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Managing unsolicited proposals in infrastructure: 5 key questions for governments

Philippe Neves's picture


Photo Credit: Tim Wang via Flickr Creative Commons

According to the World Bank Group’s Private Participation in Infrastructure (PPI) Database, an estimated 10-30% of global infrastructure projects with private-sector participation in low- and middle-income countries are unsolicited, meaning the proposal was submitted by a private sector entity without an explicit request from a government to do so. The considerable use of this alternative procurement method, where the private sector rather than the government takes the leading role in initiating and developing a project, raises important concerns for public infrastructure practitioners at both technical and political levels due to the nature of unsolicited proposals (USPs). USPs offer potential opportunities for governments, but experience shows they can introduce several challenges, such as diverting public resources away from the strategic plans of the government, failing to attract competition, and ultimately leading to opportunities for corruption.

With the private sector becoming increasingly relevant for delivering the billions of dollars in investment needed in infrastructure, how can governments in developing economies effectively mobilize the private sector’s strengths? And, if governments choose to consider USPs, how can they avoid the associated pitfalls and minimize risks? How can they ensure clarity, predictability, transparency and accountability in the delivery of infrastructure projects? What policy options are available to safeguard the public interest?
 
With this in mind, the World Bank’s Public-Private Partnerships Cross Cutting Solution Area (PPP-CCSA), through funding from the Public-Private Infrastructure Advisory Facility (PPIAF), launched an effort in 2015 to provide guidance and recommendations for governments that are considering the development and operationalization of a policy to manage USPs. The initiative resulted in the draft Guidelines for the Development of a Policy for Managing Unsolicited Proposals in Infrastructure Projects, which are now available for public consultation on our consultation page.
 
The Guidelines are based on an in-depth review of global best practices with USPs policies and projects summarized in the Experience Review Report, and provide pros and cons of options that governments should consider when managing USPs. It is important to remember that the decision to allow unsolicited projects should be carefully thought through. If deciding to accept USPs, governments should use them with caution, as the exception to the rule. In fact, independently of the procurement process – whether through PPPs, USPs, or public works—infrastructure projects should only be pursued if they are expected to truly bring additional value to the citizens.
 
So why consider integrating USPs at the policy level? Because a good policy helps ensure transparency and predictability, and protects the public interest. Introducing a clear set of rules and procedures for managing USPs will lead to fairness and competitiveness throughout the process.
 
Here are the five key high-level policy decisions for governments to shape a USP policy:
 
1) As a general policy rule, shall I allow USPs or not?
 
2) What should I use USPs for? For a specific project concept, or a specific sector? Or as a complement to the public planning process?  
 
3) How should I incorporate the USP policy in the existing regulatory framework?  
 
4) To what extent should the USP proponent be included in the development of the project?  
 
5) During the procurement phase, how can I enhance competition? In what circumstances could direct negotiation be considered? And shall I provide incentives to the USP proponent? Here, the Guidelines recommend governments to competitively tender USPs whenever possible.
 
Along with this framework for thinking about USPs, the Guidelines also include recommendations for each phase of the USP process to align it as much as possible with the procurement cycle of PPPs. We hope they will help government ensure that a PPP contract originating from an unsolicited proposal generates value for money and meets the public interest.
 
We welcome your comments on the Guidelines. Feedback can be submitted here through May 7, 2017.

Comments

Submitted by Johnson Kilangi on

Dear Phillipe,

From the World Bank's report, it is evident that most of the governments in the developing regions are hesitant to propose projects that are going to improve the lives of the people especially in the less economical regions of the country.

It is highly probable that these governments will be lax to craft policies that will guide and govern the unsolicited proposals from the private sector.

How does the World Bank and other Multilateral organisations come in to unlock this situations so as to improve the lives of the locals?

Johnson Kilangi

Thanks for your comments. Multilaterals are active in the field you mention. If for instance we consider PPIAF (created in 1999), this facility is specialized in providing grants for technical assistance to governments (national and sub-national) to enable the environment for the private sector to participate into the effort for better and more infrastructure services. To contribute to unlock the situation you describe, PPIAF also provides knowledge products, such as the Guidelines on unsolicited proposals we refer to in this blog.
We believe the guidelines will be helpful for governments to consider if they intend to include USPs as part of their procurement options, and if so, to manage them in an appropriate way. Please let us know if you have any other questions and comments.
Philippe

Submitted by Evans O Owiti on

Funding for initiatives that improve living standard and transform lives should gain funding because it would be illogical to wait for such initiatives to emerge from the governments or the sacred entities that are highly valued and given consideration to spear head such moves. while implementation of the presented idea is at our face, right on the table, hence accepting Participation of different stakeholders in developmental initiatives and creativity will boost livelihood, well the bottom line is that the expected objectives are met. To shelf such ideas pulls us back while we wait for the governments initiatives run with the one on the table because time waits for no one a stitch in time saves nine.

Submitted by Ibrahima FALL on

Thank you for sharing M. Neves. As far as it is concerned, Senegal has tried to give some answers to these 05 questions. 1) unsolicited proposals cannot be accepted when the related projects are already in a bidding process or when they are already included in the public investment program or when the studies are carried out or financed by the Government. 3. The principle of managing unsolicited proposals is open competition. 4. direct negotiation is possible but is strictly monitored when a few conditions are met. 5. When the principle of direct negotiation is adopted, it must be authorized after consultation of the PPP committee which must make the technical, economic and financial counter-evaluation of the unsolicited proposal. 6. When open competition is chosen, our law allows a bonus to be awarded to the spontaneous candidate. However this is an important issue and, in my view, the emphasis must be placed on coaching because in most of the countries where it is taken into consideration, the Administration faces difficulties in formulating projects or problems of financing feasibility studies.
However, experience has shown that negotiations in unsolicited proposals often last as long or longer than normal procurement procedures.That is to say that USPs are not a way to accelerate the implementation of projects as many countries think.

Dear Mr. Fall, thank you for sharing the Senegal experience with USPs and addressing the five questions. This complements very well the Experience Review Report (ERR) that was prepared. USPs are often subject to preconceived opinions, so your comments on the necessity for coaching / capacity building and on the duration of USP processes compared to traditional procurement are much appreciated.
Philippe

Submitted by Jacques Cook on

USPs are definitely a challenge for developing countries. Most have limited internal capacity to maintain a fair and transparent competitive process for projects originating in the private sector. That being said, I think it is unrealistic, given the extensive use of USP, to prohibit their application. I suggest that governments develop reasonable policy guidelines to control the use of USP following a careful assessment of results achieved in each case and confirmation that their use has not weakened the environment for PPPs in their respective country. We should therefore neither assume that USPs are always compatible with international best practices, nor that their benefits outweigh their potential costs in terms of value for money.

Dear Jacques, thank you for your comment that reflects considerations similar to the ones we faced while structuring and drafting the guidelines, with the aim of providing useful guidance and without willing to avoid the reality of USPs. Yes, USPs are on the rise, but many are opportunistic and low quality. The proposed guidelines seek to build clarity and raise awareness on possible options (with pros and cons) in the USP management process. It is good practice for a government to assess the benefits and costs of a public investment before eventually moving into its structuring, tendering and implementation. This should apply to USPs as well.  
Philippe

Submitted by Ogagaoghene Igbogidi on

This information os very incisive to the current realities with our governmental projects as PPP has become a welcome development thus allowing for USP which is subjected to critical evaluation and analysis. This mostly are been handled by professionals in the private sector while expecting the enabling policy from the government. There are a couple of projects that are been put together needing finance and technical assistance. The government is amenable to these projects as long as it has the following criteria: (1) able to create high employment level, (2) ability to generate revenue for both the government and private investors (3) add to the developmental stride of the government (4) boost commerce and enhance the economy. To this end, USPs are highly welcomed and we seek partnership with your goodselves to bring development in our location. Thank you.

Submitted by Anjani Kumar on

From your study, do you have a database sbout the percentage of the country which legal framework does not or does allow USP.

If a legal framework (the Law) of a country is silent about the USP, can the Regulation bring this in practice?

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