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(1) A DSU should apply industry accepted procurement practices to acquire default supply resources. The commission cannot prescribe in advance the precise industry accepted practices a DSU must apply since industry accepted practices vary depending on context and circumstances. Generally, an industry accepted approach to resource procurement should encompass the following basic steps:

(a) obtain and consider upfront input and recommendations from an advisory committee throughout planning and procurement processes, as described in ARM 38.5.8225;

(b) explore a wide variety of alternative supply and demand-side resources, products and prices;

(c) collect proposals from various parties offering supply and demand-side resources and products;

(d) analyze the proposals or offers with respect to price and non-price factors in the context of the goals and objectives of these guidelines;

(e) select the most appropriate proposals and develop a shortlist;

(f) negotiate the most appropriate contract; and

(g) anticipate changing circumstances and remain flexible.

(2) Although these basic steps could be achieved through a variety of methods, a DSU should use competitive solicitations with short-list negotiations as a preferred method of procuring default supply resources. A DSU should design requests for proposals based on its resource needs assessment. Competitive solicitations should treat bidders fairly, promote transparency in a DSU's default supply portfolio planning and resource procurement processes and contribute to achieving the goals and objectives of these guidelines. A DSU's resource acquisition process should conform to the following principles:

(a) A DSU should clearly define the resources, products and services it needs before issuing a resource solicitation and clearly communicate these needs to potential bidders in the request(s) for proposals. Multiple solicitations and/or solicitations for multiple resources, products and services may be necessary to obtain information sufficient for prudent analyses and decision-making;

(b) A DSU should establish bid evaluation and bidder qualification standards and criteria it will use to select from among offers before issuing a resource solicitation and clearly communicate these standards and criteria to potential bidders in the request for proposals. Once bids are received, a DSU should apply its bid evaluation and bidder qualification standards and criteria firmly and consistently;

(c) A DSU should develop a systematic rating mechanism that allows it to objectively rank bids with respect to price and nonprice attributes. A DSU is not required to reveal to bidders the specific ranking method used to select preferred bids, however a DSU should thoroughly document the development and use of the method for later presentation to the commission;

(d) A DSU should establish a shortlist of offers from bidders with which the DSU will pursue contract negotiations. A DSU should complete due diligence regarding bid qualifications, bidder credit worthiness and experience and project feasibility before selecting an offer for the shortlist. A DSU should not indicate to a bidder that its offer is being considered for the shortlist while performing initial due diligence;

(e) If, in evaluating offers, a DSU determines that a previously unidentified resource attribute should be considered in the bid evaluation, or that additional evaluation criteria should be used, all bidders should be given an opportunity to supplement their offering to address the DSU's desire for the new attribute or the new criteria. The DSU should attempt to minimize such occurrences;

(f) A DSU should not reassign or "flip" default supply contracts to an additional third party(ies) after the original bid activity and during the evaluation of bids. A DSU must notify the commission before reassigning any fully executed contract;

(g) During competitive solicitation and resource acquisition processes a DSU should not publicly disclose specific information related to particular bids, including price, before the DSU completes its resource acquisition process and has signed contracts with the selected bidder(s) ;

(h) The DSU should obtain input and recommendations from an advisory committee regarding any procurement process that may involve projects or proposals by an affiliate of the DSU. The DSU should employ an independent third party to develop competitive solicitations if affiliate interests could be involved. An independent third party should review the contract terms and conditions in any power purchase agreement between a DSU and an affiliate before the DSU signs the agreement. A DSU should consult with its advisory committee before selecting the independent third party and should evaluate the third party's findings with the advisory committee. The DSU should be prepared to offer substantially the same form of contract to other bidders for similar products to the extent procuring such products is otherwise justified under the goals, objectives and procedures established in these guidelines; and

(i) A DSU should not provide any information to an affiliate with respect to the DSU's resource needs assessment, evaluation criteria, bidder qualification criteria, due diligence or any other relevant resource procurement information unless such information is simultaneously provided to all other prospective bidders.

(3) To the extent a DSU does not use competitive solicitations to acquire default supply resources it should thoroughly document the exercise of its judgment in evaluating and selecting resource options, including the decision not to use competitive solicitations.

(4) Use of competitive solicitations as the preferred method for procuring default supply resources may not adequately achieve the goals and objectives of these guidelines with respect to demand-side resources. A DSU should design programs and associated marketing and verification measures, as necessary, to ensure that its procurement of demand-side resources is optimized in the context of the goals and objectives of these guidelines.

History: 69-8-403, MCA; IMP, 69-8-403, MCA; NEW, 2003 MAR p. 654, Eff. 4/11/03.

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