Risk Management in Transport PPP Projects
In the Islamic Countries
71
The economic performance calculations carried out to assess the economic benefits of the project
focused on the new infrastructure (including incidentally the costs of access roads which were
not borne by the concessionaire), while the return on the concession was calculated on the basis
of the revenues and costs borne by the concession holder under the provisions the DBOT contract.
All these assessments were important in assisting GATTEL to prepare the tendering phase and
manage the selection and award procedures. The tendering procedures were carried out
effectively and the new crossing, the Vasco da Gama bridge, was opened to traffic in 1998.
A further critical component at this stage of decision-making relates to Value-for-Money
considerations, in order to assess the convenience for the public stakeholders of a PPP
approach vs other routes, typically conventional public procurement.27 The logic of Value-for-
Money considerations, which should inform the decision on the most appropriate procurement
route in the pre-tender phase, is briefly illustrated in Box below.
Box 7 Value-for-Money (VfM) considerations28
The picture below illustrates how the trade-off between the cost and value of alternative
procurement options could be conceptualized.
Source: EPEC (2015).
The arrow “increasing VfM” points the direction where low cost options generate high value, i.e.
high performance for the contracting authority. Thus, a comparison of Option 1 and 2 indicates
that 1 dominates unambiguously 2 (same value, lower cost). The VfM exercise should identify
options lying in the upper left quadrant of the picture , i.e. those affordable and capable of
delivering at least the minimum performance (value) required.
27 There may be as well multiple public procurement options and ways to break the procurement procedure
where appropriate, e.g. tender separately early phases in project development, and different ways to share
responsibilities between the public and private parties in the process.
28 This draws on EPEC (2015). Value-for-Money Assessment. Review of approaches and key concepts.
Luxembourg, EIB. This document contains additional details and practical details on the mechanics of
computation of VfM indicators.