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Establishing a PPP Framework

21.6.1 Identification of Projects and Screening

The process starts with project origination, typically following the same or using a similar process as for originating public sector investment projects, while screening projects for their potential suitability as PPPs. Screening at this stage is usually indicative, limited to the information available at relatively low cost.

Decision criteria

The framework should ensure that only projects that meet the following criteria proceed:-

  • The project fits in with a broader plan for the sector. Sector plans will consider the needs of the sector and identify the best approaches to address problems. The projects that are most likely to demonstrate Value for Money are those that align with this sector plan;
  • The project meets PPP program objectives. PPP program objectives should clearly specify the types of projects that should be considered for development. This allows projects unsuitable to be developed as a PPP to be easily screened out; and
  • The project is economically viable and fiscally responsible. Projects should not proceed unless they are economically sound. PPPs should not be used unless either the revenues from the project are sufficient to cover its costs, or the government has adequate resources to pay for or subsidize the service. The government must also have the ability to absorb any direct or contingent liabilities. Those projects that may impose costs or incur liabilities that are beyond the financial capability of the government should be avoided.

Procedures and institutional responsibility

The PPP framework will need to identify the following:-

  • Who proposes PPP projects? Can only government entities with investment programs submit a proposal? Or can private proponents also put forward proposals for PPP projects? The advantages and disadvantages of acting on PPP ideas proposed by private firms are discussed further in section 4.5.6;
  • Who approves further development of PPP projects? Successful PPP projects typically require the support of the line agency,[63] that is, the department initiating the project, the finance ministry and other central authorities; and
  • What project documentation is needed for approval? The framework will need to indicate the level of documentation required for relevant stakeholders to be able to approve the project’s procedure.

Refer to chapters 3 and 4 for details on approvals regarding the preparatory stages of the PPP process.

 

[63] “Line agencies” are responsible for policy development, planning, and the delivery of specific services. This is in contrast to “central agencies” which have whole-of-government policy responsibilities.

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