Machine name: NLUTSRSP03

Several phases can be distinguished in a PPP concession project.

Selection and bidding phase
The government assesses, using a PPC (Public Private Comparator), whether it would be beneficial to carry out a project using a PPP integrated contract. If so, a European tender is issued for the project. Parties who wish to compete (usually consortia) then go through a preliminary qualifying round. This produces a selection containing a limited number of parties (4 to 5) who the client evaluates as being the most capable of carrying out the project. The selected candidates then submit a provisional offer. After these provisional offers are assessed, a limited number of parties (usually two) are selected for a negotiation phase that is completed when they submit a definitive offer, known as the Best And Final Offer (BAFO). The public-sector client then selects one of the consortia as Preferred Tenderer, with whom it finalises and awards the contract to be entered into (Financial Close). The selected party will have established a company specially for the project. This "Project BV" enters into the contract with the public-sector client.

Funding
The Project BV borrows most of what it needs for financing the project; the general rule here is 90% external capital and 10% from its own resources, namely from the consortium partners.  External funding is cheaper than using own resources, reducing the costs of financing. However, financial institutions require certainty, so a risk-bearing contribution has to be made in the form of the company's own equity. Unlike property financing or mortgages, project financing does not have any collateral with which the risks for the financiers can be covered. The only guarantee for the financiers are the payments based on the performance of the Project BV itself. No results therefore means no returns.

Construction phase
The Project BV is owned by the parties responsible for the realisation and management, and often belongs to the investors who are bearing the risks. The Project BV takes care of the funding for the design and construction, by means of a loan from a financial institution. The Project BV will realise the project in accordance with the contractually defined specifications, quality levels and planning.

Operation phase
Once the construction is completed and in use, the Project BV will manage and maintain the project in line with the specified performance requirements for the remainder of the contractual period (generally 25-30 years). The client will commence making payments during this period, based on the performance delivered. These payments will be used to pay for the services provided and to repay the interest on the loan. The parties with a stake in the Project BV should also receive returns on their capital invested.

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