A pre-feasibility study (also known as an outline business case or preliminary viability study) tests the fundamentals of the project, based on a preliminary technical survey identifying key constraints and assessing the basic technical and financial project fundamentals such as site selection, concept design and possible forms of implementation, revenue and financing. A first level financial model will be developed at this stage, to test the viability of the project and the potential appetite of investors. This is an essential stage of project development, to avoid wasting preparation costs on projects that do not satisfy this basic test of viability. As part of the pre-feasibility study, the contracting agency makes a preliminary assessment of value for money,20 which tests the value provided by PPP.
| Key Messages for Policy Makers |
| • Do not cut corners in procurement. It may seem easier to enter into direct negotiations instead of using competitive procurement, but it isn't. It takes longer and costs more money. Maximize competition (where possible) through good, transparent, competitive procurement. • Invest in preparation. PPP preparation takes time and money, if done well. • Be clear to bidders about what you want. Indicate clearly what results, milestones and indicators you want the investor to achieve, in particular in the bid evaluation criteria and their weighting. Help bidders to give you what you want, don't make them guess. • Be cautious when selecting the winning bid. If a bid seems too good to be true (financially, technically or otherwise), then it probably is. |
Once a preliminary decision to undertake the project through private investment has been made, a feasibility study is undertaken to identify key project issues and constraints.
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20 For further discussion of value for money, see section 3.2.5.