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Structuring and Drafting the Tender and Contract

56. Testing, Marketing and Communicating the Project before Project Launch

The project should have been sounded out during the Appraisal Phase (see chapter 4.9.1).

It is good practice to conduct further market testing during the Structuring Phase to collect reactions, suggestions, and concerns from the industry (investors, contractors, and lenders following the options and approaches described in the previous chapter). This process should test the key features of the contract before the structure is finalized. In addition, especially when there will not be an interactive process of negotiations (or Dialogue Phase), a formal interaction could take place before publishing the final tender documents and request proposals.

Market testing has to be managed with care, and time has to be dedicated to take real advantage of the feedback. The information provided needs to be critically evaluated as potential bidders will likely overstate their interest and concerns. As explained in chapter 4, transparency also matters. Therefore, when running a poll or using a questionnaire, it may be preferable to place it on an open web page giving any interested bidder or qualified person (advisor/expert, lender, and so on) the opportunity to provide input. This ensures a level playing field so as to avoid future objections.

By testing the project, the government is also marketing the project.

When the government decides not to do any further testing of the project because it has been meaningfully tested during the Appraisal Phase, the project should still be marketed to promote it. This prompts the interest of the industry and lets the potential bidders prepare themselves (that is, screen the project and look for partners so as to create a consortium when this is necessary or desirable – see appendix 6A section 2).

Marketing the project should include at least an industry meeting (an open meeting targeted at industry players, such as contractors, investors, lenders, advisors, and so on). It should also include the delivery (usually through a specific web page) of a detailed project information memorandum[60] (PIM). This should include a summary of the contract structure, procurement strategy/basic tender process, and targeted time line. Attachments should include the main documents produced during appraisal (relevant parts of the feasibility report or a full package with all the feasibility studies). See box 5.20 and footnotes for a blind example to illustrate potential good practice in managing the marketing and testing.

Communication with the public: Marketing the project means communicating with the industry, which is a paramount factor for project success because it helps to generate strong competition when launching the project. Such marketing should not be confused with communication with the public and other stakeholders (see chapter 4.11) since the communication strategy typically requires a different set of tactics to ensure public acceptance of the project.

Many projects have failed to see the light of day or have been cancelled because of public resistance or opposition. This includes political opposition from other political parties or other governments (for example, a municipal government when a state government project is to be constructed in its municipal area). Examples of public and political opposition may include toll road projects in areas where users are not accustomed to pay tolls, a “waste-to-energy” management project with opposition from environment activists, and water supply concessions that cause concerns about potential increases in water tariffs. If this latter is the case because of a need for fiscal sustainability, then the benefits to be delivered by the project, such as improvements in quality and service coverage. These should also be carefully and proactively communicated[61].

In addition to the examples cited in chapter 4, in the Ravenhall Prison Project in Victoria, Australia[62], a Community Advisory Group was established during the Structuring Phase in order to coordinate local input into the planning of the prison. The group included members of the local community, representatives from local government, the police force, and the procuring authority. Fact sheets and brochures were made available to the public, and community information sessions were held.

BOX 5.20: Example of Good Practice in Testing and Marketing a Project

Managing the interface with the market of prospective bidders through to the launch of the tender

The government of country “x” has satisfactorily finalized the appraisal of the project as a PPP and the investment decision has been approved. The project has moved into the Structuring Phase. No serious obstacles or risks have been detected. However, it has been decided that both during the finalization of the structure and the implementation of the contract and tender package, some additional studies should be conducted on a few issues so that the project is well prepared before launching.

The project was originally included in the respective sector’s infrastructure plan, and after screening it was included in a PPP pipeline accessible on a web site that promotes the country’s PPP program. The inclusion of the project in the pipeline was covered by the specialized and general press media.

Now, it has been announced that the tender will be launched on a set date, and that the procuring authority is in the process of structuring the project contract. Again, this announcement is covered in specific national and international press media (either because such media frequently ask for such information from the government/procuring authority or because the government’s relationship with these media organizations is pro-actively managed).

Some results of the appraisal are published. Normally, as good practice would dictate, this includes the financial feasibility analysis and the VfM, ESIA report and some technical background. A project information memorandum is also prepared and published.

Due to the importance of the project’s objectives, the size of the project, as well as the project’s complexity in terms of public acceptance and its multiple stakeholders (including a municipal government affected by the project), the government creates a specific web page for the project in order to publish the relevant information. This facilitates further market testing and helps to more effectively promote the project.

The government schedules two industry meetings (duly promoted on the web page and through external media), and also works with its advisors to pro-actively make industrial leaders and the investment and lending community aware of the meetings.

In the first meeting, the focus is on a presentation of the general features of the project and its preliminary financial and risk structure. After the presentation, questions and answers are encouraged. At the conclusion of the meeting, attendees and other qualified persons and companies are encouraged to send comments and suggestions. The government provides a questionnaire setting out specific issues on which it is most interested in receiving feedback, or for which it still has some doubts about in its final structuring decision. Reactions from the industry will be reviewed and considered during the structuring process as long as they are sensible, do not contravene the main objectives of the project, do not impose undesirable changes to scope or design, and do not compromise the affordability restrictions.

Once the structuring is well advanced, a more developed project information memorandum, with a detailed description of the financial and risk structure (including a risk allocation matrix), is published on the project web site and a second meeting is convened.

The government shows that it is sensitive to the industry concerns and explains the changes it has made in response to these concerns. It also provides explanations on the key issues and questions raised by the bidder community. This helps to raise and maintain the level of market tension and interest in the project. This should be tendered out in the due date (as scheduled and announced) and be consistent with the structure and features presented in the market interactions.

In some jurisdictions, in a later stage — and for projects tendered in a one-stage process — some governments will also publish the contract in draft and accept questions and concerns on the contract and RFP wording (in writing) before the tender package is closed, approved, and the project is launched.

It should be noted that the procuring authority considers that public acceptance may also be an issue and therefore the web page and information disclosure will also promote transparency for the public. Industry meetings are, however, directed to industry players. A specific communication plan and, if necessary, public hearings should be used as part of the strategy to address public concerns and the needs of other public and political stakeholders.

[60] For a
suggested outline of contents  for a PIM, see How to Engage with the Private
Sector in Public-Private Partnerships in Emerging Markets
(PPIAF, World
Bank - Farquharson, Torres de Mästle, and Yescombe, with Encinas, 2011), page
116.

[61] Disclosure
in public-private partnerships: good practice cases
(WBG and PPIAF) 2013 includes
a number of examples on how proactive disclosure is relevant for successfully
manage the industry interest and public acceptance and support.

[62]
http://www.corrections.vic.gov.au/home/prison/ravenhall+prison+project.s...

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