They are intended to harness private-sector innovation and initiative, not to guarantee project approval, contract award, or project continuation. The government cannot be compelled to accept a proposal, no matter how well crafted, just as no one can be forced into marriage.
At several points in the PPP lifecycle, the government is legally empowered—and at times duty-bound—to disengage. Recognizing these exit points is essential for both implementing agencies (IAs) and private proponents, who, in the context of USPs, may be likened to suitors rather than rights-holders.
Gatekeeping, not evaluation
First, the government may disengage at the threshold stage when a USP is found to be incomplete.
Screening by the PPP Center under the PPP Code ensures compliance with minimum technical, financial, legal, and risk-allocation requirements.
Failure to submit a complete and compliant proposal ends the process outright.
This determination is not a judgment on the proposal’s substantive merit; it simply reflects the principle that readiness is the sole responsibility of the proponent.
Policy over proposals
Second, even if a proposal is complete, the IA may decide not to proceed with the project at all.
Shifts in policy direction, fiscal constraints, institutional priorities, or development strategies may justify discontinuance.
A PPP is a policy instrument, not a private entitlement. The government cannot be compelled to pursue a project merely because a proposal exists. The IA may also choose to undertake a competitive bidding process instead, an option firmly within its discretion.
Substance over innovation
Third, during detailed evaluation, a USP may be rejected on substantive grounds.
Technical infeasibility, poor value for money, excessive fiscal exposure, weak financial structuring, or unacceptable risk allocation are all valid bases for rejection. Innovation does not excuse imprudence.
Evaluation is a gatekeeping function designed to protect the public interest, not a formality to advance proposals to the next stage.
No deal guaranteed
Fourth, negotiations may fail. Even after a favorable evaluation, the parties may be unable to agree on tariffs, government support, guarantees, risk-sharing arrangements, or other material contractual provisions.
Negotiation is not a ministerial act, and the government is under no obligation to accept a suboptimal deal. Walking away from a bad PPP is preferable to being locked into a long-term liability.
That said, once negotiations are successfully concluded, terms are agreed upon, and all required steps have been undertaken, the government cannot arbitrarily halt the process.
At that point, the next stage, which is the competitive or Swiss Challenge, must proceed, as the original proponent has already acquired a protectible interest under existing doctrines of good faith and fair dealing.
Best offer wins
Fifth, under the Swiss Challenge mechanism, the government must walk away from the original proponent when it fails to match a superior counteroffer from a challenger.
This is not a matter of discretion but the inevitable result of competition, designed to secure the best possible outcome for the public.
First-mover advantage yields to market validation. In such cases, the challenger rightfully secures the project.
Execution isn’t completion
Sixth, even after a PPP contract is executed, disengagement remains possible when the private partner fails to comply with conditions precedent, such as achieving financial close, securing permits, meeting equity commitments, or completing right-of-way requirements.
These conditions test the proponent’s capacity to deliver. Failure to comply justifies termination in accordance with contractual and legal provisions.
Breach triggers termination
Seventh and finally, during project implementation, the government may terminate the partnership when the private party commits a material breach of contract and fails to cure it.
Persistent performance failures, violations of law, fraud, or unauthorized transfers undermine the partnership and warrant exit, subject to due process and contractual safeguards.
In sum, unsolicited proposals confer opportunity, not entitlement. Knowing when and why to walk away is not a sign of policy failure but an exercise of sound governance. It ensures that PPPs remain instruments of public value, not vehicles of private convenience.
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