Spain has a 15-year national plan from 2005 to 2020 for different transportation modes. Roughly 25 percent of the expected financing for national highways and roadways during this period will come from nonbudgetary sources- in other words, through concession arrangements.
All potential projects go through a similar programming process, which Spain describes as a "maturation phase." This phase typically lasts 30 months. During it, potential projects undergo an informative study and a project development process. During the informative study, the government completes a feasibility analysis to assess, among other things, the financial circumstances of a project. If the government can define the conditions of the project so that it is a viable candidate for private finance and the appropriate level of market risk can be transferred to the private sector, the project will likely proceed as a PPP arrangement.
Figure 9 (see next page), for instance, illustrates a prelimi- nary economic analysis of a group of projects: intercity motorways, new radial highways, and regional develop- ment highways. The expected capital cost and daily traffic are depicted on the x and y axes, respectively. The lines radiating from the origin indicate a 7 percent internal rate of return (IRR) for contract terms of 35,50, and 75 years. Individual projects are plotted on their projected capital cost and daily traffic. Projects in the upper left are quite viable economically, but too attractive for the private sector. Projects in the lower right are uneconomical and, therefore, are not attractive enough. To increase the risks of the three projects in the upper left, the scope of work for the projects will be increased (increasing the capital costs) to drive the projected IRR down toward 7 percent. To reduce the risks of the two projects in the lower right, public funds are introduced to drive the projected IRR up toward 7 percent.
Once the informative study is complete, the PPP versus non-PPP decision has been made and projects proceed through the development phase, during which environmental impact analyses and public information periods are completed. Finally, the scope and conditions of a project are drafted, and it is ready to enter the delivery, or execution, phase.