Preparing a proposal for a PPP project is typically an expensive exercise. Equally, running a high-quality procurement process for a PPP can have high cost to government. Governments have different approaches to dealing with bid costs and commitments.
Many governments require bidders to submit a bid bond, to ensure commitment to the process, and prevent the winning bidder from withdrawing without good cause. For example, the Spanish procurement law prescribes that bidders should provide a temporary guarantee to back their proposal and increase it to meet the definitive guarantee once the contract is awarded. The Philippines BOT Law implementing regulations require a bid bond of between 1 and 2 percent of the estimated project cost [#202, Section 7.1 Clause b (vi)]. Kerf et al's guide to concessions [#169, page 126] provides further examples, and briefly describes the pros and cons of requiring a bid bond. The authors note, for example, that the United Kingdom government discourages the use of bid bonds for PPP projects, on the basis that they are expensive, and should only be sought in exceptional circumstances.
Governments have found different ways to deal with bid preparation costs. In some jurisdictions, the government may share bid costs, to encourage more bidders to participate. For example, Australia's PPP practitioners' guide [#16, page 29] states that bid costs may be reimbursed, but only in very limited and clearly defined circumstances. Conversely, Chile has a mechanism for asking pre-qualified bidders to jointly finance the engineering and other studies needed for the government to prepare for the transaction [#46]. This was an element of the reform to the PPP law that took place in 2010.
A KPMG review of PPP procurement in Australia [#173] describes typical bid costs for the private party to a PPP in different countries. The report also draws on a survey of PPP practitioners to provide recommendations for how bid costs can be reduced. These recommendations focus on improving the efficiency of the PPP procurement process, as well as touching on the pros and cons of governments contributing to bid costs.