has not been possible at the discretion of the Supervisory Committee.

B. In case of approval, decisions related to the Second File shall be submitted to CEDA for review and approval.

Section 9: The Third File

Phase three ‘The Third File’ or the complete business case provide comprehensive evaluation sufficient to make a final decision, after obtaining CEDA’s approval, as to whether to proceed with the procurement of the Privatization project. The Third File is subject to review and approval by the Supervisory Committee and CEDA before proceeding to the

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procurement of the privatization project. CEDA may delegate the authority to grant such approval to the relevant Supervisory Committee.

Section 10: Sections of the Third File

The Third File must, as a minimum, contain the following sections: 1. Executive Summary: The Executive Summary requirement is the same as for the Second

File, except that all information and analysis shall be updated to reflect the Privatization project concept considered by the Third File and current information. This executive summary must provide grounds for granting final approval to engage in Privatization procurement for this project. The Third File shall contain a confirmation statement acknowledging that all information is complete and up-to-date, to the best of the Work Team’s knowledge at the time the Third File is submitted to the Supervisory Committee. It also includes the recommendations to move the project to the Privatization procurement phase.

2. Administrative Context, including Concept Definition for the Project Considered in the Third File: The Administrative Context requirement is the same as at the Second File, except that all information shall be updated to reflect the Privatization project concept considered in the Third File, and current information. Note that the project name must be the same as in the First File stage, as this is used to track the project in the Project Registry.

3. Rational behind the Project Concept Considered in the Third File, and that the Need to Handle the Project is Still a Sector Priority: The Project Rationale and Assessment of Need requirement are the same as for the Second File, except that all information shall be updated to reflect the Privatization project concept considered in the Third File, and current information. The Work Team shall ensure that the information presented remains accurate and up-to-date, i.e., that any changes in the requirements or updated data are reflected, and that the stated need remains a sectoral priority. If additional project details are defined at the time of Third File preparation, these should be reflected.

4. Economic Benefits of the Project Concept Considered in the Third File, Including Negative Impacts: The Third File requirement for identification of economic benefits is the same as for the Second File. The Third File shall include an updated identification of project benefits and potential negative impacts, based on the Privatization project concept and current information.

5. Detailed Financial Case for the Project Considered in the Third File: The Third File shall explore the financial case for the proposed Privatization project. Note that in the Third File, the detailed cost estimate for the Privatization contract is not included in the Financial Case; instead these are considered in the Value for Money Analysis (see Part 12 of Chapter 4). All risk mitigation costs must be identified if there is likely to be a need for mitigation measures due to anticipated environmental or social impacts, and these will not be included in the Privatization contract, but will be separately provided by the government. The Third File shall also provide an analysis of the financial viability and sustainability of the Privatization project. At the Third File stage this shall be presented as a full financial model, which must identify the potential sources and value of revenue streams to the private sector party, i.e., budgetary payments from the Government, user fees from consumers of the project services, a combination of these sources, and/or other revenue sources. An estimate of the revenue produced from each source shall be provided, with supporting rationale, and shall assess whether these revenues are adequate to ensure the sustainability of the project. The proposed project payment mechanism shall be identified, and used to develop a projected schedule of payments over the contract term. Utilizing this information, combined with the estimates of implementation cost and operating costs, the Work Team shall assess the financial viability of the project.

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The Third File also provides detailed documentation of, and rationale for, all assumptions and calculations, and provide evidence that the financial assumptions have been substantiated in the market or reflect recent sectoral transactions. The cash flow analysis shall include net cash flow from operations (operating receipts minus payments resulting from operations, including taxes) and net cash flow including the impact of investment expenditures. The following financial statements shall be generated: Income and Expenditure Account; Balance Sheet; and Cash Flow Statement.

The Third File shall utilize the financial model to:

a) Verify that a revenue generating project is financially sustainable and will have sufficient funds to meet its commitments at each stage of its life.

b) Identify any changes to tariff regimes or provision of budget subsidies that may be necessary, if the project is not financially sustainable.

c) Confirm, in the case where a project is potentially profitable, that Privatization should be a viable project execution model.

If the financial model indicates that the project is not likely to be financially viable or sustainable, the project concept shall be revised, and a new analysis performed, or the Entity may need to pursue a non-Privatization model of project execution.

For non-revenue projects, some additional financial issues should be investigated, to include adequacy of recurrent financing during operation, and financial management capacities, as well as affordability of capital costs. These will be generally the focus of separate budgetary analyses as per Paragraph Eight of this Section.

Based on the proposed Privatization model, the Third File shall provide examples of similar Privatization projects that have been successfully implemented, either in the Kingdom or elsewhere, and discuss their applicability to the Kingdom. If no similar examples can be identified, the Third File shall describe the envisioned Privatization model and explain why it is expected to be viable.

6. Assessment of Affordability and Budgetary Impact of the Project Concept Considered the Third File: if the project will be funded wholly or partially from Government funds, the Third File shall perform a full assessment of fiscal implications and commitments. This analysis shall address all of the budgetary issues discussed in the Second File, updated to reflect the Privatization project concept and current information.

The Third File shall also consider new tax revenues, (corporate and individual), which will be received by the Kingdom due to the project being performed by a private entity. Indirect taxes may also be generated, such as customs and excise and vehicle-related taxes, depending upon the specific function to be performed by Privatization, and its employment outcomes. Tax revenues may also be lost; for example, development of privately-owned vacant urban land may result in loss of White Land Tax revenues.

Regardless of whether direct Government funding will be required, the Privatization project will have fiscal and/or budgetary impacts on the Kingdom. These might include the cost of preparing the Privatization bidding documents and conducting the procurement, monitoring the construction and operation phases of the Privatization contract, and retention of advisors to assist in these processes, etc., as previously discussed. In addition, there may be contingent liabilities with potential fiscal and/or budgetary impact. The Third File shall identify all such costs, with supporting rationale and documentation of assumptions and calculations. Impacts during project implementation and operation may differ significantly, and both will need to be assessed. The analysis will also assist in establishing whether an

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investment is affordable from the fiscal perspective by enabling its assessment in relation to projections of expenditure ceilings and available fiscal space during budget preparation.

The format for displaying the budgetary analysis for the Third File is the same as for the Second File, but the analysis shall be updated to include the additional Third File considerations and to reflect current information.

The budgetary analysis must demonstrate that the project is affordable, or that the availability of ancillary revenue sources to close the budget gap must be demonstrable and secure.

7. Risk Assessment with Risk Allocation Analysis, including allocation methodology: In the Second File, under Risk Identification, the Work Team identified potential project risks, mitigation strategies, and associated costs. The Third File shall undertake a formal risk allocation analysis, which will provide an initial identification of how these risks should be allocated between the parties to the Privatization contract. Risks may be assumed by the government, assigned to the private party, or shared between the government and private party according to clearly-defined parameters. The objective of the risk allocation is not to transfer all possible risks to the private party, but to maximize the efficiency and effectiveness of the contract by allocating risks to the party or parties with the best capacity to control and mitigate them. A separate discussion of the specific requirements of the Risk Assessment is provided in Part 11 of Chapter 4 of this Manual.

The costs identified in the Risk Assessment should be fully incorporated into the Third File’s cost estimates of Privatization implementation for both the private and public sector, as appropriate. Significant risks, particularly if they will be borne by the private party, may also need to be specifically addressed in the Procurement Plan.

8. Quantitative Value for Money Assessment for the Project Concept Considered in the Third File: A Value for Money Assessment must be provide to demonstrate that the project will provide the Kingdom with a strong combination of cost and value over the term of the project (whole-life cost) as determined by quality and quantity of services. This Value for Money Assessment provides a final confirmation checkpoint before a decision to proceed with Privatization procurement. The quantitative Value for Money Assessment upon many of the analyses already completed in the Third File as well as the qualitative value for money assessment completed at the Second File. Quantitative assessment includes the analysis of costs and risks.

A simplified summary of the value for money assessment includes the following steps:

Assessment of Costs, Revenues, and Risks for Privatizations a) Assessment of costs and revenues. b) Assessment of risks.

Qualitative review c) Review of project needs, objectives, and benefits.

Decision on the Value for Money proposition A separate discussion of the specific requirements for the Value for Money analysis is provided in Part 12 of Chapter 4 of this Manual.

9. Market Assessment Keeping in Consideration Project Concept Discussed in the Third File: A Market Assessment was conducted at the Second File stage of the Privatization preparation process. If there are any significant changes to the proposed project concept during the Third File development which might impact the private sector

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appetite and capacity to undertake this project as a Privatization, or which introduce new project aspects in which private sector experience may be limited, the Market Assessment shall be updated. For a large, complex project, simply the testing availability of a robust business case and risk allocation concept may warrant additional interaction with the market. Additional interaction with industry, e.g., through an RFI and/or the conduct of an Industry Day may be performed as appropriate. Following this update, the Third File shall document whether:

a) There is private sector interest in undertaking the project. b) There is private sector experience in similar projects, either in the Kingdom,

regionally, or globally. c) There is available private sector capacity (financial, technical) to undertake the

project. With respect to financial capacity, the Third File shall identify the potential sources and quantum of debt and equity envisaged from these sources e.g., Private sector party, local and international banks, ECA’s, multilateral agencies, etc., and the likely cost.

On the basis of these conclusions, the Third File shall document the rationale for considering private sector performance, and how any market concerns have been addressed in the project approach.

10. Additional Studies: The Third File shall include additional studies as required to address outstanding issues or concerns. Such studies may be identified by the Work Team, or may be required by the Supervisory Committee or NCP as a condition of Third File approval. Such studies may include, but are not limited to, the types of studies listed below:

Social Impact Assessment (SIA)

SIAs shall be conducted when necessary to evaluate a project’s impact on the local or regional economy and community, including the impact on the health and well-being of citizens and the community, protection and development of culture or tourism, recreation or other land use, and impact on social services, housing, education and transport. The study may also assess the balance of short term effects, such as the construction of the facility, with the long-term benefits of the project. Aspects of the SIA may be incorporated into the project documents and performance requirements for social impact and benefit of a project. If a Social Impact Assessment was already conducted as part of the Second File, it must be updated as part of the Third File submission.

Environmental Impact Assessment (EIA)

An EIA study to assess the types and significance of a Privatization project’s environmental impact on a project’s site and the surrounding environment shall be performed when a project has the potential for material environmental impacts. The study will assess current environmental conditions, whether a project will meet applicable environmental standards and locational conditions, and suggest methods and design options for mitigating a project’s negative impact. An EIA may also produce an environmental management plan that would be incorporated into the project documents and performance requirements for environmental compliance.

Demand or Market Study

The Third File shall include a demand or market study to assess of the market in which a proposed project would occur, unless this requirement is waived in writing by the

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Supervisory Committee. The study is sectoral in nature, and assesses market conditions at the time of the study and/or as forecasted for the time of project implementation. The study will assess supply and demand as well as the impact of known variables such population, demographics, income levels, current usage statistics for similar projects or alternatives, user fees or tariff rates, etc., with the goal of assessing whether the demand for the service justifies the proposed project.

Several common examples of such studies are covered in further detail in Part 7 of Chapter 4 of this Manual.

11. Project Plan, Including Detailed Procurement Plan and Legal, Contractual, Resource, Structural, Communication or Procurement Elements: The successful procurement and implementation of a Privatization project requires a significant investment in planning and resources. The Third File shall contain a detailed Procurement Plan, identifying the procurement strategy, approach, staffing, timeline, budget, and other key factors. The Procurement Plan shall include a draft of the envisioned Privatization contract.

The Third File shall identify any specific legal issues which must be addressed in order to undertake the project such as the legislative or regulatory provisions in draft form that need to be amended, rescinded, or enacted in order to enable a project.

The Third File shall identify the specific contractual and project structuring elements that will be required to undertake the project, including for example the degree and form of governmental participation; deviations from Privatization Standard Contract; deal funding including debt and equity mix, sources and cost of capital envisaged; necessary direct agreements, etc.

The Third File shall identify details of any requirement for Government equity:

a) the level of equity participation i.e., percentage holding required. b) the amount of equity funding. c) the form of this funding to be made available to the Project by the Government. d) which Government entities will hold this equity stake. e) any special rights that may be required to be attached to the Government’s equity

e.g., minimum guaranteed return.

With respect to any debt that may be made available by government, the Third File shall identify:

a) the amount. b) the duration. c) the conditions under which the debt will be made available to the Privatization

Project.

The Third File shall identify the land acquisition that will be required and if expropriation is required, and a description of the plan for undertaking the same. The Third File shall also identify whether the project is impacted by any ongoing litigation and the likelihood of legal challenges.

The Third File shall also include a Human Resource Plan Approach, identifying the skills, expertise, and numbers of staff it will need to successfully manage the project over the full contract term, how it will acquire this expertise, train and develop staff, and how it will retain and build upon these skills to ensure the retention of institutional capacity. Intermingling

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contract staff with in-house staff may be part of this human capital strategy. The annual costs of implementing this Plan over the contract term shall be identified and included.

Third File shall include a Stakeholder Communication Plan in accordance with Section 1 of Chapter 4 of this Manual and identify the cost for its implementation. If there are ongoing concerns about Stakeholder opposition to a project, these shall be highlighted in the Stakeholder Communication Plan, and presented to the Supervisory Committee for consideration in its review of the Third File.

The Project Plan submitted as part of the Third File shall include all of the above elements, and the associated costs shall be fully incorporated into the Third File’s cost estimates for the Privatization procurement.

12. Summary and Recommendation: Based upon the information provided in the Third File, and any additional explanatory or back-up data which the Work Team may wish to append, the Work Team shall summarize the major findings of the Third File and make a recommendation on whether the project should proceed to the Privatization procurement phase.

Section 11: Third File Review and Evaluation

a) Without prejudice to the provisions of Section 10 of this Chapter, the Work Team shall submit the Third File to the Supervisory Committee to review and decide on, and shall respond to any questions or requests from the Supervisory Committee regarding the Third File.

b) The Supervisory Committee shall determine, at its discretion, the minimum evaluation criteria to be answered by (Yes) within the Third File Evaluation Checklist.

c) The Supervisory Committee evaluates the Third File based on the following criteria:


A. General

1. All required sections of the Third File are provided, and the information provided is in sufficient detail to enable the Supervisory Committee to fully evaluate whether the project should proceed to the Privatization procurement phase. Any updates or revisions to the project concept are fully integrated across all Third File sections, and an affirmative statement on data accuracy and currency is included.

2. It is clear which organization is implementing the project and who will ultimately be responsible for delivering the project on time and to budget.


3. The problem or opportunity to be addressed is clearly demonstrated and the way in which the project will help solve the

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problem or respond to the opportunity is explained and is plausible.

4. The description of the scope of the project is sufficiently detailed for the Third File stage and there are no obvious omissions that could materially impact the achievement of the project purpose or materially affect the cost estimates.

5. There is an urgent need, i.e., within the next 3 years, for the services of the project as evidenced of one or more of the following:

a) existing demand for a facility close to the end of its economic life or technologically obsolescent;

b) a severe capacity constraint in existing facilities resulting in suppressed demand;

c) strongly growing demand, likely to outstrip the capacity of existing facilities in the near future;

d) demand for new services not previously provided; or

e) economic benefit from transfer of functions to private operation.

6. The project will contribute to the achievement of relevant strategic goals and objectives as set out in Vision 2030 or the National Transformation Plan and is aligned with the sectoral Privatization plan as approved by the sectoral Supervisory Committee.

C. Economic Case

7. The proposed technical solution is appropriate to the problem identified, and the risk analysis and cost estimates appear realistic and complete, based upon available information.

8. The postulated project benefits and identification of potential negative impacts is realistic in the context of this project.

9. The financial model is complete and thoroughly documented, and supports the conclusion that the project is financially viable and sustainable.

D. Affordability and Budget Impact

10. The budgetary analysis demonstrates that the project is affordable, or the availability of ancillary revenue sources to close the budget gap is demonstrable and secure.

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11. All contingent liabilities have been identified, and included within the budgetary analysis, with appropriate and realistic mitigation strategies.

12. Benefits to users are likely to be achievable at an acceptable cost, for example, approximate capital costs per user or per unit of output are in line with comparable projects and/or international experience.

E. Risk Assessment

13. The Risk Assessment has identified, correctly and completely, the major (material) risks associated with the project.

14. The proposed risk allocation is reasonable and reflective of market conditions; i.e., it will neither serve to restrict competition nor to expose the Kingdom to unacceptable risks.

F. Value for Money

15. The Value for Money Analysis is complete, correctly calculated, in full compliance with NCP requirements, and supports the conclusion that the proposed Privatization project offers Value for Money.

G. Market Assessment

16. The market assessment demonstrates that there is private sector interest, experience, and capacity to undertake the project, and is updated to reflect any changes to the project concept or approach that have been identified since submittal of the Second File.

H. Additional Studies

17. The Third File has identified and includes all studies required to validate the project concept. The studies are provided as part of the Third File, and are accurate, complete, adequately address all applicable issues, and support the conclusion that Privatization is an appropriate model for the project.

I. Project Plan

18. The Project Plan is complete, realistic, and in full compliance with NCP requirements.

J. Summary and Recommendation

19. The recommendation to proceed to Privatization procurement is supported by the information and analyses included in the Third File, which are fully compliant with all NCP requirements.

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Section 12: Third File Approval

A. After the completion of the review and evaluation of the Third File, the Supervisory Committee shall make one of the following decisions:

1. The Supervisory Committee agrees to move to the procurement phase if it found that the project deserves further study for the purpose of Privatization, and that the Third File has been completed in accordance with all the requirements contained in the Rules and this Manual. In its decision, the Supervisory Committee shall determine any additional terms or provisions relating to such approval.

2. If the project is deemed to require further review or the Third File needs amendments or contains errors or omissions in the process or documents related to it, the Supervisory Committee shall identify such amendments or errors and direct the Work Teams to amend them, and resubmit the Third File for further review.

3. The Supervisory Committee shall reject the Third File if it found that the project or any proposed alternatives do not represent a good use of public resources or contains errors or omissions in the process or documents in relation to the Third File, and that modification has not been possible at the discretion of the Supervisory Committee.

B. In case of approval, decisions related to the Second File shall be submitted to CEDA for review and approval; unless CEDA authorizes the concerned Supervisory Committee to take such approval.

Part Two: Procurement Process Once a proposed Privatization project has navigated the preparation phases and has received Third File approval, the respective Work Team shall establish the procurement process most compatible for achieving the project’s objectives.

This Section identifies how a Work Team shall conduct the procurement and determine to whom a Privatization project may be awarded. While the concepts and processes that follow are mandatory, they provide a high level structure for the Work Team to follow and certain aspects of the procurement will be determined on a case-by-case basis and in close coordination with the Supervisory Committee and NCP.

The procurement process commences with the Work Team updating and refining the Procurement Plan developed during the Third File preparation. The Procurement Plan outlines the process and resources that will be necessary to procure the project. With approval, and guided by the Procurement Plan, the Work Team shall commence stakeholder engagement and a program of communication with the private sector advertising that the Privatization opportunity is available.

As part of this process, the Work Team shall prepare and issue a Request for Qualification (RFQ) document which will solicit statements of qualification from interested bidders. After receiving qualifying materials from bidders, the Work Team shall evaluate the bidders’

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qualifications and present a proposed ‘shortlist’ of bidders to the Supervisory Committee for approval.

If the Supervisory Committee approves the shortlist, the Work Team shall move into the Request for Proposal stage where shortlisted bidders will be invited to bid and compete on the Privatization opportunity. After bid submission, the Work Team will evaluate the bids to identify a preferred bidder, or, determining that a best and final offer step will be necessary to allow bidders to enhance their bids, then identify a preferred bidder. The Work Team will make a recommendation to the Supervisory Committee that the Work Team and the preferred bidder be allowed to enter talks to finalize the agreement. Once the agreement is finalized, the Supervisory Committee will again review and consider the project for final approval, and submit it to CEDA for ultimate approval (unless CEDA delegates this authority to the Supervisory Committee) and obtain authorization for the Supervisory Committee to enter the agreement.

Key aspects and guidance for the procurement process are further detailed in this Section.

Section 1: Procurement Plan

This section describes the Procurement Plan that the Work Team shall develop to procure a Privatization project. The objective of the Procurement Plan is to detail the process the Work Team will use to manage the procurement of a Privatization project, including the necessary resources, staffing, and procurement responsibilities. A Procurement Plan will already have been developed and approved as part of the Third File, and should not require substantive revision, but as the commencement of the actual procurement begins, this Plan will need to be updated and rendered final. Substantive revisions to the approved Procurement Plan (e.g. changes to schedule, budget, or Privatization contract) shall not be made without an additional Supervisory Committee approval.

Section 2: Procurement Plan Contents

The Procurement Plan shall include:

a) a summary description of the project including: 1. an overview of what is to be procured. 2. the need which the project is intended to address. 3. the project objectives. 4. anticipated technical parameters for the project. 5. proposed Privatization. 6. Privatization payment mechanism. 7. Privatization risk allocation. 8. A description of the anticipated market, and whether national or

international partners will be sought. 9. A description of the advertising and marketing program and other steps

that will be taken to engage industry.

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b) A procurement work plan, identifying the procurement schedule, each step in the procurement process, the timeline for activities, responsibilities during each phase, and method for measuring progress. The work plan shall include a description of the record keeping that will be employed.

c) The procurement method to be used, whether restricted or open competitive procurement approaches are sought, the process for and whether comments, mark-ups, and/or alternative technical concepts will be permitted, a description of the key qualification criteria, procurement risks and how they will be mitigated.

d) A procurement staffing plan, identifying each position required for the procurement, with their role and responsibilities clearly defined. The staffing plan will include the duration of their involvement, full or part-time participation, and whether the role can be undertaken by in-house staff or external advisors will be needed.

e) A procurement budget. Note that although NCP may provide financial support for advisory requirements, a total budget, showing estimated in-house staff costs, estimated advisory costs, and estimated other costs, shall be prepared.

f) Indicative equity and debt term sheets setting out the overall debt/equity structure deemed appropriate for the project, level of equity participation required including minimum equity requirements (based on consultation with NCP), and type of debt funding including bond, project, corporate finance (including types of support / guarantees required e.g., parent company guarantees), etc.

g) Draft of the proposed Privatization contract. h) A Stakeholder Engagement Plan in accordance with this Manual.

Section 3: Final Procurement Plan Approval by the Supervisory Committee

If the final Procurement Plan contains material revisions from that approved as part of the Third File, it shall be submitted to, the Supervisory Committee for review and approval. In reviewing the Procurement Plan, the Supervisory Committee will consider whether the Procurement Plan reflects the Third File and the Procurement Plan is likely to deliver the functional requirements and desired outcomes of the project, including Value for Money.

The Work Team shall present the Procurement Plan to the Supervisory Committee, answer any questions related thereto, provide supplementary information upon request, and provide supporting rationale for the procurement approaches and methods to be implemented.

The Supervisory Committee, upon completion of its review, will take one of the following actions:

a) If all NCP requirements for the development of the Privatization project process have been met, and the Procurement Plan is complete, sufficient, and in accordance with NCP requirements, the Supervisory Committee will approve the Procurement Plan and the Work Team may proceed with the procurement.

b) If the Supervisory Committee does not concur with the proposed revisions, it may reject them and require that the Procurement Plan approved at the Third File be followed.

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c) If there appear to be errors, omissions, or insufficiencies in the process or the Procurement Plan, but the Supervisory Committee believes that these problems are resolvable, the Supervisory Committee shall identify the problems and require that they be remedied. The Work Team shall then comply with any procedural requirements and/or revisions to the Procurement Plan, and resubmit the Procurement Plan to the NCP.

d) If there appear to be errors, omissions, or insufficiencies in the process or the Procurement Plan, and the Supervisory Committee believes that these problems are not resolvable, the Supervisory Committee shall identify the problems, decline to approve the Procurement Plan, and the Supervisory Committee shall direct the Work Team to take such remedial actions as it may deem necessary, at the Supervisory Committee’s discretion.

Section 4: Market Engagement / Advertisement

Market Engagement/Advertising is the formal process by which the Work Team advertises and gives notice of the RFQ (and eventually RFP) process for a project.

The purpose of Market Engagement/Advertising is to:

a) generate as broad interest as possible in the Privatization contracting opportunity,

b) inform the private sector and the public of the project and the privatization opportunity,

c) gather more information on the opportunity, and

d) invite interested private sector bidders to participate in the RFQ process for the project.

Section 5: Process for Advertising and giving Notice of the RFQ

The Work Team shall comply with all advertising and notice requirements of this Manual and as stated in the Procurement Plan approved by the Supervisory Committee. Other details of market engagement and advertising, such as advertising in additional media outlets, may be determined by the Work Team and its Supervisory Committee.

Advertising of the Privatization project (as opposed to market assessment, which is part of the project preparation process) shall only take place after Third File approval by the Supervisory Committee.

The RFQ may be advertised in:

a) Prominent local, regional, national, and/or international newspapers and other mass-media, either electronic or conventional.

b) Ministry or other entity newsletters, website(s), and other means of communication.

c) Local, regional, national, and/or international procurement bid boards and sites.

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d) Industry publications, trade magazines, journals, and other periodicals. e) Local, regional, and international firm networks and to those firms expressing

interest previously. f) Other media capable of widely disseminating the Privatization opportunity.

Market engagement and advertising may also include industry meetings, project ‘road shows’, and other open information sessions for interested parties and potential bidders.

Part Three: Preparation and Issuance of Request for Qualification (RFQ)

Section 1: Request for Qualification

A request for qualification (RFQ) is the process by which the Work Team will confirm that there is a sufficient number of interested and qualified bidders to participate in a request for proposal (RFP) process for a Privatization project, and determine which of these interested bidders are the most qualified. This process will help narrow the field to a shortlist of the best-qualified firms, which will reduce the cost of the procurement to both the government and private bidders. Typically, the shortlist will include from three to five bidders. The goal is to ensure that there are sufficient well-qualified bidders to participate in a competitive and meaningful bid process yet not many as to make it administratively burdensome to analyze the bids.

The Work Team shall develop the draft RFQ based upon the RFQ template provided in the Rules. Deviations from the RFQ template must be approved in writing in advance by NCP. The RFQ shall be prepared in accordance with this Manual, the Third File, and the Procurement Plan. The Work Team shall also ensure the RFQ reflects the details and representations made in prior advertisements and project marketing, so long as these are consistent with the Third File and Procurement Plan, as approved by the Supervisory Committee. The RFQ shall provide a description of the project and establish the qualifying process, set out the qualifying criteria, and describe how the Work Team will review and evaluate each Statement of Qualification (SOQ) submitted by bidders. The RFQ shall be issued in English. The Work Team shall work with the advisors and NCP to establish the appropriate criteria to qualify bidders. Section 2: Project Description

The RFQ shall:

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a) Provide an overview of the Privatization opportunity including a description of the project (or projects, if the RFQ is for a program of related projects), the objectives of the Kingdom, the location of project(s), expected term, and other pertinent project characteristics;

b) Describe the preliminary financing assumptions and expectations of the Kingdom, government support if any, and the expected scope and scale of financial commitment and affordability; and

c) Identify the contracting approach and important contract details and/or deviations from the standard Privatization contract form (for example, local employment or materials requirements, identification of key stakeholders, involvement of other local or regional authorities or governmental entities, summary operational or maintenance expectations, contract security and other expected guarantees, etc.).

Section 3: RFQ Instructions

RFQs shall contain instructions for bidders. The instructions shall include, at a minimum:

An overview of the procurement with a description of the RFQ, its role in the process, and how qualifications will be evaluated:

a) A description of the RFP and its expected procedure and evaluation process. b) The preliminary schedule of the RFQ and RFP. c) Instructions and an electronic or physical address for submitting the SOQ and

supporting materials. d) The RFQ opening and closing date noted prominently on the front page of the

RFQ. e) A single point of contact for bidder inquiries and clarifications. f) A requirement that SOQs must be in English. g) Identification of any SOQ format requirements, including any page limits or

maximum word counts, file formats for electronic documents, binding or organization of documents and supportive materials, etc.

h) A statement regarding necessary competition and whether a maximum or minimum number of bidders are expected to be qualified will be qualified (e.g., 3 to 5 bidders on the shortlist).

i) A statement that the Kingdom will not bear the costs of bidders in preparing SOQs or responding to the RFQ.

j) A statement that the Work Team may amend, modify, or terminate the RFQ and procurement at any time, for any reason, and shall not be liable for any bidder costs.

k) A statement that SOQs must arrive by the specified closing date in the specified format or they will be rejected.

l) Reference to the applicable authority for the transaction, including any decrees, orders, laws, rules, regulations, and/or NCP guidance materials upon which the process relies.

m) A prohibition on communication between bidders, collusive procuring, conflicts of interest, bribery and/or other corruptive behavior, a statement that bidders shall be required to confirm their compliance with the same and applicable sanctions or restrictions for violations.

n) Instructions regarding the prohibition on communications during the procurement process.

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o) Identification of how bidder materials and intellectual property received by the Kingdom will be handled.

p) A list of individuals and entities for which the Kingdom has existing relationships and should not be part of a bidding team due to a conflict of interest.

q) A description of the SOQ evaluation process, including how responsiveness and responsibility (financial and commercial capacity) will be evaluated, whether pass/fail criteria will be used, and how the evaluation criteria will be used and weighted.

r) Identification of any bidding consortia requirements s) A prohibition on a bidder, or any member of that bidding team, submitting more

than one SOQ. t) A prohibition on and disqualification for misrepresentations and fraudulent

behavior in the RFQ process and the bidder’s SOQ. u) An outline of bidder rights and procurement dispute resolution procedures v) Identification of required bid bond or other bidder security that will be required in

the project.

Section 4: Statement of Qualifications

The RFQ shall identify the information, materials, and requirements that a bidder must submit and demonstrate in their Statement of Qualifications (SOQs) in order to be evaluated for qualification in the Privatization opportunity. At a minimum, the RFQ shall require SOQs to contain:

a) Identification of the bidder and compliance with any bidding consortia requirements. b) Composition of the bidder with constitutional documentation, for example: full

identification of individuals and entities that make up the bidder; the role and responsibilities that each is to play within the bidding team and on the project (lead or non-lead, technical or financial, design, construction, or operations, etc.); which individuals have authority to make submissions in the process and/or engage with the Work Team; bidder individuals and entities’ equity, non-equity, or other position within the bidding organization; corporate and organizational structure; shareholder status and/or membership interests; controls or conditions for changes in ownership; etc.

c) The legal status of the bidder and the bidding team. d) Key bidder personnel that will be assigned to the project. e) Evidence of the bidder’s:

1. relevant experience and demonstrated capacity in the sector and/or on comparable projects, with references and reference contact information noted.

2. ability and capacity to undertake the current Privatization opportunity. 3. financial standing. 4. experience in Privatizations, financing, designing, constructing, owning,

operating and/or maintaining, as applicable, comparable projects. 5. available equity and financing capacity. 6. financing approach on prior projects. 7. project development and innovation on prior projects, including

remediation of social and environmental impacts. 8. understanding of public sector service and project needs and ability to

interact and work with public sector entities.

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9. ability to manage risks in all phases of a project and maintain quality of services and infrastructure.

The RFQ shall require bidders to submit a transmittal letter with their SOQ materials that contains a) a pledge to adhere to the RFQ and RFP process, b) representations and warranties as to the truth and veracity of the SOQ materials, and c) acknowledgement that the Kingdom will not reimburse bidder for any costs incurred in the preparation or submittal of an SOQ.

The RFQ shall require bidders and their bidding members to certify that they are free from conflicts of interest, bribery, conspiracy, fraud, misrepresentation and/or other criminal convictions, and applicable sanctions or restrictions for violations of the same.

Further acknowledgements or certifications may be added with the prior written consent of NCP.

Section 5: RFQ Qualification Evaluation Criteria

A primary function of the RFQ is to establish the criteria by which a bidder’s SOQ will be evaluated. The criteria shall be designed to measure a bidder’s experience and qualifications for the Privatization opportunity. The RFQ shall set out and clearly specify the criteria by which the Work Team will evaluate each bidder. Pass/Fail criteria shall be listed first and the remaining criteria shall be set out and listed in descending order of importance. RFQ criteria shall include bidders:

a) experience in the sector; b) experience with prior and comparable projects; c) experience with project management; d) experience with managing project risks and delivering value and quality; e) experience with public sector partners and public service delivery; f) experience with bidding partners; g) experience with, and capacity to obtain, financing; h) experience with, and capacity to invest, equity; i) experience with designing, constructing, operating and/or maintaining comparable

projects; j) experience with managing environmental risks; k) experience with maintaining safety and security in projects; l) experience with delivering innovation in projects; m) experience with workforce development and promotion, technology and capacity

transfer, and delivering local benefits; n) history with regard to bribery, corruption, fraud, misrepresentation, mismanagement

and/or criminal offences; o) positive references and reputation in the market.

If interviews are to be conducted with each bidder to clarify SOQ submissions, the RFQ shall specify that clearly, along with an anticipated schedule for conducting such interviews.

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Section 6: RFQ Notice and Posting

Once the RFQ is prepared, an RFQ notice shall be issued. The RFQ notice:

a) shall be designed and disseminated to seek competition in the procurement and attract a sufficient number of responsive candidates.

b) The Work Team shall advertise the procurement for a minimum of 4 weeks prior to the RFQ deadline.

c) The RFQ notice shall: 1) Be published and disseminated openly to give sufficient notice of the

opportunity to qualify for the Privatization opportunity. 2) Be in both Arabic and English. 3) Take the form of a press release, advertisement, or similar posting. 4) Outline basic project information, identify the respective procuring entity,

and include a summary of the project goals and objectives. 5) Direct interested parties to the respective Entity or project website

containing the RFQ and other relevant project and qualifying materials. 6) State a clear deadline for submitting qualifying materials that allows

sufficient time for interested bidders to prepare and submit qualifying information. State any rights reserved to the Kingdom such as the right to amend the notice or terminating the qualification process.

7) Identify a single point of contact responsible for disseminating project and procurement information, answering questions, and clarifying any submission requirements, and

8) Identify the manner and place for a bidder to present its bid materials. 9) Note the confidentiality and non-disclosure requirements.

A sample RFQ notice is included in the Rules.

Section 7: RFQ Posting

The RFQ shall also be published to the public in accordance with this Manual, and shall be posted for interested bidders to view and download on the Entity’s website [and NCP’s Project Registry website]. The RFQ opening date (the date on which the RFQ materials are officially issued and accessible to interested bidders), and closing date (the date and time after which SOQs will no longer be accepted) shall be noted prominently on the Entity website [and NCP Project Registry website]. Section 8: Administering the RFQ

If not already established in the Procurement Plan, the Work Team shall determine other RFQ administrative details such as:

a) The time and location where the RFQ may be received or downloaded; b) The form, substance, and process for bidders to execute a confidentiality and

non-disclosure agreement to receive the RFQ and participate in the process;

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c) When and where SOQs must be submitted; d) Whether electronic and/or physical SOQ submissions are permitted or

required; e) The number of SOQ copies to be submitted; f) Other such reasonable RFQ and SOQ administration details.

Section 9: Pre-Qualification Conference

Once an RFQ has been launched to the market a pre-qualification conference may be organized. The purpose of the pre-qualification conference is to:

a) Market the transaction; b) Inform potential bidders and their advisers about the project and the

procurement and qualification process; c) Convey any key messages that the Supervisory Committee wishes to convey

to potential bidders for the project and the process; d) Clarify any questions that the potential bidders and their advisers may have in

relation to the project and the process in general.

Section 10: Participants

Key public sector representatives, including senior and technical representatives of the Entity, project Work Team member(s), members of the advisory team, and other stakeholders may participate in the pre-qualification conference.

Section 11: Preparation

Prior to the actual conference, the following preparatory steps shall be undertaken by the project Work Team:

a) The date and venue for the conference shall be pre-agreed and stated in the RFQ launch (including any advertisements launching the process);

b) Venue and related arrangements put in place; c) Key senior stakeholders to be invited to attend the conference and their respective

roles; and responsibilities clarified prior to the conference; d) Project Work Team shall prepare a presentation launching the project and

procurement process; e) Project Work Team shall prepare a long list of potential bidders and other invitees

to the conference and send out invitations at least a month before the actual conference;

f) Invitations shall inform potential bidders to direct their questions regarding the project and procurement process to the Project Work Team;

g) The Project Team shall prepare responses to these questions as part of their presentation;

h) The entity shall conduct a dry run of the presentation prior to the actual conference.

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Section 12: Presentation

The presentation for the pre-qualification conference shall, as a minimum, contain the following information:

a) Introduction to the Project; b) Project / transaction timetable; c) Overview of the project; d) Procurement process overview; e) Management and responsibilities; f) Qualification requirements; g) Qualification evaluation criteria; h) Responses to clarification questions.

Section 13: Procedure

On the day of the pre-qualification conference, the following process shall be followed:

a) Guests attending the conference shall be registered and contact details obtained; b) Opening welcome address to the conference delivered by senior representative of

the Entity; c) Presentation undertaken by the Project Work Team leader; d) A Question & Answer (Q&A) session conducted after the presentation; e) Detailed minutes taken of the Q&A session and circulated to all registered

conference guests.

Section 14: Debrief

After the Pre-Qualification Conference, the Work Team shall review the proceedings to evaluate, as a minimum, if any changes are required to the following, and how these changes would be implemented:

a) The project marketing strategy. b) The project procurement documents.

Section 15: RFQ Evaluation and Creation of a Shortlist

This section describes the RFQ evaluation process that Work Teams shall establish to evaluate SOQs in a Privatization RFQ process.

Evaluation of SOQs is the process of weighted scoring of appropriate areas and criteria contained in the RFQ using the SOQ submitted material of the bidders and any other bidders’ information gathered in the manner stipulated by the RFQ.

The objective of evaluations is to gather input from a wide range of qualified participants and subject matter experts regarding the qualifying of bidders and provide an objective and a defensible process that assists in the determination of the outcome of a Privatization RFQ.

Setting Up the Evaluation Team

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The Work Team shall establish sub-teams to serve as the evaluation panels and evaluation secretariats for each RFQ evaluation.

Evaluation Panel

a) An evaluation panel shall consist of a range of qualified participants and subject matter experts in the areas to be evaluated, including for example technical, financial, and legal evaluators, who are all to contribute to the evaluation.

b) Members of the evaluation panel shall be unbiased and free from conflicts of interest. Members must also commit to being independent throughout the evaluation, maintaining confidentiality of the proceedings and their evaluation, and undertaking their duties in compliance with this Manual, the RFQ, and the evaluation instructions.

c) Each evaluation panel member must confirm in writing that he/she is free of conflicts of interest, will remain so throughout the evaluation proceedings, and will notify the appropriate parties in accordance with the conflict of interest provisions of this Manual. The evaluation panel members must also confirm their understanding of their evaluation responsibilities and that they will undertake their evaluation in a neutral, unbiased manner, evaluating each proposal only on its own merit and solely against the RFQ evaluation factors.

d) The evaluation panel shall request that a representative from NCP be appointed, by NCP at its sole discretion. NCP’s representative will be appointed as a voting member of the Work Team’s evaluation panel.

Evaluation Panel Secretariat

a) An evaluation secretariat will consist of one or more individuals who assist the evaluation panel in the administration of the evaluation activity and help ensure adherence to the evaluation procedures. The member(s) of the evaluation secretariat will not be voting members of the evaluation panel.

b) The evaluation secretariat will also assist in: 1) preparing copies of the SOQ documentation for the evaluation panel. 2) preparing the scoring sheets, spreadsheets, and other materials necessary for

reviewing the bids and compiling the scores, consistent with the procurement package.

3) organizing the venue and logistics for the bid evaluation and ensuring that bid documents are delivered securely to and from the venue.

4) collating completed evaluation documents and scores. 5) any other request for assistance that the evaluation panel deems necessary.

Evaluation Timetable

A timetable for evaluating qualifications shall be established by the Work Team with the assistance of the evaluation secretariat. The Work Team, with the evaluation secretariat’s assistance, shall ensure adherence to the timetable and recommend resource allocation as necessary to meet the evaluation timetable requirements.

Evaluation Confidentiality

Information relating to the examination, clarification, and evaluation of qualifications shall not be disclosed to bidders or other persons until the qualified bidders are notified.

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Bidders may not contact the Supervisory Committee, Entity, or Work Team during the qualification evaluation, directly or indirectly, to inquire about the outcomes of the evaluation process. On the other hand, the Work Team may contact bidders only to ask questions or to seek clarifications on SOQ materials.

If unsolicited comments or information is received, any such information may be acknowledged and recorded as being received, but may be used only to improve the process, such as ascertaining the fairness or accuracy of qualification representations, however it shall not be used to change or modify the qualification materials.

Preparing the Evaluation All SOQs received shall be opened simultaneously after the RFQ closing date. Prior to the commencement of evaluation, the evaluation secretariat shall prepare and provide to the evaluation panel the SOQs, SOQ evaluation templates and such other documentation that may be necessary to conduct the qualification evaluations, including any further instructions and guidance materials that may be necessary.

The evaluation secretariat shall ensure the SOQ evaluation templates (and any further instructions and guidance material) mirror the structure and indicated criteria and process of the RFQ.

NCP will train, as necessary, and introduce the evaluation panel to the requirements of the evaluation, the process for assessing and evaluating the qualifications, and answer any questions related to the responsibilities of the evaluation panel (including for example, confidentiality, maintaining objectivity, being free from conflicts of interest, clarifying evaluation criteria, etc.).

Section 16: SOQ Evaluation

Bidders that respond to an RFQ, and comply with all RFQ procedural and substantive requirements for submitting an SOQ, shall be referred to as ‘longlist’ bidders. Using the RFQ, SOQs, and evaluation process established for the procurement, the evaluation panel shall evaluate the SOQs submitted by longlist bidders. The purpose of the evaluation is to identify those bidders that are ‘qualified’ and place those qualified bidders on a ‘shortlist’ of bidders who are permitted to compete in the next stage of the Privatization procurement process, the Request for Proposal (RFP) stage. No bidder shall be excluded if he/she is found to be qualified in accordance with the RFQ, SOQ and approved procurement evaluation process. The evaluation panel shall objectively and consistently evaluate the SOQ submissions it receives.

Section 17: Opening of SOQs

All SOQs received shall remain unopened through the RFQ closing date.

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The evaluation secretariat shall open SOQs at the same time and in according with any procedures specified in the RFQ. Evaluation of SOQs is to occur immediately after SOQs opening. SOQs shall not be opened before no less than five SOQs have been received. In cases where less than five SOQ’s have been received, the Supervisory Committee shall report the issue to NCP for approval to open the SOQs.

Section 18: Compliance Screening

a) SOQs must contain the information specified within the RFQ. b) One or more members of the evaluation panel, using a checklist based on the

RFQ, shall review and document the materials submitted by bidders for compliance with the RFQ requirements.

c) Responsive SOQs are those that have no major deviations from the RFQ requirements.

d) Minor clerical mistakes and other nonconformities may be accepted so long as they do not affect the substantive submission of the bidder.

e) Partial, incomplete, invalid or substantially nonresponsive SOQs may be deemed nonresponsive and rejected and the evaluation panel shall make a written record of the objective basis for such rejection.

Section 19: Reference Check and Pass/Fail Criteria

a) If references were requested as part of the SOQ, one or more representatives from the evaluation panel shall contact the references provided by the bidders and record any feedback received in the official record of the bid. Project and sites visit may be conducted if necessary, and questionnaires and other written responses may also be used to check references.

b) If the qualification criteria include pass/fail criteria, the evaluation panel, based

on its members’ respective areas of expertise, is to perform a qualitative evaluation of whether the material submitted is substantively sufficient to warrant a ‘pass’ determination on each pass/fail criterion.

Section 20: Evaluation of SOQs

a) The evaluation panel, including any technical, financial, legal or other subject matter expert evaluators, are to review the SOQ materials of each and all bidders and provide detailed feedback as to the strengths and weaknesses of each SOQ, recording their observations on form qualification evaluation templates which will be retained as part of the official procurement record. A sample template is included in the Rules.

b) It is not required that all members of the evaluation panel evaluate every section of the SOQ. Evaluators may be assigned specific areas to review according to their area of expertise.

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1) The evaluation shall use only those criteria set out in the RFQ and shall apply those criteria in a manner as specified in the RFQ. No criterion shall be used other than those set out in the RFQ.

2) After all evaluations have been made, they will be reviewed for compliance by the evaluation secretariat and any weighted scoring tallied such that the bidders may be ranked according to the criteria of the RFQ and a pool of 3-5, or such other number as the Supervisory Committee has authorized, qualified bidders identified.

3) The evaluation panel may conduct consensus meetings to determine on a consensus basis the ranking of each SOQ.

4) The top 3-5, or such other number as the Supervisory Committee has authorized, qualifying bidders with all necessary supporting materials will then be transmitted to the Supervisory Committee with a recommendation that these bidders be qualified. If a larger list of qualified bidders is to be provided to the Supervisory Committee, the Work Team shall indicate in its transmittal the reason for doing so and any justification for a larger pool of qualified bidders.

5) In the event that no bidders are qualified, the Work Team, with Supervisory Committee approval, may revise the RFQ requirements or, in accordance with this Manual, revise its procurement approach in an attempt to expand the competition for the Privatization opportunity.

Section 21: Clarification of SOQs

The evaluation panel with the assistance of the evaluation secretariat may contact bidders for the purpose of clarifying any materials submitted in their SOQs. If clarifications are made, those clarifications shall be in writing and shall be reviewed along with the original SOQ materials.

SOQ Evaluation Report

The evaluation panel, with the assistance of the evaluation secretariat, shall prepare an SOQ evaluation report recording the results and activities of the evaluation including the objective basis for its qualification recommendations. The report shall summarize the results and activities of the SOQ evaluation and include:

a) A brief description of the scope of the project. b) A summary description of the procurement process. c) Dates and process employed for opening and closing of the RFQ. d) The number of SOQs received and the dates they were received, the identity of

the entities submitting SOQs, the identity of any individuals or entities receiving a copy of the RFQ but not submitting an SOQ.

e) The evaluation process employed, including a description of the formation of the evaluation panel and resourcing of the evaluation secretariat.

f) A description of any SOQ clarifications that were needed and the methods used to obtain such information and outcome of such clarifications.

g) A list of the pass/fail criteria.

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h) A summary of the examination of pass/fail criteria with outcomes, including a list of bidders who were disqualified on pass/fail criteria and an explanation of the basis for doing so.

i) A list of the evaluated criteria. j) A summary of the examination of evaluated criteria with outcomes. k) A description of the reference checks employed and outcome of such reference

checks. l) A summary of the strengths and weaknesses of the 3-5, or such other number

as the Supervisory Committee has authorized, highest qualified bidders. m) A summary of the strengths and weaknesses of the 3 least qualified bidders. n) The ranking of bidders with a description of the process followed to reach a

consensus. o) A list of recommended bidders.

Section 22: Transmittal of SOQ Evaluation Record to Supervisory Committee

The Work Team, with the assistance of the evaluation secretariat, shall transmit the SOQ evaluation report to the Supervisory Committee for review and consideration. The transmittal shall include a cover letter issued by the Work Team citing:

a) the Supervisory Committee’s original approval of the procurement. b) a summary of proceedings to date, including an explanation of all evaluation

activities and summary results from the evaluation. c) a statement(s) confirming compliance with the Rules, Manual, and other legal and

administrative requirements, including Supervisory Committee requirements. d) any other important or necessary details related to the evaluation.

Section 23: Approval of Shortlist

Upon receipt of the SOQ Evaluation Report, the Supervisory Committee will begin its review. In reviewing this Report the Supervisory Committee will consider:

a) Whether the overall SOQ process appears to have been conducted in full compliance with NCP requirements.

b) Whether the evaluation of SOQ responses has been performed in accordance with NCP requirements.

c) Whether the documentation of the SOQ evaluation process and recommendation of shortlist has been conducted in full compliance with NCP requirements.

The Work Team shall present the evaluation report to the Supervisory Committee, answer any questions related thereto, provide supplementary information upon request, and provide supporting rationale for the recommended shortlist of bidders. The Supervisory Committee, upon completion of its review, will take one of the following actions:

a) If all NCP requirements for the SOQ and evaluation process have been met, and the SOQ Evaluation Report is complete and in accordance with NCP requirements, the

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Supervisory Committee will approve the shortlist and the procurement will proceed to the RFP stage.

b) If there appear to be errors or omissions in the process or the documentation, but the Supervisory Committee believes that these problems are resolvable, the Supervisory Committee shall identify the problems and require that they be remedied. The evaluation panel will then revise the evaluation and the SOQ Evaluation Report accordingly, and resubmit the Report to the Supervisory Committee.

c) If there appear to be errors or omissions in the process or the documentation, and the Supervisory Committee believes that these problems are not resolvable, the Supervisory Committee shall identify the problems and decline to approve the SOQ Evaluation Report. In this case, the Supervisory Committee shall direct the Work Team to conduct a new SOQ process, cancel the procurement, or take such other remedial actions as it may deem necessary, at the Supervisory Committee’s discretion.

Section 24: Notification of Qualified Bidders

After the Supervisory Committee has approved the shortlist of bidders, the Work Team shall notify the shortlisted bidders that they have been qualified and may participate in the RFP stage of the procurement. A formal announcement, identifying the RFQ number and title, the project name, the firms selected for the shortlist, and the address of each firm, shall be posted on the Entity’s website and the Privatization Project Registry website.

Section 25: Debriefing of Unsuccessful Bidders

Unsuccessful bidders may submit written requests for debriefing. Upon receipt of a written request, the Work Team shall perform one-on-one debriefing sessions with, or provide written responses to, bidders who were not qualified through the RFQ process. The debriefing shall be limited to feedback on the strengths and weaknesses of their SOQ and how it could be improved.

Part Four: Preparation and Issuance of Request for Proposal (RFP) Section 1: Request for Proposal

After the RFQ process has been completed and a shortlist of qualified bidders has been approved by the Supervisory Committee, a request for proposal (RFP) process shall be used to invite the qualified bidders to submit bids for the Privatization project. The process is intended to identify the bidder offering the best value, so that their proposal may be recommended to the Supervisory Committee and CEDA for award.

The RFP will establish the proposal process, set out the proposal criteria, and describe how the Work Team will review and evaluate each bid submitted by bidders.

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Section 2: Administrative Matters

The RFP shall be prepared, advertised and administered in accordance with this Manual and the Procurement Plan. The RFP shall also reflect the details and representations made in the project’s advertisements and marketing.

If not already established in the Procurement Plan, the Work Team shall determine other RFP administrative details such as the time and location where bids are to be submitted, whether electronic and/or hardcopies of bid submissions are permitted or required, the number of bid copies to be submitted, etc.

Section 3: Draft RFP

Using the RFP template provided in the Rules, the Work Team shall begin preparation of the draft RFP after Third File approval. Deviations from the RFP template shall be presented to NCP in writing for review and approval and require the prior written consent of NCP.

Section 4: RFP Instructions

The draft RFP shall prominently note the date when the draft RFP materials will be released to shortlist bidders on the draft RFP cover page, including the means by which bidders will access the RFP (e.g. Entity website, Privatization Project Registry website). RFPs shall contain instructions for bidders such as:

a) An overview of the procurement with a description of the RFP, the RFP’s role in the competitive process, and how bids will be evaluated.

b) A list of pertinent definitions and terminology used in the RFP and project. c) The preliminary time schedule of the RFP. d) An overview of the project due diligence process, availability of data or reference

materials, including access to a data room or other resources. e) A description of the process for receiving and responding to bidder questions,

including whether bidder conferences will be conducted, and whether project site visits will be permitted/conducted.

f) Reference to the applicable authority for the transaction, including any decrees, orders, laws, rules, regulations, and/or NCP guidance materials upon which the process relies.

g) Instructions for submitting the bids and an electronic and/or physical address for submitting the bids.

h) The RFP opening and closing date noted prominently on the front page of the RFP.

i) A single point of contact for the Work Team. j) A requirement for a single point of contact for the bidder. k) A requirement that bids must be in English. l) Identification of any bid format requirements, including any page limits or

maximum word counts, file formats for electronic documents, binding or organization of documents and supportive materials, etc.

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m) A statement that the Kingdom will not bear the costs of bidders in preparing bids or responding to the RFP.

n) A statement that the Work Team may amend, modify, or terminate the RFP and procurement at any time, for any reason and shall not be liable for any bidder costs.

o) A statement that bids must arrive by the specified closing date in the specified format or they will be rejected.

p) A prohibition on communication between bidders, bidders and government officials, and/or bidder and key stakeholders in the process, instructions for permissible communications during the procurement process, and a confidentiality agreement to be signed by each bidder.

q) A prohibition on collusive procuring, conflicts of interest, bribery and/or other corruptive behavior, a statement that bidders shall be required to confirm their compliance with the same, and noting applicable sanctions or restrictions for violations.

r) Identification of how bidder materials and intellectual property received by the Kingdom will be handled.

s) A list of individuals and entities for which the Kingdom has existing relationships and should not be part of a bidding team due to a conflict of interest.

t) A description of the bid evaluation process, including how responsiveness and responsibility (financial and technical capacity) will be evaluated, whether pass/fail criteria will be used, and how the evaluation criteria will be used and weighted.

u) A prohibition on a bidder, or any member of that bidding team, submitting more than one bid.

v) A prohibition on and disqualification for misrepresentations and fraudulent behavior in the bid process and the bidder’s bid.

w) Identification of required bid bond or another bid security. x) Disclaimer as to information provided. y) A note on whether any success fee may be payable.

Section 5: Project Description

The draft RFP shall:

a) Provide an overview of the Privatization opportunity including a description of the project, the objectives of the Kingdom, the scope of work to be undertaken, the location of project, expected term, and other pertinent project characteristics, and include a statement as to whether Alternative Technical Concepts are permitted.

b) Describe the financing assumptions and expectations of the Kingdom, government support, equity stake, or other financial participation, if any, the expected scope and scale of financial commitment and affordability, debt and equity requirements as set out in the indicative term sheets, whether project success fees shall be afforded, if any, etc. As a minimum, the following terms and conditions shall be included in the term sheets.

c) Minimum capital contribution required from the private sector party (to be agreed in consultation with NCP) and in the form of hard equity i.e., after taking account of that allocated to success fees and cost underrun savings.

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d) If the project is debt-financed, bid submissions should be based on a firm basis evidenced by a commitment letter signed by all the lenders and a lenders’ term sheet that is based on common terms and conditions signed by all the participating lenders shall be incorporated. The commitment letter should clearly set out any outstanding due diligence conditions and any other conditions should be kept minimal.

e) For projects that are project financed, structures that involve balloon debt repayments shall not be allowed except in the case of mini-perms and cash sweep arrangements under such mini-perms shall be kept as a minimum of 90% of excess cash, after scheduled debt service.

f) Identify the contracting approach and important contract details (for example, local employment or materials requirements, identification of key stakeholders, involvement of other local or regional authorities or governmental entities, summary operational or maintenance expectations, contract security and other expected guarantees, etc.).

g) Append the draft Privatization contract to the RFP. h) Append any other documents and relevant project agreements pertinent to the

project and RFP (e.g. third-party agreements that must be taken into consideration in preparing a bid, pre-existing approvals or permits, etc.) and the degree to which the bidders may rely upon them.

Section 6: Bids

The draft RFP shall identify the information and materials that a bidder must provide in their bid to be evaluated for the Privatization opportunity. The Work Team and its advisors shall identify the information and materials to be submitted by bidders in their bids. At a minimum, the RFP shall require bids to contain a complete response to the RFP that includes:

a) A technical proposal, with identification of alternative technical concepts, if any b) A financial and financing proposal in response to the indicative term sheets for

debt and equity included as part of the RFP, including any deviations from the term sheets.

c) An acknowledgement that 1) failure to provide a complete response to the RFP, 2) failure to make a firm commitment in their bid, and/or 3) making reservations, conditions, or other comments or qualifications on their bid or the RFP, may result in the bidder receiving a lower evaluated rating or being disqualified.

d) An acknowledgement that representations made by a bidder in the bidding process, including any bid documents received by the Work Team, may be added to the contract documents and become part of the project obligations

e) An affirmation that the bidder and composition of the bidder has not changed and remains the same as the qualified shortlist bidder

f) Proof that the bidder and/or its bidding entities are in good standing in the Kingdom

g) A transmittal letter with their bid materials that contains a) a pledge to adhere to the RFP process and bid requirements, with a further pledge to refrain from making comments, mark-ups, and/or proposing alternatives except in accordance with any process identified in the RFP, b) representations and warranties as to the truth and veracity of the bid materials, c) acknowledgement that the Kingdom will not reimburse bidder for any costs incurred in the preparation or submittal of a bid, and d) bidders and bidder

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member certification that they are free from conflicts of interest, bribery, conspiracy, fraud, misrepresentation and/or other criminal convictions

Further acknowledgements or certifications may be added with the prior written consent of NCP.

Posting for Bidders Once the draft RFP is prepared, it shall be posted in accordance with this Manual for shortlisted bidders to view and download from a secure area of the Entity’s website. Access to the bidding documents shall be restricted to the shortlisted bidders.

Section 7: Bidder Conference(s)

After posting the draft RFP, and in accordance with the schedule established in the Procurement Plan, the Work Team may conduct one or more pre-bid conferences with shortlisted bidders. The purpose of a pre-bid conference is to:

a) Discuss and clarify the bid opportunity. b) Inform shortlist bidders about the project and the RFP process. c) Convey any key messages to shortlist bidders about the project and the process. d) Clarify any questions that the shortlist bidders may have in relation to the project

and the process in general.

It should be noted that a pre-bid conference is not a negotiation and the Work Team shall take steps to control the dialogue and the information that is gathered during the meeting. The Work Team shall therefore design and conduct the meeting to focus on providing information, answering questions, preparing the shortlist bidders to bid, and gathering information that it may use to improve the documents contained in the RFP package and the project.

A bidder conference may include project site visits and other project due diligence activities.


Pre-bid conferences may be made mandatory for shortlist bidders and may be made a condition of bidding. Multiple representatives of a bidder or bidding team may attend.

The key public sector representatives in the pre-bid conference and the preparation leading to the pre-bid conference will be the project Work Team for the project and any members of their advisory team they may designate. In addition, senior and technical representatives of the Entity may participate.

Section 9: Preparation for the Conference

Prior to the actual conference, the following preparatory steps shall be completed by the Work Team:

a) The date and venue for the conference(s) shall be pre-agreed and stated in the RFP launch (including any advertisements launching the process).

b) Venue and related arrangements put in place. c) Key senior stakeholders to be invited to attend the conference and their

respective roles and responsibilities clarified prior to the conference.

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d) The Work Team shall send out invitations to shortlist bidders at least 14 calendar days before the actual conference.

e) Invitations shall ask shortlist bidders to send in their project or conference clarification questions, if any, to the Work Team in advance.

f) The Work Team shall prepare responses to these questions and provide them to all shortlist bidders for review at or prior to the conference.

Conference Presentation The Work Team may undertake a presentation at the pre-bid conference. If so, the presentation shall, as a minimum, contain the following information:

a) Overview of the project. b) Project / transaction timetable. c) Bid process overview. d) Management and responsibilities. e) Financial requirements. f) Commercial requirements. g) Bid evaluation criteria. h) Responses to clarification questions.

The Work Team shall conduct a dry run of the presentation prior to the actual conference.

Conference On the day of the pre-bid conference, the following process shall be followed:

a) Shortlist bidders shall be registered and contact details confirmed. b) Opening welcome address delivered by senior representative of Entity. c) Presentation, if any, undertaken by the Work Team leader. d) A Question & Answer (Q&A) session conducted after the presentation. e) Detailed minutes taken of the Q&A session and circulated to all shortlist bidders.

If the Work Team is unable to answer certain questions during the conference, follow up answers may be provided in writing and added as an addendum to the minutes of the bidder conference.

Pre-bid Conference debrief

After the Pre-Bid Conference and receipt of written comments from bidders, the Work Team shall conduct a review of the proceedings to evaluate, as a minimum, if any changes are required to:

a) The bidding strategy for the Project. b) The procurement documents for the Project; and c) The manner in which these changes will be implemented.

Section 10: Written Comments on RFP documentation

The Work Team may also accept written comments on the draft RFP documentation, including the draft Privatization contract. If this will be done, the process for submitting comments shall be clearly set out in the RFP, including a clear timetable for asking such clarifications. Responses to comments shall be provided to all bidders, to ensure that all bidders have access to equal information. Note that multiple rounds of clarifications and responses may be conducted.

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Section 11: Alternative Technical Concepts

At its own discretion, the Work Team may also consider Alternative Technical Concepts (ATCs). An ATC is a suggestion from a bidder that a different technical concept from that required by the draft RFP may provide greater benefit to the Kingdom (for example, that constructing a facility with 20 percent greater capacity would reduce the unit cost of output to the Kingdom). If the Work Team believes that an ATC suggestion has merit, the RFP may be amended to reflect this suggestion. However, in this event, the Third File and all associated information shall be updated to reflect the revised project concept and shall be submitted to the Supervisory Committee for review and approval with the Final RFP.

Section 12: Final RFP

After any bidder conferences have been conducted and written comments, if any, have been received and responded to, the Work Team shall update documentation incorporated in the RFP package to reflect acceptable revisions based on the conferences and comments. However, such updates shall not result in material changes to the bid requirements. The RFP opening date (when the final RFP is officially issued and shortlist bidders are requested to bid), and closing date (when bids will no longer be accepted) (to the extent adjusted) shall be notified to the bidders. The final RFP documentation shall be posted in accordance with this Manual, and shall be posted for shortlisted bidders to view and download on the secure area of the Entity’s website. Section 13: Approval by Supervisory Committee to Release RFP documentation to Bidders

Upon receipt of a proposed final RFP documentation from a Work Team to the extent modified, the Supervisory Committee will begin its review to determine whether the final RFP documentation may be released to bidders. In reviewing the RFP documentation, the Supervisory Committee will consider whether the draft RFP is in accordance with the Third File (as amended, if an ATC has been incorporated) and likely to attract competition from shortlist bidders to deliver the functional requirements and desired outcomes of the project. The Work Team shall present the RFP to the Supervisory Committee, field any questions related thereto, provide supplementary information upon request, and provide supporting rationale for the draft RFP approaches and methods to be implemented. The Supervisory Committee, upon completion of its review, will take one of the following actions:

a) If all requirements for the procurement have been met and the RFP is in accord with the Third File and likely to attract competition to deliver the functional requirements and desired outcomes of the project, the Supervisory Committee will approve the draft RFP and the Work team may proceed with releasing the draft RFP to bidders.

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b) If there appear to be errors, omissions, or insufficiencies in the draft RFP or the procurement, but the Supervisory Committee believes that these problems are resolvable, the Supervisory Committee shall identify the problems and require that they be remedied. The Work Team will then comply with any procedural requirements and/or revisions to the draft RFP, and resubmit the draft RFP to the Supervisory Committee.

c) If there appear to be errors, omissions, or insufficiencies in the procurement, and the Supervisory Committee believes that these problems are not resolvable, the Supervisory Committee shall decline to approve the draft RFP and direct the Work Team to take such remedial actions as it may deem necessary, at the Supervisory Committee’s discretion.

Section 14: Bidding

RFPs shall provide a sufficient amount of time for bidders to prepare bids and respond. The time allowed may vary in accordance with the complexity of the RFP requirements, but in no instance, shall the Work Team allow less than 60 calendar days for preparation of RFP responses. Bids shall be received at the electronic and/or physical address noted in the RFP for submitting the bids. Each bid shall be logged with the date and time of submission and the individual who performed the submission. All bids received shall remain unopened through the bid closing date and until bid opening. Bids shall not be opened before no less than three bids have been received, unless NCP approves the otherwise. In cases where the number of bids received does not meet the minimum number required to open the bids, the Supervisory Committee shall report the issue to NCP for approval to open the bids. Upon receiving such information, NCP may take one of the following actions:

a) Approve proceeding with opening the received bids, or b) Direct that the RFP be reissued.

Section 15: Best and Final Offer

The RFP shall note that the Work Team may, subject to approval from the Supervisory Committee, conduct one or more rounds of Best and Final (BAFO) competition after receiving and evaluating bids. Section 16: RFP Evaluation Criteria

The RFP shall include the criteria by which a bid will be evaluated. The criteria should be designed to measure a bidder’s proposed solution for the Privatization opportunity including their technical and financial approach. The RFP shall specify clearly the criteria by which the Work Team will evaluate each bidder. Pass/Fail criteria shall be listed first and set out separately. The remaining evaluated criteria shall be set out separately and listed in descending order of importance. Weighting of each evaluated criteria shall be specified. RFP criteria shall include bidders':

a) Responsibility and capability. b) Technical proposal, such as:

Project Management Approach:

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1. schedule for delivering the project. 2. plan for managing each stage of the project. 3. systems for cost control, quality and performance management. 4. approach to risk management and mitigation measures. 5. ability and strategy to source necessary labor, equipment and materials. 6. public relations and communication systems and plan for reporting; 7. system for complying with regulatory requirements. Design and Construction Approach: 1. descriptions, drawings and other schematics showing the project and site. 2. identification of materials to be used and source of materials. 3. proposed technological solutions, innovation, and/or integration with existing

systems. 4. value of alternative technical concepts. 5. sequence of construction, staging, testing and commissioning, and critical

path. 6. approach to mitigating construction impact (e.g. traffic, stakeholder

engagement, environmental). 7. plan for managing labor, trades, and training. Operational Approach: 1. mechanisms for ensuring quality, efficiency, and compliance with operational

requirements. 2. processes for managing operational issues. 3. safety and emergency systems. 4. labor, employment, and staffing approaches. Maintenance Approach: 1. planned maintenance regime and life cycle approach. 2. maintenance materials resourcing and supply. 3. short and long term sustainability measures. 4. plan for capital asset replacement and improvement. 5. system for mitigating interruptions to operations. 6. handover program.

c) Financial Proposal, such as: 1. Financial capacity to undertake the project. 2. Pricing sheets and costing details. 3. Plan for financing. 4. Financial Model, assumptions, and sensitivities. 5. Feasibility of financing plan. 6. Sources and Uses schedules. 7. Net present value, value for money proposition. 8. Schedule for commercial and financial close. 9. Plan for managing financial risks. 10. Surety sufficiency and information. 11. Proposal and performance security details and sufficiency. 12. Financing Term Sheets. 13. Insurance details and variables. 14. Bank support details including a commitment letter and structure and

hedging strategy and funding plan.

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d) Comments, if any, on the bidding documents including the draft Privatization Contract, although the Kingdom’s preference is for minimal changes to the Privatization Contract, and this shall be clearly stated.

Section 17: Evaluation of Bids

This section describes the RFP evaluation process that Work Teams shall establish to evaluate bids from shortlist bidders in a Privatization RFP process. Evaluation of bids is the process of weighted scoring of each bid received, based upon the objective and consistent application of the criteria identified in the RFP. The process shall be thoroughly documented, to ensure compliance with all applicable procedures. This section also describes the institutional requirements for setting up the evaluation team and performing evaluations of bids in a RFP process.

Section 18: Setting Up the Evaluation Team

The Work Team shall establish an evaluation panel and evaluation secretariat for the RFP evaluation.

A. Evaluation Panel The evaluation panel shall consist of qualified participants and subject matter experts in the areas to be evaluated, including for example technical, financial, and legal evaluators, each of whom shall contribute to the evaluation.

Members of the evaluation panel shall be unbiased and free from conflicts of interest. Members shall also commit to remaining independent throughout the evaluation, maintaining confidentiality of the proceedings and their evaluation, and undertaking their duties in compliance with this Manual, the RFP, and the evaluation instructions. The evaluation panel shall request that an NCP representative to be appointed by the NCP at its sole discretion. The NCP’s representative will be appointed as a voting member of the evaluation panel.

B. Evaluation secretariat An evaluation secretariat shall consist of one or more individuals who assist the evaluation panel in the administration of the evaluation activity and help ensure adherence to the evaluation procedures. The member(s) of the evaluation secretariat must not be voting members of the evaluation panel. The evaluation secretariat shall also assist in:

1. preparing copies of the bid documentation for the evaluation panel. 2. preparing the scoring sheets, spreadsheets, and other materials necessary for

reviewing the bids and compiling the scores, consistent with the procurement package.

3. organizing the venue and logistical matters for the bid evaluation and ensuring that bid documents are delivered securely to and from the venue.

4. collating completed evaluation documents and scores. 5. any other request for assistance that the evaluation panel deems necessary.

C. Evaluation Timetable The Work Team shall establish a timetable for bid evaluation, in accordance with the Procurement Plan, with the assistance of the evaluation secretariat. The evaluation panel,

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with the evaluation secretariat’s assistance, shall ensure that the timetable is adhered to and recommend resource allocation as necessary to meet the evaluation timetable requirements.

D. Evaluation Confidentiality Information relating to the examination, clarification, and evaluation of bids shall not be disclosed to shortlist bidders or other parties until the successful bidder is notified of the contract awarding. Shortlist bidders may not contact the Supervisory Committee, Work Team, or Entity during the bid evaluation, directly or indirectly, to inquire about the outcomes of the evaluation process. The evaluation panel may contact bidders only to ask questions or to seek clarifications on bid materials. Such communications shall be documented, and a permanent record maintained as part of the evaluation files. If unsolicited comments or information is received, any such information may be acknowledged and recorded as being received, but may not be used except to improve the process, such as ascertaining the fairness or accuracy of bid representations, however it shall not be used to change or modify the bid materials. E. Preparing the Evaluation Prior to the commencement of evaluation, the evaluation secretariat shall prepare and provide to the evaluation panel the bids, bid evaluation templates and such other documentation that may be necessary to conduct the bid evaluations, including any further instructions and guidance material that may be necessary. The evaluation secretariat shall ensure the bid evaluation templates (and any further instructions and guidance material) mirror the structure and indicated evaluation criteria and process of the RFP.

The evaluation panel may receive training to familiarize it with the requirements of the evaluation, process for assessing and evaluating the bids, and answer any questions related to the responsibilities of the bid evaluation panel (including for example, confidentiality, maintaining objectivity, being free from conflicts of interest, clarifying evaluation criteria, etc.).

Each evaluation panel member shall confirm in writing that they are free of conflicts of interest, shall remain so throughout the evaluation proceedings, and shall notify the appropriate parties in accordance with the conflict of interest provisions of this Manual. The members shall also confirm their understanding of their evaluation responsibilities and that they shall undertake their evaluation in a neutral, unbiased manner, evaluating each proposal only on its own merit and solely against the RFP evaluation factors.

F. Bid Evaluation Using the RFP and bid evaluation process established for the procurement, the evaluation panel shall evaluate the bids submitted by shortlist bidders. The purpose of the evaluation is to rank the shortlist bidders’ bids and identify a preferred bidder. The evaluation panel shall objectively and consistently evaluate the bid submissions it receives.

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G. Bids Opening The evaluation secretariat must open bids at the same time and in according with any procedures specified in the RFP and the Procurement Plan.

Evaluation of bids must occur promptly after bid opening.

H. Compliance Screening Bids must contain the information specified within the procurement requirements of the RFP. One or more members of the bid evaluation panel, using a checklist based on the procurement requirements, shall review and document the materials submitted by shortlist bidders for compliance with the bid requirements. No review of substance or the quality of submission is done with this initial screening, only a review of whether the documents and submission materials comply with the bid submission requirements. Responsive bids are those that have no major deviations from the bid requirements. Minor clerical mistakes and other nonconformities may be accepted so long as they do not affect the substantive submission of the bidder. Partial, incomplete, invalid or substantially nonresponsive or non-compliant bids may be deemed nonresponsive and rejected and the evaluation panel shall prepare a clear written record of the objective basis for such rejection. I. Reference Check and Pass/Fail Criteria If references were requested as part of the RFP, one or more representatives from the evaluation panel shall contact the references provided by the shortlist bidders and record any feedback received in the official record of the bid. Project and sites visit may be conducted if necessary, and questionnaires and other written responses may also be used to check references. If the evaluation criteria include pass/fail criteria, the evaluation panel, based on their respective areas of expertise, shall perform a qualitative evaluation of whether the material submitted is substantively sufficient to warrant a ‘pass’ determination on each pass/fail criterion.

J. Evaluation The bid evaluation panel shall review bid materials of each and all shortlist bidders and provide detailed feedback as to the strengths and weaknesses of each bid and identify the need for clarification of any bid elements, recording their observations on form evaluation templates which shall be retained as part of the official procurement record. A sample evaluation template is included in the Rules. It is not required that all members of the bid evaluation panel evaluate every section of the bids. Evaluators may be assigned specific areas to review according to their area of expertise. The evaluation shall use only those criteria that have been set out in the RFP and shall apply those criteria in the manner specified in the RFP. No criterion shall be used that has not been specified in the RFP.

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If clarifications are needed, the bid evaluation panel shall finalize their evaluations to the extent possible, identify all clarifications that are needed, and conduct clarification meetings in accordance with Section 19 of this Part. If clarifications are not needed or the necessary clarification meetings have been conducted, the evaluations shall be completed, and the evaluation secretariat shall tally the evaluations, rank the bids according to the criteria of the procurement, and identify the preferred bidder for approval by the Supervisory Committee in accordance with the terms stipulated in Section 3 of Part 6 of this Chapter. The evaluation panel may conduct consensus meetings to determine on a consensus basis the ranking of each bid. Section 19: Clarification Meetings

Bid clarification meetings are conducted after the bids have been received and if during the evaluation process the evaluation panel identifies the need for clarifications. The purpose of the bid clarification meetings is to:

a) Clarify any aspects of the bid that are not clear to the evaluation team. b) Request missing information as per the procurement requirements. c) Request additional information to help strengthen the Work Team’s negotiating

position with the bidder during final negotiation(s).


The key public-sector representatives in the bid clarification meetings and the preparation leading to these meetings will be the Work Team for the project and any members of their advisory team they may designate. In addition, senior and technical representatives of the Entity may participate.

Section 21: Preparation for the Clarification Meetings

Prior to the actual meetings, the following preparatory steps shall be undertaken by the Work Team:

a) The dates and venue for the clarification meetings shall be agreed and communicated to the bidders.

b) Venue and related arrangements put in place. c) Clarification questions may be prepared by the evaluation panel in advance, sent

to the bidders no less than ten (10) business days prior to negotiation(s), and split into technical, commercial and financial, and legal questions, as appropriate.

d) The evaluation panel shall make the arrangements for conducting the clarification meetings, who shall attend the meetings and the organization of the teams including technical, commercial and financial, and legal clarification teams comprised of the relevant experts and appoint a leader for each relevant team.

e) The evaluation panel shall identify each clarification question as one of high, medium or low importance, especially with respect to the legal clarifications in relation to the project agreements and other legal documentation.

f) The evaluation panel shall prepare a template for use during the clarification meeting. The template, as a minimum, shall contain details of the specific

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reference to the bid document, the clarification question, the preferred position of the evaluation panel and the response from the bidder (recorded during the clarification meetings) and a signature area capturing the sign offs from both parties.

Section 22: Conducting the clarification meetings

The evaluation panel shall conduct the clarification meetings as follows:

a) Prior to commencement of clarifications, a record shall be made of all attendees. b) The team leader for each team shall organize the clarification meetings. c) The evaluation secretariat shall record in detail the response to each clarification

question, and at the end of the meetings a formal written revision of the proposal document will be sent to the respective bidder to be signed off as acceptance of the final definitive document capturing their clarifications.

Part Five: Final Negotiations Section 1: Preferred Bidder

Once the bid clarification meetings have been conducted, if any, and evaluations have been completed, the evaluation panel shall prepare a report outlining their evaluation activities, the tally of the evaluations, the ranks of the bids, and their recommendation for the preferred bidder. In some cases, there may not be a clear and compelling rationale for the selection of the preferred bidder. The Best and Final Offer is an optional step, which may be employed when proposals have been evaluated and there is more than one proposal which might be considered for contract award, and there is potential to achieve greater value for the Kingdom by giving these bidders an opportunity to clarify their proposals and review their pricing. BAFOs shall normally be conducted when the evaluated difference between the highest ranked bid and second highest ranked is less than five percent. If the Work Team determines that obtaining Best and Final Offers may be beneficial, it shall prepare a Best and Final Offer justification request, documenting the timeline, cost, and rationale for conducting a BAFO. This request shall be submitted to the Supervisory Committee for review and approval. The Work Team shall answer any questions related to the BAFO request, and provide supplementary information upon request. Upon completion of its review, the Supervisory Committee may:

a) Approve the request for BAFO, and direct the Work Team to update its Project Plan accordingly, or:

b) Decline the request and direct the Work Team to complete its evaluation. If the use of a BAFO is approved, a request for Best and Final Offer shall be sent to each shortlisted bidder, specifying:

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a) That discussions with bidders are concluded. b) This is the opportunity to submit a Best and Final Offer, incorporating its post-

clarification positions. c) A definite, common cutoff date and time that allows a reasonable opportunity for

the preparation and submission of the best and final offer. d) Notice that the final offer must be received at the place designated by the time

and date set in the request and is subject to any provisions dealing with late submissions, modifications and withdrawals of proposals set forth in the solicitation.

Any BAFO round(s) of bidding shall be evaluated using the same process as used for the original bids. After completion of the evaluation process (either with or without BAFOs), the Work Team shall select a preferred bidder and a reserve bidder or bidders to proceed with final negotiation(s). Unless otherwise agreed with the Supervisory Committee, once all issues of commercial substance have been agreed with bidders, only one bidder should be identified as a preferred bidder and up to two bidders identified as reserve bidders, if there are additional bidders whose bids are fully acceptable and each shall be notified of their status by the Work Team. Section 2: Final Negotiation(s)

To the extent necessary, a negotiation team shall conduct final negotiation(s) with the preferred bidder.

Section 3: Preparation for Final Negotiation(s)

The Work Team shall establish a negotiation team comprised of Work Team members with expertise in the anticipated topics of negotiation. Additional experts may be brought in to participate in the negotiation if more specialized expertise is required. Prior to the final negotiation(s) meeting, the following preparatory steps shall be undertaken:

a) The dates and venue for the final negotiation(s) shall be agreed and communicated to the appropriate bidders.

b) Venue and related arrangements put in place. c) Formulate and document its negotiation strategy including identify each

negotiation point as one of high, medium or low importance, especially with respect to the legal clarifications in relation to the project agreements and other legal documentation and the project team’s preferred position noted for each point. This shall be set out in a document which shall be approved by the Work Team Leader.

d) A lead negotiator shall be appointed by the Work Team Leader.

Section 4: Conducting Final Negotiation(s)

The negotiation team shall conduct the final negotiation(s) as follows: a) Prior to commencement of negotiation, a member of the negotiation team shall

make a record of all attendees. b) The negotiation Team Leader shall conduct the negotiation meetings.

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c) This process shall continue iteratively including seeking guidance from higher authorities where a revised negotiation point is required from either party.

d) The negotiation shall be limited in scope and limited to improving the terms and conditions of a bid for the Kingdom. Deviations from the submission of bids are discouraged.

e) The final position on each negotiation point shall be recorded in detail and at the end of the discussion part of the meetings. This document shall be updated on a daily basis at the end of each negotiating day and once a final agreed position has been on all points.

f) The process shall conclude when a final agreed upon position has been reached on all negotiation points. The document identifying the final position on each negotiated point will be sent to the respective bidder to be signed off by them as acceptance of the final position.

Part Six: Fourth File (Final Business Case) Section 1: Preparation of the Fourth File

Based upon review of the completed Third File, a decision was made by the Supervisory Committee (and CEDA, unless CEDA waived this approval step) to pursue a Privatization procurement for a specific project. The Third File, however, is a projection of the technical and commercial outcomes expected from the Privatization procurement, based on the best information and assumptions available at that point of time. Once a preferred bidder has been identified and final negotiation(s) have concluded, the Third File projections of the technical and commercial outcomes expected from the Privatization procurement can be replaced by the actual outcomes of the Privatization procurement. These outcomes are reflected in the Fourth File, or Final Business Case. The Fourth File is a complete update of the Third File, and the requirements in terms of content and format are identical. In preparing the Fourth File, the Work Team shall:

a) Include an affirmative statement that all information is complete and up-to-date, to the best of the Work Team’s knowledge at the time of Fourth File submittal to the Supervisory Committee.

b) Update all project-specific information (need, benefits, beneficiaries, etc.) to reflect any new information available since the preparation of the Third File.

c) Update all economic factors (inflation rate, currency exchange, energy costs, etc.) to reflect current projections at the time of Fourth File submittal.

d) Update project technical information to reflect the specifics of the preferred bid, and reflect any differences in project output or quality from those assumed in the Third File.

e) Update the project financial information to reflect differences in cost or revenues; update the financial models.

f) Update the identification of government budgetary requirements, shareholding, contingent support, other obligations, etc., if any.

g) Update the project risk allocation, and identify any additional risks which may be assumed by the government.

h) Update the description of the contract to reflect any changes from the contract structure and payment mechanism from that projected in the Third File.

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i) Update the Value for Money analysis. j) Update the documentation to reflect any other material changes from Third File

assumptions or projections. k) Append the agreed form Privatization Contract and related documentation

(including any direct agreements) post negotiations together with comparison version of the agreed form Privatization Contract and the Privatization Contract issued with the RFP.

The Work Team shall also prepare a Fourth File Summary Report which identifies all the material differences between the Third File and Fourth File, to facilitate review by the Supervisory Committee and CEDA. These documents shall be submitted to the Supervisory Committee for review and approval.

Section 2: Direct Agreements

This section explains what direct agreements are in the context of Privatizations, focusing primarily on direct agreements between the Entity and the funders; and policy towards these agreements.

Direct agreements are entered into between the private sector party, the banks financing a project and the parties to the project’s key underlying commercial contracts including the Entity. The key contracts in the context of Privatizations would typically include the Privatization Contract, the main construction contract and related sub-contracts, any operation and maintenance agreement, any long-term supply contract and any long-term sales contracts.

In relation to Privatizations, the objective of a direct agreement is to enable the banks and/or other parties to step into and continue the contractual relationships in the event that the Private sector party wishes to terminate or extract itself from an existing contract that is the basis of a direct agreement, including in the event of a default in its loan obligations.

The direct agreements provide a right for the funders (i.e., banks) and/or other parties (e.g., sub-contractors) to assume the rights and obligations of the private sector party under the contract for a specified period of time or allow the transfer of the contract(s) to a separate company established by the banks for this purpose. The objective is to be able to continue to deliver the services to the Entity and/or to enable a restructuring of the Private sector party and associated services in consultation with the Entity.

Examples Examples of Direct agreements that could be established by the Entity (and other governmental entities) for and/or relate to:

a) The Financing Contract where a direct agreement is made between the Entity and the financiers (e.g., banks) and gives the financiers the right to step in and take over the execution of the Privatization Contract in the event that the Private sector party does not meet its obligations to the funders as part of their financing arrangements. This could also include any guarantees provided by the government on behalf of the Entity, to the financiers.

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b) The lease or sub-lease of the land which forms part of the package of agreements to enable the execution of the Privatization Contract – in this instance, a direct agreement is made between the lessor and the funders and gives the funders the rights to continue to use the land in the event that the Private sector party defaults and that the funders have to take over the running of the Privatization Contract.

c) Long term supply or sale contracts – for example, in the case of the energy sector, there may be a long term fuel supply agreement between the Private sector party, the Entity and a government owned or linked entity to supply the Project with fuel to be able to generate electricity or for the supply of teachers in the case of the education sector; depending on how these have agreements have been structured, there may be a need to establish a direct agreement between the funders and the suppliers to ensure continued supply in the event that the funders have to step into the Privatization Contract.

Requirements For each Privatization project, the Work Team shall append, as part of its Fourth File submission to the Supervisory Committee, a list of the direct agreements the Entity or other governmental entities have entered into along with copies of these agreements.

Section 3: Approval of the Fourth File

The recommendation as to the preferred bidder, the Fourth File, including the Fourth File Summery Report, shall be submitted to the Supervisory Committee for review and approval. The Work Team shall present these documents to the Supervisory Committee, field any questions related thereto, provide supplementary information upon request, and provide supporting rationale for the selection of the preferred bidder and the Fourth File analysis.

A. After the completion of the review and evaluation of the Fourth File, the Supervisory Committee shall make one of the following decisions:

1. The Supervisory Committee agrees to continue to the stage of contracting, signing, and commercial and financial closure if it turns out that the project is worthy of contracting and moving to the commercial and financial closure, and the results of the evaluation of the Fourth File match the conclusion reached by the Supervisory Committee in its evaluation of the Third File. The Supervisory Committee shall undertake the necessary procedures for the commercial and financial contracting and closing process.

2. If it turns out that the project is not worthy of contracting and moving to commercial and financial closure, but the Supervisory Committee determines that these issues can be dealt with. The Supervisory Committee shall identify such issues and direct the Work Teams to resolve them, and resubmit the Fourth File for further review and approval.

3. The Supervisory Committee shall reject the Fourth File if it found that the project is not worthy of contracting and moving to commercial and financial closure or contains errors or omissions in the process or documents in relation to the Fourth File, and that modification has not been possible at the discretion of the Supervisory Committee.

B. In all cases, if the Supervisory Committee finds that the results of the evaluation of the Fourth File do not match the conclusion reached by the Committee in its evaluation of the Third File, the Supervisory Committee shall not enter into the contracting process until it is submitted and approved by CEDA, unless the Supervisory Committee was authorized by CEDA to take such approval.

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Section 4: Debriefing of Unsuccessful Bidders

Unsuccessful bidders may submit written requests for debriefing. Upon receipt of a written request, the Work Team shall perform one-on-one debriefing sessions with bidders who were not selected for award through the RFP process. The debriefing shall be limited to feedback on the strengths and weaknesses of the bid and how it could be improved.

Part Seven: Signing the Privatization Contract At this stage the Privatization Contract and related documentation is fully agreed upon by the parties following negotiations, subject to conditions precedent and permitted adjustments to be undertaken at financial close.


Following approval by the Supervisory Committee, the Privatization Contract and related documents shall be executed by the Work Team, with delegated authority from the Entity, and the Project Company in accordance with the following paragraph. If the Project Company has not yet been established, the Privatization contract is executed with the preferred bidder and then assigned and transferred to the Project Company as a prerequisite for effectiveness (if establishment of a Project Company has been previously approved).

Section 2: Process

a) The Work Team shall confirm that all of the internal approvals required for signing the Privatization Contract have been met, including all the requirements for the Fourth File approval.

b) A closing protocol (which shall include prerequisites for effectiveness) shall be prepared jointly and submitted with the Privatization Contract

c) Once the Work Team, including the Negotiations Team, have updated the legal and other documentation for any changes required arising from the Fourth File approval process, a date and venue shall be set for the signing of the documents, details of which shall be communicated to the bidder that has been awarded the project.

d) All parties shall sign the documents at the allocated time and venue. e) Only upon full execution and satisfaction of all prerequisites in the Privatization

contract shall the bid bond of the preferred bidder and any reserve bidders be released.

Section 3: Signing Prerequisites

Both parties shall complete any outstanding prerequisites prior to financial close. Typical prerequisites could include:

a) Formation of Project Company and assignment of Privatization Contract. b) Environmental approvals. c) Financial Close. d) Issuance of Government Guarantees.

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Once these have been completed, the financial close process shall commence.

Part Eight: Financial Close Financial close occurs when all the project and financing agreements have been signed and all the required prerequisites contained in them have been met. It enables funds (e.g. loans, equity, grants) to start flowing so that project implementation can begin.


At a minimum, the Work Team and its advisors along with the private sector party, its advisors and Lenders will participate in the financial closing procedures.

Section 2: Preparatory Process

1) The preferred bidder/Project Company and its advisors shall prepare a financial close protocol which takes the following into consideration as a minimum:

a) The requirements of the signed agreements. b) The adjustments to the financial model and the changes to the Agreement

schedules that need to be made following financial close. c) In the event of interest rate swaps, a detailed process shall be documented and

agreed on by both the Work Team and the preferred bidder/Project Company; and.

d) Signing of the final agreements including financing agreements by the preferred bidder/Project Company.

2) The Work Team shall review and approve this protocol.

Section 3: Financial Close Process

a) The Lenders shall confirm that all financing prerequisites have been complied with or waived.

b) The financial close protocol shall be implemented and the funds are released to the preferred bidder/Project Company.

c) The financial model is updated for the permitted adjustments. d) Privatization Contract (only insofar as it needs to be amended to reflect the

permitted adjustments in the financial model) and related documentation is updated and the amendments signed by the Work Team, with delegated authority from the Entity, and the Project Company.

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Chapter Four: General Provisions

Part 1: Stakeholders Communication

Part 2: Communication with The Private Sector

Part 3: Unsolicited Proposals

Part 4: Conflicts of Interest

Part 5: Exemption Requests

Part 6: Social and Environmental Assessment

Part 7: Demand Analysis

Part 8: Output Based Specifications

Part 9: Delegation of Authority to Advisors

Part 10: Appeals Procedure

Part 11: Risk Allocation and Payment Mechanism

Part 12: Value for Money

Part 13: Insurance

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Part One: Stakeholders Communication This section describes the Stakeholder Communication that a Work Team shall undertake as part of a Privatization project.

Section 1: Stakeholder Communication

The purpose of Stakeholder Communication is to promote transparency, disclosure, and accountability for the Privatization project. It is a valuable tool for gathering input, identifying alternative perspectives and potential solutions, and clarifying roles and responsibilities within a proposed project. It can assist in identifying gaps in and risks associated with a project that need to be addressed, and resolve or reduce certain risks to improve project delivery, performance, and outcomes.

Section 2: Stakeholders Identification

Stakeholders are parties or entities, both internal and external to the Kingdom and its officials, who have an interest in the implementation and outcomes of a Privatization project.

For each Privatization project, the Work Team shall prepare as part of its Second File submission to the Supervisory Committee, a Stakeholder Index identifying known Stakeholders for each potential project approach, including a brief description of their perceived interest or concerns and how they might be handled in the implementation of the proposed Privatization project.

The Stakeholder Index shall be updated as new stakeholders are identified.

Stakeholders and their potential interests may include:

a) Entities whose cooperation or coordination may be desired by the implementing Entity in undertaking a project.

b) local or regional entities where the project will occur and/or those who may have a regulatory role related to the proposed project.

c) private sector parties and financial institutions who are interested in the project’s performance (both prospective and those participating in a project).

d) contractors and subcontractors to a project on how the work will be undertaken (both prospective and those participating in a project).

e) non-governmental, civil society, and other organizations with an interest in the impact or outcomes of the project.

f) citizens who will use or be impacted by the project.

Section 3: Stakeholder Communication Plan

Based on the Stakeholder Index, the Work Team shall create a formal Stakeholder Communication Plan, (the “Stakeholder Communication Plan”), to be included in the Third File submission. The Stakeholder Communication Plan shall detail specifically, all known Stakeholders that will be impacted by the project, their interests or concerns, and the anticipated process or approach the Work Team will use to engage with them.

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Stakeholder communication may include passive information being provided on project related websites, general public announcements, press releases to news organizations, or other means of providing information for the public to access.

Stakeholder communication may also be active engagement and may include plans for consultation and/or stakeholder input into the project, such as project meetings where the Work Team presents the proposed project and gathers feedback; periodic coordination meetings with other impacted Ministries or Entities to align public support or oversite; public meetings to solicit ideas for enhancing the project or reducing impacts on affected communities; surveys to asses public opinion, identify concerns, and help identify potential mitigation plans; and/or developing written arrangements with third parties to further the success of the project. For large projects, messaging through television, radio, print, or social media may be considered. In consultation with NCP, use of professional public relations or communication consultants may be made part of the Stakeholder Engagement Plan.

The Stakeholder Communication Plan will identify the anticipated means of communicating and/or engaging with the Stakeholder and whether it would be passive, active, or through multiple means. It will also identify whether the communication will be internal, external, and/or controlled by the procurement process (bidder conferences, for example), and list the anticipated time frames for such communication (for example, single occurrences, intermittent exchanges as needed, on demand, and/or continuous through life of the project).

The Stakeholders Communication Plan, in consultation with NCP, may include use of professional public relations or communication advisors.

Upon Third File approval, the Work Team shall implement the Stakeholder Communication Plan and engage with Stakeholders as needed over the course of the project. After contract award, the Work Team and/or parties to the contract shall undertake the Stakeholder Communication Plan in accordance with their contractual obligations. The Work Team (and/or parties to the contract after contract award) shall make a record of all communications and communication activities and log any feedback gathered from such communications, in particular, any feedback that may be beneficial to the project and the Entity should consider incorporating into the delivery or operation of the project.

Part Two: Communication with the Private Sector This section describes the types of communication that an Entity and Work Team may undertake regarding a Privatization project prior to the award of a contract for the Privatization project.

Section 1: Communication during Project Preparation (First File, Second File, Third File Stages)

During the Privatization Project Preparation stages set out in Section 3 of Chapter 2, certain interactions with the private sector are required, to determine whether there is private sector

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interest, experience, and capacity to engage in a specific project. In addition, private sector input can be an important input for helping a Project Work Team determine if a contemplated project approach will be appropriate for the market, or whether certain refinements may be necessary.

While such interaction is essential, it is also necessary for the Work Team to conduct it such that no competitive advantage is afforded to any private party, and that procurement-sensitive information is not divulged. Therefore, these interactions shall be performed as specified below, unless the Work Team obtains approval from the Supervisory Committee for additional or alternative interactions.

Section 2: Communication during the development of the First File

The Entity may not engage in communication with the market and/or potential bidders regarding a potential Privatization project during the development of the First File. The First File stage is an internal review process, and a preliminary step in the potential pursuit of a Privatization project. Therefore, the Entity must refrain from discussing the project or its potential procurement with any private parties and maintain confidentiality related to the consideration of the project and any project-related details or information.

An Entity may, however, reference contemplated projects on its web-page, with no detailed project-specific information, e.g., in a list of proposed projects under the Vision 2030 plan.

Section 3: Communication during the development of the Second File

The Work Team may engage in controlled interactions with the market and/or potential bidders regarding a potential Privatization project during the development of the Second File. These interactions shall be limited to gathering feedback on a potential project and examining the market’s capacity for and interest in a potential project. At NCP’s option, NCP may participate in any Work Team interactions with the market and/or potential bidders.

The discussions during the Second File stage shall be designed to gather information on one or more proposed projects, and produce information that is intended to assist the Work Team in deciding whether and how a project should go forward, subject to appropriate approvals. The Work Team shall limit discussions at Second File stage to questions such as:

a) Is the project realistic? b) What are the available solutions in the marketplace that would serve the entity’s

needs? c) What types of bidders and partners are available and who might be interested in the

opportunity? d) What financial, service, and other technological options exist? e) Would lenders and financiers be interested? f) Are the assumptions on a project correct and reflective of industry practice? g) What is the global experience and perspective on a Privatization project of this type? h) What Privatization models have been employed for projects of this type? i) What strengths and weaknesses can be identified in potential projects or

approaches?

Such market research data may be obtained through online surveys or questionnaires published on the internet via publicly-accessible media.

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Note: An Entity or Work Team may receive unsolicited calls or informational materials from the private sector from time to time regarding potential Privatization opportunities. The Entity or Work Team should be cautious in handling this information and materials and notify the sender that potential opportunities are pre-decisional, and that the gathering of information related to Privatization opportunities is initiated by the Kingdom, except in the case of unsolicited proposals. If the information or materials received amounts to an unsolicited proposal, then the unsolicited proposal procedures shall be complied with.

In all cases, communication with potential bidders shall be in accordance with the procedures of this Manual and applicable law.

Section 4: Communication during the development of the Third File

Communication with the private sector during the development of the Third File shall be the same as permitted during the Second File stage, except that structured public meetings with interested parties may be conducted, e.g., through advertised public meetings or with invited groups. Events shall be formal and scheduled, with an open invitation to attend for all that are interested.

The dialogue at events shall be controlled so that the topics of interest are sufficiently discussed and potential bidders are discouraged from using the interactions for other purposes, e.g. as an opportunity to gain an advantage over competitors, gather intelligence on their competitors, improperly influence the Kingdom’s decision making, or gain favor with particular authorities or officials in hopes of winning a potential contract.

Every precaution should be taken to keep all conversations and exchanges of information at the event open and public. To this end, the Work Team shall prohibit private meetings, discourage sidebar discussions between private sector attendees and government employees and advisors, and prepare a record of the meeting with such pertinent details as the agenda, the participants, their organizations, and their contact information, the objective and outcomes of the meeting, what was discussed, etc.

Section 5: Communication after Third File approval, during RFQ and RFP up to Contract Award

Communication between the Work Team and private parties during the RFQ and RFP phases of a project is to be fully structured and controlled.

All communication during the RFQ and RFP phase shall comply with the provisions of this Manual and applicable law, as well as the Procurement Plan and any communications specified in the RFQ and RFP documents.

For example, the RFQ and RFP documents may:

a) state that prior to bidding the Work Team will hold pre-bid conferences to allow bidders to ask questions and seek clarification on elements of the project or RFQ and RFP and/or build interest in potential bidders and financiers;

b) identify any meetings that will occur between shortlisted bidders and the Work Team prior to bidding; and/or

c) specify negotiation(s) that will occur between the Work Team and a preferred bidder will occur after evaluation.

Unless specified in the RFQ and RFP documents, there shall be no other communication between or amongst the Work Team, Entity, or officials of the Kingdom and bidders regarding the RFQ and RFP or project.

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All parties to the RFQ and RFP must commit in writing to using only the communication mechanisms authorized by the RFQ and RFP documents and that they shall refrain from discussing the project or RFQ and RFP outside of formal RFQ and RFP events and maintain confidentiality related to RFQ and RFP information.

Section 6: Single Point of Contact

The Work Team shall establish a single point of contact for each Privatization opportunity. The single point of contact shall include a designated website or webpage and a unique e-mail account that is dedicated to the Privatization RFQ and RFP and controlled by the Work Team. The single point of contact shall be monitored and managed by an individual who is solely responsible for communicating with bidders on behalf of the Work Team and relaying information related to the RFQ and RFP. All information related to the RFQ and RFP shall pass through this ‘single window’, and all information shared with one bidder (except for confidential and proprietary information, as the case may be) is to be shared with all other bidders, so that a consistent, single stream of information in and out of the RFQ and RFP proceedings is maintained and one comprehensive record of RFQ and RFP interactions is compiled.

This single point of contact and/or designated website can include an electronic ‘document room’ where RFQ and RFP documents are posted for all bidders to see, such as written questions with formal answers provided by the Work Team resulting from pre-bid conferences and written clarification rounds.

Section 7: Communication after Award of the Contract

Communication with the winning bidder after Award of the contract shall be open and consistent and otherwise in accordance with the Privatization contract and the Privatization Contract Management Plan.

Part Three: Unsolicited Proposals Unsolicited proposals for Privatization projects are defined as proposals to design, finance, implement (i.e., construct, expand, or renovate), operate, and/or maintain a Privatization project which are not prepared in response to a competitive RFP issued in accordance with the requirements of this Manual. Entities are prohibited from awarding a Privatization contract in response to such proposals, and any such contract shall be null and void.

NCP recognizes, however, that the private sector can generate innovative and beneficial ideas for potential Privatization projects, and that these ideas may be worthy of consideration in developing Entity Privatization programs. This section provides the procedures by which such proposals may be considered and brought into compliance with NCP requirements for due process and accountability for Privatization projects.

When an Entity receives an unsolicited proposal for a Privatization project from a private party, the Entity is under no obligation to consider it. The Entity may either:

a) Return the proposal unread to the party which submitted it, with a written statement that proposals for this project are not being solicited at this time; or,

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b) Conduct an initial evaluation of the proposal. During this evaluation, the Entity shall not engage in any discussion or communication with the private party about the proposal, but shall evaluate the proposal upon its merits as submitted. It is incumbent upon the party submitting the proposal to include sufficient information to enable a comprehensive evaluation. The information contained in the proposal shall be treated as confidential, as though it were the product of a competitive procurement, and shall not be released to any party except as required for the evaluation process.

If the Entity elects to evaluate the proposal, it may determine:

a) That the proposal is not worthy of further consideration (e.g., because the services the project is intended to provide are not a high-priority requirement, the proposed project does not appear to provide the services in a technically-feasible, cost-effective, or affordable manner, the proposal is insufficiently detailed to allow a comprehensive evaluation, etc.). The Entity shall then notify the party which submitted the proposal, in writing, that the proposal has been reviewed by the Entity and is not of interest at this time. The private party may submit a written request for a debriefing within 10 calendar days of receipt of this notice. If a debriefing is requested, the Entity shall provide a written summary of the high-level strengths and weaknesses of the proposal within 30 calendar days.

b) That the proposal appears to have sufficient merit to warrant further evaluation. In this case, the Entity shall prepare a written request to the Entity’s Supervisory Committee to consider the project as a potential Privatization. If the Entity does not yet have an established Supervisory Committee, the Entity shall contact the NCP for guidance.

In submitting the request to the Supervisory Committee the Entity shall include, at a minimum, the following information (additional information may be included at the Entity’s discretion, and may facilitate the review process):

1. Executive Summary: (including summary of recommendation to incorporate this project within the sectoral Privatization program and consider the unsolicited proposal). The Executive Summary shall not exceed five pages in length, and shall provide an overview of key aspects of the project, the process by which the unsolicited proposal was evaluated, and a summary of why further consideration of this project as a Privatization is warranted.

2. Administrative Context: This section identifies: The Entity responsible for the project; the individual at that Entity to be contacted with questions about the request or for additional information; their contact information; and the official name of the project. Note that the project name cannot be changed, as it will use to track the project in the NCP Privatization Project Registry.

3. Unsolicited Proposal: The Entity shall identify: the date the unsolicited proposal was received; a summary of key features of the proposal, such as physical assets to be developed, services to be provided, duration of contract, and payment mechanism(s); description of the proposal evaluation process; a summary of the proposal evaluation; the date the evaluation was completed; and the key strengths and weaknesses (if any) of the proposal.

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4. Project Rationale and Assessment of Need: The Entity shall identify the needs which the Entity seeks to address, and describe how this project addresses those needs. This requirement is identical to the requirement for a First File, except that an Entity may limit its consideration of alternatives to (a) the unsolicited proposal and (b) execution of the project as a traditional public procurement (additional alternatives may be included at the Entity’s discretion).

5. Preliminary Economic Case: For each alternative identified in item IV above, the Entity shall explore the economic case by providing indicative implementation cost estimates for project construction and operation (as applicable). These estimates shall meet all of the requirements of a First File, except that the cost estimate for the unsolicited proposal may be based on the proposed contract cost, plus any additional government costs, e.g., for conducting the procurement, monitoring and administering the resulting Privatization contract, etc.

6. Preliminary Assessment of Affordability: For each alternative identified in item IV above, the Entity shall prepare a preliminary assessment of affordability in accordance with the requirements for a First File.

7. Privatization versus Other Alternatives: The Entity shall explore whether it will be more advantageous to pursue the project as a Privatization or through traditional public procurement, and identify the key factors, consistent with the requirements for a First File.

8. Initial Market Assessment: The Entity shall consider and document, consistent with the requirements for a First File, whether the required capabilities to execute the project are available in the private sector. The assessment should include both an assessment of the unsolicited offer or and the broader market.

9. Consideration of Project-related Issues: The Entity shall document any technical, environmental, social, or legal issues related to the project which may be apparent at this stage in the project preparation. This documentation shall be consistent with the requirements for a First File.

10. Summary and Recommendation: Based upon the information provided in this request, and any additional explanatory or back-up data which the Entity may wish to append, the Entity shall summarize its conclusions and recommend (a) adding this project to the sectoral Privatization program and (b) considering the unsolicited proposal as one potential option for the delivery of this project in subsequent analyses.

The Supervisory Committee will evaluate this request, using the same criteria as are used for First File reviews, and may contact the Entity for discussions or to request additional information. Upon completion of its review, the Supervisory Committee will provide written notification of its determination to the requesting Entity. Three outcomes are possible:

a) If the Supervisory Committee determines that the project concept is not worthy of further consideration, it will decline the request. Upon receipt of this notification, the Entity shall notify the private party submitting the proposal, in writing, that the Supervisory Committee has determined that no further action will be taken on this proposal. This notification shall be made within 10 working days of the Entity’s receipt of this decision. The Supervisory Committee’s decision is final, and shall not be subject to appeal.

b) If the Supervisory Committee determines that the project appears worthy of further consideration as a Privatization, and that the Entity’s submittal is effectively a

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complete First File, it will approve the request and authorize the formation of a Work Team to prepare the Second File for this project. The solution proposed by the unsolicited proposal shall be one of the alternatives considered by the Second File.

c) If the Supervisory Committee determines that the project appears worthy of further consideration as a Privatization, but that additional alternatives should be considered or that other supplemental information should be provided, it will approve the request and authorize the formation of a Work Team to prepare the First File for this project. The solution proposed by the unsolicited proposal shall be one of the alternatives considered by the First File.

If the Supervisory Committee approves the preparation of a First File or Second File, the project shall be entered into the NCP Privatization Project Registry, and the record for this project shall explicitly identify that the project was generated as the result of an unsolicited proposal.

Once the approval to prepare the First File or Second File is issued, the Privatization project preparation and procurement will proceed in full compliance with the standard of this Manual guidance, except as noted below. The solution proposed by the original unsolicited proposal will be judged upon its merits, and may or may not be the final solution (if any) proposed for Privatization procurement. No communication with the firm submitting the original unsolicited proposal shall be conducted during this process, except in the course of market surveys or discussions open to other potential bidders. The original bidder shall be treated equally in all respects with other bidders and afforded no advantage in the bidding process.

Exceptions to the standard NCP procedures which apply to unsolicited proposals are as follows:

a) If a decision is made by the Supervisory Committee (or CEDA, as applicable) at the First, Second or Third File stage that the project concept is not worthy of further consideration as a Privatization, the project preparation effort will cease, and the Supervisory Committee will provide written notification to the Entity (First File) or Work Team (Second and Third Files). Upon receipt of this notification, the Entity or Work Team shall notify the private party submitting the proposal, in writing, that the Supervisory Committee/CEDA has determined that no further action will be taken on this project concept at this time. This notification shall be made within 10 working days of the Entity or Work Team’s receipt of this decision. The Supervisory Committee/CEDA decision is final, and shall not be subject to appeal.

b) If a decision is made to proceed with a Privatization procurement, the RFQ shall clearly state that this procurement was initiated as the result of an unsolicited proposal, but that the requirements of the final procurement may vary from those of the original unsolicited proposal.

c) The RFQ and RFP shall not disclose any proprietary information included by the bidder in the original unsolicited proposal. The Work Team, in coordination with its legal advisors and NCP, will make the determination as to what information will be considered proprietary; assertions and supporting rationale from a private party in its proposal that certain information is deemed proprietary will be considered, but NCP shall be the final arbiter.

d) On the date of public announcement of the RFQ for the project, the Work Team shall provide written notification to the private party which submitted the original unsolicited proposal that a procurement has been initiated as a result of its proposal,

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and that it may be eligible for reimbursement of certain proposal preparation expenses incurred as part of the subsequent procurement.

e) If the private party which submitted the original unsolicited proposal participates in the competitive procurement by submitting an SOQ and/or Proposal, and is not awarded the contract, it shall be eligible for reimbursement of up to SAR 1.5 million in total proposal expenses for the unsolicited proposal and competitive proposal combined. Claims for reimbursement shall be supported by auditable backup (e.g., timesheets, payroll data, consultant invoices, etc.) and claims lacking auditable backup may be required to be resubmitted or denied.

f) If the private party which submitted the original unsolicited proposal elects not to participate in the competitive procurement, it shall be eligible for reimbursement of up to SAR 500,000 in total proposal expenses for the original unsolicited proposal. Claims for reimbursement shall be supported by auditable backup (e.g., timesheets, payroll data, consultant invoices, etc.) and claims lacking auditable backup may be required to be resubmitted or denied.

g) If the private party which submitted the original unsolicited proposal participates in the competitive procurement and is awarded the resulting contract, it is not eligible for reimbursement of proposal-related expenses.

Part Four: Conflict of Interest Section 1: Conflict of Interest

This concept of conflict of interest is intended to assist Entities, Work Teams, advisors, or any other relevant Person in avoiding conflicts, managing actual or potential, direct or indirect, conflicts of interest that may arise during the Privatization process, and creating a process for resolving conflicts.

An “organizational interest” is a Person’s relationship or association with an organization that has an interest in the work or activity of the Kingdom. An organization can be a professional, economic, political, national, familial, or other group to which an individual has a relationship or association.

A “personal interest” is a Person’s personal private interest in the work or activity of the Kingdom that is outside their professional and/or public obligation to the Kingdom. A “personal interest” can include a friend or family interest and/or a financial interest in the work or activity of the Kingdom.

A conflict of interest may occur, for example, when:

1. A Person’s professional and/or public obligation to the Kingdom is, or has the potential to be, at odds with their own organizational, personal and/or financial interest.

2. A Person uses their positions, or knowledge acquired by such positions, for their personal interests or for the benefit of any of their relatives or acquaintances, and exploit the powers or influence they enjoy for personal gain, and favor their personal interest over the of public interests of the Kingdom.

3. A Person accepts, receives, offers, or requests any financial or in-kind benefits, hospitality services, or gifts from others because of their position.

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A conflict of interest is not limited to these examples. A potential conflict of interest is any situation where NCP, or any independent observer, could reasonably question a Person’s actions and determine that they could be influenced by incentives beyond their public responsibilities.

Section 2: Avoidance of Conflicts of Interest

The primary obligation of an Entity, Work Team, advisor, or any other relevant Person, as the case may be, is to avoid conflicts of interests. This includes:

a) implementing education and awareness of conflicts for any persons participating in a Privatization project.

b) requiring certification of freedom of conflicts. c) requiring the early identification and disclosure of any conflict. d) taking preventative steps or corrective measures that may assist in monitoring,

mitigating and/or remedying conflicts.

Section 3: Acknowledgement

The Supervisory Committee or NCP may require Persons to acknowledge or certify in writing their freedom from conflict of interest prior to, during, and/or after the procurement process, including Privatization project preparation stages and/or during Privatization contract administration.

Section 4: Education and Awareness

The Entity and Work Team shall undertake as part of each Privatization project an education and awareness program whereby individuals participating in a Privatization project are informed, at a minimum, of the risks of conflicts of interest, the NCP and Entity rules and requirements relating to conflicts of interests, and the individual’s affirmative responsibility to disclose actual and potential conflicts of interest.

Section 5: Disclosure

The Work Team, in coordination with NCP, shall ensure that Persons disclose any conflict of interest that they may have.

The Supervisory Committee, or NCP may require Persons to acknowledge or re-acknowledge their disclosure in writing prior to, during, and/or after the procurement process, including Privatization project preparation stages and/or during Privatization contract administration. The Supervisory Committee and NCP shall ensure the confidentiality of any submitted disclosures.

Disclosure shall include at a minimum:

a) a description of the current or future interest(s) and/or relationship(s) that are or could be the basis of the conflict of interest;

b) a description of the work or activity of the Kingdom giving rise, directly or indirectly, to the actual or potential conflict;

c) a description of the steps the Person can and is willing to take to mitigate the conflict of interest, if any.

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All disclosures shall be in writing, certified, and submitted to the Supervisory Committee, and NCP, as the case may be.

Whenever a disclosure is received, the Supervisory Committee shall investigate the conflict and in consultation with and with the consent of NCP, shall issue a written conflict of interest resolution that either:

a) dismisses the conflict based upon a showing that no conflict exists; b) acknowledges the conflict but conditionally excuses it so long as the conflict is minor,

will remain minor, and will have no impact on the Person’s professional and/or public obligation(s) to the Kingdom;

c) acknowledges the conflict but conditionally excuses it as long as the conflict is mitigated and timely manner and will have no impact on the Person’s professional and/or public obligation(s) to the Kingdom;

d) cites the conflict and the fact that it cannot be mitigated, and recommends remedial measures that will eliminate the conflict, such as recusal of such individual from his/her professional and/or public obligation(s) to the Kingdom giving rise to the conflict; or

e) recommends such other steps as the Supervisory Committee and NCP may decide.

Section 6: Conflict Official Record

The Supervisory Committee shall compile a written record of each disclosure, including any determinations made by NCP and/or the Supervisory Committee, and maintain a copy of the record, provided a copy of the record is submitted to NCP, upon its request.

Part Five: Exemption Requests Section 1: Request for Deviation from This Manual

Entities and Supervisory Committees (including their Work Teams and Secretariats) may not deviate from the provisions of the Manual, or any other instruction or procedures issued by NCP, without prior approval by NCP.

To request a deviation from NCP procedures, Entities and Supervisory Committees shall submit a written request to NCP, including:

a) Identification of the project or projects for which a deviation is requested. If the project(s) has already been entered into the Privatization Project Registry, the project identification shall match the project(s) name in the Registry. If the project(s) has not completed the First File stage, and does not yet appear in the Registry, the entity shall assign an appropriate descriptive project name.

b) Point of contact, position and contact information. c) The project status (e.g., “First File approved and Second File in progress”, or “in

procurement, Request for Qualifications under development”). The project status shall match the status reflected in the Project Registry.

d) The specific nature of the deviation requested and its duration, if applicable; whether there are other alternatives for exemption (considered essential by the Entity); to be included in the deviation request. This reason should clearly explain the current

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challenges or issues and why current procedures are unable to handle and remedy it.

e) The reason why the entity believes a deviation is required. This description should explain clearly the challenge or problem encountered, and why existing NCP procedures do not adequately address it.

f) A detailed rationale describing how the requested deviation would provide an improved technical or economic outcome for the project(s) versus use of existing NCP procedures.

g) If alternative for the deviation are offered, a detailed statement for each shall be presented indicating the best alternative of them, if any.

h) Any other information or documents that may be requested by the NCP.

Section 2: Deviation Request Review

NCP will review requests for deviations from NCP procedures and may contact the relevant Supervisory Committee for additional information or discussion. Upon completion of the review, NCP will take one of the following actions:

a) Approval of the request for deviation. b) Approval of the request for deviation, but with modifications or constraints imposed

by NCP. c) Imposition of an alternative deviation, determined by NCP. d) Rejection of the request for deviation.

Section 3: Decisions by NCP on Deviation Requests

NCP is the sole arbiter of requests for deviations from NCP procedures, and its decisions are final. In the event that a deviation is approved, NCP will require the requester to submit periodic reports on the progress and impacts of the deviation, the extent to which the deviation achieved its intended purpose, and how the deviation affected the project outcomes.

Part Six: Social and Environmental Assessments Section 1: Social and Environmental Impacts

Privatization projects, particularly greenfield projects which will require new construction, have the potential for significant social and environmental impacts. Social impacts are the impacts of developmental interventions on the human environment. Environmental impact refers to the effects of a project on the physical environment.

Social and environmental impacts can occur during either the construction or operational phases of a Privatization project, or both. To maintain the quality of life in the Kingdom, these impacts need to be identified and assessed to determine the:

a) nature of the potential impacts, positive or negative.

b) extent of the potential impacts.

c) mitigation measures, if any, which may need to be considered, and their costs and likely effectiveness.

d) nature and extent of any negative impacts which may not be mitigated.

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While significant benefits may result from Privatization projects, and are the reason that such projects are pursued, there is also a need to identify and evaluate the negative externalities associated with these projects. Such impacts not only need to be identified and measured but, as with any developmental action, also need to be managed in such a way that the positive externalities of Privatization projects are maximized, and the negative externalities are minimized.

The Privatization Project Preparation process therefore needs to takes into account the social and environmental impacts of the potential projects. The conduct of Social Impact Assessments (SIA) and Environmental Impact Assessments (EIA), and Social Impact Assessment (SIA) are therefore key steps in the Privatization project planning and decision-making process. These impact assessments help in identifying the likely positive and negative impacts of proposed policy actions, likely trade-offs and synergies, and thus facilitate informed decision-making. Moreover, the need for impact assessment stems from the fact that:

a) Impact assessments enhance positive and sustainable outcomes associated with project implementation;

b) They support the integration of social and environmental aspects associated with the numerous subprojects into the decision-making process;

c) They enhance positive social and environmental outcomes;

d) They minimize social and environmental impacts as a result of either individual subprojects or their cumulative effects;

e) They protect human health and minimize impacts on cultural property.

The following paragraphs provide guidance on how to conduct of these assessments for potential Privatization projects.

Section 2: Social and Environmental Impact Assessment

Work Teams shall use the Equator Principles as a guide for the conduct of SIA and EIA. The Equator Principles is a risk management framework, adopted by financial institutions around the globe, for determining, assessing and managing environmental and social risk in project finance, evaluation and management. It is primarily intended to provide a minimum standard for due diligence to support responsible risk decision-making. Further information is available at http://equator-principles.com.

The Equator Principles categorize projects based on the magnitude of their potential environmental and social risks and impacts. The categories are:

a) Category A – Projects with potential significant adverse environmental and social risks and/or impacts that are diverse, irreversible or unprecedented.

b) Category B – Projects with potential limited adverse environmental and social risks and/or impacts that are few in number, generally site-specific, largely reversible and readily addressed through mitigation measures.

c) Category C – Projects with minimal or no adverse environmental and social risks and/or impacts.

The Assessment Documentation should propose measures to minimize, mitigate, and offset adverse impacts in a manner relevant and appropriate to the nature and scale of the proposed Project.

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The Assessment Documentation will be an adequate, accurate and objective evaluation and presentation of the environmental and social risks and impacts, whether prepared by the client, consultants or external experts. For Category A, and as appropriate, Category B Projects, the Assessment Documentation includes an Environmental and Social Impact Assessment (ESIA). One or more specialized studies may also need to be undertaken. Furthermore, in limited high risk circumstances, it may be appropriate for the Work team to complement its Assessment Documentation with specific human rights due diligence (for example, if a project will require significant resettlement of affected residents). For other Projects, a limited or focused environmental or social assessment (e.g. audit), or straight-forward application of environmental siting, pollution standards, design criteria, or construction standards may be carried out.

The Assessment Documentation should propose measures to minimize, mitigate, and offset adverse impacts in a manner relevant and appropriate to the nature and scale of the proposed Project and in compliance with the applicable standards. For Category A projects the potentially significant adverse environmental and social risks and/or potential impacts that are diverse, irreversible or unprecedented shall be explicitly identified and highlighted, to include identification in the Executive Summary of the Third File, so that they may be considered by the Supervisory Committee and CEDA as part of the File review and approval process.

Section 3: National Regulations

In Saudi Arabia, the comprehensive Environmental Law was promulgated by Royal Decree No. M/34 dated 228/07/1428. It requires in Article 5 that the approval process for any project that may cause an effect on the surrounding environment will include the development and review of an EIA study. Accordingly, in Saudi Arabia, all industrial projects and the majority of infrastructure projects have a legal requirement for EIA assessment.

Article 1(18) of the Environmental Law defines “Environmental assessment of projects” as, “A study conducted to determine potential or actual environmental effects of a project and appropriate measures and means to prevent or limit adverse effects and achieve or increase the project’s positive outcome for the environment in line with applicable environmental standards.” Article 5 of this Law further provides that, “Licensing authorities shall ensure that environmental assessment studies are conducted in the feasibility study phase for projects with potential adverse impact on the environment. The authority executing the project shall be in charge of conducting environmental assessment studies in accordance with environmental bases and standards specified by the competent authority in the Implementing Regulations.” “Projects” are defined in Article 1(16) as, “Any facility or activity with potential impact on the environment.” The above requirements shall be met for all Privatization projects.

Part Seven: Demand Analysis As part of the preparation of the proposed deal structure of Privatization Projects Work Teams shall prepare and substantiate the risk transfer of proposed Privatization projects and the associated payment mechanisms and include them within the Second and Third Files. The choice of appropriate payment mechanisms and the feasibility of Privatization projects will depend greatly on a mature quantified assessment of demand and the proper assessment of demand is of considerable concern to the Supervisory Committees and NCP.

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Therefore, in order to allow the Supervisory Committees to assess the appropriateness and maturity of these proposed commercial positions in Privatization projects before the commencement of procurement, NCP will require that independent demand and revenue studies be conducted for Privatization projects that identify the anticipated usage and user and/or third party revenues.

The specific form and requirements of such demand studies will depend on the proposed sectors and guidance will be prepared by the individual Supervisory Committees.

Part Eight: Output Based Specifications Section 1: Specifications

In order to maximize the value for money and risk transfer to be provided through a Privatization arrangement, each Work Team entering into a Privatization contract shall develop clear and concise performance specifications for each Privatization contract. The performance specifications shall be an appropriate mix of input, output, and outcome specifications that on balance are sufficient, comprehensive and clearly structured so that the project services will be delivered in accordance with expectations. While certain aspects of a Privatization project may require the Work Team to utilize input specifications in the Privatization contract (traditional procurement specifications that are prescriptive in nature and specify in great detail what the private sector party must deliver, for example, specifying the use of specific proprietary technology, system or solution), the Work Team should prioritize the use of output specifications (specifications that detail the desired output of the private sector party’s activities rather than precisely how the private sector party will achieve the project, for example, a requirement that the project achieve a level of service availability or efficiency whose performance can be measured and verified by the Entity). Where possible, a Work Team should also consider use of outcome specifications (specifications that detail the desired outcomes of the project, for example, improving certain socio-economic aspects of a specified community), however, the Work Team should consider the difficulty of measuring outcomes, and identify verifiable means for confirming outcomes, before imposing such requirements. Section 2: Drafting Specifications

As part of the Third File preparation and draft Privatization contract, the Work Team shall prepare draft specifications for inclusion in the Third File. As necessary, and in coordination with NCP, the Work Team may retain specialized technical, legal, financial and/or other transactional advisors to assist in preparation of appropriate specifications for a project. The Work Team shall:

a) In the context of the Entity’s program of development, strategy for achieving their mission within a sector, and policy objectives in light of Vision 2030, identify the desired Privatization project outcomes and convert them into draft specifications.

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b) Clearly delineate in the draft specifications the private party’s responsibility for performance and timing associated with those responsibilities.

c) Establish in the Privatization contract a clear and efficient system for monitoring performance and compliance with the specifications (for example, routine data and performance reporting, audits, non-compliance reporting, etc.).

d) Align input, output, and outcome data with the Entity’s management systems, oversight tools and capacity such that performance can be effectively monitored and managed.

e) Link the payment mechanism(s) and positive and negative performance incentives with delivery of the specifications.

f) Structure how payment calculations, additions, and/or deductions will be applied based on compliance or noncompliance with the specifications.

g) Provide a system for prioritizing and rectifying noncompliant performance issues, and whether such action is to be taken by the private sector party, the Work Team, or others.

h) Outline procedures for changing the service requirements either at the public or private party’s initiation, and periodically as needed over the life of the project.

Section 3: Incorporation into Procurement Documents and Final Contract

The Work Team shall incorporate the final draft specifications in the draft Privatization Contract to be incorporated within the RFP processes. After finalization, the specifications and associated outcome monitoring and performance management systems will be incorporated into the final Privatization Contract.

Part Nine: Delegation of Authority to Advisors The preparation and procurement of a Privatization project occurs through a series of complex processes, which require a combination of data collection, analysis, technical activities, strategy formulation, and decision-making. In the aggregate, these processes are completed using a combination of in-house resources (civil servants and special hires) and advisors. These efforts only occur, however, through the express and implied authority granted to the bodies and individuals undertaking the preparation, procurement, and processes of the Privatization. As a result, while advisors are an essential component of an Entity’s Privatization program, their express and implied authority is limited to the terms and conditions of the contracts under which they were retained, (which shall be in the form of the NCP standard form advisors’ engagement contract), and certain acts are not appropriate for delegation to an advisor. These include:

a) making a decision which obligates the government to commit a specific action. b) determining a government strategy. c) obligating governmental funds. d) assuming an obligation on behalf of the government and/or relieving an obligation

owed to the government. e) relinquishing governmental rights.

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Advisors can recommend that the government make a certain decision, adopt a certain strategy, make a certain spending commitment, or assume a certain obligation, but the express and implied authority to make that determination on behalf of the government is inherently governmental, and can only be made by a properly authorized government employee or body. This principle shall be applied to, and shall limit, the Entity or Work Team’s delegation of authority to advisors in the preparation, procurement, and undertaking of processes related to Privatization projects.

In contracting for advisory services, Entities and Work Teams shall clearly specify the extent and nature of an advisor’s authority, and shall not empower or delegate to advisors, either expressly or impliedly, the authority to take actions or make decisions on behalf of government. The following paragraphs provide further explanatory examples of these restrictions. For example:

a) An advisor may participate as a member of a negotiation team for a particular Privatization procurement. In this role, an advisor can review the submitted bid, analyze its compliance with the Entity’s requirements as set forth in the RFP, identify issues or concerns, and prepare recommended negotiating positions. In contrast, an Entity employee shall make the decision as to what the Entity’s actual negotiating position will be. Once that decision is made, the advisor can refine the negotiating position (if necessary), and assist in the actual negotiation with the bidder, but at all times shall act within the bounds of the discretion, authority, and decision of the Entity’s employee. The advisor would furthermore not make decisions on behalf of the Entity, nor attempt to exercise any express or implied authority to commit the Entity to any course of action.

b) An advisor may also participate as a member of a Work Team in a pre-bid conference. In this role, the advisor may share with bidders proposed aspects of the project, answer questions related to the anticipated approach to construction or certain technical components of the project, or highlight how the project is likely to interface with other public assets and services, etc. In contrast, only a properly authorized government employee (and in this case only with Supervisory Committee approval of the project’s technical parameters) may commit the government to the type of technical solutions that will be used in a project. Once that decision is made, the advisor may convey to bidders in a pre-bid conference the practical implications of that decision on the project, but cannot commit the government to a specific technical course of action beyond that which was authorized.

As a result, Entities and Work Teams shall control the use of advisors, careful specify what activities they are authorized to perform and representations they have authorized to make, and disclaim and/or clarify any acts or representations made by advisors that exceed their limited authority.

Upon request, NCP will assist in answering any questions, making any clarifications regarding the application of these limited authority principles and appropriately scoping advisor authority.

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Part Ten: Appeals Procedure The Privatization procurement procedures of the Kingdom are designed to ensure fair, equal, and objective consideration of all bids. The procedures also incorporate robust anti-corruption provisions, reflecting international best practice as recognized by the United Nations, World Bank, and other international organizations. To help ensure that these procedures are fully and correctly implemented, in a transparent and accountable manner, NCP has established a Privatization Procurement Appeals Procedure which provides a venue for private parties who feel they have been aggrieved by a breach of the Privatization regulations to seek remedy. Privatization procurements are exempt from all other procurement appeals processes.

Section 1: Reviewing Authority

Privatization procurement appeals will be received and reviewed by the Privatization Procurement Appeals Board, an independent entity established by the Kingdom’s Privatization Law (Resolution Number upon completion). The decisions of the Privatization Procurement Appeals Board are final and not subject to further review.

The Privatization procurement Appeals Board shall consist of five members with expertise in matters of contract law and/or Privatization, and shall include both international1 and Saudi experts in these fields. Two of the five members shall be attorneys, and the other members shall represent the fields of economics, engineering or finance.

Members of the Privatization Procurement Appeals Board shall be nominated by NCP subject to approval from CEDA. Upon approval, Members shall serve for a three-year term, and may be reappointed to additional terms, subject to NCP nomination and CEDA approval.

Section 2: Criteria for Filing an Appeal

To file a valid Procurement Appeal, private parties must meet all of the following criteria:

a) Be an eligible appellant; b) Have grounds for appeal; and c) Submit a compliant appeal in a timely manner.

Section 3: Eligible Appellants

Private parties are eligible to appeal a Privatization procurement if:

a) Acting as a prime contractor, they submitted a timely response to an RFP, in the form of a proposal conforming with all RFP requirements, and they were not selected as the preferred bidder; or

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b) Acting as a prime contractor, they submitted a timely response to an RFQ, in the form of an SOQ conforming with all RFQ requirements, and they were not selected to participate as a shortlisted bidder; or

c) They were potential bidders on an RFQ or RFP, and have notified the relevant Supervisory Committee, or its delegate, on a timely basis that there were deficiencies in the RFQ or RFP which would unduly constrain or limit competition and these deficiencies were not adequately addressed by the Supervisory Committee.

Appeals received from parties which are not eligible appellants will be rejected.

Section 4: Grounds for Appeal

Private parties have grounds to appeal the outcome of a Privatization procurement (shortlist or selection of preferred bidder) if they:

a) Can demonstrate that the procuring Entity was not fully compliant with NCP requirements in its conduct of the RFP, and that remedying these deficiencies may materially be expected to affect the selection of the preferred bidder; or

b) Can demonstrate that the procuring Entity was not fully compliant with NCP requirements in its conduct of the RFQ, and that remedying these deficiencies may materially be expected to affect the selection of the shortlisted bidders; or

c) Can demonstrate that the selection of the preferred bidder or shortlisted parties was influenced by corrupt activities.

Private parties have grounds to appeal the Privatization procurement (RFQ or RFP phase) if they:

d) Can demonstrate that the bidding requirements were unduly restrictive or unreasonable and materially affected their ability to submit a responsive SOQ or bid, and that the procuring agency failed to address the issue(s) after receipt of timely notification.

The grounds for an appeal must be clear and specific, and identify the specific act(s) or failure(s) to act which justify remedial action on the part of the procuring Entity. Vague or unsupported appeals will be rejected.

Section 5: Timely Appeals

To be considered timely, a compliant appeal must be received by the procuring Entity within the following time limits:

a) For an appeal of the selection of preferred bidder, the appeal must be received by the Privatization Procurement Appeals Board within 10 working days of publication of notice of preferred bidder on the procuring Entity’s website.

b) For an appeal of the shortlist selection of preferred bidder, the appeal must be received by the Privatization Procurement Appeals Board within 10 working days of publication of notice of shortlist on the procuring Entity’s website.

c) For an appeal of the RFQ or RFP bidding requirements, the appeal must be received by the Privatization Procurement Appeals Board prior to the closing date for RFQ or RFP responses.

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Section 6: Receipt of Appeals

Appeals will be received at the office of the Privatization Procurement Appeals Board during normal working hours. Upon receipt of an appeal, the Secretariat of the Board will issue a written receipt, identifying the submitting party, date and time. To facilitate the receipt process, the exterior of the envelope, box, or other packaging containing the appeal should be clearly marked “Appeal”, together with the name and number of the procurement, and the name of the appellant.

Section 7: Form of Appeals

The appeal shall be written and include as a minimum the following:

a) The name and address of the appellant; b) Contact information (name, title, email, telephone) for the appellant’s point of contact c) Appropriate identification of the RFQ or RFP, e.g., name and/or number of the

procurement, as applicable; d) A detailed legal and factual written statement of reasons for the appeal; e) Supporting exhibits, evidence, or documents to substantiate the reasons for the

appeal; and f) The relief requested.

Section 8: Validation of Appeals

Upon receipt of an appeal, the Privatization Procurement Appeals Board will first determine whether the appeal is valid (from an eligible appellant, with grounds to appeal, submitting a compliant appeal in a timely fashion). The determination of validity shall be made within ten working days from receipt of appeal. If the appeal is found to be invalid, the Privatization Procurement Appeals Board shall make written notification to the appellant within five working days of making this determination. The notification shall include:

a) The name and address of the appellant; b) Contact information (name, title, email, telephone) for the Privatization Procurement

Appeals Board’s Secretariat point of contact; c) Appropriate identification of the RFQ or RFP, e.g., name and/or number of the

procurement, as applicable; and d) The reason(s) why the appeal was determined to be invalid.

Section 9: Consideration of Appeals

Upon determination that an appeal is valid, the Privatization Procurement Appeals Board shall commence its review. Reviews shall normally be completed within 90 working days, however, the Privatization Procurement Appeals Board, at its discretion, may extend the review period for any appeal when warranted by complexity or volume of its caseload.

In conducting its review, the Privatization Procurement Appeals Board will review the appeal, discuss the allegations with the procuring party, ask written questions and/or request documents from the procuring party and/or the appellant, interview and accept testimony from the appellant, the procuring party, and other knowledgeable parties, and analyze the data to reach its decision. The Privatization Procurement Appeals Board may

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require in person attendance at meetings or conferences regarding the appeal, and may subpoena parties or necessary evidence to support its deliberations. Appellants may elect to have counsel present at any proceeding of the Privatization Procurement Appeals Board at which they will give testimony.

Decisions shall be made on the basis of a majority vote, with a minimum of three Privatization Procurement Appeals Board Members participating.

Section 10: Documentation of Decision

Whenever the Privatization Procurement Appeals Board makes a decision regarding an appeal, it shall document its decision in a written report which shall be furnished to the appellant and the procuring Entity. A copy of this report shall be made public on the Privatization Procurement Appeals Board’s website. The public version may be redacted to protect any proprietary data of the bidding parties contained in the full report. Subject to any redactions in the public versions, each report shall contain, at a minimum:

a) The name of the appellant. b) The name of the procuring Entity. c) Appropriate identification of the RFQ or RFP, e.g., name and/or number of the

procurement, as applicable. d) The stated grounds for the appeal. e) The actions taken by the Privatization Procurement Appeals Board to investigate the

appeal. f) The conclusions of the Privatization Procurement Appeals Board. g) Any actions required to be undertaken by the parties (appellant and procuring

Entity).

Section 11: Forms of Relief

If an appeal is found to have merit, various forms of relief may be appropriate, depending upon the findings of the Privatization Procurement Appeals Board and the phase of procurement at which the issue(s) arose. The alternatives include the following determinations:

a. Corruption 1) If the Privatization Procurement Appeals Board determines that the selection of a

preferred bidder for a Privatization contract award was influenced by corrupt or prohibited activities, either by that party or on its behalf, contract award to that bidder shall be prohibited and any Privatization Contract that has been signed shall be terminated. The decision will also be furnished to appropriate authorities to determine whether additional civil or criminal charges may be warranted. Contract award may then be made to the second highest ranking bidder, if this bid offers sufficient value for money. This contract award must be approved by the appropriate Supervisory Committee and CEDA, based upon an updated Fourth File.

2) If the Privatization Procurement Appeals Board determines that a private party’s presence on a RFQ/RFP shortlist was influenced by corrupt or prohibited activities, either by that party or on its behalf, that bidder shall be struck from the procurement shortlist. The decision will also be furnished to appropriate authorities to determine whether additional civil or criminal charges may be warranted.

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3) If the Privatization Procurement Appeals Board determines that: (a) corrupt or prohibited activities occurred during a Privatization procurement; and (b) these activities led to any aspect(s) of the procurement being inappropriately conducted; and (c) an appeal was filed before shortlist or award decision (as applicable) was made, then any party conducting such activities or on whose behalf such activities were conducted will be excluded from further participation in this procurement. In addition, the procuring party will be required to amend the procurement to remedy any aspect which will limit competition or otherwise negatively influence the outcome. The decision will also be furnished to appropriate authorities to determine whether additional civil or criminal charges may be warranted.

4) If the Privatization procurement Appeals Board determines that corrupt or prohibited activities occurred during a Privatization procurement, but that these activities did not materially influence the procurement (e.g., they were intended to benefit a party who was not selected as the preferred bidder), the Privatization procurement Appeals Board may elect not to invalidate the selection of the preferred bidder, but will furnish the decision to the appropriate authorities to determine whether additional civil or criminal charges may be warranted.

b. Noncompliance with NCP Procedures 1) If the Privatization Procurement Appeals Board determines that the selection of a

preferred bidder for a Privatization contract award was materially influenced by Entity noncompliance with NCP requirements (e.g., through error or omission), contract award to that bidder shall be prohibited and the procuring party may be asked to re-perform the impacted parts of the procurement. Upon correction of the noncompliant processes, the procurement will continue, and the original preferred bidder will remain eligible to participate in the procurement. If the noncompliant processes cannot be remedied, the Privatization Procurement Appeals Board will determine whether the procurement should be cancelled or allowed to proceed or the Privatization Contract Terminated.

2) If the Privatization Procurement Appeals Board determines that the selection of a shortlist of bidders for a Privatization contract award was materially influenced by government noncompliance with NCP requirements (e.g., through error or omission), continuation of the procurement with that shortlist shall be prohibited and the procuring agency may be asked to re-perform the impacted parts of the procurement. Upon correction of the noncompliant processes, the procurement will continue, and the original shortlisted bidders will remain eligible to participate in the procurement. If the noncompliant processes cannot be remedied, the Privatization Procurement Appeals Board will determine whether the procurement should be cancelled or allowed to proceed.

3) If the Privatization Procurement Appeals Board determines that a procuring party’s conduct of procurement was noncompliant with NCP requirements and that an appeal was filed before shortlist or award decision (as applicable) was made, then the procuring agency may be asked to re-perform the impacted parts of the procurement. Upon correction of the noncompliant processes, the procurement will continue. If the noncompliant processes cannot be remedied, the Privatization Procurement Appeals Board will determine whether the procurement should be cancelled or allowed to proceed.

c. Finding of Compliance If the Privatization Procurement Appeals Board determines that the Privatization procurement has been conducted in compliance with NCP requirements and there is no

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evidence of corrupt or prohibited activities, the Privatization Procurement Appeals Board will deny the appeal, and the procuring Entity shall proceed with the procurement.

Part Eleven: Risk Allocation and Payment Mechanism Any infrastructure contract involves risks. These include commonly-recognized risks, such as the risk of construction delays, cost over-runs, or design flaws, to risks such as unforeseen macroeconomic conditions affecting the project’s financial stability. A key decision in Privatization projects is how these risks will be allocated between the public and private sector parties to the contract. The risk allocation also influences the selection of contract payment mechanisms. This section provides guidance to Entities on risk allocation and payment mechanism.

Section 1: Risk

Risk has been defined as the uncertainty of an outcome, whether as a positive opportunity or a negative threat of actions and events that might occur in a project. Risk is also described as the chance of an event occurring which would cause actual project circumstances to differ from those that were assumed when the benefits and costs of a project were forecasted. An important aspect of Privatization planning, therefore, is clearly allocating risks and implementing approaches to mitigate those risks. Section 2: Risk Allocation

Risk allocation involves defining which party to the Privatization contract will assume each risk, i.e., identifying which risks the private sector party will be responsible for and to what extent, and identifying which risks the Entity will be responsible for and to what extent. As part of the Third File, a detailed risk matrix will be prepared containing details of the risks identified and who will be responsible for it. Allocation of risk to the private sector party is also referred to as “risk transfer”, and allocation to the Entity is also referred to as “retained risk”. Risk transfer is defined by the contract scope and the Privatization contract structure. When the government undertakes an infrastructure project as a traditional public procurement, the government assumes most of the risks. For example, if the government designs the infrastructure asset, the government would be responsible for any additional costs incurred as a result of flaws in that design. One of the benefits of the Privatization model is that many of the risks can be transferred to the private party, reducing the risks to the government, and incentivizing the private party to mitigate and control those risks in an effective manner (for the least cost). Risk transfer is related to the search for efficiency, which is one of the key motivations for undertaking a project as a Privatization. Transferring the financial consequences of the project risks to the private party creates the incentive for the private party to deliver the infrastructure and service to the public as scheduled and in the required condition. This is because the party with the higher capacity to control with respect to a particular risk (in a

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Privatization, this is usually the private party) has the best opportunity to reduce the likelihood of the risk eventuating and to control the consequences of the risk if it materializes. Hence, the appropriate transfer of risk creates incentives for the private sector to supply timely, cost effective and more innovative solutions. For example, in a Privatization, the private party is normally responsible for project design and construction. Therefore, the private party should bear the risk of additional costs due to design flaws or construction issues, as they control the design and construction processes (an exception may be made for construction delays due to acts of nature [force majeure] beyond the private party’s control). Therefore, transfer of risk can generate efficiency, but only up to a limit; there are some risks which may best be retained by the government. For example, the risk of future regulatory change imposed by the government is one over which the private party has no control, and cannot effectively estimate the potential impact. Therefore, the Entity should consider remaining exposed to some of the financial implications of some of the risks and the uncertainty affecting the asset and the service. Also, the Entity will always remain exposed from a reputational standpoint, where they are the ultimate owner of the asset and have ultimate responsibility for the service delivery despite the delegation of service delivery to a private party. The private party shall include any costs incurred in assuming and managing each risk in the bidding price (for example, in the user fees or government payments). This cost is known as a risk premium. There are types of risks and/or levels of uncertainty (amounts of potential exposure) for which the risk premium may become too high or expensive. In addition, the transfer of certain risks may not be feasible, i.e., they may affect the ability of the project to attract financing. On other occasions, a risk may be acceptable to the private party at a reasonable price, but the Entity may be better positioned to handle the risk and therefore may wish to retain it or to share it with the private party according to an agreed formula, and in so doing improve the project VFM. When there are clear signs that the transfer of a risk to the private party will be unacceptable, or that it will only be accepted at a cost higher than the expected loss for the Entity if the risk were to be retained and managed directly (by the Entity), then the risk should indeed be retained (or taken back). Some risks will not be fully transferred or retained, but shared.

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The optimum point of risk transfer/retention or the maximum point of VFM will be that point at which the marginal VFM (the additional benefit in terms of incremental efficiency) of changing the risk allocation is negative. In other words, coming from a full transfer of risks, the optimum risk allocation structure will be reached at the point in which VFM is reduced, provided that the additional risk retained. Or, conversely, coming from a full retention, it will be the point at which, if an additional risk is transferred, the VFM is reduced. If the risk transfer is too aggressive, the private sector may be unwilling to submit bids as it will not be able to manage all of the transferred risk. If the risk transfer is too conservative, it may be more appropriate to opt for a Design and Build arrangement rather than a Privatization (see figure below).

Section 3: Payment Mechanism

Payment mechanism refers to the method of payment to the private party such as user fees and/or government payments based on usage or availability (or both), and how incentives and penalties are to calculated in the private party compensation account. Payment mechanism shall reflect risk allocation within the scope of obligations and terms of service.

The Entity shall consider the following options for the Payment Mechanism. The options chosen will to an extent, be driven by the nature of the project and the due diligence done with respect thereto:

a) User charges—payment collected by the private party directly from users of the service.

b) Government payment—payment by the Entity to the private party for services or assets provided. These payments could be: 1. Usage-based—for example, shadow tolls or output-based subsidies.

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2. Based on availability—that is, conditional on the availability of an asset or service to the specified quality.

3. Upfront subsidies based on achieving certain milestones. c) Bonuses and penalties, or fines—deductions on payments to the private party, or

penalties or fines payable by the private party, due if certain specified outputs or standards are not reached; or conversely, bonus payments due to the private party if specified outputs are reached.

The Entity shall design a payment mechanism that includes one or more of these elements, which shall be fully defined in the contract—including specifying the timing and mechanism for making the payments in practice. The payment mechanism should reflect, to the extent applicable, the risk allocation that maximizes VFM.

The Entity shall address specifically the following risks in the payment mechanism:

a) Demand risk. b) Performance risk. c) Inflation risk. d) Interest risk. e) Exchange rate risk.

For example, inflation risk refers to the uncertainty on the level of inflation during the period of the Privatization arrangement. As inflation is primarily driven by economic conditions, the private sector party is not able to manage this risk. If this risk nevertheless would be transferred to the private sector party, the private sector party would have to make an assumption on the level of inflation. The private sector party would make a conservative assessment of the level of inflation as the private sector party would not want to be exposed to a situation where the actual costs in nominal terms i.e. costs adjusted for inflation could not be offset by revenues. Thus the private sector party would include a risk premium for this uncertainty in its financial proposal. It is more advantageous to retain the risk of inflation. This could be effectuated by including an adjustment factor to the payment mechanism. This could be applied to either a user charge Privatization or a government pay Privatization. Both parties agree on a rate to allow for recovery of the costs in real terms i.e. not adjusted for inflation. The rate will be adjusted annually based on the actual inflation. In case of user charges, the private sector party will be allowed to adjust the user charge annually based on the actual inflation. In case of government pay Privatization i.e. availability payment, the periodical payments will also be adjusted for the actual inflation.

Alternatively, performance risk is a typical risk that is to be transferred to the private sector party. It refers to the risk that the performance does not meet agreed upon service standards (e.g. availability of the facility for use). In case of availability payments, the payment will be adjusted according the extent the performance delivery is not compliant with the standard. If for example, the contract agreement stipulates a minimum availability of facility for use of 90% of the time, and the actual availability is only 85%, the payment will be reduced. The level of the deduction is to be defined based on the specifics of the project and the impact of non-availability.

Due care is to be given to the treatment of demand risk, which should be identified by Demand Studies and the due diligence carried out on the project. Although a transfer of the demand risk through a user charge Privatization may be appealing as it relieves the Entity of financial contributions, the private sector party will charge a premium for bearing this risk. If demand for the use of the facility is highly uncertain and impacted by factors which are

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largely outside the control of the private sector party, the premium will be substantial and value for money is questionable. If this is the case, consideration is to be given to capping the demand risk. This could be done by introducing a minimum revenue guarantee that states that, if demand is below a predefined level, the Entity will fund the revenue shortfall. This capping of downside risk is to be offset by a benefit sharing provision that states that, if demand is more than a predefined level, the excess revenues will be shared between the parties. If demand is too uncertain even for such a risk sharing, the Entity is to consider the use of an availability payment scheme and retain the demand risk.

Section 4: Default Risk Allocation and Payment Mechanism

The Entity shall consider the following default risk allocation in the table below and a related payment mechanism where applicable and deviate from these guidelines only when there is a clear commercial case (i.e., better Value for Money), which will result from an alternative approach. The following table also provides guidance on how the Entity is to support the mitigation of the risks.

*Note: This table is provided as interim Default Risk Allocation matrix.

Risk Description Consequence Default Allocation

Payment Mechanism

Comments

Land acquisition

Risk that land necessary for the facility is not available or at a higher cost than estimated.

Delay and cost increases.

Entity Condition precedent for contract effectuation.

Entity to arrange adequate budget for land acquisition and launch Request for Proposal only once a substantial part of the land has been acquired and there is reasonable likelihood that all land will have been acquired upon commercial close.

Connecting infrastructure

Risk that connecting infrastructure relevant to the


Entity Condition precedent for contract effectuation

Entity to arrange adequate budget for

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Payment Mechanism

Comments

construction and operation of the facility is not in place on time (e.g. power, water).

connecting infrastructure and have appropriate arrangements for necessary connections in place with respective stakeholders.

Site Condition Risk of site conditions impair planned construction (e.g. adverse ground conditions, archaeological finds, contamination).


Private Any delay in issuance of certificate of completion will lead to delay in payments.

Entity to ensure that bid process allows for appropriate due diligence of the site condition and facilitate due diligence by making available all relevant data and access to the site.

Design Risk that design of the facility is incapable of delivering of the services at anticipated costs.

Cost increase. Private Any delay in issuance of certificate of completion will lead to delay in payments.

Entity to ensure that design is delivered as agreed through an effective project monitoring regime and facilitate in any possible cost reduction program to minimize the risk of bankruptcy.

Commissioning Risk that project approvals may not be obtained, delayed, or with unanticipated conditions (e.g. completion certificate)



Entity to ensure that bid process allows for appropriate due diligence of the necessary approval regime and

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Payment Mechanism

Comments

facilitate due diligence by making available all relevant data.

Construction Risk in construction that prevents the facility being delivered on time and on costs.



Entity to ensure that construction is delivered as agreed through an effective project monitoring regime and facilitate in any possible cost reduction program to minimize the risk of bankruptcy.

Demand Risk that usage of the facility is less than anticipated (e.g. unanticipated economic or demographic circumstances).

Revenue will be below projection.

Private except to the extent that Entity has committed to an Availability Payment element.

User charges except to the extent that Entity has committed an Availability Payment element.

Entity to consider value for money of demand risk transfer. In case of transfer of demand risk Entity to consider capping of demand risk transfer. Downside risk through Minimum Revenue Guarantees and upside risk through Benefit Sharing provision.

Performance Risk that performance does not meet with the agreed upon service standards (e.g.

Sub-standard performance

Private Entity to include adjustment factors in payment mechanism

Entity to ensure that contract includes or refers to unambiguous

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Payment Mechanism

Comments

availability of the facility).

to penalize for sub-standard performance.

and measurable service standards and that payment mechanism includes fair and reasonable payment deductions and or penalties for sub-standard performance.

Operations Risk that operations do not meet standards or are costlier than anticipated (e.g. technology failure, labour disputes, environmental incidents).

Cost increase. Private. No change allowed in payments from user and or Entity.

Entity to ensure that operation is delivered as agreed through an effective project monitoring regime and facilitate in any possible cost reduction program to minimize the risk of bankruptcy.

Inflation Risk that costs increase over time because of inflation.

Cost increase. Entity Entity to include adjustment factor in payment mechanism to account for inflation to the extent applicable.

Entity to forecast inflation for the operating expenditures and agree on the portion of the payment that is related to actual inflation considering that debt service is already in nominal terms.

Interest Risk that interest rate

Cost increase Private – Entity.

Entity to include

Entity to minimize

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Payment Mechanism

Comments

increases during the debt tenor.

adjustment factor in payment mechanism to account for fluctuation in interest rate.

exposure in the short term by including in the payment mechanism a period when payment is not adjusted for interest rate fluctuation. Entity to define period based on assessment of availability of long-term debt facilities.

Exchange rate Risk that Saudi Riyal depreciates vis-à-vis any hard currency i.e. USD, EUR or GBP.

Loss of revenue.

Entity Entity to include adjustment factor in payment mechanism to account for exchange rate fluctuations.

Entity to agree on portion of payment that is related to expenditures denominated in hard currency.

Change in Law Risk that changes in legislation and regulations impact costs and or revenues upon meeting service standards.

Loss of revenues and or cost increases.

Entity Entity to include provision in contract for adjusting payment mechanism to account for adverse discriminatory law or regulation.

Refers only to those changes in legislation and regulation that have specific impact on the project i.e. discriminatory changes. Entity to consider mitigating its exposure by only compensating adverse effects over an agreed upon

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Payment Mechanism

Comments

Significant Amount.

Force Majeure Risk of an extraordinary circumstance beyond the control of the parties (e.g. war, terrorism, strike, riot, crime, severe weather, geological event, (‘act of God’).

Prevents one or both parties from fulfilling their obligations under the contract

Shared Entity to include appropriate provisions in the contract for addressing Force Majeure.

Disasters or other natural events that are not controllable by either party but with potential extraordinary impact should be shared. If risks are insurable, Force Majeure should not apply, and risks are allocated to Private sector party.

Change in Specification

Risk that specifications need to be changed for any which reason.

Delays and or cost increases.

Entity Entity to include provisions in the contract for addressing Change in Specification and impact on payment mechanism.

Entity to ensure minimization of the chance of its specifications changing and, to the extent they must change, ensuring the design is likely to accommodate it at least expense.

Residual Value Risk that the condition of the facility is not in accordance with the agreed upon hand-back specifications.

Cost to rectify. Private Entity to include appropriate provisions in the contract to penalize for sub-standard residual value.

Entity to define and include in contract appropriate hand-back requirements.

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Part Twelve: Value for Money VFM analysis shall be performed for each proposed Privatization project in accordance with this Manual. NCP reserves the right to: modify the approach; request additional information; or require a more detailed analysis, as it deems necessary, for any specific project.

VFM seeks to capture the relationship between the cost of a project and the value which the project will provide.

The cost element usually represents the cost over the lifetime of the project to deliver the associated value, including the costs of managing the associated risks. Value comprises the quality and quantity of service or performance level over the same period.

Section 1: Assessing VFM

Demonstrating VFM requires an increasingly detailed comparative qualitative and quantitative assessment at various stages of the Privatization approval process. This begins with an identification, at the First File, of the factors which may enable the Privatization project to provide adequate VFM management. Furthermore, at the Second File, a qualitative assessment of value shall be provided, with identification of the project’s key drivers of value. For the Third File, a quantitative assessment shall be performed, comparing the net present value (NPV) of the cash flows of the public sector option (PSC) with that of the Privatization option. To support approval of the Privatization option, the analysis must demonstrate that the NPV of the preferred Privatization procurement approach is no worse than that of the public sector one. This comparative VFM assessment shall be updated at the Fourth File, based on the actual proposal of the preferred bidder.

This approach is summarized below.

Section 2: VFM Potential – First File

Although a formal value-for-money analysis is not required, the Entity should include with the First File a brief overview regarding the possibility of achieving value for money, when considering the valuation of the privatization option against other alternatives (see the First Item, of the First Chapter in the Third File of this Manual against other alternatives in the First File of the Manual).

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Section 3: Qualitative Assessment – Second File

A. At the Second File, the Work Team shall undertake a qualitative VFM assessment with respect to public finance management. The purpose of the qualitative analysis is: Provide, in qualitative terms, how the Privatization option provides value for money when compared to the public sector procurement option.

B. Identify, compare and discuss the key drivers of value for money for the Project. These key drivers will later form an integral part of the quantitative analysis in the Third File. As part of the analysis, the Second File shall provide examples of challenges and issues that have impacted projects historically under public sector procurement and how these issues and challenges will be addressed as part of the Privatization option. One of the key areas of analysis and discussion will be around risk allocation across the different options.

The qualitative analysis shall address the following areas:

A. What are the project’s main characteristics that could lead to value for money under the preferred procurement option and why (e.g., scale, scope, whole life costing approach, delays, cost overruns, etc.). The analysis shall be supported by examples of previous projects and an identification of the key drivers of value for money. In addressing this, it may consider the areas set out in Table 1 below, or other factors as applicable.

B. Although the assessment is based on the proposed risk allocation (Part 11 Chapter 4 of this Manual), it also provides an explanation and assessment of how this allocation will result in value for money. Table 1 – Qualitative Analysis

Areas for consideration and discussion VIABILITY Efficiency • Is the private sector able to exploit economies of scale through the provision,

operation or maintenance of other similar services to other customers (not necessarily utilizing the same assets)? How will this be achieved contractually and what is the impact on the cost structure?

• Does the private sector have greater experience/expertise than the Entity in the delivery of this service? Are the services non-core to the Entity?

DESIRABILITY Risk Management • Bearing in mind the relevant risks that need to be managed for the program,

what is the ability of the private sector to price and manage these risks? •

Risk management • With consideration to the relevant risks that need to be managed for program implementation, what is the capacity of the private sector to manage and assess the magnitude of these risks?

Participation • Is there an opportunity to participate in finding solutions or providing services? • Can the private sector improve the utilization of the assets on which the project

is based (such as sale, licensing, commercial development for the use of third parties, etc.)? And how is that done?

Contract duration and residual value

• Can service demand be reasonably predicted for the future? • What is the expected life of the assets, taking into consideration the number

of major asset upgrades or refurbishments during the contract or the design life of the asset?

• What are the advantages and disadvantages of a long contract length? • Are there constraints in using the assets after the contract ends? • What are the envisaged arrangements for the asset at the end of the contract

period or its useful life? Lifecycle costs • Is it possible to integrate the design, build and operation elements?

• Are there significant ongoing operating costs and maintenance requirements? Are these likely to be sensitive to the type of construction?

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Design integration • To what extent does design integration impact on VFM? How will this be realized?

Whole life costing • What and where is the scope for whole life savings? What are the maintenance costs?

• Do these have any environmental impacts or other impacts (e.g., more energy efficient buildings)?

• Do the proposed risk allocation incentivize the correct behavior by the bidders?

Section 4: Quantitative Analysis – Third File

The Third File shall include a quantitative analysis which shall:

a) develop project cost and income estimates and use these as inputs to construct a PSC financial model, projecting them as if performed as a traditional public procurement.

b) develop a parallel set (on a comparable basis) of financial projections and a financial model for the selected Privatization option.

c) calculate net present values (NPVs) for the two sets of financial projections.

d) compare the two NPVs to arrive at a quantitative assessment of VFM. The Work Team shall follow these steps to: construct a PSC financial model; construct a financial model for the Privatization option; and to undertake the VFM analysis. A suggested template for the financial model output, especially with respect to the cost breakdown required as a minimum, is provided at Table 3 below for the PSC and Table 4 for the Privatization Option (See Templates at the end of this section).

Section 5: Develop the PSC

The first step for conducting a quantitative VFM assessment is to develop a PSC financial model. The objectives of the PSC are:

a) To provide an insight into the costs, income and risks over the project life if the project were performed using traditional public procurement; and

b) To use it as a benchmark to compare with, initially, the Privatization option being proposed and eventually with the bids received as part of the Privatization procurement process. The results of the comparison will show a) whether VFM is achievable through a Privatization and b) whether the preferred bid(s) result in better value for money when compared to a public sector procurement.

A PSC is an estimate of the whole-life or baseline costs of the project from the government’s perspective, if the project were to be implemented through a traditional procurement route, taking into account any income that would be received by government in this circumstance. These costs and income should reflect the achievement of the same results as expected from the private sector under the Privatization contract. The comparison of the public sector

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and Privatization solutions will not be valid if the two sets of costs reflect different performance levels.

Section 6: Source of Data / Assumptions

The Work Team shall ensure that the cost and income analysis is based on actual and/or similar recent projects delivered under public procurement, taking into consideration the performance standards or service levels of an equivalent level as that of the Privatization option. If there is no data available on actual or similar projects delivered, then the Work Team shall obtain appropriate professional expertise in that specific asset area to compile the requisite costs.

The Work Team shall document the assumptions made and sources used to arrive at these costs and income, separately as an annex to the spreadsheet model. The assumptions shall be clearly explained and the sources referenced appropriately through source documents, links to data sources, etc. See Tables 5 and 6 (in the Templates below) for an example of how the assumptions should be set out for the PSC and the Privatization Option.

Section 7: Term of the Projections

The term of the projections shall be the term projected for the Privatization contract.

Section 8: Cost Analysis

The Work Team shall, as part of the Third File, include indicative implementation cost estimates for each phase of the project, in current (nominal) prices and in Saudi Riyals (SAR), adjusted for inflation, as follows:

a) for local costs (Saudi costs) e.g., labor, materials manufactured in Saudi or procured from within the country, a general inflation rate (or appropriate indexation) shall be applied. Work Teams shall consult with the NCP to obtain forward estimates of inflation.

b) for non-local costs, for example specialized and technical equipment that is likely to be obtained from abroad, appropriate inflation factor should be applied to these e.g., if equipment is of US origin and relates to the oil and gas sector, then specialist US Producer Price Index by Industry: Drilling Oil and Gas Wells: Drilling Oil, Gas, Dry, or Service Wells, shall be used. These assumptions and sources of data should be clearly stated and referenced.

c) Work Teams shall consult with the NCP to obtain forward estimates of exchange rates where applicable.

For the construction/implementation phase, such costs may include, as applicable:

a) Project preparation and development costs, including staff costs and consultancy fees for project management, preliminary design, feasibility study, impact studies, consultant management, and legal and procurement support.

b) Land acquisition. c) Construction. d) Plant and equipment. e) Fixtures and fittings. f) Development costs.

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g) Testing. h) Training. i) Contingency costs. j) Other costs.

Note that for infrastructure asset which would be the subject of a Privatization and where existing government assets, such as land, real property, equipment, etc., would be made available to a project company, the value of these assets shall be considered as part of the PSC and the same value as that applicable under the Privatization option shall be used in both the PSC and the Privatization option VFM analysis.

Mitigation costs shall be identified if there will be a need to build mitigation measures into the project design, due to anticipated negative environmental or social impacts. If the private party is bearing the costs of these measures under the Privatization option, these costs should form part of both the PSC and the Privatization option VFM analysis. In the event that these costs are borne by the public sector, the costs associated with this should be set out as part of the Financial Case as described in the Part One of the Third Chapter of the Manual.

For the operational phase, costs may include, as applicable:

a) Staffing for project operation, maintenance, management, and support, to include indirect support, such as accounting, human resources, and legal, etc. Staffing costs also include training, payroll and benefit costs.

b) Material and supplies. c) Utilities. d) Facility, plant, and equipment repair, renovation, and replacement. Assumptions on

repair, renovation, and replacement cycles should be clearly described, with supporting rationale.

e) Support contracts and insurance. f) Indirect costs. g) Other costs.

Section 9: Impact of Energy and Utility Adjustment

As part of the VFM analysis, the Work Team shall include the cost of energy that reflects the opportunity cost of producing energy and other utilities. The Work Team shall consult with NCP to arrive at an estimate of the unit cost of energy and utilities to be used for the purposes of this adjustment. This adjustment shall be made where the costs of energy and utilities are subsidized. In the event that this is not the case and that costs are similar to those that would be incurred by the private partner, then no adjustment is required.

The main reasons for this adjustment, is to create a fair comparison across the options, given costs of energy and utilities are subsidized for government entities.

Section 10: Income Analysis

The income analysis should only include income that would arise under a public procurement option. Assumptions used in calculating income should be clearly stated. Income sources could include:

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a) income from sale or rental, for example, surplus assets such as land and buildings could be sold or rented to third parties.

b) income based on residual value. The residual value is only relevant if the residual value differs significantly between the Privatization and public procurement options. In all other cases, the residual value should not be included in the PSC.

c) revenue to the government, if the government would sell some or all of the services produced to non-government parties e.g., tolls, user fees or other sources.

Section 11: Funding Analysis

Under a public procurement where the project is funded entirely from government sources including as part of a budgetary allocation, the PSC financial model will not include any financing cash flows. However, in the event that funding for the project is through other non-government sources where there is a direct funding cost to the Entity, the Work Teams shall include the related financing cash flows in the PSC financial model based on the cost envisaged for these funds.

Section 12: Risk Analysis and Adjusted PSC

Risks form an integral part of every project, and the cost of assuming these risks must be borne by some party. In a traditional public procurement, many of the risks, such as the risks of delays and cost overruns, may be borne by the government. Under the Privatization option, however, the risks of delays and cost overruns (among others) are passed on to the private sector. An accurate cost comparison must therefore consider the cost impact of this risk transfer.

As part of the Qualitative Analysis conducted in the Second File, a risk analysis and allocation assessment from a value for money perspective was performed. In calculating the PSC, the Work Team shall revisit the risk analysis it conducted as part of the Second File. It shall select the most important risks based on the potential impact of these risks on the cost and income estimates, e.g., resulting in delays in the project and/or an increase in project costs, and value them to adjust the PSC accordingly.

The risk adjustment is required because the two cash flows need to reflect, as far as possible, identical risk profiles from the government’s perspective. For example, if the construction risk is transferred to the private partner under the proposed Privatization scheme, the PSC needs to reflect the costs related to bearing the construction risk, and the economic consequences of possible construction cost overruns should be included in the PSC.

Section 13: Valuing the Risks

The Work Team shall value the risks based on historical data or expert opinion, as set out below.

The Work Team shall estimate the probability of cost overruns (including the impact of delays) based on historical data on previous public construction contracts, operation and maintenance (O&M) contracts, and renewal and replacement contracts. When no such data is available, the experience of technical experts shall be used to arrive at the probabilities for such cost overruns (this is generally a percentage of deviation over the

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baseline project costs). All the assumptions and data sources shall be extensively documented.

The risk valuation analysis depends on the proposed risk allocation envisaged by the draft Privatization Contract as a part of the preliminary contract structure because only the risks transferred to private parties in the Privatization option should be used in the PSC adjustment.

In summary, the Work Team shall undertake the following steps in valuing risks:

a) Estimate the size or impact of the risk. b) Estimate the probability that the risk will occur. c) Create a risk matrix which sets out the risk, the size of the risk, the estimate of

probability and a probability weighted value (see example - Table 2 below).

The probability-weighted values arrived at in the risk matrix for each specific cost item shall be added as adjustments to the cash flows developed for the initial PSC to arrive at a risk adjusted PSC, based on the timing of those cash flows. For example, in the example in Table 2 below, operating costs would be adjusted by SAR 10m per annum if there were no other adjustments to be made to operating costs.

Table 2 – Example - Valuation of Risks

No Risk Category and consequence

Size (SAR) Probability (%)

Probability Weighted

value (SAR)

Impact on

1 Scope for consultants not clear – cost overruns

5,000,000 20 1,000,000 Construction costs

2 Land acquisition – delay and overruns


3 Capital expenditure increase – cost overrun


4 Operational phase standards re-defined

50,000,000 per annum

20 10,000,000 per annum

Operating costs

Section 14: Final PSC

The final PSC will comprise of cash flows over the period of the project set out in a spreadsheet and will include:

a) Costs and income arrived at to construct the initial PSC. b) Impact on the cash flows arising from the risk analysis (the time impact on these

cash flows needs to be taken into consideration).

The Work Team shall then discount these net cash flows using a discount rate that reflects the Government’s cost of borrowing capital for a similar period as the duration of the project. The discount rate for the purposes of the VFM analysis shall be obtained from NCP. Using this discount rate, the Work Team shall calculate the net present value (NPV) resulting from the PSC financial model cash flows.

Section 15: Construct Equivalent Privatization Option - Financial Case

As part of the VFM analysis, the Third File shall explore the financial case for the proposed Privatization project, so that this can be compared to the PSC. The Work Team shall

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develop the Privatization option financial projections by documenting these costs and income in a spreadsheet model based on the envisaged term of the Privatization contract (i.e., the same term as used for the PSC). See illustrative template set out at Table 4 for financial projections and the minimum cost categories that need to be addressed.

Section 16: Source of Data or Assumptions

The Work Team shall base the cost and income analysis on actual and/or similar recent projects delivered under Privatization schemes either in the Kingdom or elsewhere. When no such data is available, the experience of technical experts shall be used to derive the requisite cost and income projections.

Estimates shall be provided as financial values. At this stage of project preparation there is generally no preliminary design, so detailed item-by-item costing may not be possible; however, notionally estimates shall nevertheless encompass all the elements of cost and income estimates required to achieve the project’s purpose, with a goal of ± 10 percent accuracy. Metrics based on previous projects may be helpful, e.g., SAR per kilometer of a similar road, or costs per square meter of a similar facility.

The Work Team shall document the assumptions made and sources used to arrive at these costs and income, separately as an annex to the spreadsheet model. The assumptions should be clearly explained and the sources referenced appropriately through appropriate documents, links to data sources, etc. See Table 5 for an example of how the assumptions should be set out.

Section 17: Cost Analysis

The Third File shall include indicative cost estimates for each phase of the project. The Work Team shall develop comprehensive cost estimates in current prices and in Saudi Riyals (SAR). Whether or not the estimates take into consideration the effects on macro-economic factors, the preparation of financial projections must show projected estimates, such as risk allocation predicted under the Privatization option, and the possibility of including inflation and exchange adjustments as part of the payment mechanism.

For the construction/implementation phase, such costs may include, as applicable:

a) Project preparation and development costs, including staff costs and consultancy fees for project management, preliminary design, feasibility study, impact studies, consultant management, and procurement.

b) Land acquisition. c) Construction. d) Plant and equipment. e) Fixtures and fittings. f) Development costs. g) Testing. h) Training. i) Contingency costs. j) Other costs.

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Note that for a brownfield asset which would be the subject of a Privatization and where existing government assets, such as land, real property, equipment, etc., would be made available to a project company, the value of these assets shall be considered as part of the PSC and the same value as that applicable under the Privatization option shall be used in both.

Note that if existing government assets, such as land, real property, equipment, etc., would be made available to a project company at no cost, the value of these assets is still a cost to the Kingdom of executing the project.

Mitigation costs shall be identified if there will be a need to build mitigation measures into the project design, due to anticipated negative environmental or social impacts and these are to be borne by the private partner under the Privatization option.

The Third File shall identify costs associated with the operational phase of the project over the projected time frame. The cost of the contract itself shall be presented not as an estimated lump sum, but as annual costs over the projections period based on the categories of operational costs listed in the following paragraph. These costs include the following:

a) Staffing for project operation, maintenance, management, and support, to include indirect support, such as accounting, human resources, and legal, etc. Staffing costs also include training, payroll and benefit costs;

b) Material and supplies; c) Utilities; d) Facility, plant, and equipment repair, renovation, and replacement. Assumptions on

repair, renovation, and replacement cycles should be clearly described, with supporting rationale;

e) Support contracts and insurance; f) Indirect costs; and g) Other costs.

The cost to the government of administering and monitoring which might include salaries, training, payroll and benefit costs, and indirect support costs, such as accounting, human resources, and legal. Travel and other expenses may be applicable. Some functions may require specialized testing services (e.g., for water and wastewater), engineering inspections, or the retention of licensed or specialized consultants.

If there will be termination costs at contract expiry (e.g., at the end of the contract term, an asset will be purchased by the government from a private partner), an estimate of these costs shall be included, with supporting rationale.

Section 18: Income Analysis

The income analysis should only include income that would arise under a Privatization option from third parties, i.e., not income received from the government and comparable to that included in the PSC.

Income sources may include:

a) income from sale or rental, for example, surplus assets such as land and buildings could be sold or rented to third parties.

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b) any payment received by the private partner in relation to residual value at the expiry of the contract period should be considered if this cost differs significantly (+/-10%) between the Privatization and public procurement options. In all other cases, the residual value should not be included in the Privatization option. In the event that this cost is included, the assumptions used in arriving at the residual value should be clearly stated.

c) revenue to the private partner from selling some or all of the services produced to third parties e.g., tolls, user fees or other sources.

No availability payment or similar should be included.

Section 19: Funding Analysis

Under the Privatization Option, financing cash flows shall be included into the Privatization Option financial model. As part of the Third File, the Work Team shall set out the envisaged funding structure for the project including the debt and equity mix, sources of funding and overall cost of capital envisaged based on the market assessment.

The Work Teams shall model these funding cash flow projections as part of the Privatization Option financial model and clearly set out the assumptions. The key assumptions shall include:

a) Sources of debt, quantum, cost of the funds from each source and any associated constraints that are likely to be imposed by potential lenders on the size and structure of loans including service coverage ratios and amortization schedule (the Work Teams shall amortize the debt equally over the life of the debt unless other constraints take priority).

b) Sources of equity, quantum of funds and equity returns envisaged by the private partner.

Section 20: Availability Payments from Privatization Option Cash Flows

The Privatization option cash flow projections over the period of the project shall be set out in a spreadsheet and include the costs and income projections used to construct the Privatization option financial model. These net cash flows shall be used by the Work Team as required by the Third File under (Financial Case), to derive a proposed project payment mechanism and develop a projected schedule of payments over the contract term i.e., availability or offtake payments.

Section 21: Project Management and Monitoring Costs of the Entity

The Work Team shall include in the Privatization Option financial model the cash flows relating to the costs likely to be incurred by the Entity in project management and monitoring of the Privatization Contract, should the contract be awarded. Assumptions as to how the Work Team has arrived at these costs should be clearly stated.

Section 22: Final Privatization Option Cash flows

The final Privatization Option will comprise of cash flows over the period of the project set out in a spreadsheet and will include:

a) Costs, income, financing cash flows.

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b) Conversion of these into a payment schedule over the life of the envisaged Privatization Contract i.e., annual net payments.

c) Add the projected costs of project management and monitoring over the life of the Privatization Contract to arrive at net cash flows i.e., annual net payments plus project management and monitoring costs.

The Work Team shall then discount these net cash flows using a discount rate that reflects the Government’s cost of borrowing capital for a similar period as the duration of the project. The discount rate for the purposes of the VFM analysis shall be obtained from NCP. Using this discount rate, the Work Team shall calculate the net present value (NPV) resulting from the Privatization financial model cash flows.

Section 23: VFM Analysis

The difference between the NPV of the Privatization option less the NPV of the PSC is the value for money potential achieved by undertaking the Privatization option, as shown below. If the Privatization option provides equal or better NPV as compared to the public procurement option, then a Privatization procurement can be pursued.

Section 24: VFM Analysis – Revenue Share Structure

Some Privatization projects will generate substantial third party revenues, such as user charges. In projects where this is the case, some or all market risk is likely to be passed to the private partner. To reflect this, the Work Team, in conducting the VFM analysis, shall undertake the following steps:

a) Derive the income cash flows for the PSC financial model based on the results arising from the Demand or Market Study (i.e., tariffs and related user demand) undertaken as part of the Third File.

b) Derive the income cash flows for the Privatization Option based on the same assumptions used for the Privatization (this to be able to compare on a similar basis with the PSC).

c) Calculate the NPV for the PSC. d) Derive the minimum revenue share percentage under the Privatization Option that

would be required to achieve an NPV for the Privatization option that is similar to the PSC NPV above.

This minimum revenue share percentage shall be one of the key areas of review as part of the Third File review and approval process.

NPV of PSC

(1,000) NPV of PPP

option (800)

Value for Money (200)

VFM Analysis - Example

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Section 25: Estimate Potential Impact on VFM from Project Risks – Sensitivity Analysis

The purpose of the sensitivity analysis is to ascertain the impact of the key assumptions on the VFM analysis, in order to assess the robustness of the VFM analysis and the allocation of risk. This is required because these key assumptions may differ from actual experience if the project is implemented.

Some assumptions have significant consequences in the final estimates of costs and income. Examples include length of the project, significant cost components, impact of technology refresh, fluctuations in exchange rates, changes in lifecycle of a particular business sector. The Work Team shall select a minimum of three key assumptions which have the most significant impact on the project with respect to delays and cost increases, to be the focus of the sensitivity analysis.

The results arising from the sensitivity analysis shall be used as a cross check to the results arising from the valuation of the risks, and an assessment shall be made regarding the robustness of the VFM analysis.

The final conclusions regarding VFM shall consider the VFM analysis, the sensitivity analysis and the qualitative assessment undertaken earlier.

This will be especially important for projects where a revenue share arrangement is envisaged.

Section 26: Comparison with the Preferred Bid - Fourth File

The VFM analysis, along with the PSC benchmark, is set up prior to the start of the procurement, i.e., during the Third File. During the procurement phase, the Work Team shall adjust the PSC to take into consideration any changes which may arise from the procurement process. Adjustments may be required due to one or more of the following:

a) Changes in the time period covered by the PSC. b) Interim changes in the assumptions, circumstances or interpretations. c) Omissions in the calculation of the PSC model, risk analysis or the estimates.

At the Fourth File, the Work Team shall confirm VFM for the bid from the preferred bidder. The Work Team shall update the VFM analysis undertaken at Third File, incorporating any adjustments necessary to reflects changes made during the procurement phase and to reflect the final bid. These revisions ensure that the final VFM analysis reflects the actual outcomes of the procurement process.

The Work Team, in undertaking a comparison between the PSC and the preferred bid, shall take into consideration a number of differences arising from:

a) Differing assumptions. b) Payment for design and construction under the public sector procurement route. c) The spread of payments to the private sector under the Privatization structure.

The Work Team shall calculate the NPV resulting from the preferred bid and compare it to the NPV of the adjusted PSC. With this step, the Work team shall confirm that the preferred bid does provide value for money akin to or better than that demonstrated at Third File.

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Templates

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Part Thirteen: Insurance

Each Privatization contract shall ensure that the private partner’s requirements to protect the provision of services and the underlying assets of a project are clearly and explicitly defined. Insurance coverage is a key tool for providing this protection. The Work Team shall conduct an insurance requirements analysis as part of the Privatization project’s procurement planning.

Section 1: Required Insurances

The private partner shall be required to meet minimum insurance requirements throughout the duration of the Privatization contract. These requirements will typically include, but are not limited to:

A. Design and Construction: 1. professional indemnity to cover design flaws or other professional service

issues. 2. insurance during transportation to cover materials and equipment which will be

used during construction (may also include marine cargo insurance). 3. construction all-risk or construction erection all-risk to cover all assets and

operations on the site during construction of the project. 4. third-party liability insurance. 5. workers’ compensation. 6. employer’s liability. 7. consequential loss, to cover consequential losses due to delayed start-up,

advance loss of profit, and business interruption, etc. B. Operation:

1. all-risk insurance during operation, including, in particular, insurance of property damage during operations.

2. mechanical or electrical failure to cover failure and replacement of key equipment not covered by operational insurance.

3. third party liability insurance. 4. consequential loss. 5. environmental impact insurance. 6. supplementary and specialized insurances as appropriate to the specific project.

Section 2: Specific Requirements

The specific requirements for such insurances shall be determined for each Program and Project and shall be included in the Contract for each Project as appropriate. These requirements may include, but are not limited to:

a) form of policy. b) minimum levels of coverage. c) principal exclusions. d) maximum deductibles.

Section 3: Lender Requirements

For projects which entail significant capital investment, the private partner will typically utilize debt to finance a majority of the capex and initial operations. Insurance is a key area of

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interest for lenders, who will wish to ensure, as a condition of lending, that their interests in the insurances are adequately protected, and that the insurance framework provides appropriate protection to the project assets and services. The Privatization contract should enable lender concerns, e.g., for long-term cover and identification of lenders as co-insured, to be addressed, where this is not in conflict with the interests and objectives of the Kingdom.

Section 4: Retention of Advisors

The retaining of Insurance advisors for Projects or Programs is addressed and is subject to the terms set forth in the Rules.

Section 5: Insurance Issue Requirements

The relevant entity may also require the insurance policies to be concluded with companies of a minimum financial and reputational standing.

Section 6: Self-Insurance

Bidders shall be required to identify in their proposals any proposed areas and levels of self-insurance.

Section 7: Insurer of Last Resort

Insurance is not always the optimal solution for mitigating every risk, and may not be commercially available or economically feasible for certain risks. Therefore, in exceptional circumstances and with the specific approval of NCP, the Entity may agree to indemnify the Privatization Partner if risks are uninsurable, or only insurable at an unreasonable or prohibitive cost. The process for such determination will be made on a case by case basis.

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Chapter 6: Publication and Entry into Force Section 1: Publication and Entry into Force This Manual shall be in force in accordance with the decision of its approval.