2. Expression of Project Need
Normally, projects are conceived on the basis of existing or future need among a cross section of society. Sometimes, projects are an outcome of political commitments. Sometimes, they are conceived as a part of the Centre Sponsored or State Sponsored Schemes or Master Plans for Cities / City Development Plans / City Traffic and Transportation Plans. In all these cases, the common factor is the interest of the people and their need for the project.
| Ideally, projects are finalised only after an elaborate sector analysis, assessment of demand and supply for the service delivery option, identification of gaps in service delivery, and a review of local community issues that might emerge from stakeholder consultations. A misconceived project tends to fail because there was never any real demand for the service or asset in the first place. |
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| Road Concession Program in Mexico Between 1987 and 1995, 52 projects (25 competitively tendered) was awarded, which was the largest PPP toll road program. By the end of 1995, 34 projects had reached financial close with a committed private investment for US$ 9.9 billion. The bid parameter was the "shortest concession period" a maximum of 15 years. This led to very high tolls. Moreover the concessioned roads were obligated to have a parallel toll free road. The construction cost overruns averaged 25% and average actual revenues were about 30% below forecasts. Only 5 projects met or exceeded targets. The average toll road fee increased from USD 0.02/km to USD 0.17/km after concessioning. The Government took over 23 projects and paid outstanding debt to Mexican Banks (about USD 5 billion) and construction companies (about USD 2.6 billion). |