Ah, Valentine’s Day is afoot. Lovebirds are sweating (or swooning, as the case may be); marketers are marketing; poets are writing. And here on the Getting Infrastructure Finance Right blog, it’s time to pull out my odd and enduring (if not endearing) abuse of the metaphor of love to describe the relational challenges of PPPs (links to past blogs below). This time we’ll discuss how this relates to unsolicited proposals (USPs) in PPPs.
If you’re interested enough in infrastructure finance to be reading this blog, you likely know that USPs occur when the private sector, rather than the public sector, takes the lead role in identifying and developing projects. My colleagues Junglim and Philippe recently launched a Quick Read on USPs that I hope you’ll read (it’s brief, I promise!) and consider sharing.
The logic for creating a special regime for USPs generally suggests that the private sector should be incentivized to be proactive in moving infrastructure agendas and, in exchange, they should be allocated any resultant project either without competition, or with an advantage if competing (for example the right to match the best bid).
Private companies have marketing and business development budgets designed to fund proactive engagement with prospective clients in an effort to build business in this way. USPs are sometimes couched as technical assistance, corporate social responsibility engagements, government-to-government dialogue, or whatever medium provides the best access to client decision makers.
USPs are common, in particular in developing countries where governments are flooded with them.
From my experience, USPs fall into four categories:
- Good firms, with good experience and capacity, that are frustrated with the slow processes that impede most government action.
- Good firms with good experience, but no local expertise. Delivering projects in Africa is very different from delivering projects in North America or in Europe. They recognize this, are keen to expand in a new region, and hope to use a USP to create such an opportunity.
- Firms with limited experience that want to develop new capacity through the proposed project.
- Firms with limited experience and no real intention to deliver the project. They are hoping to leverage the opportunity to earn a return by selling it to a more experienced firm or get bought out by the government when the USP does not deliver.
My experience in Africa and Asia suggests that USPs fall into these different categories at a rate of 10%, 20%, 25% and 45% respectively.
So this is indeed a tricky game for governments: they don’t want to miss out on a good idea from a good firm with strong experience, but at the same time they don’t want to get trapped in a bad marriage.
My daughter is the most beautiful, amazing creature in the world. I’m trying to accept the fact that some day she'll start dating. And when she does bring home a special friend, I plan to greet them while nonchalantly cleaning my shotgun or sharpening my samurai sword (I have neither of these, but please don’t interrupt my fantasy). This is to say: I will do my utmost to help her find the very best partner and avoid the rest. I cannot imagine giving preference to a dating partner just because they were the first to ask her out, or the first to take her to a nice restaurant, or even the first to profess love and devotion. The first one might very well be the best—but a lot of due diligence is needed to be certain.
Being proactive is great, and the early bird often catches the worm, but a PPP is a long-term commitment that ultimately uses taxpayer money to fund infrastructure that should improve lives. It deserves the effort and patience to find the right partner—through open, transparent, fair, and balanced competition.
My daughter is definitely worth the effort and patience. Is your PPP project worth it?
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