The project team should ensure that the commercial feasibility exercise captures the potential investor’s perspective of the project. The assumptions made, and the base case they generate, will be completely ineffective if the project team fails to understand the private sector’s value drivers and...
An effective market sounding exercise provides an opportunity for a structured dialogue between the private and the public sectors at early stages of the PPP process. This not only tests the viability of the project’s details, but it also obtains precious feedback on how aspects of the project...
The market sounding exercise’s fundamental output is a general alignment between the government and the private sector during the Appraisal Phase. This can anticipate issues that reduce the market interest in the project, which otherwise would only be explicit during the more formal Procurement...
As has been presented in chapter 3, the Cost-Benefit Analysis (CBA) should have been conducted at the Identification Phase. In this case, it will have relied on preliminary data. As the Appraisal Phase matures, several aspects of the project, relevant for a more precise economic evaluation of the...
As discussed in chapter 2 (section 1.8), many PPP projects produce some sort of long-term fiscal consequences. These can be in the form of direct liabilities (when the project is partially or fully funded by the government) or contingent liabilities (when risks are allocated to the government...
The first step in performing the fiscal feasibility exercise is to identify the liabilities assumed by government, at least on a yearly basis, for the entire duration of the contract.
There are two types of commitments that must be fully acknowledged in this identification: the direct liabilities...
The fiscal feasibility analysis provides two essential outputs.
First, it estimates the fiscal effect of the project in terms of direct and contingent exposures on the public budget. It also projects those effects from different perspectives, providing a comprehensive assessment of governmental...
Chapter 2 (section 1.8.5) presented the rationale for establishing a framework to account for the liabilities and the assets resulting from PPP contracts. In fact, many countries develop specific rules that determine how they should account for and report their financial commitments.
Analyzing the...
IPSAS 32 deals specifically with service concession agreements, focusing on their governmental accounting consequences. The guideline presents a very comprehensive approach that includes most of the contracts defined as PPPs for the purpose of the PPP Guide. In fact, IPSAS 32 describes service...
The European System of Integrated Economic Accounts (ESA 2010) set up the regulations on how the EU member states prepare national accounts and produce comparable and homogeneous fiscal statistical information. ESA 2010 is the most recent version – until recently the standards applied have been...
Despite an international movement toward a standardization of accounting practices in governments around the world, there is still a great deal of divergence regarding accepted principles.
The impact of PPPs on accounting reports can therefore vary greatly. When neither of the two international...
The output of the process of analyzing the impact of the project on the public debt involves the addition of the marginal impact of the project in terms of expenditure with the existing projection of national expenses, plus the marginal related impact in terms of debt in the national accounts.
This...
Infrastructure projects will often have significant environmental impacts arising from construction and operation, which can be both positive and negative. The impacts may also include follow-on effects beyond the immediate project area, as well as beyond the people directly associated with the...
The project team, typically with specialized consultants, must address a fundamental question during the environmental feasibility analysis: is there any specific aspect of the project that makes environmental approvals impossible or the costs to obtain them prohibitive?[43]
To approach the...
The environmental feasibility analysis needs to provide a sound recommendation about the environmental viability of the project, that is, if it can obtain the necessary approvals and, if so, at a reasonable cost.
This exercise also allows for a reduced environmental footprint of the project,...
An appraisal exercise intimately connected with the evaluation of environmental feasibility is the assessment of the project’s impact on the lives of people that live and work in the project’s area of influence.
The social impact analysis (or social feasibility assessment) can be a very important...
The social impact analysis can address a very broad set of issues related to changes in the social, economic, and cultural condition in which the surrounding community live and work. Specific types of social issues and possible impacts associated with a project can vary considerably depending on...
The process of analyzing social impacts is regulated in many countries as part of the appraisal of infrastructure projects. The project team must therefore follow any applicable legal or regulatory rules. Several jurisdictions name the process of evaluating the social feasibility as a social impact...
The social impact assessment should identify the impacts of the project in the community and classify them in terms of significance. It also provides recommendations for actions that can avoid, minimize, or compensate the adverse social impacts of the project.
The process of conducting the...
The project team have to make a thorough analysis of the legal issues surrounding the project, across several dimensions. A detailed legal due diligence should be done to ensure that all foreseeable legal requirements, which have not or will not be dealt with in other appraisal exercises, are met...
