Before confirming the decision to move to the next stage (appraisal), a list of tasks to be carried out and a schedule should be developed. This will:

To avoid the risk of sinking resources into the analysis and structuring of a non-feasible PPP project, the government must determine whether the project makes sense as a PPP, provided that it has been satisfactorily tested as economically sound or sensible (under the CBA as explained).

This issue can be determined by answering the following questions.

Scoping the PPP project means defining the work that must be done by the future private partner to deliver the project objectives. Potentially some portions of the project scope (technically speaking) may be refined and removed from the PPP project (for example, if the project selected is a bus rapid transit system, the future PPP may include the bus way, bus stops and depots but exclude the vehicles).

The risks that are inherent to a project have to be considered and included in the appraisal. This must be done through proper adjustments and/or showing the ranges of values for certain sensitivities/future movements or the deviations on critical factors and variables. For this purpose, risks have to be quantitatively evaluated, incorporating the "expected values" of the risks into the results of the analysis or evaluation.

In general terms, cost and revenue cash flows need to be adjusted in order to reflect the real value or cost for society. The current market prices for many costs (but also revenues) usually reflect the real costs for the society as they appropriately provide opportunity costs. However, some cost estimations may not reflect an appropriate cost for society, since they may be biased for several reasons or because a market simply does not exist for them (externalities). When this occurs, it may be necessary to make some adjustments. See box 3.10 and figure 3.3.

The main performance indicators in economic-analysis are the economic Net Present Value and the economic Internal Rate of Return (eNPV and eIRR, respectively). Mathematically speaking, the eNPV consists of the projected costs and benefits, duly discounted using a suitable discount rate, and the eIRR is the value of the discount rate that makes the NPV equal to zero.

This section introduces[16] the concepts of Cost-Benefit Analysis and economic analysis.

Most projects have constraints and dependencies that must be clarified before beginning the full appraisal, such as land availability and environmental studies. The main purpose of these considerations is to identify potential difficulties or obstacles that will have to be considered during the project’s full appraisal (both in terms of results and of time). The information requirements discussed in this section represent potential obstacles and apply to any project, regardless of whether it is a PPP or not.

The next step after defining the technical solution is to clarify the technical scope, including a detailed description and set of requirements for the most important aspects of the project (that is, a technical outline of the project).

This step includes a description of the project that covers aspects such as the sector, technical outline, and physical conditions (for example, distance for transport, surface for buildings, and so on), site, geographical area, affected/benefited population, and so on.

There are multiple techniques for identifying the best technical solution for a project and hence which projects best meet public needs. This section will briefly introduce those techniques.

The government should have a policy of using a particular technique so that all projects are compared in a standard way. If projects are screened on a case-by-case basis using different techniques, the result would lead to invalid comparisons between different projects.