Introduction
2.4
The choice of which PPP contract form is most suited to a particular project is a key element in the structuring and implementation of PPP contracts, and is explored in more depth in Modules 3 and 4.
Unsolicited Proposals (USPs) Under global best practices, governments will solicit private sector participation in publicly initiated infrastructure projects in the form of a competitive procurement process. Private sector participation in these projects is aligned with a national infrastructure plan, and projects are procured after the government has assessed the project’s purpose and societal need. An alternative to this publicly initiated approach is a privately initiated process, referred to as an Unsolicited Proposal (USP). In the case of a USP, a private sector entity (“USP proponent”) reaches out to the government with a proposal to develop an infrastructure project. The government’s budget or policies may not have foreseen the project; or may not have developed it beyond the preliminary concept stage. The nature of a USP is that the private sector party initiates the concept and develops the project feasibility studies, subsequently presenting it to the government. In some instances, a USP may be only a project concept, fleshed out in a few pages. In such instances, it is possible that either the private sector develops the project studies in consultation with the government, or the government takes over the project and prepares the studies. After the government accepts a USP, it may implement the project through a competitive procedure, or through direct negotiation with the USP proponent. Clearly, most USP proponents would prefer this latter approach. The international response to USPs has varied. Some countries, like the United Kingdom, have banned USPs outright, primarily because they present the following challenges: ✓ Achieving Value for Money is difficult: Achieving Value for Money is challenging enough in a publicly initiated approach in which the government has the capacity to identify, prioritise, prepare, and procure an infrastructure project. However, it is even more challenging to generate Value for Money from a USP project. It can be very difficult for the government to properly assess the cost and value of a USP project, particularly if there have not been any studies associated with the new project idea. Additionally, USP proponents generally do not make their best offer in their first pitch. As a result, the government needs to be skilled at negotiating and assessing the reasonableness of costs in order to generate Value for Money from a USP project. ✓ It is extremely challenging to ensure competition during procurement: Governments globally struggle to ensure a competitive and equal playing field for projects initiated as USPs.
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| Caribbean PPP Toolkit
Typically, the USP proponent has strategic advantages over competing bidders, including an in-depth knowledge of the project and/or access to land or required technologies. As a result, most procurements for USP projects do not attract sufficient competing bidders to ensure competitive pressure, and, therefore, Value for Money.