Public-Private Dialogue and Operator Selection in PPP Projects: An Eight-Step Process from the 2016 Three-Ministry Guide

In October 2016, the Cabinet Office, Ministry of Internal Affairs and Communications, and Ministry of Land, Infrastructure, Transport and Tourism jointly developed the "Operational Guide on Public-Private Dialogue and Operator Selection Processes in PPP Projects." The joint development by three ministries holds significance.

By having the three ministries responsible for PPP projects (the Cabinet Office for PFI Act jurisdiction, the Ministry of Internal Affairs and Communications for local autonomy, MLIT for social capital development) present a common operational guideline, the problem of municipalities being uncertain about which ministry's guidelines to reference when introducing PPP was resolved.

The drafting background is the accelerated promotion of PPP introduction at municipalities. The intended audience includes not only municipalities engaging for the first time but also municipal staff aiming to improve the quality of existing PPP efforts.

The guide does, however, caution that "results cannot be obtained merely by imitating the systems of advanced municipalities." It states that customized implementation procedures and methods tailored to local circumstances need to be devised and established.

In addition to PFI projects under the PFI Act, the guide covers diverse PPP projects.

In addition to PFI Act procedures, when utilizing the designated manager system, procedures based on the Local Autonomy Act (1947 Act No. 67) are required.

The point here is that PPP covers not only physical facilities but also soft policies (counter services, area management, etc.) as targets.

The guide's target process covers public-private dialogue conducted from the project conception stage to the contract with operators in individual projects. It is divided into eight implementation procedures.

1. Public-private dialogue at project conception
2. Decision of the implementation project
3. Public-private dialogue at tender condition review
4. Operator selection
5. Detailed negotiation
6. Explanation and coordination with the internal organization, council, and residents
7. Procedure streamlining
8. Support by national government, advanced municipalities, and specialists

Within the time axis of project conception (about one year) → project realization review (basic plan 6 months to 1 year + tender requirement review about 6 months) → operator selection (tender opening 3 to 6 months + operator decision 2 to 3 months) → project implementation + monitoring, each stage is positioned.

Public-private dialogue at the project conception stage and tender condition review stage shares common preparation items.

Grasping Regional Issues and Providing Necessary Information

It is important to grasp regional issues and then conduct public-private dialogue for their resolution. Effective cases include:

• When the options for utilizing facilities and land within the region or operating methods are considered to be limited based on internal review alone
• When market viability or a highly feasible project scheme is unclear

There is a need to provide private operators, in a form they can broadly recognize, with information on what challenges exist, what the administration seeks (improvement of public service quality, reduction of public burden, regional economic revitalization through utilization of public real estate, etc.).

Designation of a Window Department

To smoothly handle proposal reception from private operators, set up a specialized department that cross-cuts divisions to accept private proposals, or designate a window department, and publish this reception structure.

To advance PPP smoothly, the understanding of residents, councils, and private operators must be gained, and internal coordination within the municipality is needed. For this purpose, articulating basic ideas for PPP promotion, such as guidelines or pointers to provide standard procedures and documents for PPP projects, is effective.

Schedule

For project schedules including public-private dialogue, sufficient time for the dialogue is needed. Public-private dialogue at project conception often takes 3 to 6 months from the dialogue's implementation announcement through information sessions, entry reception, dialogue implementation, and result publication. Public-private dialogue at tender condition review often takes about one month from dialogue implementation to tender.

The period from result publication to operator tender should be kept as short as possible to not dampen private operator participation appetite.

Public-private dialogue covers two types of subject matter.

1. Issues and projects set by the administration side
2. Issues that the administration side does not notice or triggers for project realization that the private side proposes from its own ideas

In either case, the subject matter needs to be reviewed with an eye toward building a project scheme with market viability, one that multiple private operators will raise their hands to join.

In dialogue at the project conception stage, items to confirm include market viability, effectiveness, and feasibility as seen from private operators, business methods for facility development, operation methods for existing facilities, and utilization of held assets.

In dialogue at the tender condition review stage, alongside organizing tender conditions and clearly specifying subject matter in the survey implementation guidelines to be announced in advance, final confirmation of whether operators actually willing to participate exist is needed (in the case of absence, including the reason).

The guide organizes the methods of public-private dialogue into three types.

a. Market Sounding Type

The standard method that municipalities have widely implemented to date. Multiple private operators are gathered to exchange opinions, and market viability and issues are grasped.

b. Proposal Incentive Type

A method that receives free proposals from private operators and gives some form of incentive, such as priority negotiation rights, to outstanding proposals. It is easy to draw out private ideas and concepts.

c. Selection-Negotiation Type

A method that receives proposals from multiple private operators and then conducts detailed condition negotiations with selected operators. Suitable for precise dialogue after narrowing down project content.

The methods are not limited to these three types. It is important to combine the ingenuity in efforts of advanced municipalities shown in each type and Chapter III with the ingenuity of municipalities tailored to local circumstances, and to establish the optimal method of public-private dialogue for each municipality.

For example, in the project conception stage, market viability confirmation through type a (market sounding type) public-private dialogue, then private proposal solicitation and contract partner determination through type c (selection-negotiation type) in the project realization review and operator selection stages — combining processes by project scale and type is also conceivable.

In implementing public-private dialogue, sufficient consideration must be given to ensuring fairness and impartiality.

The basic principle is that the dialogue counterparts are those who can be project implementation entities.

As needed, it is important to broadly include those who may move into tenants to be developed. From the perspective of regional economic revitalization, conducting dialogue broadly with regional private operators, rather than limiting to private operators with PPP project experience, is effective.

To smooth dialogue with regional private operators, utilizing regional platforms to conduct training and study sessions targeting regional private operators is also effective.

Cautions at the project realization judgment stage include four items.

1. Evaluation of proposed projects for issue resolution
2. Project review and implementation structure
3. Risk allocation between public and private
4. Ingenuity for securing local company participation opportunities

In particular, "risk allocation between public and private" is a critical point determining the success or failure of PPP projects. Risks during the project period (demand variation / price variation / disasters / legal changes / facility aging / user complaints, etc.) need to be clearly allocated at the contract stage.

"Ingenuity for securing local company participation opportunities" is also important from the perspective of regional economic revitalization. With tender requirements where only major operators can apply, opportunities for local company participation are lost. Ingenuity such as making local company participation in the application consortium a scoring item is anticipated.

Across all three types, four common forms of ingenuity are observed.

Issue Grasp Structure

By accepting individual idea and know-how pitches as part of private operator sales activity at the specialized department or window department, issues themselves and private proposals serving as triggers for project realization are grasped.

Participant Recruitment

Drafting guidelines stipulating project conditions and application requirements for participant recruitment in public-private dialogue, and broadly soliciting. The guidelines clearly specify items where private opinions are sought. To publicize that broad solicitation is being conducted, press announcements, holding information sessions and site visits, distribution of email magazines, etc. are implemented.

Participation Qualifications

The qualifications of participating operators are basically operators or their groups considering project participation. In addition, hearing the views of financial institutions providing loans is sometimes effective, but including individuals or those merely seeking information collection is not effective.

Clarification of Issues

Clearly setting the issues and projects subject to public-private dialogue, and showing the specific items of public-private dialogue in advance (some list multiple projects and solicit at once; others present individual cases). Together, providing information directly and indirectly related to the project in an easy-to-understand and broad manner to private operators.

For Municipal Staff

When starting consideration of a PPP project, use this guide in the following flow.

1. Within the municipality, formulate guidelines and pointers for PPP promotion (stage before project conception)
2. Set up a specialized department or window department for accepting private proposals
3. For individual projects, conduct public-private dialogue at the project conception stage (one of the three types)
4. Decide the implementation project (with awareness of risk allocation and local company participation)
5. Final confirmation of participation appetite through dialogue at the tender condition review stage
6. Tender, operator selection, detailed negotiation
7. Explanation and coordination with internal organization, council, and residents continue in parallel
8. Utilize support from national government, advanced municipalities, and specialists

For Private Operators

Confirm the PPP promotion structure of municipalities you are participating in. The presence of guidelines and pointers, the existence of private proposal window departments, and past PPP project track records help judge the receiving posture for proposals.

Participating in public-private dialogue at the project conception stage is an opportunity to influence advantageous condition setting in subsequent tenders. Depending on whether public-private dialogue is operated as the market sounding type, proposal incentive type, or selection-negotiation type, the precision and depth of proposal documents should be adjusted.

The "Operational Guide on Public-Private Dialogue and Operator Selection Processes in PPP Projects" is an operational guideline jointly developed by the Cabinet Office, Ministry of Internal Affairs and Communications, and MLIT in October 2016. Target PPP projects fall into four categories; project fields are public facilities, infrastructure, and soft policies.

The process proceeds in eight stages (project conception dialogue / project decision / tender condition review dialogue / operator selection / detailed negotiation / internal-council-resident explanation / procedure streamlining / national-advanced-specialist support).

Public-private dialogue is organized into three types (market sounding / proposal incentive / selection-negotiation), used in combination according to project stage.

Customized design tailored to local circumstances is needed; the guide cautions that mere imitation of advanced municipalities will not yield results. Municipal PPP promotion structures (guidelines and pointers + specialized department setup) are positioned as preconditions for smoothly advancing projects.

• Primary Source Library: MLIT PPP/PFI Guidance Series (May 2026 publication)
• Related guidance: This guide is document 02 in the same archive
• Related articles: How to Conduct Market Sounding / MLIT Priority Review Regulation Guide / VFM Simplified Calculation Model Guide