Road contract rule change likely

Govt considers 'Swiss Challenge' method in government-to-government funding

The Union ministry of road transport & highways might change its rule on government-to-government (G2G) funding of roads, adopting what is termed the 'Swiss Challenge' route.

In the Swiss Challenge Method (SCM), a private company can initiate a proposal, an innovative one at that, or be asked by the government to present such a bid, for a project. Once done, other prospective developers would be asked to counter the bid. If this results in a superior proposal, the initiator is given an opportunity to match this within a stipulated period and be selected as project concessionaire. If the first bidder declines to do so, the new applicant is selected. Thereby, through consecutive iterations, a superior bid is arrived at and the private entity embarks on the project.

"Currently, the Indian procurement method does not allow for nomination for projects although 100 per cent foreign direct investment is allowed in road construction. We're exploring G2G funding by proposing SCM. Through this, we can explore another avenue to fund our projects," said a high ministry official, on condition of anonymity.

G2G funding involves a foreign government offering to construct a road project in India, with the caveat of nominating their own companies. Nominations are not typically allowed by this ministry, as it reduces the scope for competitive bidding. G2G funding can also be via a loan while the project is awarded by competitive bidding.

"State governments have previously tried the SCM route and it has not worked out that well. The proposals have to be for innovation, rather than simply a competitive bid. Also, there needs to be an incentive for the initial proposers, who have spent time and money," said Manish Agarwal, leader, capital projects & infrastructure, PwC India.

The ministry is in discussion with the ministry of finance on the proposed arrangement, said the official quoted above.

The government has made infrastructure one of its main thrust areas, having raised the budget allocation for the road transport & highways ministry by almost 50 per cent. The hoped-for target is to award contracts at a pace of 30 km a day.