Unsolicited Proposals: Paving the Way as an Alternative Procurement Strategy

Engaging the Private Sector in the Public-Private-Partnership (PPP) process for large-scale infrastructure projects is typically government initiated by launching a best practices competitive bid process. Globally, an alternative procurement strategy of Suo Moto or Unsolicited Proposals (USPs) is surfacing: a process where private companies submit unsolicited infrastructure proposals to governments. According to the World Bank Group’s Private Participation in Infrastructure (PPI) Database, approximately 10-30% of global PPP infrastructure projects in low and middle-income countries are unsolicited.

As one would expect by its definition, USPs attenuate the competitiveness of the procurement process and expose the public sponsor to unwanted risks, including those of transparency and governance. However, the inclusion of USP strategies may introduce several benefits, such as rapid mobilization of investment, stronger project pipelines, and improved efficiency. To yield the most through a USP approach, specific recognized methodologies can be promoted in complement to competitive bid processes, such as:

·  Swiss Challenge: The private entity submitting the USP is termed the Original Project Proponent (OPP). The government evaluates the proposal submitted by the OPP and, in order to induce some competition, invites other parties to submit competing bids. These private sector parties are expected to match or better the OPP’s proposal through innovation, quality and efficiency. However, to compensate the OPP for its initiative in submitting the original proposal, it is given a chance to match or better any competing bids. Due to the above methodology, the system is only partially competitive since it involves information and evaluation biases in favour of the OPP. This may lead to participation reluctance by the competitors. 

·  Margin of Preference: The OPP is given a theoretical benefit (preference margin over the other bidders) during the bid evaluation, to compensate it for the effort put in for developing the project.

The above strategies are recognized differently around the world. In India, only a handful of states, such as Karnataka, Andhra Pradesh, Bihar, Punjab, and Gujarat, allow USPs under specific circumstances as per their respective PPP legislations. World Bank and Asian Development Bank do not allow Swiss Challenge procedures, whereas a Modified Swiss Challenge (MSCM) technique is used in the Philippines. In contrast, the Margin of Preference has been prevalent in South Korea and Chile.

To standardize policies and procedures globally, the United Nations Commission on International Trade Law (UNCITRAL) has produced a model legislative guide for dealing with USPs and for distinguishing such proposals on the basis of the requirement of proprietary concepts and technology. Similarly, an entire section of the PPP Reference Guide, jointly developed by major global financial institutions like ADB, EBRD, GI Hub, IDB, IsDB, OECD, UNESCAP, and World Bank Group, communicates the implementation of USP frameworks by countries including Chile, Colombia, Indonesia, Italy, Mexico, Philippines, South Africa, South Korea, Uruguay, and USA. The Kingdom of Saudi Arabia (KSA) leverages Implementing Regulations for Unsolicited Proposals under Private Sector Participation Law as a regulatory framework.

#PPP #Bids #UnsolicitedProposals #SwissChallenge

𝐀𝐮𝐭𝐡𝐨𝐫: Suyash Gupta (Associate), Synergy Consulting Ifa