Development of Policy, Legal, and Insitutional Framework for - ppiaf

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Development of Policy, Legal, & Institutional Framework for the PPP Program in Malawi Final Report The final section of the feasibility study is the financial projections. The first part of the financial projections must be an Inputs sheet that draws data from the user demand study. Also on the inputs sheet are the capital expenditure estimates obtained from the initial engineering review. At the bottom of the sheet should be key financial indicators such as Financial Internal Rate of Return (FIRR), Economic Internal Rate of Return (EIRR), Net Present Value (NPV), Return on Equity (ROE) or Equity FIRR, and Return on Investment (ROI). Normally, feasibility analysis is conducted in two stages: (1) a pre-feasibility study, consisting of preliminary research and analysis along with data from previous studies, is prepared to enable the PPP Unit to issue a Request for Expressions of Interest; and (2) a feasibility study, which builds upon the pre-feasibility study by providing new research and detailed analysis, to enable the PPP Unit to issue a Request for Proposals. Bidders will have to perform their own due diligence and prepare the comprehensive feasibility studies that will be required to secure project financing. Feasibility research and analysis performed by PDF consultants will be limited in scope, designed only to provide data and analysis necessary to produce reliable tender documents that have enough information and analysis to enable bidders to submit responsive proposals. PPP Procurement and Contracting The tendering and procurement process for PPP is different from standard procurement, and more complex in some ways. While standard procurement requires governments to do most of the design and engineering, and then publish tenders to invite the private sector to provide those facilities at the lowest price, PPP procurement requires governments to do only the basic design and engineering, because the tender is for delivery of the outputs rather than delivery of the facilities. Private sector providers complete the design and engineering, indicating their planned approach in their proposals, and demonstrate how this approach will comply with the service delivery requirements. This infuses private sector innovation into the project design. In PPP contracting, there are often the terms: (a) Outputs; and (b) Service Delivery Standards. Although private sector innovation is encouraged in PPP procurement, government still has the responsibility of preparing a baseline project design, along with pre-feasibility and feasibility studies to demonstrate basic due diligence and to forecast the financial performance of the project. A pre-feasibility study is sufficient to begin the process, with a Request for Qualification (RFQ), but by the time the Request for Proposals (RFP) is issued, a complete feasibility study should have been completed to ensure that any data derived from prior reports has been updated and to ensure that government has completed enough of its due diligence and analysis to be reasonably assured that the information in the RFP is accurate. Inaccurate information in an RFP can later lead to contract disputes. Detailed provisions regarding PPP procurement are provided in the Regulations pertaining to the PPP Act. In applying those provisions, stakeholders are reminded to adhere to these principles: THE INSTITUTE FOR PUBLIC-PRIVATE PARTNERSHIPS 150
Development of Policy, Legal, & Institutional Framework for the PPP Program in Malawi Final Report Fairness – the procurement process must be fair to all parties, i.e. the rights of all parties must be protected at each stage of procurement, and then in contract management; Transparency – the procurement process must keep as much information as possible in the public domain, and as much information as practicable must be shared equally with all bidders, especially the methodology for selection; Competition – in order to avoid possible conflict of interest, and in order to ensure that the most qualified bidder is selected, the procurement process must provide competition sufficient to ensure that vested interests and/or corruption do not influence selection; and Accountability – decisions made by the parties must be open to review by stakeholders, and decision makers must be held accountable for their decisions. THE INSTITUTE FOR PUBLIC-PRIVATE PARTNERSHIPS 151
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31 March 2007 Mr. Constantine Chiko
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