The higher bidding costs of Australian PPPs, compared to world's best practice, are partly caused by the preference of Australian government agencies' for highly tailored and optimised design solutions, and for a high level of certainty on commercial terms before a sole preferred bidder is appointed. Further bidding stages involving requests for 'best and final offers' or 'consolidated and refreshed offers' are common in Australia.
Even though the additional bidding costs, including losing bidder costs, are ultimately borne by government in the form of higher contract prices, the additional value which government achieves by finalising the key drivers of value for money in a competitive environment would almost certainly exceed the additional bidding costs.
Indeed, there is a good case for government to return some of this value to the losing bidders that generate it, by reimbursing a portion of their bid costs.
Of course, there is no case for continuing parallel negotiations with multiple bidders once it becomes certain that a clear leader has emerged. Stalking horses are neither appropriate nor fair.