119. Due to the misunderstanding that PPPs bring a free asset and do not require much effort or commitment by the state, governments have sometimes gone to tender without demand and feasibility studies and without obtaining basic information that is essential in formulating bids, for example on geographic, geological, hydrological and meteorological factors. When this point was raised by the OECD with one MENA region government official, the response was that the private sector would do all the work to determine if a project was viable or if there were problems with the proposed location. This is not economically efficient, as it forces bidders to replicate the same evaluation work, and the increased costs will simply be passed on to the government as more expensive bids. And since these costs must be incurred by bidders with no guarantee of being awarded the contract, they may deter bidders, lessen competition and impact value for money. In addition, by leaving bidders to determine demand levels and feasibility, there is an increased risk of "optimism bias" - the natural tendency for any analyst with an interest in the success of a project to focus on optimistic rather than pessimistic outcomes (OECD/International Transport Forum, 201315). While this may result in a lower bid price in the short-term, the project will almost invariably become troubled and require renegotiation, thereby increasing costs and impacting value for money. Any initial cost savings from leaving the preparatory work to the private sector will be illusory.
120. Many MENA countries have highly centralized and bureaucratic government structures. Projects will often require the approval and/or participation of numerous government departments and agencies that may not be aware of it or share its goals, so the required permits and approvals are not always readily forthcoming. This is a particular issue for foreign companies and investors, who may be unfamiliar with navigating the region's often complex political and bureaucratic environment. There are two potential solutions: 1) the creation of a "one-stop-shop" providing all required approvals, permits and licences in one office or agency, or 2) the tendering authority obtains approvals, permits and licences on behalf of the developer.16 This is about which party takes the risks involved in obtaining these approvals, and clearly, the tendering authority, which is part of the government, is in the best position to coordinate with other agencies of the same government.
121. The two issues above, responsibility for preparatory work and responsibility for obtaining permits and approvals, are examples of governments making it unnecessarily difficult, risky and expensive for bidders to participate in the PPP procurement process. Given the multitude of investment opportunities in a globalised world and the well-known challenges facing the MENA region, governments should seek ways to make bidding more attractive and avoid creating additional barriers. This will maximise competition, the probability of project success, and value for money.
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15. Kahneman D. and A. Tversky A. (1979), "Intuitive Prediction: Biases and Corrective Procedures", in: S. Makridakis and S.C. Wheelwright (Eds.), Studies in the Management Sciences: Forecasting, 12, Amsterdam.
16. It is suggested that the tendering authority obtain approvals, permits and licences to the extent possible. It will not be possible for the tendering authority to obtain all of them, including, for example, building permits that may require a detailed final design.