Preparation of PPPs
Given the complexity, magnitude, and inherently long-term nature of PPP projects, before the decision is made to launch a PPP procurement, the procuring authority should exercise a good amount of due diligence and perform rigorous assessments to gauge the viability of the project. This preparatory phase is very important in ensuring that only a well-structured, commercially viable PPP project-which is more likely to provide value for money-proceeds to the procurement phase.
A sound PPP preparation process comprises several stages, starting with the identification of potential infrastructure projects that could be procured as PPPs. Potential PPPs should be identified and compared with other public investment priorities on the basis of an integrated infrastructure plan and a rigorous economic cost-benefit analysis. The fiscal implications of PPPs should also be established, including their budgetary, accounting, and reporting treatment.
Next, multiple preliminary assessments should be carried out to ensure that a project can succeed as a PPP. Feasibility studies should be undertaken to inform the structure of the PPP project, including assessing and deciding on the allocation of risks, and sounding out the market to gauge its appetite and capacity. Any environmental concerns connected with the identified project should be addressed by conducting an environmental impact assessment. Established good practices call for including the assessments in the request for proposals and/or tender documents, as well as making them accessible to the public.
Finally, after a PPP structure has been defined based on the appraisal process, the procuring authorities should prepare and make public the documentation required to launch the PPP procurement process, including a draft of the PPP contract. Following established good practices, PPP contracts should be standardized and made public for transparency reasons.
The recognized good practices that are undertaken during the PPP project preparation stage are especially important in light of the proliferation of projects that are formulated hastily, often with insufficient financial means or technical reliability. A list of these good practices is presented in Box 3.
| Box 3 The preparation of PPPs: Good practices scored in Procuring Infrastructure PPPs 2018 Good practices that help ensure that the decision to procure a PPP is justified and that the procuring authority is ready to initiate the procurement process include the following: › The Ministry of Finance or central budget authority approves the long-term financial implications of the project. › There is a specific budgetary and accounting/reporting treatment for PPP projects. › The project is assessed and prioritized along with all other public investment projects in the context of the national public investment plans. › The project is adequately justified on the basis of: • socioeconomic analysis • fiscal affordability assessment • financial viability • risk assessment • comparative assessment of PPP versus public procurement • market assessment • environmental impact assessment. › The results of these assessments are included in the request for proposals and/or tender documents and published online, together with the tender documents. › The procuring authority prepares a draft PPP contract and includes it in the request for proposals and/or tender documents, and these are published online. › The procuring authority has standardized PPP model contracts and/or transaction documents to expedite and guarantee consistency. |
The Procuring Infrastructure PPPs 2018 data reveal regional and income group differences in the average score for the preparation of PPPs (Figure 4). The OECD high-income region is ahead of all the other regions. South Asia, Latin America and the Caribbean, and Europe and Central Asia also score equal to or above the average. Latin America and the Caribbean has the highest intraregional variance, ranging from 2 to 90 points. Disaggregating the data by income level clearly reveals that the lower the income group level, the lower the average scores on project preparation.
Figure 4 Preparation of PPPs, score by region and income group (score 1-100)
Source: Procuring Infrastructure Public-Private Partnerships 2018.
Note: ECA = Europe and Central Asia; EAP = East Asia and Pacific; LAC = Latin America and the Caribbean; MENA = Middle East and North Africa; PPP = public-private partnership; OECD = Organization for Economic Co-operation and Development; SAR = South Asia; SSA = Sub-Saharan Africa.
The Procuring Infrastructure PPPs 2018 survey gathers data on a rich set of issues relevant to the preparation of PPP projects. The subsections that follow briefly summarize the study's results related to assessments, disclosure of assessments, and fiscal treatment of PPPs.