While unsolicited proposals have not been widely adopted in Canada and across the globe, there are benefits to governments considering these new and innovative infrastructure proposals, said a panel of experts at the recent P3 2020 conference.
The session, billed Shaking it up: Embracing unsolicited proposals, took place on Nov. 16 at the virtual conference hosted by the Canadian Council for Public-Private Partnerships.
“We are currently open to unsolicited bids for P3 projects,” said Alberta’s Minister of Transportation Ric McIver. “We don’t currently have a policy for it although we are working on one actively and probably by the end of the year we expect to roll that out.”
One of the things Alberta is struggling with is how they can do unsolicited proposals and still be trade agreement compliant.
“We’re spending public dollars, so the public has the right to expect that we get the best value that we can. That usually is proven in the public realm with a competitive bid process,” he said. “So when somebody comes forward with a new idea and we have to go to a competitive bid process and we give their idea to everyone else on equal footing, some people would say why would we ever bring you a new idea because there is no advantage in it for us to do that.”
Elisabeth Hivon, executive director for Canada with Meridiam, said the unsolicited proposals framework across Canada has been a challenge for developers.
“As a developer, we haven’t been able to find anything in Canada so far that we could actually do in this framework, but we have had some success with it in other jurisdictions namely in the U.S. and limited experience in Europe,” Hivon said.
“What we have found so far, especially in the U.S., is that we come up with these ideas, we follow the unsolicited process then once you get to the implementation of it, it either falls apart or they give it to somebody else.”
Greg Kitscha, investment director with John Laing, a global infrastructure developer, said the firm hasn’t yet secured an unsolicited proposal although it has made submissions in various jurisdictions including Ontario.
“We do need to weigh the pros and cons against putting the effort in to an unsolicited proposal and try to really understand what framework is in place, what the rules are for the procurement and what advantages might be provided to proponents that follow through with the effort of putting in a proposal,” he noted. “We are cautiously optimistic but we are not choosing every unsolicited proposal opportunity that comes across our desk.”
Many jurisdictions provide opportunities for those putting forward an unsolicited proposal, he explained, but it’s not as prevalent in North America. It could include a secured position on the shortlist or recovery of costs for the unsolicited proposal provider.
“Undertaking some of that initial work and predevelopment work, including the economic viability and feasibility studies that may be required in respect to a project, if the burden of that is put on the private sector and having that be repaid in some part either by the winning proposer or by the government itself (would be helpful),” said Kitscha.
Hivon agreed that before going forward with unsolicited proposals, the private sector needs to be pretty sure that there is going to be a revenue stream at some point.
“We all know that design work costs a lot of money so you’re not going to propose a light rail system that is going to cost $10 million of design work if there is not some form of agreement with your public sector partner to have a mechanism for cost recovery,” she said. “That’s one element. The other one is to have a fair framework. We understand that the public sector needs to make sure that they get value for what is being proposed. The challenge for a developer is to be able to balance the cost benefit.
“These are never going to be fully sole-sourced projects.”
There are many questions for developers to consider before moving ahead with unsolicited proposals, she added.
“There is going to have to be some form of procurement and this is the challenge for a developer. At what point do you bring your design-build team on board? Do you need the design-build team to be part of your unsolicited (proposal)? Or do you need to keep them for a later stage at which time you can work with the public sector partner to advance this?”
Hivon suggest a collaborative effort.
“If the group that is bringing you the project is mostly a developer group you could form some sort of a collaboration and set up a separate entity with a combination of public and private funds,” she suggested. “It’s that entity that then carries out the procurement so the people who actually brought you the idea can work with you. You still get the competitive tension by doing a procurement for the design-build and later on for the operations of your asset.”
McIver suggested speaking with someone at the government level before submitting any unsolicited proposals to find out if they are interested in the project.
“Before they go and spend a whole bunch of money on design and engineering, get a hold of the government, a minister or somebody in the ministry. For the price of a cup of coffee find out if the government is in any way interested in it before they go any further,” he said. “A little bit of due diligence in the front end will avoid heartache in the backend.”
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