Thông tư 02/2016/TT-BKHDT

Circular No. 02/2016/TT-BKHDT dated March 01, 2016, guidance on premilinary project selection, establishment, appraisal and approval for project proposal, and feasibility study report on investment project under form of public-private partnership

Circular No. 02/2016/TT-BKHDT feasibility study report intervestment project form public private partnership đã được thay thế bởi Circular 09/2018/TT-BKHDT on investment in a public-private partnership form và được áp dụng kể từ ngày 15/02/2019.

Nội dung toàn văn Circular No. 02/2016/TT-BKHDT feasibility study report intervestment project form public private partnership


MINISTRY OF PLANNING AND INVESTMENT
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SOCIALIST REPUBLIC OF VIETNAM
Independence – Freedom – Happiness
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No.: 02/2016/TT-BKHDT

Hanoi, March 01, 2016

 

CIRCULAR

GUIDANCE ON PREMILINARY PROJECT SELECTION, ESTABLISHMENT, APPRAISAL AND APPROVAL FOR PROJECT PROPOSAL, AND FEASIBILITY STUDY REPORT ON INVESTMENT PROJECT UNDER FORM OF PUBLIC-PRIVATE PARTNERSHIP

Pursuant to the Law on Public Investment dated June 18, 2014;

Pursuant to the Law on investment No. 67/2014/QH13 dated November 26, 2014;

Pursuant to the Law on Bidding No. 43/2013/QH13 dated November 26, 2013;

Pursuant to the Law on Construction No. 50/2014/QH13 dated June 18, 2014;

Pursuant to the Government’s Decree No. 15/2015/ND-CP dated February 14, 2015 on investment in the form of public-private partnership;

Pursuant to the Government’s Decree No. 116/2008/ND-CP dated November 14, 2008 defining the functions, tasks, powers and organizational structure of Ministry of Planning and Investment;

The Minister of Planning and Investment promulgates a Circular providing guidance on preliminary project selection, establishment, appraisal and approval for project proposal, and feasibility study report on investment project under form of public-private partnership.

Article 1. Scope and regulated entities

1. This Circular provides guidance on preliminary project selection; establishment, appraisal and approval for project proposal; establishment, appraisal and approval for feasibility study report on investment project under form of public-private partnership as regulated in Article 1 of the Government’s Decree No. 15/2015/ND-CP dated February 14, 2015 on investment in the form of public-private partnership.

2. This Circular applies to agencies, organizations and individuals involved in the preliminary project selection, establishment, appraisal and approval for project proposal, and feasibility study report on investment project under form of public-private partnership.

Article 2. Interpretation of terms

1. In this Circular, these terms shall be construed as follows:
PPP project refers to the investment project in the form of public-private partnership.

2. Project preparation unit is assigned by the Ministry, Ministerial-level agencies or provincial people’s committees to establish project proposal and feasibility study report and execute other relevant duties.

3. Central unit organizing the appraisal on project proposals and feasibility study report (hereinafter referred to as the appraisal unit) refers to the unit that has been established or assigned as the central PPP operation management unit as regulated in Clause 2 Article 7 of the Decree No.15/2015/ND-CP.

4. Project proposal is a report prepared as regulated in Clause 11 Article 3 of the Decree No.15/2015/ND-CP. In case the project uses state funding, the project proposal shall have the same validity with prefeasibility study report (if the project is classified in group A) or report on proposal of investment plans (if the project is classified in group B or C) as regulated by the law on public investment.

Article 3. Preliminary project selection

1. Principles for preliminary project selection

a) Preliminary project selection is to exactly determine public projects for infrastructure, provision of equipment or services that have been researched for investment in the PPP form.

b) Project that is eligible for preliminary selection must ensure the criteria defined in Section 2 of this Article.

2. Criteria for preliminary project selection

a) Project that is eligible for preliminary selection must ensure the following criteria:

- The project must be in conformity with sector and regional development planning and plans, and local socio-economic development plans;

- The project must be in conformity with the investment sectors defined in Article 4 of the Decree No. 15/2015/ND-CP and prioritized by the Ministry, Ministerial-level agencies or provincial people’s committees;

- The project must generate revenue to return investment capital to the investors. The project that directly generates revenue from its business operations shall be prioritized.

b) In addition to criteria stated in Point a of this Clause, based on level of provided information of each project, the preliminary selection may base on the following supplemental criteria:

- The project receives the consideration of the investors;

- The project has huge demand for services;

- The project has convenient factors for performing the investment (such as the site clearance has been finished; the construction of auxiliary works and connection works has been finished; it’s easy to acquire raw materials, fuels, machines and technologies on the market);

- Other relevant factors (if any).

3. Organizations affiliated to Ministry or Ministerial-level agencies; specialized agencies affiliated to provincial people’s committees or district people’s committees shall initiatively do research on preliminary project selection as regulated in Clause 1 and Clause 2 of this Article, and request the Minister, Heads of Ministerial-level agencies and Presidents of provincial people’s committees to grant permission for establishing the project proposals.

4. Based on approval on establishment of project proposal in the PPP form as regulated in Clause 3 of this Article, the competent authorities as regulated by the law on public investment shall allocate public investment funds or other lawful sources of capital to establish, appraise and approve the project proposals and feasibility study reports.

Article 4. Establishment, appraisal and approval for project proposals as regulated in Section 1 Chapter III of the Decree No. 15/2015/ND-CP

1. Detailed process

a) Establish project proposal;

b) Carry out appraisal of project proposal;

c) Apply for use of state funding to the project (if any);

d) Give approval for project proposal;

dd) Make project announcement.

2. Establishment of project proposal

a) The project preparation unit shall prepare the project proposal as regulated in Article 16 of the Decree No. 15/2015/ND-CP on the basis of guidance stated in the Annex I promulgated under this Circular. With regard to the construction project, the project proposal shall include the preliminary design (or fundamental design if the project is classified in group C) in accordance with the regulations of the law on construction. With regard to the non-construction project, the project proposal shall include the preliminary design (or fundamental design if the project is classified in group C) in accordance with the regulations of the specialized laws.

b) The project preparation unit shall submit 01 set of the application for project proposal to the Minister, Heads of Ministerial-level agencies and Presidents of provincial people’s committees and 04 sets of the application for project proposal to the appraisal unit.

c) The application for project proposal includes:

- Written request for approval for project proposal includes legal grounds for establishing the project proposal, explanation about main contents of the project proposal and suggestions;

- Draft of project proposal;

- Written approval of the competent individual with respect to the establishment of the project proposal in the PPP form;

- Relevant legislative documents.

3. Appraisal of project proposal

a) The appraisal unit receives the application for project proposal submitted by the project preparation unit and carries out the appraisal as regulated at Points b, c, d and dd of this Clause.

b) The appraisal unit takes written suggestions concerning the project proposal of relevant authorities and units and an appraisal meeting may be organized in case of need. The appraisal unit must take written suggestions on preliminary design (or fundamental design if the project is classified in group C) of construction specialized authorities as regulated by the construction law (as for construction project) or specialized authorities as regulated by specialized laws (as for non-construction project).

c) The appraisal unit shall prepare reports on appraisal of project proposal as guided in Annex II promulgated under this Circular. The appraisal unit shall only submit the project proposal that has qualified all requirements stated in Article 15 of the Decree No.15/2015/ND-CP for approval.

d) The appraisal unit shall submit the appraisal documents of project proposal to the Minister, Heads of Ministerial-level agencies and Presidents of provincial people’s committees, including:

- Reports on appraisal of project proposal;

- Draft of project proposal;

- Relevant legislative documents.

dd) The appraisal of the project proposal must be carried out within 25 days as of the receiving date of valid application. Such period is exclusive of period for approving the use of state funding as regulated at Clause 4 Article 17 of the Decree No.15/2015/ND-CP.

4. In case the project uses state investment funds, the Ministry, Ministerial-level agencies and provincial people’s committees shall submit reports to the competent authorities for giving approval for use of state funding to the project as regulated by the law on public investment.

5. Approval for project proposal

a) Based on the application for project proposal submitted by the project preparation unit, appraisal documents of the appraisal unit and decision on use of state funding to the project granted by the state competent authorities as regulated by the law on public investment (if any), the Minister, Heads of Ministerial-level agencies and Presidents of provincial people’s committees shall give approval for the project proposal within 05 days. With regard to the project whose investment plans are approved by the Minister, Heads of Ministerial-level agencies and Presidents of provincial people’s committees according to the delegation of authority regulated by the law on public investment, the project proposal and plans on use of state funding to the project shall be approved at the same time.

b) Decision on approval for the project proposal includes the following contents:

- Name of project;

- Name of state competent authority entering into the contract with the investor;

- Name of project preparation unit;

- Location, scale and capacity of project, and used land area;

- Technical requirements;

- Total estimated investment capital;

- The state funding to the project (if any);

- Type of project contract;

- Preliminary financial plan;

- Period of project contract;

- Investment guarantee and incentives;

- Other contents.

6. The Ministry, Ministerial-level agencies and/or provincial people’s committees shall carry out the project announcement as regulated in Article 18 of the Decree No. 15/2015/ND-CP Contents and procedures for publishing information shall comply with the law on bidding.

Article 5. Establishment, appraisal and approval for project proposals as regulated in Section 2 Chapter III of the Decree No. 15/2015/ND-CP

1. Detailed process

a) Establish project proposal;

b) Carry out appraisal of project proposal;

c) Give approval for project proposal;

d) Carry out agreement on contents of assigning the investor to prepare feasibility study report;

dd) Make project announcement.

2. Establishment of project proposal

a) The investor shall establish the project proposal as regulated in Point a Clause 2 Article 4 of this Circular.

b) The investor shall submit 01 set of the application for project proposal to the Ministry, Ministerial-level agencies and provincial people’s committees and 01 set of the application for project proposal to the central PPP operation management unit.

c) The application for project proposal shall apply Clause 2 Article 21 of the Decree No.15/2015/ND-CP.

3. Processes of appraisal and approval for the project proposal submitted by the investor shall comply with Clause 3 and Clause 5 Article 4 of this Circular.

4. With regard to the project that uses the ODA (the Official Development Assistance) fund and the concessional loans from foreign sponsors as regulated in Clause 3 Article 11 of the Decree No.15/2015/ND-CP the Ministry, Ministerial-level agencies and provincial people’s committees shall submit reports to the competent authorities for giving approval for use of state funding to the project as regulated by the law on public investment and the signed international agreements before the project proposal is approved.

5. The Ministry, Ministerial-level agencies and provincial people’s committees shall carry out an agreement with the investor on contents of assigning the investor to prepare feasibility study report. The agreed contents must be made in writing as regulated in Clause 3 Article 24 of the Decree No.15/2015/ND-CP.

6. The Ministry, Ministerial-level agencies and provincial people’s committees shall carry out the announcement of the approved project and information of the project investor as regulated in Article 23 of the Decree No. 15/2015/ND-CP Contents and procedures for publishing information shall comply with the law on bidding.

Article 6. Establishment, appraisal and approval for feasibility study report

1. Detailed process

a) Establish feasibility study report;

b) Carry out appraisal of feasibility study report;

c) Give approval for feasibility study report.

2. Establishment of feasibility study report

a) The project preparation unit or the assigned investor shall prepare the feasibility study report as regulated in Clause 1 Article 25 of the Decree No. 15/2015/ND-CP on the basis of guidance stated in the Annex III promulgated under this Circular, except for group-C projects.

b) The project preparation unit or the assigned investor shall submit 01 set of the application for approval for the feasibility study report to the Ministry, Ministerial-level agencies and provincial people’s committees, and 04 other sets to the appraisal unit.

c) The application for approval for feasibility study report includes:

- Written request for approval for feasibility study report that includes grounds for approving the feasibility study report, explanation about main contents of the feasibility study report and other suggestions;

- Draft of feasibility study report;

- Written agreement made between Ministry/Ministerial-level agencies/provincial people’s committees and the investor (if the project proposal is submitted by the investor);

- Decision on approval for project proposal;

- Appraisal documents of project proposal;

- Relevant legislative documents.

3. Appraisal of feasibility study report

a) The appraisal unit receives the application for approval for feasibility study report submitted by the project preparation unit or the assigned investor and carries out the appraisal as regulated at Points b, c and d of this Clause.

b) The appraisal unit takes written suggestions concerning the feasibility study report of relevant authorities and units and an appraisal meeting may be organized in case of need. The appraisal unit must take written suggestions on preliminary design of construction specialized authorities as regulated by the construction law (as for construction project) or specialized authorities as regulated by specialized laws (as for non-construction project).

c) The appraisal unit shall prepare reports on appraisal of feasibility study report including the contents defined in Clause 3 Article 26 of the Decree No. 15/2015/ND-CP on the basis of guidance stated in the Annex IV promulgated under this Circular.

d) The appraisal unit shall submit the appraisal documents of the feasibility study report to the Minister, Heads of Ministerial-level agencies and Presidents of provincial people’s committees as regulated in Clause 2 Article 26 of the Decree No. 15/2015/ND-CP within appraisal period regulated in Clause 4 Article 26 of the Decree No. 15/2015/ND-CP.

4. Approval for feasibility study report

a) Based on the application for approval for feasibility study report submitted by the project preparation unit or the assigned investor and the appraisal documents of the appraisal unit, the Minister, Heads of Ministerial-level agencies and Presidents of the provincial people’s committees shall give approval for the feasibility study report.

b) Decision on approval for the feasibility study report includes the following contents:

- Name of project;

- Name of state competent authority entering into the contract with the investor;

- Name of project preparation unit or the investor that is assigned to prepare feasibility study report;

- Location, scale and capacity of project, and used land area;

- Detailed technical requirements;

- Total investment capital;

- The state funding to the project (if any);

- Type of project contract;

- Financial plan;

- Period of project contract;

- Investment guarantee and incentives;

- Other contents.

Article 7. Use of annexes

1. The annexes promulgated under this Circular are set up on the basis of regulations of the law on investment in the PPP form and reference to the international practice for the purpose of facilitating the parties in participating in PPP project preparation and ensuring the unanimity of contents of project proposal and feasibility study report, and used as grounds for selecting the investor and negotiating and entering into project contract.

2. During the establishment, appraisal and approval for the project proposal and feasibility study report, the organizations and individuals must apply the Annexes promulgated under this Circular, and based on features, scale and sectors of each project, supplement certain contents of explanation about feasibility and efficiency for peculiar conditions of the project.

Article 8. Implementation

1. This circular takes effect as of April 18, 2016.

2. Ministries, Ministerial-level agencies, Government’s bodies, other central-affiliated agencies, People’s Committees at all levels, and relevant organizations and individuals are responsible for implementing this Circular.

3. Difficulties that arise during the implementation of this Circular should be reported to the Ministry of Planning and Investment for consideration and settlement.

 

 

MINISTER




Bui Quang Vinh

 

ANNEX

 (Promulgated under the Circular No. 02/2016/TT-BKHDT dated March 01, 2016 of the Minister of Planning and Investment)

1. Annex I: Guidance on establishment of PPP project proposal.

2. Annex II: Guidance on appraisal of PPP project proposal.

3. Annex III: Guidance on establishment of feasibility study report on PPP project.

4. Annex IV: Guidance on appraisal of feasibility study report on PPP project.

 

ANNEX I

GUIDANCE ON ESTABLISHMENT OF PPP PROJECT PROPOSAL

Project proposal is a document that contains the contents of preliminary research on the need, feasibility and efficiency of the project. Annex I provides for guidance on the contents stated in the project proposal in order that the Ministry, Ministerial-level agencies and provincial people’s committees decide the investment plans in the PPP form, determine the state funding to the project and this annex is used as grounds for bidding organization to select the investor (as for group-C project).

Based on features, scale and sector of the project, the project preparation unit or the investor prepare the project proposal according to the following contents:

A. BASIC INFORMATION OF PROJECT

The project preparation unit or the investor summarize and take explanation about basic information of the project, including:

- Name of project;

- Name of state competent authority entering into the contract with the investor;

- The project preparation unit or the investor proposing the project;

- Location, scale and capacity of project, and used land area;

- Technical requirements;

- Total estimated investment capital;

- The state funding to the project (if any);

- Type of project contract;

- Preliminary financial plan;

- Period of project contract;

- Investment guarantee and incentives;

- Other related contents.

B. GROUNDS FOR ESTABLISHMENT OF PROJECT PROPOSAL

The project preparation unit or the investor makes the list of legislative documents used as the grounds for establishing the project proposal, including:

- Laws, decrees and guidance circulars relating to the development of PPP project;

- Laws, decrees and guidance circulars relating to investment sector/field of the project;

- Decisions on approval for sector and regional development planning and plans,, and national and local socio-economic development plans in connection with the project;

- Decisions and/or documents of the competent authorities during the preliminary project selection;

- Other related legislative documents.

C. CONTENTS OF PROJECT PROPOSAL

I. Necessity of investment project

1. Overview

Provide with preliminary explanation about national and local socio-economic overview during the development of the project; appraise benefits that will be generated from the project for the fatherland and locality. Give general appraisal of sector or field proposed by the project, direct and indirect effects of regulations of specialized laws on the project. Analyze the conformity of the project with sector and regional development planning and plans, and the national and local socio-economic development plans and sector development plans.

2. Current conditions of project

With regard to new projects, provide with explanation about current conditions and real situation of region or location where the project shall be performed. With regard to renovated or upgraded project, supplement appraisal of current conditions of the works needing renovation or upgradation.

3. Relevant projects

Indicate basic information of relevant projects and good and bad effects of such projects on the proposed project.

4. Project objectives

Provide with preliminary explanation about general and specific objectives that the project must achieve in the background and current conditions specified in the above items.

5. Advantages of investment in the PPP form

Analyze the advantages of the investment in the PPP form over other investment forms with the following contents: ability for attracting sources of capital, technology, and managing experience of private sector; ability for dividing risks between relevant parties and other contents.

II. Explanation about project techniques

1. Project scale and capacity

Carry out preliminary analysis of demand for use of the project, provided products or services on the basis of planning, actual survey data or estimated figures; provide with explanation about scale and capacity of the project.

2. Location for project performance

Describe features of the land plot for project performance and other projects or works that are or will be developed in the vicinity (if any).

3. Plan for indemnity, site clearance and resettlement

If the site clearance is not yet carried out, provide with preliminary explanation about plans for indemnity, site clearance and resettlement for proposed project and other projects (if the BT contract is applied) in accordance with applicable laws.

4. Requirements for techniques, quality of the project, products or services

The project proposal contains the analysis of certain plans that may be applicable and the suggestion of certain plans that are suitable to the requirements for techniques, quality of the project and products or services on the grounds of project scale and capacity, sector standards and norms, availability and practical applications of technology. This is the basis for calculating total investment capital of the project. The fact that the investor can suggest other technical or technological plans for meeting requirements for techniques, quality of the project, products or services and achieving higher efficiency for the project must be specified in the project proposal.

5. Preliminary design

With regard to the construction project, contents of the preliminary design (or fundamental design if the project is classified in group C) stated in the project proposal shall apply the law on construction.

With regard to the non-construction project, contents of the preliminary design (or fundamental design if the project is classified in group C) stated in the project proposal shall apply the specialized laws.

6. Total investment capital of project

The project proposal shall contain preliminary calculation of total investment capital of the project, including: total investment amount and initial working capital for developing and operating the project on the grounds of explanations of selected techniques. In which, total investment amount shall be determined according to the law on construction (as for construction project) or specialized laws (as for non-construction project), and the initial working capital for developing and operating the project shall be equal to the sum of fixed costs and variable costs during the initial operation and maintenance according to specific features of each sector or field.

III. Impact on environment, society, security and national defense

Appraise the impact of the project on environment, society, security, national defense and other impacts (if any).

IV. Forecast of demand

Carry out analysis of output and demand for use of the project, products or services; forecast the growth of demand in the future to use as the grounds for consideration of socio-economic efficiency and financial plans.

V. Preliminary analysis of socio-economic efficiency of project

1. Determination of costs and socio-economic benefits

Preliminarily determine the costs and socio-economic benefits of the project according to the following groups of factors:

(i) Group of factors that may be quantified and exchanged into cash (this is used to calculate benefit – cost ratio (BCR) as regulated in Section V.2 of this annex).

(ii) Group of factors that may be quantified but not exchanged into cash.

(iii) Group of factors whose quality is determined.

2. Preliminary analysis of socio-economic efficiency of project through the BCR - Benefit Cost Ratio

BCR is a ratio between the overall benefits accrued from the investment and the overall costs spent during the investment and operation. All benefits and costs are expressed in present values. For ensuring the socio-economic efficiency of the project, BCR must be greater than 1 (>1) and preliminarily calculated during the establishment of the project proposal according to the following formula:

BCR =  =

In which:

Bt = Preliminarily calculated value of benefits of year t;

Ct = Preliminarily calculated value of costs of year t;

t = Year in the project life cycle (0, 1, 2, n); n = Total operating years of the project (period of project contract);

re = Economic discounting rate of project. re value is determined according to regulations of each sector. If specific regulations on the re value are not promulgated, the unit establishing the project proposal can refer to the re value = 10% or suggest another value provided that explanation of using that value must be specified.

3. Preliminary conclusion of socio-economic efficiency of project

The project proposal must contain preliminary conclusion of socio-economic benefits of the project on the grounds of analysis of groups of factors as regulated in Section V.1 of this Annex and BCR calculation result.

If the project is not qualified for determining group (i) as regulated in Section V.1 of this Annex for calculating the BCR, the project proposal must contain preliminary conclusion of socio-economic benefits of the project on the grounds of remaining groups of factors.

IV. Project financial analysis

1. Input parameters used in financial model

- Total costs during the project life cycle is the sum of total investment amount and the costs for developing and operating during the project life cycle. In which, total investment amount shall be determined according to the law on construction (as for construction project) or specialized laws (as for non-construction project).

- Total revenue: Total revenue of the project (basic revenue, maximum and minimum revenue) and revenue of each year must be determined on the grounds of contents of forecast of demand as stated in Section IV of this annex; price and costs of products and service charges and receivables; forecast of scheme for increasing price or costs.

- Other input parameters: loan interests, loan term; inflation rate; exchange rate; depreciation rate and other parameters.

2. Financial criteria for considering the feasibility of project

Based on the above-mentioned input parameters, financial plan of project should be calculated and analyzed according to the following primary items:

a) Net Present Value – NPV

Net Present Value - NPV is the present value of cash inflows after all expenses have been deducted during the project life cycle. For ensuring the financial efficiency of the project, NPV must be a positive number (>0) and calculated according to the following formula:

NPV =  

In which:

CFt = Net value of cash flow of project in year t;

t = Year in the project life cycle (0, 1, 2, n);

n = Total operating years of the project (period of project contract);

r = Discount rate (as regulated by the Ministry of Finance).

b) Internal Rate of Return – IRR

Internal Rate of Return – IRR is a discount rate (r) that makes NPV = 0 and calculated by solving the following equation:

NPV = = 0

In which: CFt, t, n are construed as those defined in the NPV formula stated above.

For calculating financial feasibility of project, IRR, after calculation, should be compared with the following values: (i) WACC - Weighted Average Cost of Capital; (ii) inflation rate; (iii) interest rate of bank deposit; (iv) IRRs of other projects that have similar properties in the same sector. The project’s financial aspect is feasible if IRR is higher than values (i), (ii), (iii) and conformity with value (iv).

3. Preliminary conclusion of financial feasibility of project

The project proposal must contain preliminary conclusion of financial feasibility of project on the grounds of analysis in item 1 and item 2 stated above, and state preliminary financial plan with the following contents:

- Total investment capital;

- Structure of source of capital and presumptive capital mobilization plan;

- The state funding to the project (if any);

- Requirements on price, costs of products and services;

- Financial criteria (NPV, IRR).

VII. Type of project contract

A specific type of contract that is suitable to the project must be determined on the grounds of explanation about forecast of demand and financial plan.

In the selected type of contract, division of roles and responsibilities concerning the project performance between state competent authorities and the investor during the project life cycle, including: responsibilities of state competent authorities or project managing unit; responsibilities of the investor and project enterprise, and responsibilities of relevant organizations (such as lender, input supplier, off-taker, contractor, etc.) should be specified.

VIII. Risk analysis during project performance

The project proposal must contain preliminary explanation about certain risks that may occur during the project life cycle, including: political and legal risks, land title risks, environmental risks, risks of selected techniques or technology, risks of construction and design, financial risks, demand risks, and operational risks, etc.

The project proposal must contain analysis of risks breakdown structure and risks management, and responsibilities of the parties in risks management, and certain methods of risk reduction.

IX. State assistance

1. State funding to the project (if any)

In case the project needs the state funding to the project as regulated in the Decree No. 15/2015/ND-CP the project proposal must, based on results of socio-economic analysis, project financial analysis and selected type of project contract, contain the explanation about relevant contents, including: value of state funding; estimated source of capital and balance of state funding; methods, plans and progress of disbursement of state funding for the investor.

If the project applies BT contract, the project proposal must contain preliminary explanation about value of BT project, land fund that the investor will use to perform other project, time of land allocation, methods of land allocation and other conditions for project performance.

2. Investment guarantee and incentives

The project proposal must contain proposal concerning investment incentives (including sector or local specific incentives), forms of investment guarantee, Government's guarantee and enclosed conditions as well as liability of setting up necessary provisions during the performance of project contract.

X. Plan for project performance

The project proposal must specify period for project preparation (including period for preparing project proposal and feasibility study report, organizing bidding for selecting the investor and entering into the project contract); period for project performance and time for finishing the project.

XI. Management of project performance

1. Requirements for methods of organizing management and business or provision of services

The project proposal must contain preliminary explanation about methods of organizing management and business or provision of services, including: the methods that the state competent authorities can cooperate with the investor and project enterprise during the performance of business or provision of products or services; methods of supervision to ensure stable and consecutive provision of qualified products or services for meeting customers’ demand, and methods for management of fee collection process that the investor must collect fees from the customers according to the fees rate regulated in the project contract (if the project applies BOT, BTO, BOO, or O&M contract or a similar type of project contract); and method of payment to the investor on the grounds of quality of provided products or services (if the project applies BTL or BLT contract or a similar type of project contract).

2. Management of project performance

The project proposal must contain preliminary determination of capacity and organizational structure for managing the project performance of state competent authorities, the investor and project enterprise in each specific stage of project performance, including the stages of preparation of project proposal, preparation of feasibility study report, organization of the bidding for selecting the investor, entering into contract with the investor and contract management.

D. CONCLUSION AND SUGGESTION

Conclusion and specific suggestions, and contents requiring detailed research in feasibility study report must be specified in the project proposal.

 

ANNEX II

GUIDANCE ON APPRAISAL OF PPP PROJECT PROPOSAL

Based on features, scale and sector and contents of the project proposal, reports on appraisal of project proposal must contain the following contents: If the project proposal is prepared by the investor, other contents explained by the investor should be considered. The appraisal unit must make specific comment about every content and give method of settlement for unacceptable content to the project preparation unit or the investor establishing the project proposal.

A. OVERVIEW OF PROJECT

The appraisal unit specifies general information of the project, including: name of project; state competent authority entering into contract with the investor; project preparation unit or the investor preparing project proposal; Location, scale and capacity of project,, used land area; technical requirements; total investment capital; state funding to the project (if any); type of project contract; preliminary financial plan; period of project contract; investment guarantee and incentives; and other relevant contents.

B. SUMMATION OF SUGGESTIONS OF RELEVANT ORGANIZATIONS AND UNITS

The appraisal unit must summarize suggestions of relevant organizations and units as regulated in Clause 3 Article 4 of this Circular.

C. SUMMATION OF APPRAISAL RESULTS

I. Verification of sufficiency of documents

The appraisal unit shall verify and make comments about the sufficiency of documents based on regulations on project proposal documents as stated in Article 4 and Article 5 of this Circular.

The appraisal unit can request the project preparation unit or the investor establishing the project proposal to supplement relevant documents in case of need. When the time limit for supplementing documents is over, if the project preparation unit or the investor fails in sufficient submission of required documents, the appraisal unit has to report to the Minister, Heads of Ministerial-level agencies and Presidents of the provincial people’s committees on such invalid documents to grant permission for stopping consideration of project proposal.

II. Appraisal of contents of project proposal

1. Appraisal of Necessity of investment project

The appraisal unit shall consider the conformity of the project proposal with the following contents:

- The conformity of project with sector and regional development planning and plans, and local socio-economic development plans.

- The urgency and need of prompt investment in the project.

- Advantages of investment in the PPP form compared with other investment forms.

2. Appraisal of basic factors of project

- Project objectives: The suitability of general and specific objectives for current conditions of sector/field of investment or locality, and capacity for solving matters demanded by the community must be considered.

- Project scale and capacity: The suitability of the grounds for selecting project scale and capacity; the suitability of such scale and capacity for input supply capacity and output factors; and the stability of services provided by the project must be considered.

- Location of project performance: Contents concerning features of natural, administrative, social, economic, technical and infrastructure conditions, survey results (if survey has been conducted) in the location where is selected for project performance must be considered.

- Methods of indemnity, site clearance and resettlement: The suitability and feasibility should be appraised as regulated by the law on land.

3. Appraisal of project efficiency

- Contribution of project to socio-economic development duties: Analysis of socio-economic efficiency is to compare benefits between the performance of investment project and preservation of current conditions, not performing the investment. Additionally, in case of selection between many projects, the projects with higher socio-economic efficiency shall be prioritized on the grounds of combination with balance of state funding. Therefore, the appraisal unit should consider the suitability and accuracy of costs, socio-economic benefits, and Benefit Cost Ratio (BCR). The project is considered as achieving socio-economic efficiency if BCR is higher than 1 (>1). If BCR is not determined in the project proposal, the appraisal unit shall consider the suitability of other factors.

- Impacts of the project on environment, society, security and national defense (if any): The suitability of explanation about impacts of the project for the issues of environment, society, security and national defense and other impacts should be considered.

4. Appraisal of project feasibility

a) Appraisal of technical feasibility

- Technical requirements: The suitability of technical and technological plans for project scale and capacity, sector standards and norms, and input technical requirements; the availability and practical applications of selected technology; the clearness and sufficiency of determination of primary technical risks and the suitability of plan for risk reduction must be considered.

- Preliminary design (or fundamental design if the project is classified in group C): The appraisal unit must summarize appraisal suggestions of construction specialized authorities as regulated by the construction law (as for construction project) or specialized authorities as regulated by specialized laws (as for non-construction project).

b) Appraisal of financial feasibility

- Financial feasibility of project: The suitability and accuracy of input financial factors, financial criteria and preliminary financial plan of project must be considered. The project is considered as achieving financial efficiency if:

+ NPV is a positive number (>0);

+ IRR is higher than (i) WACC - Weighted Average Cost of Capital; (ii) inflation rate; (iii) interest rate of bank deposit, and in conformity with IRRs of other projects that have similar properties in the same sector;

- Use of state funding to the project: The suitability of value of state funding, balance and allotment of state funding, methods, plans and progress of disbursement of state funding for the investor, etc. must be considered.

- The appraisal unit must consider the suitability of the investment guarantee and incentives.

5. Appraisal of suitability of project contract

The appraisal unit shall consider the project proposal according to the following contents:

- The suitability of project contract and period of selected contract.

- The reasonableness of division of responsibilities of the parties during the project performance and methods of risk prevention and reduction.

6. Plan for project performance, project management and supervision scheme

The appraisal unit must consider and make specific comments about the suitability of plan for project performance, project management and supervision scheme stated in the project proposal.

D. COMMENTS AND PROPOSAL

I. Comments

The appraisal unit shall summarize comments about the project proposal and appraise the suitability of the project proposal for requirements stated in Article 15 of the Decree No. 15/2015/ND-CP on the grounds of the aforesaid analysis.

II. Proposal

- If the project proposal is in conformity with the laws and is appraised to be feasible to perform the investment in the PPP form, the appraisal unit shall submit a proposal to the Minister, Heads of Ministerial-level agencies and Presidents of the provincial people’s committees for giving approval for the project proposal.

- If the project proposal is unacceptable, the appraisal unit shall report to the Minister, Heads of Ministerial-level agencies and Presidents of the provincial people’s committees to consider and make decision upon one of the following plans:

Plan 1: Request the project preparation unit or the investor to amend the project proposal.

Plan 2: Refuse to consider and give approval for the project proposal.

 

ANNEX III

GUIDANCE ON ESTABLISHMENT OF FEASIBILITY STUDY REPORT ON PPP PROJECT

Feasibility study report means a document that contains the contents of research on the need, feasibility and efficiency of the group-A and group-B PPP projects. Annex III provides for guidance on the contents stated in the feasibility study report in order that the Ministry, Ministerial-level agencies and provincial people’s committees decide the investment in the PPP form, and this annex is used as grounds for bidding organization to select the investor.

Based on features, scale and sector of the project, the project preparation unit or the investor prepares the feasibility study report according to the following contents:

A. BASIC INFORMATION OF PROJECT

The project preparation unit or the investor summarize and explain about basic information of the project, including:

- Name of project;

- Name of state competent authorities entering into the contract with the investor;

- Name of project preparation unit or the investor that is assigned to prepare feasibility study report;

- Location, scale and capacity of project, and used land area;

- Technical requirements;

- Total investment capital;

- The state funding to the project (if any);

- Type of project contract;

- Financial plan;

- Period of project contract;

- Investment guarantee and incentives;

- Other related contents.

B. GROUNDS FOR ESTBLISHMENT OF FEASIBILITY STUDY REPORT

The project preparation unit or the investor makes the list of legislative documents used as the basis for establishing the feasibility study report, including:

- Laws, decrees and guidance circulars relating to the development of PPP project;

- Laws, decrees and guidance circulars relating to investment sector/field of the project;

- Decisions on approval for sector and regional development planning and plans, and national and local socio-economic development plans in connection with the project;

- Decisions and documents of the competent authorities during the establishment, appraisal and approval for the project proposal;

- Other related legislative documents.

C. CONTENTS OF FEASIBILITY STUDY REPORT

I. Necessity of investment project

1. Overview

- The feasibility study report must contain explanation about national and local socio-economic overview during the development of the project; natural environment and conditions that cause impacts on the project; overview of sector and field proposed by the project, direct and indirect effects of regulations of specialized laws on the project.

- The feasibility study report must contain analysis on the suitability of the project for national, regional and sector socio-economic development planning and plans.

- Consideration of estimated benefits that the project shall contribute to the fatherland and locality must be specified.

2. Current conditions of region for project performance

With regard to new projects, the feasibility study report must contain the explanation about current conditions and real situation of region or location where the project shall be performed. With regard to renovated or upgraded project, the feasibility study report must contain description of current conditions of the works needing renovation or upgradation.

3. Relevant projects

Basic information of relevant projects (including supporting projects and competitive projects) that may cause impacts on revenue, profit and costs, etc, of the proposed project must be specified; the feasibility study report must contain the explanation about positive impacts and adverse effects of such projects on the proposed project.

4. Project objectives

General and specific objectives of the project must be determined, including:

- General objectives: the contribution of project to the national general objectives; and project benefits contributed to national, regional and sector socio-economic development must be specified.

- Specific objectives: solved matters and real situation; the number of objects enjoying benefits from the project; scale and capacity that the project must achieve to meet demand of use must be specified in the feasibility study report.

5. Advantages of investment in the PPP form

The feasibility study report must contain analysis on the advantages of the investment in the PPP form over other investment forms with the following contents: ability for attracting sources of capital, technology, and managing experience of private sector; results of practical survey on ability for project performance of private sector; plans for dividing risks between relevant parties and other contents.

II. Explanation about project techniques

1. Project scale and capacity

Carry out analysis of demand for use of infrastructure works and public services on the basis of planning, practical survey data or estimated figures; provide with explanation about scale and capacity of the project. In case of phasing of investment, scale and capacity of each phase must be specified in conformity with forecast of the growth of demand.

2. Location for project performance

Describe the location or the land plot for project performance according to the following contents: boundary, area and current conditions of used land plot, secure corridor (if any), construction area and advantages of such location for the project[1]. If there are other projects or works that are or will be performed in the vicinity or inside the location for project performance, analysis on impacts of such projects on the proposed project must be specified.

3. Plan for indemnity, site clearance and resettlement

If the site clearance is not yet carried out, make explanation about the plans for indemnity, site clearance and resettlement for proposed project and other projects (if the BT contract is applied) in accordance with applicable laws.

4. Requirements for techniques, quality of the project, products or services

- The feasibility study report must contain determination of technical and technological plans on the grounds of project scale and capacity; sector standards and norms; the availability and practical applications of technology; technical and technological risks (if any); input and output requirements of the project.

- Technical requirements, project quality, provided products or services must be specified by means of indicators for appraisal of technical quality of project.

- Description of technical and technological plan that is selected in the feasibility study report must be specified. This is the basis for calculating total investment capital of the project. The feasibility study report must contain the fact that the investor can suggest other technical or technological plans for meeting indicators for appraisal of technical quality of the project, and achieving higher efficiency for the project.

5. Fundamental design

With regard to construction project, contents of the fundamental design stated in the feasibility study report must comply with the law on construction.

With regard to non-construction project, contents of the fundamental design stated in the feasibility study report must comply with the specialized law.

6. Total investment capital of project

The feasibility study report must specify total investment capital of the project, including total investment amount and initial working capital for developing and operating the project on the grounds of explanation about selected techniques. In which, total investment amount shall be determined according to the law on construction (as for construction project) or specialized laws (as for non-construction project). The initial working capital for developing and operating the project shall be equal to the sum of fixed costs and variable costs during the initial operation and maintenance according to specific characters of each sector or field.

III. Impacts on environment, society, security and national defense

1. Impacts of the project on environment

Comply with the law on assessment of environmental impacts on the project; If natural resources are used as the primary input factor of the project (in the fields of energy, electricity, water, etc.), detailed analysis on impacts of the project on the natural resources and methods of reduction of negative impacts must be specified.

2. Impacts of the project on society

Explain about impacts on society during the project performance such as resettlement assistance, gender equality, labour, job creation, etc. and specify methods of reduction of negative impacts.

3. Impacts on security and national defense (if any)

If the project has impacts on security and national defense, detailed analysis on these contents must be specified and methods of reduction of negative impacts must be suggested.

IV. Forecast of demand

The feasibility study report must contain analysis of demand for use of the project, products or services; forecast of the growth of demand in the future to use as the grounds for appraisal of socio-economic efficiency and determination of financial plans. To be specific:

- Analysis of current demand: determine the number of objects enjoying benefits from the project based on current conditions, scale and capacity of the project.

- Forecast of demand in the future: establish scenarios for demand in the future (maximum, medium and minimum) during the project life cycle.

V. Analysis of socio-economic efficiency of project

1. Determination of costs and socio-economic benefits

Determine the costs and socio-economic benefits of the project according to the following groups of factors:

(i) Group of factors that may be quantified and exchanged into cash (this is used to calculate criteria for analysis of socio-economic efficiency of the project as regulated in Section V.2 of this annex).

(ii) Group of factors that may be quantified but not exchanged into cash.

(iii) Group of factors whose quality is determined.

2. Criteria for analysis of socio-economic efficiency of project

a) Economic Net Present Value - ENPV

ENPV is the difference between the overall benefits and the overall costs during the economic calculation and expressed in present values. For ensuring the socio-economic efficiency of the project, ENPV must be a positive number (>0) and calculated by the following formula:

ENPV = B – C =  

In which:

Bt = Value of benefits of year t;

Ct = Value of costs of year t;

t = Year in the project life cycle (0, 1, 2, n);

n = Total operating years of the project (period of project contract);

re = Economic discount rate of project. re value is determined according to regulations of each sector. If specific regulations on the re value are not promulgated, the unit establishing the feasibility study report can refer to the re value = 10% or suggest another value provided that explanation of using that value must be specified.

b) Benefit Cost Ratio – BCR

BCR is a ratio between the overall benefits accrued from the investment and the overall costs spent during the investment and operation. All benefits and costs are expressed in present values. For ensuring the socio-economic efficiency of the project, BCR must be higher than 1 (>1) and calculated by the following formula:

BCR = =

In which: Bt, Ct, t, n, re are construed as those defined in the ENPV formula stated above.

c) Economic Internal Rate of Return - EIRR

EIRR refers to the maximum economic discount rate that makes the project has ability to recover the investment capital and operating costs, and achieve the break-even. EIRR is equal to the economic discount rate (re) if ENPV = 0 and calculated by solving the following equation:

ENPV = = 0

In which: Bt, Ct, t, n are construed as those defined in the ENPV formula stated above.

For ensuring socio-economic efficiency of the project, EIRR must be higher than the Social Discount Rate – SDR: EIRR > SDR. SDR value is determined according to regulations of each sector. If specific regulations on the SDR value are not promulgated, the unit establishing the feasibility study report can refer to the SDR value = 10% or suggest another value provided that explanation of using that value must be specified.

3. Conclusion of socio-economic efficiency of project

The feasibility study report must contain conclusion of socio-economic efficiency of the project on the grounds of analysis of groups of factors as regulated in Section V.1 of this Annex and calculation results of criteria for analysis of socio-economic efficiency as regulated in Section V.2 herewith.

VI. Project financial analysis

1. Input parameters used in financial model

- Total costs during the project life cycle is the sum of total investment amount and the costs for developing and operating during the project life cycle. In which, total investment amount shall be determined according to the law on construction (as for construction project) or specialized laws (as for non-construction project); the costs for development and operation during the project life cycle are the sum of costs concerning operation and maintenance of the project, costs of human resources for operating and maintaining the project, project management costs and costs of supervision consultancy, provisions, etc.

- Total revenue: Total revenue of the project (basic revenue, maximum and minimum revenue) and revenue of each year must be determined on the grounds of contents of forecast of demand (as stated in Section IV of this annex); price and costs of products and services and other receivables of the project (determination of prices, costs; forecast of scheme for increasing price and costs must be carried out on the legal grounds).

- Other input parameters: loan interests, loan term; inflation rate; exchange rate; depreciation rate and other parameters.

2. Financial criteria for considering the feasibility of project

Based on the above-mentioned input parameters, financial plan of project should be calculated and analyzed according to the following primary criteria:

a) Net Present Value – NPV

Net Present Value - NPV is the present value of cash inflows after all expenses have been deducted during the project life cycle. For ensuring the financial efficiency of the project, NPV must be a positive number (>0) and calculated according to the following formula:

NPV =

In which:

CFt = Net value of cash flow of project in year t;

t = Year in the project life cycle (0, 1, 2, n); n = Total operating years of the project (period of project contract);

r = Discount rate (as regulated by the Ministry of Finance).

b) Internal Rate of Return – IRR

This criterion shows the profit of the project, excluding structure of capital mobilization. Internal Rate of Return – IRR is a discount rate (r) that makes NPV = 0 and calculated by solving the following equation:

NPV = = 0

In which: CFt, t, n are construed as those defined in the NPV formula stated above.

For evaluating the financial feasibility of project, IRR, after calculation, should be compared with the following values: (i) WACC - Weighted Average Cost of Capital; (ii) inflation rate; (iii) interest rate of bank deposit; (iv) IRRs of other projects that have similar properties in the same sector; (v) minimum IRR that is expected by the potential investors for the project and resulted from the market test conducted during the research and preparation of project. The project is appraised to have financial feasibility to execute if IRR is higher than values (i), (ii), (iii) and conformity with values (iv) and (v).

In addition to NPV and IRR, the feasibility study report may contain further analysis of the following criteria: Payback Period - PP; Return on Equity – ROE and Debt Service Coverage Ratio – DSCR, in order that relevant parties (the investor and the lender) can make general appraisal of financial feasibility of the project.

3. Results of financial plan of project

The feasibility study report must contain conclusion of financial feasibility of project on the grounds of analysis in item 1 and item 2 stated above, and specify a financial plan with the following contents:

- Total investment capital;

- Structure of source of capital and presumptive capital mobilization plan;

- The state funding to the project (if any);

- Requirements on price, costs of products and services;

- Financial criteria (NPV, IRR, ROE, PP, DSCR).

VII. Type of project contract

1. Grounds for selecting type of project contract

Based on the explanation about forecast of demand and financial plan, the feasibility study report must define whether the project is a commercial project, or that intended for fee collection, or a project in which the investor can receive payments according to quality of the investor’s services. Additionally, the feasibility study report must contain analysis of the suitability of types of contract for the project’s conditions.

2. Responsibilities of the parties during the performance of project contract

The feasibility study report must contain detailed explanation about the division of roles and responsibilities concerning the project performance between state competent authorities and the investor during the project life cycle, including: responsibilities of state competent authorities; responsibilities of the investor and the project enterprise, and responsibilities of relevant organizations (such as lender, input supplier, off-taker, contractor, etc.).

VIII. Risk analysis during project performance

1. Analysis of primary risks of project

Describe and appraise the primary risks that may occur during the project life cycle, including: Political and legal risks, risks associated with macroeconomic factors, social risks, land title risks, environmental risks, demand risks, risks of construction, design and production, risks of production costs and costs for finishing the works, financial risks, operational risks, and risks of contract termination. Analysis of risk probability and effects of such risks on the project must be specified.

2. Responsibilities of the parties for risk management

The feasibility study report must specify risks and responsibilities of private partners (the investor, the lender, the project enterprise, etc.) and those of state competent authorities during the project performance. A proposal of scheme for division of risks between state competent authorities and private partners must be specified.

3. Scheme for risk management

Explain about methods of risk reduction that may be feasible to execute.

IX. State assistance

1. State funding to the project (if any)

Based on results of financial analysis, selected type of project contract, and the approved plan for mid-term public investment, the feasibility study report must contain detailed explanation about the following contents: value of state funding; balance and allotment of state funding; methods, plans and progress of disbursement of state funding for the investor and other contents (if any). If the project applies BT contract, the feasibility study report must contain explanation about value of BT project, land fund that the investor will use to perform other project, time of land allocation, methods of land allocation and other conditions for project performance.

2. Investment guarantee and incentives

The feasibility study report must contain detailed explanation about proposals concerning investment incentives (including sector, field or local specific incentives), forms of investment guarantee, Government's guarantee and enclosed conditions as well as liability of setting up necessary provisions during the performance of project contract.

X. Plan for project performance

1. Project preparation

Period for preparing the project must be determined, including:

- Period for establishment, appraisal and approval for the project proposal (completed).

- Period for establishment, appraisal and approval for the feasibility study report;

- Period for organizing the bidding to select qualified investor (prequalification of bidders, bidding, carrying out negotiation and entering into project contract with the successful bidder; reaching finance close and the project contract shall become effective).

2. Project performance

Period for project performance is specified (including time for terminating the project contract). As for the construction project, period for construction, period for operation and transfer of works must be specified.

In case of phasing of investment to reduce the complexity or increase the financial feasibility and attraction of the project, the feasibility study report must contain analysis of reasons, estimated plan for phasing and methods of execution.

XI. Supervision and management of project performance

1. Supervision of project performance

Indicators for appraisal of quality of project performance must be defined to use as the grounds for establishment of project contract and supervision of quality of project, products or services provided by the investor and project enterprise.

2. Requirements for methods of organizing management and business or provision of services

The feasibility study report must contain detailed explanation about methods of organizing management and business or provision of services, including: the methods that the state competent authorities can cooperate with the investor and project enterprise during the performance of business activities or provision of products or services; methods of supervision to ensure stable and consecutive provision of qualified products or services for meeting customers’ demand, and methods for management of fee collection process that the investor must collect fees from the customers according to the fees rate regulated in the project contract (if the project applies BOT, BTO, BOO, or O&M contract or a similar type of project contract); and method of payment to the investor on the grounds of quality of provided products or services (if the project applies BTL, BLT, or O&M contract or a similar type of project contract).

3. Management of project performance

The feasibility study report must contain determination of capacity and organizational structure for managing the project performance of state competent authorities, project managing unit, the investor and project enterprise in each specific period.

D. CONCLUSION AND PROPOSAL

Summarize main contents of conclusion concerning the matters analyzed in the aforesaid parts of the feasibility study report, and submit proposals to the superior authorities (if any).

 

ANNEX IV

GUIDANCE ON APPRAISAL OF FEASIBILITY STUDY REPORT ON PPP PROJECT

Based on features, scale and sector and contents of the feasibility study report, reports on appraisal of the feasibility study report must contain the following contents: If the feasibility study report is prepared by the investor, other factors explained by the investor should be considered. The appraisal unit must make specific comment about each content of appraisal and give method of settlement for unacceptable content to the project preparation unit or the investor establishing the feasibility study report.

A. OVERVIEW OF PROJECT

The appraisal unit specifies general information of the project, including: name of project; state competent authorities; project preparation unit or the investor assigned to establish the feasibility study report; location, scale and capacity of project, used land area; technical requirements; total investment capital; state funding to the project (if any); type of project contract; financial plan; period of project contract; investment guarantee and incentives; and other relevant contents.

B. SUMMATION OF SUGGESTIONS OF RELEVANT ORGANIZATIONS AND UNITS

The appraisal unit must summarize suggestions of relevant organizations and units as regulated in Clause 3 Article 6 of this Circular.

C. SUMMATION OF APPRAISAL RESULTS

I. Verification of sufficiency of documents

The appraisal unit shall verify and make comments about the sufficiency of documents based on regulations on the application for approval for the feasibility study report as stated in Clause 2 Article 26 of the Decree No. 15/2015/ND-CP.

The appraisal unit can request the project preparation unit or the assigned investor to supplement relevant documents in case of need. When the time limit for supplementing documents is over, if the project preparation unit or the assigned investor fails in sufficient submission of required documents, the appraisal unit has to report to the Minister, Heads of Ministerial-level agencies and Presidents of the provincial people’s committees on such invalid documents to grant permission for stopping consideration of feasibility study report.

II. Appraisal of contents of feasibility study report

The appraisal unit shall prepare appraisal reports as regulated in Clause 3 Article 26 of the Decree No.15/2015/ND-CP and Article 58 of the Law on construction No. 50/2014/QH13 (as for construction project), including the following contents:

1. Appraisal of necessity of investment project

The appraisal unit shall consider the suitability of the feasibility study report according to the following contents:

- Overview of national, local or sector/field socio-economic situations and natural conditions.

- Sector and regional development planning and plans, and local socio-economic development plans.

- The urgency and necessity of prompt investment in the project.

- Effects of relevant projects.

- Advantages of investment in the PPP form compared with other investment forms.

2. Appraisal of basic factors of project

- Project objectives: The suitability of general and specific objectives for current conditions of sector/field of investment or locality, and capacity for solving matters demanded by the community must be considered.

- Project scale and capacity: The suitability of the grounds for selecting project scale and capacity; the suitability of such scale and capacity of project for input supply capacity and output factors; and the stability of services provided by the project must be considered.

- Location of project performance: Contents concerning features of natural, administrative, social, economic, technical and infrastructure conditions, survey results (if survey has been conducted) in the location where is selected for project performance must be considered.

- Methods of indemnity, site clearance and resettlement: The suitability and feasibility should be appraised as regulated by the law on land.

- Supply of input factors to project: The suitability of the capacity for supplying input factors for the scale and capacity at each period must be considered to ensure the suitability for forecast of growth of demand.

- Output factors of project: The suitability of output factors for scale, capacity and demand for use of project, products or services; and the suitability of indicators for appraisal of quality of project performance stated in the feasibility study report must be considered.

3. Appraisal of project efficiency

- Contribution of project to socio-economic development duties: Analysis of socio-economic efficiency is to compare benefits between the performance of investment project and preservation of current conditions, not performing the investment. Additionally, in case of selection between many projects, the projects with higher socio-economic efficiency shall be prioritized on the grounds of combination with balance of state funding. Therefore, the appraisal unit should consider the suitability and accuracy of costs, socio-economic benefits, and other economic criteria (including Economic Net Present Value – ENPV; Benefit Cost Ratio – BCR; and Economic Internal Rate of Return – EIRR). The project is appraised to have achieved socio-economic efficiency if the following requirements are qualified: ENPV is a positive number (>0); BCR must be higher than 1 (>1); EIRR must be higher than Social Discount Rate (SDR).

- Impacts of the project on environment: Documents of assessment of project’s impacts on environment must be prepared and approved in accordance with current regulations of the law on environment. The appraisal unit must summarize suggestions concerning assessment of the aforesaid documents of specialized authorities as regulated by the law on environment.

- Impacts of the project on society: The appraisal unit must consider the suitability of the impacts explained in the feasibility study report for various groups of objects in society, local community, disadvantaged groups of objects that are unable to make payments of prices and costs of products and service charges of project such as women, the poor, the disabled, etc.

- Impacts of the project on security and national defense (if any): In case of the project concerning security and national defense fields, the appraisal unit must consider the suitability of the impacts on security and national defense and methods of reduction of such impacts stated in the feasibility study report.

4. Appraisal of project feasibility

a) Appraisal of technical feasibility

- Technical requirements: The appraisal unit must consider the suitability of technical and technological plans for project scale and capacity, sector standards and norms, and input technical requirements; the availability and practical applications of selected technology; the clearness and sufficiency of determination of primary technical risks; the suitability of plan for risk reduction; and the reality of the indicators for appraisal of technical quality of performed project.

- Fundamental design: The appraisal unit must summarize appraisal suggestions of construction specialized authorities as regulated by the construction law (as for construction project) or of specialized authorities as regulated by specialized laws (as for non-construction project).

b) Appraisal of financial feasibility

- Financial feasibility of project: The appraisal unit must consider the suitability and accuracy of input financial factors, financial criteria (including Net Present Value - NPV and Internal Rate of Return – IRR) and preliminary financial plan of project. The project is considered as having achieved the financial efficiency if:

+ NPV is a positive number (>0);

+ IRR is higher than (i) WACC - Weighted Average Cost of Capital; (ii) inflation rate; (iii) interest rate of bank deposit, and in conformity with (iv) IRRs of other projects that have similar properties in the same sector; and (v) minimum IRR expected by the potential investors.

- The appraisal unit shall make additional consideration if the feasibility study report contains the explanation about the following financial criteria: Payback Period – PP; Return on Equity – ROE; and Debt Service Coverage Ratio – DSCR.

- Use of state funding to the project: The appraisal unit shall consider the suitability of value of state funding, value of state funding allotted in mid-term public investment plan, methods, plans and progress of disbursement of state funding for the investor, etc.

- The appraisal unit must consider the suitability of the investment guarantee and incentives.

5. Appraisal of suitability of project contract

The appraisal unit shall consider the project proposal according to the following contents:

- The suitability of project contract and period of selected contract.

- The reasonableness of division of responsibilities of the parties during the project performance.

- Primary risks of the project which are sufficiently and suitably specified in financial scenarios;

- Risk probability and effects of such risks on the project which are particularly and suitably specified;

- Methods of risk reduction that are defined to be suitable.

6. Plan for project performance, project management and supervision scheme

The appraisal unit must consider and make specific comments about the suitability of plan for project performance, project management and supervision scheme stated in the feasibility study result.

D. CCOMMENTS AND PROPOSAL

I. Comments

The appraisal unit must summarize comments about the feasibility study report on the grounds of the analysis stated above.

II. Proposal

- If the feasibility study report is in conformity with the laws and is appraised to be feasible to perform the investment in the PPP form, the appraisal unit shall submit a proposal to the Minister, Heads of Ministerial-level agencies and Presidents of the provincial people’s committees for giving approval for the feasibility study report.

- If any of the contents of the feasibility study report is unacceptable, the appraisal unit shall report to the Minister, Heads of Ministerial-level agencies and Presidents of the provincial people’s committees to consider and make decision upon one of the following plans:

Plan 1: Request the project preparation unit or the assigned investor to amend the feasibility study report.

Plan 2: Refuse to consider and give approval for the feasibility study report.



[1] In case of need, the project preparation unit or the investor may organize the survey of the location for project performance and specify detailed survey results at this item.

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            Circular No. 02/2016/TT-BKHDT feasibility study report intervestment project form public private partnership
            Loại văn bảnThông tư
            Số hiệu02/2016/TT-BKHDT
            Cơ quan ban hànhBộ Kế hoạch và Đầu tư
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            Tình trạng hiệu lựcHết hiệu lực 15/02/2019
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