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Body of Knowledge:
Establishing a PPP Framework
Affordability means the “ability to be accommodated within the inter-temporal budget constraint of the government”.[130] Due to the long-term and contingent nature of PPP costs, it is not easy to decide whether they are affordable. In practice, affordability is assessed by considering the medium-...
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Body of Knowledge:
Establishing a PPP Framework
Budgeting for PPPs involves making sure that money is appropriated and available to pay for whatever cost the government has agreed to bear under its PPP projects. Because such costs may be contingent or occur in the future, PPP budgeting can be hard to manage in traditional annual budget cycles....
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Body of Knowledge:
Establishing a PPP Framework
Governments need to account for and report on their financial commitments, including those under PPP contracts. Fiscal reporting on PPPs needs to be consistent with fiscal reporting generally. There are three main types of fiscal reporting.
Government finance statistics: These are summary...
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Body of Knowledge:
Establishing a PPP Framework
In addition to considering fiscal exposure on a project-by-project basis, some governments introduce targets or rules limiting aggregate exposure. Given the difficulties in deciding whether a particular PPP commitment is affordable, limits on aggregate exposure can be a helpful way to ensure the...
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Body of Knowledge:
Establishing a PPP Framework
PPP projects are usually implemented by the Executive branch of government. The processes and responsibilities described in section 1.7 aim to create checks and balances within the executive branch as to how those decisions are made. This section describes the broader governance of the PPP program...
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Body of Knowledge:
Establishing a PPP Framework
The legislative branch of government, that is, the elected, law-making parliament or assembly may control the PPP process in several ways.
Defining the PPP legal framework and policy: The PPP framework is often established in specific PPP legislation. As described earlier in this chapter, one...
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Body of Knowledge:
Establishing a PPP Framework
Audit entities are an important link in the chain of accountability for public expenditure decisions, providing independent reviews of government finances and performance to parliaments and to the public. The International Organization of Supreme Audit Institutions (INTOSAI) provides an online list...
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Body of Knowledge:
Establishing a PPP Framework
PPPs are meant to provide value to the public. Getting the right level of public involvement in the PPP process and program can make or break the legitimacy of a PPP program, and directly contribute to good governance. Direct public participation at various points in the PPP process can improve...
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Body of Knowledge:
Establishing a PPP Framework
High value transactions attract the risk of corruption. Private players may attempt to improperly influence transactions and public officials may attempt to extract private profit from public office. Corruption in PPPs can be minimized using the mechanisms outlined above clear processes and...
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Body of Knowledge:
Appraising PPP Projects
PPP projects demand a very sound preparation if they are to deliver timely, effective, and cost-efficient infrastructure. A significant part of this preparation is done in the Appraisal Phase. Appraising a PPP project means conducting a series of feasibility exercises that inform a decision to...
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Body of Knowledge:
Appraising PPP Projects
The Appraising or Appraisal Phase, presented in this chapter, begins once the project has been clearly identified, screened as a PPP, and preliminarily defined (in terms of the scope of the proposed contract). It should end with the green light decision to procure the project through a PPP or to...
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Body of Knowledge:
Appraising PPP Projects
Appraising a project means answering a fundamental set of questions about the project;
Is it sensible, from an economic perspective, to implement the project?
Is it practical to procure the project as a PPP? How much will it cost? Is it affordable from the government’s perspective?
Is there...
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Body of Knowledge:
Appraising PPP Projects
The nature of the Appraisal Phase is intrinsically multidisciplinary. It consists of a series of intricate and interrelated exercises that detail the project, compare the project to a set of feasibility criteria, and prepare it for procurement (see figure 4.2).
FIGURE 4.2: Overview of the Appraisal...
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Body of Knowledge:
Appraising PPP Projects
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Body of Knowledge:
Appraising PPP Projects
As introduced in chapter 3.6, the Identification Phase will likely have provided a basic scope of the contract, describing what elements of the technical solution selected for the public need will be delivered by the private partner under the PPP contract.
However, in some projects, defining the...
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Body of Knowledge:
Appraising PPP Projects
Technical requirements, together with other PPP structure parameters, lie at the heart of the contract. The technical requirements should provide enough technical details about the project so as to allow a precise definition of the design of the infrastructure (and the characteristics of the...
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Body of Knowledge:
Appraising PPP Projects
Chapter 5.6 provides a comprehensive overview of risk issues and the risk management cycle in PPP projects. During the appraisal process, risk identification and risk assessment are key tasks that provide inputs for constructing the financial base case for feasibility, for Value for Money (VfM)...
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Body of Knowledge:
Appraising PPP Projects
Estimated risk-adjusted costs are a central output of the design of the technical requirements, and this data is used to feed the financial model. Depending on the type of infrastructure, the nature of this data can change. However, the typical sets of cost estimates that should be produced at this...
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Body of Knowledge:
Appraising PPP Projects
The further detailing of the scope and the design of the technical requirements provides fundamental outputs for the Appraisal Phase and, indeed, for the whole of the PPP process, since it provides the technical description of the project used as a basis for other feasibility exercises. See box 4.2...
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Body of Knowledge:
Appraising PPP Projects
One important aspect of the project, which needs to be preliminarily defined during appraisal, is the PPP contract structure, specifically in terms of the:
Financial structure from the government perspective (revenue regime, contract term, and so on). See box. 4.3.
Risk allocation structure....
