Screening for PPP Potential

Ensure that all projects that are suitable for PPPs are implemented as PPPs; the Screening process should be based on a comprehensive set of qualitative and quantitative criteria:

Threshold to consider projects to be implemented as PPPs: Projects which are expected to deliver value for money savings when implemented as PPPs should be considered for suitability to be procured as a PPP. An initial criterion to test for PPP suitability is the total capital investment/operating costs that are required by a project during its tenure; as such, large sized projects usually have a higher potential to deliver value for money. As a policy, all projects requiring more than AED 200 million capital expenditure and/or average operating expenditure of AED 10 million per year should be tested to see if they are suitable to be procured as PPPs, before a budget is allocated.

Sufficient scale and long-term nature: The project represents a major capital investment with long-term requirements. The value could include bundling together a small number of similar projects. Projects with a low capital expenditure requirement can have a significant service/operating expense component over the Project Lifecycle and, therefore, can exhibit sufficient drivers of value for money savings. Hence, in determining whether the scale of a project is sufficient, the size of costs to government of procuring the project as a PPP should be considered.

Complex risk profile and opportunity for risk transfer: Improved risk management and more rigorous risk evaluation enables a transfer to the private sector of those risks it is best able to manage, including those associated with providing the specified services, asset ownership, and whole-of-life asset management.

Whole-of-life costing: Full integration, under the responsibility of one party, of up-front design and construction costs with ongoing service delivery, operational, maintenance and refurbishment costs, potentially delivers improved efficiency through whole-of-life costing as design and construction become fully integrated up-front with operations and asset management.

Measurable outputs: The nature of the services enables output specifications and a performance-based contract.

Innovation: As the PPP approach focuses on output specifications, this provides a wider opportunity to use competition as an incentive for private parties to develop innovative solutions in meeting these service specifications.

Asset utilization: Reducing costs to government through potential third-party utilisation and through more efficient design to meet performance (e.g. service delivery) specifications.

Better integration of design, construction and operational requirements. Ongoing operational, maintenance, and refurbishment requirements become a single Private Party's responsibility for the length of the contract period.

Market Appetite: A competitive market exists and the use of a competitive process helps encourage the Private Party to develop innovative means of service delivery, while meeting government cost and service objectives.

Make certain that PPPs are not utilised solely as a means to develop projects which have not been provided budgetary allocations, but, instead, to develop, through a robust needs assessment, projects that require government funds, satisfy societal and strategic needs, and are within the existing remit of the procuring entity.