Meaning:
- A ‘Swiss Challenge model’ is a way to award a public project to a private player on an unsolicited proposal.
- Without an invitation from government, a private player with credentials can submit a proposal to government for the development of an infrastructure project with exclusive intellectual property rights.
- That proposal will be made online and a second person can give suggestions to improve and beat that proposal.
- An expert committee will accept the best proposal and the original proposer will get a chance to accept it or reject the proposal.
- In case the original proposer is not able to match the more attractive and competing counter-proposal, the project will be awarded to the counter-proposal.
Benefits of Swiss Challenge Method
- It cuts red tape in awarding contracts as the bid is presented by the private players.
- Timelines is shortened as first step itself which is time-consuming takes no time which is project proposal by private players.
- It fosters innovation and enterprise in the infrastructure sector by rewarding the private sector for its ideas.
- An element of competition can be introduced by modifying the model.
- Brings cost efficiencies
- Offering cost reimbursement🡪countries like Chile and South Africa allow reimbursement of original project proponents for their project concept or project development cost. Advantages are that it maintains private sector interest during the development phase of an infrastructure project and helps to ensure that the source of ideas isn’t limited to large investors with deep pockets.
Criticisms of Swiss Challenge Method
- No strong legal framework at the national level (significant concessions including land at subsidized rates, real estate space, viability gap funding, etc. are granted by the government)
- Planning Commission advised state governments to adopt the Swiss Challenge route as an exception rather than a rule.
- The Central Vigilance Commission had observed that there’s a lack of transparency and lack of fair and equal treatment of potential bidders in the method.
- The Vijay Kelkar panel on “Revisiting and Revitalising the PPP model of infrastructure development” had discouraged the government from following the model.
- Can potentially foster crony capitalism, and allow companies space to employ dubious means to bag projects.
- By allowing a bidder to initiate an idea and giving him first right of refusal, the method can promote favoritism in the award of public projects, opening the doors to corruption.
- Since the government authorities might not have complete knowledge of the infrastructural requirements, this model might result in wasteful expenditure.
- Bureaucrats, who ultimately sign off on such projects, continue to be afraid to take calls that might face an investigation later
Swiss Challenge Model in India
- 2009🡪the Supreme Court of India had approved the Swiss Challenge for awarding contracts.
- 2011🡪The Draft Public-Private Partnership Rules allow the use of Swiss Challenge only in exceptional circumstances –in projects in rural areas or to BPL populations.
- 2015🡪 The Union Cabinet on gave its approval to redevelop 400 railway stations using the Swiss Challenge method.
- The many States in India use this method of awarding contracts for roads and housing projects.
State governments such as Andhra Pradesh, Rajasthan, Karnataka, Madhya Pradesh, Chhattisgarh, Gujarat, Maharashtra, Punjab, and Bihar have allowed this method to be used for public-private partnership (PPP) bids and have enshrined it in their respective state Infrastructure Development Acts.
- Maharashtra Housing and Area Development Authority has used this for a housing project in Thane.
- The Jaipur Development Authority is also reported to have announced the Mega Film City venture in this format.
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Way forward🡪
- as there’s no strong legal framework in India, it’s suggested that this method may not be adopted for large scale projects.
- This Method it should be avoided in highly commoditized bids like electricity generation or highly regulated sectors such as telecom.
- This method is more suitable to the projects where creativity and design and innovation are key determinants to project success.
- clear the specific process with the relevant vigilance commission.
- Ensure that 100 per cent of the project details (other than proprietary information) submitted by the proponent are made available to all qualified bidders and confirm that there are no hidden advantages that accrue.
- On all elements of service delivery and key configuration aspects, upper and lower bounds have to be specified so that at the stage of comparison of competitive bids, one does not fall into an apples-versus-oranges trap.
CONCLUSION
Swiss Challenge model looks promising if done in a transparent manner. There are good examples of success of this model in South Africa, Korea, Indonesia & Taiwan.
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EXAM TIME SYNOPSIS
| Definition | Procedure to award government contracts to private players for government procurement. |
| Objectives | Method of bidding, any person with credentials can submit a development proposal to the government; Method allows a seller to mix-and-match the features of both an open auction and a closed tender to discover the best price for an asset. |
| Method in India | State governments such as Andhra Pradesh, Rajasthan, Karnataka, Madhya Pradesh, Chhattisgarh, Gujarat, Maharashtra, Punjab and Bihar have allowed this method to be used for public- private partnership (PPP) bids and have enshrined it in their respective state Infrastructure Development Acts |
| Benefits | Encourage innovation, technological advances and unique development in projects; brings cost effectiveness, promotes enterprises, government offers cost reimbursements to the private player. |
| Criticisms | No strong legal framework at the national level, lack of transparency, can foster crony capitalism. |
| Way forward | Needs to have a strong legal framework, may not be adopted for large scale projects, should be avoided in highly commoditised bids, more suitable where creativity and innovation are key determinants in a project. |
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Email : contact@diademy.com 011-41561002