User Guide Developing Toolkits for Improving Public
Contents
1. KN WLEDGE lt Rice Ss INFRASTRUCTURE Building for Growth2. Not Provided _ Select Explanatory notes io be completed by Expert Group Examples of supporting evidence m Explanation of how the project fits with and furthers the objectives ofthe Sponsoring Autharity rrr 5 7 Other resources Tools and Resources Module also includes a set of other resources to help PPP practitioners These include links to other online PPP related resources gt downloads of examples of tables of contents for important documents gt Aset of 5 case studies of PPP experience in India Case studies included in the Toolkit Alandur Sewerage Project Karnataka Urban Water Supply Improvement Project Latur Water Supply Project Salt Lake Water Supply and Sewerage Network Timarpur Okhla Municipal Solid Waste Management Project Vadodara Halol Toll Road Tuni Anakapalli Annuity Road Project Delhi Gurgaon Expressway INhava Sheva International Container Terminal User Guide Gangavaram Port Hyderabad Metro Amritsar Intercity Bus Terminal Project U Q N N Q o O t A o0 C gt c Oo t7 O D Q a A A o0 gt O pa A _ N s b0 oO 9 D gt D Q Notes Notes pino SN sesso oJg BUPEPJ UOISII9G ddd SulAO dulij 104 s3p jioo Suido e e www pppinindia com L APACITY BUILDING CURRICULUM LASE STUDIES EDUCATION HEALTH LEGAL ISSUES ROADS STRATEGIC COMMUNICATION URBAN TRANSPORT WATER
3. Government of India Ministry of Finance The World Bank Department of Economic Affairs Developing Toolkits for Improving Public Private Partnership Decision Making Processes SPDPIAE NERASTRUCTURE PUBLIC PRIVATE INFRASTRUCTURE ADVISORY FACILITY Building for Growth Government of India Ministry of Finance Department of Economic Affairs Developinzg Toolkits for Improving Public Private Partnership Decision Making Processes User Guide December 2010 PPIAF PUBLIC PRIVATE INFRASTRUCTURE ADVISORY FACILITY The World Bank Developing Toolkits for Improving PPP Decision Making Processes User Guide Department of Economic Affairs All rights reserved Published by PPP Cell Department of Economic Affairs Ministry of Finance Government of India New Delhi 110 001 India www pppinindia com Disclaimer This Toolkit has been prepared as a part of a PPP capacity building programme that is being developed by the Department of Economic Affairs Ministry of Finance Government of India DEA with funding support from the World Bank AusAID South Asia Region Infrastructure for Growth Initiative and the Public Private Infrastructure Advisory Facility PPIAF A consulting consortium consisting of ECA and CRIS commissioned by the World Bank has prepared this Toolkit based on extensive external consultations ECA and CRIS have taken due care and caution in preparing the contents of this Toolkit
4. to properly develop and oversee the programme To further its support for scaling up PPPs Department of Economic Affairs requested the World Bank for assistance in developing tools methodologies and processes to assist the governments agencies to strengthen decision making at all key stages of the PPP project cycle These will serve a very urgent and critical purpose of capacity building and guidance for government at various levels The objective of this assignment is to develop a web based on line PPP Toolkit to facilitate identification assessment development procurement and monitoring of PPP projects The Toolkit is structured to cover the full life cycle of PPP projects While the general structure has incorporated international best practices the Toolkit has built on specific approaches for project procurement approval etc currently in place in India to ensure that it forms a relevant resource for practitioners in India The on line nature of the Toolkit means it will be possible to update the resource quickly over time as the approaches in place develop and change The toolkit is proposed to be made available to practitioners through DEA PPP Cell s website www pppinindia com as well as in the form of CDs and manuals The primary audience for the Toolkit are officials at the National State and city local governments State owned enterprises and other agencies responsible for developing and monitoring PPPs The Toolkit will be
5. amp Resources Module or by clicking on Go To My Tools You need to login before you can use the tools Each of the tools is briefly introduced below 5 1 PPP Family Indicator The PPP family indicator tool uses a decision tree to help the practitioner see quickly the main PPP mode options available in the selected sector and for the particular project type This provides the earliest indication of the mode that might be best for the project PPP modes can be loosely grouped into several families which share certain important characteristics The simplest family groups are Opex PPPs and Capex PPPs The Family Indicator asks some questions about the type of project that you have in mind It then uses the answers to make a preliminary suggestion of which PPP family would best fit the project It may be helpful to use the Family Indictor before using the Suitability Filter E T Figure 5 Screen shot of the PPP Family Indicator Tool op min oi T a PPP Family Indicator Go to My Tools gt The PPP family indicator is structured as a decision tree The user should work through the questions from the top down to c identify the appropriate indicative family of PPP options O DT i E s U 1 Does the project have a capital expenditure Operations and Capex focused project focus maintenance focused includes opex also a Capex focused project includes opex also project
6. Family Indicator 5 2 Mode Validation Tool 5 3 PPP Suitability Filter 5 4 Financial Viability Indicator Model 5 5 VFM Indicator Tool 5 6 Readiness Filters 5 7 Other resources Tables and Figures Tables Table Tools in the PPP Toolkit Table 2 Case studies included in the Toolkit Figures Figure The PPP process Figure 2 Screen shot of PPP Toolkit Home Page Figure 3 Screen shot of Process Maps Page Figure 4 PPP Toolkit site map Figure 5 Screen shot of the PPP Family Indicator Tool Figure 6 Screen shot of the Mode Validation Tool Figure 7 Screen shot of the Suitability Filter Figure 8 Screen shot of the Financial Viability Indicator Model Figure 9 Screen shot of VFM Indicator Figure 10 Screen shot of a Readiness Filter O OO OO COO Q OA ON Wo N 2 3 16 gt O NN O UU 1 2 3 14 gt PPP Toolkit User Guide The PPP Toolkit is a web based resource that has been designed to help improve decision making for infrastructure PPPs in India and to improve the quality of the infrastructure PPPs that are implemented in India The Toolkit covers five infrastructure sectors gt Highways gt Water and sanitation W amp S Ports Municipal Solid waste management SWM Urban transport Bus Rapid Transport Systems BRTS The Toolkit is for use by PPP practitioners across India in both the public and private sectors It has been designed with a focus on helping decision making by proj
7. The accuracy adequacy or completeness of any information contained in this Toolkit is not guaranteed and DEA World Bank AusAID or PPIAF is not responsible for any errors or omissions or for the results obtained from the use of such information Vhile this Toolkit has been prepared to provide useful guidance it should not be considered as a substitute for the due diligence and project development process expected in respect of a PPP project Its contents should not be construed to be the opinion of the DEA World Bank AusAID or PPIAF DEA is not liable for any direct indirect incidental or consequential damages of any kind whatsoever to the subscribers users transmitters distributors of this Toolkit The Toolkit shall not be reproduced in any form other than those intended by DEA without prior written permission from DEA Preface With the rapid growth in the PPP programme policy makers are increasingly focused on a new set of issues relevant to a programme of this size and maturity Key amongst these are assessing performance of PPPs in India to inform future approaches and programmes the regulation and management of PPPs under operation and ensuring that the fiscal risks associated with PPPs are properly understood reported and managed Government of India GOI is also well aware that the expansion of the PPP programme will most urgently require strengthening capacities at all level Center States and local level governments
8. The first page after entering the Toolkit is the start page Here you can choose which part of the Toolkit you want to start using To use the tools you must Login The first time you will need to register and choose a username and password Registration is quick and easy On the Tools login page click Register Here and follow the instructions Once you have registered you can view your profile and change your password by clicking on the links at the top of the page Click Signout to end the current session and leave the Toolkit The next time you go to the Tools page you will be asked to Login again 4 2 Navigation Use the menu on the left of each page to navigate around the Toolkit The Sitemap available from the bottom of the menu on the left also provides a convenient way of seeing all content in the Toolkit and navigating around The navigation banner at the top of the page tells you which sector you are viewing and which part of the Toolkit you are in You can change sector at any time by using the Sector Selector at the top of the page In the PPP Process module you can also navigate by clicking on the Process Maps These show the PPP process in a flow diagram making it easy to see where you are in relation to other parts of the process WLEDGE To quickly access the tools including your saved versions click on Go To My Tools Screen shot of Process Maps page Figure 3 Sector Selector Sector State Hig
9. ability to control certain risks One of the goals of a well designed PPP is to pick out the strengths and combine them together The result should be that a partnership of public and private parties is stronger and more efficient than either party by itself When should PPP be used The use of PPP for infrastructure projects should only be considered when gt The public sector environment is suited to supporting PPPs a PPP is a complex arrangement that requires support from the Public sector during development and Developing Toolkits for Improving PPP Decision Making Processes User Guide operation The likelihood of PPP success will be increased when the public sector supporting environment is strong gt The project is suitable to being carried out as a PPP certain characteristics make a project well suited to being a PPP while others imply that the PPP approach will be difficult or inappropriate gt The potential barriers to successful project implementation have been identified and can be overcome many of the common obstacles to successful PPP implementation can be identified in advance If these are insurmountable then the project should not proceed as a PPP If they can be overcome as will often be the case then this needs to be factored into the PPP development and thoroughly planned for gt Given that these conditions are satisfied the project must be commercially viable for the private sector a
10. and learning tools PPP Family Indicator PPP Suitability Filter PPP Mode Validation Tool Financial Viability Indicator Models VFM Indicator Tool Readiness Filters and Process Maps vy Indian contextualisation and project assistance was provided by CRISIL Risk and Infrastructure Solutions Limited CRIS a subsidiary of CRISIL Lisi Limited a Standard amp Poors company INFRASTRUCTURE ADVISORY Case studies of PPP experience in India were researched and prepared by CRIS 7 7927241 Web design web develobment and brogramming was by Cross Section Interactive CSI India Core development team members Economic Consulting Associates ECA Ray Tomkins ECA Director Team Leader Shane Avers PPP Financial Exbert William Derbyshire PPP Capacity Building Advisor Robert Arbon Modelling Expert Sophie Tremolet PPP Expert Advisor contributed initial insights CRISIL Risk and Infrastructure Solutions Limited CRIS Pratyush Prashant CRIS Director Consulting PPP Expert and Deputy Team Leader Amit Vora Financial Expert Cross Section Interactive CSI Rajat Berry CSI Director and Web Development Team Leader Amrish Tyagi Senior Software Engineer Sumit Makan Senior Web Developer Contents U N PPP Toolkit User Guide What is PPP in infrastructure Contents of the Toolkit How to use the Toolkit 4 1 Entering the Toolkit 4 2 Navigation 4 3 Suggested ways of using the Toolkit The Toolkit tools 5 PPP
11. by the private sector entity for a specified time period where there is a substantial risk sharing with the private sector and the private sector receives performance linked payments that conform or are benchmarked to specified pre determined and measurable performance standards The level of private sector participation in infrastructure can cover a spectrum from short term service contracts at one end all the way through to full privatisation disinvestment at the other KNi WLEDGE Service contracts and disinvestments are generally not considered as PPPs in India An infrastructure PPP in India is therefore more than just a short term contract for services with the private sector but does not go so far as to include complete private sector ownership and control Characteristics of PPPs A PPP typically has the following characteristics the private sector is responsible for carrying out or operating the project and takes on a substantial portion of the associated project risks during the operational life of the project the public sector s role is to monitor the performance of the private partner and enforce the terms of the contract the private sector s costs may be recovered in whole or in part from charges related to the use of the services provided by the project and may be recovered through payments from the public sector public sector payments are based on performance standards set out in the contract gt oft
12. e PPP glossary PPP modal definitions Developing Toolkits for Improving PPP Decision Making Processes User Guide 4 3 Suggested ways of using the Toolkit Follow the process to develop a PPP A PPP practitioner who is developing a project as a PPP can follow the Process module in a step by step way This will help ensure that all the important preparations and actions that are needed for a PPP are carried out which will in turn help strengthen the PPP and help to avoid problems later on in the PPP s development and in its operational life The Process module presents a clear process for the identification development and implementation of a PPP This indicates best practice and shows where clearances and approvals are needed The Process module also ties in with the tools which support the key activities that are required during the Process When you reach a stage in the process that is supported by a tool you can go and use the tool and then return to the Process module and continue During the development of a PPP the practitioner is likely to use other resources also including External Advisors The practitioner can return to the Toolkit as they progress to the next step in the process Use it as a reference resource A user might dip in and out of the Toolkit to use the specific parts that they are interested in at any particular time The Toolkit contains useful background material about PPPs in general and about PPP
13. O X m u SS ee ee RTI et ir n 2 i 2 Would the private operator be responsible for i Yes the project is combined No the project is only for 5 both construction of assets and operating the construction and operation construction 3 project during its lifetime c Yes the project is combined construction and ope L lt m mm m m m mo Ee ee ue m s s mom 3 O ya pes 3 Would assets under the proposed PPP be Brownfield assets Greenfield assets 5 greenfield newly built or brownfield additions to existing roads O i O Greenfield assets i i E Ei i aa DEC J O s m i e EU E DRUSI D 4 Who would be responsible for design Public sector design D Public sector E m 5 All road projects will have public ownership Public ownership ID Q Q Q Q J Q Q s Q Q Q Q Q Q s Q Q Q Q Qs Qs s Q Q 2 Qs Q Q Q Q Q Q Q Q s s Q Q Q Q G 25222222 5 6 For Capex roads PPPs the main finance source Private sector will be private sector finance moro than 20 af new capex m n ar ux m m m m m m m w wm m m m AUS m w m m m m OUS m w m m m m m m w m m m m m w m m m m m m m m s m m m m x m i T What will the primary revenue source be For Annuity unitary Toll from users Shadow toll paid by the private sector charge User charge public sector Annuity unitary charge 5 2 Mode Validation Tool The Mode Validati
14. The Financial Viability Indicator can be used to make a preliminary assessment of the likely financial viability of the project for the private sector The model looks at financial returns from the PPP compared to the after tax return on equity a commercial developer would expect The idea is to get an indication of whether the proposed PPP would be likely to attract private partners and to show what the financial implications would be for the public sector You can enter a range of financial options into the model including gt an assessment of the level of user charges annuity or other payment needed to make the project attractive to the private sector gt an initial test of whether and how much government support is likely to be needed for example through VGF funding gt what if tests of different financial designs and alternative project outcomes The complexity of the Financial Viability Indicator Model has been deliberately reduced to make it applicable across sectors and flexible enough to analyse many different projects while still retaining all of the key financial inputs and variables that affect a project In this way it is a valuable tool to highlight the key project details to practitioners in a way that is most accessible Important Excel s Macros must be enabled in order to use the Model Screen shot of the Financial Viability Indicator Model 6 PPP viability analysis CapExproject with greenfield assets an
15. and an options analysis for providing the services including whether assets are required Potential PPPs are then evaluated for their suitability for development as PPPs and a pre feasibility report is prepared An Internal Clearance is required before proceeding to the next Phase gt Phase 2 Full feasibility study PPP preparation and clearance A potential PPP that was considered suitable in the Phase analysis is studied in detail and an application is made for In principle Clearance to continue to the procurement Phase gt Phase 3 PPP procurement the procurement process takes place an application is made for Final Approval the preferred bidder is selected and the project is taken to technical close Phase 4 Contract management and monitoring the Sponsoring Authority manages the PPP throughout its life including monitoring the private partner s performance against the requirements of the Concession Agreement Phase 4 begins at the pre operative stage and spans the construction stage where relevant the operations stage and contract closure and asset transfer The Toolkit is designed to assist the Sponsoring Authority as it goes through this process Contents of the Toolkit The Toolkit is made up of three modules I PPP Background module this provides explanatory and reference material about PPPs It will be of most interest to people who are fairly new to PPPs and to those who want a refresher on so
16. d No user charges Revenue from annuity paid by government Expressed i Warning some data may not have been entered fully Please check the flags at bottom of this sheet and then check the data inputs cover User Guide Set up Demand capEx opEx Revenue viability Analysis Cash Flow income statment Balance Sheet Results Export Total Cashflow LLLI mmumum Quer App amam T aq kaa iUi Lhi de show hii Ps I H I1 1 1 ME I od i l i k amp 5 oo hs n eee ow Test the viability of the project Sensitivity and scenario analysis M minal X Real Shareholder cashflows nominal 15 0 8 55 Equity IRR raquirad by private sector partner Terminal real payment to private sector partner RsCr 0 0 Private investor perspective Shareholder cashflows and returns NPY of shareholder cashflows Cost of Equity 12 0 2 amp 2 As Cr Vieble Net Present Value NPv made up of Equity invested present value 778 R Cr Dividends received present value 103 0 Ra cr This project is viable from a private investor perspective 5 5 VEM Indicator Tool Viable Rate of retum The results from the Financial Viability Indicator Model are an input to the VFM Indicator Tool A quantitative value for money VFM test compares the estimated cost of procuring the project in the public sector with the estimated cost of procuring it as a PPP Typical VFM tests use just one moneta
17. e PPP to proceed further Any weaknesses that are identified should be addressed Screen shot of a Readiness Filter Figure 10 Checklist 1 Project design need and justification See the section on How to use the Readiness Filters for an explanation of how to answer the questions in this checklist Q1 Is there a clear and demonstrated need for the project Is the project documentation complete Readiness assessment Complete Partially Complete C Not Provided Select Explanatory notes io be completed by Expert Group Examples of supporting evidence m Results of preliminary needs assessment including description of the changes in demand supply obligations or other needs that justify the project m Explanation of how the project will meet these needs Me Q2 Is the project consistent with the objectives and scope of the 5ponsoring Authority Is the project documentation complete Readiness assessment Complete Partially Complete
18. ect officers at the Central State and Municipal levels However other users including PPP practitioners in the private sectors are also likely to find the material useful It should be used as a learning tool and as a resource for best practice in PPPs This Guide provides a quick introduction to the online Public Private Partnerships PPP Toolkit It begins with a short introduction to PPP in infrastructure It then gives an overview of what is in the Toolkit explains how to use the Toolkit and briefly introduces the Toolkit tools Developing Toolkits for Improving PPP Decision Making Processes User Guide What is PPP in infrastructure Physical infrastructure such as roads water and sanitation networks and transportation systems involve large investments that can put a strain on the public purse This strain is especially great for countries such as India whose economies are undergoing rapid development and urbanisation and have a great need for expanded infrastructure Public private partnerships PPPs are increasingly being used by governments and public sector authorities throughout the world as a way of increasing access to infrastructure services for their citizens and economies at a reduced cost The objectives of a PPP in infrastructure are to gt increase the availability of infrastructure services gt todo so with greater efficiency lower cost for the level of services provided than could be achieved usin
19. en the private sector will contribute the majority of the project s capital costs although this is not always the case It will often be necessary to build or add to existing assets in order to meet the infrastructure needs of the economy and users However an important part of the infrastructure PPP concept is that gt PPP is focused on outputs and gt The outputs of the PPP are infrastructure services not infrastructure assets The reason for the focus on outputs and services rather than assets is to encourage efficient use of public resources and improved infrastructure quality Risk a key focus of PPP design Allocating risk to achieve added efficiency is what makes PPP a potentially powerful way of reducing project related costs and achieving improved value for money for the public sector The level of risk can be changed by allocating responsibility for individual risks to those who are best able to manage them The parties involved in a project can affect the amount of risk by gt the level of influence they have over events and thelevel of information they have about the present and the future The public and private sectors are different in the types of influence and information that they have This means they can control risks in different ways from each other and they are better at controlling some risks and not as good at controlling others On their own both the public and private sectors are weaker in their
20. f VFM in most recent simulation 9475 Average VFM most recent simulation Developing Toolkits for Improving PPP Decision Making Processes Range of expected VFM results Probability a I eG E m cO m ro mr OM m OM T co OG ug 0 OG UU i C 0 O 0 uq oO m o QI OQ 0 UO O GQ Q IO F d D Im o n AN G OO cr ow 6 oO KF curs Expected VFM Rs cr 5 6 Readiness Filters The Readiness Filters are used during the four Readiness Checks that are included in the PPP development process outlined in Process module The Readiness Checks happen at key milestones in project development Their purpose is to help make sure that the PPP project is ready for the next stage and to highlight areas where the quality of preparation can be improved By doing the Checks the overall quality of the PPP can be improved The Readiness Filters are structured in the form of checklists containing a series of questions relating to the PPP project design Each Readiness Filter also contains an overall assessment of the project proposal and a recommendation as to whether it should proceed to the next stage of the process The Project Officer or the person in charge of developing the PPP for the public sector sponsor should fill out the Readiness Filter This should then be reviewed by an internal team of two or three more senior reviewers The job of the reviewers is to check that the quality of preparation is high enough to allow th
21. g the traditional public sector approach PPPs make this possible because gt PPPs allow access to the substantial financial resources of the private sector gt PPPs enable the public sector to benefit from private sector technical expertise experience and efficiency gt PPPs enable the public sector to transfer project related risks to the private sector A PPP brings the public and private sectors together as partners in a contractual agreement for a pre defined period eg 30 years matched to the life of the infrastructure assets used to provide the services The private partners investors contractors and operators provide specified infrastructure services and in return the public sector either pays for those services or grants the private partner the right to generate revenue from the project For example the private partner may be allowed to charge user fees or receive revenue from other aspects of the project The best PPPs will have the public and private partners working together to build and sustain a long term relationship that is of benefit to all Definition of PPPs in India The Department of Economic Affairs DEA defines PPPs as gt PPP means an arrangement between a government or statutory entity or government owned entity on one side and a private sector entity on the other for the provision of public assets and or related services for public benefit through investments being made by and or management undertaken
22. her Toolkit material will then be customised to this sector The Sector Selector also appears at the top right of each page and can be changed at any time CETTE Screen shot of PPP Toolkit Homepage Developing Toolkits for Improving PPP Decision Making Processes Public Private Partnerships Y PPP TOOLKIT M IN INDIA Ministry of Finance Government of India NFRASTRUCTURE Buidina for growth India Toolkit sectors The toolkit covers five infrastructure sectors s State highways Water and sanitation W amp S Ports Welcome to the online PPP toolkit Solid waste management SWM The PPP Toolkit is a web based resource that has been designed to help improve decision making Urban transport Bus Rapid Transport for infrastructure PPPs in India and to improve the quality of the PPPs thatare developed Systems The Toolkit is for use by PPP practitioners across India in both the public and private sectors It has Enter the Toolkit been designed with a focus on helping decision making by Project Officers atthe Central State and Municipal levels Other users including PPP practitioners in the private sectors will also findthe material useful State Highways v Please select a sector before entering the toolkit A brief User Guideto the toolkit is available here Go directly to My Tools Copyright 2010 2011 Dept of Economic Affairs Ministry of Finance Govt of India After choosing a sector click Go to enter the Toolkit
23. hway Module 2 Work through the PPP process Introduction Process Maps The staps in all Phases in the PPP Process including tha linkages with ite tools and the madinass checks are shown in the Process Maps for each Phase The Process Maps are interactive and accessible from all parts of the toolkit By clicking on the Map the user can go directly to that part of the toolkit orto a tool Top level process map for Module 2 Major activities in the PPP process PPP Decision Tools Click on a piace to see Click on step or tool fo goto R in the tenki amore detailed process map for ihal phase Identification Strategic planning fora set of projects Financial Pre feasibility checks and analysis eee ppp Mode Readiness check 1 Family Validation I i Indicator Tool A Readiness Fitter j PPP SultabilityDeeision Phase 2 Full f e Fehus ceu ac The sitemap for the Toolkit is at Figure 4 PPP Toolkit site map Module I PPP Background Module 2 PPP Process Guide Module 3 Tools and Resources Overview of PPP in Infrastructure Overview of PPP in India Risk a critical focus of PPP design Overview of main PPP modes PPP supporting environment Overview of the PPP process Phase I PPP identification e Strategic planning e Strategic planning activities PPP process management e Pre feasibility analysis e PPP suitability checks e Pre feasibilit
24. ity Report Screen shot of the Suitability Filter User Guide Click here to update slider values Legal limitations policy support 1 Are there laws or other legal instruments that enable PPPs Wo known legal restrictions EA O Skip Possibieas PPP 0 2 Does a policy for private participation in the sector exist Polley Issued by current government Ed m activeasPPP Pow IIIIIIII I II I OI IZIIIIIII IIIIIIIIIIIIIIKII IIZ IIIIII IIIIIIIIIII WKXIIIIIIIIIIIIIIIIIIIIIIIII I lt ISIII Z QC IZ IIIII IAIII IRI IZII AN S A HVU Vl Kl V UKKU ae e ae ae e lIIIIIGIIICICIOYYTPYJll l rere Political support for the project Developing Toolkits for Improving PPP Decision Making Processes 3 Is there a high level palitical champion for the PPP A strong high level political champion exists for the project a Skip Vary Attractive as PPP 4 Is there support for the PPP in the affected communities Local community actively opposed to the PPP concept EJ O Skip Difficult as PPP 4 5 4 Financial Viability Indicator Model A simplified Financial Viability Indicator Model is provided to help the practitioner make their own financial assessment of the PPP project The model is a spreadsheet that runs in Microsoft Excel 2003 or later The Model has been customised for each of the five sectors
25. me of the main PPP concepts such as risk and the common types of PPPs 2 PPP Process module this describes the process of developing a PPP through four Phases from identification of potential PPP projects to preparation and clearance to procurement and on to management of the PPP contract during the operational life of the PPP The PPP process LN PPP identification O PPP development pipeline gt PPP operation Phase 1 Strategic planning Phase 4 Project pre feasibility PPP suitability testing Internal clearance Implementation and monitoring 3 Tools and resources module contains a set of decision making tools to help PPP practitioners at important stages of the PPP Process This module also contains downloads and links to other PPP resources and a set of 15 case studies of PPP project experience in India Tools in the PPP Toolkit Lo PPP Family Indicator Value for money Indicator Tool PPP Suitability Filter Tool PPP Mode Validation Financial Viability Indicator Tool Model Readiness Filter User Guide How to use the Toolkit 4 Entering the Toolkit The Toolkit is available online at www toolkit pppinindia com On the homepage choose a sector using the Sector Selector drop down menu Specific parts of the Toolkit will then be customised to that particular sector For example if you are working in the water sector choose Water and Sanitation from the menu The tools and ot
26. nd offer value for money VFM for the public sector the choice of PPP should allow the project to be undertaken at lower cost on a lifetime basis while delivering the same or better quality services than could be achieved through implementation by the public sector or private sector on their own lt must also be commercially viable in order to be attractive to private investors These important conditions should be checked early for every project This will improve the quality and likely success of projects entering the PPP development pipeline Where these tests are not met it may be better to carry out the project through the traditional public sector route In this case private sector involvement might be introduced in management or operations but primary responsibility for financing and control of the project would remain with the appropriate public sector authority In general in a well designed and supported PPP the advantages will outweigh the challenges The purpose of the Toolkit is to help Sponsoring Authorities achieve this The PPP Process Identifying developing and implementing a project as a PPP involves a series of steps and should be undertaken following a clear process The PPP Toolkit organises the PPP process into a sequence of four phases gt Phase I PPP identification A set of potential projects is identified through a strategic planning process which includes a needs analysis for the infrastructure services
27. on Tool uses a risk allocation approach to further test the preliminary choice of the best PPP family for the project The aim at this stage is to prompt the practitioner to go to the next level of detail in thinking about the particular project risks and how these might best be allocated between the public and private sectors in a PPP This risk allocation is key to choosing the PPP mode The Mode Validation Tool allows you to specify your own preferred risk allocation and then to compare this against the typical risk allocations under the main families of PPPs Where there are differences between the preferred allocation and the typical allocations you should ask yourself why this is and consider whether a different allocation would be more appropriate In this way you should get a better sense of the best suited PPP mode The actual mode for the project will be further refined during the full feasibility and procurement stages and finally specified in detail in the Concession Agreement The exact details of the specific PPP mode will be determined by the Project Team or by External Advisors Screen shot of the Mode Validation Tool Preferred PPP mode for comparison Step 1 BoT Toll Risk Type Sensitivity Relevance during Preferred Allocation Allocation under BoT Toll yp the concession Step 2 A PRE OPERATIVE TASK RISKS Medium 0 5 years PrivateSectot Medium 0 5 years PrivateSector Medium 0 5 years Private Secto
28. r Private Sector Medium 0 5 years Public Sector PrivateSector Low 0 5 years Private Sector Private Sector Throughout Private Sector M L privateSeetor mesa Punic Secor y citur 5 3 PPP Suitability Filter The Suitability Filter is effectively a preliminary qualitative value for money VFM test It tests for qualitative factors that have an impact on the ease or difficulty of doing the project as a PPP The Filters purpose is to weed out dead end PPP projects early so resources aren t wasted and can instead be used on the most promising projects The results of the Filter can also be used to highlight where there are weaknesses in the project or in the supporting environment that would make the project less suited to being a PPP By highlighting any such weaknesses the Filter can help the Project Officer identify areas that need to be improved or to decide that the project is not well suited to being a PPP In this way the Suitability Filter can help to strengthen the quality of PPPs entering the development pipeline The Suitability Filter is made up of a series of questions about the important factors that impact on the suitability of the project for being a PPP The answers to each question are scored and the final result from all questions is presented on a scale of ease or difficulty of developing the project further as a PPP The Suitability Filter results would be summarised in the Pre Feasibil
29. ry value for the risk that would be transferred to the private sector in the PPP The test is very dependant on the level of uncertainty in the estimate of transferred risk The VFM Indicator highlights the uncertainty by using a range of values for the estimate of transferred risk This range is based on probability distributions This means the VFM Indicator can incorporate the uncertainty into the result and give a better indication of how likely the PPP is to deliver VFM or not The result of the VFM Indicator is a range of expected VFM results that may occur from the project gt Ifthe range is all positive then this indicates that the project can be expected to provide VFM gt If it is all negative then VFM may be unlikely gt Ifthe range covers both negative and positive VFM outcomes then the focus should shift to a careful qualitative assessment to check where the risks to VFM are and to mitigate these risks where possible Note it is good practice to carry out a qualitative assessment of likely VFM in any case for example by using the Suitability Filter Screen shot ofVFM Indicator User Guide 2 Range of simulated VFM outcomes Average expected VFM was positive and strong in the most recent simulation The estimated chance of a positive VFM outcome was 94 A qualitative VFM assessment of the proposed PPP should still be carried out as best practice Rs Cr 282 9 VFM as of project cost 17 256 Probability o
30. s in India as well as links to other resources and an instructional set of case studies of previous experience with PPPs in India Use the tools to help with particular parts of PPP preparation PPP practitioners might use particular tools such as the Financial Viability Indicator models the Suitability Filter or the Readiness Filter to test or check a project that they are developing The Toolkit tools The Toolkit contains the following 6 tools to help decision making for PPPs gt PPP Family Indicator gives a starting indication of which PPP mode family the particular project might be suited to PPP Mode Validation Tool uses a risk allocation analysis to help decide further whether the selected PPP mode is best for the project The PPP Suitability Filter tests how well suited the project is to being a PPP and checks for barriers that might make it difficult to do the project as a PPP Financial Viability Indicator Model allows an analysis of the key questions of financial viability of the project and to test these using what if scenarios Value for money Indicator Tool provides an indication of the expected range of value for money for the public sector from the PPP Readiness Filters checks that all the important steps have been followed and that the important preparations have been made so that the project is ready to move on to the next step in development as a PPP The tools are available from the Tools
31. useful in expanding the lessons learned in the transport and power sectors to other infrastructure sectors considering the use of PPPs More specifically the Toolkit will benefit the lagging States and regions that currently have huge infrastructure deficits and low capacity to conceptualise and develop PPP projects The Toolkit will also be of use to the private sector and financial institutions involved in infrastructure PPPs consultants advising the private sector and governments as well as civil society Credits The Toolkit was develobed for Debartment of Economic Affairs Infrastructure Ministry of Finance Government of India The Toolkit was develobed under a non lending technical assistance co financed by AusAID through the South Asia Region Infrastructure for Growth Initiative Public Private Infrastructure Advisory Facility PPIAF and the World Bank Core team members for the DEA Mr Govind Mohan Joint Secretary DEA Ms Aparna Bhatia Director PPP Cell DEA Mr Atul Garg PPP Expert Mr Saji TD MIS Expert Mr Prashant Bharadwaj MIS Expert Toolkit development credits A consortium of consultants led by Economic Consulting Associates ECA was engaged by the World Bank to develop and produce the Toolkit The Toolkit concept structure and content were conceived developed and prepared by Economic Consulting Associates ECA of London UK ECA also conceived and developed the Toolkit s PPP analysis decision making
32. y report e Readiness Check Phase 2 Full feasibility PPP preparation and project clearance e Planning for PPP management Full feasibility analysis and PPP due diligence e Choosing best suited procurement method e First drafts of key project documents e Readiness Check 2 and application for in principle clearance Phase 3 PPP Procurement Preparing for procurement e Market sounding EOI e Qualifying RFQ and shortlisting Final drafts of key bidding documents s Readiness Check 3 amp Final approval Bidding RFP and bid evaluation s Contract finalisation amp award Phase 4 PPP contract management and monitoring e Goals principles and stages of contract management e Preparation for contract management s Readiness Check 4 Monitoring performance Managing asset transfer s Other contract management issues guidance on specific Case study lessons Tools e PPP Suitability Filter e PPP Family Indicator Tool e PPP Mode Validation Tool e Financial Viability Indicator Model e VFM Indicator Tool Process guides and checks e Process Map e PPP readiness filter Document guides e TOR contents for needs and options assessment full feasibility study e Checklists for environmental and social assessments pre feasibility checklist s Document examples Links and resources e Links to websites and other online PPP resources e Set of 15 PPP in India case studies
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