PPP Development Stage – Defining Parameters (Scope)
7.2 What key processes are involved in defining
Due to the differences in project fundamentals, country constraints
and government objectives it is impossible for policymakers
to choose a ready-made solution to defining project parameters.
However, if it can provide clear answers to the following questions,
the government or municipality should be able to formulate an optimal
set of parameters.
- Which tasks (design, build, maintenance, operation, financing
and so on) are going to be delegated to the private sector?
- What is the level of autonomy that will be left to the
private sector and how is the private contractor to be
- Will the project be implemented as a single link or as
part of the network?
- How will the project risks be allocated between the
public and private sectors, and how will risk allocation
evolve during construction and/or operation?
- What type of cost recovery system will be used (for
example: tax payer or direct and/or indirect user; specific
taxes; dedicated resources; private sector remuneration
linked (or not) to recovered costs; external costs; and
- Which methods of financing are possible and suitable
(for instance: government budget through taxes and loans;
national savings or international funding; private financing
with or without support from the government; or International
Finance Institutions [IFIs])?
The fact that each of these six questions has a wide range
of possible answers, which will result in an almost infinite
variety of combinations, leaves the project designer with
the difficult task of adjusting project parameters harmoniously
in order to suit project needs.
Defining the parameters of a PPP should start with the
identification of the main project fundamentals, in particular:
- the nature of the project; and
- the objectives of the stakeholders.