11.2. The Issue of No or Only One Responsive Proponent

It is possible that no bidders will submit, which constitutes a clear process failure. This is best avoided by having a well-planned and well-structured tender process, consistent with the practices described in chapter 5 of this PPP Certification Guide. If it does eventuate that there are no bidders, it is not uncommon to grant additional time for bid submissions when there is evidence that time insufficiency was the cause of the failure. Otherwise, the process will be suspended, and it might be re-tendered after adjusting the structure or requirements — if there is evidence that the lack of responses can be remedied without compromising the VfM.

A variation of this situation is when there are proposals but all of them are regarded as irresponsive (typically due to a lack of financial or commercial feasibility – this can be related to an insufficiently high price ceiling or possibly other factors related to risk). In such cases, it is not uncommon for the authority to open a negotiation process with the best proposer, while a redefinition of the project (subject to a reassessment or re-appraisal) may be more appropriate.

It is also possible that only one bidder submits (or more than one bidder submits, but only one meets both the qualification requirements and the requirements of a valid bid). This can place the procuring authority in a difficult position. If the project was unattractive to all other potential bidders, this may reflect a poorly structured project that is unlikely to succeed. The sole bidder may also be overly ambitious and have an unrealistic expectation that it can deliver the project.

The procuring authority is in a weak bargaining position if it chooses to engage in direct negotiation with the sole bidder, as there is no alternative bidder to turn to if a satisfactory outcome cannot be agreed. Some governments prevent this situation arising by requiring that there be a minimum of two valid bids in order for the procuring authority to award the contract. Other jurisdictions seek to protect the government’s position by limiting which aspects of the bid can be subject to negotiations. For example, the Philippines’ PPP Implementing Rules and Regulations allow direct negotiation with a sole bidder, but only with respect to the proponent’s financial proposal and its rate of return. Hence, the sole bidder cannot try to negotiate a change in the risk allocation. Nevertheless, negotiating with a sole bidder on this basis may not provide a good outcome (for example, because the sole bidder has met the requirements necessary to have submitted a valid bid, but the bid may offer very poor Value for Money). It is therefore good practice for the procuring authority to reserve the right to terminate the tender process if only one valid bid is received, and to re-tender the project or seek an alternative solution in these circumstances.[14]