It is the prime responsibility of the Government to provide public infrastructure and related services to address public needs. However, in most developing countries including Ghana, there is a huge gap between infrastructure needs and infrastructure delivery by Government. One reason for this is inadequate resources for Government to use to provide needed infrastructure. One option to deal with this is Government engaging private sector to deliver such public infrastructure and related services. Public Private Partnerships (PPPs) have become one of the most preferred options for engaging the private sector to support Government in the provision of public infrastructure and related services.
PPPs simply refer to any form of contractual arrangement by which public sector entities partner with private sector entities to deliver public infrastructure and related services usually over a long-term with the private sector partner assuming substantial risk[ii]. In order to engage a private sector partner, Government prepares the project through the conduct of feasibility studies and prepares procurement document, then invites proposals for the projects from interested private entities using a competitive procurement process. However, private parties can also submit proposals without any request from Government to provide public infrastructure and related services through unsolicited proposals.
A good number of people reading this article may have come across a brilliant and innovative initiative by a Small or Medium-scale Enterprise (SMEs) and thought that some major national infrastructure gap or required public service would be filled or provided if the initiative was adopted by Government. However, for many of such SMEs or startups, the thought of partnering with Government is confusing and daunting.
This article breaks down the process for unsolicited proposals under the PPP Act for easy understanding and makes a case for SMEs to be proactive in solving public infrastructure problems through such unsolicited proposals.
Under Ghana’s PPP Act, an unsolicited proposal is a proposal made by a private party to undertake a partnership project and is submitted at the initiative of the private party rather than in response to a request for proposal by a public sector entity. Thus, an unsolicited proposal is considered a private sector-led proposal.
Preliminary requirements for PPP Projects Initiated by Unsolicited Proposals
There are three (3) requirements for PPP projects initiated through unsolicited proposals. These are:
- The PPP project must be innovative and not place an onerous obligation on Government.
- The PPP project must be a project that is not already part of the Medium Term Development Plan of the public institution that the private entity is seeking to partner with; and
- The PPP project proposed must be consistent with the overall National Infrastructure Plan.
Even though dictated by law, the writer is of the view that it should be possible for unsolicited proposals to be submitted for projects in the Medium Term Plan and National Development Plan. The focus must be on the innovation that the proposed solution offers. This avoids instances where projects, though urgently needed, are never implemented for many years due to lack of resources from Government. Government should be open to consider unsolicited proposals.
Notably missing from the requirements above is the fact that the scale of the product or services rendered by the private party is not a condition precedent for consideration of a PPP project through unsolicited proposals. Thus, there is an opportunity for SMEs or startups to submit unsolicited proposals under the PPP Act.
Once the above criteria are met, the PPP Project will go through processes prescribed under the Act including a feasibility study before final approval by the relevant government entity that will undertake the project.
Advantages of Unsolicited Proposals
The use of unsolicited proposal to execute public project confers a number of advantages on the private party, Government and the public including:
- For the private sector, PPP projects through unsolicited proposals provide a great platform for private sector companies to see their innovative solutions to complex national problems roll out on a nationwide scale.
- Also, the private sector and public entities avoids lengthy procurement processes to implement projects more quickly. Government is able to catch up with the ever increasing demand for infrastructure and related services through the adoption of a faster procurement process that is well balanced with ensuring value for money and related issues.
- For Government, the projects that Government does not have the needed resources to implement, can be implemented through unsolicited proposals especially those of a commercial nature for which user changes make economic sense. The Government is able to focus limited resources on other projects mostly of a social and non-commercial nature.
- Unsolicited proposals are a good avenue for overcoming the Government’s lack of (financial and human) to identify, prioritize, prepare and procure projects.
- Unsolicited proposals enable the Government to address its inability to plan and fund necessary infrastructure development.
- Government is able to tap into the private sector’s innovation and knowledge to identify value-for-money project solutions through the adoption of unsolicited proposals.
- The public gets the needed infrastructure and related services with all its attendant economic and social benefits.
Challenges with Unsolicited Proposals
In spite of the many benefits of unsolicited proposals to both Government and the private sector, PPP projects initiated through unsolicited proposals come with challenges including:
- Perception of Corruption: Perhaps, the most notable among such challenges especially in this part of the world, is the challenge of balancing the need to address infrastructure needs with the private sector’s motive to make profit and the attendant adverse perception of corruption.
- Unsolicited projects can divert government attention from systematically planning infrastructure, especially in developing countries where there is a plethora of infrastructure needs each screaming for immediate attention. This is because, while Government may have a holistic approach to infrastructure plans, a private entity has no such objective.
- There is also the possibility of not getting value for money since the process for unsolicited proposals is less competitive compared with a Government invitation to interested parties to submit proposals.
- Due to profit motive of the private sector, the high rate of return may affect financial viability of projects. To deal with this, the private party may request for viability gap funding, tax exemption and other government financial support.
- User Affordability: related to the above, user charges proposed by the private party may be high and above acceptable levels for the general public or users of the infrastructure and related services.
To overcome the challenges, the following are recommended:
- Government’s clear policy for unsolicited proposals must provide steps and timelines for management of unsolicited proposals, covering minimum submission requirements; reimbursement and protection of intellectual property; procedures for introducing competition and reward systems and eligibility and types of Government support, if any. The PPP Act has attempted to address this by providing various checks and balances with respect to the procedure for the approval of unsolicited proposals. However, there is an absence of clear guidelines for PPP projects based on international best practices. Hopefully, the enactment of the PPP regulations would fill this gap.
- Government must build institutional capacity particularly for public sector agencies with the requisite skill for managing unsolicited proposals including; conducting feasibility; designing and implementing clear guidelines for the assessment of fiscal risks and liabilities; evaluating proposals, drafting and negotiating PPP contacts as well as monitoring implementation. Where the required expertise is absent in-house, transaction advisors should be engaged.
- Government agencies must ensure that they are getting value for money. If more than one private sector entity propose similar PPP projects, the proposals must be vetted objectively. It is expected that the Public Private Partnership Regulations would outline a procedure for unsolicited proposals that will balance the need to strictly vet unsolicited proposals with the goal of encouraging innovative projects from the private sector to address national issues.
A fast paced development is dependent on both private sector initiative and government effort. The private sector has been touted as the engine of growth. Unsolicited proposals offer a great opportunity for private sector entities to propose and undertake projects that not only fill the infrastructure gap, but also accelerate development.
While government must embrace this option and build institutional capacity and provide clear guidelines that encourage private sector parties to take up the opportunities, the private sector must proactively begin to put their innovations to use by proposing solutions to public entities and implementing those proposed solutions in partnership with public entities not only for their mutual benefit, but for a broader public good and development.
[i]For more information about PPPs and an overview of the features of a PPP you may look up an article I co-authored with Ferdinand Adadzi in the June 28, 2021 edition of the Business and Financial Times
Naa Ayeley Komey is a lawyer at AB & David specializing in the areas of Energy, Infrastructure and Public Private Partnerships; Government Business and Legislation; Corporate and Intellectual Property. She also holds a Master’s Degree in International Business Management from the Robert Gordon University, Aberdeen, UK. You may reach Naa at [email protected]