2. Overview of the Structuring Phase

FIGURE 5.3: Structuring and Drafting Process

Note: RFP= request for proposal; RFQ= request for qualification.

The main work developed in this phase is the structuring of the contract and the tender process itself, followed by the detailing of the structure and technical terms in a clear and detailed set of documents (comprising legal, technical and financial documentation) which will be made available to bidders.

According to the PPP Reference Guide (World Bank Group and Public-Private Infrastructure Advisory Facility [PPIAF] 2014)[2], “structuring a PPP” means allocating responsibilities, rights and risks to each party to the PPP contract. That “structure” will be subsequently documented in the PPP contract, a task that may be also defined as “drafting” the contract. See also box 5.3.

For the purpose of this PPP Guide, “structuring” has a wider meaning than that in the PPP Reference Guide. In the PPP Guide, structuring includes not only the contract, but also the procurement process because the qualification conditions, marketing and interaction approach, bid requirements, and selection drivers are all policy decisions that influence the sustainability and success of the PPP. Therefore, they must form a coordinated Bid Pack that sends a consistent message to bidders.

The structuring task may be also defined by describing the commercial and financial impact of the analysis, and the decisions taken on the key aspects of the project contract and its tender process. It may be said that there are three main types of “structuring”, which in turn are highly interrelated.

• Financial and budgetary or fiscal structuring: When it is considered as value adding or because it may be necessary (for example, in the case of market/user-fee oriented projects) to define and shape the public financing support or public financial instruments (for example grants, deferred payments, complementary payments, participative loans, equity contributions, and guarantees). The decision on the contract term/length is another instrument of analysis that relates to financial structuring. The definition of the payment mechanism is also part of the financial and budgetary structuring, linked to the risk structuring, because the payment mechanism underpins the risk allocation. This is explained in section 4;
• Risk structuring: Assigning or allocating risks to each party. This is explained in section 5; and
• Tender/procurement structure – especially the qualification criteria and evaluation criteria.

The next section describes the main steps of the structuring and drafting process illustrated in figure 5.3, including follow-up activities related to the appraisal and preparation — to the extent that they were not finalized during the Appraisal Phase. The focus is on those tasks that are most relevant and inherent to the structuring process and the drafting and preparation for the Tender Phase. The main analysis and types of appraisal are explained in chapter 4.

Many of these tasks may proceed in parallel. Indeed, some tasks must proceed in parallel as they are mutually dependent (for example, VfM analysis may require that the risk structure is revisited, as the VfM result may not be acceptable without altering the risk allocation). The order of certain tasks is also influenced by the legal framework or policy framework (official guidelines for the procurement process) of the respective jurisdiction.