The main function of the project identification stage is to select projects suitable for adopting the PPP model, which includes four steps: project initiation, project screening, value-for-money evaluation and financial capacity demonstration. The work of the project identification link is mainly responsible by the government, and its key issues include the following aspects:
First, clarify the project screening responsibility subject
At present, there are two PPP lead agencies at the national level, namely, the Ministry of Finance and the National Development and Reform Commission (NDRC). In the implementation stage, it is important to clarify the responsible body for project screening, which is a prerequisite for the successful adoption of the PPP model.
Second, clear project screening criteria
According to the screening principles of the Operational Guidelines, "infrastructure and public ****service projects with a large scale of investment, long-term stable demand,
flexible price adjustment mechanism, and a high degree of marketization" are suitable for the adoption of the PPP model. But this principle is a qualitative description, the screening criteria is not clear, in practice, it is difficult to implement.
Third, the PPP policy lacks operational details
Currently, from the national to the local level, more policies have been issued, but there is a lack of operational details. The Ministry of Finance's affordability demonstration rules ("Guidelines for Financial Affordability Demonstration of Government and Social Capital Cooperation Projects" (Caijin [2015] No. 21)) have just been introduced, and the value-for-money evaluation rules have been delayed. In this case, each place, when doing PPP projects, carries out value-for-money evaluation and financial affordability demonstration according to its own understanding, which leads to confusion in the evaluation and demonstration methods and leaves room for human intervention in the demonstration results.
Fourth, how to define social capital
The latest "Guiding Opinions on Promoting the Government and Social Capital Cooperation Mode in the Field of Public ****services" (Guo Ban Fa [2015] No. 42) issued by the General Office of the State Council defines "social capital", stating that "For those that have established a modern enterprise system and realized market-oriented operation, they can participate in local government and social capital cooperation projects as social capital under the premise that the local government debts they have assumed have been included in the government budget, properly disposed of, and clearly announced that they will not assume the function of local government debt financing in the future." However, there is still no clear elaboration on other controlling state-owned enterprises.
Fifth, how to define the scope of public **** products
Public **** products and public **** services first emphasize a public ****ness, the government should have a certain degree of constraints on the quality, quantity or price of services provided by social capital. However, some local governments, in order to quickly promote the project and increase political performance, apply the PPP model to projects in purely competitive areas such as commercial real estate and park development, which is inconsistent with the intent of the PPP model.
Project preparation stage
The project preparation stage is to make preparations for the project implementation, including project implementation program, project implementation agencies, personnel, etc., of which the most important work is to prepare the project implementation program. The preparation of the project implementation plan needs to focus on the following issues:
First, the reasonable allocation of project risks
The basic framework for risk allocation is to reasonably allocate project risks between the government and social capital according to the principles of optimization of risk allocation, risk-benefit reciprocity, and controllability of risks, and by comprehensively considering the risk management capability, project return mechanism, and market risk management capability and other elements. In principle, the commercial risks of project design, construction, finance, operation and maintenance are borne by the social capital; the risks of law, policy and minimum requirements are borne by the government; and the force majeure risks are reasonably*** borne by the government and the social capital.
Second, choose the appropriate project operation mode
The operation mode of PPP mode is based on the various aspects of the project between the government and social capital to allocate the combination. By examining the various aspects of the project is the government to do, or social capital to do more appropriate and efficient to the project design, construction, financing, operation, maintenance and other aspects of the division of functions. Different division methods will get different combinations, resulting in different PPP operation.
The Operational Guidelines issued by the Ministry of Finance list entrustment-operation (OMC), management contract (MC), build-operate-transfer (BOT), build-own-operate (BOO) , Transfer-Operate-Transfer (TOT) and Reconstruction-Operate-Transfer (ROT) are the six ways of operating PPP projects, but this is certainly not enough. Depending on the different combinations of the various stages of the project, dozens of operational methods should result.
Which operation mode to choose will vary according to project specifics. At present, the main basis for choosing the PPP mode of operation in China is for project financing, but when the economy develops to a certain stage, the main purpose of the government to launch the PPP project will no longer be financing, but rather the government is responsible for financing, and the social capital is only responsible for the design, construction, operation and maintenance of the duties. Because the government's credit is higher than that of enterprises, accordingly, the government's financing cost is lower than that of enterprises, and it is more value for money to adopt this model.
Thus, project implementation organizations need to choose a reasonable project operation mode according to the level of economic development and project characteristics.
Third, choose the appropriate procurement method
According to the requirements of the Ministry of Finance, the procurement of PPP projects should comply with the Government Procurement Law, and adopt open tendering, invitational tendering, competitive negotiation, single-source procurement, competitive negotiation, as well as other procurement methods recognized by the government procurement supervision and management departments. From a practical point of view, open bidding is currently the most commonly used procurement method for PPP projects around the world, because it carries the least political risk for the government.
However, open tendering is not always the most suitable procurement method for PPP projects. Open tendering is complex and rigid, requiring a long pre-qualification period and meeting requirements designed for traditional, simple government procurement, such as "more than three bidders". Open tendering is suitable for projects where the core boundary conditions and technical and economic parameters are clear and complete and are not changed during the procurement process. While a large number of PPP projects have vague boundary conditions and complex procurement requirements, the simple application of open tendering procedures usually leads to abortive bidding and increases the failure rate of project procurement.
At present, the more suitable procurement methods for PPP projects are competitive negotiation and competitive consultation. Through the negotiation and consultation between the government and the potential investors, it can help the government to clarify the boundary conditions of the project, so as to set reasonable procurement conditions and improve the efficiency of project procurement.
Fourth, the development of a reasonable transaction structure
The transaction structure of a PPP project is mainly determined by four factors, namely, the project participants, the project investment and financing structure, the return mechanism and the relevant supporting arrangements. Project participants refer to the various subjects involved in the project, including the authorized government level, project implementation agencies, regulatory agencies, funding agencies, etc.; project investment and financing structure refers to the source of funds for capital expenditures, the nature and purpose of the project, the formation and transfer of project assets, etc.; the return mechanism mainly consists of user fees, feasibility gap subsidies, government payments in three ways; the relevant ancillary arrangements refer to the project outside of the relevant agencies to provide The relevant supporting arrangements refer to the land, water, electricity, gas and other supporting facilities provided by the relevant organizations outside the project and the upstream and downstream services required by the project.
The government or the consulting organization commissioned by the government needs to formulate a reasonable trading organization by considering these four factors.
Fifth, the design of a reasonable return mechanism
There are mainly three kinds of return mechanisms for PPP projects. The first is user fee, where the purchaser of the service pays for the purchase, and operational projects such as highways, water supply companies, and parking lots are more suitable for adopting the user fee model. The second is feasibility gap subsidy, the user fee is not enough to meet the social capital or project company cost recovery and reasonable return, and the government in the form of financial subsidies, equity investment, preferential loans and other preferential policies, to give economic subsidies to the social capital or the project company, for example, rail transportation PPP project is a typical use of feasibility gap subsidy projects. The third is paid directly by the government, this model can be divided into the following three cases: one is the availability of payment, such as social capital for the government to provide a road to meet the access standards, the government to buy the road availability of payment to the social capital; the second is the amount of use of payment, such as free parks, the government can be based on the amount of admission to the park to pay for the payment; the third is payment in accordance with the performance of the payment, such as the social capital for the government to provide grassroots Thirdly, payment according to performance, such as social capital for the government to provide primary health care services, the government in accordance with the performance of the service to set up the relevant indicators to pay.
In addition, in the design of the return mechanism should also consider the price adjustment mechanism, such as rail transit PPP projects, usually the main factors to determine the rail transit fares for the power costs, labor costs and other costs, through the setting of the price adjustment mechanism, when these costs change, the fare will be adjusted accordingly.
Project Procurement Phase
The key issues in the project procurement phase include three, which are adequate market testing, setting reasonable pre-qualification conditions and core boundary conditions.
First, adequate market testing
Market testing is a tool used by the government to test whether the project program can attract the willingness of market participants, such as potential investors and financing institutions, before launching the PPP procurement process, and to obtain feedback from various types of market participants and make adjustments and improvements to the PPP program. Market testing is a process to find the best project implementation program, not the process of finding the best counterparty, nor the process of substantive negotiations. Currently, investors are not particularly motivated to participate in market testing. But market testing is critical to the operation of PPP projects, and many project failures have been attributed to it.
Second, set reasonable pre-qualification conditions
Pre-qualification is mainly to realize the function of market test, verify whether the project is attractive enough to achieve full competition. The conditions of pre-qualification are mainly objective conditions such as qualification, project experience, finance, etc. The conditions need to be set to meet the basic needs of the project, the special requirements of the implementing organization, and also take into account the actual situation of the potential investors. Pre-qualification conditions require too high, may lead to meet the requirements of the number of social capital is insufficient to achieve full competition; conditions require too low, it may be difficult to meet the needs of the project.
Before setting the pre-qualification conditions, it is necessary to fully understand the relevant indicators of social capital in the industry in which the project is located, and to understand the basic qualifications and experience requirements needed for the project.
Third, set reasonable boundary conditions
The procurement boundary conditions of the project mainly include the project operation mode, the project cooperation period, the return mechanism, the transaction structure, and the risk sharing mechanism. The government should fully consider the interests of social capital when setting the boundary conditions, leaving a reasonable profit margin for it, so as to better guarantee the smooth landing of the project. There are also some conditions that can be flexibly adjusted in the implementation of the project.
In practice, some local governments are always worried about social capital "taking advantage of", for social capital to enter the set of more demanding conditions, such as setting too low a price limit or not set the price adjustment mechanism. These boundary conditions greatly weakened the attractiveness of the project, but also to the social capital to create the impression that the local government is difficult to cooperate, very likely to lead to the failure of the project bidding.
Project execution stage
Project execution is the key to the success of PPP project operation, because PPP projects may take only a few months to complete from project identification, project preparation to project procurement stage, while the execution stage of a PPP project usually takes 20-30 years, which is the key stage for a PPP project to start implementation and generate efficiency. Project implementation focuses on the establishment of the project company, financing management, performance monitoring and disbursement. The project implementation stage also requires the development of a regular evaluation mechanism, and according to the Operational Guidelines, a mid-term evaluation is required every 3 to 5 years. The issues that need to be paid attention to in the project implementation stage mainly include two aspects:
First, good performance management ability
Good performance management ability mainly includes two aspects, on the one hand, it refers to the government's performance of the project company has the awareness of the supervision and the ability to supervise, because most of the PPP projects are provided with the public **** products, in order to protect the public interest, the need for the government to provide the In order to protect the public interest, it is necessary for the government to carry out daily supervision of the quantity, quality and price of the products; on the other hand, it refers to the government's own contract performance awareness and ability, of which the core is the government's ability to pay.
Second, the design of a reasonable performance appraisal mechanism
PPP projects to achieve value for money in an important way is to pay for the services of the project company in accordance with the performance, but most of the projects are not enough to pay for the linkage with the performance appraisal. To realize the pay-for-performance mechanism, the government needs to establish a performance evaluation index for the operation of the project company, and determine the amount of government payment through the annual assessment of the project's operational performance.
Project handover stage
The main tasks in the project handover stage include handover preparation, performance testing, asset delivery and performance evaluation, of which the most critical part is performance testing.
The project implementation agency or other agencies designated by the government shall form a project handover working group to confirm the circumstances of the handover and the compensation method according to the agreement, and to formulate an asset evaluation and performance test program. The project transfer working group shall conduct performance tests on the transferred assets in strict accordance with the performance test program and transfer standards. If the performance test results are not up to standard, the handover working group shall require the social capital or project company to carry out restorative repairs, renewal and replacement, or draw a handover maintenance bond.
How to ensure that the facilities handed over by the social capital are in good condition, and what standards should be met by the handed over facilities, all of which need to be described in detail and accurately in the contract, but for the time being, a lot of PPP projects have agreed on these issues in a rather rough way.