Competition in Infrastructure Procurement -

Issues Raised in the Waste Management Sector of

India
Abstract
Competition is a crucial instrument in the procurement of assets
and services to bring a competitive private player to the project
and ensure value for money. Extant literature is silent on the
competition effects in municipal infrastructure projects. This study
initiates such an understanding by taking Indian projects as a case.
Concentration ratio was used to analyse the MSW market's general
competition. For understanding the specific competition, trends of
bidder participation in seven municipal solid waste (MSW) PPP
projects are utilised. Project documents and interviews conducted
with relevant stakeholders provided these evidence. Findings show
that though the competition ratio of top four firms (CR 4) is less in
this sector, typically meaning oligopoly with a medium level of
concentration, the results cast doubt on the existence of intense
competition based on the findings of both the general competition
as well as the specific competition. Consequently, expression of
interest (EOI) cannot be construed as a measure of competition in
developing countries while unbundling can be adopted as a pro-
competition move and enhance the maturity of the market for
future projects. Thus, PPP mode in the MSW sector has to revisit
the principles of partnership and its governance to see success in
future projects.

Keywords

Competition, public-private partnerships, municipal solid waste

management, procurement, maturity.
Introduction
Whenever there is a good balance between the competition policy and
the sector specific regulation, network infrastructure industry tends to
thrive. Concerning the necessary interventions by the public sector, the
sector specific regulation would effectively complement the prevailing
laws on competition. The assets and services of network infrastructure
are crucial in economic, social and political terms. Competition is
considered as one of the crucial parameters in public procurement and
especially in PPP infrastructure procurement. Kwak et al. (2009)
acceded that lack of competition caused numerous PPP projects to fail.
Public utility services such as water, wastewater treatment, and solid
waste management are typically viewed as a network infrastructure.
These network utilities are generally noted to have very few numbers of
private players (Araral, 2009). Moreover, many of the waste projects,
even with government guarantees faced cancellations across the globe.
Also, most of the projects procured before 2000 had to undergo re-
negotiation proceedings immediately, i.e. within as low as 1.6 years from

1
the date of signing the project contract (Araral, 2009). One of the critical
factors that could be attributed to these cancellations is the prevalence
of unsound proposals that emerged as a consequence of poor competition
in the market. As a result, the MSW sector may suffer from a lack of
cost-saving, where one of the theoretical benefits of having a tight
competition is cost-savings (Soukopová and Malý, 2013). This is because,
the competition in the market and the competition for the market decides
the successful operations in the MSW sector (Biggar, 2002). The type of
competition usually informs the strategy that can be adopted (Barney,
1986).

The public sector, consequently, should strive to gain an understanding

of the optimum competition in the procurement process. As an
implication, the public sector should formally assess the prevailing
competition in the sector and then frame measures that ensure that
optimal competition is maintained. Interest in the competition policy of
developing countries is increasing. Though Indian CCI has rolled out
many policies, regulations, and empirical case studies on infrastructure
sectors in general, it is silent on the competition and the effects MSW
sector. Besides, interest in the competition of domestic markets was a
result of over realisation of trade liberalisation and particularly
supported the entry of international players into the domestic markets.
These issues pertaining to competition and the necessary interventions
were unexamined so far in the developing economies, particularly the
relations of competition, market, and the infrastructure development
objectives of the public sector (Cook, Fabella and Lee, 2007). Studies to
understand competition in the context of the MSW sector are scarce, and
no research has been undertaken in the context of the Indian market. In
fact, Thu and Akintoye (2007) noted that a study on each sector's sketch
of competition and PPP market nature is still in a rudimentary stage.
Such a study would result in better articulation of this sector and will
help policy-makers to frame sector-specific reforms to improve this
sector. This study can moreover answer the call by Iimi (2008) about the
need to introduce appropriate measures to address the lack of maturity
and a low level of competition in such sectors of developing countries.
This study is, thus, a step in this direction to understand the MSW sector
in the context of India. The research question that is set out is
What are the patterns of competition and market structure of
the MSW projects developed in India and what do these trends
suggest about future project procurements?
Literature Review
Public procurement laws usually aim to promote competition, eliminate
restricted business practices, bring economic efficient, and economic
freedom, and finally cause public welfare (Cook, Fabella and Lee, 2007).
They aim to tackle anti-competitive practices or bid-rigging in the public
tenders. PPP procurement, an important form in the modern public
procurement, is arguably dependent on the procurement stage in its
lifecycle because of its influence on the success and functioning of

2
infrastructure asset and service. Often the type of competition that is
prevailing in the market even dictates the type of procurement system, to
make competitive tendering a more effective process (Dolla and
Laishram, 2019b). This is because a lengthy tendering period deters the
competition (Casady et al., 2019). Additionally, the ability to prevent
hold-up problems and ability to ensure proper investments, asset quality
and the effective price adjustment is strongly contributed by the
competitive tendering.

Competition policy of any country aims to defend competition instead of

defending competitors.
Stanford and Molenaar (2018) argued that competition is predominantly
viewed as per two schools of thought. The first one is from the
neoclassical viewpoint. As per this view, increased competition would
lead to better price and higher quality product in construction
procurement. Likewise, lack of competition is regarded as a market
failure, exhibiting an extreme form of monopoly. The second perspective
stems from transaction cost economics (TCE). As per this view,
competition should be limited to some extent as every transaction would
incur certain costs to the procuring organization caused by the
administrative burden of bid process management. This is often referred
to as tension in the theory of competition of public procurement
(Stanford and Molenaar, 2018).

Competition can be viewed in two forms: general competition and

specific competition. General competition or the industry competition
relates to an understanding of the maturity of the sector, whereas
specific competition is about the bidders participating in the project in
hand. Economists have prescribed typology-based trajectory for
understanding the general competition or the, in other words, the
maturity of the sector or market. Market can be defined as an
asset/service or group of assets/services offered in a specific
geographical area. Market participants are those who are currently
providing the assets or services in a geographical area. Consequently,
the number of firms in the market and their respective market shares
determine the market concentration. Market structure refers to “the
number and distribution of firms in the market” (Besanko et al., 2013,
p.171). Bain (1950) has argued that the characteristics of market
structure potentially influence the choice of competitive pattern. Hence,
researchers identified concentration as a conventional but indirect
intensity of competition measure (Besanko et al., 2013; Ye, Lu and Jiang,
2009). In general, concentration ratio (CR), entropy, Gini coefficient and
the Herfindahl–Hirschman Index (HHI) are the four major concentration
methods to measure the intensity of competition in any industry which
indicate the market structure (Ye, Lu and Jiang, 2009). Among these,
CR4, which means the concentration ratio of the top four firms in the
market of a given sector, is one of the popular and widely used indicators
of the market structure due to its ease of calculation. In the present
context, the market is the population of the firms (Cook, Fabella and Lee,

3
2007) which are actively participating in the procurement, construction,
and operation of the public procurement projects in the MSW sector of
India.

General competition indicates or is a proxy measure of the degree of

competition in the industry (Ye, Lu and Jiang, 2009). Study of general
competition, i.e. knowing the population size of all potential bidders
benefits the contracting authorities to design the procurement package
and the awarding criteria effectively. Market structure assessment gives
an understanding of the dominance, and also competition determines the
ability of the private sector to bear the risks (Shrestha et al., 2016). For
the construction industry, the market structure can be perfect
competition (a great number of companies constructing a homogenous
product), oligopoly (when a few number of companies have at least 40%
of market share), and monopoly (ruled by only one firm). Perfect
competition is considered to be ideal. In perfect competition, the
tendency to reveal their marginal cost in the bidding process increase
due to competition. These marginal costs will need to be lowered by
technical innovation - a direct benefit of good competition. This is
because innovation is positively correlated with the market concentration
levels (Cook, Fabella and Lee, 2007). Bidders bid less aggressively as a
strategy to win the project whenever the competition is high while
warranting caution to evade the winner’s curse. Langford and Male
(2005) noted that the competency and expertise of the private sector is
the reason for differences in prices during bidding. Prices can be used as
a proxy for the competency of the firm, organizational expertise, ability
to assess both the market networks and competition which helps to set
their bid price and expected profit level intelligently. From the principal-
agent theory perspective, an agent can be motivated to act in the social
interest by the competition activities and their incentives. Moreover, in
PPP projects, restricted competition can sometimes cause the
construction cost to increase up to about 30% (Thomson, Goodwin and
Yescombe, 2005). Based on the observation in the Japanese construction
industry, Harada (2015) pointed out that market dominated by five major
firms can be treated as highly restricted competition. Moreover, this
level of competition can be viewed positively if these five major firms
have demonstrated their ability to deliver the project successfully at a
competitive price due to the vast experience gained by them. Maturity is
also viewed as subjective quality of availing best projects. It is a measure
of the maturity of the principal (public authorities) to weave together
their actions, attitude and contextual knowledge to increase the project
success (Henjewele, Sun and Fewings, 2014).

Specific competition indicates the competition prevailing for a particular

project in the tendering stage. This is denoted by the private firms which
are shortlisted to at least contract negotiation or bidding but not the
number of interested bidders nor the population of companies in the
industry (Casady, 2016). A client’s choice about the minimum number of
contractors is contingent on the potential population of the bidders in the

4
market which is again dictated by the market conditions (Ngai et al.,
2002). Teo and Bridge (2017) show that 'number of bidders' as a
consistent measure of value for money in PPP projects and as a good
indicator of avoiding pre-market (the state of cancelling a procurement)
and post-market failure (cancelling after the award of the contract).
When governments invite bids, it is expected that participation by more
number of bidders would contain the overall cost of the public
procurement, prevent collusion and corruption, and bring value for
money into the project.

The practical implications of studying the specific competition are the

public organisation can understand the market conditions and vary the
minimum number of bidders in a competition to achieve the most
competitive bid. If the minimum competition is still not achieved, they
may have to look into the package and adjust the influencing factors such
as the project type and size, since other affecting factors such as client,
geographical location, and market conditions cannot be changed. The
main implication for clients is that, in order to obtain the most
competitive bids for projects in the most cost-efficient way, they should
vary the minimum number of bidders in the competition according to
market conditions (Ngai et al., 2002).

There is no industry-wide accepted metric to understand or analyse the

specific competition. In this regard, Li et al. (2008) argued that
restricting the bidder participation to around six bidders would create a
perfectly competitive environment for any typical project. Besides, the
number of bidders is analyzed from various perspectives where four or
more bidders can never be collusive because cooperative and collusive
behaviour would become difficult to sustain. At least five bidders can
exert high competitive pressure in the market. For these purposes, five
bidders are shown as the dividing line between few and many. The
minimum threshold is five, where less than that would be low
competition. A reasonable threshold for maximum bidders is eight,
where the lowest bid decreases until eight bidders (Teo and Bridge,
2017). This number of bidders have a crucial impact because their
competitive profiles have a heavy influence on the final outcomes of the
project.

Vertical integration is a phenomenon of producing heterogeneous

products by the same firm. This can also be called as bundling of various
segments of the supply chain (Dolla and Laishram, 2019a). While
studying the competition effect on vertical integration, Riordan (2008)
argued that recent studies had provided strong evidence on the efficiency
and benefits of vertical integration. Nevertheless, vertical integration is
observed to cause some monopolistic effects and studies showed harmful
or mixed competitive effects in significant cases (Riordan, 2008). To
counter this phenomenon, Riordan recommended evaluating the possible
rise in costs, reduction in competition, and the occurrence of collusion as
the first step in making decisions on vertical integration. Additionally,

5
the procuring authorities are suggested to identify other mechanisms
from the perspective of end-users, besides resorting to vertical
integration. Riordan (2008) also specifically pointed to the power of
contracts and the power of markets as crucial elements for discerning
the competitive effects of vertical integration.

Van den Hurk (2016) argued that competition is limited because of the
excess inertia problem, i.e. tendency to limit competition in the bidding
due to bundled procurement. Typically, when the demand for any
infrastructure increase, the construction industry will turn to be a seller's
market and the private firms providing those services will earn
supernormal profits. This becomes critical when there is a need for
speciality contractors for execution. When they participate in the
bidding, they tend to dictate terms and condition of engagement due to
the limited availability and capacity of such contractors (Cheung and
Shen, 2017). In this vein, Estache and Iimi (2011) found higher
procurement costs of bundled projects than that of unbundled projects.
Research Methodology
The market structure of the sector based on the PPP database in India
was first constructed using the measure ‘Concentration Ratio’ (CR). CR4
represents the concentration ratio of the top four firms which occupy a
major share of the projects Cheung and Shen (2017). The data for
analysis was obtained from the Indian PPP Database till 03 July 2019. It
lists the details of 1899 project that cost more than 5 crore. They have a
total value of ₹ 2,570,954.33 crores (approx. £ 150 Billion @ 1 £ = ₹ 90),
across the sector and states (DEA, 2019). Current study confined to the
75 MSW PPP projects hosted in the database till 2017. This year marks
the end of the 12th five-year plan of India, thus giving a suitable sample
for analysis and arrive at the conclusions for this policy and execution
period. The total value of the project reported was at least ₹ 7901.23
crores (£ 877 million) (some project costs were not reported). The
average project cost was ₹ 121.55 crores (£ 13.5 million) which are
comparatively of a smaller value when compared with the projects
belonging to other sectors such as highways, airports, and power.

Second, to gain an understanding of the competition and participation of

bidders in the projects, we employed seven specific cases and drawn
inferences from the analysis bidder participation trends. The usage of
this methodology is demonstrated by Carpintero and Petersen (2014)
while understanding the competition light rail project procurements. The
overview of the cases is shown in Table 1. The evidence are derived from
a wide range of project-related documents, notices, and minutes of
meetings of the procuring authorities. The case study intends to
ascertain the trend and extent of competition, the nature and
performance of the bidders of those projects. In addition to this
quantitative data, the present study triangulated the results with
qualitative data. Eight interviews were carried with stakeholders of
these seven procurements of MSW sector and has 10.9 years as their

6
average experience.
Results

Results of General Competition

The CR4 ratio of the sample is 0.52 and CR8 is found to be 0.69. There is
a steep drop in market share after the top four companies. In order to
understand the competition, each of the winning bidder market share is
identified for these seven case study projects, from the project database.
The single largest market share of the TOPPER company is 0.23. The
company handling project ONE, TWO, and SIX have a market share of
0.19, and the company handling project FIVE has a market share of 0.11.
The company handling project FOUR has a market share of 0.04.

Results of Specific Competition

Concerning the number of bidders who participated in the seven cases
studies, results show a drastic reduction in the extent of private sector
participation from the expression of interest stage to the bid submission
stage. During the EOI stage, 92 unique bidders had participated in these
seven case study projects, while during the bidding stage, four bidders
submitted a bid in four of these seven case study projects, three bidders
submitted a bid for three case study projects and 11 bidders for two case
study projects.

Table 1 Overview of the Specific Competition in the Case Studied

Number of bidders Duration of
Year# Project Project Scope Description during procurement
EOI RFQ RFP
2006 ONE Collection, Transportation, 13 5 1
10 months
Treatment, and Disposal
2009 TWO Collection, Transportation, 22 6 2 6 months
Treatment, and Disposal
2009 THREE Transfer Stations, Treatment 8 5 2 5 months
and Disposal
2011 FOUR Collection, Transportation, 11 8 3 4 months
Treatment, and Disposal
2012 FIVE Transfer Stations, Treatment 3 3@ 3@ 6 months
and Disposal
2013 SIX Transfer Stations, Treatment 37 23 1 18 months
and Disposal
2014 SEVEN Collection, Transportation, 5 3 * 15 months
Composting, and Disposal
Total Average 13.9 6.5 2.6
Legend: # - year of procurement; EOI - Expression of Interest; RFQ- Request for
Qualification (for technical qualification); RFP - Request for Proposal (for the
financial bid); @ - technical cum financial proposal; * procurement terminated by
the High Court on account of low competition.

To analyse further about the nature of participated bidders, in project

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ONE, nine bidders were shortlisted for bidding wherein the request for
qualification was issued to them. However, as per the revision, when the
scope of work changed to bundle waste to energy plant, the competitive
landscape was reduced to participation by one bidder only. Due to the
addition of waste to energy segment, the financial cost of the project also
increased, thereby expecting higher financial capacity from the private
entity. The share of the private entity (project developer) increased from
₹ 15.33 crore (£ 1.70 million) to ₹ 65.81 crore (£ 7.31 million). Besides,
the increase in financial exposure, the lack of maturity of the market to
handle highly technical complex projects was another key factor limiting
competition, as waste to energy plants are more complex than
composting plants. The bidding process for selection of developer did
not generate adequate competition in case of ONE. The case study
evidence indicated that a high level of competition was observed when
the scope of the project was earlier confined to the collection,
transportation, and treatment using composting. The private entities had
the expertise for collection and transportation, and treatment using
conventional technologies such as composting. The level of competition
was, therefore, high when the segments were unbundled. While
tendering for collection and transportation of MSW for 31 wards, it has
been observed that multiple numbers of non-governmental organizations
(NGOs) had participated in bidding for 23 wards. Bidding for the
remaining wards, which did not receive more than one bid, had also
experienced more competition when it was put to rebidding. Considering
the lack of maturity of the market and the absence of private parties with
high financial capacity, the ULB had even reduced the amount of
performance guarantee that resulted in improved competition. The level
of competition in the market appears to be declining in case of
procurement using the bundled approach vis-à-vis the competition
observed when procured through unbundled route.

Twenty-two firms have submitted their expression of interest for project

TWO. The criteria used in the evaluation is to have a net worth of ₹ 175
crores (£ 19.44 million). Moreover, experience in collection,
transportation, treatment, and disposal was given 70% weight. The rest
30% weight was given to bidder’s methodology and approach for this
project. Out of these 22 firms, only six firms were technically qualified,
and request for proposal is offered to them. The remaining bidders were
not permitted as they scored less than 60 points in the technical
evaluation. The bidding scenario for TWO project points that lack of
competitive players for the scale and scope intended from bundling. The
first bidder (1B) did not have the minimum waste handling capacity of 3
lakh metric tonnes of MSW in the previous two years. They had
experience in composting and waste handling. They initially provided
services for Tata Steel. Second bidder (2B) failed to furnish the
agreement copy of previous projects and could not furnish the experience
certificate for collection, transportation, processing, and disposal of
MSW. Nevertheless, they had executed a 25-megawatt power plant
using 2050 TPD of waste in Delhi, thereby showing that they are capable

8
of handling the WTE project. 2B had a subcontractor who has executed
projects through technologies provided by Germany. However, this
subcontractor had issued an insolvency resolution on August 7, 2017. 3B
handled only one project of 1700 TPD for processing and disposal of
waste only. 4B consortium had wide expertise in landfill gas capture and
MSW to energy. They had produced at least 34995 kilowatts of energy
across the globe. In India, they have produced 4563 kilowatts of
electricity. However, this firm did not possess any experience in
collection and handling. 5B is an entity that has previously supplied
equipment for processing. They had constructed and erected processing
plants. 6B had not submitted any relevant documents in response to EOI.
7B is a consortium of Indian player and an international player. The
technical partner was the international player that has experienced only
in their home country. On the other hand, the Indian company had
demonstrated experience in collection, transportation, and dumping (but
not sanitary landfill) of MSW in one Indian city. This consortium
collectively demonstrated the required experience. 8B had extensive
experience of MSW to energy plants across the globe but mainly in
China. However, they did not produce any documentary evidence of the
collection and transportation of MSW.

The ninth bidder of the project TWO, i.e. 9B was a joint venture (JV)
between one domestic player whose equity share is 60% with experience
in collection, segregation, and transportation of waste and one
international player with 40% equity share and experience in composting
and engineered landfill in Brazil. 10B was a JV of a domestic player
having rich experience in composting, and door to door collection and
transportation whereas the international player had the experience of
door to door collection, construction and operation of the transfer station
along with composting, outside India. 11B had demonstrated experience
in door to door collection in one Indian city and treatment and disposal in
cities outside India. 12B was also a JV of three Indian bidders, where the
first firm has experience in hazardous waste and processing of waste
through composting and landfilling; the second firm also has experience
in processing through composting; the third firm has experience of
collection, segregation, transportation, and disposal of MSW. 13B was a
JV between two domestic partners. These firms exhibited experience in
collection and transportation of MSW only but did not have any
experience in processing and disposal. 14B was a domestic bidder
having required experience of collection and transportation individually
with treatment and disposal through a different project. 15B was a JV of
2 domestic firms and two international firms. One domestic firm is the
lead party and the other aimed for collection and transportation. One
international firm is the technical partner, while the other international
firm wanted to utilize its expertise in power generation. 16B had an
experience of reclamation of the existing dumpsites through composting.
However, this firm did not have experience in collection, transportation,
refuse-derived fuel and landfill. 17B gave incomplete information on the
capability. 18B was also a JV of two domestic players where one firm had

9
experience in collection and transportation while another firm's
experience was unknown. 19B was a JV between a domestic player and
an international player. The domestic player did not have any experience
whatsoever in MSW. On the other hand, the international player had
experience in remediation of waste landfills, construction of sorting
plants, fermentation of organic wastes. 20B was a fertilizer
manufacturer and marketing agency showing interest in only compost
related products. 21B failed to submit a responsive proposal. 22B was a
domestic bidder with a maximum handling capacity of 100 TPD in the
collection, composting and disposal of waste. This firm lacked the
technical capacity. Overall, 7B, 9B, 10B, 11B, 12B, and 14B
demonstrated experience and hence qualified for the RFP stage. Though
14B was declared the winning bidder, it had no prior experience of
implementation of waste to energy project, which was within the scope of
the project TWO. The results of the rest of the five projects are not
presented for the sake of brevity.
Discussion
The analysis has prompted three themes for discussion as per the initial
research questions that were set. They are
1. The implication of existing competition in the MSW sector
2. Causes of poor competition
3. Strategies to enhance the competition in the MSW sector

The implication of the general competition/current

market structure in the MSW sector
The nature of the PPP market for MSW sector is observed to be oligopoly
with a medium level of concentration. Less concentration in the market,
in general, would suggest that there are many small players and that
subcontracting might also be very much prevalent in this sector.
However, a deeper probe into the success rate of the projects handled by
the CR4 companies indicates a very high failure percentage even of those
top four firms. TOPPER company has faced several criticisms in
operations. For instance, the majority of TOPPER companies’ operations
in the state of Uttar Pradesh state of India are terminated. In general,
the projects have suffered some of the challenges such as court litigation,
abandoning of the project by the private partner citing the breach of
contract by public sector or termination of the project by the public
sector stating poor performance by the operation. There is no country-
level mechanism to verify the performance of past projects. Currently,
during the procurement, the ULBs’ only ask for the certificates of past
works. For instance, the project handled by 14B in the Bangalore state
of India was subjected to extreme civic and political unrest. There are
many instances of unscientific disposal of waste and transportation. The
audit report in 2016 indicated various problems such as excess payments
to the tune of three times more, fictitious claims on the transfer of inert
waste to landfill, short supply of compost to ULB, and improper
treatment of leachate. These aspects were not considered during the

10
procurement as such information is never asked. On the other hand, only
two financial bids were submitted by the qualified parties (TWO and
THREE) and this highlight the low level of competition. Moreover,
typical infrastructure projects expect the participation of at least 5 – 8
technically qualified bidders in the financial stage. Though competitive
dialogue may enhance the value and reduce the time of procurement,
however, the dialogue is limited to only the L1 (lowest) bidder by the
Indian procurement guidelines. This could become a detrimental factor
for making progress in the procurement of PPP projects in the MSW
sector, adding up to the existing low level of competition.

There are many companies which have exhibited very little market share.
Some companies (e.g. winning bidder of FOUR) have seized to take up
new projects in the past five years (2013-2017) and thus apparently
ceased to exist. These situations also indicate that MSW firms were not
able to gain experience grounded in the successful execution of the
projects. This may be a reason for such companies getting dissolved or
not taking up new projects. This shows the absence of healthy
competition effects, which are productivity, ability to expand the firm,
and ability to innovate. Moreover, organizational theory clearly suggests
that healthy firms would demonstrate the continued operation and secure
new projects. Such companies also invest in knowledge up-gradation and
skill-building exercises to gain a competitive advantage over their
competitors in order to capture more significant market share.
Nevertheless, such developments were hardly observed in many of the
companies that had operated in the MSW sector. MSW projects are
typically low valued projects, and thus more competition is required.
This is because, for large-sized and attractive projects, fewer bidders
may be acceptable, but for smaller projects, more bidders may be
required to get the desired results (Stanford and Molenaar, 2018).
Governments, thus, need to focus on the planning of procurement for
such low valued projects to enhance the competition effect (Estache and
Iimi, 2011).

The drastic reduction of firms submitting their technical and financial

bids indicate weak specific competition in the market. The bidders also
fall short of showing ‘eligible project’ concerned with the record of
‘successfully’ operating for a continuous period of 3 years till the bidding
period. One expert notes, “In MSW, there are instances of players
defaulting in ensuring sustained operations – hence checks to ensure the
efficacy of private firm into the qualification criteria”. In such a
situation, EOI would give a false indication of the competition prevailing
for a given project. It may be safe to conclude that EOI may work for
sectors which have exhibited maturity or has demonstrated successful
project execution in the past. Nevertheless, EOI cannot be construed as
a representation of the competition in emerging sectors and emerging
nations in which PPP is in a nascent stage. The average competition in
the projects with the full supply chain is comparatively less than the
competition in the projects where only a part of the value chain is

11
delegated to the private sector. This might be due to the situation where
private contractors face less risk in an unbundled procurement,
particularly the financial risks. Contractors who prefer to have lower
financial guarantees to reduce the uncertainty of the cash released from
the exchequer can benefit from the context of unbundling. Additionally,
contractors who are financially incapable but with sufficient
technological know-how can bid for the projects, thus increasing the
competition (Trujillo et al., 1997).

Causes of poor competition

Large companies which have joint ventures with multinational companies
for imported treatment solutions are carrying the small scale projects to
continue their business activities and keep their market domination.
These companies also face allegations of malpractice in various projects,
and lack of profitability can be attributed to this scenario. On the other
hand, small companies, the registered trusts and non-governmental
organizations are participating but only in small scale projects. They do
not have any imported treatment solutions in their portfolio. This clearly
shows that the market is divided into a service-based competition and
facility-based competition. This study confirms some hypotheses laid out
in the past studies and adds new hypothesis for future testing. For
instance, Teo and Bridge (2017) hypothesised that 5-8 bidders are
optimum, and this explains the failure and poor value for money in some
of the case study projects.

International bidders were not winning bids because the Indian

government is argued to be apprehensive about the suitability of these
technologies in the Indian context, considering the different physical and
chemical characteristics of the MSW being generated by the Indian
cities. As a result, private participants need to demonstrate the
suitability of these technologies for local conditions. Comparatively, this
is not a predominant factor in international bidding of other sectors such
as airports and roads. The care of bidders concerning the information
disclosure and the compliance checklist suggest that some bidders did
not participate in the bidding exercise to win the project's bid. One
respondent stated that "…it seems some bidders did not take seriously.
They just sent some information. Later, a few of these companies asked
for another chance. The tendering committee did not agree on it.” Some
companies even failed to furnish details about the projects that they
claimed to implement. Such practices were more prevalent in case of
projects TWO, and SIX and these projects were high-valued contracts.
This suggests that the entry of international contractors in MSW business
is still a mobile entry but not a permanent entry (Chen, 2008).

The present study did not find evidence that lengthy tendering periods
can reduce the competition. This is because all the procurement periods
are rapid when compared with the industry standards of the developed
countries such as the UK (34.8 months), Canada (19 months), Ireland (34

12
months) and Australia (Reeves, 2015; KPMG, 2010). Particularly, Ireland
waste to energy project average at 58 months for procurement. This
scenario suggests that the Indian procuring agencies were spending less
time to prepare the project carefully, are not concerned about the views
of the private partners during tendering and are quite rigid. Similar
quick procurement periods (four months) are reported and are correlated
with weak competition in Spain light rail projects (Carpintero and
Petersen, 2014). In this study, out of the seven cases, only case SIX has
opted for a technology-neutral procurement process where they
successfully engaged the private sector to come up with innovative
solutions to meet the project requirements. As a result, it took 18
months. These quick procurement periods also made the design of
concession agreements one-sided and ignored the views of bidders. For
instance, the views of the private sector during the pre-bid meeting of
case ONE are ignored, which eventually caused litigation between the
public sector and the private sector. Contrary to the widespread opinion,
this study argues that, rather, only in a highly competitive market can
lengthy tendering period reduce the competition. This is because a highly
competitive market will constantly put the firms into the pressure of
looking for opportunities, given many players who can potentially win the
same bid.

The present study confirms that PPP projects will see a decline in the
number of potential bidders participating in bidding when the projects
are procured in bundled mode (Grimsey and Lewis, 2009). As the level of
competition reduces, negative results of poor competition would be
manifested, resulting in lowering of value for money due to poor
efficiency in construction and operation. OECD (2010) in the context of
waste management, notes that “Municipalities can also decide to what
extent household and commercial waste is sorted at collection points.
Municipalities’ decisions regarding waste management can have a
dramatic effect on how much competition there will be in the market”.
More information has the potential to cause more competition in the
bidding process. Due to the lack of maturity in the market to handle
projects in bundled mode, the level of competition is very low. This lack
will harm the initiatives by the private sector for bringing in innovation
and may incite opportunistic behaviour. This is because the innovative
advantage is often determined the market concentration. Moreover, this
study confirms the past finding that bundle size is negatively correlated
to the bidding competition (Qiao, Fricker and Labi, 2019).

Strategies to enhance the competition in the MSW

sector
The MSW sector must welcome strategies such as annual pre-
qualification of the bidder applicants and e-tendering through a central
level nodal agency. This annual pre-qualification is used by National
Highways Authority of India (NHAI) since 2012. In this process, the
prospective bidders are requested to submit the application related to

13
their prequalification once in a year to NHAI to be considered for tender
calls in the concerned year. Only the list of developers who are
adjudicated as qualified in the various project sizes can submit bids for
all the calls issued by NHAI. This initiative has brought many benefits
such as the transparency of bidding process is increased, the speed of
tendering and the efforts to bring in a sizable competition is simplified,
reduced transaction costs, and more importantly, bidders have more
serious consequence of defecting in a project as such observations in any
remote project in the country can lead to potential disqualification in the
future projects. Australia’s ‘National prequalification system (NPS) for
civil (road & bridge) construction’ is also a similar yet another
international best practice for enhancing competent private sector
participation. Another strategy that promotes competition is e-
procurement. CCI (2019) notes that e-procurement has indeed increased
the participation of the bidders in the bidding process. Similar measures
will enhance the understanding of market concentration and the
availability of competent bidders for MSW sector. This also facilitates the
identification of poor performers.

Poor competition may suggest that segments should be unbundled.

Fuentes-Bracamontes (2016) observed that unbundling the value chain is
an age-old proposition. This happened in the 1990s and is governed by
the logic that greater market participation is possible when components
of a value chain are secluded. Such a separation though cause in the
increase of transaction costs, increase private sector participation in the
competitive bidding can bring an increase in efficiency and also offset the
additional costs. This is because transactions costs are assumed to be
lower in case of vertically integrated utilities. Consequently, power
sector reforms in Africa are motivated to introduce competition, i.e.
increase participation of more number of players in the market were to
enhance the quality of service as well as lower tariffs (UNIDO, 2015).
The lack of competition has been asserted as a representation of high-
cost solutions to the crippled power sector. Therefore, when competitive
bidders are more, then bundling is the preferred route. PPP model in
itself cannot be construed as pro-competition but requires stringent and
careful actions to achieve the best interests in this procurement. In
contrast, as Massarutto (2007) argued, bundled MSW projects can fail to
bring the benefits that competitive tendering would bring otherwise.
Some other ill effects follow, such as not being easy to liberalize,
unsuitable for tendering, less incentive to engage in recycling efforts
once the investment has been made in sunk disposal infrastructure.

Furthermore, this paper finds that bundling is not a problematic issue in

all areas of the MSW sector but rather only the treatment facilities.
Furthermore, it is shown that bundling of treatment facilities which
require facility-based competition with other services that have service-
based competition can be considered as more problematic than bundling
the whole supply chain of the MSW management. This study confirms
the extant literature argument that unbundling is promotes competition

14
(Köksal and Ardiyok, 2015). Bundling of the segments limits the
competition to a limited number of bidders and invoke the negative
results of the poor competition. The choice between bundling and
unbundling should be towards the one that encourages bidders to bid
less aggressively to win the project and, at the same time, provokes the
bidders to avoid winner’s curse. Therefore, when the sector is in the
nascent stage, where a few numbers of private players are operating, the
level of competitiveness in the market could be increased if projects are
procured in unbundled mode. The same market, when it is matured with
the presence of many private parties, the option of bundling the
segments could be explored once a competitive landscape has been
established. This confirms Devapriya (2006) findings that alignment of
network infrastructure utilities to the market arrangements has resulted
in their unbundling. Private investment has been introduced only after
these reforms in the network infrastructure industries such as electricity,
telecommunications, water & sewerage, and transport. The need to
manage asset-specific risks and enlarge the borrowing capacity to meet
the investment needs has determined the choice between bundling and
unbundling in this kind of infrastructure. In addition to vertically
unbundling its functions, Victoria (Australia) has undertaken horizontal
unbundling across the distribution/retail functions of water supply and
wastewater management on an area basis by setting up three
government-owned business and benchmarked performance across each
of this business. This unbundling is a pro-competition move and is
required in the current scenario of India (Wellman and Spiller, 2012).
Contributions of the current study
Given that there is no data even with world bank on the sector average
competition measured in number of bidders for MSW sector (Iimi, 2008),
the current findings extend the study on competition to MSW sector and
confirms that MSW sector is marked by weak competition not only India
but also many parts of the world and hence care is warranted in this
procurement (Thu and Akintoye, 2007; Bel and Warner, 2008). It also
addressed crucial questions such as which effect does bundling may have
in the market with particular characteristics of the MSW sector? Which
regulatory measures could be applied in order to enable or stimulate
competition? The 74th constitutional amendment act in 1992 delegated
the responsibility of MSW services to the urban local bodies, and this has
brought a poor procurement and regulatory mechanism for the projects.
Consequently, there is no national-level regulation related to competition
in the MSW sector, nor there is any focus in this direction. This situation
is true to many other countries where a roundtable related competition in
MSW sector noted that “the incentives on local governments to organize
their purchasing and regulation efficiently are often weak (Biggar,
2002).” There is a need to formulate appropriate regulations related to
competition and procurement, given the poor success rate of this sector.
Since competition law can only facilitate access to markets, this study
will shape the understanding of practitioners to frame implicit
competitive measures in the project documents of procurement.

15
These findings can be used by the urban local bodies and public sector
organisations and their transaction advisors as part of their decision-
making process, allowing them to take into the potential benefits of
unbundling certain types as they pertain to site proximity and
technological uncertainty which is often a major component of cost of the
MSW projects. The current study shows the limited markets of
developing countries particularly India where the average competition is
very low while other developed countries such as the Hong Kong (14
bidders (Ngai et al., 2002)), 6.3 in typical construction auctions of Utah
(Li and Philips, 2012). Since the bidder regularly updates the
information either directly or indirectly, i.e. through shortlisted bidder
details, particularly about the timing in industry, information feedback
conditions, and success rate of bidding, prolonged lack of competition is
quite unhealthy. Bidders will increase their markup. It is possible that
future projects can be affected by high prices when a bidder realize that
there is little competition as observed in the bidding of Surat MSW
treatment procurement. Thus governments need to take remedial
actions. The current study could guide the MSW procurement in many
other developing countries where similar situations of MSW exist.
Conclusions
Competition and maturity of the PPP market play a very crucial role in
the procurement of PPP MSW projects. This study has used the
concentration ratio of the sector and case study data from seven projects
to assess the status quo of competition and maturity. Results suggest
that Indian MSW PPP market has a poor competitive environment. Poor
competition apparently affected the projects in terms of not being able to
meet the expectation of investment and efficiency in services. Though
small infrastructure project requires more competition, most of the PPP
projects in the Indian MSW sector do not have that level of competition.
Furthermore, the understanding that extent of interests shown by the
private parties in EOI stage indicates the level of competition has turned
out to be not relevant for small scale public utility projects, especially in
the Indian context. Also, bundling the segments of the value chain
further decreases the level of competition in MSW projects. The findings
from this study should prove useful for a range of practitioners and
decision-makers involved in the structuring of PPP projects in the MSW
sector.
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