Current Status and Challenges of Sounding
More public-private dialogues, and the problem of too few participants or merely perfunctory participation
Projects discussed in MLIT-run soundings (FY2019, six venues, 71 public bodies)
84 cases
Structural reasons operators don't participate
5
Options facing municipalities with zero responses
3
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. MLIT notes that local governments increasingly hold public-private dialogues such as soundings, and in FY2019 the ministry itself held dialogues on 84 projects from 71 public bodies at six venues nationwide.
Running a sounding does not guarantee participants, however. MLIT's guide itself warns that when incentives are small, operators are less motivated and a sounding may attract fewer participants. When zero responses occur, municipalities face three options:
- Revise conditions and conduct sounding again (months to a year of schedule delay)
- Proceed to solicitation without sounding (without understanding private sector needs)
- Abandon the project entirely
Each option carries significant costs for municipalities. Below, we analyze the structural reasons operators do not participate in sounding.
Reason 1: Insufficient Participation Incentives
How unpaid participation, non-disclosure of results, and no scoring bonuses suppress participation motivation
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. The template implementation guidelines in MLIT's guide offer, for soundings without incentives, the wording "participation in the sounding will not be considered in the evaluation of the operator solicitation." For soundings with incentives, the template gives an example of adding points for participation or proposal content.
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
Reason 2: Information Asymmetry
How insufficient information provided by municipalities makes operator assessment difficult
Municipal Information vs. Operator Needs
Gaps frequently exist between information municipalities provide and information operators need for decision-making.
| Information Municipalities Tend to Provide | Information Operators Actually Need |
|---|---|
| Location, area, building age | Structural drawings, systems diagrams, deterioration assessments |
| Overview of utilization policy | Range of uses and conditions the municipality will accept |
| Nearby success stories | Site-specific constraints (regulations, infrastructure capacity) |
| "We welcome creative proposals" | Municipal budget, timeline, and decision-making process |
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
Reason 3: Rigid Conditions
When conditions are too predetermined to allow genuine dialogue
When "Dialogue" Becomes "Briefing"
Sounding gathers operators’ views before project conditions are finalised. If a municipality has already settled those conditions, participants may be unable to propose changes and the exercise may merely check whether they can take part.
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
Reason 4: Participation Cost Burden
The burden of document preparation, site surveys, and presentations
The Rationality of Investing Today in a "Project 10 Years Away"
Implementation of a PPP/PFI project may take years. Operators incur staff, travel and preparation costs even when the procurement date is uncertain. Municipalities should explain progress and the expected timetable so participants can assess costs and the prospect of involvement.
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
Reason 5: Distrust of Implementation
When sounding becomes a performative ritual rather than genuine engagement
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
Sounding Design to Prevent Zero Responses
Specific design improvements addressing each of the 5 reasons
Below is a checklist of design improvements addressing the five reasons.
| Checklist Item | Corresponding Reason | Specific Measure |
|---|---|---|
| Participation incentives established | Reason 1 | Scoring bonuses, site tours, feedback provision |
| Detailed facility information provided | Reason 2 | Drawings, infrastructure data, regulatory constraints |
| Condition flexibility explicitly stated | Reason 3 | Dialogue-based condition adjustment possibility noted |
| Participation costs minimized | Reason 4 | Simplified documentation, online dialogue option |
| Implementation timeline communicated | Reason 5 | Decision-making process and timeline explicitly shared |
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.
What to do next
When considering reuse of idle facilities, examine their condition, local demand and operator interest.
| # | What to check or consider | Responsible team or contact |
|---|---|---|
| 1 | Review idle facilities and local demand. Compare building condition and location with uses needed in the area | Asset management team |
| 2 | Check seismic assessment and asbestos survey results for candidate facilities. If surveys are missing, determine their scope and how to commission them | Facilities team |
| 3 | Use MLIT's platform to gather information. Membership is free and provides case studies and notices about grants and expert dispatch calls | Official platform website |
| 4 | Ask operators about their interest and requirements. If a standalone project is difficult, consider cooperation with neighbouring municipalities | Market sounding and neighbouring municipalities |
| 5 | Compare operating rights, leasing and designated management in light of operator feedback. Choose a method suited to the facility's use, finances and public-private responsibilities | Responsible department and asset management team |
Platform membership provides access to information about expert dispatch and grant calls. Before applying, check eligibility, available support and deadlines in the call documents.
References
Sounding-Type Market Survey Handbook for Local Governments — MLIT General Policy Bureau (2019)
Effective Approaches to Sounding-Type Market Surveys — MLIT Chubu Block Platform (2020)
PPP/PFI Promotion Action Plan (FY2024 Revision) — Cabinet Office, PPP/PFI Promotion Office (2024)
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