Charting the Path to Success

At first, the GCA begins with the budgeting activity for the preparation stage of the KPBU project. It ensures budget availability for all Pre-FS components (reviews) & supporting activities. It focuses on allocation of companion budget if a Preparation Agency or facilitating Minister is involved in the project preparation.

At step 2, the GCA/ delegated authority sets up the teaming for the preparation stage. It appoints an external certified consultant, PPP Preparation Agency and/or Process Advisor. In this activity, the PPP node assists the GCA.

At step 3, the GCA engages in the Strategic Review. In the Strategic Suitability Study for a solicited KPBU, the GCA carries out a confirmation of the conformity with and/or update to the strategic review conducted in the PS at the planning stage. The strategic review of the Pre-FS should provide information about the strategic context of the proposed KPBU. The review should make observations about the following in relation to the strategic review conducted previously in the PS (i) The existence or absence of new regulations from those that have been used as references in the preparation of the strategic study in the PS (ii) Validity of regulations used as references in the preparation of the strategic study in the PS (iii) Development of regulatory reviews in accordance with the progress of the KPBU project and/or (iv) Development of institutional reviews in accordance with the progress of the KPBU project.

At step 4, the GCA conducts the Economic Review. In this review, the GCA identifies projects that provide the best Value for Money (VFM) through an economic study. The review is carried out through a Social Cost Benefit Analysis (SCBA) and quantitative VFM analysis. The review/ assessment comprises estimation of the full costs and benefits (financial as well as non-financial) of the solicited KPBU/PPP project to the society as a whole. This assessment helps the GCA determine whether the project is desirable or not from the viewpoint of the society as a whole.

At step 5, the GCA conducts the Commercial Review. This assessment covers site, land, environment, outcome specifications, PPP form, demand review, and revenue review. A commercial review is a review conducted by the GCA to prepare a project agreement structure under the KPBU/PPP scheme. A complete commercial review contains two parts: (i) A technical preparation review and (ii) A commercial preparation review.

At step 6, the GCA conducts the Financial Review. This review includes the proposed solicited KPBU’s financial feasibility analysis and a financial review. The former includes determining WACC, FNPV, FIRR, Equity IRR, preparing financial statements projections for the project, DSCR, sensitivity analysis, form & value of government support and magnitude of government guarantee. The financial review is conducted considering equity and loan ratio proposed for the PPP project, macro-economic information, capital cost analysis, operational and maintenance costs, depreciation costs and book value at the end of the concession period, calculation of other costs related to the PPP project, e.g., resettlement costs, environmental maintenance, permits, and indirect costs, risk mitigation costs and income calculations based on results of commercial study.

At step 7, the GCA conducts the Management Review. In this review, the GCA’s goal is to prepare a project monitoring and evaluation (M&E) mechanism for the KPBU/PPP agreement for the solicited project. To fulfil the goal, the GCA conducts the management review. The management review document is a reference guide for PPP node/s to monitor and evaluate the KPBU/PPP project. The GCA’s management review also involves preparation of a draft of the management document for the KPBU agreement.

At step 8, the GCA carries out supporting activities. Before conducting the process of IBE procurement, the GCA initiates the implementation of supporting activities and substantiates it with documents. Supporting activities include public consultation/s, issuance of final Availability Payment (AP) confirmation for ministries/ agencies, submission of application for approval to utilise state/regional assets, land acquisition planning & implementation, environment permit receipt etc., procurement committee readiness, request for government support/guarantee, and implementation of other activities and permit obtainment required for PPP implementation as per sectoral laws and regulations.

At step 9, the GCA conducts market sounding. This includes exploring the market’s interest for the solicited KPBU project. The exploration happens by gathering inputs, interest, and responses regarding the PPP from stakeholders via one-to-one meetings or promotional activities.

At step 10, the GCA conducts a public consultation/s. The purpose of this activity is to obtain responses and/or inputs from stakeholders attending the consultation/s. This activity includes planning and executing pre-implementation, implementation and post-consultation activities and reporting the minutes, outcomes, conclusions and a follow-up plan of all activities. The GCA conducts an evaluation of the results of public consultation/s to support the implementation of the infrastructure provision plan. The GCA attaches the activities and results of public consultation/s, as a ‘public consultation report’, to the Pre-FS. The results of the public consultation are an integral part of the Pre-FS. This activity verifies project compliance with social & environmental norms, gathers input about community needs, and involves participants based on gender equality, disabilities, and social inclusion.

Lastly, at step 11, the GCA produces documents for declaring project readiness. To demonstrate project readiness, the GCA produces the Pre-FS report and documents of supporting activities. It ensures the fulfillment of project readiness as per sector-specific needs.

Following the above steps, a GCA is ready with a prepared solicited project – sent further on for evaluation to Bappenas as ‘ready-to-offer’ (RTO) project for transaction.

The following pages describe the methodology to draft each section / review / component of the Pre-FS and provides the necessary templates, tools, and checklists to prepare a Pre-FS for a solicited project.