Thought leadership from our experts

Competitive Dialogue in Public-Private Partnerships

The new Public Private Partnership Law ("PPP Law"), enacted last month, has introduced in Peru the competitive dialogue procedure ("CD"). CD was conceived by the European Commission in 2004, for the procurement of complex projects, where the contracting authority is not able to select the appropriate technical means capable of satisfying its needs. Thus, CD "aims to align complex demands of principals with possible solutions that contractors have to offer"1. Similar procedures have been replicated in UK, India and some US states, among other countries2.

The underlying idea is that, through several negotiation rounds between the contracting authority and potential contractors, where all relevant aspects of the contract are discussed, it is more likely to find appropriate solutions and an efficient risk allocation than in traditional contract award procedures, where the technical specifications are unilaterally decided by the authority and direct communication between the parties is restricted.

Pursuant to PPP Law, the purpose of CD is to: "include innovative solutions originating from the private sector and optimize public sector's value for money". Departing from the EU precedent -where CD may be used in the event of complex technical, legal or financial projects – under PPP Law this procedure is restricted to technically complex projects, with the intention to "incorporate, at an earlier stage, the participants technical experiences."

The successful use of CD procedures in other jurisdictions evidences that, when it comes to highly sophisticated projects, promoting a dialogue with the private sector, aimed at finding the best way to satisfy the public interest turns out to be more efficient than traditional contract award procedures. By applying a more flexible process, that promotes cooperation and communication among the authority and potential investors, the parties are abler to assess risks, allocate responsibilities and find innovative solutions. Thus, if efficiently designed and implemented, CD may reduce the risk of incurring in future and continued renegotiations, due to inadequate contract design and lack of technical knowledge by the contracting authority. The latter has been a constant in Peru where, according to the National Comptroller's Office, 77% of transport infrastructure PPP contracts have been renegotiated3.

Although it is too early to anticipate whether CD will prove effective to achieve better PPP contracts – the Regulations are yet to be published- the great challenge for the Government will be to ensure transparency, equality of treatment, genuine competition, and secrecy of the technical solutions and confidential information provided by participants; specially at a time when the confidence in clean PPP contracts award has been severely damaged by "Operation Car Wash" and other corruption scandals.

  1. HOEZEN, VOORDJIK & DEWULF., 2012 Contracting dynamics in the competitive dialogue procedure, DOI: 10.1108/20441241211235017, p. 6.
  2. HOEZEN et al, 2012.
  3. Contraloría General de la República. 2015. Causas y efectos de las renegociaciones contractuales de las Asociaciones Público – Privadas en el Perú. Lima: Editorial Súper Gráfica E.I.R.L., p.141.