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8-12% price increase in a PPP
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Africa. Mid-2010s. You’re in the middle of a multibillion-dollar PPP. Your consortium is assembled. Your lenders are mobilized. Your bid team is burning cash like Tesla compensating executives… The agency launches the RFP. Everyone is excited. A fair, competitive process… in theory. And then it starts: Deadline extended. “More time to refine proposals,” they say. Another extension. Silence. And then another. “These guys don’t seem ready” Drop a new batch of documents in the data room. (Oh, sorry we forgot to tell you that… the ground conditions are a bit worse than expected.) More risks transferred. (We found a clever way to push 20 more years of uncertainty onto you. You’re welcome.) Ambiguous evaluation criteria. “What do you mean by ‘preferred delivery certainty outcomes’?” “Just trust the process.” Meanwhile… Bid costs are exploding. Executive patience evaporates. Equity providers start asking, “Are we sure this government actually wants a PPP?” Some of the best players leave the room quietly. And the agency? They look around shocked: “Where did all the competition go?” Here’s the real case part: It wasn’t “much”. The RFP dragged on nine extra months… Nine. If you are a dad or mum, you know that many things happen in that time… Things like: Lenders increased pricing because the market changed Designers had to redo half the work Our risk budget doubled Competitors dropped out The final price went up by 8–12%... Expensive… when you’re talking about billions. All because someone couldn’t run a clean process. When the public agency finally realized the damage, guess what they did? Nothing. They just blamed “market conditions.” Usual suspect… The Lesson If you (the procuring agency) aren’t ready: Don’t launch the j*dida RFP. A PPP is not a school project you get to “figure out later.” It’s a competition. And competitions need rules, clarity, and speed. If governments want: Real competitive tension Strong international bidders Better financing terms Innovation Value for money Then they must respect bidders’ time, capital, and risk. Otherwise… the best players walk away. And all that’s left is politics and excuses. Want the inside truth on how to run (or win) one of these properly? You’re already reading the right newsletter. Now you just need to click below. PD 1: If you liked this email, don't keep it in secret and forward it to a friend. They will thank you enormously one day. PD 2: If somebody has sent you this email and you want to receive emails like this yourself, visit vicentevalencia.com PD 3: If you want unsubscribe, click the link below. |
Vicente Valencia
I talk about Personal Growth, Management, Infrastructure and More | 👇JOIN +2k readers 👇
Many people challenge my preferred RFP strategy for PPPs: “Pre-qualify strong consortia, set a minimum technical pass/fail, and award to the best NPV bidder? They’ll just bid low and renegotiate later!” I get it. That tactic has been abused in Latin America for years. But we need to ask: Why has +20% (often +50%, +100%, +200%) become almost inevitable there? Let’s look at the real causes: Why PPP prices skyrocket after award 1) Renegotiation is systemic. In transport PPPs, up to 78% of...
January 5th. In Spain and many parts of the world, kids go to sleep excited because the Three Wise Men are coming with toys. Meanwhile… in Australia… a mega-project disaster. Hobart, 1975 – 9:27 PM The Tasman Bridge. A massive concrete jewel connecting both sides of the Derwent River. Strong. Modern. Safe. Until a bulk carrier called Lake Illawarra hit one of its piers. Concrete collapsed. Cars fell into the void without even seeing it. Twelve lives lost. A city cut in half for more than two...
Christmas is not my cup of tea. I guess that I’m too practical to over eat, over drink, over talk and over spend. It’s not an optimal solution. One of the things I’m trying to be practical about is gifts. In Spain, gifts are given on the 6January morning. The 3 wise men day. There is also a very famous place. El Corte Inglés… or The English Cut (?) Where you can buy all gifts. Adults and children alike. From clothing to iPads to travel packages. One shop to get everything. So, you won’t see...