Best Practices for Unsolicited Proposals

Managing Unsolicited Proposals in PPPs: Global Best Practices

Unsolicited proposals (USPs) are privately initiated Public-Private Partnership project proposals made without a public-sector request. In a USP, a private sponsor identifies and develops a project concept and offers it to government, rather than responding to a government tender.¹ Such proposals may arise when governments face gaps in technical or financial capacity, need innovation, or have urgent infrastructure needs. Allowing USPs can help “not miss any opportunity to develop infrastructure”. However, USPs often pose risks: they can divert resources from official plans, skew value-for-money, and invite perceptions of unfairness or corruption. For example, many USPs have ended up linked to allegations of patronage or poor project outcomes (e.g. cost overruns or quality issues) when governance is weak. These concerns make it essential for governments to have clear legal frameworks and procedures to manage USPs.²

Key Principles and Trends

Today over 85% of countries formally allow USPs, and many have adopted dedicated USP policies or laws. Best practice frameworks generally agree on several points:

• USP as Exception: USPs should be treated as exceptions to the normal procurement process, not the rule. Governments and donors advise that solicited, competitive bidding remains the preferred norm for PPPs.³ USPs may be used cautiously when they offer truly novel solutions or when government otherwise lacks alternatives.

• Alignment with Priorities: Any USP must fit the country’s plans and budget. Many new laws explicitly require USPs to be consistent with the national infrastructure strategy and not duplicate projects already on the government’s priority list. This ensures USPs only supplement, not supplant, planned projects.

• Transparency and Fairness: Strong transparency is critical. Best-practice guidance stresses full disclosure and open competition. Governments should publish USP details and apply the same rules as other PPPs, avoiding secret deals. A well-structured USP policy will mandate public notices, allow sufficient time for competing bids, and enforce conflict-of-interest rules.⁴

• Value-for-Money (VfM) Discipline: As with all PPPs, USPs require rigorous VfM and risk analysis. The World Bank notes that many past USPs delivered “poor value for money”. Governments should apply standard PPP evaluation (e.g. public-sector comparator) to each USP and proceed only if it clearly benefits the public purse.

• Reimbursement of Development Costs: Since private sponsors incur preparation costs, frameworks usually allow reimbursement after a fair selection. Common practice is to repay bona fide feasibility study costs to the winning bidder (or, if no award, by government), but only once the project is tendered or awarded. For example, Chile, Peru, Italy and some U.S. states reimburse the original proponent’s studies at bid award. Requiring a Project Development Agreement (PDA) up front helps: it spells out each party’s role and how/when costs will be reimbursed, ensuring transparency in these arrangements.

• Incentivizing Competition: Policies often give modest rewards to the USP proponent while preserving open competition. Common approaches include:

  • Bonus Points: Adding a small bonus (e.g. 3–10% of the score) for the USP proponent during bid evaluation. Chile uses a 3–8% bonus, and experience shows this did not deter competition there.

  • Automatic Shortlisting: Guaranteeing the USP proponent a spot in the final bidding stage (skipping prequalification), as used in some South African road tenders.

  • Developer’s Fee: Paying the original proponent a fixed fee for their concept if another bidder wins, as allowed under Indonesia’s PPP regulations. These incentives are preferred over Swiss challenge (right-to-match) methods, because Swiss challenge often discourages competitors. Under Swiss challenge, after a tender any bidder can be outmatched by the original proposer matching the best offer. The World Bank guidelines “highly discourage” Swiss challenge, noting bidders may shy away if they know a rival can simply match their bid. Indeed, countries using Swiss challenge (e.g. Italy, Philippines, Colombia) have struggled to attract competitors. In contrast, providing only bonus points or fees tends to keep multiple bidders interested.

Procurement Options for USPs

Governments typically choose from several procurement routes for USP projects. Key options include:

• Competitive Tendering (no incentive): The USP is treated like any PPP: after review, it is put out to open competition on equal terms. This maximizes competition and value-for-money, though it offers no reward to the original proponent. For example, in Virginia (USA) and South Africa many USP projects are run as regular bids with no extra points..

• Swiss Challenge (Right-to-Match): An open tender is held, and if the original USP proposer does not win outright, they have the right to match the lowest (best) bid and claim the contract. This effectively guarantees the originator a second shot. Although sometimes used (notably the Philippines and earlier Colombia/Italy), it is widely viewed as anti-competitive because bidders anticipate the match option. The World Bank and PPP experts generally advise against Swiss challenge unless carefully constrained.⁵

• Bonus-Point System: An open tender is held, and the USP proponent receives an extra evaluation credit (for example, 5% added to their financial score). This small advantage recognizes their early work. Chile’s model grants about 3–8% bonus points to the proponent. Empirical evidence suggests bonus points need not deter competitors if set modestly..

• Two-Stage Bidding (Best-and-Final-Offer): A multi-round process where all qualified bidders first submit initial bids, and the top bidders (including the USP proponent) are invited to submit final offers. For example, South Africa’s road projects have used this: the USP proponent automatically makes the final shortlist, then competes normally in round two.

• Direct Negotiation with Safeguards: In some cases, governments directly negotiate with the USP proponent without holding a full tender. This is the riskiest route for value-for-money. The World Bank found no evidence that direct awards speed up delivery or yield better projects, and in practice they often spark controversy. If direct award is allowed (for example if only one suitable bidder exists), it should be limited by strict vetting, external review and post-negotiation audits to protect public interest.

Each option has trade-offs. Most experts agree that open competition is the default best practice for USP projects. Incentives (bonus, fees, shortlisting) can help motivate quality proposals, but should be calibrated so as not to undermine the competitive process.

Approaches in Key PPP Jurisdictions

Different countries have tailored these principles to local law and practice. A few illustrative examples:

• South Korea: Korea’s Act on Public–Private Partnerships and its implementing decrees expressly cover privately initiated projects. Korea follows a unified PPP framework (using the Public Infrastructure Management Center, PIMAC) where USPs are reviewed like other projects and typically subject to competitive bidding. Notably, Korea does not provide special reimbursements for USP proponents under its laws. (Guarantees and subsidies have been used historically in Korean PPPs, but Korean practice emphasizes transparent, plan-aligned proposals.)

• Chile: Chile’s 1996 Concessions Law (updated 2010) governs both solicited and unsolicited PPPs. Chile’s rules require USP projects to undergo full competitive tendering. The original proponent typically prepares a detailed feasibility study (to government oversight) and may be reimbursed by the winning bidder. Importantly, Chile grants the proponent bonus points in evaluation (commonly 3–8% of the financial score). This has allowed Chile to attract multiple bidders: of 12 USP concessions awarded by 2006, 10 drew competing offers, and only 5 ultimately went to the proposer.

• Philippines: The Philippines’ Build-Operate-Transfer (BOT) Law and NEDA regulations permit USPs and generally use a Swiss Challenge approach. When an agency deems a USP worthy, it publishes a competitive bid; the original proponent is allowed to match the lowest bid in the final stage. Historically, this mechanism has meant that other bidders often drop out, and in fact all 11 USP-based PPP contracts awarded by 2006 were won by the original proponent. (Recent reforms have sought to enhance transparency, but the Swiss Challenge remains a core feature of Philippine USP policy.)

• South Africa: South Africa’s PPP regulations are supplemented by National Treasury Practice Note No. 11 (2008/09) specifically for USPs. USPs in South Africa must comply with the PPP Act, but the Treasury note provides additional steps (e.g. project review, feasibility). In practice, USPs are put into open competition. For example, some road PPP tenders have used a two-stage “best and final offer” where the USP proponent is automatically shortlisted to the final round. South Africa does not generally grant the proponent additional scoring, and reimbursement of development costs occurs only if the bid is won by others (paid by the winner).

• Italy: Italy’s Public Contracts Code (codice dei contratti) explicitly covers privately initiated PPPs. Under Italian law, a regional or local authority may accept a USP and then either negotiate it or subject it to tender. Italian practice has varied: some projects have used Swiss Challenge or negotiated deals. While there are no official “bonus points” in Italy, some USPs have proceeded with the authority awarding the contract to the original developer (often after rebidding). Italy’s long experience (and some noted controversies at the local level) underscore the need for strict transparency. For instance, observers have warned that USPs at sub-national levels can be prone to irregularities, highlighting that robust oversight is essential even in well-established markets.

Each country calibrates incentives and safeguards differently. Mature PPP markets tend to avoid automatic awards: competitive bidding is common in Chile, South Africa and Korea, whereas the Philippines and (less frequently) Italy still rely on right-to-match. Regardless of method, these countries demonstrate that strong legal frameworks and enforcement of clear rules are critical to making USPs work.

Case Examples

• Chile – Balanced Competition: Chile’s USP regime is often cited as a balanced model. By requiring full tenders and reimbursing studies, Chile has integrated private initiatives without sacrificing competition. The bonus-point rule gave USP proponents a modest edge but did not deter bidders: in most cases multiple companies bid, and the originator won only about half of the time..

• Philippines – Swiss Challenge Alone: In contrast, the Philippines’ reliance on Swiss Challenge has delivered fewer competitive outcomes. When only the proponent can match the best bid, outside firms may hesitate to participate. As a result, the historical data show all USP PPPs (through 2006) were eventually awarded to the original sponsor, raising concerns that others never got a fair shot.

• Potential Pitfalls: Unstructured USPs can go wrong. For example, some projects (e.g. a regional hospital PPP in Veneto, Italy) attracted allegations of irregularities when the process lacked transparency. Similarly, in environments without strict rules, USPs can be manipulated (for instance, by fast-tracking projects not on the master plan or by weak tendering). These cases underscore that without proper checks, USPs risk public pushback and lost value.

Recommendations and Practical Takeaways

Based on global experience, governments should adopt the following measures to manage unsolicited PPP proposals effectively:

• Enact Clear USP Policy and Law: Define USPs in statutes or guidelines. Specify eligibility (e.g. project uniqueness) and require USP submissions to include a minimum level of analysis (such as a preliminary feasibility study). Articulate the purpose of allowing USPs (e.g. to leverage innovation or private resources). This legal foundation ensures all parties understand the rules up front.

• Align with Public Planning: Rigorously check that any USP is consistent with the government’s infrastructure plans. Prohibit acceptance of USPs that compete with projects already budgeted or planned. This guards against diverting scarce resources to pet projects.

• Competitive Bidding as Default: Commit that USP projects will be competitively tendered under the same procedures as other PPPs. The USP proponent may receive incentives (see below), but all finalists must compete on equal technical and financial criteria. This maximizes fairness and value-for-money.

• Use Modest Incentives: If incentives are included, keep them small. Options like a fixed score bonus or automatic final-stage shortlist can reward the proposer without precluding others. Crucially, do not allow the USP sponsor to automatically get the project unless they truly offer the best deal. For example, Chile’s 3–8% bonus system has worked well. In all cases, any incentive scheme should be clearly defined in law or policy to avoid arbitrary advantages.

• Reimburse Development Costs Fairly: If the government requests or requires the proponent to prepare detailed studies or designs, commit to reimburse those costs only after competitive procurement or award. Normally the winning bidder pays those costs (or the government, if no award occurs). This balance ensures proponents cover their initial effort but still compete on a level playing field. A Project Development Agreement should spell out these terms..

• Transparency and Disclosure: Publicly disclose USP submissions (subject to legitimate confidentiality) and make key details (scope, cost, technical specs) available to all bidders. Set deadlines that give competitors adequate time to respond.. Record all approvals and evaluations in writing. As one expert blog notes, “infrastructure projects initiated through USPs…should be managed and used with caution as an exception to the public procurement method” – and transparency is a key safeguard.

• Strengthen PPP Institutions: Route all USPs through the PPP Unit or equivalent central body. Have dedicated staff review proposals’ technical merits and financial assumptions. Require independent appraisal of the project’s economics. Often PPP units require a “screening committee” to verify the project is sound and necessary before proceeding. This was recommended after observing that strong rules and PPP capacity are needed for managing USPs.⁶

• Guard Against Abuse: Institute conflict-of-interest rules (e.g. banning civil servants or PPP advisors from immediately joining USP consortia). Avoid rushed exclusivity agreements with proponents. The government should retain the right to reject any USP that appears speculative or for rent-seeking. Continual training of officials on USP risks and anti-corruption practices is also advised.

• Rigorous VfM and Audit: Apply the same value-for-money tests to USPs as to solicited PPPs. Because USPs historically tend to “provide poor value for money” if unchecked, compare the USP approach to traditional procurement using shadow bids or benchmarks. After contract award, subject the project to the usual monitoring and audit processes to ensure compliance with terms and prevent budget overruns.

By following these best practices, governments can tap private-sector creativity without sacrificing fairness or efficiency. In short: treat USPs as potential opportunities only if they undergo the same rigorous analysis and competition as any PPP, with clear upfront rules and incentives that reward – but do not override – competition.

Sources

Authoritative guides and studies by the World Bank Group (PPIAF), IFC/ALSF, OECD and others on PPP best practice, as well as national PPP laws and guidelines. Sources include:

¹. alsf.int. https://alsf.int/publication/0VzOElVu.pdf

². Policy Guidelines for Managing Unsolicited Proposals in Infrastructure Projects | UN SDG:Learn. https://www.unsdglearn.org/courses/policy-guidelines-for-managing-unsolicited-proposals-in-infrastructure-projects/

³. Avoiding Using Unsolicited Proposals to Circumvent Regulations and Best Practices when Procuring PPPs - Public Spend Forum. https://www.publicspendforum.net/blogs/david-baxter/2017/10/25/avoiding-unsolicited-proposals-regulations-procuring-publicprivate-partnerships/

⁴. Unsolicited proposals in infrastructure: a balancing act between incentives vs. competition https://blogs.worldbank.org/en/ppps/unsolicited-proposals-infrastructure-balancing-act-between-incentives-vs-competition

⁵. Privately-Initiated Projects | The APMG Public-Private Partnerships Certification Program. https://ppp-certification.com/ppp-certification-guide/166-privately-initiated-projects 

⁶. Guidelines for the Development of a USP Policy - Sample Chapters. https://thedocs.worldbank.org/en/doc/976121488983070966-0100022017/original/GuidelinesfortheDevelopmentofaUSPPolicy.pdf