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23rd September 2003

Presentation to the Joint Oireachtas Committee on Transport Assessment, Approval, Public Sector Benchmark and Procurement of PPPs. 23rd September 2003. Key PPP Procurement Steps . Preliminary Project Appraisal/Cost-Benefit Analysis NDFA Assistance PPP Assessment Approval Points

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23rd September 2003

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  1. Presentation to the Joint Oireachtas Committee on TransportAssessment, Approval, Public Sector Benchmark and Procurement of PPPs 23rd September 2003

  2. Key PPP Procurement Steps • Preliminary Project Appraisal/Cost-Benefit Analysis • NDFA Assistance • PPP Assessment • Approval Points • Optional Market Consultation • Public Sector Benchmark • Affordability Cap • Procurement Process • Value for Money Comparison • PSB: why confidential?

  3. Preliminary Assessment Responsibility of Sponsoring Agency • Follow Guidelines • Establish the business need • Appraise options for delivery of service or asset • Assess costs and benefits

  4. 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)

  5. Benefits of NDFA • Increased Value for Money • Application of commercial standards to public procurement projects • Underpinning PPP approach to public service provision • Centralising expertise

  6. 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.

  7. 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 Exchequer?

  8. Approval Points • Sanctioning Authority considers • Priority of project • Preliminary Appraisal • PPP Assessment • Sanction is given • To proceed with the project • To appoint client advisors

  9. 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

  10. Public Sector BenchmarkDefinition • 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

  11. Public Sector Benchmark • Public Sector Benchmark: validates continuation of the procurement process • Sets out cost of project using traditional procurement • PSB must be • Comprehensive • Detailed • Risk-adjusted • PSB must focus of whole-life costs

  12. Public Sector Benchmark (contd.) • Costs must be derived from detailed output specifications • 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

  13. 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

  14. 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

  15. 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

  16. 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

  17. 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

  18. Central PPP Unit Department of Finance pppinfo@finance.gov.ie www.ppp.gov.ie

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