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Establishing a PPP Framework

21.6 Defining the PPP Process

The framework should provide guidance on each stage of developing and implementing a PPP project from initially identifying candidate projects, to managing PPP contracts throughout the project lifecycle.

Governments need to ensure that only ‘good’ PPP projects are developed. These are PPPs that, amongst other things, are cost-benefit justified, provide better Value for Money than traditional public procurement, financially viable and fiscally responsible, and will attract market interest. Whether a project meets all these criteria cannot be fully assessed until the PPP is fully designed and structured. This creates a paradoxical situation the government does not want to incur the considerable costs of designing and appraising a project unless it knows the project meets the criteria. However it cannot tell if it meets the criteria until the project has been designed and appraised.

Successful PPP programs tackle this problem through progressively more rigorous screening at successive stages of project development. Once a project has been identified as potentially worthwhile, it is screened using simple indicators to see if it is likely to be a good PPP project. If it passes this first screen, it may be further developed or appraised through additional stages before being submitted to decision-makers for approval to take to tender.

This section introduces the key decision criteria, procedures, and institutional responsibilities that should be considered across the PPP process. This section focuses simply on the features of the process that need to be considered when putting together a PPP framework. Details on the specific tasks at each step are provided in the remaining chapters of this PPP Guide and an overview of the process has been provided in chapter 1.

It is important to note that these are simply guidelines. There are many subtleties in the PPP process and what works well in one culture or public administrative system may not work as well in others. Therefore, the local circumstances and how the public sector works be understood before adopting practices from elsewhere. See table 2.5

 

TABLE 2.5: Summary of Decision Criteria, Procedures and Institutional Responsibilities across the PPP Process

 

Key Decision Criteria

Procedures

Identify projects and screening

· Does the project fit in with a broader plan for the sector?

· Is the project economically feasible and fiscally responsible?

· Does the project meet PPP program objectives?

· Prepare pre-feasibility or initial scoping study.

· Seek confirmation that the project contributes to a broader sector plan.

· Seek confirmation that the project is economically feasible and fiscally responsible.

· Submit project documentation for approval.

Appraise the project

  • Is the project economically, technically, environmentally, and legally feasible?
  • Is the project affordable?
  • Is the project suitable as a PPP? (Commercially feasible and bankable, and likely to deliver Value for Money as a PPP?)
  • Is there an appropriate procurement strategy?
  • Prepare a comprehensive appraisal which provides evidence of the project’s economic, commercial, technical, environmental, and legal feasibility, as well as its affordability.
  • Conduct a Value for Money assessment of the suitability of the project as a PPP.
  • Prepare procurement strategy.
  • Submit project documentation for approval by relevant agencies.

Structure the procurement process and project contract

  • Does tender documentation reflect the procurement strategy?
  • Have risks been identified and allocated to the most appropriate party?
  • Are management plans in place for risks allocated to the government?
  • Have contracts been drafted to reflect the risk matrix?
  • Prepare tender documentation, including qualification criteria, evaluation criteria, and proposal requirements.
  • Prepare risk matrix and allocate risks.
  • Develop risk management plans.
  • Draft contracts.
  • Seek approval for contracts.
  • Refine and finalize procurement strategy.
  • Obtain approvals.

Tender and award

  • Has the procurement process been competitive?
  • Have qualified private partners been informed about the PPP?
  • Have qualified private partners been given ample opportunity to express their interest and develop proposals?
  • Has the selection criteria ensured a Value for Money private partner is selected?
  • Market the PPP.
  • Undertake qualification/prequalification.
  • Qualify (and, if necessary, shortlist) qualified firms.
  • Issue Request for Proposals (RFP) and receive bids.
  • Evaluate bids.
  • Select the proposal that offers the greatest Value for Money.
  • Sign the contract and reach financial close.

Manage the contract – construction, service delivery and hand back

  • Are there issues with project delivery that need attention?
  • Should the contract be terminated or altered?
  • Manage the contract, including the delivery of the service against the agreed performance metrics/key performance indicators (KPIs).
  • Communicate issues to central agencies if risk status escalates.

 

Neither this chapter nor the remainder of the PPP Guide discuss in detail general project governance frameworks or project management techniques. Instead this PPP Guide simply draws attention to this where they are relevant. For example, chapter 3 includes both a description of matters to be considered when planning the management of the PPP process for a project (see chapter 3.11), and stakeholder management and communication matters (chapter 3.12).

 

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