Swiss Challenge

//Swiss Challenge

Swiss Challenge

In India, the corporate bankruptcy cases are being held up due to skirmishes between bidders, therefore, the banks are now looking forward to use the Swiss Challenge route to decide on winning bidders.

What is a ‘Swiss Challenge’?

  • It is a method of bidding, mostly used in public projects, in which the interested party indicates a proposal for a contract or the bid for the project.
  • Government puts the details of the project in the public domain and subsequently invites proposals from other interested parties to execute it.
  • Upon receipt of the bids, the original contractor is invited to match the best bid and put forward its own bid in comparison to that.

Relevance in handling bankruptcy cases 

If the Swiss challenge is applied in the ongoing bankruptcy cases, it may entail two rounds of bidding for a distressed company or its assets. It will bring transparency as well as speed up the process of bidding and liquidation of assets.

Significance 

  • It 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 case of getting a better bid after the official bidding gets closed, the banks currently faced sticky situation as they suffered the losses due to such rules. Swiss challenge resolves this problem as it allows two rounds of bidding.
  • It allows an infrastructure developer to come up with a suo moto proposal for a new project without wasting any time on the government to call for bids. It will foster innovation as both the contractors and developers may initiate projects that the government cannot even think of.
  • Good news is that the Supreme Court of India has legitimised this model for awarding public projects and Government has already tried this method in road and railway projects.
  • If the method is tried in bankruptcy cases, banks will be able to squeeze out more funds from the auction of stressed assets.
  • Similarly, the application of the Swiss model in public projects may lead to both innovative project proposals as well as quicker execution besides filling up the coffers of the government.

Concern 

Giving the first bidder to initiate a proposal and giving him the first right of refusal may entail favouritism in the award of public projects opening the doors to corruption. Experts believe that an open list of public projects must be formed to allow Swiss Challenge to be initiated and full public disclosure of bid should be made whenever the government receives a proposal.

SourceThe Hindu Business Line

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By | 2018-08-17T16:07:02+00:00 August 17th, 2018|Categories: News|Tags: , |0 Comments

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