Australian experience suggests that bidding and contracting costs for a $2 billion project could be as high as $20 million per bidder. If there are three bidders, then including the government's cost, this would represent 2.5 - 4% of the total cost of the project.
Some of these costs are driven by the historic Australian requirement for bidders to have committed finance (although this is becoming less common since the global financial crisis). This brings financiers into the process who demand more rigorous investigations into the likely costs and revenues than construction companies by themselves would demand. An alternative model involving a large bond rather than committed finance may possibly avoid some of these costs. In a number of jurisdictions, funding competitions are held after selection of the preferred bidder, which reduces "at risk" bid costs but may extend the period of time leading to financial close. However, there may be other reasons for the high bidding costs, such as the complexity of the contracts employed in Australia and the lack of standardisation in that market.
Further clarification is required whether the high bidding costs are inherent to a PPP or whether they are avoidable by adopting better contracting and tendering processes. Containing bidding costs is one of the objectives that should be pursued in designing a bidding process. See chapter 9.