### Key Points: Overview of the PPP Process Cycle Chapter 10

#### General Overview

- The PPP project process is detailed in chapters 3 to 8 of the PPP Guide.
- It provides a broad view of the process, varying by country depending on tender routes or
modalities.
General or Main Stages in the PPP Process

#### Phases of the PPP Process

- **Project Identification and Selection**:
- Initial phase involving project identification on a project-by-project basis.
- Can be part of a program approach where projects are screened as PPP candidates.

- **Phase Definitions**:
- The scope and naming of phases vary; there is no universal consensus.
- Contract structuring and feasibility can have different interpretations.
- The appraisal activity can be a separate phase or integrated with the investment decision.

#### Considerations and Flexibility

- The process includes initial project analysis and PPP screening, followed by detailed project
appraisal and preparation.
- The framework accommodates variations in tasks and decisions across phases.
- Tasks may extend beyond their respective phases and revisit previous analyses.

The PPP Process Cycle as Considered in This PPP Guide

#### Key Elements for a Successful PPP

1. **Identification**: Based on an appropriate technical solution.
2. **Appraisal**: Assess feasibility and prepare the project before tendering.
3. **Structuring**: Develop a suitable PPP contract and tender process.
4. **Tender Process**: Ensure effective procurement following legal requirements.
5. **Contract Management**: Manage the project throughout its contract life.

#### Terminology Variations

- Different jurisdictions use various terms for similar phases and tasks (e.g., project identification
vs. selection, cost-benefit analysis vs. economic feasibility).

#### Detailed Phases

- **Phase 1: Project Identification and PPP Screening**:

- Objectives: Select the best technical solution and pre-assess PPP suitability.
- Tasks: Identify/select project solution, scope the project, assess project economics, screen as a
PPP, prepare governance for tender.

- **Phase 2: Appraisal and Preparation**:

- Objectives: Assess project and PPP feasibility, mitigate risk, and prepare the project as a PPP.
- Tasks: Refine project scope, test technical feasibility, assess environmental impact, refine
socio-economic feasibility, assess PPP commercial feasibility, develop financial assessments,
conduct due diligence, pre-structure the PPP, define procurement strategy and plan.

#### Special Considerations

- **Alternative Processes**:
- Some governments, especially those with strong fiscal positions, separate the investment
decision from the procurement decision, focusing on efficiency and effectiveness.
 - Example: State of Victoria, Australia, uses a strategic business case followed by a full business
case to determine procurement method.

- **Appraisal and Feasibility**:

- Projects must be appraised regardless of procurement method.
- PPP projects require more time and effort in preparation and structuring compared to
traditional public works projects.
- Feasibility analyses include cost-benefit analysis, economic feasibility, financial and
commercial feasibility, and affordability.

- **Preparation**:
- Government activities to mitigate project risks before tendering, including site availability and
environmental clearances.
- Preparation continues until the tender is launched, with an emphasis on ensuring the project's
success.

#### Outcomes of Appraisal and Preparation Phase

- Confirm project's value for money and feasibility.
- Outline proposed PPP structure for further development.
- Define procurement strategy and plan for the next phase.

### Main Points Summary

#### Tender Processes (Box 1.35)

1. **Open Tender/One-Stage Tender**:
- Single stage integrating submission of qualifications and proposals.
- Common in Latin America and the Philippines.
 2. **Open Tender with Pass/Fail Pre-qualification (Two-Stage Open Tender)**:
- Separates the call for qualifications (RFQ) from the call for bids (RFP).
- Common in Latin America, e.g., Mexico.
3. **Restricted Procedure (Shortlisting with One Bid)**:
- Initial stage invites qualifications, shortlisting top-ranking bidders for final bids.
- Common in EU countries and India.
4. **Negotiated Process (Shortlisting with Negotiations)**:
- Shortlisted companies submit bids and engage in negotiations.
- Iterative bids may be submitted, with final evaluation after negotiations.
5. **Dialogue or Interaction Process**:
- Combines shortlisting with a structured dialogue or interaction during RFP.
- Varies significantly among countries like Australia, EU, and New Zealand.

#### Structuring and Drafting Phase (Chapter 5)

- **Objectives**:
- Develop a PPP contract and tender process that optimize Value for Money (VfM).
- **Tasks**:
- Define and finalize the project contract structure, including financial structuring, risk
allocation, and payment mechanisms.
- Finalize due diligence and preparation tasks from the Appraisal Phase.
- Confirm or reassess previous analyses, including economic, financial, and commercial
feasibility.
- Finalize reference design, technical requirements, and output specifications.
- Define other business terms and contract management strategy.
- Draft RFQ (qualification criteria) and RFP (proposal requirements and evaluation criteria).
- Finalize the draft contract for issuing with the RFP.
- **Main Work**:
- Structuring and drafting the project contract.
 - Structuring and drafting procurement documentation (RFQ and RFP).

#### Tender Phase (Chapter 6)

- **Objectives**:
- Manage the selection process to choose the best value proposal and execute the contract with
the most suitable bidder.
- **Tasks**:
- Launch the tender and qualify bidders.
- Issue clarifications and conduct interactions or negotiations if required.
- Evaluate proposals and negotiate if necessary.
- Award the contract and ensure conditions precedent are met before signing.
- Achieve financial close.
- **Stages**:
- Pre-qualification or shortlisting.
- Bid period from launch to submission.
- Bid evaluation and award.
- Contract signature or commercial close.

#### Contract Management Phase - Construction (Chapter 7)

- **Objectives**:
- Manage the contract to mitigate risks and ensure compliance during construction.
- **Tasks**:
- Establish governance and contract management team.
- Administer the contract, including developing a contract management manual.
- Oversee site handover, permits, and design.
- Monitor compliance and performance.
- Manage delays, communication, stakeholders, changes, claims, and disputes.
 - Administer payments in co-financed projects.
- Commission and start operations.

#### Contract Management Phase - Operations (Chapter 8)

- **Objectives**:
- Manage the contract to mitigate risks during the operations phase and ensure asset hand-back
at contract expiration.
- **Tasks**:
- Monitor performance and manage changes, claims, and disputes.
- Prepare for hand-back and finalize the contract.
- **Specific Concerns**:
- Non-compliance and under-performance.
- Ownership changes and refinancing.
- Oversight of renewal plans and investments.

This summary captures the main points and tasks involved in the PPP process, highlighting the
key stages, objectives, and methodologies used in different types of tender processes, as well as
the crucial phases of contract structuring, tendering, and management.

Chapter 10

### Detailed Overview of the PPP Process Cycle

#### General Overview

- The PPP Guide provides a comprehensive breakdown of the PPP project process in chapters 3
to 8.
- It aims to offer readers a holistic view of the PPP process, highlighting how it can vary
depending on the country and the selected tender route or modality.
Phases of the PPP Process
- **Project Identification and Selection**:
- The PPP process generally begins with identifying and selecting suitable projects.
- In cases where the government adopts a program approach, project identification and PPP
screening are integrated into the program development process.

- **Phase Definitions**:
- There is no universal agreement on the exact definition and scope of each phase.
- Terms like "contract structuring" and "feasibility" can have varied interpretations.
- Differing views exist on whether the appraisal phase should be separate or combined with the
investment decision phase.

#### Considerations and Flexibility

- The PPP Guide adopts a flexible approach to account for variations in tasks, decisions, and
authorizations within each phase.
- Many tasks extend beyond their respective phases, requiring revisits and updates in subsequent
stages.
- The policy and legal framework influence the tasks performed in each phase.

#### Key Elements for a Successful PPP

1. **Identification**:
- Projects must be based on an optimal technical solution, often referred to as identification.
2. **Appraisal**:
- Projects need thorough appraisal to assess feasibility, confirm PPP suitability, and prepare
adequately before tendering.
3. **Structuring**:
- A well-structured PPP contract and a meticulously designed tender process are crucial.
4. **Tender Process**:
- Effective procurement in accordance with legal and regulatory requirements is essential.
5. **Contract Management**:
- Proper management throughout the contract's life cycle ensures project success.

#### Terminology Variations

- The terminology used to describe the PPP phases and tasks differs across jurisdictions. The
guide offers a comparison of preferred terms and common alternatives:
- Project identification vs. selection
- Cost-benefit analysis (CBA) vs. economic feasibility
- Screening as a PPP vs. pre-assessing as a PPP
- Appraising vs. feasibility analyses
- Feasibility vs. viability
- Value for Money (VfM) analysis vs. VfM under the Public Sector Comparator (PSC) method
- Structuring tender vs. designing the procurement route
- Structuring the contract vs. designing the contract
- Tender process vs. procurement process
- Shortlisting vs. pre-selecting bidders
- PPP contract vs. PPP project or project agreement

Detailed Phases

- **Phase 1: Project Identification and PPP Screening**:

- **Objectives**:
- Select the best technical solution for the need.
- Pre-assess the project's suitability as a potential PPP to avoid unnecessary resource
expenditure on unsuitable projects.
- **Tasks**:
- Identify/select the optimal project solution from various options.
- Scope the project.
 - Assess project economics, including socio-economic assessments using CBA in some
countries.
- Screen the project as a potential PPP.
- Prepare project governance for the preparation process through to tender launch, including
developing a project management plan and defining the project team.

- **Phase 2: Appraisal and Preparation**:

- **Objectives**:
- Assess the feasibility of the project and PPP contract to mitigate project failure risks during
tender or contract life.
- Advance the project's preparation as a PPP.
- **Tasks**:
- Refine project scope and pre-design, test technical feasibility, and assess environmental
impact.
- Refine or conduct full socio-economic feasibility/assessment (CBA).
- Assess PPP commercial feasibility (including bankability) and test the market.
- Conduct financial assessments: VfM under the PSC method in some countries, PPP
affordability, and national accounting impact analysis.
- Prepare and conduct due diligence: assess risks and perform due diligence tasks.
- Pre-structure the PPP.
- Define procurement strategy/route and design the procurement plan.

#### Special Considerations

- **Alternative Processes**:
- In some developed countries with strong fiscal positions, the investment decision is separate
from the procurement decision. These governments first decide on the project's necessity based
on socio-economic analysis and then determine if PPP procurement offers better Value for
Money (VfM) than traditional methods.
- Example: State of Victoria, Australia, follows a strategic business case approach, focusing on
efficiency and effectiveness rather than just fiscal constraints.
- **Appraisal and Feasibility**:
- Regardless of the procurement method, projects must be appraised for feasibility.
- PPP projects require more extensive preparation and structuring than traditional public works
projects.
- Feasibility analyses include cost-benefit analysis, economic feasibility, financial and
commercial feasibility, and affordability.

- **Preparation**:
- Governments need to mitigate project risks before tendering, such as securing site availability
and obtaining preliminary environmental clearances.
- Preparation tasks continue until the tender is launched to ensure project success.

#### Outcomes of Appraisal and Preparation Phase

- Confirm the project's value for money and feasibility.
- Develop an initial outline of a proposed PPP structure for further refinement.
- Define the procurement strategy and plan for the next phase, including qualification
approaches, timing of RFP issuance, and bid evaluation methods.

This detailed elaboration provides a comprehensive understanding of the PPP process,

highlighting the main phases, tasks, and considerations crucial for preparing, structuring, and
managing a PPP contract.
### Tender Processes (Box 1.35)

**Open Tender or One-Stage Tender Process**:

- **Description**:
- A single-stage process where qualifications and proposals are submitted together.
- The proposal requirements also include qualification requirements, which can be structured in
a single document or two linked documents (RFP and contract).
- **Usage**:
- The most common method in many Latin American countries and also used in the Philippines
for certain projects.
- Sometimes referred to as the “one-stage tender process.”

**Open Tender with Pass/Fail Pre-Qualification (Two-Stage Open Tender)**:

- **Description**:
- Similar to the one-stage tender, but separates the call for qualifications (RFQ) from the call for
bids (RFP).
- Initially, potential bidders are invited to pre-qualify, followed by the issuance of the RFP to
those who pass the pre-qualification.
- Typically, there is only one bid round, and no negotiations are involved.
- **Usage**:
 - Common in various Latin American countries, such as Mexico.

**Restricted Procedure (Shortlisting with One Bid)**:

- **Description**:
- Begins with an initial stage where potential bidders submit their qualifications.
- Qualified bidders are ranked, and a limited number of the highest-ranking bidders are
shortlisted.
- Shortlisted bidders are then invited to submit their bids, which are evaluated to make the
awarding decision.
- **Usage**:
- Common in EU member countries and India.

**Negotiated Process (Shortlisting with Negotiations)**:

- **Description**:
- After shortlisting, companies are invited to submit bids and enter negotiations.
- Bids may be iterative, with more than one bid submitted by each proponent before calling for
the final offer.
- Only the final bid is evaluated, but negotiations may occur with the preferred bidder.
- **Usage**:
- A variant of the restricted process, usually employed in jurisdictions allowing negotiations.

**Dialogue or Interaction Process**:

- **Description**:
- Involves shortlisting followed by a structured dialogue or interactive process during the RFP
stage.
- Begins with the RFQ, which includes basic business terms and project structure to pre-select
qualified bidders.
- Significant variations exist among countries, notably between Australia, the EU, and New
Zealand.
### Structuring and Drafting Phase (Chapter 5)

**Objectives**:
- To develop a PPP contract and tender process tailored to the project to protect and optimize
Value for Money (VfM).

**Tasks**:
- **Define Final Contract Structure**:
- Develop the financial structuring, risk allocation, and payment mechanism, and outline the
contract.
- **Finalize Due Diligence and Preparation**:
- Complete preparation tasks initiated in the Appraisal Phase.
- **Reassess or Confirm Previous Analyses**:
- Re-evaluate economic, financial, and commercial aspects, potentially including new market
testing, and update the PSC and affordability analysis.
- **Finalize Reference Design and Technical Requirements**:
- Define the technical specifications and output requirements.
- **Define Business Terms and Contract Structure**:
- Implement contract management strategy and tools.
- **Draft RFQ and RFP**:
- Define qualification criteria for RFQ and proposal requirements and evaluation criteria for
RFP, including regulations for dialogue or negotiation phases if applicable.
- **Finalize Draft Contract**:
- Prepare the contract to be issued with the RFP.
**Main Work**:
- **Structuring and Drafting the Project Contract**:
- Refine the preliminary contract structure developed in the previous phase, focusing on
financial structure, payment mechanisms, and risk allocation.
- **Structuring and Drafting Procurement Documentation**:
- Design the tender process to fit the project characteristics, including qualification criteria,
evaluation criteria, bid bond requirements, submission timelines, and regulations for dialogue or
interaction phases.

### Tender Phase (Chapter 6)

**Objectives**:
- To manage the tender process smoothly and rigorously to select the best value proposal and
execute the contract with the most suitable bidder.

**Tasks**:
- **Launching the Tender**:
- Initiate the tender process and make it public.
- **Qualify Bidders**:
- Evaluate potential bidders’ qualifications and shortlist them if applicable.
- **Issue Clarifications**:
- Provide answers to any questions or clarifications needed during the tender process.
- **Conduct Interactions or Negotiations**:
- Engage in dialogue, interaction, or negotiation with bidders as required by the tender process
type.
- **Close RFP and Contract**:
- Finalize and issue the invitation to propose (ITP) in interaction processes.
- **Evaluate Proposals**:
- Assess and evaluate the bids submitted.
- **Negotiate Proposals**:
- Conduct negotiations if allowed by the tender process.
- **Award the Contract**:
- Select the winning proposal and proceed to contract award.
- **Sign the Contract**:
- Ensure all precedent conditions are met and sign the contract.
- **Financial Close**:
- Achieve financial close to secure funding for the project.

**Stages**:
- **Pre-Qualification or Shortlisting**:
- Initial stage to assess and shortlist qualified bidders.
- **Bid Period**:
- Time from launching the tender to bid submission.
- **Bid Evaluation and Award**:
- Assess and select the preferred bidder based on submitted bids.
- **Contract Signature or Commercial Close**:
- Finalize the contract award and achieve financial close.

### Contract Management Phase - Construction (Chapter 7)

**Objectives**:
- To manage the contract proactively during construction to avoid or minimize risks, changes,
claims, and disputes.
**Tasks**:
- **Establish Governance and Management Team**:
- Set up a governance structure and contract management team.
- **Contract Administration**:
- Develop a contract management manual focused initially on the Construction Phase.
- **Oversight and Management**:
- Oversee site handover, permits, design, and monitor compliance and performance during
construction.
- **Manage Delays and Communication**:
- Address delays and manage communication with stakeholders.
- **Handle Changes, Claims, and Disputes**:
- Manage changes, claims, and disputes arising during construction.
- **Administer Payments**:
- Handle payments during construction in co-financed projects.
- **Commissioning and Operations Start**:
- Oversee commissioning and commencement of operations.

**Foundations of Contract Management Strategy**:

- **Financial Model and Reporting**:
- Include financial mechanisms and reporting requirements in the contract.
- **Remedies for Non-Performance**:
- Define penalties, liquidated damages, deductions, or early termination for non-performance.
- **Risk Management Procedures**:
- Establish procedures for handling risks, claims, changes, and disputes.

**Initial Tasks**:
- **Develop Contract Management Manual**:
 - Create a user-friendly manual to guide the contract management team.
- **Establish Management Decision Governance**:
- Define decision-making processes and governance structures before contract signature.

### Contract Management Phase - Operations (Chapter 8)

**Objectives**:
- To manage the contract proactively during operations to mitigate risks and ensure proper
performance and hand-back at contract expiration.

**Tasks**:
- **Monitor Performance**:
- Continuously assess the private partner’s performance.
- **Manage Changes, Claims, and Disputes**:
- Address and resolve changes, claims, and disputes during operations.
- **Prepare for Hand-Back**:
- Plan and execute the hand-back process at the end of the contract.
- **Finalize the Contract**:
- Ensure all contract terms are met and the project is successfully handed back.

**Specific Concerns During Operations**:

- **Non-Compliance and Under-Performance**:
- Address any failures to meet performance standards.
- **Ownership Changes and Refinancing**:
- Manage changes in ownership and refinancing impacts.
- **Renewal Plans and Investments**:
- Oversee the renewal plan and manage renewal investments and funds.
**Contract Management Manual**:
- **Include Specific Sections for Each Phase**:
- Tailor sections of the manual to address specific requirements and risks of the Operations
Phase.
- **Administer Payment Mechanisms**:
- Implement and manage the payment mechanism, ensuring payments are made based on
service delivery.

**Monitoring and Management**:

- **Performance Monitoring**:
- Ensure continuous compliance with contract specifications.
- **Managing Changes and Claims**:
- Handle changes in service requirements, compensation claims, and disputes.
- **Oversight of Renewal and Investment Plans**:
- Supervise the private partner’s renewal and investment activities throughout the operations
period.