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Appraising PPP Projects

410 Confirming Economic Feasibility: Refining the Cost-Benefit Analysis

As has been presented in chapter 3, the Cost-Benefit Analysis (CBA) should have been conducted at the Identification Phase. In this case, it will have relied on preliminary data. As the Appraisal Phase matures, several aspects of the project, relevant for a more precise economic evaluation of the project, are detailed. These aspects must be incorporated into the previously developed CBA, and its results must be revisited. A minimum of the following aspects must be input into the CBA, during the Appraisal Phase.

  • The detailed description of the project scope in terms of infrastructure design and services that can help to refine the identification of the service users and other stakeholders whose socio-economic costs and benefits should be considered;
  • The “willingness to pay” evaluations, eventually done as part of the estimation of demand, allowing a clearer projection of economic benefits;
  • The technical specifications, providing a much more precise estimate of the whole-life costs of the project; and
  • The risk assessments, providing adjustments to the economic data.

All of this information must be entered into the cost-benefit analysis originally conducted in the Identification Phase. Its conclusions are an essential part of the final appraisal report and should be considered an important driver to the final green light decision.

It should be recognized that some countries only conclude a full CBA at the Appraisal Phase. In this case, the exercise described in chapter 3 will be conducted with the more accurate data produced during the Appraisal Phase.

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