Managing Unsolicited Proposals

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ManagingUnsolicitedProposals

• John Hodges
• INF Vice Presidency
• June 6, 2006

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Unsolicited Proposals

• Working Definition private companies suggesting
  specific project concepts that are unrequested by
  governments, often including detailed
  construction, operation, maintenance, and
  financing plans
• Focus markets with little or no competition
  (i.e. airports, toll roads, water distribution,
  etc.)

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Possible PPP Project Awarding Scenarios
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Why an Issue?

• Prevalence Philippines 17 (9/52), Chile
  Transport 25 (12/48 - 1b), South Korea 31
  (40/128)
• Cost and Risk to Public Sector e.g. Guarantees -
  Chile (75), Korea (60-80 - now abolished)
• Competition Often for natural monopolies (i.e.
  toll roads, airports, water dist., etc.)
• Transparency Often original private proponent
  being awarded project through sole-source
  negotiations

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Common Arguments for Sole-source Awards

• Often in markets with little or no competition by
  nature (i.e. toll roads, airports, water dist.,
  etc.)
• Too small, too remote, or involves political risk
  and therefore will not attract much private
  sector interest
• Developed more rapidly through direct
  negotiations
• Proponent claims intellectual property rights to
  the project concept or engineering technologies

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How unsolicited proposals are commonly handled

• Serbia?
• Majority of Countries - No formal policies, some
  prohibit (e.g. Colombia)
• Part of Formal PPP System
• Require market-testing (e.g. Canadian and
  Australian States)
• Formal review and competition (e.g. Chile, S.
  Korea, Philippines)
• Variations South Africa, Taiwan, Argentina

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Unsolicited Proposal Approval Process
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Competitive Systems
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Other Countries with Systems

• COSTA RICA
• NEW SOUTH WALES, AUSTRALIA
• QUEENSLAND, AUSTRALIA
• VICTORIA, AUSTRALIA
• GUJARAT, INDIA
• ANDHRA PRADESH, INDIA
• ONTARIO, CANADA
• BRITISH COLUMBIA, CANADA
• STATE OF VIRGINIA, US
• SRI LANKA
• GUAM

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Bonus System Example

• Original proponent of the unsolicited proposal is
  awarded a bonus of 10 after having proposed a
  new toll road to government
• In exchange for this bonus, the government has
  the rights to make adjustments to the toll road
  proposal and call for an open tendering process
• In an open tendering process the participant who
  bids the lowest tariff per km wins
• Best offer received by challengers is 0.19 per
  km.
• Original proponent bid 0.20 per km
• Original proponent wins, because is within 10 of
  the lowest bid

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Main Issues

• Competition and Transparency are Key
• Reimbursement for Project Development Costs
• Advantage to Original Proponent
• Time Frames

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Chile Experience to Date
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Time Frame For Awards
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2006 Diagnostic Work

• Phase 1 Update experiences to date
• Phase 2 Develop toolkit type framework to
  directly assist govts and colleagues to develop
  policies
• Phase 3 Work with pilot countries

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• Thank You

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COMPARISONS OF COUNTRY/STATE TABLE