Road Network Operations
& Intelligent Transport Systems
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Procurement Methods

Procurement laws typically dictate how a public authority should go about buying in a project or service, including ITS. For example, in the European Union countries, except in very special circumstances, any procurement exceeding €134,000 for services or €5,186,000 for works is subject to competition. Many public authorities self impose a lower project and service values. For example, the UK Department for Transport normally requires projects and services exceeding £25,000 to be procured competitively (about €29,600).

Competition in procurement is not only good politics - bringing transparency, anti-graft and accountability - but it also yields other project benefits. Competition facilitates market prices and spurs innovation, higher service levels and better value.

As ITS services move from trials and demonstrations to fully operational, competition in procurement should be the default option. There are situations where a "full blown" competition is not warranted. Where an ITS project or service is of a low value the procurement cost, which can be considerable, could far outweigh the benefits from competition. In such cases, when permitted by local procurement laws, procurement through a single source could be more value for money. (See Competition and Procurement)

Sometimes an unsolicited project or service is put forward by a private sector developer to the public authority. This sort of initiative by the private sector is permitted by the public-private partnership laws of some countries, for example Malaysia and South Africa. Such initiatives are dealt with according to procedures which aim to protect both the intellectual property rights of the private developer and the public interest.

Single or Multiple Sourcing?

A difficult issue for road authorities is whether to opt for single or multiple sourcing of the systems, hardware, software and communications for ITS. The issue is particular (but not unique) to large contracts for traffic control and freeway management systems (ATMS), electronic payment systems (EPS), vehicle fleet management systems. It is easier to maintain supplier independence if open architecture and standards, and non-proprietary systems are specified. (See Applying Standards) Strategies that encourage multiple sourcing and price competition will offer protection for the authorities against becoming bound by a single monopoly supplier.

Whether an ITS project is procured through a single source or competitive tender, road authorities and others should be aware that the provision of ITS often lends itself to natural monopolies. This is because of the need to achieve good geographical coverage of the road network and the high initial investment required to provide the basic infrastructure. For example, an exclusive franchise agreement with a single city-wide or regional agent to receive and issue public data has definite attractions but in a market context it may be regarded as anti-competitive. There are advantages for the authorities involved in making exclusive the operation of traffic and traveller information centres since the authority needs only to make an agreement and liaise with a single provider. But exclusivity can also lead to higher costs later as the incumbent exploits single provider position. Other potential suppliers may be weakened and in the worst case go out of business.

Development Projects

There are special considerations that relate to development projects. Central to this is the intellectual property rights for the project and how the supplier recovers the cost of ITS system and product development. This is especially an issue when the public sector is the major – and sometimes the only – customer. Furthermore, early customers – the pioneers – may be paying for development work and problem-solving that will benefit later customers, without necessarily being able to share the development costs with these others. Should the pioneers retain at least a share of the intellectual property rights to potentially re-coup parts of the development costs?

In these cases, where competitive procurement is to be followed, the road authority should consider whether the ITS project's technical specifications and performance requirements - as well as the contract terms and conditions - are sufficiently well defined to attract bids that are "fit for purpose", affordable and value for money. Where the project is novel or has alternative or variant solutions with different economic outcomes it would be sensible to incorporate an element of negotiation or dialogue with potential suppliers as part of the procurement process, unless restricted by law.

Lastly is the desirability to get small and medium-sized enterprises more involved in development of ITS services to develop local capability and generate local employment. It is notable that French Public-Private Partnership  contracts require the private sector concessionaire to set aside 30% of the value of the capital works for local enterprises. (See: Contracts)


The following is a summary of the different approaches that are available to practitioners who are procuring ITS-based systems and services.


This procurement method is increasingly confined to low value contracts or special situations, where time is the essence.

Many road authorities keep a list of past and potential suppliers. Some road authorities pre-qualify these potential suppliers. From this supplier list the road authority invites a suitable supplier to discuss and bid for the work required. Once agreement is reached on the work process, deliverables and price the road authority lets the contract to the chosen supplier.


In the case of Open Tender or open procurement, the road authority (who is the client) has a clear understanding of what it needs. Either the design is complete or the technical specifications and performance requirements are clear. Usually the works do not include high levels of risk to either party.

The road authority prepares a request for proposal (RFP) document which is offered to all interested suppliers who wish to submit a tender proposal. The RFP documents will specify:

  • the qualifications required of bidders
  • the terms and conditions of the contract
  • details of the services required and the specifications or performance requirements for those services

Upon receiving the tender proposals the road authority will assess them to determine each bidder's technical ability to deliver the services and financial ability to make any requested payments. This is a traditional method of procuring services adopted by road authorities for the delivery of non-complex road construction or maintenance services.

In an open procurement process any supplier can reply to a request for proposal. The information that each supplier is required to provide in the tender submission must be sufficient to enable the road authority to select the preferred service provider. This method is well established in most countries. Usually there are standardised general conditions of contract available and a good body of contract law to assist in managing this type of procurement. Typically bids are submitted using a 'double envelope' system - so that the bidder's technical proposals and financial offer are kept separate.  The technical proposals will be assessed prior to opening the financial offers. Only those bidders whose technical proposals are judged to be of sufficient quality will be accepted.

Some countries adopt this procurement method to promote equal opportunity and to reduce graft in public procurement.

More information is available in the PIARC Technical Committee report Financing, Contracting and Managing of Road System Investment. 


A variation on the Open Tender method is to require interested suppliers to 'pre-qualify' before they can go on a tender list for the delivery of services. This is a two stage approach:

  • in the first stage interested suppliers are invited to provide limited - but sufficient - information on technical and financial capacity so that a short-list of capable service providers is developed. The invitation to make proposals is then restricted to those private sector companies that meet the road authority’s pre-qualification conditions
  • in the second stage the short-listed (restricted) bidders are invited to respond to the Request for Proposal (RfP) and show they can meet the conditions of the contract and provide the services requested to the required specification

Pre-qualification typically takes longer to procure the project. It has the benefit of reducing the overall effort required by the service providers to produce the necessary technical and financial information - and by the road authority in assessing it. Pre-qualification also enhances the road authority's confidence that the service providers invited to respond to a RfP will all have previously demonstrated the required skills and financial capacity to undertake the works. It is normal to employ a double envelop system and assess the technical proposals prior to opening the financial offers. Only those bidders whose technical proposals have been judged to be of sufficient quality are accepted.

More information, including a case study on this procurement method, is available in the PIARC Technical Committee  report: Financing, Contracting and Managing of Road System Investment .


Some service requirements have become complex and the contractual arrangements, such as franchise and public-private partnership, have involved significant risk transfer to the private sector. The 'Negotiated procedure' was introduced in the European Union to address the procurement of such complex projects.

Clear, absolute pre-definition of technical specifications and contract terms and conditions can become very difficult. In these situations the client (usually this is the road authority) has a view of what it is seeking, but it does not have a detailed specification of the optimum solution. The authority accepts proposals from industry to finalise those details and deliver the services.

In essence the negotiated procedure follows a 4 stage process:

  1. Pre-qualification - this starts with the publication of the contract notice, followed by the issue of the “Request to Participate” documents to interested parties. The private sector's submission will then be used to select the candidates to participate in the next stage, using the selection criteria which have been determined in advance.

  2. Invitation to negotiate (ITN) - this commences with the contracting authority issuing the ITN documents to those who have pre-qualified, including the terms which it intends to negotiate. Bidders are invited to submit proposals for negotiation. Upon receiving the candidates submissions the contracting authority, after examining the proposals, invites the bidders to enter the negotiations.

  3. Negotiation - the negotiation starts with the submission by the bidders of clarification questions about the contents of the tender documents, and their comments on the draft contract. The contracting authority then negotiates equally with all bidders the details of their proposals. Depending on the extent of modifications during the negotiation period, the contracting authority may publish a “Modifications Document” to include in the tender documents in order to ensure full coverage of its requirements. Some bidders may withdraw at this stage.

  4. 'Best and Final Offer' - the remaining bidders (all of them pre-qualified) then submit their best and final offers.Following further evaluation the contracting authority names the preferred bidder and finalises the contract award.

More information, including an Austrian case study, on this procurement method can be gained from the PIARC Technical Committee report: Financing, Contracting and Managing of Road System Investment .


Competitive Dialogue procurement was introduced in 2006 by the European Commission for use in the award of complex contracts. This procedure is employed where the road authority is not able to define objectively the technical means to address the project needs; or it is not able to specify objectively the legal and/or financial components of the project. Competitive Dialogue allows the contracting authority to discuss all aspects of the proposed contract with candidates to enable a better understanding of the tendered solutions on offer prior to final tenders being submitted.

Like the Negotiated procedure (see above), Competitive Dialogue procedure follows a staged process. It differs from the negotiated procedure by commencing the dialogue (discussion/negotiation) with bidders at an earlier stage. This allows the contracting authority to start the procurement process with fewer requirement specifications of its own and greater opportunity for bidders to shape the ultimate contract.

The 3-stage process can be summarised as follows:

  1. Contract Notice - the contracting authority publishes a notice containing its needs and requirements and calls for Applications to Participate (Expressions of Interest) from bidders. From the responses received, the contracting authority will select a short-list of bidders to progress to the dialogue stage.

  2. Dialogue - the dialogue is held with each invited bidder and - without "cherry picking" - will cover areas, such as technical aspects, economic aspects (such as prices, costs and revenue) and legal aspects such as treatment of risk, guarantees, or the creation of a legal entity for a limited purpose (special purpose vehicles). The dialogue will progressively reduce the number of solutions being examined and the number of bidders involved, towards the time when the contracting authority will conclude the dialogue and request the remaining bidders submit to their final tenders.

  3. Final Assessment and Award - the contracting authority will undertake its final assessment of the tenders using the initially declared criteria and award the contract to the successful bidder. The contracting authority may seek fine tuning or clarification  the final tender submissions, but the additional requested information may not alter the basic features of the tenders.

More information, including a Slovakian case study on this procurement method is available in the PIARC Technical Committee report: Financing, Contracting and Managing of Road System Investment.


Reference sources

PIARC Technical Committee A.2 (2012) Financing, Contracting and Managing of Road System Investment   PIARC Ref 2012R08EN, Paris.  ISBN 2-84060-255-5