When confronted with an unsolicited proposal, the government has three options:
• direct negotiations to the offeror;
• purchase the project concept then competitively tender among a range of bidders; or
• offer original proponent a predefined advantage in recognition of the value of the original proposal (bonus system) and open-up bidding.
Entering into a sole-source process can save government time and money and may alert government to an unrealized opportunity for PPP. However, sole sourcing can encourage corruption through lack of transparency, and the cost benefits to competitive bidding are lost. Government has to be confident of its negotiation skills and its information to ensure that a sole-source deal is advantageous.
The government needs to ascertain that procurement laws and/or rules permit it to award such a contract based on direct negotiations. There is also an elevated risk that the fairness of the contract award will be challenged at a later stage, e.g., by disappointed potentia bidders or by the political opposition. As such, a strategy of direct negotiations could be considered politically risky. Box 15 shows the strategy for dealing with unsolicited proposals in the Philippines.
Box 15: Unsolicited Proposals |
Under the Philippines' Build-Operate-Transfer (BOT) Law, national or local authorities were able to accept unsolicited proposals for BOT projects on a negotiated basis if: • The project involves a new concept or technology and is not already listed in the roster of priority projects identified by the government. • No direct government guarantee, subsidy, or equity is required. • The project is submitted to a price test or "Swiss challenge" from competitors. The price test works as follows: the agency awarding the project must invite comparative proposals to any unsolicited proposal it has received. The invitation to tender must be published in a newspaper of general circulation for at least 3 weeks. The published invitation must inform potential bidders where to obtain tender documents; however, proprietary information contained in the original proposal is confidential and may not be disclosed in the tender documents. Competitors have 60 days to submit competitive proposals. If a lower-priced proposal is received, the original proponent has 30 days to match it and win the contract. Otherwise, the award goes to the lower bidder. This challenge has been used, for example, in the case of a New Zealand developer who submitted a proposal to the National Power Corporation to rehabilitate and maintain a 350-megawatt hydro plant, challenging an unsolicited proposal by an Argentine company. |
Source: Republic of the Philippines. 1994. |