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Project Identification and PPP Screening

37. Information Requirements/Data Checklist

Most projects have constraints and dependencies that must be clarified before beginning the full appraisal, such as land availability and environmental studies. The main purpose of these considerations is to identify potential difficulties or obstacles that will have to be considered during the project’s full appraisal (both in terms of results and of time). The information requirements discussed in this section represent potential obstacles and apply to any project, regardless of whether it is a PPP or not.

If there are many uncertainties regarding constraints and dependencies in aspects of the project, they will need to be listed to support the screening process, since this is a factor (time and readiness) that may influence the decision about moving forward. Such issues include: (i) land availability; (ii) relevant construction risks, such as a dependence on geo-technical conditions; (iii) technology requirements (need to use new or untested technology); (iv) significant site risks including lack of information (for example, utilities, hazardous materials, and so on); (v) important environmental concerns; (vi) access to other permits (such as those to be issued by other governments); and (vii) general concerns about the availability of information for the project’s appraisal, and so on.

In addition, a list of legal and regulatory issues that need to be further tested in the full appraisal should be included in the screening report to inform the next phase of the project. The information collection should consolidate the information and data required to be analyzed. It should also provide a description of any information or data weaknesses, recommending, if necessary, further analysis or research to correct these weaknesses.

Information requirements

The information and data required to properly assess CBA analysis, economic feasibility, and later on screen the suitability of a project as a PPP (to finally determine whether it should proceed to appraisal) includes the following;

  • Name and position of the proponent (person in charge/department within the Public Sector) (*);
  • Project description: Sector, technical features (surface for buildings; kilometres for transport), and so on (*). At this stage, the project description is preliminary and subject to change;
  • Cost estimate (Capital expenditures – CAPEX): Composition of the cost estimate for CAPEX (*). As at this stage, the Capex estimation is preliminary and subject to change. To avoid creating unrealistic expectations about project costs, some governments consider it important to guard against public release of this cost estimate;
  • Construction term considered;
  • Affected area/population (*);
  • Operation and maintenance (O&M) cost estimates (including life-cycle/refurbishment costs that will be incurred during the possible term of a PPP contract);
  • Consideration of whether, and to what extent, user fees can be charged for the project;
  • Revenue estimates (if it is a revenue-making project). This may require studies of demand for the infrastructure, such as traffic forecasts – see box 3.6 for a discussion of the challenges associated with traffic forecasting;
  • Timetable objectives: Desired procurement dates (*);
  • Considerations regarding the need for public support/contributions and estimates of the necessary contributions, if any;
  • Explanation/justification about the project’s suitability in relation to the public sector’s general policies / strategic plan (*);
  • Description of the need being fulfilled by the project. Main economic impact factors and socio-economic benefits of the project (*);
  • Options and suitability of the proposed solution. Are there other technical options? Have these options been considered? If not, explain why;
  • Description of potential interest from private investors/promoters and potential appetite and suitability of the private sector (availability of private skills for such a project). This description should include potential sources of finance; likely sources of bidders, including whether local firms will be interested in or capable of bidding alone (or as part of a consortium), and whether regional or global firms will be interested;
  • Similar precedents (both successful precedents and unsuccessful precedents[13]);
  • Site/land availability, if relevant (*);
  • Environmental considerations: Describe environmental requirements/ difficulties if significant;
  • Status and readiness: Describe studies that have already been carried out or that are in process, if applicable; and
  • Other relevant information in relation to suitability, economic soundness, project readiness, risk of failure in project delivery/implementation, and so on.

Note that this list is a summary and does not include all the information that may be necessary to properly pre-assess the project and screen the suitability of the project as a PPP, or to determine whether it should proceed to appraisal.

BOX 3.6: Forecast for Traffic

A 2005 analysis of 104 toll-road projects by Standard & Poor’s[14] found that, on average, forecasts for traffic exceeded actual first year traffic by 20 to 30 percent. When demand is overestimated, projects may fail to deliver the expected revenues. It is nearly impossible to obtain either bank or private financing for a project that does not include solid demand forecasts with sensitivity analyses on key risks (such as a rise in raw-material costs or changes in levels of demand).

Overestimation of demand is also of concern to governments, even if the project is successfully financed, as it can result in unworthy projects proceeding and, if there is government financial support for the project, significant fiscal risks for government.

Some of the basic information can be collected directly from the project management team. Data related to estimates of Capex, operational expenditures (Opex), and O&M costs (as well as similar precedents, and so on) can be collected in a variety of different ways. It may be possible to directly estimate the costs of delivering the project scope. But even in this case, it is important to compare these costs to market parameters for similar projects. A data base of comparator projects[15] can greatly assist the project team to assess the reasonableness of these estimates.

 

[13] Successful precedents indicate that a project of this type is possible.  Unsuccessful precedents help the public entity to understand what the key risks and challenges are in a project of this type.

[14] Bain, R., Polakovic, L.: Traffic Forecasting Risk Study 2005: Through Ramp-Up and Beyond. Standard & Poor’s, London (2005)

[15] An example of this worldwide information can be found in the United Kingdom website https://www.gov.uk/government/publications/private-finance-initiative-pr...

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