Evaluation Station

E1 - General Considerations
E2 - Technical Considerations
E3 - Financial Considerations
E4 - Political and Social Considerations
EA - Evaluations - Export Assistance
EB - Evaluations - Financial Institutions

In identifying a project an evaluation should be done simultaneously, the general considerations determine if a further more complex evaluation of the project is necessary. In order to avoid unnecessary expenditures and heartache the Evaluation stage should have a developed set of criteria or considerations.

The distinction must be made between projects that are tendered and those which can be identified and negotiated on a sole-source basis. The distinction is important in terms of effort and cost expended at different stages in the project.

E1 - General Considerations

Choosing your role

Various roles are possible for firms interested in privatized infrastructure projects (BOT and variants). The choice of role is the single most important decision that is made; the wrong decision is likely to result in abandonment and losses.

Vendor : The firm which at heart has no interest in being an owner, but wants only to sell goods and/or services to the project company should, in most cases, not even get on the train. The challenge is to identify, approach and persuade the ultimate owner of the project to buy their goods or services, whether they be tendered or are purchased on a sole-source basis. It is a question of adapting marketing skills, formerly focused on the public sector buyer, to a new TYPE of client in the private sector probably in an OECD country (even if the project is in a non-OECD country).

In some cases, more rare than sometimes imagined, the project owner may require, for reasons having to do with a demonstration of commitment or a need for equity, that a vendor have a token equity position. In such a case the vendor may want to stay on the train possibly through the development stage.

Developer : Some firms decide that they can best earn money from BOT opportunities by identifying and developing projects to a point, usually after pre-feasibility and before financial close, at which time they can be sold for a combination of cash, retained interest and contracts for the sale of goods and/or services.

If this is your role then you will be in effect the "owner" of the project possibilities for a period of time and therefore be responsible for the costs and risks incurred in bringing it to that point where it can be offered for sale.

You should stay on the train, perhaps as late as the financial deal is closed.

Natural Investor / Owner-Operator:  Utilities and some large industrial concerns are in the business of owning and operating infrastructure for a profit.

In some cases, firms from other related fields (e.g.: contractors, consulting engineers, consultants, manufacturers) may be interested in expanding into such a role as a consortium or alone on a project-by-project basis.

In these cases, the entity is normally the project sponsor from an early stage and may continue as owner for a considerable time after commissioning.

Some of these firms may want to stay on the train throughout the whole journey.

Various combinations of these roles are possible (i.e. : developer or vendor who wants to negotiate a further interest in the project company). However, this does not obviate the fact that each role comes with specific objectives and its own discipline.

The project that you may want to undertake may be too large or have too many components for your firm to handle. Do not get clouded by your enthusiasm.

Ask the question, "Can your firm complete this project successfully and make money?".

Projects have various stages of development, you can be involved in every stage or you can enter at a particular stage. It is obviously advantageous to identify a project at an early stage. The IFI's use a simple system to show what stage of development they are at. Often it is too late to enter into a project at the procurement stage as the competition has been interacting with the decision-makers much earlier.

Check to see if you will be able to attract investment and be able to insure your project. Contact the EDC and DFAIT and they will have the information you require. The EDC maintains an investment profile for every country and this can have a profound effect on whether investment and insurance will either be available or costly.

It is important to know the competition. This information may not be readily available, so research will be necessary. Find out about the local firms and who they may be affiliated with. Check to see who won similar projects in the region or country.

Are there any significant language barriers? Putting together a proposal and communicating with officials in China can be difficult if your firm does not have the personnel with the appropriate language skills. Of course the personnel can be hired, but this may be expensive.

In many cases there are registrations required with the government, chamber of Commerce and other organizations in order to bid on a project.

A network of key decision makers in both the public and private sector is beneficial. Even though the bidding process may be clearly defined, this network will be particularly useful in negotiations and discussions.

An extended time frame because of delays, complications, and negotiations can create strains on the budget. "Staying power" is important and so the budget should be structured to be able to cope with delays and other factors. The associated costs of project development can be astronomical and is one of the most problematic issues in infrastructure development today.

Most companies do not have the capability to chase projects throughout the world. In order to focus, one has to ask various questions regarding the country and the of project involved : Are they in my strategic plan? The identified project may look viable, but is it within my original strategy? If it is not then one of two things may happen, proceed and adjust the focus of the plan or keep the focus of the original plan and find another project.

E2 - Technical Considerations

Do you understand the scope of the project?

Have you had a site visit and met the key decision-makers?

Do you have the appropriate technologies?

What are the environmental risks?

Does a feasibility study exist?

Is the project technically viable?

E3 - Financial Considerations

Infrastructure projects were once the domain of the public sector. As privatization becomes more apparent, the levels of private sector participation have become better defined. There are eight main options for the private sector. These can be sub-divided into two groups: Public ownership and private ownership. All BOT options are based on some form of concession agreement.

Public ownership includes :
Service contracts
Management contracts
Lease arrangements
Engineer Procure Construct (EPC)
Design-build
Turn-key

Private Ownership includes: 

Build-Operate-Transfer (BOT) , or the numerous variations of this like Build-Own-Operate-Transfer (BOOT)
Build-Own-Operate (BOO)
Joint ownership or mixed companies
Outright sale

What is the cost of the bid package?

The cost of the bid package may be so high that it is simply not worth purchasing. One of the methods used by governments to get serious bidders is to price bid packages very high. An example of this would be the Buenos Aires water concession, the bid package cost $30,000 (USD).

Do a basic assessment of financing feasibility?

An assessment of financing feasibility would be using basic research and knowledge to see if financing can be attained for the project. Gauging the economic need, the political/security factors, the regulatory background, and your experience in similar projects. These factors should give you a basic idea of the difficulties in obtaining adequate financing. A distinction must be made on whether the project may be viable and whether the project can be financed.

E4 - Political and Social Considerations

Do you have contacts?
Are you known in the region?

Do you have a temporary exclusivity accord? This accord usually stipulates that for a given duration of time (the shortest possible for the client - the longer possible for you) that the client accepts to work with you on an exclusive base.

Is the project a government priority and when are the next elections?

Do you have the network to gain Canadian government support?

Does it reflect on Canadian foreign policy?

Development costs for the Evaluation Station ($)

There are many ways of paying for the development costs of the Evaluation Station.

1. Own Resources or through a Consortium

2. PEMD - MDS (for information go to IA)

3. CIDA INC (for information go to IA)

4. Provincial programs (for information go to IA)

Nota Bene: 

For more specific information, go below to: 

Export Assistance
Financial Institutions

Export Assistance

Go To Identification - Export Assistance

It may be useful to contact the Canadian Commercial Corporation

Go to Development - Export Assistance.

Financial Institutions

Export Development Corporation (EDC)

The Export Development Corporation (EDC) is a financial services corporation dedicated to helping Canadian business compete and succeed in foreign markets. EDC provides a wide range of flexible and innovative financial solutions to exporters across Canada and their customers around the world. For more than 50 years, the corporation's risk management services including insurance, financing and guarantees have become an integral part of the export strategies of many large and small Canadian companies.

Contact the EDC to find out if the project is financially viable from their point of view. Each country has an Economic and Credit Summary that shows EDC's experiences, attitudes, risk indicators and other issues. These are also available online at their site, but it is best to contact an EDC representative in your area. (see FB for program information)

Contact EDC

151 O'Connor Street
Ottawa, Ontario
Canada K1A 1K3
Tel. : (613) 598-2500
Fax : (613) 237-2690
http://www.edc.ca/

Other Institutions

It may be useful to visit some commercial banks (Canadian and foreign) and other relevant organizations to ensure that financing will be available -Financial - Financial Institutions.