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PSB Public Private Partnership


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									Presentation to the Joint Oireachtas
     Committee on Transport

Assessment, Approval, Public Sector
Benchmark and Procurement of PPPs

       23rd September 2003
    Key PPP Procurement Steps
1. Preliminary Project Appraisal/Cost-Benefit Analysis
2. NDFA Assistance
3. PPP Assessment
4. Approval Points
5. Optional Market Consultation
6. Public Sector Benchmark
7. Affordability Cap
8. Procurement Process
9. Value for Money Comparison
10. PSB: why confidential?
      Preliminary Assessment
Responsibility of Sponsoring Agency
• Follow Guidelines
• Establish the business need
• Appraise options for delivery of service or
• Assess costs and benefits
    National Development Finance
      Agency: Main Functions
• Recommend to State authorities the optimal
  financing mechanisms for major capital projects

• Advise State authorities in respect of financial
  aspects of infrastructure projects

• To provide financing directly for projects or
  through the creation of Special Purpose
  Companies (SPC’s)
            Benefits of NDFA
• Increased Value for Money

• Application of commercial standards to public
  procurement projects

• Underpinning PPP approach to public service

• Centralising expertise
            NDFA Advice
State Authorities have a statutory obligation to
  seek NDFA advice for:
• Major projects and grouped projects
  – With a capital cost in excess of €20 million
• NDFA will support State Authority in all
  finance, risk or insurance project issues.
            PPP Assessment
Sponsoring Agencies must determine appropriate
  procurement mechanism:
• Has Sponsoring Agency necessary statutory power
  or vires?
• Is there potential for VFM with a PPP?
• Is there potential for user-charges?
• Is there potential for 3rd party income?
• What form of PPP delivers best VFM for the
              Approval Points
•   Sanctioning Authority considers
    1. Priority of project
    2. Preliminary Appraisal
    3. PPP Assessment
•   Sanction is given
    –   To proceed with the project
    –   To appoint client advisors
   Optional Market Consultation
Market Consultation may be needed to
• Establish market interest & capacity to deliver
   the project
• Identify & clarify suitable options or solutions
• Determine bankability of project
• Evaluate risks
• Assess private sector appetite for risk transfer
       Public Sector Benchmark

•   PSB is a key management tool used in the
    quantitative assessment of VFM during
    the procurement process and in the
    evaluation and comparison of bids
        Public Sector Benchmark
•   Public Sector Benchmark: validates continuation
    of the procurement process
•   Sets out cost of project using traditional
•   PSB must be
    –   Comprehensive
    –   Detailed
    –   Risk-adjusted
•   PSB must focus of whole-life costs
    Public Sector Benchmark (contd.)
•    Costs must be derived from detailed output
•    Historic data should be used where available
•    Shadow bid may be required
•    Sanctioning Authority must compare PSB with
     Preliminary Assessment: do benefits outweigh
     project costs?
•    PSB does not change: any material change
     necessitates review of original CBA &
             Affordability Cap
•   Set by Sanctioning Authority
•   Absolute limit on outturn cost
•   Usually the PSB +/- agreed % margin
•   Used to evaluate tenders
•   Must:
    –   Not be exceeded by Sponsoring Agency
    –   Remain unchanged
           Procurement Process
Must not commence before Affordability Cap is agreed:
•   Request for Expressions of Interest
•   Pre-qualification evaluation
•   Shortlisting of consortia
•   Tender Invitation
•   EU Directives: negotiated procedure
•   BAFO Stage
•   Tender Evaluation
•   Selection of Bidder
  Value for Money Comparison
Project Board evaluates preferred tender
   against PSB & Affordability Cap:
• Focus on VFM
• Criteria to evaluate all tender elements
• More/less risk may be transferred
   compared with PSB
• Signing of contract sets & seals public
   sector outturn costs
      PSB: Why Confidential?
•   Incentivises Competition
•   Key in allowing innovation
•   Safeguards commercially sensitive information
•   Enabled bidders to use professional expertise in
    identifying best approach to delivering outputs
•   Encourages approaches to service delivery that
    span traditional boundaries
PSB: Why Confidential? (Contd.)
• Incentivises different, improved design and
  service solution to those in the PSB
• If PSB made public then output-based
  tenders can become input based contracts
• Incentivises flexibility
• Focuses supplier on re-engineering business
  to reduce costs
           Central PPP Unit

Department of Finance

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