Swiss challenge method

Why in news?

• Brihanmumbai Municipal Corporation (BMC) is planning to take the ‘Swiss Challenge Method’ for creating Mumbai’s first desalination plant.
• The proposed plant, which will be able to desalinate 200 million litres of water day by day (MLD), will come up at Manori and will help overcome the water scarcity confronted by Mumbai.

About Swiss challenge method:

• Swiss Challenge Method is a method of bidding, often used in public projects, in which an interested party initiates a proposal for a contract or the bid for a project.
• The government then puts the details of the project out in the public and invites proposals from others interested in executing it.
• On the receipt of these bids, the original contractor gets an opportunity to match the best bid.

Why is it important?

• The Swiss Challenge allows a seller to mix-and-match the features of both an open auction and a closed tender to discover the best price for an asset.
• In its original form, a Swiss Challenge allows an infrastructure developer to come up with a suo motu proposal for a new project without waiting for the government to call for bids.
• This can foster innovation, as contractors or developers may initiate projects that the powers-that-be didn’t even think of.
• The method was upheld by the Supreme Court of India for awarding public projects and the Government of India has tried out this method in road and railway projects.

What are the problems?

• By allowing a bidder to initiate an idea and giving him the first right of refusal, the Swiss Challenge can promote favouritism in the award of public projects, opening the doors to corruption.
• To guard against this, legal experts suggest an open list of public projects that allow Swiss Challenge and full public disclosure of bid details when the government receives a proposal.

PRELIMS QUESTION

Consider the following statements about the revamped Viability Gap Funding (VGF) scheme:
1.It has a budget of more than 8000 crore rupees.
2.Funding under the scheme is limited to projects concerning economic infrastructure.
Which among the above statements is/are correct?
(a)1 only 
(b)2 only 
(c)Both 1 and 2
(d)Neither 1 nor 2

Answer to prelims question