The public call for proposals method is a method used by government agencies and municipalities to select the most suitable partner for a project or contract by comprehensively evaluating not only price, but also the company's proposal, technical capabilities, and track record. The best proposal is selected based on a review of the content of the proposals submitted by companies that meet the requirements. While regular competitive bidding emphasizes price, the public call for proposals emphasizes the quality and ingenuity of the proposals to determine potential contract candidates.
Japan's public contracting system requires that, in principle, local government contracts be awarded through open competitive bidding (i.e., the lowest-priced bidder is selected from among multiple vendors). However, some tasks, due to their nature and purpose, do not lend themselves to price-only competition. For example, in projects that require specialized, advanced technology and creative proposals, it is difficult to prepare detailed specifications in advance, and selecting a contractor based on price alone may not produce appropriate results. Against this backdrop, the public call for proposals method was introduced to solicit the best proposals through competition.
Under the legal system, contracts with the companies selected through the public call for proposals are concluded in the form of negotiated contracts (voluntary contracts), as defined in Article 167-2, Paragraph 1, Item 2 of the Local Autonomy Law Enforcement Order, as "contracts whose nature or purpose is not suitable for competitive bidding. In other words, the public proposal method is positioned as an exceptional method of general competitive bidding, and is adopted only when it is highly necessary. Municipalities are required to pay close attention to ensuring fairness and transparency when adopting this method, and to operate in accordance with the purpose of the system.
The purpose of the system is for the client (municipality, etc.) to select the most suitable business operator, taking into consideration factors other than price. For projects that require a high level of technical expertise or where there is a great deal of room for originality and ingenuity in the proposals made by each project proponent, the open call for proposals method allows the client to compare multiple proposals and select the best proposal. This is expected to improve the quality of public works projects andcreate new value, and to pursue creative results that cannot be obtained by ordering according to uniform specifications.
The public proposal method is widely introduced mainly by local governments (prefectures and municipalities). Many local governments have established guidelines for this method, and select project proponents under fair procedures. For example, Osaka City has established detailed guidelines for the proper operation of the public proposal method, a form of negotiated contracting, and has established rules to eliminate arbitrariness in the composition of selection committee members and evaluation procedures. In addition, similar guidelines have been published by Iwaki City, Ikoma City, Asahikawa City, and other municipalities throughout Japan. The number of cases in which the public proposal method is used for various tasks ordered by local governments (e.g., urban planning consultancy, public relations and PR, and facility operation contracts) is on the rise.
Central government ministries and agencies are also using a proposal competition method similar to the public call for proposals. For example, the Ministry of Land, Infrastructure, Transport, and Tourism (MLIT) has issued guidelines for the use of the proposal method and the total evaluation bidding method for outsourcing construction consulting services, and is actively working to ensure quality in projects that require high-level technical proposals. Schemes that incorporate the creativity of the private sector, such as public-private partnerships (PPP) and PFI projects, also sometimes use a format in which proposals are competed for at the time of public solicitation of projects. In other words, from local governments to national organizations, the public call for proposals method is widely incorporated into the public procurement system, depending on the nature of the order.
The selection of a contractor through the public call for proposals method follows a prescribed procedure. The details vary from municipality to municipality, but the general process is as follows
Determination of ordering method and preparation for public bidding: The department in charge examines the work and decides to adopt the proposal method if it determines that it is appropriate to use it instead of bidding. An internal review board confirms the appropriateness of the method and prepares the call for proposals and draft evaluation criteria. To ensure fairness, preparations are also made to establish a selection committee that includes outside experts.
Public notice (implementation of the call for proposals): Public notice of the call for proposals is made on the local government's official website, procurement information disclosure system, etc. The application guidelines, eligibility requirements, deadline for proposal submission, etc. are widely publicized and applicants are invited to participate. If necessary, we will hold a briefing session for prospective applicants to explain the details of the project and application procedures, and answer questions.
Application and Submission of Documents: Companies and organizations wishing to apply must submit an application for participation within the designated period and have their qualifications verified by the local government. Those that meet the requirements will be given the opportunity to submit proposals and will have until the deadline to prepare and submit their proposals and related materials. The proposal will include ideas and methods for project implementation, organizational structure, achievements, and estimated cost.
Proposal review (document review and presentation): A selection committee is established to evaluate the submitted proposals. In most cases, this is done in two stages : a document review and ahearing/presentation review. Proposals are scored according to the evaluation items, such as originality and feasibility of the proposal, ability and track record of the proposer, and appropriateness of the price, and each committee member gives a score. The committee members will then compare and discuss the proposals impartially in depth through a question-and-answer session and presentations by the proposers. External experts such as academic experts will be included in the committee to ensure objectivity and transparency in the evaluation.
Selection and announcement of the best proposal: Based on the results of the evaluation by the Selection Committee, the business operator with the best proposal will be selected as the preferred bidder (prospective contractor). The results will be notified to the participants, and the reasons for selection and evaluation comments will be announced by the local government. At this point, the contract is not officially signed, but rather the parties to the contract negotiations have been decided.
Contract negotiation and conclusion: The selected preferred bidder and the client negotiate specific contract terms and conditions based on the proposal. Once both parties agree on the terms of the contract, a negotiated contract (a negotiated contract based on a competition) is formally concluded. The contract amount and scope of work are finalized, and a written contract is exchanged. After the contract is signed, some municipalities may report the results to an auditor or a bid monitoring committee.
Publication and verification of results: After the contract is signed, the client publicly announces the reasons for adopting the open call for proposals method (reasons why competitive bidding was not suitable) and a summary of the selection results. For example, the name of the selected business, the key points of the proposal, and the basis for awarding a negotiated contract will be clearly indicated on a website or other means to ensure transparency. In addition, depending on the project, we may verify and evaluate whether the project based on the content of the proposal is properly executed after the contract is signed, and utilize this information to improve the operation of publicly solicited proposals in the future.
As described above, the public call for proposals method proceeds in the following order : public announcement, call for proposals, screening, selection, and contracting. Compared to the conventional bidding process, this method requires more procedures and places a heavier burden on the parties involved, but it also allows the selection of the most suitable partner after examining the quality of the proposals.
The public call for proposals method has the following advantages for both the client and the successful bidder.
Selection of the most suitable partner based on the content of the proposal: The ordering party can comprehensively evaluate not only the price, but also the content of the proposal itself, as well as the company's technical capabilities, track record, and structure, making it easier to select the most suitable project partner for the project. Especially for projects that require creative ideas and a high level of expertise, hiring a firm that offers a high-quality proposal rather than one that is simply inexpensive will lead to improved project quality and the creation of innovation. For example, "the point that is very different from ordinary bidding is that we choose a business operator including the planning ability and reliability of the proposer.
Encouraging creative and flexible approaches: In the proposal method, each business competes with its own unique proposal, attracting a wide variety of ideas that are not bound by conventional specifications. For the client, this provides an opportunity to obtain the best solution from multiple options, and encourages creativity and ingenuity in project methods and the use of new technologies. This is especially effective in the areas of urban development and regional revitalization, and aims to improve the quality of public services by drawing on private-sector know-how.
Open competition: As the name "open competition" implies, basically anyone can apply as long as they meet the eligibility requirements. Because it is open to a wide range of companies and organizations, not just specific contractors, there is a high degree of fairness and opportunities for new entrants to enter the market. This is an opportunity for private companies to expand their business, as they do not have to wait for an invitation from the government, as is the case with conventional competitive bidding, but can take on projects on their own initiative. In fact, there have been cases in which companies that had no experience in doing business with local governments have succeeded in receiving orders through outstanding proposals.
Easy to secure a profit margin for the contractor: In the public call for proposals, the quality of proposals is emphasized rather than price alone, making it difficult to compete on the basis of unreasonably low prices. The firms that submit proposals of high value at a fair price will be selected, and as a result, it is easier for the winning firm to secure a certain level of profit. Since the lowest bidder does not have to offer the lowest price, as is the case in general competitive bidding, the business can strive to provide high quality services while earning a reasonable profit commensurate with its proposal.
Reflection of regional contributions and policy goals: Contractors can incorporate their own perspectives into the evaluation items, such as "ripple effects on the regional economy," "environmental considerations," and "corporate social contribution. This makes it possible to select businesses that contribute not only to economic rationality but also to the realization of policy goals. For example, by adding "contribution to the region" and "cooperation with local companies" to the evaluation criteria, proposals that lead to the development of local industries and job creation are given preferential treatment. The public call for proposals method is a flexible mechanism that facilitates the reflection of the client's intended social value in the selection of the contracting party.
As described above, a major advantage of the open call for proposals method is that it allows both the pursuit of high-quality results and the assurance of fair competition. For the client, it is a means of selecting a better partner, and for the contractor, it is a stage where strengths other than price can be demonstrated, which is beneficial to both parties.
On the other hand, the following demerits and operational issues have been pointed out in the open call for proposals method.
Time-consuming and costly preparation and review: The cost of bid participation tends to be high because of the work involved in preparing proposals and presentations, which is not part of the normal bidding process. Companies must devote time and manpower to proposal preparation, and must carefully develop their plans, drawing on all of their expertise and planning capabilities. This burden is especially heavy for small and medium-sized companies, which risk wasting their resources if their proposals are not selected. The process from proposal solicitation to evaluation is also more complicated for the ordering party, increasing both the administrative burden and the time required compared to open competitive bidding. If there are many applications, it takes time to screen them, and it is also expensive to secure and manage the staff and expert committee members in charge.
High level of proposal and technical capabilities are required: Since proposals must be differentiated from those of other companies, this method is a high entry hurdle for companies that do not have sufficient competitiveness in their field. In other words, companies with extensive experience and know-how tend to have an advantage, while startups with innovative ideas but limited track records tend not to be selected. When evaluation items include "past performance of similar businesses" and "reliability of the company," it is difficult for new entrants and small businesses to obtain high scores, and the challenge is how to ensure a framework that allows for fair competition.
Concerns about subjectivity and fairness of evaluation: Subjective judgments are inevitably involved in the process of evaluating the superiority or inferiority of proposals. Although the evaluation criteria are defined in advance, the judges have discretion in assigning points and comments to each proposal, which leaves room for uncertainty. The client side is taking steps to ensure transparency and objectivity, such as clarifying the evaluation criteria and using outside committee members, but if the selection results are suspected of arbitrariness or collusion, this could undermine confidence in the bidding process. Accountability is also more important than in normal bidding, and if appropriate measures are not taken, such as providing feedback to unsuccessful bidders and disclosing the reasons for the evaluation, this may lead to appeals. Thus, if the public bidding proposal method is mishandled, it may be perceived as an "opaque negotiated contract," and it is essential to establish a system to ensure fairness at all times.
Risk of procedural irregularities and breakdown of negotiations: In the proposal method, there is a negotiation phase to finalize contract terms with the preferred bidder, but negotiations may be difficult or break down in the process. If a contract cannot be agreed upon with the best offeror, it may be necessary to contact the runner-up or re-advertise the contract, which could significantly delay the start of the project. It should be noted that in the case of open competitive bidding, the successful bidder is awarded the contract, whereas in the case of publicly solicited proposals, there remains uncertainty until the contract is concluded. There are also cases where the call for proposals itself is unsuccessful because there are no applicants or no proposals that meet the expected standard. In such cases, it may be necessary to re-open the call for proposals or switch to a different method, which will affect the originally projected schedule.
Discouragement of abuse: Although the public call for proposals is a convenient mechanism, it is an exception to the rule of "negotiated contracts," and abuse of this method is strictly discouraged. If the proposal method is easily used even for projects in which price competition is possible, it may undermine the original principle of competitive bidding. Procurement managers in government are required to make appropriate judgments as to which projects should be submitted for proposals. The guidelines of each municipality also strictly stipulate the conditions under which the proposal method can be adopted and limit the scope of work to be covered, thereby preventing the easy expansion of the exceptional method. Thus, a key issue is to operate the system in a moderate manner that does not violate the system's purpose.
From the above points, it can be said that the open call for proposals system has both advantages and disadvantages. While it allows for the solicitation of better proposals, it also has issues such as operating costs and the difficulty of ensuring fairness, so the client must consider the merits and demerits of each project when deciding whether or not to adopt it, and must also establish appropriate procedures.
The public proposal method has a significant relationship with the real estate industry. In particular, this method is actively used in the utilization of land and buildings owned by public institutions and in urban development projects. The main relationships and impacts in the real estate sector include
Use of public real estate for sale and development: When local governments and prefectures sell or lease idle land or aging public facilities to the private sector, they are increasingly soliciting public bids with ideas for their use, rather than simply selling them through competitive bidding. For example, Yamanashi Prefecture has adopted the public proposal method for the sale of the former bus standby station of the former Linear Observation Center, inviting proposals for land use plans from the private sector rather than simply selling the land. This method of public solicitation with conditions is being used in many areas to comprehensively evaluate development plans and prices that contribute to the community, and the company with the most desirable utilization proposal is chosen as the seller. While this is a new opportunity for real estate developers and construction companies to acquire public land, it also requires a different approach in that it requires them to present a vision for urban development rather than simply asking for a high price.
PPP/PFI facility development and operation: The public proposal method also plays an important role in public-private partnership projects. For example, in projects such as rebuilding dilapidated public housing, reusing closed school buildings, and redeveloping public spaces, local governments solicit a wide range of proposals from the private sector and conclude a project contract with the best proposal. In fact, redevelopment projects that will become local landmarks, such as "ONOMICHI U2 (a tourism base by revitalizing a port warehouse in front of Onomichi Station)" in Onomichi City, Hiroshima Prefecture, "INN THE PARK (a glamping facility using the site of the former Boys Nature House)" in Numazu City, Shizuoka Prefecture, and a hot spring resort revitalization project in Fuji Town's Furuyu, Saga Prefecture All of these projects have been selected and contracted through public proposals. For companies in the real estate industry, these PPP projects provide an opportunity to showcase their planning and proposal capabilities and participate in businesses that contribute to the local community. On the other hand, because the projects require advanced proposals that take into account business risks and profit planning, real estate developers generally form consortiums with financial institutions, design firms, and other organizations to apply.
Increased opportunities for proposal-based work in both the public and private sectors: With the proliferation of the public proposal method, real estate-related companies are required to strengthen their proposal sales and consulting capabilities. For example, urban planning consultants and real estate consulting firms are actively participating in proposals for urban development projects by local governments, competing for orders by presenting their expertise in the form of proposals. Architectural design firms and developers are also increasingly taking on proposals for the design and construction of public facilities and redevelopment projects. This has lowered the hurdles for entry into public-sector projects within the real estate industry, allowing a diverse range of players to become involved in public projects. Conversely, general contractors and developers that have traditionally been involved in public works projects are facing increased competition from emerging companies, and there is a growing need to demonstrate their superiority in terms of value-added proposals other than price.
Impact on institutional design in the real estate sector: The public proposal method is also attracting attention in the context of "effective utilization of public real estate (PRE). The Ministry of Land, Infrastructure, Transport and Tourism (MLIT) collects and publishes examples of public real estate utilization in various regions, and the public call for proposals method is positioned as an effective method for commercialization. For example, many cases have been reported in which private companies were invited to submit proposals for the use of vacant government building sites and public facilities, and the best proposals were either leased for a fixed term or sold to solve local problems or to secure financial resources. It is hoped that the accumulation of such successful cases will influence future real estate policies and further promote the use of real estate through public-private partnerships.
In general, the expansion of the public proposal method is bringing both new business opportunities and challenges to the real estate industry. The public sector is able to create unprecedented value by incorporating the creativity of the private sector in the utilization of land and facilities, while real estate companies have the opportunity to expand their business domain through participation in public projects. At the same time, the ability to make proposals and coordinate with the local community in order to win proposals is becoming increasingly important, and companies in the real estate industry need to hone their expertise in planning and dealing with public agencies in addition to their traditional development skills.
The above is a summary of the public proposal (project proposal) method, from its definition, institutional background, specific procedures, advantages and disadvantages, and impact on the real estate industry. This method, which is more sophisticated than price-oriented bidding, brings a new style to public procurement, but it is also a difficult method that requires appropriate operation. In the real estate field, it can be a driving force for the creation of creative community-based projects, so it is important for industry professionals to properly understand the purpose and operational points of this method, and to make the most of it for future business development.