PPP appraisal at the long-list stage
A4.4 When considering at the long-list stage, qualitative questions help to identify whether should be the "preferred way forward" or form part of the short-list. In addition to assessing a option against critical success factors set out in Chapter 4, the issues in Box 20 should also be considered.
A4.5 Public sector organisations putting forward proposals (the ) will need to secure as much evidence as possible against the questions in Box 20 as part of the long-list process. In particular, they need to consider the lifetime costs and risks involved in the project, including those arising from early termination. The risk assessment should also consider any major financial and operational risks that could affect the private partner over the life of the project.
Box 20. Qualitative Issues when Considering Options
| Issues to Consider |
Ability of the public sector to define and measure objectives and outputs |  Is the satisfied that long term contracts could be constructed for projects in the sector and that any contractual outputs could be objectively measured and assessed?
|
allocation and management of risk by the private sector | Is the sure that optimal risk allocation and service delivery is achieved through a delivery model (including practical risk transfer to the private sector for better management)? Is the private sector able to manage the risks associated with the programme more effectively than the ? Have service demand and income risks been fully assessed in the context of proposed contract length for the option? |
Operational flexibility | Is the sure that there is an appropriate balance between the degree of operational flexibility desired and long term contracting based on up-front capital investment? The should assess the likelihood and nature of variations during the life of the contract. Can the service be implemented without unacceptably constraining the in Value for Money delivery of future operational objectives? |
Equity, efficiency and accountability | Is the sure there are no factors that mean direct service delivery is required, rather than a contract? |
Innovation by the private sector | Is there scope for innovation in the design of the solution or the provision of services, including the need for removal of constraints by the public sector organisation? |
Contract duration and residual value | Is the sure that the advantages and disadvantages of the proposed contract length are understood? This consideration should include how far into the future service demand can reasonably be predicted, the expected life of any assets, what the expected use of any asset or service could be post-contract, the residual value of any assets and the affordability of the contract. |
Incentives and monitoring | Can the contracts be drafted to avoid perverse incentives for the private sector? Are private sector partners actively able to manage the risks they will hold and be held accountable for doing so? The should assess whether incentives for delivery or service levels can be enhanced through the proposed payment mechanism. They should also be satisfied that the service can be independently assessed against an agreed standard. |
The Market | Is the private sector capable of delivering the required outcome? The should assess whether a significant market with sufficient capacity for these services exists in the private sector. They should also assess whether there is sufficient market appetite and whether other similar projects have been tendered to market. Do potential private partners have the financial and managerial resources to manage the risks it is taking on? |
Timescale | The should ensure that the procurement is feasible within the required timescale and that there is enough time for the resolution of key procurement issues. |
Skills and resources | The should ensure that it has the management expertise and capacity to define, deliver and support the service throughout the procurement and the subsequent delivery period. |