By John Karamanlis, Business Development Manager
Solar offers a cost-effective way for organizations in both the private and public sectors to access affordable and reliable renewable energy, while improving their sustainability and reducing their carbon footprint. Depending on your needs and situation, sourcing and procuring a solar project can be accomplished through bilateral discussions with a solar developer or via a request for proposals (RFP).
At EDF Renewables, we believe that bilateral discussions yield the best outcomes, because they enable us to work closely with the client to understand their needs and develop a customized solution optimized to their unique situation. A bilateral approach is also significantly faster and can result in a project being delivered in a little over a year (14-16 months), whereas an RFP can extend this timeframe by at least six months.
For organizations that are required to issue an RFP, there are several factors that can improve the quality of bids you receive and increase the success of your project.
Given the complexities involved in solar procurement, many organizations have found it advantageous to hire a consultant or RFP advisor to help them navigate the procurement process by:
Many RFP advisers are market experts and leverage their knowledge and experience to deliver success for clients of all types and sizes. Advisers typically work on a performance basis and are only compensated if a deal is closed.
If your organization wishes to issue and manage the RFP on its own, consider using resources from NREL or the US EPA to guide the process. To ensure good results, the RFP should provide prospective bidders with sufficiently detailed instructions and information. Important topics to cover include:
Remember the adage “garbage in, garbage out.” Vague RFPs can lead to highly varied responses that are difficult to evaluate and compare. That said, it’s a good idea to give respondents the flexibility to present potential technical and financial options that can increase a project’s value. Further, it’s best to not include strict specifications regarding major equipment – let the developer propose equipment they believe will be best.
The RFP should establish clear goals and expectations for the solar project. Gathering input from relevant stakeholders such as energy managers, procurement, marketing and sustainability teams early in the process will assure the project aligns with organizational objectives as well as help avoid potential issues and delays.
Also standard items such as cost and scope, requesting information on topics such as expected system performance and project economics can allow for a more accurate assessment of bids, including:
In addition to providing a preliminary sense of how many developers are interested in the solicitation, pre-bid meetings give prospective bidders an opportunity to ask questions and receive clarifications on the RFP. Further, if the meeting is held onsite, developers can see the location in person, which may help shape their responses.
Establishing standard metrics and valuations is essential to enabling accurate comparisons among bids. The following metrics offer good data points for comparison and should be requested in the RFP:
Creating a scorecard with assigned weights for different categories is a great way to help differentiate various bidders and proposals. Note that metrics like total savings over time or internal rate of return may include unknown assumptions that could skew the numbers and should therefore be avoided.
Once all bids have been reviewed, a shortlist of finalists should be created. These bids will be discussed in greater detail, often with each bidder present to answer additional questions and provide comments. This process can provide insights on potential issues as well as creative solutions that were not considered in the original RFP. If necessary, a request for the best and final proposals in which all bidders are working with an identical set of assumptions and exclusions may be issued, and a finalist can be selected.
Prevailing wisdom says that RFPs deliver the lowest cost. While this may be true, it’s important to remember that the lowest price may not offer the best value. Developers know that a competitive bid must match the RFP scope as closely as possible, but this may require submitting a proposal that misses opportunities or doesn’t reflect the full investment needed to make the project a success.