Risk Management and Governance for PFI Project ... - Title Page - MIT

Types of Tendering
In a PFI project, instead of the conventional bidding method where the winning bidder is
selected by the main standard of the lowest price, it is the principle to adopt the integrated
evaluation method, which considers various factors including the quality and the price. All
the PFI projects conducted by the national government are fundamentally based on this
method. However, the projects conducted by the local governments prefer the
open-application proposal method.
I. Integrated Evaluation Method (Open Tendering): a method to evaluate the overall
quality and the bidding price and to select the winner that received the best rating. To
use this method, determining and advertising the standard for the winning bidder (i.e.,
the specific mechanism of overall greatest value) in advance is required, and changing
the standard after the publication is prohibited. In addition, after the determination of
winner, the concrete rating results are made publicly available.
II. Open-Application Proposal Method (Single Tendering): a method to choose a single
contractor that proposes the best plan by evaluating the proposed plans that the bidders
have created based on the request for proposal (RFP). In this method, it is possible to
negotiate with the best proposer and to request to change or improve the project content.
If the negotiation breaks down, the orderer can negotiate with another (second best)
proposer. This method also allows the orderer to change the conditions advertised at the
time of the open application. It should be noted that because this method is single
tendering and falls into the exceptional case, it could be approved only when satisfying
certain criteria.
Record of PFI in Japan
Japanese PFI Law mandates the publishing of an "execution plan", including a summary of the
project. Since its enactment in 1999, the project costs and the number of published execution plans
of the PFI have increased steadily. At the end of fiscal 2009, the total number of published
execution plans reached 366, and the total project cost reached approximately 3.2 trillion yen (See
Figure 6). However, as for the implementation status of each fiscal year, the number of published
execution plans in recent years has been on a decline (See Figure 7). In addition, the application
scope is limited to the building facilities, such as city hall, school buildings, and housing for
government workers, and the cases of backbone infrastructure are only a small part, such as the
development project of the Haneda Airport International Terminal (See Table 5).
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