Paper No.
670
Grant and Premium
In all the highway PPP projects in India, lowest
grant or highest premium is the sole criteria for the
award of the project. The private party satisfying
the prequalification requirements and technical
evaluation in the bidding process and seeking the
lowest grant or offering highest premium is
awarded the project. The basis of awarding the
project i.e. whether on grant or premium is not
predefined. It depends on the responses of the
private parties. If there are no private parties
offering premium to the Government Entity, the
project is awarded to the party seeking lowest grant
and if there is a private party offering premium,
the project is awarded to the party offering highest
premium. When the project awarding basis i.e.
grant or premium is predefined during the Request
for Qualification Stage (RFQ), the number of
interested private parties may vary. The project with
grant may attract more number of private parties
as this reduces the financial burden on the private
party during the project implementation. This is
internally ascertained by the private parties while
considering the commercial viability as reflected
in the cost of the project, revenue potential, market
conditions such as lending rates, and its benchmark
IRR. The project with premium will attract the
private parties only when the profitability of the
Fig. 1 Typical Procurement Process for PPPs in India
The Indian Government has laid down the
following principles to guide the prequalification
process of PPP projects 17:
i. Selection of bidders must be fair and
transparent
ii. Selection should be carried in two stages
iii. Only credible bidders should be prequalified
Journal of the indian Roads Congress, July - September, 2017 95
project is high. When the awarding basis in terms
of grant or premium is not predefined, its effects on
the prequalification limits is not yet envisaged.
4. PrequalificatIon process in
India
The Indian Government at the federal level has
streamlined the procurement process based on the
initial experience gained from implementation
of PPP projects in highway sector. As part of
this initiatives, the procurement process and the
bidding documents have been standardised. Fig. 1
shows the typical process used for procurement
of PPP projects in India. In case of project
without a proven track record about private
sector participation, the public entities normally
undertaken a market sounding exercise in the form
of call for Expression of Interest (EoI) to test the
number of interested bidders in the market and/or
gather information about the technical and financial
design of the proposed project. The information
from the submitted EOI in then used to customize
the standard bidding documents such as Request for
Qualification (RFQ)/Request for Proposal (RFP)
16. The procurement process can be divided into
two distinct phases – prequalification and bidding
stage. The prequalification of bidders is normally
done to assess the technical capacity and financial
strength of the bidders.
iv. Recommend, though not imposes, to
shortlist around 6-7 prequalified bidders to
submit the financial proposals in RFP stage in
order to secure high quality and competitive
bids.
v. Recommend setting the technical and
financial capacity limits.