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Laying the Groundwork for Project Success

An introduction to the essentials of structured planning.

Introduction

This section is an introduction to the entire Pre-FS in the preparation stage of the PPP project. The Pre-FS is expected to have many sections and subsections. The sections or chapters are classified as ‘reviews’ of the PPP project under consideration. Before the reviews begin, the GCA shall draft the introduction sections to introduce the background of the project and its features which set the context for the subsequent sections.

The introduction section includes the

  • Project background including overview of infrastructure and PPP in the sector, the project concept & vision, conclusions & recommendations of the Pre-FS, need / intent / purpose of PPP in the project, and objective of the Pre-FS, a section on
  • Project initiator including the GCA and the consultants/experts deployed in project preparation
  • Legal and regulatory basis/framework including the legal basis to prepare the Pre-FS and the substantive changes to Ministerial Regulations Number 7 of 2023, a section on the
  • Methodology including the process to conduct Pre-FS studies, primary and secondary data sources and limitations, if any
  • Structure of the Pre-FS and (vi) Key qualifications/disclaimer.

From this section, the evaluator/reader shall become aware of the background to the PPP project, with the required references to the previously prepared Preliminary Study (PS) and know what to expect as content in the Pre-FS.

Background

I.

  • The GCA shall describe the status of infrastructure in the sector of the project proposed as a collaboration with business entities i.e., the PPP. Describe the status of PPP in the sector of the project. Describe the need for the proposed infrastructure provision through the PPP (solicited) scheme. Refer to various documents. Documents include the PS for this project. Refer to similar infrastructure projects proposed in the sector, projects recommended by official or reputable institutions, and projects included in the planning documents of ministers/heads of institutions/regional heads/directors of SOEs. The conclusion of the response should confirm or justify the need to apply the PPP Scheme as project financing in the planned infrastructure provision.

  • The GCA shall describe the concept that was developed when the PPP was first proposed before the PS. Mention if and how the concept evolved in the PS. The concept details could include the objectives, vision, and reason to propose the project, type of infrastructure, the scope of the project such as details of the infrastructure provision or asset, potential funding sources of the project, potential beneficiaries of the project, potential or identified project development location, and potential benefits that the project is likely to deliver. If there is an update or a confirmation on any of these details between the PS stage and the Pre-FS, the updates and confirmation should be mentioned here.

  • The Pre-FS is a continuation and more detailed document of the project’s evolution from planning stage i.e., PS to preparation stage. Therefore, refer to the conclusions and recommendations of the PS and mention them here. The conclusions and recommendations of the PS are a start point to develop the Pre-FS’s various sections. This section, including follow-up plans, also helps pay attention to specific areas mentioned in the PS conclusions and recommendations for the project’s preparation through the Pre-FS.

  • Explain if the financial capacity and technical experience of the prospective project initiator to develop and implement the project is inadequate. Explain if PPP can potentially help meet the project objective/s. Explain why there is potential advantage of a PPP for the project. Potential advantages of a PPP could include accelerating investments in the sector, more effective project delivery, improvement in project performance, and optimum risk sharing with the Business Entity. Explain how alternate financing through PPP could be an appropriate solution for project implementation. Explain how the PPP could fill in the service (infrastructure) gap in the sector. Explain who are stakeholders of the project and explain if the proposed PPP has support from the relevant stakeholders.

  • The objective of the Pre-FS is to help the GCA draw conclusions on
    • PPP (PPP) funding sources
    • Identification of contractual, regulatory, and institutional frameworks
    • Technical aspects of PPP design
    • Proposed government support and/or government guarantee required
    • Risk identification, risk mitigation recommendations & risk allocation and
    • Form of return on business investment. Hence, PPP preparation through the Pre-FS aims to assess feasibility and prepare the infrastructure provision further for partnership with the Business Entity in the transaction stage.

Project initiator

  • Based on the results of the PS, the minister/head of the institution/regional head/SOE directorate/director of Regional SOE is appointed as the GCA. A Person in Charge of Cooperation Projects/GCA is the provider or organiser of the proposed infrastructure based on the statutory regulations. As the responsible party in charge of the PPP, there could be one or more GCAs depending on the types of infrastructure. The number of GCAs involved could be
    • a combination of 2 (two) or more GCAs for 1 (one) type of infrastructure or
    • a combination of 2 (two) or more GCAs for 2 (two) or more types of infrastructure.
    Therefore, the involved GCA could be the provider or organiser from any one or two or more infrastructure sectors including transportation infrastructure, road (internal and external access) infrastructure, water resources and irrigation, drinking water, centralised and local wastewater management systems, solid waste and/or hazardous and toxic waste management system, telecommunications & Information Technology (IT), electrical, oil and gas, renewable energy, including bioenergy and energy conservation, economic infrastructure for urban facilities, education, research & development facility, sport, art, & culture facility, area infrastructure including science, technology area, settlements area, business centre area, warehouse, logistics area, tourism, health, correctional facility, public housing, state building, industrial ecosystem, and infrastructure for battery-based electric vehicle, as per Ministerial Regulations Number 7 of 2023.

  • It is possible to explore various types of expertise support while preparing the project. One of them is the PPP Node. The PPP Node is an existing or new unit or organisation within the ministry or institution or regional government or SOE. It follows the provisions of laws and regulations. A PPP Node
    • assists the GCA in preparing the Pre-FS
    • assists the GCA in carrying out supporting activities in the preparation stage of the PPP
    • assists the GCA in coordinating with the Preparatory Agency, if any
    • assists the GCA in conducting market sounding and public consultation
    • submits periodic reports to the GCA on the implementation of the preparation stage
    • collects documentation produced in the preparation stage and
    • formulates policies, synchronises, and coordinates in the preparation stage.

      The PPP Node can be assisted in its tasks by other experts including

      • preparation agency
      • PPP-certified (nationally and/or internationally recognised) business entity consultant
      • individual consultant with a nationally and/or internationally recognised expert PPP certification and/or (d) academicians.

        For example, the recommended experts to be involved in Pre-FS preparation of a health-sector PPP, could include:

        • PPP Law
        • PPP
        • Business Administration
        • Financial and/or Economic Analysis
        • Architecture
        • Mechanical, Electrical, Plumbing (MEP)
        • Structural design
        • Environment
        • PPP Risks and
        • Experts as needed based on project preparation requirements.
    The GCA may deploy one or more of the above expertise or competent parties or consult them to prepare the project. The recommendations of the experts are not binding and are to be adjusted to the needs of the project and the sector. The GCA shall assess the background, capabilities and experience of the experts, before deploying them for the Pre-FS preparation. Describe here which type consultant/expert has been deployed to prepare the PPP project, as per the project’s needs. Refer to the Pre-FS template ‘Transaction Advisor Terms of Reference (TOR)’ to implement the activity of appointing any consultant or expert.

Methodology

  • A GCA may adopt different types of processes to conduct a Pre-FS study and assess the feasibility of the proposed project. It can do so in accordance with the logical technical & economic approach and methodology set out by Bappenas to establish suitability of procurement using the PPP modality. Alternatively, the process of conducting a Pre-FS may have included creating an outline of the Pre-FS based on requirements of the Ministerial Regulations Number 07/2023, writing information or content based on this outline and based on the primary and/or secondary data referred to, followed by drawing conclusions. The GCA can also use this Pre-FS offline template as a tool to draft the sections of the Pre-FS in a logical and systematic manner and in accordance with regulations and customise the responses to the requirements of the project and sector under consideration. There may be other such methodologies or processes to prepare the Pre-FS and assess the feasibility of the proposed project. A GCA may adopt any suitable methodology or process. Whichever process the GCA uses, describe it here to confirm how the Pre-FS was developed.

  • A Pre-FS may be prepared using primary and/or secondary data. Outputs of a Pre-FS are closely dependent on the data used to prepare it. For example, part of the results of a needs analysis and compliance assessment for the project may be based on primary research & its assessment and on available secondary data’s assessment too. The PS, prepared previously in the planning stage, is a crucial reference document for drafting many sections of the Pre-FS. Data and information used while conducting the Pre-FS (either primary or secondary) must be authentic, can be quoted, and originate from a reliable source that is universally known. If none of these apply, avoid the use of the data or information collected. The Pre-FS may need specialist studies like real demand assessment, site surveys, technical studies, preliminary environmental and social assessments etc. These studies are done as per the requirements of the sector for arriving at the real demand for the project services, preparation of initial project designs, estimating project costs etc. These studies form the basis for the development of the project as described in the Pre-FS. Each data source and studies undertaken used for content of the Pre-FS should be cited/listed here.

  • The GCA would make its best attempt at preparing a Pre-FS using this framework/tool/template. Yet, it may be the case that limitations to the study may arise while generating a Pre-FS. Limitations may or may not occur in every Pre-FS. If a Pre-FS has limitations, they may be stated as ‘Limitations’ in a separate section, here. A limitation of a Pre-FS refers to its flaws or shortcomings resulting from data or resource unavailability, and/or partially or fully not in accordance with the latest applicable regulations or sector policies, and/or not adapted to specific circumstances, and/or not consulted experts or transaction advisors (TA) or other competent parties for the Pre-FS preparation. These are indicative limitations. There could be less/more limitations that the GCA shall discover while preparing the Pre-FS and mention here. Describe which of these or other limitations or shortcomings exist in the Pre-FS.

Structure of The Pre-FS

  • The Strategic Suitability Study chapter in the Pre-FS for a solicited PPP should have confirmation of the conformity with and/or update to the strategic review conducted in the PS. The strategic study or review of the Pre-FS should provide information about the strategic context of the proposed PPP. The review should make observations about the following in relation to the strategic review conducted previously in the PS
    • The existence or absence of new regulations from those that have been used as references in the preparation of the strategic study in the PS
    • Validity of regulations used as references in the preparation of the strategic study in the PS
    • Development of regulatory reviews in accordance with the progress of the PPP project and/or
    • Development of institutional reviews in accordance with the progress of the PPP project.
    Describe how the chapter, sub-chapters, and sections within sub-chapters of the Pre-FS document are organised. The flow and scope of the Pre-FS document should be clear to the reader upon seeing the structure. The structure should serve as a Table of Contents (TOC). Name the chapters, sub-chapters and briefly (one sentence), describe their content. Include the executive summary, the next steps or conclusion section and the list of appendix too, in this structure. This approach can nearly be replicated as a Pre-FS structure however, the GCA would carefully make additions or modifications based on the project’s needs and considerations of what should be part of the Pre-FS of the said PPP project.

Key Qualification/Disclaimer

  • This section of the Pre-FS should state upfront the exclusions to the Pre-FS. The disclaimer should cite the exclusions clearly. Similarly, this section should state the basis of the assumptions (for example: exchange rates, sample sizes of potential users for demand analysis etc.) applied while preparing the Pre-FS and while drawing the conclusions. This section should also state the conditions in which this Pre-FS would remain valid (for example: time period (weeks/months/years)). This section should also state the conditions under which the Pre-FS shall not remain valid or would require a significant review (for example: change in political circumstances, change in land acquisition conditions, unpredictable circumstances/force majeure conditions, change in identified risks, change in government support, change in tax regimes, change in output specifications of the project, change in sector policies, change in regulations etc.). Each project being assessed for feasibility would have unique conditions, exclusions, and assumptions and the GCA shall carefully assess the factors applicable and note these in this section.