Both the process are essentially two stage bidding . That means in both the cases at first stage the eligibility criterion of the bidders are ascertained, whereas at second stage the financial offers are evaluated and the contract is awarded to the most economical bidder. But there is marked difference in 2 and 3 envelop system of tendering/procurement and that is on TOR(Terms of Reference) level. That means the purchaser is not sure about the technology or solution which they would like to go for the intended procurement. Below paragraphs will highlight the difference in 2 and 3 envelop system of procurement. Two Envelop System: This process is followed in cases where technical specifications, TOR (Terms of Reference) or the technology/process etc are pre-determined. Now only the two things namely: Eligibility criterion of the bidders and the financial offer needs to be evaluated. As far as opening the is concerned, obviously the envelop one containing eligibility criterion is opened first and the financial proposal of only those who meet the qualification criterion are opened. And the tender is awarded to the most economical bidder. Three Envelop System: In this case the bidder are asked to submit the documents as below: Envelope 1 : Documents related to eligibility criteria. Envelope 2 : Technical bid. Envelope 3 : Financial bid. The envelops are opened in sequence, that means first, second and then third. Through the documents submitted in envelop one, the eligibility of the bidder is ascertained. Envelop 2 will be opened of only those bidders who meets the qualification criterion. At this stage technical offer of all the Eligible bidders is opened. generally at pre-defined date a conference is arranged to discuss the various offer submitted by various bidders, to discuss the merits and demerits of the technical offers. The bidders who offer the most viable and technologically superior technical solution are declared. All successful bidders at this stage are now asked to modify their financial bids, if required, as the technical specification has changed. Envelope 3 will be opened of only those successful bidders at stage 2. And the contract is awarded to the most economical bidder. Let me give you one example: For example a state utility wants to set us a 660 MW Thermal Power Plant. Now there may be few different options (depending upon unit size, technology, coal quality availability etc) by which this plant of this size can be installed. Some may offer 3 units of 210 MW each with locally available coal, some may offer a single unit of 660 MW and some may offer 660 MW single unit of Super Critical plant with high CV imported coal. There might be so many evaluation parameters by which the final option will be selected. These may be: Outgo of Forex (if the equipment needs to be imported), Patern of load/demand, land availability, local employment, gestation period etc.
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