The Zero-Response Sounding Problem — 5 Reasons Private Operators Don't Participate and How to Fix It

A sounding-type market survey is a dialogue-based market survey conducted before public tender to gather private sector opinions and ideas on utilizing public assets. According to MLIT's handbook, annual implementations reached 84 cases in FY2019, continuing an upward trend.

However, alongside growing implementation numbers, the challenges of "zero respondents despite conducting sounding" and "participation that remains merely perfunctory" are becoming visible. When zero responses occur, municipalities face three options:

1. Revise conditions and conduct sounding again (months to a year of schedule delay)
2. Proceed to solicitation without sounding (without understanding private sector needs)
3. Abandon the project entirely

Each option carries significant costs for municipalities. Below, we analyze the structural reasons operators do not participate in sounding.

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The "Unpaid Work" Structure

Sounding participation is voluntary, and all costs are borne by the operator. Operators bear the following costs to participate:

• Personnel costs: Half-day to full-day commitment from business development staff and technical experts
• Document preparation costs: Proposal materials and rough estimates
• Travel costs: Site visits and dialogue sessions

Meanwhile, there is no guarantee that sounding participation will provide advantages in subsequent solicitations. MLIT's handbook notes that many implementation guidelines stipulate "sounding participation history shall not be factored into operator solicitation evaluations".

This structure represents, from the operator's perspective, an investment with costs but uncertain returns. For SMEs and NPOs in particular, the rationality of devoting limited resources to sounding is difficult to justify.

Remedies

• Provide solicitation scoring bonuses for sounding participants (Kaiseizan Park designed 5+3 bonus points)
• Deliver sounding result feedback to participating operators as information useful for their next assessment
• Offer participants-only site tours and detailed materials, creating informational advantages

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Municipal Information vs. Operator Needs

Gaps frequently exist between information municipalities provide and information operators need for decision-making.

The vague invitation "we welcome free and creative proposals from the private sector" appears to solicit innovation. However, for operators it means "we can't determine what proposals would be accepted," increasing assessment costs.

Remedies

• Include detailed facility drawings, infrastructure information, and regulatory constraints in sounding materials
• Explicitly state the range of acceptable conditions (permitted uses, project duration, renovation scope)
• Publish FAQs in advance to address operators' fundamental questions

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When "Dialogue" Becomes "Briefing"

The essence of sounding is "dialogue" to gather private sector input before finalizing project conditions. In practice, however, municipalities sometimes conduct sounding with conditions essentially already decided, reducing the exercise to a "briefing" that merely asks "can you operate under these terms?"

Hiroki Terazawa of Machimirai has pointed out the problem of sounding becoming a procedural formality. When the gap between municipal requirements and conditions under which private operators can viably enter is large, and sounding feedback of "these conditions are unworkable" goes unaddressed, motivation to participate in future soundings evaporates.

Remedies

• Divide sounding into multiple phases (Phase 1: open dialogue, Phase 2: condition adjustment, Phase 3: final confirmation)
• Publish how sounding results were reflected in solicitation conditions
• Explicitly indicate flexibility for condition changes to communicate willingness to adjust based on dialogue

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The Rationality of Investing Today in a "Project 10 Years Away"

In PPP/PFI project soundings, implementation may take years. For operators, the rationality of investing today's personnel costs, travel expenses, and document preparation costs in "a project that might materialize in 10 years" is questionable.

From a private consultant's perspective, sounding participation decisions are made along three axes: "probability of project realization," "fit with own strengths," and "participation cost recovery prospects." When this information is unavailable in advance, rational operators choose "not to participate."

When required documentation becomes voluminous or multiple dialogue rounds are expected, effective business development costs can reach hundreds of thousands to millions of yen. Large enterprises can absorb this in their business development budgets, but for SMEs and NPOs it often represents a participation-prohibitive threshold.

Remedies

• Minimize submission requirements (a few A4 pages)
• Offer online dialogue options to reduce travel cost burden
• Explicitly state required time commitment and number of sessions so operators can pre-estimate participation costs

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When Sounding Becomes "Posturing"

The most serious reason operators decline sounding participation is distrust based on experience — "participating won't lead to project implementation."

Specifically, the following experiences generate distrust:

• Post-sounding project abandonment with no feedback provided
• Sounding results not reflected at all in solicitation conditions
• Favorable dialogue during sounding followed by a different operator being selected
• Formally conducting sounding when decision-making is already internally complete

Operators who accumulate these experiences come to view sounding as "a ritual for municipalities to demonstrate PPP/PFI engagement as posture," deprioritizing participation.

Remedies

• Publish sounding results (anonymized) alongside explanation of how they influenced solicitation terms
• Explicitly communicate the decision-making schedule — "who decides, by when, and through what process"
• Publish the track record of past sounding → solicitation → implementation cycles to demonstrate credibility

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Below is a checklist of design improvements addressing the five reasons.

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Zero-response sounding is almost always a sounding design problem, not an operator motivation problem. Designing conditions under which operators judge "participation is worthwhile" is what determines sounding success or failure.

Sounding Design Template

Design methods for 3-phase sounding and condition design to maximize operator participation.

PPP/PFI 7-Method Comparison

Overview of PPP/PFI methods that are subjects of sounding. Decision support for which method to target.

References

Sounding-Type Market Survey Handbook for Local Governments (2019)

Effective Approaches to Sounding-Type Market Surveys (2020)

PPP/PFI Promotion Action Plan (FY2024 Revision) (2024)