Page 27 - Banking Finance July 2019

ARTICLE

3. By pass long channel of old bidders by opening doors proponents to allocate the resources needed to ensure
for new a innovative ones. that projects are professionally developed.

4. Promote worthy enterprises 2. Limited time given for submitting counter proposal
Government often sets time limits on the approval and
5. Bring unique techniques and innovations
bidding phases. Time constraints on counter proposals
6. Open negotiate and better price for the
give an obvious competitive advantage to the original
7. Globally, there are not too many good examples of project proponent. The proponent has already spent
Swiss Challenge projects. South Africa, Chile, Korea, much time and effort preparing the project and thus is
Indonesia, the Philippines and Taiwan have seriously much more familiar with its characteristics. By contrast,
considered, awarded and implemented unsolicited a challenger may have as little as 60 days in some
projects. countries (such as the Philippines) to prepare a counter
proposal. Many potential challengers may be unwilling
8. The obvious advantages are that it cuts red tape and
to compete without sufficient time to prepare.
shortens timelines, and promotes enterprise by
rewarding the private sector for its ideas.
What are the Problems?
9. The private sector brings innovation, technology and
Governments need to have a strong legal and
uniqueness to a project and an element of competition
regulatory framework to award projects under the
can be introduced by modifying the Challenge.
‘Swiss Challenge Method’.
10. Swiss Challenge Method would encourage the private
Governments sometimes lack an understanding of risks
players to bring innovation, technology and uniqueness
involved in a project, direct negotiations with private
in development of projects.
players can be fraught with downsides. In general,
11. It will bring in cost efficiencies, cuts the red tape and
competitive bidding is the best method to get the most
shortens the project timelines.
value on public-private partnership projects.
The government might also end up granting significant
Apart from above there are various attributes,
concessions in the nature of viability gap funding,
which the government takes into account while
commercial exploitation of real estate, etc., without
dealing with the Swiss Challenge System, it
necessarily deriving durable and long-term social or
includes: economic benefits.
1. Proper honorarium to original proponent :
The Central Vigilance Commission (CVC) had earlier
Some countries such as Chile and South Africa allow
observed that there is a lack of transparency, and lack
reimbursement of original project proponents for their
of fair and equal treatment of potential bidders in the
project concept or project development costs. The same
Swiss Challenge method.
has been done with an intention to compensate for
using their original project concept. Sometimes bidding The erstwhile Planning Commission of India had advised
documents also incorporates the guidelines of some State governments to adopt ‘Swiss Challenge
Method’ as an exception rather than a rule.
reimbursement for project development costs by the
winning bidder or the government. Other countries
Recently, the Vijay Kelkar panel on 'Revisiting and
(such as Korea and the Philippines) allow no
Revitalising the PPP model of infrastructure
reimbursement of project development costs.
development' had discouraged the government from
Advantage of offering cost reimbursement maintains following the 'Swiss Challenge' model. Without a strong
private sector interest during the development phase legal and regulatory framework, the method fosters
of an infrastructure project, helps to ensure that the crony capitalism and is also conducive to discretionary
source of ideas is not limited to large investors with favours being shown to a private party by the
huge financial background, and encourages petty government of the day.

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