Chapter 4 PPP.modProject Development with Public Private Partnership
A PPP is an arrangement between a public (government) entity & a private (non-government) entity by which services that have traditionally been delivered by the public entity are provided by the private entity under a set of terms and conditions that are defined at the outset. Definition of PPPs in India PPP means an arrangement between a government or statutory entity or government owned entity on one side and a private sector entity on the other, for the provision of public assets and/ or related services for public benefit, through investments being made by and/or arrangement undertaken by the private sector entity for a specified time period, where there is a substantial risk sharing with the private sector and the private sector receives performance linked payments that conform (or are benchmarked) to specified, pre-determined and measurable performance standards. PPPs can follow a variety of structures and contractual formats. However, all PPPs incorporate three key characteristics: a. A contractual agreement defining the roles and responsibilities of the parties, b. Sensible risk-sharing among the public and the private sector partners, and c. Financial rewards to the private party commensurate with the achievement of pre-specified Outputs. Essential conditions in the definition 1. Arrangement with Private Sector Entity: The asset and/or service under an arrangement
will be provided by the Private Sector Entity to the public.
2. Public asset or service for public benefit: Has the element of facilities/ services being provided by the Government as a sovereign to its people. To better reflect this intent, two key concepts are elaborated below:
(a) ‘Public Services’ are those services that the State is obligated to provide to its citizens (towards meeting the socio-economic objectives) or where the State has traditionally provided the services to its citizens. For example, provision of security, law and order, electricity, water, etc. to the citizens. (b) ‘Public Asset’ is that asset the use of which is inextricably linked to the delivery of a Public Service. or example, public road which is linked to public transportation. OR, those assets that utilize or integrate sovereign assets to deliver Public Services. For example, right of way on highways, or use of river / water bodies,etc.
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The advantages of PPP include: • Access to private sector finance • Efficiency advantages from using private sector skills and from transferring risk to the private
sector • Potentially increased transparency • Enlargement of focus from only creating an asset to delivery of a service, including maintenance
of the infrastructure asset during its operating lifetime • This broadened focus creates incentives to reduce the full life-cycle costs (ie, construction costs
and operating costs) All of these provide strong reasons in favour of using PPPs in India and elsewhere. • Benefits to people
o Better quality of service – National Highways, Telecom, Air travel o Decreased user fees – Telecom and Air travel o Happy that Government using taxes not for salaries but for general public – High tax
payers
• Benefits to private sector o Return on investment – Paradise Island o Business opportunity – Hotel Metropole, Mysore o Long term involvement and guaranteed income due to lower market risk – BIAL
Airport
• Disadvantages of PSP o Only profit – no service – Cable TV, public transport crowded o Private monopoly – Courier services v. Speed Post o Stay till profitable and default o Governments expectations high especially in commercial properties
Need for PPP Economic reasons - Inadequacy of resources – leveraging on lower government funding Optimal transfer of risks – to the entity best suited to manage the risks
− Design, Financing, Construction, Operations and Maintenance – all are commercially understood and manageable
− Change of scope, defective designs, time overrun, cost overruns, leakage of revenues, high maintenance costs
Transfer of responsibilities – efficiency gain − Appropriate technology, innovative design solutions, project management, better
collection practices, life cycle costing Enhanced bankability – more rigorous project preparation Incentive to deliver whole life solution – not just asset creation Focus shifts to service delivery – integrated with construction, measurement of quality &
payment linked to service delivery Acceleration of programme – time-bound implementation Better overall management of public services – transparency in prioritisation, selection and
ongoing implementation
PPP Options
Features of PPP Genuine risk transfer
− All risks pertaining to design, building, financing and to the private entity
− Transfer of demand risk depends on the extent to which the private sector can influence usage
Output based Specifications − Contracts specify the service outputs required rather than asset
configuration/mode of se − Emphasis on type of service & performance standards − Private entity incentivised to deliver outputs using innovation in design,
construction, operation and financing Whole life asset performance
− Private entity takes responsibility & assumes the asset and delivery of service over a long term
Payment for Performance Revenue/ Payment to private entity is subject to performance in relation to specific & quantified criteria enshrined in the contract
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All risks pertaining to design, building, financing and operation transferred to the private entity Transfer of demand risk depends on the extent to which the private sector can influence usage
Output based Specifications Contracts specify the service outputs required rather than asset configuration/mode of service delivery Emphasis on type of service & performance standards Private entity incentivised to deliver outputs using innovation in design, construction, operation and financing
Whole life asset performance Private entity takes responsibility & assumes risk for the performance of the asset and delivery of service over a long term
Payment for Performance Revenue/ Payment to private entity is subject to performance in relation to specific & quantified criteria enshrined in the contract
operation transferred
Transfer of demand risk depends on the extent to which the private sector
Contracts specify the service outputs required rather than asset
Private entity incentivised to deliver outputs using innovation in design,
risk for the performance of
Revenue/ Payment to private entity is subject to performance in relation to specific &
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PPP Models
Item Service Contract Mgt, Contract Capital Finance Public Public O & M Private Private Duration(Yrs) 1-2 Yrs 3-5 Yrs Commercial Risk Public Public Concession BOT Capital Finance Private Private
O & M Private Private Duration 20-30 Yrs 20-30 Yrs Commercial Risk Private Private
Management Contract • Coverage (1) O & M (2)Leak Reduction (3) Energy Savings(4)Billing and Collection • Duration : 3-5 Years • Advantages: Integrated Approach • Issues: Existing Staff Policy Review Needed
CONCESSION CONTRACT
• Coverage: O& M, Leak Detection, Energy Savings, Billing and Collections & Capital Investment
• Duration: 20-30 Yrs. • Advantages : Expertise of Pvt. Operator fully utilised • Issues: Long Period/No regulatory framework
Service Contract • Coverage: O & M of distribution system, pumping stations and filtration plants • Duration: 1-3 Years • Advantages: No major changes required/Efficiency • Issues: No Commercial Risk by Operator/Management of the Contract requires efforts Contractual Framework of PPP projects
All intentions need to be set out in a contract Concession Agreement - bundle of rights & obligations and consequences in case of non-
fulfillment Usually the only tangible security available Contracting parties : Government Agency – Concessioning Authority and Private Party –
Concessionaire
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Other parties – state government, Lenders, Suppliers of services A concession is a license – rights enjoyed for obligations performed
Issues
Striking a balance between differing concerns & objectives of parties Legislative Back up Rights and obligations of parties Identification and allocation of risks Penalties and rewards which would ensure performance
Broad Roles & Responsibilities
Government Agency Providing Project Site/ Assets Environmental Clearances Specific Obligations (e.g. timely clearances, support infrastructure facilities) Regulatory Functions
Concessionaire Designing, Engineering, Financing Construction/ augmentation / upgradation Operation and Maintenance Payment and other obligations Transfer of assets at expiry of concession period
In exchange the concessionaire has the right to receive revenue – tolls or annuity or any other mechanism
Other Key Elements
Bankability Issues − Concessionaire’s ability to assign rights − Lenders’ step-in rights − Charge on project assets and enforceability − Critical Events and consequences
Force Majeure Events of Default
− Remedial process in case of default/ events leading to termination − Protection of debt in the event of termination
Supporting Provisions − Dispute Resolution Mechanism − Re-negotiation in good faith − Termination as a last resort − Preferential treatment in re-bidding
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• Viability Gap Funding (VGF) Scheme • India Infrastructure project Development Fund (IIPDF) • India Infrastructure Finance Company Limited – A scheme for financing viable
infrastructure projects through special purpose vehicle VGF scheme & how to avail it?
Revolving fund Rs. 200 crores Project gets the fund during implementation In the form of grant and is monitored by GoI PPP projects only Project implementation by private entity Private entity to be selected through open competitive bidding Bid criteria amount of VGF required by private entity Project based on contract or concession agreement Service to be rendered on payment at a pre-determined tariff or user charge
Admissible sectors
Roads and bridges, railways, seaports, airports, inland waterways Power Urban transport, water supply, sewerage, solid waste management and other
physical infrastructure in urban areas Infrastructure projects in SEZ International convention centres and other tourism infrastructure projects
India Infrastructure Project Development Fund
GoI has set up a fund called IIPDF Initial corpus - Rs. 100 Crore Objective to assist States & encourage PPP Upto 75% of development costs borne IIPDF replenished from successfully bid project and topped up with budget support If bid successful–interest free loan otherwise deemed as grant
The Guidelines for the Viability Gap Funding (VGF) scheme of Ministry of Finance- Guidelines for Financial Support to Public Private Partnerships in Infrastructure’ defines PPPs as- a project based on a contract or concession agreement, between a government or statutory entity on the one side and a private sector company on the other side, for delivering an infrastructure service on payment of user charges. The Scheme and Guidelines for the India Infrastructure Project Development Fund, issued by Ministry of Finance, Government of India define PPPs as- Partnership between a public sector entity (Sponsoring authority) and a private sector entity (a legal entity in which 51% or more of equity is with the private partner/s) for the creation and/or management of infrastructure for public purpose for a specified period of time (concession
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period) on commercial terms and in which the private partner has been procured through a transparent and open procurement system. The preface of the Guidelines for Formulation, Appraisal and Approval of Public Private Partnership Projects mentions that unlike private projects where prices are generally determined competitively and government resources are not involved, PPP infrastructure projects typically involve transfer of public assets, delegation of governmental authority for recovery of user charges, private control of monopolistic services and sharing of risks and contingent liabilities by the Government. Protection of user interests and the need to secure value for public money demand a more rigorous treatment of these projects.
Comparative Table of Highlighting Core Elements that Define PPP
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STEPS IN PPP • Unbundling • Identify parts amenable to PPP • Select Mode of Privatization - Divestiture assets/Rights are Sold or Transferred for BOO, BOOT etc.) - Contracting Out - Financing - Deregulation - Invite Bids - Assess the Bidding - Selection of Bids - Preparation of Contract - Award of Contract - Monitoring, Evaluation and Impact Assessment PPP Toolkit of GoI The Government of India has developed PPP Toolkit a web-based resource that has been designed to help improve decision-making for infrastructure PPPs in India and to improve the quality of the PPPs that are developed. The Toolkit is for use by PPP practitioners across India in both the public and private sectors. It has been designed with a focus on helping decision-making by Project Officers at the Central, State and Municipal levels. Other users, including PPP practitioners in the private sectors, will also find the material useful. PPP process:
• Phase 1: PPP identification, covering strategic planning, project pre-feasibility analysis, PPP suitability checks, and internal clearance to proceed with PPP development
• Phase 2: Full feasibility, PPP preparation and project clearance, covering project appraisal including a full feasibility study, PPP preparation including draft documents, and in-principle clearance
• Phase 3: PPP procurement, covering procurement, final drafts of bidding documents, final approval and project award
• Phase 4: PPP contract management and monitoring, covering project implementation and monitoring over the life of the PPP
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• The PPP process
Phase 1 takes place before projects are allowed to enter to the development pipeline. The purpose of Phase 1 is to ensure a quality pipeline of PPPs. This is a very important Phase. Projects that are in Phase 2 or Phase 3 are in the ‘PPP development pipeline’. This means they are under detailed study, development and (if they are good enough) procurement as a PPP. Projects that are successfully developed through to award of a contract to a private bidder then enter the operations Phase, covered in Phase 4. In most cases Phase 4 is the longest Phase in the life of a PPP. This Phase is focused on monitoring the terms of the contract to ensure that the infrastructure services are delivered to the agreed standard. For a PPP to be successful the Sponsoring Authority must remain engaged with the project throughout its operating life. The toolkit includes a series of Readiness Checks at key points in the PPP process. At each of these checks the project must prove that it is ready to continue to further development as a PPP. If a project is not ready it must either be improved or it should exit the process altogether to make way for a higher quality project. For this reason, a project is called a ‘potential PPP’ until it has been given final approval by the relevant Authority in Phase 3. A set of tools has been developed to assist the analysis and decision making of potential PPPs. These tools are used at several stages in the PPP process. The tools are: • PPP family indicator tool, to show typical options for PPP mode in the sector, and to give a
starting indication of which PPP ‘family’ might be right for the particular project. PPP Mode Validation tool, to use a risk allocation analysis to help decide further which PPP mode the project is best suited to
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The PPP Suitability Filter, to test how well suited the project is to being a PPP. Used in Phase 1 during the selection of projects for PPP development.
• PPP Financial Viability Indicator Model, to analyse the key questions of financial viability and test these using ‘what-if?’ scenarios. Used in Phase 1, Phase 2 and Phase 3.
• VFM Indicator Tool, to help check how likely the project is to provide value-for-money to the public sector. This is used in Phase 2 and Phase 3.
• Readiness Filter, to check that all the important steps have been followed and that the
project is suited to further PPP development. Used in all Phases during the Readiness Checks.
Strategic Planning Exercise Preliminary needs assessment study
• The key drivers for planning an infrastructure programme are the service needs of the end-users. An overall needs assessment should be carried out taking account of the types of services users will need, total user demand for those services, and all sources of existing and planned delivery of services.
• Planning for infrastructure services that are provided by assets with long lives should include a needs assessment that covers a correspondingly long period. This requires a holistic view taking account of factors that might affect the level and location of demand, including expected and planned urban and industrial development.
• Infrastructure services can be defined and measured in total for all users and broken down into totals for specific groups of users. The strategic plan should provide at least a preliminary assessment of needs for user groups that would be served by particular infrastructure assets or integrated systems. These can then be mapped to individual project interventions.
• Defined services in the roads sector would include vehicle kilometres, peak-hour flows.
• Examples of specific user groups include roads sector users of a particular route or corridor, such as commuter traffic, light commercial vehicles, buses, multi-axle vehicles etc.
Pre-feasibility analysis The pre-feasibility of the project should include the following preliminary analysis::
• Needs and options analysis • Legal feasibility • Technical feasibility • Scoping social/environment safeguards analysis
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• Preliminary financial viability including expectations of required Government financial support • Institutional capability analysis • Identification of next steps required
Full feasibility study and PPP due diligence Contents of the full feasibility study The analysis and information contained in a feasibility study will in general include those listed below. Each of these is a detailed separate section of the toolkit. Sector specific contents of feasibility studies are given in the tools section. The general contents of a feasibility study include:
• Market analysis and project scope, to assess the need for and appropriate scope of the project, building on the work already done at the strategic planning and pre-feasibility stage. This would include:
o Needs analysis – does the project meet an end-user need? Does it contribute to meeting the objectives of the sponsoring authority? Who will the users be?
o Options analysis – what is the best option for meeting the service need: a no-asset solution, existing assets, or new assets?
o Define the output – what services will the project provide?
o Estimate and forecast demand – what level of demand is there for the outputs / services from
the project, and how much are users willing to pay (what is the value of the demand)?
• Social and environmental feasibility, including the requirements for impact assessments and for the associated mitigations
• Technical feasibility and technical parameters based on the market analysis, including specification of required facilities and scenarios of project size, for use in preliminary project design
• Risk studies and refined PPP mode – Assessment of the risks associated with the project,
study of which party is best able to bear each risk, and refinement of the PPP mode selected at the pre-feasibility stage
• Preliminary cost assessment, to within a sufficient range based on the technical specification
and assessed project risks
• Financial analysis and due diligence, incorporating a projected revenue structure (eg. Proposed tariff, required annuity) and assessing any need for financial support from the public sector
Economic feasibility – Assessment of overall net economic benefit of the project, incorporating estimated project benefits and costs including non-market factors such as those from the social and environmental assessment.
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• Other PPP due diligence activities, including value-for money analysis if data is available
• Project implementation schedule, including an outline of the proposed PPP procurement and award process through to technical and financial close, an outline of the construction schedule and target operation date, and any phasing that is planned for project extensions or ongoing development.
Social and environmental feasibility Infrastructure projects will often have significant social and environmental impacts arising from their construction and operation, which can be both positive and negative. The impacts may include flow-on effects beyond the immediate project area and beyond the people directly associated with the project (secondary impacts). Social impacts on communities affected by the project include, for example, requirements for resettlement and the associated impact on quality of life and livelihoods, and impacts related to environmental alteration (eg on health and livelihoods) Environmental impacts on the project location and in associated areas (eg downstream, ground water or ambient air) include effects on environmental resources due to alterations or pollutants It will often by a mandatory regulatory requirement for assessments of social and environmental impacts to be carried out during infrastructure project development. The scope of social and environmental studies can cover:
• Quantifiable social and environmental costs and benefits • Non quantifiable social and environmental costs and benefits • Options for mitigating adverse impacts and the cost of mitigation.
The secondary effects should be included in the assessment. Public consultation is often a part of the social and environmental feasibility process. The analysis should identify what type of social and environmental impact studies are needed, and the type of permits and licenses required, and should take into account health and safety standards. This information will assist the sponsor with the preparation of tender documents if the project is taken to market, and will assist bidders with the preparation of risk minimising bids. The final assessment of environmental and social costs and benefits is an input to the economic assessment of the project. Therefore, in addition to being a requirement from a legal and regulatory perspective, the social and environmental analysis is an important part of the assessment of the project’s overall welfare impact, as captured in the economic analysis. Environmental Clearance and EIA Under Central Government regulation, Environmental Clearance (EC) must be gained for all physical infrastructure projects that meet certain thresholds. An Environmental Impact Assessment (EIA) report is often a key requirement as part of the process of gaining
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Environmental Clearance. In the recent past an EIA has been a particularly stringent requirement for road related projects (such as Highways). EIA is governed within the EC process. In some cases a preliminary EIA is carried out at the feasibility stage and a complete assessment takes place during procurement. In other cases the full EIA will be carried out as part of or in parallel to the feasibility study. Depending on the regulatory regime, final approval may depend on the EIA being satisfactory and that there are no major adverse environmental impacts which can not be mitigated. The whole environmental clearance process can take a year depending on the complexity of the project. This must be factored into the PPP development plan. Environmental Clearance is regulated at the Centre by the Ministry of Environment and Forests (MoEF), which is the nodal agency. The requirements are specified in MoEF’s draft Environmental Impact Assessment Notification (2006) (the Notification was modified in 2009 but remains in the draft stage). Environmental Clearance is mandatory under the Notification. In addition to formal environmental impact analysis, environmental laws and regulations may also require:
• Mitigation plan • Environmental monitoring plan • Approvals from the State Forest Department or Central / State Pollution Control Boards, if
required Social impact analysis / social feasibility Social Impact Assessment (SIA) is a process that provides a framework for prioritizing, gathering, analyzing, and incorporating social information and participation into the design and delivery of projects. It ensures that infrastructure project development is:
• informed and takes into account the key relevant social issues, and • incorporates a participation strategy for involving a wide range of stakeholders
At the micro-level, SIA impacts on individuals, at the meso-level it impacts on collectives (eg, groups of people, institutions, and organizations) and at the macro-level it impacts on social macro-systems (eg, national and international political and legal systems). The stages in Social Impact Assessment are:
• Describe the relevant human environment/ area of influence and baseline conditions • Develop an effective public plan to involve all potentially affected public • Describe the proposed action or policy change and reasonable alternatives • Scoping to identify the full range of probable social impacts • Screening to determine the boundaries of the SIA • Predicting Responses to Impacts. Develop Monitoring Plan & Mitigation Measures
Ideally the SIA should an Integral part of other assessments as shown below.
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Technical feasibility A technical description of the engineering and non-engineering aspects of the project would be developed. This would be based on the service definition and sizing in the project scope. This would include:
• Field surveys of the project site, which may include (depending on the project) mapping, topographical and geotechnical surveys,
• Analysis of environmental conditions that impact on the technical design. There may be some overlap between the information collected for this task and for the environmental impact assessment.
• A preliminary technical design of facilities required to provide the project outputs. This should consider alternative design options, taking into account uncertainty in the demand projections and other site-related uncertainties. Feasibility Study Report The outputs of the full feasibility analysis should be drawn together into a Feasibility Study Report (FSR), which provides the PPP business case. If the feasibility study is supportive of the investment and procurement by PPP the FSR can then be presented to the relevant Appraisal / Clearance Authority for in-principle clearance. The FSR summarises the results of the project feasibility analysis and PPP due diligence. It provides all the information that will be needed for a decision by the appraisal and clearance committees. At a minimum the FSR should contain summaries of the outputs of each component of the feasibility study described above. The contents in this list have been separated into two parts to emphasise the point that there should be a particular focus on the PPP aspects of the project. However, the contents of the actual FSR may be arranged differently. The FSR should include the following:
• Support and justification for the project – Results of the feasibility study providing justification for the investment:
o Need for the project – gaps identified in the market analysis that would be filled by the project, policy objectives met by the project, alternatives considered
o Description of the project, including definition of services / outputs it would provide, location, target user group, technologies to be employed, agencies involved and their responsibilities, project timeline, etc
o Social and environmental assessments and planned impact mitigations o Technical description of infrastructure additions required for the project o Benefits and costs of the project and their distribution among key stakeholders, including social
and environmental impacts o Summary of the financial viability of the project o Summary of economic appraisal (benefit / cost analysis)
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o Project implementation schedule
• Support for procuring the project as a PPP – In addition to the general project feasibility results, the FSR should include results of the specific PPP due diligence analysis:
o Identification of major project risks and their allocation between the public and private partners o Type of PPP proposed including description of likely finance structure o Requirement for government assistance to the project (eg VGF) o Value-for-money (VFM) analysis and result o Other due diligence assessments (legal, market sounding) o Capacity of sponsor to implement the PPP, plan for implementation and PPP management
including capacity building and use of advisors, plan for meeting project development costs
• A section summarizing the justification for the PPP project Projects that are applying for JnNURM funding are required to prepare a Detailed Project Report (DPR), which has similarities to the contents of a FSR. Choosing the best-suited procurement method Before applying for in-principle clearance for the project the Sponsor should decide which procurement method would be best suited. A number of different methods are available. Which one is most appropriate for a particular project will depend on the project characteristics? It is generally accepted best practice to procure PPP projects via an open, competitive bidding process. Competition encourages innovation and efficiency and ideally should be as strong as possible . Several different competitive bidding options are available. Having decided on the bidding strategy it is also necessary to choose a bidding process. This covers the basis for selection and the number of stages in the bid process. A Few PPP based projects in Karnataka
• BIAL • HMRDC • MSW Treatment and landfill at Mavallipura • Madivala Market • Bangalore-Maddur State Highway • NICE Road • Hotel Metropole and Hotel KRS • Hotels & Yatri Niwas across State • CSB to Karnataka Border – Elevated Expressway to E City • KUWASIP • Swachha Bangalore • MCC, Devanahalli
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• Site Area- 31 Acres • Estimated project cost- Rs 900 Crore
• KSRTC and BMTC propose to jointly develop the existing Kempegowda Bus Terminal
at Subhashnagar into an Intermodal Transit Center through Private Sector Participation on BOT basis Objectives − State of the art/ modern terminal infrastructure facilities, amenities, services and
conveniences − Adequate parking facilities for all users − integration of the terminals with the proposed mass transit system and City Railway Station − Commercial development- To leverage the latent potential from the site − To create a landmark-a ‘welcome gate’ which will become the new focus for the city RTO 1. Nodal Department : Transport Department 2. Computerisation of RTOs/Check Posts in Karnataka 3. Financing, Supply, Installation and Maintenance of Hardware and Application Software at
locations all over Karnataka 4. Private developer to issue smart cards for driving licences and vehicle registration certificates 5. Estimated capital investment of Rs.30 crores 6. Bid process underway
BOT Projects 1. Sandur Bypass 2. Tornagallu-Kudligi, Sandur-Hospet & other roads 3. Ring Road in Bellary City 4. Elevated Corridor for IT City – Bangalore
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Key Constraints in PPP
Lack of PPP friendly enabling policy and regulatory framework Inadequate instruments and capacity to meet long-term equity and debt financing Incapability of public institutions and officials to manage the PPP process. Lack of shelf of credible, bankable infrastructure projects
A few examples of PPP based projects
Chennai
• Services: O& M :WS& S, Treatment Plants & Pumping Stations • Management Option : Service Contract • Capital Finance :CMWWSB • Time: 1-3 Yrs
Case study The Greater Noida Industrial Development Authority(GNIDA) has described various steps which have lead to the scientific management of solid waste in Greater Noida. The active participation of the private sector and Community Based Organisations and proper sharing of the tasks among the private sector, Neighbourhood Management Committees and GNIDA Officials are crucial factors for success. While collection of garbage and maintenance of cleanliness of the city is the task of the Private Operator, Monitoring and Supervision is carried out by the Neighbourhood Management Committees and GNIDA Officials. With the success of this model, the GNIDA has decided to extend the process of involvement of private sector, Neighbourhood committees in the operation and maintenance of Urban Infrastructure Services. Another important aspect in the success of the project is a joint and consultative approach among various departments to obtain expert views of all the departments while formulating project documents which ultimately smoothened the implementation process.
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Bangalore
• SERVICES : Bulk water Supply • Mgt. Option: BOT ( Biwater-Preferred Bidder) • Capital Finance :Private Agency • Time : 30 Years • Project Cost : 1600 Crores
Pune
• SERVICES WS & Sewerage • Mgt. Option Const. and O & M • Capital Finance :HUDCO/Pune Munc.
Corpn./ICICI • Time : 5 yrs for O & M • Project Cost : Rs. 715 Crores
Alandur
Steps in PPP Project Development Process
Project Identification
Bid Documentation
Bidding Process
Case study The Alandur municipality has developed the project on the partnership model of Build Own Operate and Transfer with assistance from the Tamil Nadu Urban Development Fund (TNUDF) and the Government of Tamil Nadu. Technical consultants for the project are Consulting Engineering Services. In order to minimize construction and design risks, the municipality plans to implement the project through an innovative contractual arrangement. In this arrangement the private operator will: (a) construct the sewer collection system and pumping station through a regular contract; (b) construct and operate the sewage treatment plant on a build-own- operate-transfer (BOOT) basis. The estimated cost of the project is Rs. 480 million. TNUDF proposed to fund about Rs. 180 million. The rest of the project cost was proposed to be funded through loans from other financial institutions, internal resources of the municipality, and deposits to be collected through new sewerage connections.
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TEMPLATE (Indicative)
• Name of the project • Location of Project • Justification for the Project • Unbundling of Project
Identify parts amenable to PPP
1. Identify Service/Project 2. Break the service into pieces 3. Identify parts amenable to PPP
eg. Water Supply can be broken into
• Source of supply • Headworks • Purification • Supply to distribution network • Metering and Collection of charges • Operation and Maintenance
Solid Waste Management Can be broken into
• Door to door collection and segregation • Secondary storage • Transportation • Processing and recovery • Landfilling
• Select Mode of Privatisation for each part or whole of the project Type of PPP (BOT, BOOT, BOLT, OMT etc.)
- Divestiture of assets/Rights are Sold or - Transferred for BOO, BOOT etc.)
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• Financing
Total cost Source of Financing Phasing of Investment Returns on Investment IRR, BCR, NPV at 12% etc. Social & other environmental benefits
• Screening of Project through GoI PPP Toolkit Yes/No
Whether Full Feasibility study is done?
• Deregulation
• Assess the Bidding • Selection of Bids
• Preparation of Contract
• Award of Contract
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• Checklist of implementation schedule
No. Information to be covered in the implementation schedule Included? (yes, no)
1 In-principle clearance timeline:
1A First draft of tender documents and other key project documents (eg, EoI, RFQ, RFP)
1B Application for in-principle clearance for the PPP
2 Pre-qualification and final document preparation timeline:
2a Issue RFQ
2b Pre-qualification of bidders
2c Final draft of tender documents, and feedback on bid documents from bidders for complex / new sector projects
3 Application for Final Approval of the PPP
4 Procurement and award timeline:
4a Issue RFP, allowing adequate time to respond to bidder queries
4b Evaluation of bids
4c Negotiation and award
5b Obtaining clearances
6 Engineering, procurement and construction (EPC) activities and timeline (for projects that involve a capital expenditure component)
6a Detailing each major milestone through the EPC process
7 Post-construction activities
9 Major milestones in the operating lifecycle of the project
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QUIZ
Chapter 4
1. What does PPP stands for a. Public Private Partnership b. Public People Partnership c. Public Place Partnership d. None of the above
2. PPP incorporate following characteristic a. Contractual agreement b. Risk sharing among the public & private partners c. Financial rewards to the private party based on achievements/ output d. All of the above
3. PPP has following advantages a. Access to private sector finance b. Transferring risk to the private sector & increased transparency c. No responsibility to public sector d. a & b
4. PPP envisages a. Reduced user fees & better quality of service to people b. Profit & return on investment private party c. Sometimes only profit & private monopoly d. All of the above
5. Generally PPP is required a. When government has less resources & funds b. When government could not manage the project on its own c. When government has better capacity to manage d. a & b
6. In management contract capital investment in the project is made by private party
a. True b. False
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[
8. The commercial risk in case of service & management contracts lies with public entity
a. True b. False
9. Commercial risk in case of concession & BOT projects lies with private party a. True b. False
10. The duration of service contract would normally be between 1 to 3 years a. True b. False
11. In any PPP project penalties & rewards are important to ensure performance a. True b. False
12. In some of the major PPP based projects Government agency needs to a. Ensure necessary environmental & other clearances b. No need to provide any support to private party c. Have clear regulated functions d. a & c
13. Viability Gap Funding (VGF) scheme of Government of India considers a. All types of projects b. Only PPP projects c. Only Public projects d. None of the above
14. Under VGF scheme following sector is eligible
a. Urban transport, Airports, water supply & other infrastructure project b. Bridges, Roads, Water supply, Sewerage & Solid waste management c. Housing schemes d. a & b
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15. The objective of India Infrastructure Project Development Fund (IIPDF) is to a. Encourage PPP & assist states b. Assist all schemes c. Only profit based projects d. None of the above
16. In case of IIPDF scheme ------- % equity is with private partner a. 40% b. 51% or more c. 61% d. None of the above
17. Unbundling, Identifying parts amenable to PPP, selecting mode of privatization are important steps in PPP
a. True b. False
18. The process of PPP involves a. PPP identification b. PPP preparation project clearance & procurement c. Contract management & Monitoring d. All of the above
19. Government of India has developed web based resource tool kit for decision making & to improve quality of PPP development
a. True b. False
20. Following are the tool for analysis of PPP project a. PPP family indicator tool b. PPP mode validation tool c. PPP suitability filter d. All the above
21. Assessment of risks with the projects, capacity to bear the risk & subsequent
refinement of PPP mode at prefeasibility stage is an important step a. True b. False
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22. Environmental clearance must be obtained for all physical infrastructure project that meet certain thresholds a. True b. False
23. EIA( Environmental Impact Assessment) is required to be carried out for giving Environmental Clearance a. True b. False
24. EC (Environmental Clearance) is mandatory EIA notification of MOEF (Ministry Of Environmental Forest ) for all major infrastructure projects taken up on PPP mode a. True b. False
25. In principle clearance for any PPP based project is given only after full feasibility analysis & FSR to the concerned clearance authority a. True b. False
26. Before applying for in principle clearance, the sponsor should decide which procurement method would be best suited a. True b. False