Infrastructural development and social development are critical inputs for
the growth of the Indian economy. These projects are highly capital intensive
and require huge investments. Our country is facing a lot of difficulties in
implementing these projects due to the huge amount of investments required.
Thus, union and state governments in India have introduced various models of
Public-Private Partnership (PPP) to implement such development projects.
These models include Service Contract and Management Contract, Turnkey
contracts, Lease contract, Private Finance Initiative, and Private ownership,
Joint venture, Viability Gap Funding (VGF), Design-Build Operate (DBO), Built
Own Operate (BOO) etc. However, in such models, projects are planned by the
Government and executed by private partners. The Government may not plan many
innovative projects and proposals due to various reasons, for such innovative
projects the government intends to provide an opportunity to private sector
participants to conceive an innovative project and submit the project for
consideration. Such projects can be carried out under Swiss Challenge Method (SCM).
What is Swiss Challenge Method?
Swiss Challenge Method is one of the models by which government contracts can be
awarded to private players. Without any instruction from the government, a
private party can submit a proposal for development of an infrastructure project
with exclusive Intellectual Property Rights. Then the Government has two
alternatives for the proposal. First, the Government can buy the intellectual
property rights from the original proponent and call for competitive bidding to
award the project and second, the government allows other private players to
submit their proposals, if any proposal is better than that of the original
proponent then the original proponent is asked to match with the other proposal
and if he fails to do so the project is awarded to the best bidder.
The original proponent submits an innovative proposal with project report to the
Government Agency or local authority depending upon the jurisdiction of the
proposal. The Government Agency or the local authority first evaluates the
project and then forwards it to the Infrastructure Authority along with its
evaluation within the prescribed time period for approval. The Infrastructure
Authority then evaluates the technical, commercial and financial aspects of the
proposal and decides whether the proposal is in line with the requirements of
the State and whether the sharing of risks as proposed in the Concession
Agreement is in conformity with the risk-sharing framework as adopted by the
Government for similar projects and if the project is in the long-term objective
of the government. If the Infrastructure Authority recommends any modification
in the scale, scope and risk-sharing aspects of the proposal or the concession
agreement, the Original Project Proponent will have to consider and incorporate
If merit is found in such suo-motu proposal the Infrastructure Authority will
require the Government Agency or the Local Authority to invite competing
proposals using the Swiss Challenge Method. The original proponent will be given
an opportunity to match any competing counter proposals that may be better than
the original proposal, if the original proponent matches or improvises upon any
such counter proposal the project shall be awarded to the original proponent,
otherwise, the bidder making the competing offer will be allowed to execute the
project. If the project is not awarded to the original proponent, the Government
Agency or the Local Authority will reimburse the original proponent with
reasonable costs that may have been incurred for preparation of the original
proposal and the concession agreement. The original proposal and the concession
agreement prepared by the original proponent shall be the property of Government
Agency or the Local Authority.
Main Aims of Swiss Challenge Method:
- Initiation in spotting an unidentified need and provide a solution for
- To bring in technology, finance, and expertise in execution among
- To encourage induction of new technology and promotion of unique
solutions which could result in value addition for the project.
- To provide financially sustainable solutions.
- To augment public-private partnerships in sectors or projects which are
not covered under the current PPP framework.
Strengths of Swiss Challenge Method:
- This method is very useful for governments that have limited technical
and financial capacity to develop projects.
- This method promotes innovation and incentivizes to propose new ideas.
- It also reduces transaction costs.
- If the project is awarded to the project proponent it can be implemented
- This method incentivizes private sector participation.
- This method is a Potential route for furthering local projects that are
not national priorities.
Weaknesses of Swiss Challenge Method:
- There are risks of insufficient transparency and inadequate competition
in the Swiss Challenge Method.
- There is no legal validity of using this method when a counter-proposal
contains different specifications than the original proposal.
- There is no symmetry in bidding time given to bidders to prepare counter
proposals in relation to the time taken by the originator for preparation.
- It is very difficult to measure the monetary value of an unsolicited
proposal when contract or project is not given to the original proponent.
- There is no guarantee that that unsolicited bidder won't withdraw its
Swiss Challenge Method in India:
At least half-a-dozen states in India have used the Swiss Challenge Method to
award projects in sectors including IT, ports, power, and health. Gujarat
included it in the Gujarat Infrastructure Development Act, 1999, and in 2006,
amended the Act to provide for direct negotiation. It was subsequently made part
of the Andhra Pradesh Infrastructure Development Enabling Act and Punjab
Infrastructure (Development & Regulation) Act.
Rajasthan and Madhya Pradesh have included it in their guidelines for infra
projects. At the central level, the Draft Public-Private Partnership Rules,
2011, allow the Swiss Challenge only in exceptional circumstances, that too in
projects that provide facilities to predominantly rural areas or to BPL
Presently, Swiss Challenge Method
is in the limelight because, in recent past,
Cabinet cleared a proposal to redevelop about 400 railway stations through 'open
invitation' from interested parties. The parties will present designs and
business ideas for commercial exploitation of Railways real estate - land and
Stations are redeveloped by Indian Stations Development Corporation
Ltd, a Special Purpose Vehicle (SPV) set up as a joint venture between IRCON
(51%) and Rail Land Development Authority (49%). But given its inability to
develop all stations, the SPV proposes to accept business ideas from private
players. So reportedly the government is considering allowing private developers
to submit unsolicited proposals for expressways. This will quicken the process
of awarding the projects and building the roads.
The Swiss Challenge method is one of the best models for planning and execution
of projects for infrastructural development and social development. The
application of this model of public-private partnership provides a fool-proof
solution for the problem of requirement of a large number of investments for the
execution of infrastructural projects, it also provides scope for innovation for
better execution of such projects. Many innovative schemes, propagandas, and
projects about which there was no prior planning are introduced to the
Government by submission of various plans by different private players.
Swiss Challenge Method also provides the Government with various alternatives to
execute a particular project. It is also adopted by various states like Andhra
Pradesh, Kerala, Karnataka, Rajasthan, Gujarat and Punjab in different sectors
such as Roads, Bridges, Health, Land reclamation, Canals, Dams, etc. The model
has been successfully tried in countries such as Virginia, Costa Rica, Chile,
South Africa, Sri Lanka, China, etc.
Therefore, the Swiss Challenge Method shall be considered as a potential model
for the execution of such projects related to infrastructural and social