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Dealing with Unsolicited Proposals

Dealing with Unsolicited Proposals. John Hodges INF Vice Presidency April 3, 2006. Possible PPP Project Awarding Scenarios. Why an Issue?. Prevalence: Philippines 17% (9/52), Chile 25% (12/48 - $1b), South Korea 31% (40/128)

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Dealing with Unsolicited Proposals

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  1. Dealing with Unsolicited Proposals John Hodges INF Vice Presidency April 3, 2006

  2. Possible PPP Project Awarding Scenarios

  3. Why an Issue? • Prevalence: Philippines 17% (9/52), Chile 25% (12/48 - $1b), South Korea 31% (40/128) • 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 • Cost and Risk to Public Sector: e.g. Guarantees - Chile (75%), Korea (60%-80% - now abolished)

  4. How unsolicited proposals are commonly handled • 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. Africa, S. Korea, and….to a lesser degree….Philippines & Virginia) • Newer hybrid models: Costa Rica, Taiwan

  5. Competitive Systems

  6. Chile: Experience to Date

  7. Conclusion • Competition and Transparency are Key • 2002/2006 Diagnostic: • 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

  8. Thanks

  9. 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 • May not be cost efficient to tender • Developed more rapidly through direct negotiations • Projected was an unsolicited proposal, and proponent claims intellectual property rights to the project concept or engineering technologies

  10. Unsolicited Proposals: Pros and Cons • A means for the private sector to bring governments constructive ideas for project development • Many governments’ experiences with unsolicited proposals thus far have been unfavorable (e.g. Dabhol Power Plant in India, IPPs in Indonesia) • Criticism usually stems original private proponent being awarded project without sufficient competition and transparency • Governments, almost everywhere, do not have expertise to negotiate with corporate lawyers • Politically, sole-source negotiations are often unpopular regardless of outcomes

  11. Country Prelim. approval Final approval Call for open tenders Counter-proposals / open tender Additional time Total(months) Chile 7 12 12 2–4 n.a. 33–35 Korea, Rep. of 0.5 4 — 2–4 n.a. 6.5–8.5+ Phils 2 3 — 2 1 8+ South Africa 1 9 3 2 2 17 Time Frame For Awards

  12. Virginia’s Unsolicited Transport PPPs • Governed by Public-Private Trans Act (1995) • $50,000 Proposal Review Fee • Can use public funds to finance project • Public does have some access (VA FOIA, website postings, comment period of 60 days) • Allow counter-proposals within 45 days • Various “subjective” internal reviews • and finally…..…sole-source negotiations

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