Outline Business Case Development and Report Out 1.0 Introduction The main objective is to demostrate the technical, economic, and financial viability of any identified project(s) as PPP projects, through the generation of an Outline Business Case. The OBC will represent a key input of the PPP project preparation phase. Among the tasks involved in the generation of the Outline Business Case are: • • •
Definition of project concept- a clear description of the project concept, including description of policy context; Technical scope- description of the key technical parameters envisioned for the project; Needs analysis- high-level review of the project’s commercial rationale, and analysis of the demand for and desirability of the project;
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Cost estimation- preliminary project costing, including expected capital outlays, environmental and social safeguards, and ongoing maintenance costs, as well as a discussion of non-quantifiable costs;
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Preliminary assessment of social and environmental impacts of the project;
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Revenue forecasting;
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Development of a preliminary financial model to carry out the initial PPP screening to determine which projects can support a tariff (and or unitary payments) and which cannot, and ultimately suitability for PPP execution. The consultant or MDA should prescribe a methodology to differentiate fully self-supporting tariff projects from those likely to require subsidy (capital grant and/or availability payment/revenue guarantees) and those likely to be fully publicly financed. The financial model will evaluate full project life costs, affordability limits, risks and their costs and optimal value-for-money methods of delivery, and include, at minimum, the following inputs: o
Cost of Year Expenditure
Construction costs
Annual routine maintenance (where relevant)
Periodic major maintenance by annual drawdown amount;
Tariff or Toll collation operating costs (where relevant)
Security and Safety
Other ancillary operating costs
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Toll or Tariff Revenue income based on proposed tariff structure (or tariff structure options)
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Other sources of funds: VGF, debt financing, concessionaire equity
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The economic and financial conclusions drawn from the financial model should be clearly articulated, and should include sensitivity analysis and reporting of standard financial and economic evaluation parameters including post-tax Financial Internal Rate of Return (FIRR)
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Affordability analysis- Where a PPP concession scheme is found to be viable, the consultant or MDA will provide indications of minimum Viability Gap Funding and/or operating subsidies, if appropriate, required to attract private sector participation, along with justifications for such indications;
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Risk analysis- preparation of risk register identifying all the reasonably foreseeable risks and possible mitigation measures, and preliminary risk allocation among the public and private sectors;
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Options analysis- If the project is found to be suitable for a PPP, presentation of the range of technical, legal and financial options for structuring a PPP transaction for the project(s), including key contract terms for the recommended option (for example proposed payment mechanism to reflect recommended risk allocation). If it is found to be not suitable, evaluation of alternative options for meeting project objectives; Implementation recommendations: if applicable, preliminary recommendations on proposed approach to PPP tendering process, timetable, etc.
Please see section 2, below, for a detailed description of the required contents of the Outline Business Case Report. 2.0 Report Out The Outline Business Case Report should provide all the relevant information for the [sponsoring MDA] to make a well-informed decision on whether or not to proceed with the suggested PPP option for each project. It should incorporate all of the issues described in the Scope of Work, above. A model outline of the Outline Business Case is provided below: 1. Introduction • Executive summary • Introduction • Project background • Approach and methodology to the OBC study 2. Strategic and Local Context of Project • Policy context and strategic objectives • Needs analysis (including future demand and sensitivity to economic/social factors) • Service objectives and performance measures 3. Project Appraisal (Cost/Benefit Analysis) • Technical cost estimation (capital, maintenance, operating) • Social and environmental impact costs and benefits • Traffic and revenue projections 4. Risk Analysis • Identification and categorization of risks • Risk register with risk analysis and quantification • Proposed risk allocation 5. Financial and Economic Appraisal • Financial model and sensitivity analysis • Assessment of economic and financial viability 6. Options Analysis • Assessment of alternative forms of both conventional procurement and PPP
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• Evaluation of PPP options considered • Recommendations on preferred option • Key contractual terms Implementation Recommendations • Recommendations for further project preparation (feasibility studies, technical studies, due diligence, etc.) • Proposed project timetable • Recommendations on procurement strategy and procedures
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