When a project is delivered using a method such as the traditional tender method, private sector bidders are usually willing to submit proposals at their own cost. This is because the design work, standards and specifications have already been determined by the local government.
As the amount of work required to submit a proposal increases, the private sector bidders are more likely to request an honorarium from the public sector owner as partial compensation for their costs in creating a complete proposal. Honoraria, when paid, are generally paid only to unsuccessful proponents.
The advantages of paying an honorarium include increasing the likelihood of:
• receiving better quality submissions
• the public sector partner clearly 'owning' the proposal contents waivers being signed by proponents on receipt of payment to not instigate any future legal action with regards to the project's procurement process
Paying honoraria also demonstrates to prospective private partners that the local government is committed to the project.
Traditional disadvantages of paying an honorarium include:
• poor public opinion about paying the private sector for preparing proposals
• the likelihood that acceptable submissions would be received regardless
The issue of paying honoraria should be addressed in the local governments' policy statement on public private partnerships