Manual For Procurement of PPPs 2022 Clean v10 (Draft)

MANUAL FOR
PROCUREMENT OF
PUBLIC PRIVATE PARTNERSHIP CONTRACTS
2022 (Draft)
Government of India
Ministry of Finance
Department of Economic Affairs
Manual for Procurement of PPP Projects -2022
Department of Economic Affairs, Government of India
FOREWORD
1
DISCLAIMER
2
TABLE OF CONTENTS
Table of Contents
FOREWORD 1
DISCLAIMER 2
TABLE OF CONTENTS 3
ABBREVIATIONS AND ACRONYMS 6
CHAPTER 1: 8
INTRODUCTION TO PROCUREMENT OF P P P s 8
1.1. Overview 8
1.2. Clarification, Amendments and Revision of this Manual 9
1.3. Applicability of this Manual 9
1.4. Basic Principles of PPP Procurement 9
1.5. Key considerations of PPPs 10
1.6. PPP Procurement Lifecycle: 11
1.7. Key Stakeholders 12
1.8. PPP Project Development Framework 12
CHAPTER 2: 15
PRE-PROCUREMENT ACTIVITIES 15
2.1. Stage – I: Project Identification 15
1.1. Stage – II: Project Feasibility Analysis 17
1.1.1. Technical feasibility: 18
1.1.2. Financial feasibility: 19
1.2. Stage – III: Project Structuring 31
1.3. Other Pre-procurement activities 34
CHAPTER 3: 35
BID DOCUMENTATION STAGE 35

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3.1. Procurement Strategy & Planning 35
3.2. Pre-qualification criteria (PQC) 39
3.3. Project Information Memorandum 40
3.4. Bid Security 41
3.5. Bid Validity 41
3.6. Bid Parameter for selection 42
3.7. Draft PPP Concession Agreement 42
CHAPTER 4: 44
PROCUREMENT PROCESS 44
4.1. Electronic Procurement (e-Procurement) 44
4.2. Modes of Procurement 44
4.3. Formation of Bid Opening and Bid Evaluation Committee 47
4.4. EOI process 48
4.5. RFQ process 49
4.6. RFP process 51
4.7. Dealing with Situations 56
CHAPTER 5: 58
POST AWARD CONTRACT MANAGEMENT 58
5.1. Objective of Contract Management 58
5.2. Key stages post award of project 58
5.3. Key considerations of contract management 59
5.4. Contract Management Framework 59
5.5. Formation of Contract Management Team 60
5.6. Contract Management Plan 61
5.7. Performance monitoring, Reporting & Review 62
5.8. Risk Management 62
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5.9. Relationship Management 62
5.10. Issue Management & Dispute Resolution 63
5.11. Contingency planning and change management 64
5.12. Knowledge Management & Information Dissemination 64
5.13. Ongoing Review/Renegotiation of contract 65
5.14. Capacity building of contract management team 65
CHAPTER 6: 66
PROCUREMENT GOVERNANCE FRAMEWORK OF PPP 66
6.1. Key questions to be answered 66
6.2. Suggested Institutional structure 67
BIBLIOGRAPHY 70
ANNEXURE – I: LITERATURE REVIEW 72
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ABBREVIATIONS AND ACRONYMS
CA Competent Authority
CPPP Central Public Procurement Portal
CVC Central Vigilance Commission
DDT Dividend Distribution Tax
DEA Department of Economic Affairs
DFPR Delegation of Financial Power Rules
DOE Department of Expenditure
DSCR Debt Service Coverage Ratio
ENPV Economic Net Present Value
EOI Expression of Interest
ERR Economic Rate of Return
EVA Economic Viability Analysis
FIs Financial Institutions
FVA Financial Viability Analysis
GFR General Financial Rules
GTE Global Tender Enquiry
IEE Initial Environment Examination
IIPDF India Infrastructure Project Development Fund
IRR Internal Rate of Return
KPI Key Performance Indicators
LOA Letter of Award /Letter of Acceptance
LTE Limited Tender Enquiry
MAT Minimum Alternate Tax
NIT Notice Inviting Tender
NPV Net Present Value
O&M Operations & Maintenance
OTE Open Tender Enquiry
P3/PPP Public Private Partnership
PIM Project Information Memorandum
PQB Pre-qualification Bid
PQC Pre-qualification Criteria
PSA Project Sponsoring Authority
PSC Public Sector Comparator
QCBS Quality Cost Based Selection
R&R Rehabilitation & Resettlement
RFP Request for Proposal
RFQ Request for Qualification
SDR Social Discount Rate
SPV Special Purpose Vehicle
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VFM Value for Money

VGF Viability Gap Funding
WACC Weighted Average Cost of Capital
WTP Willingness to Pay
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CHAPTER 1:
INTRODUCTION TO PROCUREMENT OF P P P s
1.1. Overview
i) Various ministries, departments, attached and subordinate offices, local urban

bodies, public sector enterprises and other government (including autonomous) bodies
(hereinafterreferred as ‘Project Sponsoring Authorities’ or PSAs) undertake procurement
of Public Private Partnerships to discharge the duties and responsibilities assigned
to them.
ii) At present, there is no centralized set of uniform Rules, Regulations and Procedures
which can be adopted for procurement of PPPs. Due to this, the PSAs are required to
search and apply information available in bits and pieces in various Government
Documents.
iii) To ensure that PPP procurements are made by following a uniform, systematic, efficient,
and cost-effective procedure and to ensure fair and equitable treatment of bidders/
contractors, this procurement manual has been prepared as a guidance document.
This manual aims to bring together at one place in a whereat and logical step by step
procedural manner, the information related to procurement of PPP’s, which is hereto
collected.
iv) At the apex of the statutory framework governing public procurement, is Article 299
of the Constitution of India, which stipulates that, contracts legally binding on the
Government, must be executed in writing by officers specifically authorized to do so. The
Constitutionalso enshrines Fundamental Rights (In particular Article 14 – Right to
Equality beforelaw and Article 19 (1) (g) – Right to carry on a Profession) which
have implicationsfor Public Procurement. Further, the Indian Contract Act, 1872 and
the Arbitration andConciliation Act, 1996 (as amended in 2015) are major legislations
governing contractsfor procurement (both private and public) in general. There are
additional guidelines issued by Central Vigilance Commission (CVC) relating to
Governance issues which are applicable to Public Procurement also. There is no law
exclusively governing procurement of PPPs.
v) Further, comprehensive Rules and Regulations are available in the General Financial
Rules (GFR), 2017, Delegation of Financial Powers Rules (DFPR) and the guidelines issued
by the Central Vigilance Commission to increase transparency and objectivity in public
procurement are also available.
vi) Without purporting to be a comprehensive compendium of all such ‘Procurement

Guidelines’, this manual is intended to serve as a guiding document for Project
Sponsoring Authority to enter the specific area of PPP procurement.
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1.2. Clarification, Amendments and Revision of this Manual

For revision, interpretation, clarification, and issues relating to this manual, the Private
Investment Unit, Department of Economic Affairs, Ministry of Finance would be the
nodal authority.
1.3. Applicability of this Manual

PPPs: This manual is applicable to procurement of PPPs. A “Public Private
Partnership” or “PPP” means a form of fixed-term contractual arrangement between
a public entity on one side and a private entity on the other, for the provision of public
assets and/or public services through investments being made and/or management
being undertaken by the private entity, may or may not require payment of fee by
users, for a specified period of time, where there is well defined allocation of risk
between the private entity and the public entity and the private entity’s performance
is contractually obligated to conform (or are benchmarked) to specified and pre'
determined performance standards.
PPP Procurement Entities viz. Project Sponsoring Authority: Procurement Entities,

which can benefit from this manual include ministries, departments, or a unit thereof, or
an attached or subordinate offices/ units; any other body (including autonomous
bodies) substantially owned or controlled by or receiving substantial financial
assistance from the Central Government, State Governments and Public Sector
Undertakings (PSUs). This procurement manual will not apply to non-PPP procurements.
This manual for procurement embodies the best practices for PPP procurement and
aims to provide a guiding document for PPP procurement. However, PSA having their
own established PPP procurement procedures may continue to follow them.
1.4. Basic Principles of PPP Procurement

In PPPs, the private partner assumes the hitherto traditional role of the public entity -
of delivering services to the general public - under conditions that are monitored,
independently or by a government agency, regulated or left to the market, depending
on the nature of the services/assets. It is important to note, though, that the ultimate
accountability to users for provision of these services continues to remain with the
public entity, even if the delivery is by the private partner.
In a PPP procurement, the basic aim is to achieve value for money through proper
risk allocation, optimum utilization of public resources and ensuring quality service
delivery. The entire process of procurement (from the time that need for an
infrastructure service is identified till the concession agreement is signed and
thereafter till the time the need is satisfied, through management of the concession
agreement up to the end of the concession period) is designed to achieve following
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basic aims:
a) Optimum Value for money
b) Efficient Risk identification, allocation, and mitigation
c) Promoting Transparency
d) Ensuring quality
e) Right balance of government objective with private sector interest
1.5. Key considerations of PPPs

PPP procurement can be considered as selection of a strategic long term partner and
is different from single instance public procurement of goods/services/works. Under
PPP, the private partner and public authority shares the project risks based on the
principle that “risks are allocated to the party best capable to manage”. Thus, the
success of PPP, depends on certain key considerations as detailed below:
a) Clear responsibility allocations
Clarity in allocations of responsibility between public authority and private partner,
is one of the critical consideration of PPPs. The responsibility allocation is based
on proper identification of risks and allocation of the same to the party best capable
to manage. Inefficient responsibility allocation leads to disputes and affects service
delivery during project implementation
b) Long term nature of contract

Typically, PPP contracts for infrastructure development are long term in nature
due to higher capital investment requirement and longer gestation period. Hence,
it is practically challenging to forecast all possible risks/contingent situations that
may arise during the contract period. Hence, the PPP contracts should have
appropriate provisions/mechanism for managing any contingent situations if arise
during the contract period, so that a win-win situation can be achieved. Some of
the examples of such situations could be change in law, force majeure, unexpected
reduction in demand triggered by factors not under the control of private partner
etc.
c) Quality assurance
Though in PPP, private partner is responsible for delivering quality services, it is
essential for public authority to ensure, quality is maintained to the desired level.
Quality assurance can be achieved through following ways:
• Defining minimum construction and operational performance specifications in line
with the applicable quality standards and good industry practices
• Performance linked payment mechanism: Defining measurable Key Performance
Indicators (KPIs) and associated penalty for non-compliance. In case of Viability
Gap Funding, the same should be linked to achievement of defined milestones.
• Setting up of a robust institutional mechanism for governance and monitoring: A
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robust institutional mechanism is essential for faster decision making and

monitoring. The institutional mechanism should be structured to achieve following
objectives:
o Facilitation in faster resolution of any operation issue/challenge
o Proper monitoring of compliance with KPIs and fair determination of
penalty for non-compliance(s) if any
o Suggesting corrective measures to ensure quality and avoiding future
non-compliances
o Faster decision making and resolution of disputes if any
• Independent monitoring: Independent / third party monitoring is considered to be
essential to ensure impartial monitoring and decision making. Hence, provision of
third-party monitoring through an independent expert agency during construction
and operation phase of the project with clear articulation of scope and selection
process of said independent agency, should be included in the PPP contract.
d) Effective contract management/monitoring

Proper contract management/monitoring is essential to ensure timely completion
of contractual obligations of parties and avoiding/resolution of disputes among
stakeholders. The contract management process can start with preparing a
contract management manual articulating key contractual terms and required
procedures/activities for discharging the contractual obligations followed by
setting up a dedicated team for contract management and capacity building of the
team. The contract management team will be responsible for liaising with
stakeholders involved in monitoring of performance of private partner and
supporting public authority in appraising about various project milestones/activities
and discharging its obligations.
1.6. PPP Procurement Lifecycle:

The different stages in PPP procurement lifecycle are set out in the schematic
diagram given below:
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The foremost stage in the PPP lifecycle is the project preparation stage which involves
identifying the project need. It is followed by the development stage comprising activities
such as project feasibility, project structuring, bid documentation and bid process
management. The development stage concludes with identifying a private partner. The
private partner is then responsible for the construction, operations, and maintenance
(O&M) of the project during the construction and O&M period. The last stage is the
handover stage which involves handing over of the project facilities from the private
partner to the public entity upon expiry of the concession/contract period.
1.7. Key Stakeholders

The key parties to a PPP arrangement are the public authority (Government) and the
private partner. In addition to the public authority and the private partner, there are several
other stakeholders who are associated with PPP projects, a few of which are described
below:
a) Public entities – means all Government authorities responsible for providing
required approvals and permits for project implementation
b) Special Purpose Vehicle (SPV) - is simply an entity created to act as the legal
manifestation of a project consortium. An SPV is a legal entity with no activity other
than those connected with the project. Typically, the selected private partner forms
a special company called a “Special Purpose Vehicle” (SPV) which contract with
public authority. The SPV to develop, build, maintain, and operate the asset for the
contracted period. In cases where the Government has invested in the project, it
is typically (but not always) allotted an equity share in the SPV.
c) Lead Financial Institution - means the FI that is funding the PPP project, and in
case there is a consortium of FIs, the Fl designated as such by the consortium.
d) Urban local bodies – the local development authorities who is responsible for
regulating development in their jurisdiction. The local development authorities
control regulations, land use related regulations are some of the important
considerations for PPP projects
1.8. PPP Project Development Framework

Following are the typical stages in planning, execution, and monitoring of PPPs:
i) Pre-procurement activities
a) Project identification.
• Preliminary need assessment
• Assessment of strategic alignment
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• Identifying potential delivery options

• Pre-feasibility study
b) Project feasibility – DPR Stage

• Technical feasibility
• Financial feasibility
• Economic viability
• Value for Money / Public Sector Comparator
• Legal feasibility
c) Project structuring
• Risks assessment
• Responsibility framework
• Pricing & payment mechanism
• Monitoring mechanism
• Key terms of PPP contract
d) Other pre-procurement activities
• Land acquisition
• Obtaining approvals/applicable permits
ii) Bid documentation stage

a) Procurement Strategy & Planning
b) EOI
c) RFQ
d) RFP
e) Project Information Memorandum (PIM)
f) Draft PPP Agreement
iii) Procurement process

a) E- procurement
b) Deciding modes of procurement (OTE/GTE/LTE)
c) Formation of bid opening and evaluation committee
d) EOI process
e) RFQ process
f) RFP process
g) Issue of Letter of Award / Letter of Intent
h) Formation of SPV and fulfillment of any pre-condition of signing of agreement by
selected private partner
i) Execution of concession agreement with the SPV
iv) Post award Contract Management

a) Contract management framework
b) Formation of contract management team
c) Capacity building of contract management team
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d) Condition Precedence
e) Financial Closure
f) Appointed Date
g) Monitoring
Support provided to Central/State Project Sponsoring Authorities by

Department of Economic Affairs - Infrastructure Finance Secretariat
Development of
Handholding Quality PPP IIPDF Support for VGF – CAPEX
Support for Project Project and OPEX
Project Proposals Development Support to PPP
Structuring through the Expenses Projects
Empaneled TAs
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CHAPTER 2:
PRE-PROCUREMENT ACTIVITIES
2.1. Stage – I: Project Identification

Under this stage, project need is identified and possible options to address the need are
analyzed. Following to this, pre-feasibility study is carried out to check the prima facie
feasibility of the project. The project Identification stage answers the following questions:
i) Whether there is a pressing need for the project?
ii) Whether the project is strategically aligned with government priorities/public

interest/socio-economic objectives?
iii) Whether all possible service delivery options have been considered for the project?
Key activities
The key activities to be undertaken at the project identification stage include:
Identifying
Preliminary Need Assessment of
potential delivery Pre-feasibility study
Assessment Strategic Alignment
options
a) Preliminary need assessment: The objective of the need analysis is to identify

the underlying objective/problem statement that the proposed development will solve.
The Project Sponsoring Authority (PSA) should identify the underlying need that the
proposed project will address along with ultimate beneficiaries who will be benefited
from the project
The need for a new service can arise from several reasons, viz. Government policies,
regulatory compliance, increased demand for services, replenishing of asset capacity,
increasing, or providing an alternative range of services, business improvements and
efficiencies, sustaining service delivery, or enhancing service capacity. An overall need
assessment should be carried out, considering the types of services users will need,
total user demand for those services, and all sources of existing and planned delivery of
services.
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In case of any existing asset is proposed to be improved, the existing infrastructure

should be assessed for its ability to deliver the currently needed services and the service
requirement expected for the future. An assessment should be made of:
o The service capacity of existing assets.
o The condition of existing assets, including how well maintained they are, their age
and likely longevity.
The PSA would need to question itself on whether there is a need for the proposed
development, whether the capacity of existing assets is adequate to provide the quality
service delivery to people, what is the life of the existing asset and whether it is time to
replace it or augment capacity, etc. It is only after sufficient scrutiny of the existing assets
that it will be possible to establish the need for any project/ service delivery.
b) Assessment of strategic alignment: PSA should assess the strategic alignment of the
project with the government priorities and public interest. Also, socio-economic impact
of the project needs to be kept in mind while identifying and prioritizing the projects.
c) Identifying potential delivery options: Options analysis would include listing out all
the available options to address the need, evaluation of the merits and demerits of each
option and selecting the optimum option which best suits/addresses the need. PSA
needs to identify all possible options for addressing the need, typical options that are
considered at this stage include:
• Existing asset-based option: This option envisage assessment on, whether the
existing assets held by the Government can be used to deliver the solution. This
may involve the renewal, enhancement, replacement, adaptation, or
reconfiguration of existing assets. The service standard provided by existing
assets. Service standards are typically measured by performance indicators
relevant to the sector.
• Non-asset-based option: This option envisages service-based solution without any
infrastructure development. This option primarily requires improvement of
management of existing assets
• New asset-based option: In this option, greenfield assets are created based on the
need
d) Pre-feasibility study: Post identification of options, a pre-feasibility study should be

conducted to assess the options and identify the best possible option. Along with this,
the pre-feasibility study provides an assessment of the prima-facie feasibility of the
project. An indicative framework of pre-feasibility study is provided as below:
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Key outputs
The key outputs of this stage are
• Project concept to address the underlying need
• Pre-feasibility report – draft indicatory to be included in a pre-feasibility report are
available in the IIPDF scheme of DEA.
Post identification of the project and before project feasibility, certain activities need
to be undertaken by the PSA. The activities that need to be undertaken post
identification of the project includes but not limited to:
• Identification of suitable land / location for project implementation
• Constitution of project management cell/unit
• Hiring of transaction advisors/consultants/experts for supporting PSA during the
process of project development
• Stakeholder consultation to assess the willingness and acceptance of the project
• Obtaining any preliminary approvals as applicable
• Exploring potential sources of funds/schemes that will be required for pre-
procurement activities like preparation of concept plans, project feasibility study,
procurement process management etc.
2.2. Stage – II: Project Feasibility Analysis

Based on the ground works considerations in previous stages, under this stage of project
development, detailed feasibility of project from technical, financial, economic, value for
money and legal standpoint is assessed. The outcome of this activity is to arrive at whether
the project is feasible to be implemented under PPP mode. In addition to this, at this stage,
various PPP structure options for implementation of the project are analyzed along with
associated risks. It is usually the technical feasibility study, which is carried out first, followed
by the financial feasibility, economic viability analysis and value for money analysis of the
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project. The legal feasibility envisages compliance of the project with the existing legal and
regulatory compliance framework.1Each of the stages of the feasibility are explained as
below:
2.1.1. Technical feasibility:

Technical feasibility of project envisages analysis of site feasibility, assessment of demand-
supply gap, design/engineering options, social & environmental assessment, estimated cost
of construction. The key questions that need to be addressed at this stage include:
• Whether the site is technically feasible for implementation of the project?

• What are the possible designs/engineering options for the project and what will
be the best possible option?
• What are the social and environmental impacts of the project?
• What are the possible mitigation measures for minimizing adverse impact of the
project on environment?
• Is there any R&R requirement? If yes, what is the cost and plan for R&R?
• What is the cost of implementing the best possible design option?
• Whether the project will have sustainable demand?
Key activities
The key activities to be undertaken as part of technical feasibility assessment include:
• Site Assessment: This includes site suitability analysis including topographic

study, soil investigation, site surrounding analysis, Strengths, Weaknesses,
Opportunities and Threats (SWOT) analysis of the site etc. The site assessment
also includes identification of any environmental constraints around the site.
• Market assessment: This includes assessment of demand and supply scenario
and arriving at demand-supply gap. This becomes the basis of arriving at project
configuration.
• Environmental assessment: Typically, as part of project feasibility Initial
Environment Examination (IEE) study can be conducted to identify and assess the
environmental constraints if any along with required mitigation measures for
minimizing the adverse impact on the environment
• Social Impact Assessment: Social impact assessment is conducted as part of
project feasibility to assess the impact of the project on the social strata of the
catchment. Any rehabilitation & resettlement (R&R) requirements should also be
clearly identified along with a plan for smooth R&R.
• Stakeholder consultation: Stakeholder consultation is one of the important
exercises which should be started early stage of project lifecycle and continues
1Panel of Transaction Advisors: If, the in-house capacity is not available in Project Sponsoring Authority, then it may
hire the expert TA services from the market. In order to fast track onboarding of TA services, the DEA has released a list
of empaneled TA’s along with a user manual. The details are updated on the PPP India Website
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throughout the project lifecycle. At the project feasibility stage, the stakeholder
consultation starts with identifying all relevant stakeholders. Typically,
stakeholders at project feasibility stage can comprise of:
o Public authorities having a role in the project
o Ultimate beneficiaries of the project
o Potential private players
o Social stakeholders getting impacted by the project
o Potential financing agencies/lenders
• Project conceptualization/designs: Based on project feasibility and in line with
applicable regulations, a project concept plan is prepared. This activity also
includes estimation of approximate capital cost requirement for the project
Key outputs
The key outputs of the technical feasibility are:
• Project configuration including scale and size of the project

• Project concept plan showcasing concept layout of the project
• Minimum technical specifications/standards of project facilities
• Service level specifications & standards (O&M level specifications & standards)
• Estimated Construction cost
• Requirement of financial support from Government
• R&R plan if any
Support from DEA

• PPP Structuring booklet
• Empaneled TA
• Funding of cost under IIPDF Scheme
2.1.2. Financial feasibility:

Financial feasibility envisages assessment of attractiveness of the project for private sector
investment from commercial perspective. The key questions that need to be answered as
part of financial feasibility include:
• Whether project is attractive for private sector investment?
• Whether project requires any funding assistance from Government, or it is solely
viable based on the project generated returns?
• What revenue the private partner can share with PSA?
• What is the tolerance level of the project returns to contingent scenarios that
results decrease in revenue and/or increase in costs?
Key activities
The activities to be performed as part of financial feasibility include:
• Financial viability analysis: The PSA needs to prepare a financial model from
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the perspective of private partner incorporating the inputs from technical

feasibility. A typical inputs and outputs of the financial model is shown as below:
• Sensitivity analysis: A sensitivity analysis will also be undertaken to assess the

sensitivity and tolerance level of the project to decrease in revenue and/or increase in
costs resulting from contingent scenarios. The sensitivity analysis will help PSA in
keeping adequate buffer and plan appropriate risk mitigation measures to face any
such contingent scenarios.
2.1.3. Legal Feasibility
The PSA must ensure that all the activities that form the procurement process must be
permissible within the applicable legal and regulatory framework of the country. Failure on
the part of the public entity to adhere to this framework makes the project vulnerable to
litigation, resulting in delays or, in some cases, even annulment of the entire process. The
key questions that legal feasibility answers include:
• Whether the project is permissible under the law of the land?
• Whether the procurement process is permissible under the law of the land?
• Whether project and procurement process comply with applicable Central / State
/ Local level regulations?
• Who is the competent authority to procure private participation?
• What is the State level institutional structure and approval process for PPP
procurement?
• In case any financing scheme(s) of Centre/State is leveraged, whether
project/procurement complies with the extant guidelines of such schemes?
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Key activities to be performed:

The legal framework for each project will depend on the nature of project and applicable
legislations of State Government. PSA should undertake a diagnosis of all applicable
legislations impacting the project and take necessary measures since early of project
lifecycle for compliance with such legislations. This will not only avoid any future
litigations/disputes but also build investor/private sector confidence in the project. Public
Private Partnership Handbook of ADB suggests a set of existing legal, regulatory and policy
framework that need to be diagnosed. The same is presented here below. However, PSA
should identify and diagnose all applicable regulations/policy/standards depending on the
nature of project.
Typical existing legal, regulatory and policy framework to be diagnosed
The project feasibility report (DPR) should capture summary of all such applicable
legislations and explain how project will comply to the same. The key activities to be
performed as part of legal feasibility is presented as below:
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Key outputs
The key outputs from legal feasibility will be:
• List of applicable permits/approvals required
• Applicable institutional framework for PPP project / procurement approval
• Procedure and timelines for obtaining applicable approvals/permits
2.1.4. Economic viability analysis

Economic viability analysis includes an assessment of the economic benefits from and the
economic costs of a project. The difference of economic benefits and economic costs in
present value terms, is the net economic benefit to society. The economic benefits
represent the higher human well-being and economic costs represent reduction in human
well-being. Economic analysis is an integral part of project development studies. The key
questions that economic viability analysis answers:
• What are the economic benefits that the project generates to the society?
• What are the economic costs of the project to the society?
• Whether project has any damaging repercussions on the environment, health, and
social well-being and what are the possible measures that can be taken to
minimize these damaging repercussions?
Economic analysis is different from financial viability analysis in many ways as detailed
below. However, the primary difference between economic analysis and financial viability
analysis is that economic viability analysis looks at the positive and negative effects of an
investment decision, which cannot be attributed a market price (such as the impact on
indirect employment generation and economic activity, local environment and ecosystem,
project affected people etc.) and those that may not result in cash flows to the project:
DIFFERRENCE BETWEEN ECONOMIC VIABILITY ANALYSIS (EVA)

AND FINANCIAL VIABILITY ANALYSIS (FVA)
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1 The financial feasibility analysis involves direct costs and revenues associated
with the project whereas an economic analysis considers the net benefit of the
entire society.
2 The discount factor in financial viability analysis is WACC; in economic
analysis, the discount factor is the social discount rate (economic opportunity
cost of capital)
3 In financial analysis, some inputs may not have a financial cost and are
therefore not shown in the analysis (E.g., if water at the intake is available to
the water utility for free). However, the cost of these inputs would be shown in
the economic benefit cost analysis if the input has a scarcity value (E.g., if raw
water is diverted from another alternative use such as irrigation or
hydropower).
4 FVA cash flows may include accrued values, depreciation, and other similar
allowances. EVA does not use accruals, depreciation allowances or other non-
cash items.
5 In EVA, each cost and benefit are recognized fully at the time that it occurs (not
accrued beforehand), timing is dealt through discounting the cash flow, and
changes in the values of assets are dealt with by including residual asset values
in the investment horizon.
6 In benefit-cost analysis, accounts receivable and payable are not recognized
until the cash is actually received or paid. Working capital is not a cost,
although the change in working capital during a particular period is either a
cost or a benefit. Production costs are recognized fully at the time they occur.
Changes in inventory may signal either costs or benefits, but the actual
measurement of these is through production costs and sales. In brief, benefit-
cost cash flows are based on everything recognized when it occurs.
Before proceeding with economic viability analysis, it is essential to understand certain key
parameters/inputs that are used for conducting economic viability analysis as detailed
below:
• Economic Benefits and Costs (EVA)

The costs in an economic analysis are mostly comparable to the capital costs and the
O&M costs, whereas the economic benefits relate to non-monetary impacts such as
safety, efficiency, welfare and so on. The key challenge for these benefits is how to value
them, which is commonly approximated by the Willingness to Pay (WTP).
WTP is the amount (demand price) that an individual is willing to pay for an incremental
unit of good or service. This measures its economic value to him/her and hence, it is
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considered as an economic benefit to the economy. The WTP is typically assessed

based on a primary sample survey of the target population for the project.
• Shadow discount rate

A feature of economic analysis is the use of accounting shadow prices based on social
opportunity cost using a Social Discount Rate (SDR), instead of the observed
prevailing prices, which may not represent the true cost.
The SDR is the discount rate used in the economic analysis of investment projects. It
reflects the social view on how future benefits and costs should be valued against
present ones. SDR measures the rate at which a society would be willing to trade
present consumption for future consumption. It is also referred to as the Social Time
Preference Rate and is one of the most critical inputs in economic analysis.
As part of economic analysis, the observed prices or public tariffs pertaining to a

project are converted into shadow prices that better reflect the social opportunity cost
of the goods. The externalities and indirect/remote effect of the project are also
considered and assigned monetary values. All costs and benefits that are associated
with the project are discounted by a real social discount rate.
• Economic Net Present Value (ENPV)

The ENPV is the difference between the discounted total economic benefits and costs.
This captures the present value of the costs and benefits that will occur over the life of
the project. It has the benefit of summarizing a lifetime of project values into a single
figure and allowing an easy comparison between different projects. ENPV provides the
criterion to decide whether the project should proceed at all (in general, a project with
a negative ENPV would not be pursued).
• Economic Rate of Return (ERR)

ERR indicates the rate of return which equalizes the present value of the economic
costs and benefits of the project. It is the rate that produces a zero value for the ENPV.
ERR allows a project to be compared against a required rate of return. It gives a yes or
no answer about whether the project is economically viable.
• B/C Ratio
This is the ratio between discounted economic benefits and costs
In principle, each project with ERR less than SDR and negative ENPV should not be
pursued further. In existing structure, efforts should be made to improve ERR and ENPV
upto the threshold level through appropriate structuring and value capturing.
Key activities
24
Given below are indicative activities that need to be performed for conducting economic
viability analysis:
• Defining methodology:
There is no uniform method for conducting economic analysis. Various methods are
followed across the world for the analysis. The first step of EVA is to define a
methodology that is proposed to be followed. The key principles that need to be kept
in mind while defining the methodology include:
o Identifying economic benefits and costs. The methodology can start
from assuming the base case as “what happens in the status quo is
maintained?” and what will be the benefits of doing something to
change the statis quo? Doing noting and maintaining the status quo
might involve costs in terms of loss of property, loss of life on account
of hazard or disaster, which could be saved through interventions. It is
essential to identify what are the economic benefits and costs
associated with different delivery options.
o Methodology for assessing economic benefits and costs: Post
identification of heads of economic benefits and costs, PSA should
arrive at a methodology for quantifying the economic benefits and
costs, which shall include:
a. Required data (E.g., costs avoided by introducing the project,
incremental income due to the project, life savings/increased
life expectancy etc.)
b. Sources of data (E.g., stakeholder consultation, secondary
literatures published, financial model etc.)
c. Methodology for collection of required data (E.g., primary, and
secondary research required)
• Identifying quantifiable economic costs:
o PSA should identify all quantifiable economic costs associated with the
project. The quantifiable economic costs can also be comparable with
the capital costs and O&M costs involved in the project. Any possible
adverse social and environmental impact should also be considered if
the same can be quantifiable
• Identifying quantifiable economic benefits:
o The identifiable economic benefits could be based on the followings:
o Avoided costs - incremental costs which are unavoidable if nothing is
done, but may be avoided if action is taken
o Cost savings - verifiable reductions in existing levels of expenditure if a
programme proceeds
o Benefits to project beneficiaries not reflected in revenue flows (E.g.,
increase in income levels / employment generation, life savings
/increased life expectancy etc.) - while difficult, attempts should be
25
made to quantify these, with assumptions and methodologies clearly

explained and
o Any positive impact on environment, if quantifiable
o Residual value of asset (if any)
• Calculate Net Benefits:

Quantifiable economic costs and benefits over the project life need to be
expressed in net present value terms. Sensitivity analysis should be undertaken
to test the robustness of results under different scenarios, using different
assumptions about some or all of the key variables. PSA should note that in a
constrained budgetary situation, economic performance indicators such as
ENPV and Benefit to Cost Ratio measures are important considerations for
budget funded projects and programs.
• Identify qualitative factors and summarize results:
Qualitative aspects such as environmental considerations, social or regional
impacts, resource availability, funding, distribution of benefits and costs, etc. will
also have to be considered in choosing between competing options and projects.
Some of these may be quantifiable to some extent but where they are not,
qualitative aspects of options or projects should be discussed in the appraisal.
The report on the appraisal should include a clear summary of results and
indicate the preferred option.
1.1.1. Value for Money (VFM) Analysis

Value for Money (VFM) analysis is conducted to ascertain whether the project being
developed through a PPP framework offers good value to the public entity and
ultimately to the general public. The analysis is useful to decide whether to pursue
the project under a PPP framework. On receipt of bids from the private partners, the
results of value for money analysis are useful for examining whether the winning bid
delivers value to the public entity. The key questions that this analysis answers
include:
• Whether developing the project under a PPP framework results in any value
addition to public sector?
• Whether the bid submitted by the preferred bidder is acceptable to the public entity
thereby providing value to the public sector
• Whether or not to award the project to the preferred bidder?
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The VFM analysis is a combination of qualitative and quantitative analysis as

demonstrated below:
Qualitative Analysis
The purpose of the qualitative assessment is to subjectively test whether the
objectives, service requirement and proposed structure of the project are likely to
provide the private sector with sufficient scope to give the public entity and the end
users value. Some of the factors that need to be considered while undertaking the
qualitative analysis are detailed below:
• Viability: An assessment of whether there are any efficiency, accountability or equity

issues which demand that services are provided by the Government directly rather
than through a PPP project. It also considers the extent to which the service
requirements can be adequately captured in a contract - based approach, with a
clear specification in output terms for the PPP to transfer risk effectively to the
appropriate parties.
• Desirability: Determination of the relative benefits provided through different
procurement routes, such as incentives and risk transfer in PPPs vis-à-vis the
Government’s lower cost of borrowing in conventional procurement. This requires
an upfront consideration of the relative advantages and disadvantages associated
with a long-term contractual relationship between the public and private sector, and
the strength of the mechanisms that could be used to ensure that different benefits
are realized.
• Achievability: Gauging the level of likely market interest, the skills and capacity of
the private sector, their appetite for risk, any lender constraints and whether the PSA
has sufficient capability to manage the complex processes involved.
Quantitative Analysis
Quantitative Assessment involves estimation of the risk adjusted cost of delivering a
project through the PPP mode as compared to the risk adjusted cost of delivering
the same project through the traditional public procurement mode. The value
27
analysis compares the estimated cost of procuring the project through traditional
public procurement with the estimated cost of procuring it on a PPP basis. The
quantitative assessment aims to:
• Support the qualitative assessment in determining value.
• Enable projects to make appropriate use of private capital, to justify explicit
additional costs against the benefits achieved as a result of transferring risk to the
private sector; and
• Enhance the data availability to PSA to support future procurements, and to be able
to justify decisions taken in the context of Government policy.
The steps involved in VFM analysis at the feasibility stage is shown as below
Estimate Public Sector Check whether PSC is

Comparator (PSC) greater than Shadow Bid
If the PSC is greater than Shadow Bid, there is a value in implementing the project
through PPP framework
Public Sector Comparator

To understand the costs of a traditional public-sector approach, Public Sector
Comparator (PSC) is used to compare and understand the value proposition of
projects. The Government of Western Australia, Department of Treasury, defines
PSC as: “The PSC is an estimate of the net present cost to Government if it was to
deliver the project under a more traditional procurement method, for example design
and construct”. The World Bank assisted presentation on “Public Sector Comparator
for Highway PPP Projects” defines PSC as: “The PSC is the hypothetical risk-
adjusted cost if a project were to be financed, owned and implemented by a
Government Agency”.
The PSC is developed in accordance with the required output specification, the
proposed risk allocation and is based on the most efficient form and means of
Government delivery of its obligations.
PSC is derived from the following factors:

• Raw PSC
• Competitive neutrality
• Retained Risk
28
• Transferable Risk
Raw PSC
The raw PSC is referred as Whole of Life Cycle Cost which is estimated as net
present value of projected cash flow from the project over its useful life. The Raw
PSC provides a base costing under the public procurement method where the
underlying asset or service is owned by the public sector. This includes all capital
and operating costs, both direct and indirect, associated with construction, finance,
maintenance, and delivery of the service (or underlying asset) over the same period
as the term under the proposed PPP mode of project and to a defined performance
standard as required under the output specification. Expected cash flows for the
Raw PSC need to be forecast over the life of the project. The raw PSC should not
include any valuation of risks to which Government remains exposed. In many
cases, the public procurement method may involve an element of design and
construction outsourcing or other forms of private contractor management. The raw
PSC should not include any such third-party revenues.
Competitive neutrality
Competitive Neutrality removes the net competitive advantages that would accrue
to a government business by virtue of its public sector ownership. The purpose of
including this component is to allow a like-with-like value assessment between a PSC
and private bids.
Government-owned entities are engaged in many significant business activities and
as a result there are distortions in resource allocation. Competitive advantages from
public sector ownership typically include taxes that are not levied on public entities.
Similarly, the competitive disadvantage for public sector ownership is in terms of
increased scrutiny and reporting requirements
Competitive neutrality inclusions in the PSC are made on a cash flow basis and the
cost of capital is not included in the Competitive neutrality component of the PSC
numerator but is reflected in the discount rate used to calculate the Net Present
Value (NPV). Non-cash adjustments such as depreciation would not form part of
Competitive neutrality.
The steps of estimating Competitive neutrality inclusions are shown as below:
Step 2: Estimate the value

Step 1: Identify areas of Step 3: Calculate
of net advantage of
competitive advantage competitive neutrality
Competitive Neutrality
and disadvantages inclusions in the cash flow
Effect
1.1.2. Project Risks – Retained and Transferable Risks
29
To arrive at the PSC, the risks that are present over the life of the project need to be
quantified. These include those risks that are retained and those which could be
transferred to the private partner. (The value of project-specific risks is to be added
to the cash flows while calculating the PSC. The risk may be quantified in terms of a
regular cash-flow, or it may be reflected as a discount factor while arriving at the
NPV value).
The steps involved in quantifying the risks are shown as below:
Step 4: Value of
Step 3: Estimate risk =
Step 1: Identify all Step 2 Quntify
probability of (Consequences x
material risks of consequences of
ocurrance of each probability ) +
the project each risks
risk contingency
factor
Estimating PSC
Based on the four factors explained above, PSC is estimated as below:
Estimated net cost of PSC = Raw PSC + Competitive neutrality inclusion

+ Value of transferable risks + Value of retained risks
Shadow Bid
The Shadow Bid is a hypothetical private party bid which meets the same output
specifications as that used for estimating PSC. It can also be referred as PPP
reference bid. In case of Shadow Bid, the costing of the output specifications should
be carried out from a private party’s perspective. Comparing the net present cost to
the public entity/public finances of a risk-adjusted PSC model with the net present
cost of a risk adjusted PPP reference model enables an assessment of whether
service delivery by the Government or by a private party yields the best value to the
public entity.
The key steps for estimating the costs to public entity in case of PPP reference bid
/Shadow bid includes:
30
If the estimated net cost for the PSC is higher than the net cost for the Shadow Bid,
then the value test is positive, and the PPP is expected to provide value to the public
entity. One of the important considerations, is the scope of Shadow Bid in terms of
output specifications & performance levels should be same as that of PSC.
2.3. Stage – III: Project Structuring2

Project structuring is the most important stage of project development. At this stage, the
contour of PPP structure is finalized. The key questions that need to be answered at this
stage include:
i) What are the various risks associated at each stage of project implementation?
ii) How the risks can be managed and allocated among parties on best possible way?
iii) What is the contractual framework for implementation of the project under PPP
mode?
iv) What is the responsibility framework between PSA and private partner?
v) What are the monitoring parameters and how the institutional structure be framed for
monitoring of the project?
vi) In case of funding assistance from Government is proposed, how the disbursement
mechanism to be structured?
Key activities to be performed:

The various activities that need to be performed under this stage include:
• Risk assessment: This is an important activity based on which the overall responsibility
framework and key aspects of contractual framework are finalized. Risk assessment
framework includes
o Risk identification: This first step of risk assessment is identification of various
risks associated with each stage of project implementation
o Risk allocation: Post identification of risks, each risk will be allocated to the party
best placed to manage.
o Risk mitigation: For each of the risks, mitigation measures will be identified.
Appropriate provisions in line with the mitigation measures will be included in the
PPP contract
2Department of Economic Affair, through its Infrastructure Finance Secretariat can provide support during the
Project Structuring State to Center/State Implementing Agencies
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For example: If, one of the demand risks in the operation stage of the project is risk of
reduction in demand due to any unexpected situation (beyond the control of private
partner) during operation stage. This risk can be allocated to authority, as the unexpected
situation is beyond the control of private partner. One of the possible mitigation measures
for this situation could be providing a suitable extension of concession period. There could
be other possible measures depending on the nature of PPP project. The necessary
provision pertaining to this mitigation measure can be included in the PPP contract.
• Responsibility framework: Based on the risk assessment framework, the responsibility

allocation between PSA and private partner will be framed.
• Pricing/payment mechanism: It would be essential to finalize a suitable

payment/pricing mechanism for sustainability of project financials. The
pricing/payment mechanism varies
based on the business model of
the project. Some of the examples
of pricing/payment mechanism
could be Institutional Monitoring
Structure Parameters
o Upper ceiling on user fee (to
bring in affordability in case of
essential public service)
o Escrow mechanism for timely Reporting
Framework
payment
o Milestone linked payment (in
case of VGF assistance from
Government)
o Any other mechanism depending on the nature of project
• Monitoring mechanism: A robust monitoring framework is one of the critical factors for
success of any PPP project. While designing the monitoring framework, the PSA
should keep in mind to strike a balance between ensuring quality and providing
operational autonomy to private partner to encourage innovation. Monitoring
mechanism should always answer following three questions:
o What to monitor?
o How to monitor?
o Who monitors?
These questions are typically addressed by following three primary components as
depicted below:
Institutional structure for monitoring: This typically includes designing an

institutional framework which not only takes care of overall governance & monitoring
but also facilitates faster decision making and resolving any operational issues that
may arise during project implementation. The institutional structure should also
32
integrate the mechanism of third-party independent monitoring. An example of a

typical institutional framework is illustrated as below. PSA can form their own
institutional structure depending on the project requirement and their existing
government framework:
ILLUSTRATIVE INSTITUTIONAL STRUCTURE FOR MONITORING
Governing Committee • High level committee by PSA for

• Key decision making
• Dispute resolution
• Recommending any contractual
amendments
• Any other key decision making upon
recommendation of monitoring
Recommendation & committee
Reporting
• Operational committee with representatives

from
Monitoring Committee • PSA
• Private partner
• Representatives of other departments
as required
• Independent experts if required
Reporting • Responsible for operational day to day
monitoring
• To be appointed by PSA in consultation

with private partner
Independent monitor • Cost might be shared by authority and
private partner
Monitoring parameters: This includes defining key performance indicators,

technical output specifications and operational performance specifications. The
associated penalty for non-compliance along with frequency of monitoring should
also be defined.
Reporting framework: The frequency and formats of reporting in line with the
defined key performance indicators and performance parameters need to be
finalized. This shall form part of the PPP contract.
Key outputs
33
Key outputs of project structuring stage are:

• Identified risks at each stage of project lifecycle along with risk allocation and
mitigation framework
• Responsibility framework in line with risk allocation
• Appropriate pricing and corresponding payment mechanism
• Financing framework (in case funding assistance from Government)
• Technical output specifications and operational performance standards
• Key performance indicators and associated penalties
• Reporting formats and frequency
• Key terms of Concession agreement / PPP contract
2.4. Other Pre-procurement activities

Post completion of project structuring, certain activities need to be started by the PSA
as mentioned below. Few activities might continue to take place post selection of
private partner:
• Land acquisition including rehabilitation & resettlement if required
• Obtaining approvals (required to be obtained by PSA) for off-site infrastructure
facilities
• Required administrative approvals as per applicable
Rules/Regulations/Legislations of State Government
• Obtaining any other applicable permits (required to be obtained by project
authorities). This activity can be started at this stage and timeline can be decided
depending on the nature of required approvals and requirement for obtaining
approvals.
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CHAPTER 3:
BID DOCUMENTATION STAGE
3.1. Procurement Strategy & Planning

Procurement strategy is designed to achieve an appropriate balance between the
countervailing needs for Right Quality, Right Source, and the Right Price under
different complexities/ criticality of the requirements and value of procurements.
Depending on the complexity and criticality of technical requirements, availability of
private sector market, demand/need for such project and known private sector
willingness to invest, following types of procurement strategies may be used:
2.1.1. Expression of Interest (EOI)

Invitation of EoI Tenders: In EoI tenders, an advertisement inviting expression
of interest should be published. The invitation to the EoI document should
contain the following information:
• A copy of the advertisement.
• Objectives and scope of the requirement: This may include a brief
description ofobjectives and broad scope of the requirement.
• Instructions to the applicants: This may include instructions regarding the
nature of work, last date of submission, place of submission and any other related
instructions.
• Formats for submission: This section should specify the format in which the
bidders are expected to submit their EoI.
Eligibility criteria: The invitation to EoI should clearly lay down the eligibility
criteria, which should be applied for short listing. Supporting documents
required need to be clearly mentioned. The eligibility criteria must be designed,
keeping in mind the specific objectives of the EoI. At this stage, typically the
eligibility criteria are kept in such a way to encourage wider participation, which
provides a scope to have wider views/inputs for finalizing project structure and
output specifications. Criteria used should be measurable and based on
documents that are verifiable. Definitions and explanatory notes shall be
provided for each criterion that are simple and unambiguous. The eligibility
criteria should be a combination of technical and financial eligibility criteria.
An illustrative difference of EOI criteria and pre-qualification criteria is shown as

below for illustrative purpose:
35
2.1.2. Two Stage Bidding Process

In case of two stage bidding with pre-qualification, RFQ document is used in
the first stage for pre-qualifying /shortlisting capable bidders for issue of RFP.
Contents of RFQ
• The RFQ document shall contain:
• Instruction to applicants
• Description of bidding process
• Project overview and scope
• Pre-qualification / shortlisting criteria
• Process of evaluation of applications
• Formats for submission of application
• Supporting documents required for pre-qualification criteria
It is also advisable that, there should be provision for providing clarification to

applicants’ queries at this stage. A pre-application meeting can also be
organized to provide clarifications to applicants. Department of Expenditure,
Government of India has issued a model RFQ, which can be referred for
preparing RFQ document.
2.1.3. Single Stage Two Envelop Bidding System

Suitability
In single stage bidding for PPP projects, bids are invited in a two envelopes
system. This strategy is suitable where technical requirements of the project
are not complex / new private sector market is available for competition,
demand/need for such project is well established and private sector
36
willingness to invest is expected. The key features of this bidding system are
as below:
• Two envelop system with two stage evaluation, both the envelop to be
submitted together.
• The pre-bid conference is to be organized before the bid submission date.
It may be necessary to issue the pre-bid conference minutes to all
participants/ upload to the web-portals. Depending on the pre-bid response,
amended bid documents should also be issued/uploaded in the web-portals.
• The Envelop one, called the techno-commercial bids, contains supporting
documents for technical and financial eligibility criteria and other documents
sought in the bid documents except the price and relevant financial bid
details. If required, a project plan along with methodology for delivery may
also be asked as part of this envelop for evaluation from bidders depending
on the complexity of technical requirements/scope of the project.
• In the envelope two, called the financial bid, the price quotations along with
other financial bid details as sought in the bid document are submitted. Both
the envelopes are to be submitted together in a sealed outer envelope, as
it would not be desirable to invite financial bids after opening of techno-
commercial bids.
Opening of Bid:
• The envelope one: Techno-commercial bids are to be opened in the first

instance on the bid opening date and time and scrutinized and evaluated by
the bid evaluation committee with reference to criteria prescribed in the bid
documents.
• The evaluation of envelop one can either be on pass/fail basis or through
scoring. In case of scoring, depending on the complexity of technical
requirements/scope of the project, in addition to the quantitative scoring,
there can be a qualitative evaluation through presentation from all bidders
with clearly defined qualitative parameters along with respective scoring
• Based on evaluation, responsive and eligible bidders are shortlisted for
opening of envelop 2: Financial bid.
• The financial bids are to be opened on a pre- announced date and time.
Financial bids of other bidders, who did not qualify in evaluation of techno-
commercial bids, would not get opened.
2.1.4. Single Stage Multiple Envelope System

This bidding system consists of a three envelop mechanism with three stage
evaluation, however all three envelops to be submitted together only. In the
first envelop, a clear-cut, fail-pass qualification criteria along with bid security
and other eligibility documents can be asked to be submitted, so that bidders
can be qualified based on minimum qualification criteria. In the first
37
instance on the bid opening date only the first envelope is opened and
evaluated to qualify the responsive bidders who pass the minimum qualification
criteria, the first envelop does not have score assigned to it. The second
envelop of only those bidders who qualify the evaluation, can be opened based
on a scoring mechanism with either minimum threshold score or ranking of
bidders from highest to lowest followed by qualifying certain number of bidders
based on ranking. The third envelop, which is financial bid, will be opened for
bidders who qualify based on evaluation of second envelop. The bidders who do
not qualify at any of the first two stages, the rest of the envelopes will not be opened for
such bidders. Rest of procedures are same as two envelope system explained
under section 3.1.1 above.
2.1.5. Two Stage Bidding with Expression of Interest (EoI)
Two stage bidding with EOI is followed in case the proposed project is of
complex nature and the PSA does not have the full knowledge of either the
various technical solutions available or the likely private partners for such project.
The EoI stage is intended towards exploring the market and to finalize the
transaction structure and output specifications based on technical
discussions / presentations with the experienced bidders in the EoI stage in a
transparent manner. Expression of Interest (EoI) may be invited in following
situations:
• It is not feasible for the PSA to formulate output specifications and/or

transaction structure for the subject matter of procurement, without
consultation with potential private players in the market.
• The proposed project is subject to rapid technological advances or market
fluctuations or both.
• The PSA is not sure about the availability of potential private players for the
project to ensure a healthy competition
The procedure for two stage bidding shall include the following:
• In the first stage of the bidding process, the procuring entity shall invite EoI
containing the broad objectives, technical and financial eligibility criteria,
terms and conditions of the proposed procurement etc. without a bid price.
On receipt of the EoI applications, technical discussions/ presentations may
be held with the applicants qualifying the prescribed technical and financial
eligibility criteria, which are prima facie considered technically and
financially capable of executing the proposed project. Equal opportunity to
all such applicants should be provided to participate in the discussions.
During these technical discussions, the procuring entity/PSA may also invite
38
those other stakeholders, who could add value to the discussion on various
technical aspects.
• Based on the discussions/ presentations so held, PSA should frame the
output specifications and transaction structure for the project in a manner
that is consistent with the objectives of the transparent procurement. At the
same time care should be taken to make the output specifications generic
in nature so as to provide equitable opportunities to the prospective bidders.
Proper record of discussions/ presentations in the EoI stage along with the
process of deciding the output specifications and transaction structure
should be kept.
• In finalizing the relevant terms and conditions of the transaction structure, if
found necessary, as a result of discussions with the shortlisted applicants in
EOI stage, the PSA shall not modify the fundamental nature of the
procurement itself.
• In the second stage of the bidding process, the procuring entity shall invite
bids from all those bidders whose bids at the EOI stage were not rejected.
The second stage should be a two envelop system as explained under
section 3.1.5.iv) above.
• If the PSA is of the view that after EOI stage, there is likelihood of further
participation by many more bidders either due to increased market
awareness, change in eligibility criteria, project requirement etc., the second
stage bidding may not be restricted only to the shortlisted bidders of EOI
stage, and this may be so declared in the EOI document ab-initio. Thereafter
in the second stage, open bidding may be done. Such variant of EOI is called
as ‘Non-committal’ EOI.
3.2. Pre-qualification criteria (PQC)

PQC should be unrestrictive enough so as not to leave out even one capable bidder.
However, on the other hand, these criteria should be restrictive enough so as not to
allow even one incapable bidder and thus vitiate fair competition for capable bidders.
A misjudgment, in either direction may be detrimental. Due consideration should be
given while framing PQC, to its effect on adequacy of competition. PQC should
therefore be carefully decided for each procurement with the approval of competent
authority (CA). It should be clarified in the RFQ documents that, bidders have to
submit authenticated documents in support of eligibility criteria. Specific criteria of
‘pass’ for each attribute will be as specified in the standard pre-qualification
document. The attributes PQC should depend on required project scope. The model
RFQ issued by Department of Expenditure, Government of India, can be referred for
finalizing the PQC
3.2.1. Two Stage Bidding with Pre-qualification

Depending on the complexity of technical requirements of the project and
where capability of private partner is crucial, for the successful
performance of the contract, besides considering techno-commercial
39
suitability, it is necessary to ensure that competition is only among

bidders with requisite capabilities matching the challenges of the project
scope. In case bidders with inadequate capability are allowed to compete, the
better qualified bidders would be eliminated, since their bid price is likely to be
higher commensurate with their higher capability and infrastructure. In such
situations a separate bidding may be considered.
The procedure in case of two stage bidding with Pre-qualification shall include
the following:
• In the first stage of the bidding process, the procuring entity shall invite
Request for Qualification (RFQ) containing the technical and financial
eligibility criteria, short-listing criteria, project overview, brief about the
bidding process, terms and conditions of the proposed procurement etc.
without a bid price. On receipt of the RFQ applications, the applications are
evaluated against the eligibility and short-listing criteria. The shortlisting
criteria can either be a pass / fail criteria or scoring criteria or both.
Applicants may also be called for a presentation at this stage and the
presentation may be evaluated based on a pre-defined qualitative
parameter. The presentation can be assigned a score in case of scoring
criteria.
• Based on the evaluation of applications received against RFQ, a pre-defined
number of applicants are pre-qualified
• In the second stage, the procuring entity shall invite bids exclusively from
the shortlisted bidders at the RFQ stage.
• The pre-qualification shall be valid for such period as may be specified in
the RFQ. During the period of such validity, the procuring entity shall invite
bids for procurement (Request for Proposals – RfP) from pre-qualified
bidders. In case bids are not invited within such a period, fresh pre-
qualification shall be done. The RFQ should clearly specify the duration for
which the pre-qualification criteria(s) are valid. After the expiry of such
validity period, whenever a subsequent procurement shall be carried out,
fresh pre-qualification criteria shall be incorporated in such RFP documents.
• Within the validity period of pre-qualification, the RFP document will follow
single envelope mechanism. The envelop will comprise of financial bids
along with other documents as sought in the RFP.
3.3. Project Information Memorandum

A Project Information Memorandum (PIM) may be issued which will be for reference
purpose only. It may be issued with any stage/bid mechanism as and when required,
it is not a separate bid stage. The PIM shall primarily include but not be limited to the
followings:
i) Objectives of the project
40
ii) Brief details of the market assessment and technical features of the project
iii) Brief overview of the project scope
iv) Brief overview of the transaction structure
v) Soil investigation/geo-technical report (if applicable)
The PIM shall clearly specify that, this is for reference purpose only and not binding
on the PSA.
3.4. Bid Security

In order to minimize or pre-empt frivolous bids, each bidder must submit a bid security
along with the bid. Any bid which is not accompanied by the bid security is rejected.
The model RFP issued by Department of Expenditure, Government of India, prescribes
an amount equivalent to about one percent of estimated project cost as bid security.
The mode and manner of submission of the bid security would be set out in the RFP.
Ideally the Bid Security should be quoted in rupees terms in figure and not as a
percentage of Project Cost
The RFP should list the circumstances or events that could lead to the bid security
being forfeited, some of the these include the following:
a) If Bidder submit a Non-responsive Bid
b) If the bidder engages in corrupt, fraudulent, coercive, undesirable or restrictive
practices
c) If bidder fails to sign and return the duplicate copy of LOA.
d) If bidder fails to sign the Concession Agreement; or
e) If bidder fails to furnish the Performance Security within the period
prescribed in the Concession Agreement; or
f) If a Bidder fails to provide any clarification or explanation as may be
sought by the Project Sponsoring Authority from such Bidder within the
time specified for the same; or
g) If a Bidder makes a misrepresentation as to any facts or figures regarding
its Bid or during the Bidding Process in order to get the LOA/ Concession
The bid security can be payable online/DD/bank guarantee depending on the practice
followed in e-procurement portal followed for the procurement process. As per model
RFP, the bid security of all bidders except in the case of preferred bidder, shall be
refundable within 60 days from the bid due date. The bid security of the preferred
bidder shall be retained till it submits the performance security.
3.5. Bid Validity

The bid submitted by bidder shall remain valid till completion of bid evaluation process
and signing of agreement with preferred bidder. As per model RFP issued by
Government of India, the bid validity period is prescribed as 120 days from bid due
date. In case more time is required for completion of bid valuation process, the bidders
shall be communicated to extend the bid validity period. Necessary provision in this
41
regard should be incorporated in the RFP.
3.6. Bid Parameter for selection

The financial bids for PPP projects in the RFP stage should normally be invited by way
of a single objective bidding parameter. The bid parameter is ideally an outcome of
the project structuring exercise. The risk sharing among the parties to the
arrangement determining the mode of PPP also provides the PSA/procuring entity
with the most optimum choice of the bidding parameter. Depending on the project
structure, which is finally determined for project development, the PSA/procuring
entity may consider the bidding parameter for selection of preferred bidder.
A Tentative formulation of bid parameters are provided in the RFQ cum RFP of DEA.
EXAMPLES OF BID PARAMETERS3

1. Lowest financial support requested by the bidder – in projects that involve the
development of infrastructure projects under PPP framework for which financial support
is sought under the scheme of Financial Support to PPPs in Infrastructure, Department of
Economic Affairs, Ministry of Finance, Government of India.
2. Highest share (or present value of) of revenue / highest upfront payment - This type of
bid parameter is typically followed for PPP projects which involve real estate
development, development of tourism properties/ hotel properties/ convention centres,
etc.
3. Lowest unit value or present value of payments by Government – lowest unit value offered
by the bidder, or the lowest discount sought by the bidder as a bid parameter – For
example: development of renewable energy projects where the bidder is expected to
quote the lowest power purchase tariff/ discount the bidder sought from the public entity.
4. Highest present value of future payment offered by the bidder
5. Lowest annuity payment sought from the Government – in projects that are financially not
viable, often seen in water supply projects, development of roads, etc.
6. Highest social benefits – typically in case of social infrastructure projects like highest
reservation of free bed days / discount from market rates for poor patients in case of
healthcare projects
3.7. Draft PPP Concession Agreement

A draft PPP agreement should be issued along with the RFP. The draft PPP agreement
sets out the terms and conditions that govern the PSA and the private partner in a PPP
arrangement. The draft project agreement comprises several sections or chapters and
each of those sections set out terms and conditions pertaining to a specific aspect of
project. There are multiple annexes or schedules attached to the main body of the
draft project agreement which provide more details on some specific matters, for
3 Implementing Agencies can also refer the Model RFQ cum RFP issued by Department of Economic Affair for
referring to Bid Parameters provisions
42
example, the technical and performance specifications for the project or other
agreements relating to the project etc. Model Concession Agreements issued by
Government of India can be referred while preparing the draft PPP agreement. The
indicative terms and conditions that form part of the draft project agreement includes
the following:
INDIDACTIVE KEY TERMS OF DRAFT PPP AGREEMENT
Conditions Precedent Scope of Obligations of Parties

Services
Construction O&M Pricing & Payment

Mechanism
Performance Monitoring Dispute Resolution Performance Security
Insurance Force Majeure Termination
Exit Management /
Divestment
43
CHAPTER 4:
PROCUREMENT PROCESS
4.1. Electronic Procurement (e-Procurement)

Rule 160 of GFR 2017 makes it mandatory for Ministries/ Departments to receive all
bids through e-procurement portals in respect of all procurements. Ministries/
Departments which have not initiated e-procurement through any other solution
provided so far, may use e-procurement solution developed by NIC i.e., Central Public
Procurement Portal (CPPP). Other Ministries/ Departments may either use CPPP or
engage any other service provider following due process. In individual cases, where
national security and strategic considerations demands confidentiality, Ministries /
Departments may exempt such cases from e-procurement after seeking approval of
concerned Secretary and with concurrence of Financial Advisers. State Governments
may follow their respective e-procurement portals developed for public procurements in
the State.
4.2. Modes of Procurement4

Bids from prospective bidders must be invited according to a procedure that
achieves a balance between the need for the widest competition, on one hand, and
complexity of the procedure, on the other hand. Different modes of procurement are
used to suit various procurement circumstances to achieve this balance.
The various modes of procurement that can be used for procurement of PPP
projects are:
i) Open Tender Enquiry (OTE).
ii) Global Tender Enquiry (GTE).
iii) Limited Tender Enquiry - LTE
4.2.1. Open Tender Enquiry (OTE)

In OTE, an attempt is made to attract the widest possible competition by
publishing the NIT simultaneously on the designated websites and in the press
(newspapers and trade journals). The procurement procedure should be
conducted through e-procurement portals.
Under this mode of tendering
• Participation should not be restricted to only Bidders enlisted with the

procuring entity/PSA/State Government. Bidders already enlisted are also
free to participate. GFR 2017 (Rule 159) makes it mandatory for all
Ministries/ Departments of the Central Government, their attached and
Subordinate Offices and Autonomous / Statutory Bodies to publish their
tender enquiries, corrigenda thereon and details of bid awards on the
Central Public Procurement Portal (CPPP). An organization having its own
4 Manual for Procurement of Works 2019, Department of Expenditure, Ministry of Finance and GFR 2017
44
website should also publish all its advertised tender enquiries on the web
site. State Government Departments/agencies should either utilize CPPP or
the e-procurement portal used by the respective State Government. The
procuring entity should also post the complete bidding document in its web
site to enable prospective bidders to make use of the document by
downloading from the web site. The advertisements for invitation of tenders
should give the complete web address from where the bidding documents
can be downloaded. In order to promote wider participation and ease of
bidding, no cost of tender document may be charged for the tender
documents downloaded by the bidders; and
• Tender documents should be available for download free of cost up to the
date of opening of tenders. The organization should also post the complete
tender document in the web site and permit prospective tenderers to make
use of the document downloaded from the web site. However, in case any
tender fee to be charged to bidders, the same should be mentioned clearly
in the tender document and e-procurement portal. The payment mode of
the tender fee shall be as per the applicable mode under e-procurement of
each State Government.
• The due date for submission of bids shall be minimum 21 (twenty-one) days
from the date of advertisement which may vary, taking into account the
nature of project and time required for preparing the bid. The due date may
be subsequently extended with the approval of the competent authority,
only if it is felt necessary to have better competition.
• Bid security should be sufficient to ensure that bidders honor their bids but
at the same time should not be large enough to reduce competition.
4.2.2. Global Tender Enquiry (GTE)

GTE is similar to OTE but, through appropriate advertising and provision for
payment in foreign currencies, it is aimed at inviting the participation of inter-
alia foreign firms. Development of local industry also needs to be kept in mind.
Hence, it may be viable only in following situations:
• Where required technology/ specifications/ quality is not available within the

country and alternatives available in the country are not suitable for the
purpose.
• Absence of a sufficient number of competent domestic bidders likely to
deliver the required technical specifications and in case of suspected cartel
formation among indigenous bidders, where participation of international
bidders would enhance value for money.
Terms and Conditions
• Publishing of tenders may be done as described in case of OTE above. In

addition, in GTE tenders, copies of NIT should be circulated to Indian
Embassies in relevant countries and embassies of those countries in India;
45
and
• GTE tender documents must be in English, and the price should be asked
in Indian Rupees or US Dollars or Euros or Pound Sterling or Yen or in
currencies under the Reserve Bank of India’s notified basket of currencies
or a mix of any of these currencies.
• GTE tender documents must contain technical specifications which are in
accordance with national requirements or else based on international trade
standards.
• The due date fixed for opening of the tender shall be usually about four to
six weeks from the date of advertisement which may vary considering the
nature of the project and the time required to prepare the bids. The due
date may be subsequently extended with the approval of the competent
authority only to promote better competition and considering account
delivery requirement.
4.2.3. Limited Tender Enquiry (LTE)

LTE is a restricted competition procurement, where bids are invited from a
pre-empaneled list of bidders (empaneled with the Procuring
Entity/PSA/State Government); This mode provides a short and simple
procedure but may not provide as good a VFM as in case of open tendering.
Though open tendering is suggested for PPP procurement in the interest of
better competition and scope of better VFM, procuring entity may adopt LTE,
when limited numbers of bidders are known to possess requisite capability
and experience to deliver quality services. In such mode of procurement, the
procuring entity should ensure that,
• The empanelment list used for inviting bids should have a fixed validity
period and as on date of inviting bids, the list should be within its validity
period.
• The empanelment list should be periodically refreshed with updated list of
bidders through a transparent bidding process
• The empanelment list of bidders should be relevant for the required scope
of the project
Terms and Conditions
• Copies of the bidding documents should be sent free of cost directly by

speed post/courier/e-mail to empaneled bidders. Further, procuring entity
should also mandatorily publish its limited tender enquiries on the e-
procurement portal. Apart from e-procurement portal, the organizations
/departments should publish the tender enquiries on their official
websites.
• The minimum number of bidders to whom LTE should be sent is more than
46
three. However, the bid documents should be sent to all bidders empaneled
in the list used for LTE. In case it is proposed to exclude any empaneled
bidder for inviting LTE, detailed reasons, such as past performance defaults,
blacklisting, termination of previous contract etc., should be duly recorded
and approval of the competent authority should be taken before exclusion.
The selection of bidders should be with proper due diligence, to ensure that
bidders who do not meet eligibility criteria, do not get shortlisted.
• The due date for submission of bids shall be minimum 21 (twenty-one) days
from the date of advertisement which may vary, considering the nature of
project and time required for preparing the bid. The due date may be
subsequently extended with the approval of the competent authority, only if
it is felt necessary to have better competition.
The stage of procurement (two stage or single stage) is also dependent on

the mode of procurement chosen by the PSA. For example, in case of LTE,
the procurement is based on an empaneled list. In this case, a single stage
process can be followed for selection of preferred bidder out of the
empaneled list of bidders.
4.3. Formation of Bid Opening and Bid Evaluation Committee

It is essential that PSA forms a bid opening and bid evaluation committee post issue
of EOI/RFQ in case of two stage bidding and post issue of RFP in case of single stage
bidding. The bid opening committee and bid evaluation committee can either be
same or different at the discretion of PSA. The bid opening committee meetings
should be conducted at each time of opening of bids i.e., opening of EOI/RFQ
applications, opening of techno-commercial bids, and opening of financial bids. The
transaction advisor (if hired) for supporting in bid evaluation should present the bid
evaluation report to the bid evaluation committee and the same should be discussed
in detail during bid evaluation committee meetings.
The roles & responsibilities of bid opening and bid evaluation committee meetings are
provided as below:
ROLES & RESPONSIBILITIES OF BID OPENING AND BID EVALUATION

COMMITTEE
Bid Opening Committee

1 Opening of bids and ensure compliance with bid documents provisions regarding
opening of bids
2 Identify any late bid submission or withdrawal of bids prior to bid due date
3 Ensure attendance of bidders’ representatives attended are taken and recorded
4 Ensure minutes of each bid opening meeting issued
47
Bid Evaluation Committee

1 Ensure evaluation of bids are conducted in line with the provisions of bid
documents
2 Recommend any clarifications to be sought from bidders during bid evaluation
3 Recommend short listing of bidders in EOI/RFQ stage
4 Recommend selection of preferred bidder
5 Provide any information as required by PSA / competent authority with respect to
bid evaluation and selection of preferred bidder
6 Respond to any disputes/queries raised during bid evaluation
7 Finalize and recommend date of opening of financial bids
PSA needs to ensure that, each of the meetings of bid opening committee and bid
evaluation committee should be recorded through minutes for future reference of
PSA/procuring entity or any competent authority.
4.4. EOI process

In case of two stage bidding with EOI, the procedure followed for EOI process includes:
i) The procuring entity shall invite EoI containing the broad objectives, technical and
financial eligibility criteria, terms and conditions of the proposed procurement etc.
without a bid price.
ii) Depending on the provision in e-procurement portal, the EOI can either be invited
through e-procurement or through hard copy
iii) Upon receipt of the EoI applications, the bid evaluation committee shall open the EOI
applications received in the presence of bidders’ representatives.
iv) The EOI applications shall be evaluated against the pre-defined criteria and a list of
eligible applicants will be arrived
v) A technical discussion / presentation may be held with each of the applicants
qualifying the prescribed technical and financial eligibility criteria. Equal opportunity to
all such applicants should be provided to participate in the discussions. During these
technical discussions, the procuring entity/PSA may also invite those other
stakeholders, who could add value to the discussion on various technical
aspects.
vi) Based on the discussions/ presentations so held, PSA should frame the output
specifications and transaction structure for the project in a manner that is consistent
with the objectives of the transparent procurement. At the same time care should be
taken to make the output specifications generic in nature so as to provide equitable
opportunities to the prospective bidders. Proper record of discussions/ presentations
in the EoI stage along with the process of deciding the output specifications and
transaction structure should be kept
vii) The PSA/procuring entity may or may not issue the bid documents to the shortlisted
48
bidders at EOI stage. If the PSA is of the view that after EOI stage, there is likelihood
of further participation by many more bidders, the second stage bidding may not be
restricted only to the shortlisted bidders of EOI stage and it may be so declared in the
EOI document ab-initio. Thereafter in the second stage, open bidding may be done.
Such variant of EOI is called as ‘Non-committal’ EOI.
4.5. RFQ process

The RFQ process is carried out to short-list and pre-qualify applicants who will be
required to submit financial bids at the RFP stage. The objective is to identify
experienced bidders who have the requisite technical and financial capacity to
undertake the project. Through this process, the public entity weeds out unsuitable
firms and stimulates qualified firms to prepare a good proposal.
The rationale for short-listing firms is that only those firms that are capable to
undertake the project are considered for evaluation in the procurement process. It
also rests on the fact that if this is not done, a large number of firms are likely to be
selected and firms with lower capability, in their competition with established firms, are
likely to undercut and offer irrationally low financial bids compared to their better
qualified counterparts. The model RFQ issued by Government of India recommended
a short-listing of about six to seven pre-qualified bidders to secure high quality and
competitive financial bids. This restriction is intended towards shortlisting of best
available bidders to improve the chances of successful PPP operation.
The procedure to be followed for RFQ process as below:
Step 2: Pre- Step 5: Opening,

Step 3: Issue of
qualification Evaluation of
Step 1: Issue of response to Step 4: Receipt of
conference and applications and
RFQ notification queries and applications
addressing shortlisting of
addendum if any
queries bidders
Step 1: Issue of RFQ notification

The publication of the Notice Inviting Tender (NIT) is a step through which potential
developers are informed officially about the project. In publishing the NIT, the public
entity, apart from following the internal rules in this regard, must also follow the mode
and manner set out in the procurement laws applicable to their respective jurisdiction.
NIT would need to provide the following key information related to the tender process:
• minimum time for submission of bids.
49
• date of issue of the RFQ document.

• due date of submission of applications.
• place or the website from which the RFQ document can be obtained.
• any tender fee if payable
Step 2: Pre-qualification conference

The pre-qualification conference is organized after the issue of RFQ. The purpose of
pre-qualification conference is to provide clarification to the interested bidders on their
understanding of the project, submission of applications and to obtain feedback and
understand their concerns on any issue relating to the implementation of the project
or the qualification criteria provided in the RFQ document. The procuring entity may,
at its discretion and based on the complexity of the project, arrange one or multiple
rounds of the pre-qualification conference. Based on the suggestions gathered from
the pre-qualification conference, the procuring entity/PSA may revise the RFQ
documents, where appropriate.
Step 3: Issue of Response to queries and Addendum if required

The procuring entity/PSA may, at any time before the last date specified for
submission of applications, modify the RFQ documents by issuing an addendum or
corrigendum. The modification in RFQ documents may be made by the procuring
entity/PSA either on its own initiative or as a result of any clarification or comment
made by the bidders during the pre-qualification meeting.
The addendum has to be communicated to all the bidders who have attended the pre-
qualification conference. Along with addendum, the procuring entity should also
communicate the response to pre-qualification queries. The response to pre-
qualification queries along with addendum should also be published on the website
and procurement portal where the RFQ document was published.
Step 4: Receipt of applications

All applicants interested in submitting their applications for the project have to submit
their application before the application due date and time and in the manner and form
as prescribed in the RFQ document. Applications submitted after the application due
date are liable to be rejected by the procuring entity. Applicants can modify, substitute,
or withdraw their applications only within the deadline prescribed in the RFQ
document.
Step 5: Opening, evaluation of applications and shortlisting

The procedure to be followed for opening, evaluation and shortlisting of applicants
include:
50
• The bid evaluation committee shall open the applications in the presence of
applicants’ representatives.
• The procuring entity/PSA shall evaluate the applications either itself or through
transaction advisor (is appointed).
• At the first step of evaluation of applications, the PSA shall check the
responsiveness check, which is checking the applications to confirm that, all
required forms and supporting documents as asked in the RFQ document are
submitted by applicants
• The responsive applications are further evaluated against the pre-defined pre-
qualification criteria.
• Post completion of evaluation, the findings of the evaluation shall be reviewed and
discussed by the bid evaluation committee. Any clarification required to be sought
from applicants need to be discussed and recommended during bid evaluation
committee meeting.
• Accordingly procuring entity shall issue communication to applicants seeking
clarifications along with due date for submission of clarifications
• Post receipt of clarifications, the same shall be evaluated and discussed by bid
evaluation committee
• Based on the evaluation of applications and subsequent clarifications received, a
list of shortlisted bidders will be recommended by bid evaluation committee
4.6. RFP process

In the case of a two-stage procurement process, the RFP involves only the financial
bid evaluation with or without the technical proposal evaluation. In this case, evaluation
of technical and financial capacities of the bidder would have been completed in the
RFQ stage. The purpose of the RFP process is to obtain financial offers from the
bidders pre-qualified at the RFQ stage.
As part of the RFP document, the procuring authority needs to provide the project
information memorandum and draft agreement to all pre-qualified bidders. The project
information memorandum is generally provided as a preliminary reference and its
contents are not binding on the PSA. The bidders, while submitting their financial bid,
are expected to conduct their own due diligence. The draft agreement must document
the risk allocated between the parties and the duration of the agreement. Unlike the
terms provided in the Project Information Memorandum (PIM), the terms in the draft
agreement are binding on the PSA and have an overriding effect over anything to the
contrary contained in the RFP.
In case, a single stage procurement process is adopted by the procuring entity, the
RFP is issued as open bidding. In such cases, the procurement process would involve
multiple stages of evaluations comprising minimum qualification submissions
51
evaluation (of technical and financial capacities), technical proposal evaluation

(optional) and financial bid evaluation. At each stage, bidders are shortlisted for
evaluation in the next stage.
The steps to be followed in case of RFP, are similar to the RFQ process. After the
evaluation of the financial proposal submitted as part of the bid under the RFP stage,
the PSA/procuring entity declares the preferred bidder (the bidder who quotes the
best bid) to whom the letter of award/letter of acceptance (LoA) is issued followed by
execution of the agreement.
The steps followed for RFP process in case of single stage bidding and two stage
bidding are shown as below:
a) Single Stage Bidding
The steps in the single stage bidding are shown as below:
Step 1: Step 6:
Step 3: Step 8:
Issue of Step 2: Step 5: Opening and Step 7:
Issue of Execution
RFP Pre-bid Opening, evaluation of Issue of
response Step 4: of
notificatio conferenc Evaluation Financial Letter of
to queries Receipt of agreement
n through e and of proposal for award to
and bids with
e- addressing Technical technically selected
addendum selected
procureme queries Proposal qualifid bidder
if any bidder
nt bidders
Step 1: Issue of RFP notification

The publication of the Notice Inviting Tender (NIT) is a step through which potential
developers are informed officially about the project. In publishing the NIT, the public
entity, apart from following the internal rules in this regard, must also follow the mode
and manner set out in the procurement laws applicable to their respective jurisdiction.
The NIT along with RFP document should be published in the e-procurement portal
and official website of the procuring entity/PSA. NIT would need to provide the
following key information related to the tender process:
• minimum time for submission of bids.

• date of issue of the RFP document.
• due date of submission of bids.
• place or the website from which the RFP document can be obtained.
• any tender fee if payable
• Bid security payable
Step 2: Pre-bid conference
52
The pre-bid conference is organized after the issue of RFP to provide clarification to
the interested bidders on their understanding of the project, submission of bids,
procurement process and to obtain feedback and understand their concerns on any
issue relating to the implementation of the project or the qualification criteria provided
in the RFQ document. Typically, the pre-bid conference can be organized at least a
week after issue of the RFP document so that bidders will have adequate time to go
through the documents and consolidate their queries. It is also a practice that, bidders
are asked to submit their queries at least 2 days prior to the date of pre-bid conference.
Step 3: Issue of Response to queries and Addendum if required

The procuring entity/PSA may, at any time before the due date of submission of bids,
modify the RFP documents by issuing an addendum or corrigendum. The modification
in RFP documents may be made by the procuring entity/PSA either on its own initiative
or as a result of any clarification or comment made by the bidders during the pre-bid
conference.
The addendum and response to pre-bid queries should be uploaded in the e-

procurement portal where the RFP document was issued.
Step 4: Receipt of bids

All bidders interested in submitting their bids for the project have to submit their bids
before the bid due date and time and in the manner and form as prescribed in the RFP
document. Bids submitted after the bid due date are liable to be rejected by the
procuring entity. Bidders can modify, substitute, or withdraw their bids only within the
deadline prescribed in the RFP document.
Step 5: Opening, evaluation of Technical Proposals

The procedure to be followed for opening, evaluation and shortlisting of applicants
include:
• The bid evaluation committee shall open the Technical Proposal on the pre-
specified date in the presence of bidders’ representatives.
• The procuring entity/PSA shall evaluate the bids either itself or through transaction
advisor (is appointed).
• At the first step of evaluation of bids, the PSA shall check the responsiveness
check, which is checking the bids to confirm that, all required forms and supporting
documents as asked in the RFP document are submitted by bidders
• In case RFP specifies the minimum eligibility criteria, the bids shall be evaluated to
check the compliance with minimum eligibility criteria
53
• The Technical Proposal of those bidder who satisfies the minimum eligibility criteria
will further be evaluated against the technical proposal evaluation criteria as
specified in the RFP
• At each stage of evaluation of Technical Proposal i.e., evaluation of minimum
eligibility criteria and evaluation of Technical Proposal criteria, the findings of the
evaluation shall be reviewed and discussed by the bid evaluation committee. Any
clarification required to be sought from bidders need to be discussed and
recommended during bid evaluation committee meeting.
• Accordingly procuring entity shall issue communication to bidders seeking
clarifications along with due date for submission of clarifications
• Post receipt of clarifications, the same shall be evaluated and discussed by bid
evaluation committee
• Based on the evaluation of technical proposal and subsequent clarifications
received, a list of shortlisted bidders for will be recommended by bid evaluation
committee for opening of financial proposal.
• The date of opening of financial proposal shall also be decided by the bid
evaluation committee post shortlisting of bidders based on Technical Proposal
evaluation
Step 6: Opening, evaluation of Financial Proposals

• The financial proposals of all shortlisted bidders will be opened on designated date
and time through e-procurement by the bid opening committee in the presence of
bidders’ representatives
• Post opening, the financial quote of all bidders should be made visible to all bidders
in the e-procurement portal.
Step 7: Issue of Letter of Award

The bidder offering the best quote as per the provisions of the RFP, will be issued a
letter of award / letter of intent. The letter of award should include the followings:
• Intimating the project award and invitation to signing of agreement

• Any pre-conditions to be fulfilled prior to signing of agreement
• Timeline for signing of agreement
Step 8: Signing of agreement with selected bidder

Within the specified time in the letter of award / letter of intent, the agreement will be
signed with the selected bidder. A few of the points that need to be considered while
executing the agreement include.
• The Agreement should be executed on stamp paper of relevant value as per the
law applicable in the jurisdiction in which the agreement is to be made.
54
• It should be signed by an authorized person and this authority can be established

through power of attorney or charter document of the company.
• The bid submitted by the successful bidder, along with the bid security, should be
kept valid till execution of the agreement.
• Representatives of all the parties to the Agreement with the authority to sign should
execute the Agreement in the presence of at least two witnesses, whose signatures
must be taken: and
• In case SPV is required to be formed by the selected bidder for the project prior to
signing of agreement, the same shall be formed and charter documents of SPV
should have been verified by PSA to confirm the alignment with scope and
obligations of the private partner
• Both the parties will sign each page of the agreement and the seal of the parties
should be applied. The common seal of the SPV signing the agreement shall also
be put on the contract
b) Two Stage Bidding

In case of two stage bidding, all steps for the RFP process are similar to single stage
bidding except the followings:
• RFP is issued to the shortlisted bidders in the RFQ stage
• RFP involves only the financial bid evaluation with or without the Technical
Proposal evaluation. In this case, the evaluation of technical and financial capacities
of the bidder would have been completed in the RFQ stage
The steps followed for RFP process in two stage bidding are shown as below:
Step 7:
Step 1: Step 2: Pre- Step 3:
Step 5: Step 6: issu Execution
Issue of bid Issue of
Step 4: Opening, of Letter of of
RFP to conference response to
Receipt of Evaluation award to agreement
shortlisted and queries and
bids of financial selected with
bidders in addressing addendum
proposal bidder selected
RFQ stage queries if any
bidder
In case of projects that involve the development of infrastructure projects

under PPP framework for which financial support is sought under the scheme of
Financial Support to PPPs in Infrastructure, Department of Economic Affairs, Ministry
of Finance, Government of India, necessary processes as per the scheme guidelines
need to be adhered to by Project Sponsoring Authority.
55
4.7. Dealing with Situations
i) Receipt of Single Bid

There might be instances, where single bid is received in response to the RFP. In such
situations, it is essential for the PSA to understand the causes behind receipt of single
bid. There might be multiple reasons like restricted criteria, stringent terms &
conditions of agreement, lack of wide circulation of notice inviting bid, inadequate
marketing, lack of satisfactory response to bidders’ queries etc.
Hence at the first instance, the PSA should identify the reason for single bid and assess
requirement of alteration/restructuring of bid conditions with the objective of
transparency and encouraging competition. Post that, the project should be
retendered either with altered terms & conditions of RFP / transaction structure or with
the same terms / transaction structure as the case may be with due approval of
competent authority.
In case in the second round of bidding, single bid received, the same can be
considered with due approval of competent authority. The approval of competent
authority could be based on due justification that the bid was widely advertised,
qualification criteria was non-restrictive, terms of transaction were arrived based on
proper study & due diligence. Post opening of financial proposal, the single bid
received can be considered if it is providing value for money.
ii) In case only one bidder qualifies in the evaluation of Technical Proposal
There might be also instances, where multiple bids received in response to RFP,
however, post evaluation of Technical Proposal, only one bidder qualifies for opening
of Financial Proposal. In such situation, PSA can follow either of the following two
options with due approval of competent authority:
• Option 1: In case it can be established that qualification criteria was non-restrictive,

terms of transaction were arrived based on proper study & due diligence, the single
bidder can be considered for opening of financial proposal. Post opening of
financial proposal, the bid of shortlisted bidder should be considered if the bid
received is providing value for money
• Option 2: In case it appears that the situation is on account of deficiency in
evaluation criteria / bid documents, which can be remedied in the interest of
increased competition without compromising the quality, the project should be
retendered duly modifying the deficiency.
iii) In case preferred bidder withdraws/disqualified before signing of concession

agreement:
In case preferred bidder withdraws/disqualified post issue of letter of award but
56
before signing of concession agreement, PSA, in addition to forfeiting bid security of

preferred bidder, may following additional steps:
• Invite other bidders to match the bid of preferred bidder. In case more than one
bidder agrees to match the bid of preferred bidder, then the bidder with highest
quote in 1st round of bidding will be selected
• In case no bidder matches the bid of preferred bidder, call for 2nd round of bidding.
Preferred bidder of 1st round bidding will be excluded. The eligible bids in the 2nd
round of bidding, should be higher/lower than the 2 nd highest / lowest bid in 1st
round of bidding as the case may be
57
CHAPTER 5:
POST AWARD CONTRACT MANAGEMENT
Post award period commences from the date of issue of Letter of Award to the Successful
Bidder and ends after the expiry of Project Agreement/ Concession Agreement. Department
of Economic Affairs, Ministry of Finance has issued a “Post Award Contract Management
Manual for PPP Concessions”.
5.1. Objective of Contract Management

Post award contract management is one of the key success factors for PPP projects.
The key objectives of contract management include:
i) To ensure that the private partner is performing its obligation as per the terms and
conditions of the agreement
ii) To ensure PSA is performing its obligations as per the terms & conditions of the
agreement
iii) To ensure project milestones are completed on time in compliance with agreement
iv) To ensure any dispute arose during the project execution are resolved timely and in a
manner which is in the interest of project
v) To ensure that the project is executed and operating as per the minimum service levels
specified in the agreement
vi) To prevent any revenue loss to the PSA
5.2. Key stages post award of project

PPP project undergoes following four stages post award of the project:
i) Development Stage: includes the process leading up to contract execution, starting

from the date of Letter of Award up till the date of commencement of construction
consisting of all pre-construction project activities like land acquisition, financial
closure, obtaining applicable approvals & permits for commencement of construction
etc.
ii) Construction Stage: involves the period commencing from the date of
commencement of construction through the commissioning process to the completion
of construction as specified in the terms and conditions of concession agreement.
iii) Operations & Maintenance Stage: this stage extends for the longest portion of the
PPP project development lifecycle. It covers the provision of service by the private
partner and the use of such services during the concession period
iv) Handover Stage: includes the period leading up to and after contract expiry or
termination
58
5.3. Key considerations of contract management

The key considerations for an effective contract management are tabulated as below:
Key considerations Details

Planning & project • Identification of constraints and addressing the same
management • Planning/ risk management through early alarm bells
Regular Management/
Monitoring • Management of public entity’s rights, obligations, and
contingent liabilities
• Ensuring performance of obligations by private partner
• Management of incentives and penalties
• Monitoring of critical tasks/ timelines
• Tariff/ payment adjustments
• Handover management
• Dispute resolution
Compliance • Ensuring adherence to laws, policy, and regulation
• Ensuring adherence to required Governance principles
PSA’s accountability • Continuity of adherence of objective of the project
• Ensuring intended use of public resources
Managing Eventualities • Management of eventualities/ contingencies like force
majeure, termination, etc.
• Contract renegotiation management
• Change management
Effective coordination • Relationship management with private partners
• Internal coordination amongst Departments
• Coordination with third parties
Institutional Perspective • Ensuring uniformity in contract management approach
• Streamlining communication\Maintaining institutional
memory
• Capturing and monitoring performance indicators
User Perspective • Protection of user rights
• User grievance/ feedback management
• Knowledge management and information sharing with
stakeholders
Source: PPP Practitioner Guide, DEA
5.4. Contract Management Framework

Well-structured contracts and effective on ground preparation are key to good
contract management. According to the “PPP Practitioner Guide” issued by DEA,
59
“Contract management involves developing and implementing processes and

procedures to enable the public entity and the private partner to meet their obligations
in achieving the desired outcomes as per the contract terms”. Contract management
activities go beyond mere administration of contracts. Project authorities can refer
“Post Award Contract Management Manual for PPP Concessions” issued by
Department of Economic Affairs, Government of India.
5.5. Formation of Contract Management Team

A contract management team has the primary responsibility of monitoring and
reviewing the PPP project to ensure that the performance of the private partner meets
the contractual terms. It is important that the team executing the contract management
activities is selected with great care and thought to ensure the selection of the right
set of people with the required skillsets.
As the contract management team needs to discharge its responsibilities across all
stages post award of project, the team should have expertise required across stages.
PPP Practitioner Guide issued by DEA suggests a 3-level structure for contract
management team namely:
i) Operations level
ii) Supervisory level
iii) Decision making level
The structure and size of the contract management team depends on the followings:
i) Size of the project
ii) Governance and monitoring framework of the project
iii) Project milestones and activities to be performed
iv) Potential risks identified and possible consequences
v) Roles & responsibility of contract management team
The contract management team should be led by a Contract Manager who shall be
the single point of contact for all stakeholders. The key responsibilities of the contract
management team include:
i) Monitoring completion of project milestones and activities in accordance with the
timelines specified in the agreement
ii) Monitoring fulfillment of contractual obligations by each party to the agreement
iii) Facilitate and provide guidance and support to parties in case any challenge faced by
parties in fulfilling their obligations
iv) Monitoring performance of private partner in accordance with the agreement
v) Liaising with stakeholders and inter-departmental coordination as required
vi) Monitoring performance of independent monitoring agencies and review monitoring
reports
vii) Facilitate formation any monitoring committees for faster decision making
60
viii) Facilitate discussion in monitoring committees and competent authority meetings (as
required) with respect to project
5.6. Contract Management Plan

A contract management plan forms the basis of all the contract management functions.
Development and implementation of a contract management plan should start at an
early stage during the procurement process so that the contract management
requirements are included in the draft agreement developed by the PSA.
The key objectives of the contract management plan are:

i) To provide a clear understanding of how to approach the contract management
activity.
ii) Be meticulous and exhaustive for stages throughout the lifecycle.
iii) To develop a comprehensive understanding of in- depth procedures of approaching
each contract management activity.
iv) To adopt a pro- active approach to resolution of issues and disputes and define a
procedure for the same; and
v) To support the contract management team in reviewing their current contract
management
The contract management plan should be developed in such a way that it should be
guiding on how each of the contractual obligations/milestones/activities to be
performed. The contract management plan should be beyond the agreement. A
contract management plan must ideally address followings aspects:
Performance
monitoring,
Reporting &
Review
Ongoing Risk
Review Management
Contract Management Plan
Knowledge
Relationship
Managment &
Management
dissemination
Contingency Issue
planning and Management &
change Dispute
management Resolution
61
Source: PPP Practitioner Guide, DEA
5.7. Performance monitoring, Reporting & Review

The contract management plan should document the followings with respect to
performance monitoring, reporting & review:
i) Processes and activities to be done for smooth monitoring of performance of private
partner
ii) Key performance parameters, monitoring frequency and associated penalties
iii) Institutional structure for performance monitoring
iv) Various reports to be submitted along with frequency of reporting
v) Formats for reporting
vi) Frequency of various meetings of monitoring committees
The guidelines document on post award contract management issued by the

Department of Economic Affairs, Government of India sets out a checklist for
managing and monitoring performance
5.8. Risk Management

The contract management plan should present a risk assessment framework for each
stage of the project. The risk assessment framework should present
i) Identified possible risks

ii) Risk allocation
iii) Mitigation measures to be followed
The risk assessment framework in the contract management plan should provide an
approach to mitigate the risks if arises during project period
5.9. Relationship Management

Relationship management aims at maintaining a harmonious relationship between the
contract parties. The key elements of which are:
i) Mutual trust based on an understanding of mutual benefit: The parties to the
agreement should view the PPP arrangement as a mutually beneficial enterprise.
ii) Understanding objectives: The institution and the private partner must understand
and respect the independent objectives of each entity and the overall project
objectives.
iii) Open communication and information sharing: The institution should foster an
environment for sharing information with, and obtaining information from, the private
62
partner on matters directly or indirectly related to the project. The key to developing
an effective long-term relationship is the establishment of a collaborative working
arrangement along with systems and communications that actively support the
partnership throughout the life of the project.
Communication is the essence of a good working relationship. Such communication

happens in the following ways:
i) Strategic level communication focuses on discussing the partnership, its
management, and any initiatives within it that they could promote or initiate. The idea
is to promote the relationship and commitment to a healthy relationship by leading
through example.
ii) Business level communication is more formal and structured. Changes to the
contract are managed at this level and any issue that arises may be dealt.
iii) Operational level is where the actual service delivery occurs and is monitored by the
contract management team. Day-to-day problems in the delivery of services may be
resolved here. If this is not possible, they can be escalated to the contract manager.
Successful relationships in contract management are typically spearheaded by the top

management by establishing a collaborative rather than a confrontational approach to
contract management. A collaborative approach is encouraged when officials of both
the public entity and the private partner to engage in meetings and discussions. The
objective should be to review information and engage in a constructive and
collaborative dialogue. Points of discussion could include contract performance, KPIs,
operations, etc., evolving risks and issues; use the registers and joint plans to address
issues.

Department of Economic Affairs, Government of India sets out a checklist for
relationship management.
5.10. Issue Management & Dispute Resolution

Dispute management in PPPs refers to the mechanism for the amicable management
of disputes that can arise during the agreement period. The focus in dispute
management is not on the resolution of disputes but on creating an environment that
reduces their occurrence. Dispute management thrives on a cordial relationship
between the public partner and the private entity. It also requires the presence of open
communication channels and a periodic assessment of the relationships between the
parties.
The contract management plan should describe the followings:

i) Dispute resolution framework
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ii) Activities to be performed for dispute resolution

iii) Institutional framework for dispute resolution

Department of Economic Affairs, Government of India sets out a checklist for dispute
resolution
5.11. Contingency planning and change management

PPP projects are generally spread over a long project. Hence there is significant
probability for the project to face financial, political, physical contingencies. It’s a good
practice for the public entity to identify and detail major contingencies and the
response to the same. This would also provide an exhaustive list of key stakeholders/
paradigms to be considered while drafting a solution.
Contingencies can be majorly broken into 3 categories:

i) Contingencies that involve default by Private Partner but cause no interruption
of service delivery. For example, When the Private party defaults on its insurance
payments, there is no loss to the service obligations, but the Authority has the right to
recover the premium payments from the Concessionaire.
ii) Contingencies that interrupt service delivery but do not involve default by
Private Partner. For example, Change of Scope, Force Majeure events, etc.
iii) Contingencies that interrupt service delivery and involve default by Private
Partner. For example, non - adherence of private party to meet the service obligations
as per the Concession Agreement, inability to finish project in time and request for
extension, request for refinancing/ restructuring of project costs, etc.
5.12. Knowledge Management & Information Dissemination

One of the key objectives of contract maintenance and knowledge management is
ensuring the continuous availability of project related knowledge and information
through the project lifecycle. This objective is achieved through efficient knowledge
management by the contract management team.
Efficient knowledge management requires, among other things:

i) Maintaining a document/information management system – the degree of
complexity and need of automation of the system would be dependent on project
variables like project duration, scope, inter-linkages etc.
ii) Establishing necessary tools and processes – these include policies and
procedures for managing information, records, and documents
iii) Fostering an enabling culture – this helps adherence to specified policies and
procedures and information/knowledge exchange at appropriate levels
64
5.13. Ongoing Review/Renegotiation of contract

Regular review of projects is a significantly important exercise for Contract
Management. It helps in keeping both the project information and the issue
management activities up-to date. At all points of time, new and more complex
challenges surround project managers and hence these new problems might cause
severe delays in the project execution and management.
In order to deal with such situations, the provision of renegotiation of relevant

contractual provisions should be kept for having a win-win situation for both parties.
Such situations should be dealt carefully, as amending provisions of contract could be
seen as biased towards private partner. While renegotiating the contracts, it is
advisable that, any proposed amendment should be routed through the competent
authority (who has approved the bid documents prior to commencement of
procurement process) for approval. Also following aspects need to be kept in mind
during such renegotiation of contracts:
i) Whether the proposed amendment is generating value for money for public sector?
ii) Whether the proposed amendment is creating a win-win situation for both parties?
iii) Whether the proposed amendment is in public interest?
iv) Whether the proposed amendment is in compliance with all applicable regulations?
v) Whether all other options have been explored for dealing with the underlying situation
triggering the renegotiation of contract have been explored and found not suitable?
5.14. Capacity building of contract management team

Post formation of contract management team, it is essential that the team members
are trained on how to discharge their responsibility. Following steps need to be
followed for training to contract management team:
Step 1: Developing training content

As a first step, a training content need to be developed covering following aspects:
i) Provisions of PPP agreement
ii) Detailed understanding of contract management plan
iii) Risk assessment
iv) Key stakeholders involved and their roles
v) Roles & responsibility of each of the members of contract management team
Step 2: Developing a training plan

Post development of training content, a training plan need to be developed, which
shall include:
i) Scheduling the date of training
ii) Scheduling the training sessions
iii) Identifying the trainer
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iv) Planning the venue of the training and other administrative arrangements
Step 3: Conducting the training

The training should not only provide conceptual understanding, but also
understanding of measures and decisions that contract management team should take
in different situations.
Step 4: Post training assessment

The assessment should be continuous at the end of each module to assess the
understanding level of the team.
CHAPTER 6:
PROCUREMENT GOVERNANCE FRAMEWORK OF PPP
PPP projects requires involvement of multiple stakeholders within and outside government.
As understood from the previous sections of this manual, success of PPP projects requires
multiple activities and variety of expertise along with satisfaction of multiple stakeholders’
expectations. Hence, a structured governance framework within Government is very much
essential to ensure PPP projects are structured and implemented to meet its intended
objectives.
6.1. Key questions to be answered

As mentioned by PPP Handbook issued by ADB, following questions need to be
answered while creating an institutional structure for governance of PPP projects:
vi) Are the institutional and legislative frameworks in place to support sector improvement
and PPP, in particular? What are the impediments according to the ministry, users,
and utility?
i) Do the level of autonomy and accountability of stakeholders match their proposed
obligations?
ii) Are the relevant levels of government prepared to relinquish or revise their roles?
iii) Are the relevant levels of government prepared to delegate some control to private
partners within defined policy and regulatory parameters?
iv) Does each institution have the funding, staff, training, and equipment required to
66
discharge its functions?

v) Does each institution understand its role and know how to develop the procedures for
accomplishing this role?
vi) Is there a key stakeholder—i.e., a champion — with the capacity and the political will
to lead and drive the reform agenda forward?
6.2. Suggested Institutional structure

The suggested institutional arrangement for governance of PPP may include5:
i) PPP cell
ii) Project Implementation Unit
iii) Technical assistance
6.1.1 PPP Cell

PPP Cell is a central institution for supporting, monitoring, quality control of PPP
projects. In case of State Governments, this cell can be established at State
level. PPP Cell at the State level shall be the single point of contact for all line
departments for review and monitoring PPP projects. This PPP cell at the State
level can also be a point of contact for processing all PPP proposals sent by
State Government for central government funding under “Scheme for Financial
Support to PPPs in Infrastructure”. The key roles & responsibilities to be
performed by PPP cell include:
• Single point of contact for line departments and central government for PPP
projects
• Shall be responsible for maintaining repository for all PPP projects in the
State along with status
• Shall review the PPP projects and process approval for competent authority
• Facilitate discussion for approval of competent authority
• Provide necessary advice/support to line departments in PPP project
development including assistance in selecting transaction advisor
• Provide necessary advice/guidance to line department regarding financial
assistance schemes for PPP projects
• Shall review/draft/suggest any updation in PPP policy of State Government
as required
• Monitoring implementation status of PPP projects and guide/advice line
departments in case any challenges faced
• Any other responsibility as assigned by State Government regarding PPP
projects
5 PPP Handbook, ADB
67
There is also increased attention to the structure and location of PPP Cell.
Specifically, the PPP cell should have right level of authority in line with the role,
it is expected to be perform. It should also be led by a well-respected and
competent executive with experience in PPP supported by few support staffs.
The expertise to be brought into PPP Cell will be based on the roles that PPP
Cell is expected to perform. The PPP Cell need not be large; in fact, a large
unit can be seen to undermine the intent of PPPs to promote efficiency. The
PPP Cell may often require initial or ongoing technical assistance from external
PPP specialists to be deployed as required on contractual mode.
6.1.2 Project Implementation Unit

Project Implementation Unit (PIU) is a dedicated unit formed at line
ministry/department level for planning and monitoring implementation of
project activities. The unit can be formed at the beginning of project lifecycle.
The unit can be formed with combination of government staff and external
experts. The PIU shall remain operational throughout the project lifecycle. A
PIU can be formed for a project requiring larger capital investment. PIU can
also be formed to monitor multiple PPP projects of the line ministry/department.
The contract management team can be part of this PIU. The key roles &
responsibility of PIU could be:
• Monitoring & reporting project progress
• Financial management and monitoring
• Close coordination with PPP cell
• Procurement and monitoring performance of transaction advisor, review
reports of transaction advisor and facilitate decision making during project
development
• Facilitate project specific decision making and procurement process for
selection of private partner
• Monitor project implementation to ensure contractual obligations and
milestones are completed on time and in line with the provision of the PPP
agreement
• Procurements that PSA need to do like mobilizing external experts,
appointment of independent engineer/monitor etc.
• Any other responsibility that line ministry/department assigns pertaining to
PPP project(s)
6.1.3 Technical Assistance

In case PSA does not have the required experience in PPP project
development, the PSA should hire transaction advisor for providing technical
assistance in PPP project development. The transaction advisor should support
the PSA and PIU from project feasibility throughout the procurement process,
68
selection and contract signing with private partner. The scheme of “India
Infrastructure Project Development Fund (IIPDF)” issued by Government of
India can be leveraged by State Governments for financing the cost of
transaction advisor for PPP projects. The scheme guidelines of IIPDF issued by
Department of Economic Affairs (DEA), GoI may be referred in this regard.
69
BIBLIOGRAPHY
1 PPP Guide for Practitioners, Department of Economic Affairs, Ministry of Finance,

Government of India 2016
2 Guidelines for post award contract management for PPP concessions, PPP cell, Infrastructure
Division, Department of Economic Affairs, Ministry of Finance, Government of India, 2015
3 Model RFQ for PPP projects, Department of Expenditure (DOE), Ministry of Finance,
Government of India, 2009
4 Model RFP for PPP projects, Department of Expenditure (DOE), Ministry of Finance,
5 Manual for procurement of works, Department of Expenditure (DOE), Ministry of Finance,

6 General Financial Rules, 2017
7 PPP Handbook, Asian Development Bank, 2008
8 Value for money assessment (VFM) guidance, HM Treasury, Government of UK, 2006
9 PPP framework & guidance, Alberta, 2020
10 National PPP policy framework, Australia, 2015
11 South Africa National Treasury’s PPP manual, 2004
70
ANNEXURE – I: LITERATURE REVIEW
A. EXISTING GUIDELINES ISSUED BY DEA

a. PPP Practitioner Guide, 2016
The PPP Practitioner Guide has been developed by PPP Cell of
Department of Economic Affairs. This serves as a manual for
practitioners to develop projects through appropriate PPP
frameworks. This PPP Guide is divided in to 17 modules with each
module discusses a certain stage or concept in the PPP project
development process.
b. Guidelines for Post Award Contract Management for PPP

Concessions, 2015
This guideline has been developed as a quick reference strategic
road map for authorities and contract managers. The guidelines
provide the foundation principles of post award contract
management for PPP projects irrespective of the sectors. The
guidelines establish only “Why” and “What” of contract management
practices.
B. GENERAL FINANCIAL RULES, 2017
General Financial Rules (GFRs) are a compilation of rules and orders of

Government of India to be followed by all while dealing with matters
involving public finances. Rule 142 to Rule 223 of GFR deals with
procurement of goods and services.
C. OTHER GUIDELINES / MODEL DOCUMENTS

a. Model RFQ for PPP projects issued by Department of
Expenditure (DOE), Government of India, 2009 (To be updated
once updated document is published)
The model RFQ document is a reference document issued by DOE
with the objective of providing guidance to project authorities about
the provisions that need to be kept in mind at the pre-qualification
stage of procurement process for PPP projects. This document has
been published as a best practice document that State Governments
may adopt.
b. Model RFP for PPP projects issued by Department of
Expenditure (DOE), Government of India, 2009 (To be updated
once updated document is published)
The model RFP document along with the model RFQ document was
issued to present a model framework for selection of private partner
for infrastructure projects to be implemented under PPP mode. This
document is published as a best practice document that State
Governments may adopt.
c. Model RFQ cum RFP for PPP projects draft issued by Department
of Economic Affairs (DEA) Government of India, 2022 (To be
updated once approved)

The model RFQ cum RFP document issued to present a model
framework for selection of private partner for infrastructure projects
to be implemented under PPP mode. This document is published as
a best practice document that State Governments may adopt for
single stage bidding for infrastructure projects
d. PPP Handbook by Asian Development Bank

The PPP handbook is developed by ADB for its staffs and its
developing member countries’ clients. The handbook addresses a
range of matters associated with PPPs, from policy considerations to
implementation issues.
e. Value for Money Assessment (VFM) Guidance issued by HM

Treasury, Government of UK, 2006
The VFM assessment guidance highlights different issues that
procuring authorities should consider in establishing the driving
factors for VFM in their projects. The guidance presents a 3-stage
assessment framework for VFM namely programme level
assessment, project level assessment and procurement level
assessment.
The literature review includes study of international PPP procurement practices,

existing guidelines issued by Department of Economic Affairs (DEA), Government
of India, General Financial Rules 2017, and other guidelines/model documents.
The literature review undertaken has been discussed under this section as below:
D. INTERNATIONAL PPP PROCUREMENT PRACTICES
The PPP policy / law of following countries have been reviewed.

• Canada
• Australia
• South Africa
• Indonesia
• Bangladesh
• UK
A comparison of brief overview of PPP procurement practices being

followed by these countries are tabulated as below:
Canada
Project Canada
Development
Activities
Project identification & assessment
Project Project identification is based on initial assessment of
identification value for money and preliminary risk assessment. Key
factors considered for project identification include:
•well defined scope

•any history of cost overrun for similar projects
•long term nature
•whether risks can be clearly defined
•payments can be linked to performance
•market appetite for adequate competition
•fair, transparent selection process can be followed
•comparison with traditional procurement methods
•on time/on budget delivery and protection against
scope creep
Project A detailed business case is prepared considering:
Assessment • A detailed need assessment
• A detailed value for money analysis
• A detailed risk assessment
• Business and operational impact assessment
The business case is put up to Treasury Board for

approval. Post approval of business case by Treasury
Board, the procurement process is commenced.
Procurement Phase
Procurement Procurement process consists of two stages as below:
process • First stage involves issue of RFQ to shortlist capable
bidders
• In the second stage, RFP is issued to bidders
shortlisted in the RFQ stage
1st Stage of RFQ
Procurement • The RFQ shall cover primarily technical and financial
eligibility criteria, project information and shortlisting
criteria
• Maximum of 3 bidders shall be shortlisted at this stage
2nd stage RFP
procurement RFP is issued to shortlisted bidders inviting financial bid
Project Canada
Development
Activities
Evaluation and Preferred option of evaluation and selection criteria is
selection criteria technical pass/fail followed by least cost
The QCBS option with scoring technical and financial

proposal can be followed by taking due approval
Business Post selection of preferred bidder, the business plan
case/value for needs to be reviewed and updated based on the bid of
money analysis preferred bidder and update any change in value for
update money. This also becomes the criteria for final approval
for award of project
Procurement Three Step Approval:
Governance • Step 1: Business case is put up for approval by
Process Treasury Board prior to commencement of
procurement process
• Step 2: Bid documents are put up for Deputy
Ministers’ Capital Committee approval prior to
commencement of procurement process
• Step 3: Post selection of preferred bidder Deputy
Ministers’ Capital Committee approval is sought for
signing of contract with preferred bidder
Institutional Structure for Procurement process

management:
Deputy Ministers Capital Committee to provide direction
and approval during procurement process
• P3 programme review committee to advice, provide
guidance, strategic & policy inputs to Project Director
• Fairness Auditor to see the procurement process is in
line with pre-established processes and criteria
• Project Director responsible for delivering and
managing entire transaction process
• Working committee for day-to-day management
Contract The practices followed for contract management include:
Management • A PPP contract management team formed
• Contract management manual prepared
• Capacity building of the contract management team
carried out
• Performance data recorded digitally
• Mechanism of modification / renegotiation of contract
terms is in place with due approval from an additional
governing authority
Source: PPP framework & guidance, Alberta, 2020
Australia
Project Australia
Development
Activities
Project Identification & Assessment
Project Two filter approach is followed for project identification:
identification • Profiling: Compatibility with strategic infrastructure
priorities
• Appraisal: Qualitative cost-benefit analysis
The project selection and prioritization are done based

on these two inputs through consensus of a panel of 11
members
Project A 3-step approach is followed for project assessment:
Assessment • Identifying service need
• Project assessment (financial viability analysis, risk
assessment)
• Procurement strategy analysis (identifying core and
non-core services, value for money analysis, market
capability assessment, public interest
A business case is prepared and the same is put up for

approval of Government. Post approval, the procurement
process is commenced. The approval process is
decentralized with Governments in each jurisdiction will
have their individual approval processes
Procurement Phase
process • In the first stage, EOI is issued to assess market
interest, initiate consultation. At this stage, capable
bidders are shortlisted for the second stage
• In the second stage, RFP is issued to bidders
shortlisted in the first stage
1st Stage of EOI
Procurement • The EOI shall provide important project information
and shortlisting criteria
• Maximum of 3 bidders shall be shortlisted at this stage
2nd stage RFP
Evaluation and The selection criteria is decided on case-by-case basis
selection criteria with principle based on proposal offering best value for
money analysis
Business
case/value for
money analysis
Project Australia
Development
Activities
update
Procurement At each of the following stages, cabinet / cabinet sub-
Governance committee approval is sought:
Process • Approval of budget post identification of project
• Approval for implementation under PPP mode post
identification of project
• Approval for commencement of first stage of
procurement process inviting EOI
• Approval of RFP prior to issue to shortlisted bidders
• Post selection of preferred bidder, approval for award
of project.
For signing of agreement with preferred bidder,

treasurer approval is sought.
Management • A PPP contract management team formed
• Contract management manual prepared
• Capacity building of the contract management team
carried out
• Performance data recorded digitally
• Mechanism of modification / renegotiation of contract
terms is in place with due approval from an additional
governing authority
Source: National PPP policy framework, Australia, 2015
South Africa
Project South Africa

Development
Activities
Project Identification of project is based on:
identification • Preliminary need analysis
• Assessing budget and identifying sources of funding
Post identification of project, the activities to be

completed include:
• Registration with Treasury
• Formation of project team
• Appointment of transaction advisor. The cost of
transaction advisor is met through a dedicated Project
Development Fund.
Project A detailed feasibility study covering followings to be

Development
Activities
Assessment carried out:
• Need analysis
• Options analysis
• Project due diligence
• Value for money assessment
• Economic viability analysis
• Procurement plan
The feasibility study is put up for approval of Treasury

Board. Post approval, procurement process is
commenced
Procurement Phase
Procurement Procurement process consists of three stages as below:
process • In the first stage, EOI is issued to assess market
interest. EOI is issued before feasibility to assess
whether to proceed with the project. This stage is
optional for the procurement authority. No shortlisting
of bidders happens at this stage
• In the second stage, RFQ is issued to shortlist capable
bidders
• In the third stage, RFP is issued to bidders shortlisted
in the RFQ stage
1st Stage of RFQ
Procurement • cover primarily technical and financial eligibility
criteria, project information and shortlisting criteria
• Maximum number of bidders to be shortlisted is left to
project authority to decide on case-by-case basis
2nd stage RFP
Evaluation and QCBS mode of selection is followed with scoring of
selection criteria technical and financial proposal
Business Post selection of preferred bidder, the value for money
case/value for analysis report to be updated based on the preferred
money analysis bidder's bid. This also becomes the criteria for final
update approval for award of project
Procurement At each of the following stage, approval of Treasury is
Governance required:
Process • Project inception stage for implementation under PPP
mode
• Project feasibility for going ahead with the
procurement under PPP
• Approval of bid documents

Development
Activities
• Post selection of preferred bidder, approval for project
award
• Approval for signing of agreement with preferred
bidder
Management • A PPP agreement management team to be formed.
The team shall be in place since project inception
• PPP agreement management manual to be formed
• Mechanism of modification/renegotiation of contract
terms is in place with due approval from Treasury
Source: South Africa National Treasury’s PPP Manual, 2004
Indonesia
Project Indonesia
Development
Activities
Project Identification of project is based on:
identification
• Need analysis
• Compliance with applicable regulations, master plans

and other regional & national requirements
• Value for money criteria
• Potential revenue sources, required government

support, fiscal status etc.
• Benefits if delivered through PPP
Project The project assessment consists of Pre-feasibility study

Assessment and Final Pre- feasibility study.
Pre-feasibility study (PFS)

The PFS shall cover the followings:
• Market demand and need
• Socio-economic benefits
• Legal compliance
• Technology options
• Risk assessment
• Preliminary socio-environment factors
• Forms of PPP
• Government support requirements
Project Indonesia
Development
Activities
Final Pre-feasibility study (FPS)
The FPS is intended to obtain stakeholder approval of
the preliminary PFS. It aims to ensure that
• The PPP concept in the PFS has been updated and

improved based on inputs from various stakeholders;
• Project sponsoring authority sent the request for

government support to the relevant authority;
• Verify that the PPP team has been formed;
• Plan the preparation of the land acquisition,

resettlement activities, etc.;
• Schedule the preparation of a detailed environmental

study;
• Identify ways to address any legal issues that may

exist
The pre-feasibility study is submitted to Ministry of
National Development Planning. Ministry of National
Development Planning appraise the project and include
the same in the PPP book. Projects listed in the PPP
Book are categorized either as ready-to-offer PPP
projects or as projects under preparation in accordance
with the criteria defined in Presidential Regulation No. 38
of 2015
Public consultation / market sounding
The project sponsoring authority conducts public

consultations and a market sounding to obtain inputs
and responses from the PPP stakeholders. The market
sounding shall include:
• Reviewing the compliance with the social and

environmental standards, in accordance with the
provisions of the relevant environmental and social
laws and regulations
• Obtaining inputs regarding public needs related to the

PPP plan
• Ensuring PPP readiness

Procurement Phase
process
• In the first stage, pre-qualification is done based on
Project Indonesia
Development
Activities
defined pre-qualification criteria. RFQ/pre-
qualification document is issued at this stage
• In the second stage, RFP is issued to pre-qualified

bidders
1st Stage of RFQ

Procurement • Cover pre-qualification criteria, project information
and shortlisting criteria
2nd stage RFP
Evaluation and The selection criteria is decided on case-by-case basis
selection criteria
Procurement
• At the project identification stage, the pre-feasibility
Governance
study is submitted to Ministry of National Development
Process
Planning. Ministry of National Development Planning
appraise the project and include the same in the PPP
book.
• Project sponsoring authority proceed in procurement

and selection of preferred bidder
• Government of Indonesia has following three financial

support mechanism for improving attractiveness of
PPP projects:
• Project development facility to support project

preparation activity (through PPP unit under MOF)
• Viability gap funding (through PPP unit under MOF)
• Government guarantee for certain projects through

Indonesia Infrastructure Guarantee Fund (IIGF)
Source: PPP Monitor, Indonesia, ADB, 2020
Bangladesh
Project Bangladesh
Development
Activities
Project The responsibility of identifying the project lies with the
identification line department. The line department/project authority
Project Bangladesh
Development
Activities
shall undertake a preliminary assessment of the
proposed PPP project and send to the applicable line
ministry for endorsement. The line ministry shall endorse
the identified project and send the same to PPP
Authority for screening. After concurrence of PPP
Authority, the applicable line ministry submits the
proposal to Cabinet Committee on Economic Affairs
(CCEA) for in-principle approval.
PPP Authority under the chairpersonship of Hon’ble

Prime Minister of Bangladesh has been formed, which is
the nodal agency for supporting line departments
through-out project development process. All PPP
projects in the country should be routed through PPP
Authority for development and approvals.
Post receipt of in-principle approval, PPP Authority

appoints the transaction advisor for providing technical
assistance in project development activities
Project A detailed project feasibility study has been undertaken
Assessment covering the followings:
• Technical issues including site assessment including

land due diligence, topography, geo-technical
investigation, market assessment including demand-
supply gap and need assessment
• Commercial and financial considerations
• Social issues through social impact assessment
• Environmental issues assessment
• Any other issues as deemed relevant by PPP

Authority
The project feasibility study is discussed with line

department/ministry and approval of line department
was sought. Post approval of project feasibility study by
line department/ministry, the procurement phase begins.
Procurement Phase
Procurement The bidding process can either be single stage or two
process stage bidding process to be decided on case by case
basis. In case of single stage, RFP is issued.
1st Stage of In case two stage bidding, the first stage is RFQ. RFQ
Project Bangladesh
Development
Activities
Procurement shall include pre-qualification / shortlisting criteria
(technical and financial capacity) along with brief project
information. The maximum number of bidders shortlisted
in the RFQ stage is 5
2nd stage RFP is issued to shortlisted bidders
procurement
Evaluation and The evaluation method may either include the Quality and
selection criteria Cost Based Selection (“QCBS”) method or the Cost
Based Selection (“CBS”) method to be decided on case-
by-case basis
Procurement The procurement governance process for PPP include
Governance the followings
Process
• Cabinet Committee of Economic Affairs (CCEA) is the
authority that provides in-principle approval for PPP
project at the project identification stage and final
approval post selection of preferred bidder prior to
issue of Letter of Award.
• PPP Authority under the chairpersonship of Hon’ble

Prime Minister has been established as nodal
Authority for providing all advisory and facilitation
support for PPP projects in the country
Source: Procurement Guidelines for PPP projects, Bangladesh 2018
United Kingdom (UK)
Project UK
Development
Activities
Project Project identification is based on initial assessment
identification following factors:
• Establishment of project need expressed as outputs
• Compliance with policy, statutory and strategic

obligations of the country
• Value for money
• Broad cost-benefit analysis

Project UK
Development
Activities
• Potential market interest
• Affordability
Project A detailed business case is prepared considering:
Assessment • Detailed technical assessment including site
assessment, technical specifications, design options
etc.
• Market assessment
• Detailed financial assessment
• Detailed legal & regulatory assessment
• Detailed value for money assessment
• Risk assessment
• Market readiness assessment
The business case is put up to Treasury for approval. Post

approval of business case by Treasury, the procurement
process is commenced.
Procurement Phase
Procurement Two stage procurement process followed
process
1st Stage of In the first stage, advertisement is issued for shortlisting
Procurement of bidders
2nd stage Tender is issued to shortlisted bidders. The tender shall
procurement cover the followings:
• Technical specifications and performance standards
• Invitation to tender
• Financial bid
• Draft PFI contract to be signed with preferred bidder
Evaluation and The evaluation criteria is least availability payment
selection criteria payable by Government. Performance linked payment
mechanism is followed
Procurement At each stage of the project development, approval of
Governance Treasury is sought:
Process • Business case
• Tender document
• Approval post selection of preferred bidder for award
Source:
1. Overview of UK PPP, PartnershipUK, 2009
2. Allocation of risk in PPP/PFI construction projects in the UK, International Journal of Project
Management, 2004

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MANUAL FOR

ABBREVIATIONS AND ACRONYMS 6

1.2. Clarification, Amendments and Revision of this Manual 9

1.3. Applicability of this Manual 9

1.4. Basic Principles of PPP Procurement 9

1.5. Key considerations of PPPs 10

1.6. PPP Procurement Lifecycle: 11

1.7. Key Stakeholders 12

1.8. PPP Project Development Framework 12

2.1. Stage – I: Project Identification 15

1.1. Stage – II: Project Feasibility Analysis 17

1.1.1. Technical feasibility: 18

1.1.2. Financial feasibility: 19

1.2. Stage – III: Project Structuring 31

1.3. Other Pre-procurement activities 34

BID DOCUMENTATION STAGE 35

3.1. Procurement Strategy & Planning 35

3.2. Pre-qualification criteria (PQC) 39

3.3. Project Information Memorandum 40

3.4. Bid Security 41

3.5. Bid Validity 41

3.6. Bid Parameter for selection 42

3.7. Draft PPP Concession Agreement 42

4.1. Electronic Procurement (e-Procurement) 44

4.2. Modes of Procurement 44

4.3. Formation of Bid Opening and Bid Evaluation Committee 47

4.4. EOI process 48

4.5. RFQ process 49

4.6. RFP process 51

4.7. Dealing with Situations 56

POST AWARD CONTRACT MANAGEMENT 58

5.1. Objective of Contract Management 58

5.2. Key stages post award of project 58

5.3. Key considerations of contract management 59

5.4. Contract Management Framework 59

5.5. Formation of Contract Management Team 60

5.6. Contract Management Plan 61

5.7. Performance monitoring, Reporting & Review 62

5.8. Risk Management 62

5.9. Relationship Management 62

5.10. Issue Management & Dispute Resolution 63

5.11. Contingency planning and change management 64

5.12. Knowledge Management & Information Dissemination 64

5.13. Ongoing Review/Renegotiation of contract 65

5.14. Capacity building of contract management team 65

PROCUREMENT GOVERNANCE FRAMEWORK OF PPP 66

6.1. Key questions to be answered 66

6.2. Suggested Institutional structure 67

ANNEXURE – I: LITERATURE REVIEW 72

ABBREVIATIONS AND ACRONYMS

VFM Value for Money

i) Various ministries, departments, attached and subordinate offices, local urban

vi) Without purporting to be a comprehensive compendium of all such ‘Procurement

1.2. Clarification, Amendments and Revision of this Manual

1.3. Applicability of this Manual

PPP Procurement Entities viz. Project Sponsoring Authority: Procurement Entities,

1.4. Basic Principles of PPP Procurement

1.5. Key considerations of PPPs

b) Long term nature of contract

robust institutional mechanism is essential for faster decision making and

d) Effective contract management/monitoring

1.6. PPP Procurement Lifecycle: