Govt may open Swiss challenge for private players to develop highways

“We are looking at a proposal to allow private developers to build expressways under the Swiss Challenge System. It will enable investors to conceptualise projects of their choice. Since the DPR (detailed project report) will be prepared by the original proponent it will expedite the process of award and construction projects,” said a senior official in the ministry of road, transport & highways.

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The Swiss Challenge System is a bidding process designed to enlist private sector initiatives in core sector projects. As per this norm, private investors can conceptualise and offer for evaluation a project to the government. The Swiss Challenge System allows third parties to make better offers (challenges) for a project during a designated period to avoid exaggerated project development costs. The original proponent, however, is accorded the right of first refusal and the right to counter-match any superior offers given by the third party.

The ministry feels this model can help throw up innovative ideas and expedite development of expressways in India as the company which prepares the DPR would be aware of project requirements. The official added, “While the hybrid annuity model would be used to bid out national highway development projects, the Swiss Challenge model is being explored for expressways.”

The Andhra Pradesh government has decided to use this method to award some projects for construction of its new capital, however, the Swiss Challenge mode is not widely practiced in infrastructure sector globally except in a few South American countries.

Vishwas Udgirkar, senior director (infrastructure) at Deloitte Consulting said, “The roads ministry has been examining various financing models to revitalise private interest in the sector. The Swiss Challenge System has not proved to be very successful elsewhere. The private entity is required to make a lot of initial investment under this model, which he may not be able to recover unless he wins the contract. It, however, allows players to conceptualise projects of their own interest. An infrastructure company, owning a port for instance, may want to develop the last-mile road to improve accessibility.”

Industry experts informed the Swiss Challenge Sytem will require firms to offer something unique to the project in terms of technology or execution so that the company preparing the DPR is in a strong position to challenge the bids of other participants.