As the interplay between the several feasibility assessments evolves, including the legal due diligence and the social and environmental assessments, the government will be able to ensure that the project can be done. It will understand what the main obstacles ahead are, and, whenever relevant, what the main actions to overcome them are. Thus, the Appraisal Phase provides a central contribution to the preparation of the PPP project.

At the end of the Appraisal Phase, a considerable amount of the technical work required for a thorough preparation of a PPP project will have been done. In fact, this work sets the stage for the structuring of the project and, indeed, for several aspects of the procurement process and contract management.

The appraisal exercise, reflected in the appraisal report, should recommend one of the following four decisions to be made by the governmental body charged with making the final green light decision or procurement decision.

The report must present the assumptions, discussions, and conclusions of the whole feasibility exercise presented in this chapter. Therefore, a typical table of contents for the appraisal report will include the following:

The next phases of the PPP process can be as demanding and challenging as the Appraisal Phase. They are multidisciplinary and profoundly interactive, and the natural interests surrounding large infrastructure projects tend to create a difficult decision environment. Thus, as the Appraisal Phase ends and the project enters the Structuring Phase, there must be sound planning for the future challenges of the project.

Chapter 2 (section 1.7.5) introduced some of the key points generally considered as decision drivers for governmental departments responsible for making the procurement decision. These decision drivers are often translated into national PPP frameworks. As introduced in chapter 1, having policy guidelines in place (binding or indicative) is extraordinarily helpful to diminish failure risks and gain time, efficiency and reliability in the PPP process.

The procurement strategy determines how the private sector partner will be selected, and it focuses on developing an approach to procurement that helps obtain the best VfM. So, when actual alternatives are legally feasible, the project team should search for a strategy capable of creating the correct incentives for all the players involved.

The Value for Money (VfM) analysis indicates how the PPP alternative compares to traditionally procured infrastructure, not only in terms of the associated fiscal costs but also in terms of the net economic benefit of the project. The assessment also incorporates qualitative aspects of this comparison, addressing issues not quantifiable.

The VfM analysis compares the relative merits of PPP procurement against one or more other procurement routes, usually traditional public finance. This can be done using quantitative analysis, qualitative analysis, or both. Some frameworks focus on quantitative analysis, requiring a comparison of the cost of the PPP against the cost of traditional delivery, which is represented by a Public Sector Comparator (PSC) cost model. Other frameworks rely on qualitative analysis or on a combination of the two approaches.

The assessment of the Value for Money (VfM) of the project can be revisited in the Structuring Phase. Until then, the risk allocation mechanisms may still be altered with potential consequences for the VfM conclusions.