Many private companies submit unsolicited proposals with a view to directly negotiating a contract for the proposed project-creating the problems described above. Box 3.11: Competitive Procurement or Direct Negotiation describes some [#129] sets out the following approaches:
• Access to best and final offer-a two-stage bid process is used, in which the highest-ranked bidders from the first stage are invited to submit final proposals in a second stage (see Section 3.5.4: Managing the Bid Process). The proponent is automatically included in the second stage. This approach is used in the South Africa roads sector, as set out in a South Africa Roads Agency policy note [#219]
• Developer's fee-the proponent is paid a fee by the government or the winning bidder. The fee can simply reimburse some project development costs, or be defined to provide a return on developing the project concept and proposal. This is one option for dealing with unsolicited proposals permitted in Indonesia under the presidential regulations governing PPP [#148].
• Bid bonus-the proponent receives a scoring advantage-typically defined as an additional percentage added to its evaluation score-in an open bidding process. This approach is used in Chile, where the bid bonus can be between 3 and 9 percent of the financial evaluation score (in addition, the proponent is reimbursed for the cost of detailed studies) [#46]
• Swiss challenge-following an unsolicited approach, an open bidding process is conducted. If unsuccessful, the proponent has the option to match the winning bid and win the contract. This approach has been used in several states in India, as described further in Reddy and Kalyanapu's paper on managing unsolicited proposals for PPPs in India [#212].
Table 3.5: Examples of Procurement Strategies for Unsolicited Proposals provides further examples and references. These alternatives have not all proved equally effective at enabling competition. Hodges and Dellacha reviewed several countries' experience with unsolicited proposals [#129, Appendix B]. In Chile, for example, of 12 concessions awarded from unsolicited proposals as of March 2006, 10 attracted competing bids, and only 5 were awarded to the original proponent. On the other hand, in the Philippines under the Swiss Challenge approach, all 11 PPP contracts awarded from unsolicited proposals by 2006 went to the original proponent.
Table 3.5: Examples of Procurement Strategies for Unsolicited Proposals
Jurisdiction | Reference | Key Features |
Chile | Public works concession regulations (updated 2010) [#46, Title II: Bids Submitted by Private Parties] | ■ Two-stage process for accepting unsolicited proposals-initial proposals are screened; if accepted, the private party must conduct detailed studies and prepare a detailed proposal. The government then prepares bidding documents based on the detailed proposal, and puts the project out to competitive tender ■ Costs of carrying out studies are reimbursed (paid by the winning bidder; or by the government if project never proceeds to bid stage). Costs agreed at initial project approval stage ■ Proponent receives a bid bonus of a pre-defined percentage (between 3 and 8 percent depending on the project) added to financial evaluation score |
Indonesia | Presidential Regulation 67(2005) [#148, Chapter IV] | ■ Unsolicited proposals welcomed for projects not already in priority list ■ Accepted proposals are put through normal competitive process. Proponents may either be awarded a bid bonus, of up to 10%, or paid a developer's fee for the proposal. The approach is set by the contracting authority, based on an independent appraisal |
Italy | Legislative Decree no. 163 (2006) [#164, Articles 153-155] | ■ Contracting authorities publish three-year plans on an annual basis; private companies are invited to make proposals for infrastructure listed in these plans (following clear content requirements-including detailed studies-and timeline). Proposals are evaluated by the contracting authority ■ A type of Swiss Challenge process is used to procure the project. A first stage is used to identify two competing bidders, who together with the proponent enter into a negotiated procurement procedure (see Error! Not a valid result for table.). If a competing proposal is preferred, the proponent is given the right to match that proposal, in which case the proponent is awarded the concession |
Republic of Korea | ADB review of PPP experience in the Republic of Korea [#171, pages 67-69] | ■ Unsolicited proposals must be evaluated by the contracting authority and the PPP unit (PIMAC) ■ The opportunity is published and alternate proposals are requested, within a 90 day time limit ■ The proponent receives a bid bonus of up to 10 percent, added to the overall bid evaluation scores. The proponent may modify its original proposal at the bidding stage, but its bonus is reduced to a maximum of 5 percent. Bonuses are disclosed in the request for alternate proposals ■ Losing bidders are compensated in part for proposal costs, to encourage competition |
Philippines | BOT Law 1993 (Republic Act No. 7718) Rules and Regulations [#202, Rule 10] | ■ Unsolicited proposals welcomed for projects not already in priority list ■ The contracting authority must advertise the opportunity for at least three weeks, and invite competing proposals within a 60 day time limit ■ If competing proposals are received, a Swiss Challenge process is followed-if the proponent is not the winning bidder, it is given the opportunity to match the winning bid and win the contract ■ If no competing proposal is received, the authority may negotiate with the proponent |
South Africa (roads sector) | SANRAL policy for unsolicited proposals (2001) [#217] | ■ Unsolicited proposals must comply with clear content requirements, and are evaluated by the Agency ■ If the proposal is accepted the Agency and the developer enter into a 'Scheme Development Agreement', under which the private party is responsible for detailed development of the PPP, including developing tender documentation. The agreement includes a developer's fee payable by the winning bidder to the proponent ■ The project is put out to competitive tender, in a two-stage best and final offer process. The top two bidders from the first round are invited to re-submit best and final offers; the proponent is also invited, if not already in the top two |
Commonwealth of Virginia, United States of America (highways sector) | ■ Proposals are welcome that comply with the detailed requirements set out and are evaluated in the same way as government-originated projects ■ Proposals for PPPs requiring no government oversight or support are advertised for 90 days; those for PPPs requiring government support for 120 days. If no competing proposal is received, the government may negotiate directly with the proponent | |
Uruguay | Article 37 of Law Number 18.786 [#269] | ■ Proponent is entitled to a bid bonus of up to 10% of the final evaluation score ■ Proponent is reimbursed for the cost of detailed studies only if not successful in winning the contract |