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PPP in Hospitals - Key Characteristics
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Are the objectives and scope of the project clear and stable (e.g. policy, demographics)?
Are the requirements adequately expressed in terms of outputs?
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Familiarity of this approach to output based contracting to the public/private sector.
Reasons for excluding clinical services provided by doctors, nurses.
Output specifications and longer term contract management.
Managing changes
Staff transfer, union issues
Who is responsible and pays for decanting, for cleaning up the old site
Are the old sites included as part of the transaction?
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Methodology for assessing costs and benefits
Discount rates
In-house capacity for evaluation of projects beyond simple social cost-benefit analysis
Is Option 6 necessarily the best option o balancing costs and benefits
Costs of changing your mind later on
Qualitative and quantitative value for money analysis
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Who?:
o investors - the private-sector
o taxpayers - through the government
o users
Plannin / Land Failure to obtain planning permission or necessary land, resulting in termination of
^cquisition Risk the project or significant variation to the service solution.
Desi n Risk Design of the chosen solution does not allow the output requirements to be met,
leading to revisions in design, changes to specification or termination of project.
Risks associated with the construction phase, such as latent or construction defects,
Construction Risk archaeological discoveries or unforeseen ground conditions, leading to construction
delays and cost overruns.
Demand Risk Risk of fluctuations in long term demand for the service, leading to changes to
specification or termination of project.
Perormance Risk Risk of not achieving performance targets set out in the output specification, leading
to poor quality service to users.
Technolo y and
Risk that changes to technology render proposed solution obsolete, leading to
Obsolescence Risk
expensive changes to design/scope.
Risk ^llocation«3
Risk of higher than expected operating costs, making it more costly to deliver services
Operatin Risk
to stated standard.
Third Party Risk of lower than expected income from third party users, making it more costly to
Income Risk deliver services to stated standard.
Residual Value Risk of fluctuations in the value of the asset associated with the service at the end of
Risk the contract, making the contract more expensive overall .
Risk of inability to obtain finance to fund the project, or fluctuations in the cost of
Financin Risk funds or the terms of financing anticipated at the outset o making it costlier to provide
the service.
Risk Identiication and ^llocation
Case Study Questions and Discussion Points
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Which key risks do you think have not been identified?
What do you think of the probability and impact of the risks?
Do you think that the proposed allocation for each of the risks is sensible?
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Appetite of the market for risk transfer
Design risk
Demand risk
Payment risk
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Geography/sector/size
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Is there stron evidence o contractor, lender and investor market interest?
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Depth o local contractor market
o Quality o market soundin
o Comparability o previous projects
o Size and experience o local contractors
o Project mana ement and acility mana ement expertise
Expected availability o lon -term limited recourse inancin
o Expected returns on equity and debt
o Lon term interest rate and orei n currency hed in
o Terms and conditions that lenders and equity providers typically require or
the risks involved
o Credible risk transer to investors
Quality o advisers
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Is the project affordable?
Can the authority pay its contribution and what are the risks for the authority?
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se o sensitivities in the analysis
Risks around sale o land
Inclusion o transaction and lon term authority monitorin costs
Existence o bankable lon term payment obli ations to satisy the investors and
lenders
Parliamentary approvals!!
Reliability, relevance and sensitivity o car parkin income
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In there evidence in the case study that a credible and well resourced team is in place to
manage the project?
Are credible and experienced advisers available and appointed?
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Project management arrangements used to date in PPP pathfinder projects
Commitment and availability of Project Owner and Project Manager
Stability of project team o who is leading on the site sale?
Clarity of roles
Adequacy of budgets
Size and effectiveness of the Project Board o ability to meet and take decisions
Delegation
Track record and experience of external advisers o local auditing firm
Depth of the external adviser market
Procurement processes and budgets enabling appointment of the right advisers
How will the contract be managed in the long term?
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Who are the key stakeholders?
How effective is the stakeholder management process?
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Identification of Project sponsors
Stakeholder management and communication process
Who does the IEIG report to?
Evidence of stakeholder commitment
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Ensure that statutory processes (planning, public enquiry, consultation) have been considered
and the timetable incorporates any implications that compliance to statutory process may
entail.
Ensure that risk of compliance with statutory processes is properly shared with private sector
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Have all the important approvals been identified /obtained to deliver the project as a PPP?
Discussion Points:
Site or land ownership issues
Is land title likely to be an issue? Who normally deals with this?
Local authority¶s capacity to award and enter into long-term contracts
Other key statutory obligations which might pose problems (e.g. archaeological concerns)
Required collateral infrastructure (e.g. roads, power, water, waste) in place
Development of contractual documents
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Manage the PPP supply market (to generate interest, understand constraints,
familiarise with procurement process and manage expectations)
Determine achievable share of whole-life project risks
Determine the scope of the competition (e.g. Information Management &Technology)
Determine the number of competitors
Design the nature of the competition
(process and timing)
Determine the bidder requirements
Procurement Process
Case Study Questions and Discussion Points
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What is your view on the proposed tender phase time-table
What needs to have been done and in place before the tendering phase?
Will there be reasonable competition for this project?
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Requirements of local procurement law
Developing evaluation criteria - balancing a fast and transparent bidder selection process
with selection of the right long term solution
Raising awareness of the project, PIMs
Bid bonds
Who bears bid costs?
Short List vs. Long List after Pre-qualification document /PQQ
nsolicited proposals
Participation of national companies
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Is DFI finance likely to important for the project?
Does the availability of DFI funding look likely?
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Involvement of DFIs (how and when)
se of DFI term sheets during the tender phase
Role of DFIs in developing long term finance
Role of DFIs as an ³honest broker´
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