The risk to the public interest is most significant when a non-price selection process is used to appoint the Preferred Proponent, where, in the absence of competition from a second Proponent, the Owner must rely solely on:
• its ability to negotiate favourable commercial and legal terms with a Proponent that is (normally) a leading industry practitioner who has the legitimate objective of optimising shareholder returns; and
• its ability to source up-to-date and leading industry knowledge of market conditions and pricing to formulate benchmarks it can use to assess the offer from a single Proponent.
Non-price selection works well where there is a full symmetry of capability and capacity between the two parties. For example, in the Australian infrastructure construction industry there are a handful of companies that are considered 'Tier One'. When a Tier One company wishes to let a subcontract to another Tier One company, it is reasonable to expect that there will be full symmetry of capability and capacity between the two. In this case, full or partial price competition would not necessarily be required for either contractor to assure its shareholders of the good VfM outcome of its negotiations (although, it is likely there will be some hard negotiation, wrangling and game playing; and it is also likely that the deal does not completely satisfy either party but is acceptable enough to proceed with the work).
When using full competition, to negotiate reasonable commercial terms and a fair TOC, the Owner would only require the capabilities of any competent agency experienced in procuring and delivering capital projects. However, a non-price process requires the Owner to match capability with a leading industry expert when both participating and evaluating the TOC development. When this symmetry is not achieved, there is a heightened risk to the public interest.