The Swiss Challenge Method

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TOPIC: Investment Models

  • In this method, a private player (say P1) goes to the government voluntarily with an innovative proposal.
  • The concerned Department or the Ministry will put his proposal on it’s website so that other private players can give suggestions to improve it or challenge it by a better proposal.
  • Suppose another private player (say P2) challenges the original proposal and it is better than the original in terms of cost and technological aspects.
  • Then an expert committee will accept the best proposal and the original proposer will get a chance to accept it if it an improvement on his proposal. If P1 rejects the best offer, the challenger will get to develop the project then.
  • The committee can also ask P1 to bring a new proposal to counter the best proposal (proposed by the challenger) decided by it.
  • Or, the government can even buy the intellectual property rights of the best proposal from the proposer and can then invite bids from other private players by issuing a tender.
  • The government will have to reimburse reasonable costs incurred by P1 in preparing suo moto proposals, if they end up as the loser.

Positive Aspects

  • It is not new to India. It is being used in states like Karnataka, Gujarat, Rajasthan, Andhra Pradesh, Madhya Pradesh, Bihar and Punjab for housing and road construction projects.
  • Many stuck PPP projects got a new lease of life using the Swiss challenge Method.
  • Even the Supreme Court in 2009 accepted it as a valid system for awarding contracts.
  • The Union Cabinet in 2015 gave its approval to redevelop 400 railway stations using the method. This is because of insufficient resources with Railways to develop them on its own.
  • Local projects that are not national priorities will benefit.
  • As the projects will be put online, this will discourage non-serious proposals.

Negative Aspects

  • Unsolicited ( voluntary) proposals bring information asymmetries in the procurement process and result in lack of transparency and in the fair and equal treatment of potential bidders in the procurement process.
  • Crony capitalism ( cartelisation i.e. private players helping each other by proposing frivolous counter proposals)
  • Lack of enough challengers which can affect efficiency.
  • Even the Planning Commission had warned of using the Swiss Challenge method as an exception and not as a rule.

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