The challenges of Swiss Challenge
The Andhra Pradesh government has proposed to develop the new capital city through a public private partnership (PPP) mode by selecting project and investment partners under the Swiss Challenge method.
The Andhra Pradesh government has proposed to develop the new capital city through a public private partnership (PPP) mode by selecting project and investment partners under the Swiss Challenge method. Unconfirmed reports suggest that senior bureaucrats have expressed their reservations over this approach. The Central government expert committee called the Kelkar Committee has also come out against the Swiss Challenge method to raise funds for the development of projects.
What is Swiss Challenge?
The Swiss Challenge is a method wherein the government keeps an unsolicited bid in public domain and invites others to come up with better or improved ones within a given time-frame. The unsolicited bidder is a private player who approaches the government for development of a new infrastructure project.
Prone to arbitrariness
There are significant technical issues that can lead to arbitrariness in approving the developer for the project. The government has to compare the third party proposal with the unsolicited proposal (the originator of the proposal) to arrive at a conclusion on who will bag the contract. This is a complex exercise and the government is prone to criticism for favouring the unsolicited bidder.
Unless the entire details of the project proposal originally submitted by the unsolicited bidder are in public domain, it is difficult for others to either match it or exceed it. Indian politics and government are known for their culture of official secrecy. Whether this Swiss Challenge method can be approp0riate in such a situation is a million dollar question.
The government calls it the best available option to develop a greenfield capital, while the critics cry foul. The citizens are confronted with the challenge of comprehending the Swiss Challenge. The Swiss Challenge method is a new process of giving contracts. Various State governments and even the Central government are using this method to undertake housing, transport projects etc.
In 2009, even the Supreme Court approved the method for award of contracts. The Swiss Challenge is certainly innovative. But, one should be conscious of the challenges in pursuing this method for huge public works involving billions of rupees, that too in Indian context.
The advocates of Swiss Challenge argue that this would speed up the process of awarding projects. It reduces the red tapism. It encourages enterprise as this method enables the governments to reward the private sector for its innovative ideas. Quite often, infrastructural projects like roads, railways, power projects etc., are inordinately delayed, causing serious time and cost overruns.
The Swiss Challenge method is followed across the world to tide over this. The Supreme Court of India in Ravi Development Vs. Shree Krishna Prathisthan and Ors (AIR 2009 SC 2519), held that, "the said method is beneficial to the government inasmuch as the government does not lose any revenue as it is still getting the highest possible value." But all this is only one dimension of the debate.
The critics of this method express genuine concerns over the possible misuse of this innovative approach, given the nexus between politics and business in India, which was even acknowledged by N N Vohra Committee appointed by the Government of India. Possible lack of transparency and absence of real competition are the concerns especially in regard to the unsolicited bidder.
Is it really unsolicited? Does India have a strong and effective legal and regulatory regime yet to deal with the challenges posed by the Swiss Challenge method? In an age of crony capitalism, companies may employ dubious means to win mega projects. Thus this method has a potential to encourage large-scale corruption and swindling of precious public resources.
The public private partnerships are normally prone to private appropriation of public resources. India’s development history is replete with many examples to substantiate this. The government before embarking upon Swiss Challenge is obliged to convince the people and the political system of the relative advantages of this new method when compared to competitive global bidding.
Normally, the government grants a plethora of concessions to private developers in granting of public private partnership projects. Such concessions can include viability gap funding, allotment of land at subsidised or no price for the private parties to commercially develop, tax concessions etc. Quite often such concessions and the projects as a whole can land up in political and legal controversy. A number of scams like the Commonwealth Games, spectrum, KG basin, coal, etc., reveal how the corporates hobnobbed with ruling politicians and bureaucrats to curry unprecedented favours.
Even the committee to review and revitalise the PPP mode of infrastructure development headed by Vijay Kelkar has warned of the hidden dangers of Swiss Challenge method of awarding contracts, when it said: “Unsolicited proposals (or the Swiss Challenge) may be actively discouraged as they bring information asymmetries in the procurement process and result in lack of transparency and in the fair and equal treatment of potential bidders…” (Chapter 6, paragraph 6.2.7). This committee has submitted its report as early as November 2015 and it was constituted by the Department of Economic Affairs, Ministry of Finance, Government of India.
Even the Central Vigilance Commission has also recommended that the Swiss Challenge method should be followed as an exception rather than a rule. The Kelkar Committee has rightly warned that, “A vague definition of the term ‘Swiss Challenge’ risks the danger of encouraging opacity in the bidding process” Follow these parameters The Andhra Pradesh government is politically and legally mandated to take every measure to ensure that the Swiss Challenge method it wants to adopt for the development of the capital is free from arbitrariness, corruption, favoritism and waste of public resources.
The State government should, therefore, follow the guidelines suggested by the Supreme Court of India in the verdict on the above mentioned case. The State government should publish in advance the nature of Swiss Challenge Method and particulars. Publish the nature of projects that can come under such method. Mention/notify the authorities to be approached with respect to the project plans.
Mention/notify the various fields of the projects that can be considered under the method. Set rules regarding time limits on the approval of the project and respective bidding. The rules should be followed after a project has been approved by the respective authorities. All persons interested in such developmental activities should be given equal and sufficient opportunity to participate in such ventures and there should be healthy inter se competition amongst such developers.
However, the apex court has observed, “Though the government cannot arbitrarily choose any person it likes for entering into such a relationship or to discriminate between persons similarly situate, it is open to the government to reject even the highest bid at a tender where such rejection is not arbitrary or unreasonable or such rejection is in public interest for valid and good reasons.” But, the words, “valid, reasonable, good, public interest,” are easy to define but difficult to ensure.
The polity and the public administration should embody highest values of purity and probity to ensure that the process is not arbitrary as hoped by the highest court of India. The government should be accountable to the political system and civil society in this regard as there is a limited scope for judicial review of government contracts as courts normally do not replace the executive decisions with those of their own.