Quizz - Chap4&5 - Preparation

Which is NOT true about this phase (Appraisal)?

• a. Appraisal is naturally progressive
• b. It helps to filter the Project: the gateway process avoids sinking resources into poor projects and failing in delivery
• c. Projects that are feasible are also suitable for PPP delivery
• d. The procurement decision is taken in this phase

Which one describes deliverables of appraisal phase?

• a. Technical requirements, financial model, preliminary contract structure and request for proposals
• b. Technical requirements, financial model, preliminary contract structure and procurement strategy
• c. Technical requirements, financial model, preliminary contract structure and request for qualifications
• d. Technical requirements, financial model, the contract in draft and procurement strategy

Which is NOT a deliverable of the appraisal phase?

• a. Financial model
• b. Technical requirements
• c. Preliminary contract structure
• d. The RFP and RFQ

Which is NOT true regarding the scope definition?

• a. Scope definition delineates the boundaries and interfaces between the public and private sectors
• b. Scope definition is intended to determine the precise space or geographical area in which private partner will deliver the service service
• c. Scope definition defines the general framework from which to outline the technical and performance requirements
• d. Scope definition provides the context to decide upon the revenue regime which will form the basis of the financial and risk structure of the PPP

What is NOT true with respect to project design and construction requirements:

• a. They are usually in the form of a functional design or a reference design, so as to allow the bidder / private party to enjoy a higher return
• b. Providing a functional design or a reference design to bidders is consistent with a PPP focusing on outputs/services, allowing flexibility for innovation and efficiency
• c. A minimum level of detail is necessary to allow for identification of the key design requirements that will later be included in the PPP contract as specifications for construction
• d. The Procuring Authority could provide a fully prescriptive design when it has certainty of the optimal means and methods of meeting the need

What is NOT true regarding the design technical requirements?

• a. It is necessary to check applicable regulatory standards and policy directives like minimum size of a class or safety regulations in roads
• b. Detailed Technical Requirements allows bidders to accurately assess the technical risks and price the service
• c. They should state and describe clearly the full design of the infrastructure as expected and required by the authority
• d. While defining technical requirements, costs will be assessed so as to provide key input to the commercial feasibility which is to be done in this phase

What is not true with respect to preliminary structure?

• a. Preliminary structure involves preliminarily defining the structure of the contract in terms of financial structure and risk allocation
• b. The preliminary structure influences commercial feasibility, value for money and affordability
• c. The structure will be refined or further detailed in Structuring Phase
• d. It allows to the procuring authority to proceed straight forward with contract drafting once the project receives the green light at the end of the phase

What are true regarding preliminary risk allocation? 1. Appraisal requires a preliminary allocation, so as to permit risk adjustment of baseline costs needed for constructing the financial model, estimate the required return on equity so as to conduct commercial feasibility and make the needed adjustment to risk to the Public Sector Comparator for conducting VFM 2. It aims to define which party will suffer the financial consequences of a risk eventuating, which means changes in values within the business case 3. The mechanisms to allocate risks are the revenue / payment mechanism and specific contract provisions

• a. All are true
• b. Only 1 and 2 are true
• c. Only 2 and 3 are true
• d. Only 1 and 3 are true

Pick up the incorrect statement

• a. Debt repayment profile may be flat repayment, constant amortization (and decreasing debt service) and “sculpted” to meet covenants so as to maximize debt volume
• b. There is not a minimum % of equity required by lenders but leverage is always defined mathematically as a result of the debt service ratios
• c. The cost of the debt includes the base interest rate, the margin over the base rate, bank fees (e.g. structuring, arranging, availability of finance) and the costs of interest rate hedging
• d. To properly develop the financial model, it is important to be aware of the availability of finance providers and likely conditions

Pick up the incorrect statement

• a. User charges involve estimation but service payments / government payments are a result/output
• b. Potential revenue estimated will be used to determine the floor for payments to the procuring authority (the concession fee) or the ceiling for the public payments required if there is a viability gap
• c. Estimating demand is a challenge, especially in greenfield projects, and depends on estimates of price elasticity (usually through evaluation of willingness to pay)
• d. There is no a need for the Financial Model to reflect applicable accounting policies as the exercise being done is for the use of the public sector