Financial feasibility analysis although is carried out during the feasibility stages of the PPP project development process, it has a lasting impact on other aspects of the project. For instance, the decision on whether the project is to be taken up for development under PPP is objectively determined by a Value Proposition of Projects analysis. The shadow bid for the value proposition of projects analysis is an outcome of the financial feasibility analysis.
Similarly, various parameters in project structuring and bidding are influenced by the output of the financial feasibility assessment exercise. The estimated project cost, bid security, performance security, eligibility criteria (which, in turn, depends on the estimated project cost) are also an outcome of this assessment. Financial feasibility assessment also influences answers to certain questions such as the following.
• Is it necessary to provide project support in terms of grants?
• What could be the tenure of the project?
• What must be the mode and interval of payments to be made between the parties?
• Is the financial proposal of the preferred bidder justified, prior to award of the project?
• Is the project financially sound to lend to, and if so, to what extent and on what terms?
It is important always to keep in mind that the financial feasibility assessment is only a tool that enables the public entity to make reasonable decisions; the quality of its output depends upon the quality of inputs that are used in the assessment.