The Value of Intellectual Property_Winter 2023

The fundamental principles of PPP/PFI are equality and trust.

Disclose the project proposal!

I received a consultation from a private business operator who said they were perplexed because, after being designated as the preferred negotiator for the second term of the same project, the executive branch received a request from the assembly to 'provide the preferred negotiator's project proposal as reference material' for their deliberations.

As I have written in my books, 'The First Book to Read When Engaging in PPP/PFI' and 'Practice! The Book to Make PPP/PFI Successful,' as well as in the aforementioned note, a private business operator's project proposal is a collection of intellectual property and should not be disclosed easily. In the first place, while some contracts, such as those based on the PFI Act or construction contracts exceeding a certain amount, may be subject to assembly resolution and thus might require a summary of the proposal as material accompanying the contract itself, in general contracts, the decision of which business operator the executive branch enters into a contract with is within the scope of executive power and is not a matter that falls under the authority of the assembly.

The role of the assembly is clearly defined in the Local Autonomy Act: to carefully examine what kind of projects the executive branch intends to undertake during budget deliberations to exercise its right to vote on the budget, and to verify whether the budget it approved was executed appropriately and achieved sufficient results during the settlement of accounts to make a decision on approval or disapproval.

Many of the cases that have become problematic in many local governments in recent years stem from the fact that the executive branch and the assembly do not fully understand the dual representation system or each other's authority, leading to excessive interference or the creation of a vacuum because both sides overlook their respective roles.

Are discretionary contracts a high hurdle?

As in the case above, when such fruitless disputes arise, people use the cliché 'discretionary contracts are a high hurdle' as an excuse and stop thinking. As I have written in the aforementioned note and elsewhere, if discretionary contracts were truly bad, they would have been excluded from the Local Autonomy Act (and its enforcement regulations). It is a great waste to lose the 'return to the town' that should be gained from them due to small, incorrect perceptions such as trauma or prejudice against discretionary contracts. Various proposals that are commonly carried out all over the country are also discretionary contracts. A proposal competition serves the meaning of 'preparatory acts for a contract' to decide with whom and in what form a discretionary contract will be concluded, and as a contract, it is nothing other than a discretionary contract. If you are 'buying know-how or ideas that only that person has' or 'that only that person or company can provide,' you just need to clearly explain that as the reason for the discretionary contract. In recent years, the number of local governments that publish lists of discretionary contract cases and the reasons for the contracts on their websites has been increasing, and they should just proudly state the reasons for their decision-making in such places; if they cannot even do that, the quality of the output will naturally be determined accordingly.

Looking at it from a different perspective, what can be put up for general competitive bidding is only 'something where the breakdown without price can be fully written out.' Even in construction contracts, where a lump sum is recorded, there is a high degree of freedom (in specifications, procurement methods, costs, etc.) and the discretion of the private business operator plays a significant role, so it is not originally suitable for general competitive bidding. Furthermore, in various consulting service contracts, the methods, members, procedures, and number of processes differ greatly depending on the company, so it is unreasonable to handle them through general competitive bidding.

Discretionary contracts should be a very effective option if there are proper procedures, determination, resolution, and action to improve the quality of the project.

What are equality and trust?

Not limited to PPP/PFI, a relationship of 'equality and trust' is a major prerequisite for building any kind of project with citizens and private business operators. To create a world that the administration alone cannot reach due to a lack of manpower, know-how, funds, networks, etc., there is no choice but to borrow the power of 'someone' or run together. In fact, most towns today are in a situation where they cannot even manage administrative operations (let alone local government management) through tax redistribution alone, so PPP/PFI should be inevitable as a means of survival.

A town cannot be moved or changed by the administration alone. Various entities must try and error while organically connecting and disconnecting, making the most of their respective areas of expertise. Based on this premise, since we are 'borrowing the power of private business operators' (who originally should be specializing in their own business and have no need to be involved in that town), it is all the more important to respect the other party's existence, intellectual property, and value.

To improve the quality of a project, it is necessary for you to provide more resources than the management resources such as manpower, know-how, funds, and information that the partner invests, and in reality, it is better to recognize that it only becomes 50:50 when the administration brings out significantly more resources.

Buying intellectual property

What the administration buys from private business operators in proposal competitions (and private-sector proposal systems with discretionary contract guarantees) is the 'intellectual property of the private business operator.' Every word written in the project proposal and the nuances contained between the lines are a collection of intellectual property that 'the administration would never have thought of on its own.' It is not something 'you thought of, nor something you bought by paying an appropriate price.' There is no reason why it should be exposed through information disclosure requests by the assembly, fake critics, self-proclaimed administrative ombudsmen who only look for faults, and ultimately, competitors in the same industry who were competitors in the proposal.

If you really wanted that project proposal, as I have written in my book 'Practice! The Book to Make PPP/PFI Successful,' you should inquire directly with the company that created the project proposal, but it is absolutely impossible that they will provide it to you. You must never make light of the most important intellectual property for a private business operator, and it is not something for a third party to request out of curiosity or to criticize. It is not the time for the administration to respond to such easy voices with self-centered, superficial, model-student responses or self-protection, saying 'information held by the administration is the common property of citizens.' This is because a private business operator's project proposal is 'not your (the administration's) intellectual property.'

To improve the quality of the project

'Who you do it with' is important

Saying 'there are no decent private business operators in our town, they don't come, and no good project proposals come out' is synonymous with 'we have not reached that point, or we are at that level,' when considering the aforementioned relationship of equality and trust.

If we can seriously break away from thought circuits and behavioral principles such as conventional wisdom, following precedents, and avoiding trouble, engage in projects including cutting into vested interests, desperately face the players, local content, and the context of our own town, and thoroughly repeat sales activities, the chances of meeting good partners will increase, and we will also develop the discernment to judge the other party.

What greatly influences the quality of a project is 'who you partner with.' If you partner with second-rate or third-rate parties, the quality of the project will only be at that level. If you only meet partners through general competitive bidding, the business (not project) will inevitably be of that level.
First-class partners possess first-class intellectual property. If you want to nurture a first-class project, you must have the utmost respect for your partner's intellectual property.

Being compared...

To create high-quality projects, it is important to walk with first-class partners, but first-class partners do not easily participate in proposal competitions, and certainly do not participate in 'cheap and nasty' general competitive bidding.

As long as you have an attitude of deciding partners solely based on price (based on specifications defined primarily by the administration), you will not meet first-class partners. In the first place, first-class people are busy, so they have no time to write project proposals, nor do they have time to deal with bidding. Furthermore, they are not at a level where they would be superficially compared with other private businesses based on price or project proposals.

Thinking in this sense, the significance and potential of direct negotiated contracts and private proposal systems with negotiated contract guarantees should become visible. It is just a repetition of what I have been saying everywhere, but this is no longer an era to be complaining about negotiated contracts.

Appropriate compensation

Unfortunately, I still often hear voices that show no respect for private businesses, such as 'If we use PPP/PFI, we can solve all the town's problems with one project,' 'Collaborating with the private sector leads to cost reductions,' 'It is outrageous for private businesses to make money using public assets,' or 'Since the administration is utilizing the private business, it should be done at the administration's price.'

Even in a town that was supposed to be called an advanced municipality in PPP/PFI and municipal management until a few years ago, the mayor himself said, 'Is it that expensive?' regarding the estimate we presented (without adding any sales expenses, etc.). Even with lecture requests from consultants, while saying 'It's something our employees can't do,' they have calmly presented amounts that are 'in accordance with the national honorarium unit price,' which is at a part-time job level and overwhelmingly lower than the unit price of a new employee at that company.

It is not just a matter of money, but if you seriously want to partner with 'that person' or 'that company,' paying appropriate compensation is important.
Because they skimp on immediate costs in such areas and short-sightedly outsource to 'cheap and nasty' consultants through general competitive bidding, they end up unable to control the construction costs of the final output, the level of the business becomes low, or in the worst case, it becomes a tombstone or a government-made city without private demand, causing the town to decline.
Every town must have experienced many times that by slighting the initial costs that should be spent (i.e., buying intellectual property) and the process, they end up with huge cash outflows or 'this was not supposed to happen,' yet they continue to repeat the same mistakes.

This is no time to be trapped in the Reiwa version of the 'Essence of Failure' loop.

Resolve, Decision, Action

After all, regarding intellectual property, the administration is also required to respect the position of private businesses that are valuable partners, and to 'resolve, decide, and act' without being swayed by the movements of those around them who have trivial theories and ulterior motives.

Can a person or town that is intimidated by demands for disclosure of project proposals be a trusted partner? Instead of disclosing the project proposal, you should convey with passion to such people, while wrapping it in a veil of consideration for intellectual property, how wonderful the proposals received were, and let them look forward to it when it appears in the three-dimensional world. (Because those who are complaining in the previous stage will never be involved in the project construction process, and there is no possibility that they will have a positive effect even if you deal with them.)

Also, in order to avoid such fruitless project proposal disclosure disputes, I will note that it is also an effective countermeasure to include in the proposal implementation guidelines or requirement specifications that they submit a one-page 'Project Proposal Summary' that can withstand public disclosure, containing only the nuances.

While the administration's enthusiasm and ability to act are, of course, a major prerequisite, since private business is also a business, one must not hesitate to firmly accept the value of that intellectual property and pay appropriate fees for it.

Notice

Public FM Fes 2024 in Fukuyama

The Public FM Fes, which was held in Soka City in August 2023 and was very well received. We have decided to hold the second one in Fukuyama City on January 17, 2024, with full preparation.
I would like you to check the details at the link above, but this time as well, we will develop a 1-on-1 talk battle with venue participation over 3 blocks while utilizing Slido. It is a super realistic place that is absolutely non-reproducible and can only be heard here, so please everyone participate.

Practice! A Book to Make PPP/PFI Successful

On November 17, 2023, my second solo book, 'Practice! A Book to Make PPP/PFI Successful,' was published. It is a book that features 'content specialized for practice, a column format, and a volume that can be read through.' Please purchase a copy.
The 'Write a Review and Get Super-Concentrated Contact Service' publication commemorative project is also currently underway, so please apply for that as well.

The first book to read when working on PPP/PFI

My first solo book, released in 2021. As of November 2023, it is in its 5th printing and is being read by many people. Reading it together with 'Practice! A Book to Make PPP/PFI Successful' will deepen your understanding.

Machi-Mirai Guide

At Machi-Mirai, we advocate for a field-oriented and practice-first philosophy, providing support for public facility management in local governments, PPP/PFI, local government management, urban development, and project construction support for private businesses.
We are currently accepting requests for quotes for fiscal year 2024 projects.

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