Operational Guidelines for Public-private Partnerships (Trial Implementation)

Article 2: For the purposes of these Guidelines, the term “private capital” or “private capital entity” means an enterprise with legal personality in China or abroad that has established a modern corporate system, but excludes financing platform companies belonging to the concerned government and other controlled state-owned enterprises.

Article 3: These Guidelines shall apply to the regulation of activities such as the identification, preparation, procurement, execution and transfer of PPP projects carried out by governments, private capital and other participants.

Article 4: Finance departments shall strengthen coordination with relevant government departments, actively make use of the functions of third party professional firms and comprehensively take charge of the administration of PPPs on the basis of the fundamental principles of a socialist market economy and in the spirit of system innovation and cooperation contracts.

The finance departments of the provinces, autonomous regions, municipalities directly under the central government, cities with independent development plans and the Xinjiang Production and Construction Corps shall actively establish PPP centres or designate dedicated bodies to perform duties such as planning, guidance, financing support, identification, appraisal, consulting services, publicity, training, performance assessment, statistics keeping, and the establishment of directories of experts and projects.

Article 5: Participants shall implement PPP projects in a lawful, compliant and efficient manner in line with the principles of fairness, impartiality, transparency and good faith.

Part Two: Project identification

Article 6: Use of PPPs are suitable for infrastructure and public service projects in which the investment is relatively large, demand is stable over the long term, the price adjustment mechanism is flexible and the degree of commercialisation is relatively high.

PPP projects are initiated by the government or private capital, with initiation by the government being most common.

(1) Government initiation

The finance department (PPP centre) shall be responsible for soliciting potential PPP projects from the competent departments of industries such as transport, housing and development, environmental protection, energy, education, medicine and sports, fitness and cultural facilities. The competent industry department may select potential projects from greenfield or rehabilitation projects in national economic and social development plans and dedicated industry plans, or existing public assets.

(2) Private capital initiation

Private capital shall recommend potential PPP projects to the finance department (PPP centre) by means of a written project proposal.

Article 7: The finance department (PPP centre), in concert with the competent industry department, shall evaluate and make a selection from among potential PPP projects to determine candidate projects. The finance department (PPP centre) shall formulate annual and medium-term project development plans based on the selection outcome.

For a project listed in the annual development plan, the project initiator shall submit the relevant documentation as required by the finance department (PPP centre). For a greenfield or rehabilitation project, a feasibility study report, project output specifications and the preliminary implementation plan shall be submitted; and for an existing project, historical materials about the existing public assets, project output specifications and the preliminary implementation plan shall be submitted.

Article 8: The finance department (PPP centre), in concert with the competent industry department, shall conduct both a qualitative and quantitative value for money (VFM) assessment. The quantitative assessment shall be conducted based on the actual circumstances of the region in question.

The qualitative assessment shall chiefly focus on whether opting for the PPP as compared to opting for the traditional government procurement method can increase supply, optimise risk allocation, improve operating efficiency, promote innovation and fair competition, etc.

The quantitative assessment shall calculate the magnitude of the VFM of the project through comparing the current value of the government expenditures and costs during the whole life cycle of the PPP project and the Public Sector Comparator (PSC) to determine whether the PPP would lower costs during the whole life cycle of the project.

Article 9: To ensure fiscal sustainability over the medium and long terms, the finance department shall conduct validation of fiscal bearing capacity in respect of a project with partial government payment or government subsidies based on factors such as fiscal expenditures and government debt during the whole life cycle of the project, and government payments, government subsidies or other such fiscal expenditures each year may not exceed a certain percentage of the fiscal revenue for the year in question.

Preparations may commence for a project that has undergone a VFM assessment and validation of fiscal bearing capacity.

Part Three: Project preparation

Article 10: A local people's government at the county level or above may establish a dedicated coordination mechanism chiefly responsible for tasks such as project assessment, arranging coordination, inspection and guidance so as to realise objectives such as simplifying the examination and approval procedure and enhancing work efficiency. The government or the relevant functional department or public institution designated by it may serve as the project implementing authority responsible for tasks such as project preparation, procurement, oversight and transfer.

Article 11: The project implementing authority shall arrange for the formulation of the project implementation plan, which shall address the following topics in the sequence set forth below:

(1) Project overview

The project overview shall mainly include the basic particulars of the project, the economic and technical indicators and the information on the equity of the project company.

The basic particulars mainly elucidate the details of the products and services for the public sector to be provided by the project, the necessity and feasibility of using a PPP to operate the project and the objectives and significance of operation of the project.

The economic and technical indicators mainly elucidate the location of the project, the area covered by it, construction details or scope of the assets, size of the investment or value of the assets, the main output specifications and source of the funds.

The information on the equity of the project company mainly elucidates whether a project company is to be established and the equity structure of the company.

(2) Basic framework for risk allocation

In line with the principles of optimal risk allocation, risk-return tradeoff, risk controllability, etc., factors such as government risk management capabilities, project payback mechanism and market risk management capabilities shall be comprehensively considered so as to appropriately allocate the project risks between the government and private capital.

In principle, the commercial risks of project design, construction, finances, operations and maintenance, etc. shall be borne by the private capital, legal, policy and minimum demand risks shall be borne by the government and risks such as force majeure shall be reasonably shared between the government and private capital.

(3) Project operating method

The project operating methods mainly include Operations and Maintenance (O&M), Management Contract (MC), Build-Operate-Transfer (BOT), Build-Own-Operate (BOO), Transfer-Operate-Transfer (TOT) and Rehabilitate-Operate-Transfer (ROT).

The selection of the specific method of operation is decided mainly on the basis of factors such as the charge pricing mechanism, the project's investment return level, basic framework for allocating risks, financing requirements, rehabilitation and expansion requirements and disposal upon expiration of the term.

(4) Transaction structure

The transaction structure mainly includes the project's investment/financing structure, payback mechanism and relevant ancillary arrangements.

The project's investment/financing structure mainly explains the source, nature and purpose of the capital expenditure funds for the project, the formation and transfer of the project assets, etc.

The project's payback mechanism mainly explains the source of the funds for the investment returns secured by the private capital, including payment methods such as user charges, viability gap funding and government payments.

The relevant ancillary arrangements mainly explain ancillary facilities such as land, water, electricity, gas and roads provided by entities external to the project and the upstream and downstream services required by the project.

(5) Series of contracts

The series of contracts mainly includes the project contract, shareholder contracts, financing contracts, construction contracts, operating service contracts, raw material supply contracts, product procurement contracts and insurance contracts. The project contract is the core legal document.

The project boundary conditions are the core substance of the project contract, mainly including boundaries such as rights and obligations, transaction conditions, performance assurances, and adjustments and dovetailing.

The rights and obligations boundaries mainly elucidate title to the project assets, the public liability borne by the private capital, the government payment method and the risk allocation results.

The transaction condition boundaries mainly elucidate the project contract term, the project payback mechanism, the charge pricing revision mechanism and the output specifications.

The performance assurance boundaries mainly elucidate the mandatory insurance plan and the series of performance guarantees consisting of the investment competition guarantee, construction performance guarantee, operations and maintenance guarantee and transfer and maintenance guarantee.

The adjustment and dovetailing boundaries mainly elucidate the handling of contingencies, temporary receivership and responses for early termination, contract amendment, contract extension, additional project rehabilitation and expansion requirements, etc.

(6) Oversight framework

The oversight framework mainly includes the authorisation relationship and oversight method. The authorisation relationship is mainly the authorisation given to the project implementing authority by the government and the authorisation given to the private capital either directly or through the project implementing authority by the government. The oversight method mainly includes performance management, administrative oversight and public scrutiny.

(7) Selection of procurement method

Project procurement shall be handled in accordance with the PRC Government Procurement Law (Revised in 2014) and related rules and regulations. The procurement methods include public invitation for bids, competitive negotiations, private invitation for bids, competitive consultations and single-source procurement. The project implementing authority shall select the appropriate procurement method in accordance with the law based on the particularities of the procurement requirements of the project.

A public invitation for bids mainly applies to projects the core boundary conditions and technical and economic parameters of which are clear, complete and comply with state laws, regulations and government procurement policies and in the course of the procurement for which changes will not be made.

Article 12: The finance department (PPP centre) shall verify the VFM and fiscal bearing capacity of the project implementation plan, and if the same passes verification, the project implementing authority shall submit it to the government for review. If the project implementation plan does not pass verification, it may be submitted for verification again after revision. If it fails verification again, the PPP shall not be used therefor.

Part Four: Project procurement

Article 13: The project implementing authority shall prepare the preliminary qualification review documents as required for the project, publish a preliminary qualification review announcement and invite private capital and the financial institutions cooperating with it to participate in the preliminary review of qualifications so as to ascertain whether the project can attract responses from private capital and give rise to sufficient competition, and submit the assessment report on the preliminary review of qualifications to the finance department (PPP centre) for the record.

If at least three private capital entities pass the preliminary review of qualifications, the project implementing authority may continue with the preparation of the procurement documents. If fewer than three entities pass the preliminary review of qualifications, the project implementing authority shall arrange for a new preliminary review of qualifications after revising the implementation plan. If the number of qualified private capital entities is still less than three after the new preliminary review of qualifications, the procurement method selected for the implementation plan may be revised in accordance with the law.

Article 14: The preliminary qualification review announcement shall be published in the media designated by the finance department of the people's government at the provincial level or above. If the qualifications of the private capital entity that has passed the preliminary review of its qualifications change before the execution of the project contract, it shall notify the project implementing authority in a timely manner.

The preliminary qualification review announcement shall include the names of the project authorising entity, project implementing authority and project, the procurement requirements, the requirements in respect of the qualifications of the private capital entities, whether a consortium is permitted to participate in the procurement activities, the proposed number of private capital entities participating in the competition and the method of determination of such number and the time and place for submission by private capital entities of the application documents for the preliminary review of their qualifications. The time for submission of the application documents for the preliminary review of qualifications may not be less than 15 workings days from the date of publication of the announcement.

Article 15: The project procurement documents shall include the procurement invitation, bidder instructions (including sealing, signature and stamp requirements), the documents evidencing qualifications, creditworthiness and track record that the bidders are required to provide, the procurement method, the authorisation given by the government to the project implementing authority, the official reply on the implementation plan and the approval documents for the project, the procurement procedure, the requirements in respect of the preparation of the response documents, the deadline for submitting the response documents, the time and place of their opening, the amount of the mandatory bond to be paid as security and the form thereof, the evaluation method, the evaluation criteria, the government procurement policy requirements, a draft of the project contract and other legal documents.

If the competitive negotiation or competitive consultation procurement method is used, the project procurement documents shall, in addition to the contents set forth in the preceding paragraph, specify the contents that may change substantively depending on the negotiations between the evaluation committee and the private capital entities, including the technical and service requirements in the procurement requirements and the draft contract terms.

Article 16: The evaluation committee shall consist of an odd number of representatives of the project implementing authority and evaluation experts totalling at least five persons, with the number of evaluation experts being not less than two-thirds of the total number of members of the evaluation committee. The evaluation experts may be selected by the project implementing authority itself, provided that among those experts there is at least one financial expert and one legal expert. The representatives of the project implementing authority may not participate in the evaluation of the project as evaluation experts.

Article 17: If procurement for a project is to be done by a public invitation for bids, private invitation for bids, competitive negotiations or single-source procurement, matters shall be handled in accordance with government procurement laws, regulations and related provisions.

If procurement for a project is to be done by competitive consultations, it shall be carried out by the following basic procedure:

(1) Publication of procurement announcement and application

The competitive consultation announcement shall be published in media designated by the finance department of the people's government at the provincial level or above. The competitive consultation announcement shall include the names of the project implementing authority and the project, the project structure and core boundary conditions, whether private capital entities that have not undergone the preliminary review of their qualifications are permitted to participate in the procurement activities, as well as the review principles, project output specifications, the requirements in respect of the response documents to be provided by private capital entities, the time, place and method of obtaining the procurement documents and the sales price of such documents, the deadline for submitting the response documents, and the time and place of their opening. The time for submission of the response documents may not be less than 10 days from the date of publication of the announcement.

(2) Review of qualifications and sale of the procurement documents

For private capital entities that have undergone the preliminary review of their qualifications, the evaluation committee will not conduct any further review of their qualifications at the evaluation stage. For private capital entities that are permitted to undergo a later review of their qualifications, the evaluation committee will conduct a review of their qualifications at the response document evaluation stage. The project implementing authority may, depending on the specific circumstances of the project, arrange for an examination and verification of the qualification conditions of qualified private capital entities.

The sales price for the procurement documents shall be determined based on the principle of covering the costs and expenses of printing the same. Such documents may not be sold for profit nor may the project procurement amount serve as a basis for setting the sales price of the procurement documents. The time limit for the sale of the procurement documents may not be less than five working days from the date of commencement.

(3) Clarification or revision of procurement documents

The project implementing authority may carry out the necessary clarification or revision of the released procurement documents until the deadline for submission of the initial response documents, with such clarifications or revisions constituting an integral part of the procurement documents. If the clarifications or revisions could affect the preparation of the response documents, the project implementing authority shall notify in writing all of the private capital entities that received the procurement documents at least five days before the deadline for submission of the initial response documents. If fewer than five days remain, the project implementing authority shall extend the deadline for submission of the response documents accordingly.

(4) Evaluation of the response documents

The project implementing authority shall arrange for the acceptance and opening of the response documents in accordance with the procurement documents.

The evaluation committee shall conduct a two-stage evaluation of the response documents:

First stage: determination of the final procurement requirement plan. The evaluation committee may conduct multiple rounds of negotiations with the private capital entities, and during the course of such negotiations may substantively revise the technical and service requirements in the procurement documents and the draft contract terms, provided that the non-negotiable core conditions specified in the procurement documents are not revised. Substantively changed contents shall require the confirmation of the project implementing authority and all of the private capital entities involved in the negotiations shall be notified thereof. The specific procedure shall be handled in accordance with the Measures for the Administration of Government Procurement Methods Other Than an Invitation for Bids and relevant provisions.

Second stage: comprehensive scoring. Once the final procurement requirement plan is determined, the evaluation committee shall comprehensively score the final response documents submitted by the private capital entities, prepare an evaluation report and submit to the project implementing authority a list in ranking of the candidate private capital entities. The specific procedure shall be handled in accordance with the Measures for the Administration of the Invitation for and Submission of Bids for Government Procurement of Goods and Services and relevant provisions.

Article 18: The project implementing authority shall specify, in the preliminary qualification review announcement, procurement announcement, procurement documents and procurement contract, relevant government procurement policies such as the preferential measures offered to domestic private capital and the range thereof, and requirements in respect of the domestically produced goods and services procured by foreign private capital as well as the mandatory security requirements in respect of the participation by private capital in the procurement activities and the performance bond. Private capital shall pay the bond in non-monetary form, such as cheque, bill of exchange, promissory note or letter of guarantee issued by a financial institution or security providing institution. The amount of the bond for participating in the procurement activities may not exceed 2% of the amount budgeted for the project. The amount of the performance bond may not exceed 10% of the initial total investment or appraised asset value of the PPP project. For a service-type cooperation project without fixed-asset investment or the investment amount of which is not large, the amount of the performance bond may not exceed an average six months of service revenue.

Article 19: The project implementing authority shall arrange for an onsite inspection or hold a pre-procurement question and answer session for private capital, but may not individually or separately arrange for onsite inspections or question and answer sessions where only one private capital entity participates.

Article 20: The project implementing authority shall establish a dedicated procurement result confirmation and negotiation work committee. In the ranking of the candidate private capital entities, it shall carry out negotiations on the confirmation of modifiable details of the contract with the candidate private capital entities and the financial institutions cooperating with them, and the first with which it reaches a consensus shall be the winner. The confirmation negotiations may not involve the non-negotiable core terms in the contract, and further negotiations may not be carried out with a higher ranked private capital entity with whom negotiations have terminated.

Article 21: Once confirmation negotiations are completed, the project implementing authority shall execute a memorandum of confirmation negotiations with the winning private capital entity and announce the procurement result and the contract text drafted on the basis of the procurement documents, response documents, supplementary documents and memorandum of confirmation negotiations for a period of not less than five working days. The major undertakings and technical documents in the response documents of the winning private capital entity shall serve as annexes to the contract text. An announcement may be obviated for provisions in the contract text that involve state secrets or trade secrets.

A project contract in respect of which no objections are raised by the expiration of the announcement period shall be executed by the project implementing authority and the winning private capital entity after review and consent thereof by the government.

If a dedicated project company needs to be established for the project, the project company and project implementing authority shall execute a project contract anew or a supplementary contract concerning succession to the project contract once the project company is established.

The project implementing authority shall announce the project contract in the media designated by the finance department of the people's government at the provincial level or above within two working days from the date of its execution, with the exception of provisions therein involving state secrets or trade secrets.

Article 22: The finance authorities of people's governments at every level shall strengthen their monitoring inspections of PPP project procurement activities and promptly deal with violations of laws or regulations occurring in the course of such activities.

Part Five: Project execution

Article 23: The private capital entity may establish a project company in accordance with the law. The government may designate a relevant authority to take an equity interest in the project company in accordance with the law. The project implementing authority and finance department (PPP centre) shall monitor the private capital entity to make sure it, in accordance with the procurement documents and the project contract, makes its capital contribution punctually and in full to establish the project company.

Article 24: The private capital entity or project company shall be responsible for project financing. The private capital entity shall commence tasks such as financing plan design, discussions with institutions, execution of contracts and financing funds settlement in a timely manner. The finance department (PPP centre) and project implementing authority shall duly carry out the oversight work so as to guard against the transfer of corporate debt to the government.

If the private capital entity or project company fails to complete financing in accordance with the project contract, the government may take measures ranging from drawing from the performance guarantee to terminating the project contract. In the event of a systemic financial risk or force majeure, the government and the private capital entity or project company may hold consultations to revise the relevant financing terms in the contract in accordance with the project contract.

In the event of a major operating or financial risk arising in a project, threatening or harming the interests of a creditor, the creditor may, based on the direct intervention agreement or clauses executed with the government and the private capital entity or project company, demand that the private capital entity or project company improve management, etc. If the material risk is dispelled within the period specified in the direct intervention agreement or clauses, the creditor shall cease its intervention.

Article 25: With respect to government payment obligations in the project contract, the finance department shall, in taking into account medium and long-term overall fiscal planning considerations, incorporate them into the budget of the government at the same level and handle matters in accordance with relevant provisions on budget management. The finance department (PPP centre) and project implementing authority shall keep a government payment ledger for the PPP project and strictly control government fiscal risks. Once a comprehensive government financial report system has been established, the government payment obligations in PPP projects shall be incorporated in the comprehensive government financial reports.

Article 26: The project implementing authority shall monitor, in accordance with the project contract, whether the private capital entity or project company performs its contractual obligations, regularly monitor the project output performance indicators, prepare quarterly and annual reports and submit the same to the finance department (PPP centre) for the record.

If the government has payment obligations, the project implementing authority shall make payment in full in a timely manner to the private capital entity or project company directly or by notifying the finance department to do so in accordance with the output specifications specified in the project contract and in line with actual performance. If a mechanism has been established to share excess returns, the private capital entity or project company shall pay to the government its share of the excess returns in full in a timely manner in accordance with the project contract.

If the actual performance of the project is superior to the specified criteria, the project implementing authority shall execute the reward clauses specified in the project contract, and may treat the same as a basis for determining whether the contract can be renewed upon expiration of the term of the project. If the specified criteria are not fulfilled, the project implementing authority shall execute the penalty clauses or remedial measures specified in the project contract.

Article 27: If the private capital entity or project company breaches the project contract, threatening the continuous stable and safe supply of the public-sector products and services, or jeopardising national security or material public interests, the government shall have the right to take measures ranging from imposing temporary receivership over the project to initiating the procedure for terminating the project early.

The government may designate a qualified organisation to carry out the temporary receivership of the project. All of the expenses incurred by the project under temporary receivership shall be, pursuant to the project contract, solely borne by the party in breach or shared between the responsible parties. The temporary receivership charges bearable by the private capital entity or project company may be deducted from the termination compensation payable to it.

Article 28: In the course of performance and management of the project contract, the project implementing authority shall pay special attention to tasks such as contract revision, liability for breach of contract and dispute resolution.

(1) Contract revision

In accordance with the conditions and procedure set forth in the project contract, the project implementing authority or the private capital entity or project company may submit an application to revise the project contract in light of changes in conditions such as the social and economic environment, and demand and structure of the demand for the public-sector products and services. The same shall be implemented after review and consent by the government.

(2) Liability for breach of contract

If the project implementing authority or the private capital entity or project company fails to perform its obligations as specified in the project contract, it shall bear the attendant liability for breach of contract, including halting the damage, eliminating the effect, paying liquidated damages, compensating for losses and termination of the project contract.

(3) Dispute resolution:

The project implementing authority or the private capital entity or project company may, in respect of a matter over which a dispute has arisen in the course of implementation of the project and that cannot be resolved through consultations, apply for arbitration or institute a civil action in accordance with law as specified in the project contract.

Article 29: The project implementing authority shall conduct an interim assessment of the project every three to five years, with an emphasis on analysing the project operation and the compliance, suitability and reasonableness of the project contract; and, in a timely manner, assess the risks of issues that have been uncovered, formulate counter measures and submit the same to the finance department (PPP centre) for the record.

Article 30: Relevant functional departments of the government shall perform their administrative oversight responsibilities in respect of the project in accordance with relevant state laws and regulations, paying special attention to the quality and price of the public-sector products and services, the pricing mechanism, work safety, environmental protection, workers' rights and interests, etc.

If the private capital entity or project company is dissatisfied with an administrative oversight handling decision of a government functional department, it may apply for administrative reconsideration or institute an administrative action in accordance with the law.

Article 31: The government and the private capital entity or project company shall publicly disclose project-related information in accordance with the law, ensure the public's right to know and submit to public scrutiny.

The private capital entity or project company shall disclose information on the quantity and quality of project output, details on the business operations of the project, etc. The government shall disclose PPP project contract clauses that do not involve state secrets or trade secrets, performance monitoring reports, interim assessment reports and details of material changes in, or termination of, the project.

If the public or a project stakeholder discovers a violation of the law or breach of contract in the project or that the public goods or services are substandard, it may request that the government functional department conduct a monitoring inspection.

Part Six: Project transfer

Article 32: When a project is transferred, the project implementing authority or another authority designated by the government shall represent the government in recovering the project assets specified in the project contract.

The project contract shall expressly specify the transfer form, compensation method, the subject of the transfer and transfer criteria. The transfer form includes transfer upon expiration of the term and transfer upon early termination; the compensation method includes transfer without consideration and transfer with consideration; the subject of the transfer includes the project assets, personnel, files and intellectual property; and the transfer criteria include metrics such as the equipment intact rate and minimum service life.

If transfer is to be made with consideration, the project contract shall expressly specify the compensation plan; if the same is not specified or is unclear, the project implementing authority shall draft the compensation plan based on the principle of “restoration to identical economic position” and implement the same after review and consent by the government.

Article 33: The project implementing authority or other authority designated by the government shall establish a project transfer work committee, confirm with the private capital entity or project company the transfer details and compensation method in accordance with the project contract, and formulate the asset appraisal and performance testing plan.

The project transfer work committee shall engage a qualified asset appraisal firm to appraise the assets to be transferred by the appraisal method specified in the project contract, which appraisal shall serve as the basis for determining the compensation amount.

The project transfer work committee shall conduct a performance test of the assets to be transferred in strict accordance with the performance testing plan and the transfer criteria. If the results of the performance test fail to satisfy the criteria, the transfer work committee shall require the private capital entity or project company to carry out restorative repairs, effect replacement or draw from the transfer maintenance guarantee.

Article 34: The private capital entity or project company shall transfer the project assets satisfying the performance test requirements, intellectual property and technical and legal documents, together with the asset list, to the project implementing authority or other authority designated by the government, and duly carry out the procedures for legal transfer of title and transfer of management rights. The private capital entity or project company shall cooperate in duly carrying out the tasks for the stable transition of the project operations.

Article 35: Once transfer of the project is completed, the finance department (PPP centre) shall arrange for relevant departments to conduct a performance assessment of the project output, cost effectiveness, oversight efficacy, sustainability, application of the PPP, etc. and make the assessment results public in accordance with relevant provisions. The assessment results shall serve as the reference basis for government decision-making on PPP management.

Part Seven: Supplementary provisions

Article 36: These Operational Guidelines shall be implemented from the date of issuance and be effective for three years.

Article 37: The Ministry of Finance is in charge of interpreting these Operational Guidelines.

Annex 1: Operational Flow Chart for PPP Projects

Annex 2: Definition of Terms

1. “Whole life cycle” means the whole cycle of a project from design, through financing, construction, operations, maintenance until termination and transfer.

2. “Output specifications” means the economic and technical standards that the project assets are intended to achieve after completion of the project as well as the delivery scope, standards, performance level, etc. of the public-sector products and services.

3. “Value for Money (VFM)” means the maximum long-term benefits that an organisation can derive from utilising its available resources. VFM assessment is an assessment system commonly used internationally to assess whether a PPP may be used for public-sector products and services traditionally provided by governments, the objective of which is to optimise the efficiency of the allocation and utilisation of public resources.

4. “Public Sector Comparator (PSC)” means the current value of all the costs of the public-sector products and services provided by a government using the traditional procurement model during the whole life cycle, mainly including the net costs of construction and operation, transferable risk bearing costs, retained risk bearing costs and competitive neutrality adjustment costs.

5. “User charge” means the direct charge to the end consumer for purchasing the public-sector products and services.

6. “Viability gap funding” means financial assistance granted to the private capital or project company by the government in the form of fiscal subsidies, share capital injection, concessional loans and other preferential policies where the user charges are insufficient to satisfy the cost recovery and reasonable returns of the private capital entity or project company.

7. “Government payment” means the direct payment by a government to purchase public-sector products and services, mainly including availability payments, usage payments and performance payments.

The main basis for government payments are factors such as facility availability and usage and quality of the products and services.

8. “Operations & Maintenance (O&M)” means a PPP operating method wherein the government entrusts the responsibility for operating and maintaining existing public assets to the private capital entity or project company and the private capital entity or project company is not responsible for the provision of services to users. The government retains ownership of the assets and only pays to the private capital entity or project company an O&M fee. In general, the contract term does not exceed eight years.

9. “Management Contract (MC)” means a project operating method wherein the government bestows the responsibility for operating and maintaining existing public assets and the provision of user services on the private capital entity or project company. The government retains ownership of the assets and only pays to the private capital entity or project company a management fee. Normally, MC serves as the transitional method for TOT, and the contract term generally does not exceed three years.

10. “Build-Operate-Transfer (BOT)” means a project operating method wherein the private capital entity or project company assumes the responsibility for the design, financing, construction, operations and maintenance of a greenfield project and for user services and, upon expiration of the contract term, the project assets and related rights are transferred to the government. In general, the contract term is 20-30 years.

11. “Build-Own-Operate (BOO)” has evolved from BOT, with the main difference between the two being that under the BOO method the private capital entity or project company owns the project, but, in the contract, it is necessary to set forth constraining clauses to ensure the public good. In general, there is no provision for transfer upon expiration of the project term.

12. “Transfer-Operate-Transfer (TOT)” means a project operating method wherein the government transfers existing assets to the private capital entity or project company for consideration, which assumes the responsibility for operation, maintenance and user services, and, upon expiration of the contract term, the assets and ownership thereof, etc. are transferred to the government. In general, the contract term is 20-30 years.

13. “Rehabilitate-Operate-Transfer (ROT)” means a project operating method wherein the government, on the basis of the TOT model, adds rehabilitation and/or expansion provisions. In general, the contract term is 20-30 years.