1.1  Project selection and definition

The ultimate objective of the project selection process is to ensure that the investment offers value for money. Value for money refers to the best available outcome for society, account being taken of all benefits, costs and risks over the whole life of the project.  Guidance 2 A necessary condition for a project to represent value for money, irrespective of the procurement option chosen to deliver it, is that the benefits to be derived from the project out-weigh the costs. This is normally tested by undertaking a cost-benefit analysis of the project and its requirements.

A distinctive feature of PPP projects is that their requirements are defined in terms of outputs rather than inputs. Conventional project procurement has usually focused on inputs. In this regard, PPPs involve fundamental changes in the way projects are prepared and in the information that the Authority needs to provide to private sector sponsors. While the typical set of feasibility studies used in the public procurement of projects focuses on inputs, PPP projects demand a clear set of output requirements and service quality standards, which are reflected in the PPP contract. As a result of the output nature of PPPs, the bulk of the expensive and time-consuming technical design5 activities for a project will be carried out by the private partner.  Guidance 3

In the project selection step, the Authority and its advisers will review alternative project definitions, sometimes following guidelines that the public sector will use to assess PPP projects. These guidelines normally specify who approves what and when throughout the process of project selection, preparation and procurement.

Once a project specification is selected, the Authority and its advisers will undertake feasibility analyses and project preparation, including supply or demand analysis, cost analysis and a preliminary environmental assessment of the potential impacts of the project.

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5  The term "design" is used in several ways throughout the Guide. To avoid confusion, the expression "technical design" refers to the detailed plans or sketches used for the construction of a project.