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BOI's guidelines for private sector investment

  1. BoI's guidelines for private sector investment
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Detailed procedure for most commonly used modes like BOT, BOO, BLT for financing the projects

From YOUSAF RAFIQ
Special Correspondent, Islamabad
Oct 18 - 24, 1999

The infrastructure sector projects in developing countries in the past have been built under the direct supervision of the government itself or a government agency and paid for from budgetary resources or through sovereign borrowing. Due to heavy debt from different local and foreign lending agencies, several concepts were seen finding alternative ways to finance those projects. The most commonly used modes of financing the private sector projects are Build, Own and Transfer (BOT), Build, Own and Operate (BOO) and Build, Lease and Transfer (BLT).

Given below is a detailed procedure and guidelines for private sector investment on BOT/BOO and BLT projects drafted by the Board of Investment but in conjunction with other ministries.

BOT projects

A contractual arrangement whereby the project proponent undertakes the construction, including financing of a given infrastructure, facility and the operation and maintenance thereof. The project proponent operates the facility over a fixed term during which it is allowed to charge facility users appropriate tolls, fees, rentals, and charges not exceeding those proposed in its bid or as negotiated and incorporated in the contract to enable the project proponent to recover its investment, and operating and maintenance expenses in the project. The project proponent transfers the facility to the government agency or local government unit concerned at the end of the fixed term which shall not exceed fifty years. The BLT shall include a supply and operate situation which is a contractual arrangement whereby the supplier of equipment and machinery for a given infrastructure facility, if the interest of the government so requires, operates the facility providing in the process technology transfer and training to local counterparts. The process of technology transfer and training to local counterparts shall commence during the course of the fifty years period to enable the local counterparts to operate the project independently on transfer to the agency concerned.

BOO projects

A contractual arrangement whereby a project proponent is authorized to finance, construct, own, operate and maintain an infrastructure or development facility, in which the proponent is allowed to recover its total investment, operating and maintenance costs plus a reasonable return by collecting tolls, fees, rentals or other charges from facility users. Under this project, the proponent which own the assets of the facility may assign its operation and maintenance to a facility operator.

BLT projects

A contractual arrangement whereby a project proponent is authorized to finance and construct an infrastructure or development facility upon its completion turns it over to the government agency concerned on a lease arrangement for a fixed period after which ownership of the facility is automatically transferred to the government agency.

Constitution of a committee

A committee consisting of the following shall be appointed by the public sector organizations undertaking a project where private sector investment is involved for pre-qualification, evaluation of bids and award of project: Head of the organization/secretary of the ministry concerned, a legal officer from the organization, one knowledgeable technical officer from the organization and one officer knowledgeable in finance from the organization. The concerned organization shall appoint consultants to seek their advice in the process at all stages involved.

Responsibility of the committee

The committee shall e responsible for all aspects of the pre-bidding and bidding process, including, among others, the preparation of the bidding/tender documents, publication of the invitation to pre-qualify and bid, pre-qualification of prospective bidders, conduct of pre-bid conferences and issuance of supplemental notices, interpretation of the rules regarding the bidding, the conduct of bidding, evaluation of bids, resolution of disputes between bidders and recommendations for the acceptance of the bid and / or award of the project.

Eligible types of the project

The construction, rehabilitation, improvement, betterment, expansion, modernization, operation, financing and maintenance of the following types of projects, including other infrastructure and development projects as may be authorized by the appropriate agencies, may be prosecuted. (i) Transport including railways or raid-based projects packaged with commercial development opportunities; airlines, non-rail based mass transit facilities - navigable inland waterways and related facilities. (ii) Port infrastructure like piers, wharves, quays, storage, handling, ferry services and related facilities. (iii) Airports, air navigation and related facilities. (iv) Telecommunications, backbone network, terrestrial and satellite facilities and related services. (v) Water supply, sewerage, drainage and related facilities. (vi) Land reclamation, dredging and other related developmental facilities. (vii) Industrial and tourism estates or townships, including related infrastructural facilities and utilities. (viii) Government buildings and housing projects. (ix) Public fish-ports and fishponds, including storage and processing facilities. (x) Environmental and solid waste management facilities such as collection equipment, composting plants, incinerators, landfill and tidal barriers, among others. (xi) Energy sector including Power, Gas, LPG etc. (xii) Any other project involving private sector investment.

List of priority projects

Concerned agencies are tasked to prepare their infrastructure/development projects and to include therein a list of specific priority projects that may be financed, constructed, operated and maintained by the private sector through a contractual arrangement or a joint venture agreement. The list of priority projects require the approval of the Cabinet Committee on Investment (CCOI). Such requisite approval shall be applied for through the Board of Investment, prior to the call for bids for the projects. For this purpose, all agencies, upon approval by the CCOI of said list of priority projects, shall cause the same to be published in national newspapers of general circulation. At the discretion of the Agency concerned, the list may be published in an international newspaper of general circulation.

The agencies shall determine the priority of their projects whereas the inter-agency priority of the projects will be determined by the CCOI and also approve the concept of the project. The priority will be sector-wise while seeking approval of priority projects the agency concerned shall clearly spell out the concessions proposed to be given and equity of GOP if any. The agencies concerned would carry out pre-feasibility studies of the projects proposed to be offered for private sector investment to determine the site, size of the project and estimated cost. The agencies may charge the expenditure incurred while selling the project documents.

Who may participate?

Any individual, partnership, corporation or firm, whether local or foreign, including joint venture or consortia of local, foreign or local and foreign firms, subject to the limits set in the Investment Policy issued by the BOI may participate or apply for pre-qualification for the projects in different sectors. The Head of the Agency concerned shall, upon the approval of the priority project ready for implementation forthwith cause to be published, once every week for three consecutive weeks, in at least two newspapers of general circulation a notice inviting all project proponents to pre-qualify and bid for the projects so approved. Likewise, the Agency concerned shall issue official notification of the same to project proponents registered with them. The Agency concerned shall allow prospective bidders at least 60 calendar days from the last date of publication of the Invitation to Pre-qualify and Bid to prepare their respective pre-qualification documents to -pre-qualify and bid. In any event, the deadline for submission of pre-qualification statements shall be indicated in the published Invitation to Pre-qualify Bids.

Pre-qualify requirements

To pre-qualify, a project proponent must comply with the following requirements. The proponent and facility operator must be duly registered with the Corporate Law Authority as a locally incorporated company. In case the project proponent is a joint venture or consortium, the members or participants shall submit a sworn statement undertaking that if awarded the contract, they shall bind themselves jointly and severally responsible for the obligations of the project proponent under the contract.

The proponent-applicant must posses adequate experience in terms of the following. Firm Experience. By itself or through the member-firms in case of a joint venture/consortium or through a contractor(s) which the project component may have engaged for the project, the project proponent and/or its contractor(s) must have successfully undertaken a project similar or related to the subject infrastructure/development project to be bid. The individual firms and/or their contractor(s) may individually specialize on any or several phases of the projects. A joint venture consortium proponent shall be evaluated based on the individual or collective experience of the member firms of the joint venture/consortium and of the contractor(s) which it has engaged for the project. For purposes of the above, a joint venture/consortium shall submit as part of its pre-qualification statement a business plan which shall, among others, identify its members and its contractors if the experience of its contractors are necessary for the determination of the capacity of the joint venture/consortium to undertake the project and the description of the respective roles of said members and contractors, if necessary, shall play or undertake in the project. The business plan shall disclose which of the members of the joint venture/consortium shall be the lead member or corporation, the financing arm, the contractors if required to be pre-identified as prescribed in the published Invitation to Pre-qualify and Bid or if the qualifications/experience of their contractors are necessary for the determination of the capacity of the joint venture/consortium to undertake the project, and/or the facility operators. The key personnel of the proponent and/or its contractors must have sufficient experience in the relevant aspect of schemes similar or related to the subject project, as specified by the Agency. The CVs of key personnel shall be attached.

Financial capability

The project proponent must have adequate capability to sustain the financing requirements for the detailed engineering design, construction and/or operation and maintenance phases of the project, as the case may be. For purposes of pre-qualification, this capability shall be measured in terms of (i) proof of the ability of the project proponent and/or the consortium to provide a minimum amount of equity to the project, and (ii) a letter testimonial from reputable banks attesting that the project proponent and /or members of the consortium are banking with them, that they are in good financial standing, and that they have adequate resources. The government agency concerned shall determine on a project-to-project basis and before qualification, the minimum amount of equity needed.

Pre-qualified and pre-disqualified proponents

After undertaking the above process, the departmental committee shall mark the pre-qualification documents of each prospective proponent as either "Pre-qualified" or "Pre-disqualified", as the case may be, countersigned by the Chairman. Accordingly, the Committee shall duly inform the prospective proponents who have pre-qualified within seven calendar days after approval thereof. Disqualified proponents shall likewise be informed stating therein the grounds for their disqualification. They may appeal the decision to disqualify to the Secretary of the Ministry concerned (being an appellate Authority) within fifteen working days from receipt of the notice of disqualification. The Appellate Authority shall act on the appeal within thirty working days from receipt of the appeal.

Acceptance of criteria

All prospective bidders shall be required to submit, as part of its pre-qualification documents, a statement stipulating that the bidder (i) has accepted the pre-qualification criteria established and (ii) waives any right it may have to seek and obtain a writ of injunction or prohibition or restraining order against the concerned Agency to prevent or restrain the pre-qualification process or any proceedings related thereto, the holding of a bidding or any proceedings related thereto, the negotiation of an award of the contract to a successful bidder, and the carrying out of the awarded contract. Such waiver shall, however, be without prejudice to the right of a disqualified or losing bidder to question the lawfulness of its disqualification or the rejection of its bid by appropriate administrative or judicial processes not involving the issuance of a writ of injunction or prohibition or restraining order. The Agency concerned shall make available the related bid documents to all pre-qualified bidders as soon as practicable to provide respective bidders ample time to examine the same and to prepare their respective bids prior to the date of opening of bids.

A bid security of 2 percent of the cost of project shall be required from all bidders in accordance with the form and amount prescribed upon submission of their bids. The original proponent shall submit the required bid security on or before the prescribed sixty days deadline for the submission by other interested proponents of comparative or competitive proposals. The instructions to bidders, which establishes the rules of the bidding, shall be clear, comprehensive and fair to all bidders. Minimum design and performance standards/specifications, including appropriate environmental standards shall be clearly defined and shall refer more to the desired quantity and quality of the outputs of the facility and should state that non-conformity with any of these minimum requirements shall render the bids as non-responsive. Likewise, the following economic parameters, among others, shall be prescribed: (a) discount rate and foreign exchange rate as prescribed by the government; (b) maximum period of project construction; (c) fixed term for project operation and collection of tolls/fees/rentals/charges in the case of BOT, BOO and other variations thereof authorized/approved by the government; (d) formula and price indices to be used in adjustments to tools/fees/rentals/charges, in the case of BOT, BOO and other variations thereof authorized/approved by the government; and, (e) minimum period of repayment, in the case of LT and other variations thereof authorized/approved by the government.

Responsibility of the bidder

The prospective bidder shall be solely responsible for taking all the necessary steps to carefully examine and acquaint himself with the requirements and terms and conditions of the bidding documents with respect to the cost, duration, and execution/operation of the project as it affects the preparation and submission of his bid. The agency concerned shall not assume any responsibility regarding erroneous interpretations or conclusions by the prospective bidder out of data furnished or indicated in the bidding documents.

Supplemental notices

If a bidder is in doubt as to the meaning of any data or requirements or any part of the bidding documents, written request may be submitted to the Agency concerned for an interpretation of the same, allowing sufficient time for the concerned Agency to reply before the submission of the bid. Any substantive interpretation given by the Agency shall be in the form of a Supplemental Notice and furnished to all bidders. The Agency concerned may also issue Supplemental Notices to all prospective bidders at any time for purposes of clarifying any provisions of the bidding documents provided that the same is issued within a reasonable period to allow all the bidders to consider the same in the preparation of their bids. Receipt of all Supplemental Notices shall be duly acknowledged by each bidder prior to the submission of this bid and shall be so indicated in the bid.

Pre-bid conference

A pre-bid conference shall also be conducted by the concerned Agency at least sixty days before the deadline for the submission of bids to clarify any provisions, requirements and/or terms and conditions of the bidding documents and/or any other matter that the prospective bidders may raise. Nothing stated at the pre-bid conference shall modify any provisions or terms and conditions of the bidding documents unless such is made as written amendment thereto by the concerned Agency. Any amendments shall be issued by the Agency concerned to all bidders within a reasonable time to allow them to consider the same in the preparation of their bids and shall be duly acknowledged by each bidder prior to the submission of his bid so indicated in his bid.

Bidders shall be required to submit their bids on or before the deadline stipulated in the Instructions to Bidders in two (2) separate sealed envelopes, with the name of the bidder and project to be bid out in capital letters and addressed to the Committee of the concerned Agency. They shall be marked "Do Not Open Before (date and time of opening of bids)."

The first envelope shall be labeled "Technical Proposal" and shall contain the following: Operational feasibility of the project, which shall indicate the proposed organization, methods and procedures for the operation and maintenance of the project under bidding; Technical soundness/preliminary engineering design including proposed project timeline; preliminary environmental assessment, which shall indicate the possible adverse effects of the project on the environment and the corresponding mitigating measures; project cost including operating and maintenance cost requirements and proposed financing plan (proposed equity contribution, debt etc); bid security in the form of cash, certified check, manager's check, letter of credit, or bank-draft/guarantee issued by a reputable bank, or a surety bond callable on demand issued by an entity duly registered and recognized, acceptable to the Agency, or any combination thereof payable to the Agency concerned in accordance with the required Bid Security not less than 2 percent of the estimated cost of construction. The posting of the bid security is for the purpose of guaranteeing that the proposed contract awardee shall within fifteen calendar days from receipt of the Notice of Award enter into contract with the concerned Agency and furnished the required performance security within the time prescribed therefor. Bids and bid securities shall be valid for a period to be prescribed by the Agency concerned in the bidding documents but in no case beyond 180 days from the date of opening of bids; other documents as may be required by the concerned Agency to support the bidder's technical proposal.

The second envelope shall be labeled 'financial Proposal" and shall contain the following, as the case may be: (i) For BOO, BOT and similar variants: (proposed user/tolls/fees/rentals/other charges; and present worth of the proposed user tolls/fees/rentals/other charges over the fixed term based on the discounting rate and foreign exchange rate prescribed under the bidding documents: (ii) For BLT and similar variants; (proposed amortization payments and repayment period; present worth of the proposed amortization payments based on the discounting rate and foreign exchange rate prescribed under the bidding documents: (iii) for projects which are not public utilities, where the Agency requires payments to be made by the project proponent to the government and where the Agency opts to adopt the method and criteria for financial evaluation; (proposed payments schedule; present worth of the proposed payments based on the discounting rate and foreign exchange rate prescribed under the bidding documents. Bids submitted after the deadline for submission prescribed in the Instructions to Bidders shall be considered late and shall be returned unopened.

Opening of the first envelope

At the date and time of bid opening as stipulated in the Instructions to Bidders, the Committee shall open only the first envelope and ascertain whether the same is complete in terms of the data/information required above and whether the same is accompanied by the required bid security in the prescribed form, amount and period of validity. Such information shall be recorded at the time, including the names and addresses of required witnesses. All bidders or their representatives present at the opening of the First envelopes shall sign a register of the bid opening.

Automatic rejection of bids

The first envelope of bids determined at the bid opening date to have incomplete submission/data vis-‡-vis the requirements prescribed and/or not accompanied by the required bid security in the form, amount and period of validity prescribed shall be automatically rejected and their second envelopes shall be returned unopened.

Opening the second envelop

Only those bidders who passed the first stage of evaluation hereof shall have their second envelopes opened for further evaluation. Those who failed the first stage of evaluation shall not be considered further and the Committee shall return their second envelopes unopened together with the reasons for their disqualification from the bidding.

Once the bidders who have qualified for the second stage of evaluation have been determined, the Committee shall notify said bidders of the date, time and place of the opening of the second envelopes. The opening of the bidders' second envelopes shall follow the same procedures prescribed for the opening of the first envelopes.

Withdrawal and/or modification of bids

Withdrawal and/or modification of bids may be allowed upon written notice by the bidder concerned to the Agency prior to the time and date set for the opening of bids (opening of first envelopes) as specified in the Instructions to Bidders. No bids shall be modified or withdrawn after the time prescribed to open bids. Bid modifications received after said period shall be considered late and will be returned unopened. Withdrawal of bids after the bid opening date shall cause the forfeiture of the bidders bid security.

First stage evaluation

The evaluation of bids shall be undertaken in two stages in accordance with the procedures described below. The first stage evaluation shall involve in the assessment of the technical, operational, environmental, and financing viability of the proposal as contained in the bidders' first envelopes vis-a-vis the prescribed requirements and criteria/minimum standards and basic parameters prescribed in the bidding documents. Only those bids which have been determined to have positively passed the first stage of evaluation shall be qualified and considered for the second stage of evaluation. The Agency concerned shall evaluate the technical proposals of the bidder in accordance with the following criteria.

The basic engineering design of the project should conform to the minimum design and performance standards and specifications set by the Agency concerned as prescribed in the bidding documents. The engineering surveys/plans and estimates should be undertaken within +/- 20 percent of the final quantities. The construction methods and schedules should also be presented and shown to be feasible or "do-able." The proposed organization, methods, and procedures for operating and maintaining the complete facility must be well defined, should conform to the prescribed performance standards, and should be shown to be workable. Where feasible, it should provide for the transfer of technology used in every phase of the project. The proposed design and the technology of the project to be used must be in accordance with the environmental standards set forth by the agency concerned under the related bidding documents. The proposed financing plan should positively show that the same could adequately meet the construction cost, and operating and maintenance costs requirements of the project. The Agency concerned shall assess the financing proposals of the bidders if the same match and adequately meet the cost requirements of the project under bidding. The project proponent may offer more favorable terms to the government to make the proposals more attractive, such as increase of government share in revenues; less government guarantees or reduction in the level of government undertakings or support. The Committee of the Agency concerned shall complete the evaluation of technical proposals within thirty calendar days from the date the bids are opened.

Second stage evaluation

The second stage evaluation shall involve the assessment and comparison of the financial proposals of the bidders. For BOT, BOO and other similar schemes that may be approved/authorized by the government, assessment and comparison of the financial proposals to bidders shall be based on the present value of the proposed tolls, fees, rentals and other charges over a fixed term of the facility to be constructed, rehabilitated, operated and maintained according to the prescribed minimum design and performance standards, plans and specifications. For BLT and other similar schemes that may be approved/authorized by the government, assessment and comparison of the financial proposals of the bidders shall be based on the present value of the proposed schedule of amortization payments for the facility to be constructed according to the prescribed minimum design and performance standards, plans and specifications. The agency concerned shall award the contract to the bidder whose proposed tolls/fees/rentals/charges in case of BOO, BOT and other similar schemes, or proposed schedule of amortization payments in case of BLT and other similar schemes, are determined to have the lowest present value. For projects which are not public utilities where the Agency concerned required payments to be made by the project proponent to the government, the assessment and comparison of the financial proposals of bidders may be based on the present value of proposed payments. The Agency concerned shall award the contract to the bidder whose proposed payments are determined to have the highest present value. The second stage evaluation shall be completed by the Committee of the concerned Agency within thirty days from the date the first stage evaluation shall have been completed.

Single bid

In case there are a few pre-qualified bidders who have purchased the bidding documents but only one submitted bid, provided apparently there is no collusion among the pre-qualified firms and the bid price is not much higher than the estimated, than the contract should be awarded to this bidder. In this case re-bidding is not justified because even if only open bid was received, there was no competition since this bidder did not know that other pre-qualified firms would not submit their bids. However, in case this bidder is the only pre-qualified firm or the only firm who purchased the bidding documents, a re-bidding is justified on the grounds of lack of competition. Re-bidding is also justified if the bid price is much higher than the estimate and negotiation with this bidder is not successful, provided further that there was a fair chance of having a greater number of bidders with lower bid prices.

Condition for the award

Contracts for infrastructure and development projects to be implemented under the provisions be approved by the Head of the concerned Agency subject to the following conditions. (i) Submission of the required performance security as prescribed. (ii) Proof of sufficient equity and firm commitments from reputable financial institution to provide sufficient credit lines to cover the total estimated cost of the project. (iii) In case of a joint venture/consortium, submission of a sworn undertaking that the members of the joint venture/consortium are jointly and severally responsible for the obligations of the project proponent under the contract. (iv) clearance from the CCOI on a no-objection basis. (v) For negotiated contracts and for projects which have been granted a natural monopoly or where the public has no access to alternative facilities, approval by the concerned Regulatory Bodies i.e. Monopoly Control Authority of the proposed tolls/fees/rentals/charges shall be obtained that monopoly is in public interest and, therefore, valid under the laws of Pakistan. (vi) Such other conditions imposed by the Agency.

Notice of award

The Notice of Award shall indicate, among others, the time within which the proposal awardee shall submit the prescribed performance security, proof of commitment of equity contribution and indications of financing resources, and in the case of a joint venture/consortium, the agreement indicating that the members are jointly and severally responsible for the obligations of the project proponent under the contract, as the case may be.

Execution of the contract

The successful bidder should execute the contract with the Agency concerned within fifteen days from receipt of the Notice of Award. In the event of refusal, inability or failure of the bidder with the lowest complying evaluated bid to make good his bid by entering into contract with the Government within the time provided therefor, the Agency concerned shall forfeit his bid security. In such an event the Agency concerned shall consider the next complying and qualified lowest evaluated bid for award. If the same shall likewise refuse or fail to enter into contract with the government, its bid security shall likewise be forfeited, and the Agency concerned shall consider the next complying and qualified lowest bid, and so on until a contract shall have been entered into. In the event that the concerned Agency is unable to execute the contract with any of the complying and qualified bidders due to the refusal of the latter, the project shall be subjected to a re-bidding.

Unsolicited proposals

An agency may accept unsolicited proposals on a negotiated basis provided that all the following conditions are met. (i) The project involves a new concept or technology and/or not part of the list of priority projects. (ii) The question of any government guarantee, subsidy or equity shall be decided by the competent forum i.e. CCOI. (iii) The Agency concerned has invited by publication, for three consecutive weeks in a newspaper of general circulation, comparative or competitive proposals and no other proposal is received. In the event that another project proponent submits a price proposal lower than that submitted by the original proponent, the latter shall have the right to match the said price proposal within thirty working days. Should the original proposal fail to match the lower price proposal submitted within the specified period, the contract shall be awarded to the tenderer of the lowest price. On the other hand, if the original proponent matches the submitted lowest price within the specified period, the original project proponent shall immediately be awarded the project.

Government undertakings for unsolicited proposals

The presence of government support, other than direct government guarantees, subsidy or equity, shall not, as may be determined by the competent forum, necessarily disqualify a proposal from being treated and accepted as an unsolicited proposal as described above. The sale or lease of government assets to project proponents shall not be considered as subsidy or equity.

Performance guarantee

To guarantee the faithful performance by the project proponent of its obligations under the contract including the prosecution of the construction works related to the project, where said project involves government undertakings, the project proponent shall post in favor of the Agency concerned, within the time prescribed by the concerned Agency, a performance guarantee of 5 percent of the construction cost in the form of cash, bank draft or guarantee confirmed by a local bank (in the case of foreign bidders bonded by a foreign bank), letter of credit issued by a reputable bank, surety bond callable on demand. On receipt of performance guarantee, the bid bond will be returned to the proponent.

Liquidated damages

Where the project proponent involving government undertakings fails to satisfactorily complete the work within the construction period prescribed in the contract, including any extension or grace period duly granted, and is thereby in default under the contract, the project proponent shall pay the Agency concerned liquidated damages, as may be agreed upon by the parties, which shall in no case be less than an amount equal to one-tenth of one percent of the total project construction cost minus the value of the completed portions of the project certified by the Agency concerned as usable as of the expiration of the project construction time, for each calendar day of delay, until the work is completed and accepted or taken over by the Agency concerned. In no case however shall the delay exceed twenty percent of the approved construction time stipulated in the contract plus any time extension duly granted. In extreme cases the Agency concerned shall impose stiff liquidated damages.

Repayment schemes

The repayment schemes for the projects shall depend on the contractual arrangement used therefore, which shall be generally classified as follows: (a) Arrangements where the project proponent operates the facility for a fixed term and thereafter, transfers the facility to the Agency concerned under BOT or any other mode. (b) Arrangements where the project proponent is allowed to own and operate the facility (BOO). (c) Arrangements where the project proponent builds out does not operate the facility (BLT). For projects undertaken through arrangements described in (a) and (b) above, the project proponent shall be repaid by authorizing it to collect reasonable tolls, fees, and charges for a fixed term. In the case of arrangements described in (a), such term shall in no case exceed fifty years. However, for arrangement described in (b), the project proponent upon renewal of its franchise or contract with the Agency, may be allowed to continue collecting toll, charges and rentals for the operation of the facility or the provisions of the service.

Projects undertaken through arrangement described in above may be repaid by the Agency through such amortization payments as may be appropriate and reasonable, provided that, in the case of the arrangements described in , the tolls, fees, rentals and charges that the project proponent may collect while operating the facility on behalf of the Agency may be applied directly to the amortization payments. Moreover, in the case of , the facility operator may be repaid by the Agency through a management fee as may be incorporated in the management contract entered between the Agency and the project proponent.

Tolls, fees and charges

The tolls, fees charges and rentals that a project proponent may generally charge for the use of the facility shall be those incorporated in the contract and, if required by existing laws, approved by the appropriate government regulatory bodies. He proposed tolls, fees, and charges shall be considered by the Agency in the evaluation of the bid, taking into account the reasonableness thereof to the end-users of the facility.

For negotiated contracts, and for projects which are considered a natural monopoly or where the public has no access to alternative facilities, the tolls, fees, charges and rentals incorporated in the contract shall be subject to the approval of the appropriate government regulatory bodies. Said regulatory bodies shall approve tolls, fees or charges based on a reasonable rate of return to be based on the total project cost. For negotiated contract for public utility projects which are monopolies, the rate of return on rate basis shall be determined by existing laws. The presence of a monopoly or natural monopoly shall be determined by the government.

The tolls, fees, rentals and charges may be subject to adjustment during the life of the contract, based on the predetermined formula and official price indices prescribed in the Instructions to Investors and the approved contract. As provided under such formula shall take into account the reasonableness of the same to the end-users by the concerned Agency. For this purpose, the concerned Agency may consult with the proper regulatory body or undertake such activities to ensure the reasonableness of such formula. The monitoring of the consistency of the proposed adjustments of tolls, fees, rentals and charges with the prescribed rate of return, if any shall be undertaken by the appropriate regulatory body or implementing agency.

The Agency concerned may share in the revenue from the operation of the project in the form of either a fixed fee or a certain percentage of the gross revenue, provided that the same is indicated in the bidding documents and included in the contract. All revenues and receipts pertaining to or accruing to the government derived from any project prosecuted, including expenditures or use of funds and property owned or held in trust by, or pertaining to the government, shall be subject to examination/audit by the Auditor General of Pakistan.