Presentation made by Fernando Crespo Diu, Ministry of Finance, Portugal, at the 9th annual network meeting of Senior Infrastructure & PPP Officials held at the OECD, Paris, on 1 March 2016

1. U T A P
Unidade Técnica de Acompanhamento de Projetos
Managing VfM: a project lifecycle approach
OECD Annual Meeting of Senior
Infrastructure and PPP Officials
Paris, March 1st, 2016

2. U T A PContents
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1) VfM during project lifecycle
2) Creating VfM during planning, structuring and tendering
phases
3) Managing VfM during project execution and contract
management
4) Final comment regarding institutions
Managing VfM: a project lifecycle approach – Fernando Crespo Diu

3. U T A P
Institutionalbackground
Contract signature
VfM during project lifecycle
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Project structuring
Project tendering
Project execution
Contract management
Planning
Creating VfM
Managing VfM
Managing VfM: a project lifecycle approach – Fernando Crespo Diu

4. U T A PCreating VfM
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Enabling conditions during planning, structuring and tendering
 Planning for the medium and long run
 Pipeline with political and social support
 Integrated projects, enhancing network effects
 Meaningful projects, socioeconomic perspective
 Sustainable projects, financial and fiscal perspectives
 Build a realistic risk matrix
 Promote competition during tendering
 Choose amongst quality bidders, in financial and technical terms
 Build and sign a robust contract
Managing VfM: a project lifecycle approach – Fernando Crespo Diu

5. U T A PManaging VfM
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Contract as a “frontier” during execution and management
Contractual dispositions
Keeping VfM
Periodic and occasional acts
Managing VfM: a project lifecycle approach – Fernando Crespo Diu

6. U T A PManaging VfM
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Keeping VfM – periodic/recurrent acts
 Private partner performance monitoring
o Schedule of works and associated payments
o Quality assurance
o Of particular importance in contracts with payments linked to
availability of infrastructure (reward/penalty system)
 Public partner payments monitoring
o Effectively linked to schedule, performance and quality
o On time avoiding surcharges to contracting authorities
o On budget according to contractual dispositions
Managing VfM: a project lifecycle approach – Fernando Crespo Diu

7. U T A PManaging VfM
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Keeping VfM – occasional/non-recurrent acts
 Avoid unilateral decisions by the public partners, such as
changes of scope, quality specifications, taxes…
o Minimize “unnecessary negotiations”
o Minimize litigation
o Minimize additional costs and contingent liabilities
 Keep quality of private partners in financial and technical terms
o Regulate capital ownership changes, mergers and acquisitions
o Monitor financial standing of SPV and shareholders
Managing VfM: a project lifecycle approach – Fernando Crespo Diu

8. U T A PManaging VfM
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Contract as a “frontier” during execution and management
Contractual dispositions
Keeping VfM
Adding VfM
Periodic and occasional acts
“Rise to the occasion”
Managing VfM: a project lifecycle approach – Fernando Crespo Diu

9. U T A PManaging VfM
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Adding VfM – “rise to the occasion”
 Pre-condition, a sound regulatory/legal framework
 Robust contract that foresee future VfM occasions
 Sharing upsides regarding
o Core activity revenues
o Non-core activities
 Sharing refinancing revenues
 Undertake “necessary negotiations” when truly needed
Managing VfM: a project lifecycle approach – Fernando Crespo Diu

10. U T A PFinal comment
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Regarding the “quality of institutions”
 The general quality of the public partners will determine the
result of projects in VfM terms
 Public action regarding PPP must be:
o Purely technical after the planning phase, free of politics
o Driven by professional and stable teams
o Limited resort to externals advisers
o Permanent communication amongst teams throughout
project lifecycle
o With direct participation of the Ministry of Finance/Treasury
Managing VfM: a project lifecycle approach – Fernando Crespo Diu

11. U T A P
Estruturação de Projetos de PPP 11
Ministério das Finanças
Rua Braamcamp, 90 – 6º piso
1250-052 Lisboa
Web: www.utap.pt
Fernando Crespo Diu – Director
E-mail: fernando.crespo@utap.pt
Telef: +351 211 119 711
U T A P
Unidade Técnica de Acompanhamento de Projetos