Basic

 Concept  of  Availability  Payment  

and  Case  Study  in  Japan  

December  20th  ,  2016

KPPIP  Support  Facility

Table  of  Contents

1.  Basic  Concept  of  Availability  Payment  

2.  Case  Study  in  Japan

2
Two  Types  of  PPP  Project

PPP  TYPE SERVICE  and  REVENUE DEMAND  RISK

Project  Company  
User  Pay   Typically,  demand  
Service Tariff/Fee risks  rest  with    
(Typical  BOT)  
PRIVATE  SECTOR
Users/Beneficiaries  

GCA  
Availability  Payment   AP Typically,  demand  
Project  Company   risks  rest  with    
PUBLIC  SECTOR
Service
Tariff/Fee
Users/Beneficiaries  
3
  CharacterisTcs  of  Availability  by  Sector?

Sector CharacterisIcs  of  Availability Payment  Criteria

1.  Electricity Power  plant  is  ready  to  generate   Based  on  generaTon  
electricity capacity
2.        Toll  Road Road  lanes  are  available  for  road   Based  on  number  of  
users   available  lanes
3.        Water  Supply Water  treatment  plant  is  ready  to   Based  on  treatment  
treat  water capacity
4.        Public  Hospital Public  hospital  facility  spaces  are   Based  on  available  space  
available  with  supporTng  services area  with  supporTng  
services
5.        Public  Housing Public  housing  facility  spaces  are   Based  on  available  space  
available  with  supporTng  services area  with  supporTng  
services

4
CharacterisTcs  of  Availability  Payment  Scheme

ConvenIonal  Scheme AP  Scheme

Number  of  Contracts Several  (Design,  ConstrucTon,  OperaTon,   Only  One  
Maintenance) (PPP/AP  Contract)
Typical  Contract  Year ConstrucTon  (1-­‐3  years)   10-­‐30  Years
Maintenance  (Every  year)
Typical  Risk  AllocaTon Public Risks  (ConstrucTon,  O&M,  Demand,  etc)  
are  transferred  to  Private  
Financial  Source  for   Public   Private
ConstrucTon
Service  SpecificaTon  and   Input  SpecificaTon  and  Public  Sector   Output  SpecificaTon  and  Performance  
Monitoring Monitoring   Monitoring  with  Self  Monitoring  based  on  
pre-­‐agreed  Parameters
Fiscal  Burden/   Top  Heavy   Flat  and  Pay  as  Service  Delivery
Payment  Schedule    
Amount  ($) Amount  ($)
   
   
   
   
  Time Time
 
ConstrucTon OperaTon ConstrucTon OperaTon
5
Payment  Profile  of  ConvenTonal  Scheme  and  Availability  Payment

ConvenIonal  Scheme  
•   Top  heavy  financial  burden  
•   ConstrucTon  overrun  risk  and  Tme  
overrun  risk  born  by  public  sector  
•   O&M  cost  over  run  risk  and  
service  delivery  risk  born  by  public  
sector

AP  Scheme
•   Flat  financial  burden  
•   ConstrucTon  overrun  risk,  Tme  
overrun  risk,  O&M  cost  over  run  
risk  and  service  delivery  risk    
transferred  to  private  sector  
• O&M  cost  managed  by  life  cycle  
cost  basis

6
SelecTon  Criteria  is  Value  for  Money    

Necessary  Expenditure  
for  Private  
(Project  Life  Cycle  Cost)* VFM

Investment  Cost  

O&M  Cost   ConvenTonal  

Scheme  
Interest   AP  Scheme  

Tax  

Dividend  etc.  

This  total  amount  shall  

be  bidding  price  for  
investors
*The  cost  include  risks  which  private  would  take.  

7
  Comparison  of  Value  for  Money

Public  Expenditure  of  ConvenIonal  Scheme

Total  Expenditure

$ ConstrucTon  Payment
Risk/ConTngency  

260
O&M  Payment owned  by  public

10
100                100                    5                    5                      5                      5                    5                        5                      5                      5                      5                        5  
   1                        2                        3                      4                      5                      6                  7                          8                      9                    10                    11                12   Year

Public  Expenditure  of  APS

No  construcTon  payment Total  Expenditure
$ Risks  are  transferred  and  
Availability  Payment managed  by  private.

                                                           25                  25                  25                  25                25                25                  25                    25                  25                  25  
250
   1                        2                        3                      4                      5                      6                  7                          8                      9                    10                    11                12  
Year
AP  shall  be  reduced  if  service  level  become  lower  than  contracted  
level  which  will  be  monitored  daily  basis.
8  
  Source  of  VFM

OpImal  Risk   A risk shall be allocated to the entity who can

AllocaIon   best able to manage it.
* Too much risk transfer to the private undermines achieving the highest VFM.

CompeIIon   A sound competition help realizing least pricing

among  Bidders   and innovations for delivering quality services.
* Single source selection and direct appointment undermine achieving the highest VFM.

IncenIves  and   A project company shall be well motivated

PenalIes   through out all project phases.
* Moral hazard of Project Company undermines achieving the highest VFM.

This is all up to project management by GCA

Capacity development of GCA staff is essential.

9
  Advantage  of  Availability  Payment  (AP)  Scheme

(AP  vs.  User  Pay)  

•  AP  scheme  makes  the  project  “Bankable”  even  demand  is  unstable  
–  Even  demand  is  unstable,  private  would  receive  stable  income  (AP)=>  Akract  
more  investors  =>  Higher  compeTTon  =>  Lower  project  cost  
–  Private  will  receive  stable  income  (AP)  =>  Lower  demand  risk  premium  *  =>  
lower  project  cost  
•  AP  is  applicable  for  the  projects  with  economically  feasible  and  
strategically  desirable  but  not  commercially  viable  (User  pay  =>  X  )  
–  Social  infrastructure  such  as  public  housing,  public  hospital,  etc.  
 
(AP  vs.  ConvenIonal)    
•  AP  can  reduce  iniTal  financial  burden  for  public  through  flat  and  
scheduled  payment  
–  Achieve  more  infrastructure  services  with  same  budget  size  
•  Best  “value  for  money”  can  be  achieved  by  AP  
–  AP  can  reduce  life  cycle  public  expenditure  and  increase  quality  of  public  
service  by  uTlizing  private  sector  know-­‐how  and  performance  based  payment

*  Private  would  borne  “Availability  Risk”  but  controllable  for  private. 10

Role  of  GCA  (Local  Government)

•  Feasibility  study  for  applicaTon  of  APS  

•  Land  acquisiTon  
•  Bid  preparaTon,  including  development  of  output  
specificaTon  and  drap  PPP/AP  Agreement  
•  ApplicaTon  of  subsidy  and  guarantee  (as  necessary)  
•  Carrying  out  bid  and  closure  of  PPP/APS  contract  
•  Project  performance  monitoring  
•  Securing  yearly  budget  and  payment  to  Project  Company  

11
Key  to  Success

•  Strong  commitment  and  iniTaTve  of  the  head  of  GCA  as  
“Project  Champion”  
•  Capacity  development  of  GCA  staff  is  essenTal  

12
Table  of  Contents

1.  Basic  Concept  of  Availability  Payment  

2.  Case  Study  in  Japan

13
Case  Study  1:    Fukuoka  City  New  Children  Hospital  
-­‐  Outline  -­‐  

Fukuoka City New Children Hospital

GCA Fukuoka  city
Facility Hospital  bldg.  26,000  m2(floor  area)  /  
260  beds  
Nursery  house  300m3  
Family  house  2,000m2(bldg.  area)   Hospital  Exterior Heliport

SOW Facility  development  and  maintenance  

for  new  hospital   *  1  JPY  =  118  IDR
Contract    Oct.  2011  –  Nov.  2029    
Hospital    
period (approx.  15  years) Hall  way

Contract   approx.  15.5  billion  JPY  

Amount (≒IDR  1.8  trillion  IDR  *)
Features AP  system  includes  bonus  point   AutomaTc  RegistraTon

Schedule:  
PublicaTon        Oct.  2009  
SelecTon  of  project  as  PFI      Dec.2009  
RFP  Issue      Feb.  2010  
SelecTon  of  winning  bidder  Aug.2011   Family  House  Lobby Family  House  Kitchen
Contract  agreement    Oct.2011  
OperaTon      Nov.2014-­‐Nov.2029  (15  years)  
14
Case  Study  1:    Fukuoka  City  New  Children  Hospital  
-­‐  Background  -­‐  
•  Current  Fukuoka  City  Children  Hospital  building  is  already  30  
years  old  and  the  size  became  to  small  to  deal  with  the  
increased  number  of  paTents  
•  Fiscal  condiTon  of  Fukuoka  city  did  not  allow  huge  
construcTon  expenditure  for  new  hospital  
 
=>  New  Children  Hospital  building  is  required  to  construct  with  
the  most  cost  effecTve  method  

15
Case  Study  1:    Fukuoka  City  New  Children  Hospital  
-­‐  Project  Scheme  -­‐  

Fukuoka  City

Insurance  Co. PFI  Contract AP  

Loan Invest
Bank SPC Investor  
Repayment Dividend

Private  
Business   Maintenance  
fee
CAPEX

Maintenance  Co. ConstrucTon  Co.

CorporaIon  Company Shareholder

Yamashita  Sekkei Architecture  design Property  Trust  CorporaTon Building  maintenance
Matumoto-­‐Gumi  CorporaTon ConstrucTon Toda  CorporaTon ConstrucTon
Setsubi  Hoshu  Center Facility  maintenance Kyudenko Facility  design  and  construcTon  
Asou Hospital  management
Koyo Medical,  welfare  service

16
Case  Study  1:    Fukuoka  City  New  Children  Hospital  
-­‐  Scope  of  Work  for  Private  Company  -­‐  
Hospital  Management
Medical  Service
DiagnosTc,  ExaminaTon  
Nursing
and  Treatment  by  Doctor
Medical  Support  Service Hospital  Opera2on  Service
Hospital  OperaTon

Equipment  
Laboratory AdministraTon RecepTon
Management
SterilizaTon  /   Medical  Gas   Medical  
DisinfecTon Maintenance Material   AccounTng
Procurement  and  
Catering Linen  Medical  Fee  
Management
Claiming
PaTent  Transfer Cleaning

Imaging Physiological  Test

Facility  
Pharmacy Maintenance
Security Scope  of  
Private  Co.
ConstrucTon

Medical  Equipment
Hospital  

Building  Facility
Land

17
Case  Study  1:    Fukuoka  City  New  Children  Hospital  
-­‐  Points  of  ConsideraTon  -­‐  
1.  Work  split  between  public  and  private    
  If  more  services  (e.g.  medical  support)  are  included  into  the  scope  of  
work  for  private,  there  are  more  room  for  service  improvement.    
  However,   the   operaTonal   coordinaTon   between   public   and   private  
will  be  more  complicated.  

2.  Co-­‐work  arrangement  between  public  and  private  

  Since  public  and  private  work  together  within  the  same  hospital,  it  is  
very  important  to  have  good  co-­‐work  framework  and  rules.  

3.  Private  business  opportunity  

  If  the  hospital  locates  in  the  middle  of  big  city,  there  is  a  possibility  
for   integraTon   of   private   profitmaking   faciliTes   (e.g.   hotel   for  
paTent’s  family,  residence  for  paTents  who  required  regular  dialysis  
treatment),  which  may  decrease  cost  for  public.    

18
Case  2.  New  Toshima  Ward  Office  (Non  AP,  Advanced  Scheme)  
-­‐  Overview  -­‐  

•  Toshima  Ward  PopulaTon:  284  thousand    

•  Project:  Complex  of  Ward  Office  and  private  
housing  (apartment)  
•  Total  floor  area  95  Thousand  square  meters:  
Ward  Office  25  Thousand  square  meters  
•  Project  Scheme:  Urban  RenovaTon  Project
(NOT  using  ordinary  public  procurement)  
•  Project  cost:  Approximately  JPY  22  Billion  (2.8  
Trillion  IDR)  for  Ward  Office  but  Toshima  Ward  
using  no  cash  for  this  project  
•  Project  ConsorTum:  Toshima  Ward  and  Real  
estate  company  

19
Case  2.  New  Toshima  Ward  Office  (Non  AP,  Advanced  Scheme)  
-­‐  Simultaneous  development  of  Old  and  New  Sites  -­‐  
Before Aper

 
Demolish Office  
Theater  
Site  for      
ExisTng   City   Shops  
Old  Office Old  Toshima  Office
Building Hall

Public   Public   Lease  land  for  77  years  to  Private  

Demolish Demolished
New   Residence  
Site  for    
Building Elementary   Children’s   Individual  
New  Office School House Houses

Public   Private  
New  Toshima  Office
Ownership  of  land  change  to    
ownership  of  building Co-­‐share  of  land  
Public
Private 20
Case  2.  New  Toshima  Ward  Office  
-­‐Flow  of  Cash  for  Gov’t  Office  ConstrucTon  -­‐  

11F-­‐49F
Residence
Payment  
for  land  co-­‐
ownership  
Old  Gov’t  Office
from  
residence
 
1F-­‐9F
New  Gov’t  Office
Payment  for  
land  lease  
from  private  
NaTonal  Gov’t  subsidy  
company for  redevelopment

=>  Toshima  ward  gov’t  was  able  to  construct  new  office  building  without  actual  spending.
21
APPENDIX  

22
 Outline  of  PPP  AP  Capacity  Development  Module  
Module   Title   Major  Contents  
Basic  Principles  and   1.  Purpose  and  Features  of  PPP/AP  
Mechanism  of  AP   2.  Project  Structure  of  AP  
3.  Basic  Mechanism  of  Availability  Payment    
I   4.  Understanding  VFM  (Value  For  Money)  
5.  Role  of  GCA  and  Key  to  Success  
6.  Securing  Bankability  
Case  Studies  for  Various   1.   Hospital  (Fukuoka)  
Sectors  ApplicaTon   2.  Water  Supply  (Yokohama)  
II   3.  Public  Housing  (Kyoto)  
4.  Airport  Apron  (Haneda)  
5.  Railway/  LRT  (Bangkok)  
Gevng  Started:  PreparaTon   1.  Overview  of  Availability  Payment  Regulatory  
and  ImplementaTon  of  AP  in   Framework  in  Indonesia  
III   Local  Governments   2.  Required  RegulaTons  in  Local  Government  
3.  Project  PreparaTon  
Advanced:  InnovaTve   1.  Air  Rights  Selling  to  Private  
Methods/  Financing  for   2.  Power  and  Heat  Supply(Waste  to  Energy)  
IV   AddiTonal  Value  CreaTon   3.  Transit  Oriented  Development    
4.  Land  Readjustment  
5.  Hybrid  Financing  
23  
 Fukuoka  City  New  Children  Hospital  
Facility  Map

Island  city  central  park

Hospital

Heliport
Parking
Entrance Entrance

24
 Fukuoka  City  New  Children  Hospital  
Scope  and  Criteria  of  Output  SpecificaIon

Facility  Development Maintenance  management Commercial  facility  operaIon

【Required  facility     【Required  work】   【Basic  policy】  
 and  specificaTon】   1.  Manual    preparaTon   1.  Contribute  to  all  user’s  
1.  Low  level  with  roof  garden   2.  Rehearsal     convenience  visiTng  the  
2.  Surgery  faculty,  Perinatal   3.  Regular  repair  and  replace   hospital  
Medical  Center,  PICU   4.  Planned  Repair   2.  Financially  independent  
(Pediatric  Intensive  Care   5.  Energy  management  and   3.  No  bad  influence  to  the  
Unit)  and  HCU  (High  Care   supervision:     hospital  
Unit)  are  on  same  floor   CalculaTon  and  analysis  for    
3.  OutpaTent  service  on   energy  consumpTon   【Component】  
ground  floor   6.  ReporTng:     1.  Shops  
4.  ExaminaTon  room:   Management  of  ledger  and     2.  Café  ,  restaurant  
 3m  x  4  m     takeover  manual   3.  Vending  machine  
5.  Sleeping  room  next  to   4.  Coin  laundry  
central  treatment  room   5.  Locker  
6.  Interview  room  near  the   6.  Post  
entrance   7.  ATM  
7.  Heliport     8.  Telephone  room  
8.  Cleanliness  level:  level  I-­‐IV

25
 Fukuoka  City  New  Children  Hospital  
Monitoring  and  Payment

Performance  Parameter  (PP)  for  the  evaluaTon  is  categorized  in  four  zones,  S,  A,  B  and  C.  
Bonus  point  is  given  for  the  zone  A,  and  penalty  points  is  given  for  the  zone  B  and  C.  
The  amount  of  AP  except  for  the  lump  sum  porTon,  will  be  calculated  based  on  the  summaTon  of  
bonus  points  and  penalty  points
EvaluaIon  Zone
Zone Gold Blue Yellow Red
EvaluaTon S Well  SaTsfied A SaTsfied  Enough B Need  to  Improve C UnsaTsfied

Bonus  Point  and  Penalty  Point

Level Bonus  Point Penalty  Point
1 1  Point  (=0.5%  for  the  original  AP) 2  Point
2 2  Point 3  Point
3 3  Point 5  Point

CalculaIon
Bonus Penalty
Original Point Point
AP AP 1
200
*In  case  (Bonus  Point  –  Penalty  Point)  is  plus,  the  points  will  be  carried  forward  to  the  next  quarter  and  be  valid  in  one  year
26
 Fukuoka  City  New  Children  Hospital  
AP  ComposiIon

AP Contents Time
Facility  development  cost   Lump  sum  at  
1
(Lump  Sum  porTon) •   Facility  development  cost  (except  for     transfer  
Facility  development  cost    commercial  facility)   Every  quarter  
2
(Installment  porTon) aper  transfer  
Lump  sum  at  
3 Equipment  procurement  cost •   Equipment  procurement  cost
transfer
•   Commencement  cost  
Commencement  and  overhead  
•   Fixture  cost   Every  quarter  
4 cost  during  facility  
•   Overhead  during  facility   aper  transfer  
development
development
•   Interest  during  maintenance   Every  quarter  
5 Installment  interest
•   Profit  and  tax aper  transfer  
Every  quarter  
6 Maintenance  cost •   Facility  management  cost
aper  transfer  
Every  year  aper  
7 Maintenance  cost  (Repair) •   Planned  repairing  cost
transfer  
8 Other  cost •   Other  management  costs  of  SPC   -­‐
27
 Fukuoka  City  New  Children  Hospital  
AP  Schedule

Contract  Amount:    approx  15.5  billion  JPY  (≒1.8  trillion  IDR)  

AP  Schedule
Payment

Equipment  
procurement   Maintenance   Maintenance   Maintenance  
(Repair) (Repair) ・・・ (Repair)

Facility   Maintenance Maintenance ・・・ Maintenance

development Facility  
development     Commenceme Commenceme Commenceme
(Lump  Sum   nt  and   nt  and   ・・・ nt  and  
porIon)   overhead overhead overhead
  Facility   Facility   Facility  
development   development   development  
(Installment   (Installment   ・・・ (Installment  
porIon)   porIon)   porIon)  

2012 2013 2014 2015 2016 ・・・ 2030 Year

28