According to a review of bid costs commissioned by Infrastructure Australia in 20103, bidders typically spend about A$2.5 million on bids for projects with a capital value between A$250 300 million, rising to A$5-6 million for a A$1 billion hospital, and A$30 million or more for a large A$2 billion plus economic infrastructure project. It is possible that costs have been exaggerated, as the review appears to have relied on information provided by market participants without verifying it. |
| "While bid costs may be significant, they are certainly not excessive." |
The costs include success fees paid to consortium members in the winning consortium.
While these costs may be significant in absolute terms, they equate to between 0.5-1.2 per cent of project capital value (with the larger projects costing proportionately less), which was close to world's best practice at that time, so they are certainly not excessive.
There is also little, if any, evidence that these bid costs are discouraging potential bidders from bidding to an extent which is materially affecting competition and, consequently, the value for money which government is obtaining from PPP bidding processes.4
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3 Infrastructure Australia, PPP Procurement - Review of Barriers to Competition and Efficiency in the Procurement of PPP Projects, May 2010.
4 National PPP Working Group, Statement of Response to the Infrastructure Australia Report, August 2010.