3.2.4 At the very beginning, before even calling the pre-qualification, the GPE should sound out the market, where practicable with the PPP advisor's help. Market sounding focuses on the supplier market as a whole, not individual suppliers. It does not include any element of provider selection or bid evaluation. There is no commitment of any kind from either the private sector or the GPE. Rather, market sounding helps the GPE assess the likely reaction of the market to the proposed PPP procurement, and the GPE's preliminary thinking on the salient aspects of the PPP contract. With the feedback from the market sounding stage, the GPE can better structure the subsequent PPP tender such that it is workable (e.g. whichever company is chosen subsequently as the PPP provider can raise the needed financing from the capital market based on the PPP contract), and can attract strong bidding interest from competent potential PPP providers.
3.2.5 GPEs should ensure that the market sounding is conducted in a fair and transparent manner and does not give any one potential bidder an unfair competitive advantage. For instance, the GPE can plan a pre-procurement briefing on the PPP project, say 3-6 months, before issuing the PPP tender. The pre-procurement briefing should be open to any interested bidders, including financiers. At the briefing, the GPE can inform the industry of the following:
a) What services does it intend to procure under this PPP deal? What is the size of the demand (e.g. a facility capable of accommodating xxx students)?
b) What is the likely tenure of the PPP contract?
c) What will be the role of the successful tenderer? E.g. to design, build, finance and operate the facility?
d) What can the provider own in this PPP deal? E.g. land and building?
e) How will the payments be structured? Will there be only availability payments, or will there be usage-related payments?
f) To what extent is the provider free to generate third-party revenue streams, and how is the provider to share this revenue with the GPE?
g) Which risks will the provider bear, and which will be borne by the GPE? E.g. is the demand risk to be borne by the GPE? What are some of the key risks to be co-shared between the GPE and the provider?
h) What are the exit arrangements (including compensation if any) like (e.g. if PPP provider defaults, if GPE terminates, or if unforeseen events arise?)
3.2.6 The above information, though indicative only, will help the industry to give informed feedback to the GPE. GPE can then use this market sounding phase to assess a) the potential level of bidding interest; and b) the valid concerns which the industry may have on the draft PPP structure.
3.2.7 If responses from the market during this market sounding phase indicate that the proposed PPP project is unfeasible or that there is not likely to be much competition during the bidding process, the GPE should review the proposed approach and structure of the PPP contract.