Rethinking the Pricing of Risk
Updated: Dec 14, 2020
In anticipation of a potential wave of national infrastructure spending, procurement processes need to become even more constructive for both government and industry.
Processes must support the production of robust data given to bidders; timeframes must reflect the complexity of a transaction; and interactive processes must be actually interactive to encourage deeper understanding of risks and the pricing of risk.
Procurement (and evaluation) is an exercise in risk management.
A process whereby bidders are encouraged to articulate positions on key risks, and understanding of how commercial regimes respond under multiple scenarios during a contract, could be a better way to evaluate whether a particular bidder is informed (a better risk for government), rather than naïve (a bad risk for government). An "enhanced" departures table approach.
This will equally inform the agency’s understanding/impact of the risk allocation it has put to market and refine scope/allocation as required.