Procurement gets proactive, kind of.
18 July 2019
There’s a trend rippling
across the
procurement world that has been touted as being the better
process for encouraging innovative ideas for the delivery of public
infrastructure and services. With disruption and innovation moving
faster than procurement documents can even be assembled,
market-led
proposals (MLPs) or
unsolicited proposals are becoming the new way to
sell into government outside of a formal procurement-led RFx process.
“We don’t know what we don’t know”
Governments are recognising that
MLPs are a good way to attract private investment into the economy.
Through direct solicitations from industry, they can discover
innovations from private sector proponents that they would otherwise not
be aware of when scoping requirements through the traditional
procurement process.
In most instances governments seek to work with proponents who can help
them advance their priorities to close service gaps, or develop
large-scale infrastructure and
urban-renewal projects. The goal is to
remove the reliance on public debt to finance long term asset investment
while creating contestability in the market by taking advantage of new
and innovative ideas with private sector investment.
Bringing government and private sector together to solve civil and civic
problems through outcomes-based contracting is where market-led
proposals are making a big impact. This new model allows government to
support projects that can be funded by the private sector and are
important to the community. In Australia and the UK, governments are
increasingly looking at ways to turn their land into revenue and new
sources of income to handle population growth, and new ways of living,
working and commuting.
The market-led proposal process
The difference between MLPs and traditional procurement is that it
originates within the private sector and involves proponents developing
a project or service specification and then approaching government for
approval and support of the proposal. There is often a requirement in
this process to provide a business case as to why government should
negotiate directly with the proponent in place of an open competitive
process.
As with centralised procurement, there’s usually a single-channel and a
clear, consistent and transparent process to follow. The time and effort
can still be long – years – involving a multi-stage process.
Proponents are usually encouraged to contact the relevant government
agency secretariat responsible for MLPs to set up an initial meeting to
discuss the process, the information requirements, the responsibilities
and how the proposal will be assessed. As there is no international
standard for MLPs, different jurisdictions will have their own
processes, including high level selection criteria and assessment
approaches (examples include the Bonus System; Swiss Offer and Best and
Final Offer.
MLP reality
Based on
Better Infrastructure Initiative’s research,
it is estimated that over $30 billion of market led proposals have
either been approved or progressed to an advanced stage of assessment
over the period 2013-2017, including some of Australia’s largest and
most well-known infrastructure and real estate development projects (ie.
tollroad and rail station developments).
Despite governments receiving hundreds of MLPs, very few have actually
come to market, leading many to speculate as to whether this new
framework represents a true shift in government procurement policy and
public private sector collaboration. It is notable that small business
and community groups don’t appear to be using this process with any
degree of success – presumably because government looks for
game-changing projects, and the intensity of the project is too
demanding for what they are able to handle.
Examples of proposals that have been ‘under assessment’ for a long time
include a digital train radio system upgrade in Australia involving
Vodafone and Nokia Networks for the
Victorian Government; and the
Heathrow Southern Railway (HSRL) backed by US firm
AECOM in the
UK. There are many more ‘backlog’ examples sitting on government
databases. This suggests then, that while MLPs serve the goal of finding
innovative and alternative solutions, they still don’t solve the problem
of red-tape decision making and infrastructure and service bottlenecks.
The reality is that despite MLPs “trying” to break free from traditional
competitive tender models, political cycles, ambiguous government
priorities and lack of evidence to back the business case after a
project has been announced creates delays and mistrust of the process.
Meanwhile, industry investors aren’t likely to stay around forever so
they understandably will move on to other more rewarding commercial
ventures.
Conclusion
For the model to work, proponents
and their investors need more assurance from governments that MLP
frameworks are more than political-term conversations. Industry needs a
clear route to market for the risks (legal, financial and intellectual
property), along with the time and cost of planning and resource
allocation they are dedicating to the process.
Industry has for a long time worked within procurement frameworks where
value for money, compliance, transparency and fairness have been
required. Let’s not hold up progress on re-educating the market on the
rules of engagement.
Industry, get ‘MLP ready’ and begin your discussions with partners
early. Come up with solutions not yet thought of to help create the jobs
that don’t yet exist. Prepare a solid business case – collect data and
other evidence to support mutually beneficial outcomes – and get the
wheels in motion because the pressure is on and governments with little
financial means and growing pressure from industry and community with
have no choice but to make progress happen, for a good cause.
--ENDS--
Source: Bidhive - www.bidhive.com
Contact: https://bidhive.com/contact-us/
External Links:
https://sydney.edu.au/john-grill-centre/our-research.html
Recent news by: Bidhive