Response to WEF's Community Paper on Unsolicited Proposals for the Development of Infrastructure

"Finding the right strategy for using infrastructure development to boost economic activity has often been a struggle. The big infrastructure projects that can transform a city, a region or a country can take enormous amounts of time, money and effort to implement. For governments that have capacity constraints, this can hobble the ability to efficiently develop infrastructure. It is also a major inhibitor to the introduction of innovation into the process, compounding infrastructure’s sectoral struggle to embrace new technologies" - WEF, July 2020

A Call for More Unsolicited Proposals for Infrastructure Development

In July the World Economic Forum (WEF) issued a "Community Paper" calling for Infrastructure Development through Unsolicited Proposals (USPs) - see https://www3.weforum.org/docs/WEF_UPs_Note_2020.pdf

I am a strong proponent of USPs if they are well managed and their procurement is fully transparent and competitive. Many international donor institutions and development banks support the idea of unsolicited USPs, albeit with caution, as USPs can become conduits for corruption.

USPs can be catalysts of change. The WEF paper correctly states that this is a way for the public sector to tap into innovation to improve infrastructure delivery, especially in the case of public-private partnerships (PPPs). However, I would change the statement to say that not only is it a way for the public sector to tap into the private sector, but it is also an opportunity for the private sector to tap into the public sector.

Challenges of Traditional Procurements

Government's have their long term development strategies and goals that are typically manifested in project pipelines which announce the projects they hope to procure through conventional procurements. The WEF correctly points out that government led procurements can be costly to implement and they take time. This reality creates opportunties where the private sector can be proactive and approach the public sector with infrastructure project ideas that the public sector might not have thought of or had the funding to consider.

Setting Ground Rules for USPs

The private sector can be an innovator and enabler but it is important that ground rules (best practices) are established for how proactive engagement by the private sector should proceed. There are some fundamental best practices that must to be considered for USPs -

• It is important that the private sector is not allowed to circumvent traditional procurement project pipelines by proposing USPs projects that are already being considered and procured. This means that governments should be extremely cautions about allowing the private sector to propose projects that have already been identified. The reason for this is that many could see already identified projects and their procurement being by-passed through inappropriate and corrupt actions that seek ways to avoid competitive and transparent procurements.
• Entertaining a USP must never be seen as a commitment by the public sector to automatically procure the project being proposed. Discussions on an USP proposal need to be transparent and documented so that any resemblance of bias to a specific company can be avoided. The private sector project proponent also needs to understand that irrespective of how much time and resources they have expended on their proposal that the government reserves the right to turn the project down. It is also critically important that project proponents are not aligned with politicians and interest groups that could use their influence to demand consideration of projects. This also implies that contracting officers need to declare any conflicts on interest before they consider these projects.
• Almost all reputable public sector institutions have developed guidelines and policy regarding USPs and how they can be turned into a competitive and transparent procurement (see resource section for World Bank guidance at the end of this blog). The private sector needs to be aware of these rules and be willing to participate in a competitive procurement if required by a countries procurement rules. Fair competition between private sector institutions is the only way the governments can ensure that they will receive true "value for money" from the project being proposed. Best practice for competitive and fair process for an USP (e.g. the "Swiss Method" and other hybrids) are bountiful and where the thought leadership and innovation of the private sector proponent is awarded and protected during procurement.
• Even before a USP is considered, it is critical that a comprehensive feasibility study be done to ensure that the project merits consideration. The question always arises - "Who should pay for and commission the the feasibility study?" This is a difficult test important question. I firmly believe that the feasibility study should be commissioned by the government to ensure that its outcomes are subjective. If the project is meritorious, well-off governments could pay for it. If not, it would not be unfair for the government to require that the proposer pays for the feasibility study, with the understanding that if they are not selected in the resulting competitive and transparent procurement that they are fairly compensated by the government or the selected bidder for their initial efforts.
• One area of great sensitivity for USPs is the question of protection for intellectual property. The private sector will take a risk when it offers a new innovation as this information could be unintentionally shared with competitors when the USP is procured under competitive and transparent procurement rules. A clear understanding needs to be reached on how intellectual property with be shared and protected. It is also important that should the proponent not be selected in a competitive procurement that they receive compensation and protection for their intellectual property.

USPs must Promise Sustainability and Resilience

It is important that governments require that innovative USP project proponents include considerations of sustainability and resilience in their proposals. There should be a threshold commitment to "outcome" principles that include economic effectiveness and fiscal sustainability; environmental sustainability and resilience; replicability; and stakeholder engagement. This would require additional considerations of what adds value to USP proposals. This would require a revisiting of the concept of "value" addition that moves beyond "value for money" to include "value for people" and "value for the future." These principles underlie a new paradigm approach to PPPs being developed by the UNECE PPP Center of Excellence in Geneva called ‘People-First’ PPPs. This paradigm approach is also closely aligned with helping countries develop infrastructure that promotes economic development and the achievement of their Sustainable Development Goals (SDGs).

Expedited USPs in Times of Crises

I acknowledge that there could be times that USPs could be considered as ways to proactively expedite procurements during times of crises, such as the Covid-19 pandemic. If a path is chosen that fast-tracks a procurement through a sole source procurement, it is critical that this occur with considerable transparency and over sight from national procurement regulators and treasury officials. It should never become a free-for-all process driven by panic, but by careful consideration of short-term national crises priorities and benefits. Once the crises has passed, every effort should be made to revert to conventional procurement processes.

It is important that when the public sector considers USPs that they do not become distractions that divert attention and resources away from strategic infrastructure programs and priorities. If too many USPs are considered, decision making on critical infrastructure could be delayed and drain resources.

WEF Community Paper Take Aways

There are valuable takeaways from the WEF Community Paper when USPs are being considered. The papers recommends the following best practices -

• Governments must have adequate capacity to review and consider USPs
• Transparency, clarity and efficiency is critical during the administration of USPs
• Desirable success factors for increased sustainability must be considered
• USP benchmarking should also be considered through ex-post competition

Conclusion

In the closing comment of the WEF "Community Paper" the following statement is made.

"The adoption of a UP approach can also afford countries and governments at all levels an opportunity to encourage greater innovation in the development of infrastructure solutions, as the traditional approach of a government soliciting proposals within clearly predefined parameters often militates against innovative solutions." - WEF, July 2020

I fully agree if the ground rules are clear and transparency is paramount. If not, poor decisions can be made that undermine the projects sustainability, resilience, and future proofing against unknown calamities. and could leave the public sector holding a red-herring.

If you are interested in reaching out to a community of PPP practitioners who are well versed in USPs, the World Association of PPP Units and Professionals (WAPPP - https://wappp.org/) and the International Sustainable Resilience Center (ISRC - https://ippprc.org/ ) would be a good starting point.

Readings on USPS

To read more about innovative procurement approaches during the pandemic, I would suggest that you take a look at these thought leadership papers I wrote on this issue over the last few months.

https://www.dhirubhai.net/pulse/ppp-units-champions-gatekeepers-post-pandemic-project-david-baxter/

https://www.dhirubhai.net/pulse/need-covid-19-recovery-triage-national-ppp-david-baxter/

https://www.dhirubhai.net/pulse/expediting-procurement-needed-healthcare-services-goods-david-baxter/

https://www.dhirubhai.net/pulse/procurement-solicitation-emergency-healthcare-proposals-david-baxter/

World Bank Resources for USPs

https://ppp.worldbank.org/public-private-partnership/library/policy-guidelines-managing-unsolicited-proposals-infrastructure-projects