Managing unsolicited proposals in infrastructure: 5 key questions for governments

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.