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 contracts are renegotiated… often within the first year.

2) Projects launched half-baked.

Weak studies, incomplete designs, poor risk allocation, unclear scope.

Politicians chase ribbon-cutting photos. Taxpayers pay the bill later.

3) Soft-budget dynamics.

Bid cheap → survive construction → “discover” new works → renegotiate.

Initial price becomes a fantasy.

4) Hidden fiscal costs.

Future liabilities, guarantees, scope expansions…

Everything that wasn’t priced at Day 1 suddenly appears at Day 500.

Net result:

Everyone pretends the initial cost is low.

Everyone knows it won’t be.

It’s not a governance model.

It’s a game… and a very expensive one.

Between 1990 and 2013, over 1,700 PPPs reached financial close in Latin America.

The majority were renegotiated.

+20% became the minimum increase.

What this means for each stakeholder

Governments

PPP done fast and sloppy = more expensive than traditional procurement.

And with less accountability.

Bidders & Investors

Low-ball bids become booby traps:

scope creep, disputes, restructuring, reputation damage.

Citizens

Higher tolls, higher taxes, deferred public debt.

The opposite of value for money.

That’s not the future we want.

How to stop the price creep

If agencies want good PPP outcomes, they must:

Finish the homework before launching the RFP

Define minimum technical standards, KPIs, lifecycle requirements

Conduct real market sounding and incorporate feedback

Provide ground & property data, early technical clarity

Run a disciplined, transparent evaluation (no grey areas)

Enforce independent review before any renegotiation

If you reward clarity and discipline…

You get innovation and competitive tension.

If you reward shortcuts…

you get a renegotiation.

PPP Rule of Thumb:

If you don’t allocate risk upfront,

Risk will allocate itself later…and it will be very expensive.

More tomorrow.

In the meantime, you can do click below.

​Vicente Valencia Academy ​

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