1. Following the remit from the NICSO Review, the Infrastructure Committee has considered a three-step ICB procedure to be applied in the appropriate cases instead of the one-step or two-step procedure for international competitive bidding. While agreeing in principle to the 3 step procedure, the Committee noted that several aspects of the procedure still remained unresolved. The Committee therefore determined that it was preferable to obtain experience with the procedure in some representative practical cases, before passing judgment on those aspects. It is therefore important that the Committee, the International Staff and the host nations be aware of the unresolved issues and take appropriate measures in those test cases to ensure that the arrangements with industry are not in doubt.
2. The primary unresolved issue is the dispute arrangement. One of the most important features of the three-step ICB procedure is that it eliminates firms at stage I of the process on other than objective compliancy grounds. Some nations have objected to this idea and wanted to leave the possibility open, at Step 3, for all interested firms to be enabled to submit a bid and for the bid to be judged on technical grounds. On the other hand, some nations pointed out the interactive process that governs the three-step ICB procedure, and the virtual impossibility that “outsiders” could offer a valid bid. The main concern of the nations is to protect their legitimate economic/industrial interest in these projects. Some nations felt in this context that those economic/industrial interests could better be safeguarded in other ways. (Production sharing, mandatory sub-contracting, balanced consortia, etc.) It was pointed out that, were a firm to be rejected as the responsible main contractor, it could of course stay in competition as sub-contractor or member of a consortium. The fact that all parties (industry, host nation, International Staff, users/MNC) are in continual contact with each other also reduces the risk of disputes. In practice, it is expected that the number of interested main contractors would be fairly limited for projects foreseen for the three-step procedure. It must, therefore, be possible to establish an acceptable selection/elimination process as clarifying the dispute procedure to be applied. In any case, this must be done before entering into a three-step bidding procedure.
3. Several other aspects are not completely defined:
(a) The question as to who decides whether or not the three-step procedure is applied and, if so, whether or not deviations should be allowed.
At present, the three-step procedure is intended “as the basic procedure which the host nation should normally apply in the case of complicated projects”.
(b) The relationship between the host nation and the International Staff/users/other nations during the selection process.
The present text suggests a rather strong relationship and permanent dialogue in this respect. Some nations stressed the responsibilities of the sovereign host nations, whilst other nations stressed the necessity for regular involvement by the International Staff, user nations/MNCs, and nations other than the host or user nation. Also, with respect to this aspect, practice will have to show whether a workable relationship can be established that does justice to all interests.
4.When a host nation offers a project to the Infrastructure Committee to which the three-step procedure could be applied, the above mentioned aspects should be discussed and agreed by the Committee with the aim of reaching clarity, before entering into a three-step ICB bidding exercise.
(i) projects requiring R&D and where such R&D has not been acquired independently (for instance, via a project definition contract);
(ii) projects where the necessary clarification of risk areas, until mutual satisfaction is reached, cannot be achieved via the “optional preliminary bidding procedure”;
(iii) projects where selection of one technological approach may restrict competition.
(i) to allow a step-by-step approach to the implementation of complicated NATO Security Investment projects;
(ii) to identify risk areas at the earliest possible stage and to reduce them;
(iii) to ensure that there is full understanding between the host nation, user nation (s) and the contractor (s) of the requirements involved and of the methods and means to meet them.
- The Mission Need Document (MND) 1
- The outline NATO Staff Target (ONST) 2
- The TACE
Action to be taken
(i) the NMAs prepare and validate the “Mission Need” document (MND), outline the “NATO Staff Target” (ONST) on which the project should be based and recommend planning funds for programming;
(ii) the host nation issues a Type “A” cost estimate (TACE) in which the functional baseline requirements are stated and on which the performance specifications should be based. The host nation indicates, if possible, already at this stage which bidding procedures will be used;
(iii) the NMAs include the project in a Capability Package (CP) (or, exceptionally, submit it as a “stand alone”) and submit the package to the Senior Resource Board which screens and endorses the package and recommends it for approval to the Council/DPC;
(iv) the Infrastructure Committee authorizes, if necessary, advance planning funds and agrees to the procurement procedure, the application or non-application of a dispute procedure and, if appropriate, the evaluation procedure to be followed.
Action to be taken
(a) The NMAs prepare and validate the NST;
(b) The host nation issues an initial Type “B” Cost Estimate (TCBE) for the follow-on project itself as well as a notification of intent to call for bids in accordance with Document AC/4-D/2261 (1996 Edition) indicating therein that the three-step procedure would be applied;
(c) The host nation issues the RFBV together with the high level performance specifications covering the project. The RFBV will provide nominated firms with a comprehensive insight into the relevant operational concepts and the baseline functional requirements and/or foreseen problems which should be considered in preparing initial responses. Through a common understanding of the requirement and of the procurement procedure being adopted, the RFBV will thereby offer a basis for preliminary discussions and inform the nominated bidders of the criteria and rating factors for the evaluation of technical proposals and the selection of the bidders (e.g. two or three) for the project definition study. The RFBV will include:
(i) an indication of the scope of the proposed project:
(ii) a statement that the three-step procedure will be applied;
(iii) guidance of the basic information to be submitted in the bidder’s response, i.e. the proposed system approach, the bidder’s technical proposals for meeting the stated requirements together with a budgetary estimate for the production of the required system and a broad production timescale;
(iv) a statement as to whether bidders should feel free to include in their brochures proprietary information which will not be disclosed, or whether the procurement agency will consider that any information submitted in brochures is available to NATO and the procurement agency to improve the performance specification of the project;
(v) the standard terms of the contract that will apply to any subsequent contract award;
(vi) a statement about the cost sharing arrangement of the project definition study and the project itself where applicable;
(vii) a description of the dispute procedure to be followed, if appropriate, at this stage;
(viii) a closing date for the submission of the RFBV response (this closing date must be at least 42 days after the issue of the RFBV) and an indication as to whether or not requests for extension in accordance with the provisos in paragraph 10 (iv) – (v) of Document AC/4-D/2261 (1996 Edition) would be admissible.
(a) Firms reply with brochure4 responses which set out their general approach to meeting the requirement, their qualifications in the technological area concerned, and their estimate of time and cost for project definition (PD) studies. The industrial part of this feasibility stage is not funded by NATO. On receipt of the responses the Host Nation assesses the replies. Face-to-face discussions will then be held between the Host Nation and each firm, on the basis of its RFBV response, in order to identify and clarify any difficulties foreseen in the implementation of the project.
(b) During the discussions with the firms, all personnel involved in the discussions will be cautioned against furnishing to one firm any additional information that may afford it a competitive advantage over the other eligible firms; if information is provided to one firm on a particular subject which could help it in any way, the same information will then be provided to all other eligible firms, by means of an amendment to RFBV document; disclosure of such information within the Host Nation will be on a “need to know” basis only.
(c) In cases where firms have proprietary or other interest in the information submitted with their responses, including descriptive literature or materials or specific technical data, they should so specify in their response. Host nations will take every measure to safeguard the information contained therein which the firms do not want disclosed to the public or used by the Host Nation for any purpose other than evaluation of their system approach; special instructions in the RFBV will provide guidance to the eligible firms on how to identify and mark the data which falls in this category.
(d) The objective of the above actions is to select the bidders (e.g. two or three) deemed to be most clearly capable of meeting the stated requirements and which should therefore conduct the project definition studies. In the selection process, the host nation should ensure that the major users, the International Staff and the MNCs are adequately informed and consulted on a timely basis as the technical, financial and procedural aspects of the project develop, and that irreconcilable differences will be notified to the Infrastructure Committee5;
(e) The host nation will notify the firm (s) selected of its decision, it will also notify the firms not selected.
15. The Host Nation, at the conclusion of this stage will develop the TCBE for the Project Definition Studies to be considered under the next stage. The Infrastructure Committee authorizes the Project Definition Study together with the necessary amount of funds and notes the initial TBCE for the total project.
16. The purpose of the project definition study is to explore all aspects of the project in question more thoroughly and especially to identify and eliminate the high risk areas of those parts of the project involving high technology and the development of new hardware and software. The study should be used, inter alia, to clarify any ambiguities in the requirement, to examine in greater detail the areas of development, to produce (if necessary) prototypes of the more complicated parts of the system, to develop a test plan and to provide detailed and realistic costings and implementation schedules – including trade-offs, and, finally to produce a system design which the firm in question would have to implement if it were to gain a production contract.
17. In the project definition stage, the NMAs again refine the requirements, producing a validated NATO Staff Requirement (NSR)6. The Host nation prepares the PD work statement and lets contracts to the selected contractors. The Host Nation should have in-depth discussions with the contractors during this stage. The PD products will include detailed specifications prepared by the contractors (the B-level specifications) and include a detailed description of the test program and the contractor effort to be devoted to this program. The Host Nation then assesses the outcome of the PD stage and recommends the development/production stage. If it is decided to proceed then the Host nation updates the TCBE for the total project and starts to prepare the IFB including any revision for refinement of performance specifications proposed by the major users in the light of the project definition studies.
Action to be taken
18. The action to be taken under this stage will be as follows:
(a) The NMAs prepare and revalidate the NATO Staff Requirement.
(b) The Infrastructure Committee, at the request of the host nation, authorizes funds for the PD study, and determines the amount to be paid to each firm, taking into account any cost sharing arrangements between NATO and industry7.
(c) Following authorization by the Infrastructure Committee, the host nation awards the PD study contracts, as indicated above, to the firms selected.
19. During the project definition study phase, the competing contractors are to be treated equally by host nations and NATO Authorities concerned. Each must be given the same information, and there should be a regular exchange of views between the host nation and the firms concerned. Special care must be taken to ensure that the privileged views and concepts being proposed by one contractor are not compromised or passed on to another contractor.
20. A realistic timescale should be set for the completion of project definition studies – normally six months – and each study should then be evaluated by the Host Nation. With the delivery of the PD study NATO (unless otherwise specified in the contract) acquires the proprietary to the PD study/the right to implement the project according to the firm’s proposal.
21. Representatives of the major users and the International Staff should be closely involved during the project definition study phase and should, for example, be invited to attend all meetings between the host nation and the firms concerned and to assist in the evaluation of PD studies.
22. The NMAs update and re-validate the NATO Staff requirement on the basis of the PD study results.
23. On the basis of the PD study results, the host nation updates the TBCE for the project. It should be based on the updated baseline functional requirements which resulted from the updated performance specifications. They should in no case be specifically tailored to one of the systems and technical solutions proposed by the PD study contractors but those updated baseline requirements should normally be met by one or more of the systems technical solutions.
24. ICB disputes are not admissible at the end of the Project Definition Study.
25. The host nation submits the updated TCBE to the Infrastructure Committee. In accordance with the established procedures the Committee authorizes the implementation of the project together with the funds as required on the understanding that the project would be open to international competitive bidding8.
Actions to be taken
26. The Host Nation issues the IFB which should be based on the approved final Type “B” cost estimates and include the required legal, contractual and financial clauses. The IFB should also contain a statement to the effect that the contractor who would be finally selected will be committed to his own design as regards both the system and technical specifications as far as it is reflected in the TBCE and specifications.
27. The group of experts mentioned in paragraphs 14 (d) and 21 above should, if necessary, be called upon to assist the Host Nation in drafting the final IFB.
28. The Host Nation awards the contract in accordance with Document AC/4-D/2261 (1996 Edition).
A statement based on a mission analysis identifying in broad outline a quantitative or qualitative operational deficiency that cannot be solved satisfactorily with existing or planned forces and/or equipment.
A very broad outline of the function and desired performances of a new weapon or equipment to satisfy a mission need, before the possibilities of achievement and the financial aspects have been examined.
A broad outline of the function and desired performance of new equipment or weapons system (s), before the feasibility or method of meeting the requirement, or other implications have been fully assessed.
Based upon the findings of any prefeasibility study (ies), the NATO Staff Target lists, in greater detail, operational characteristics and certain technical specifications which are desired and which have been shown to be broadly feasible. It may also contain broad cost parameters when required.
This document is used a basis for the request for proposals from industry for feasibility study on candidate system solutions.
4 The term “Brochure” is used to cover whatever response a firm elects to make.
5 In the case of complicated projects involving several or all member nations and MNCs, NATO should consider tasking a special body (NATO agency) with the role of Host Nation, as is the case with NACISA for NATO Communications Systems. Where an agency is made responsible for a procurement, arrangements should also be made to involve the major users, the International Staff and the MNCs in the contractor selection process.
6 NATO Staff Requirement A detailed statement of the required design parameters and operational performance of the equipment or weapon system (s).
7 The amount of money to be paid for these studies might have an influence on the proprietary rights.
8 Originally it is intended to limit the final ICB to the remaining firms only. As nations were not in a position to agree to this idea unanimously the methodology of selecting the firms which are allowed to bid in the final step of the three-step procedure will have to be decided by the Infrastructure Committee on a case-by-case basis during the trial period (see also cover letter).