The success of a PPP project is vastly dependent on the criteria for selection of the concessionaire,

especially as these projects typically involve large capital investments for providing essential
infrastructure services to users on a long-term basis.

Airport PPP involves selection of a service provider who can operate and maintain the
selected airport/s for the given tenure profitably. Bids submitted by different bidders
are evaluated on the basis of evaluation parameters .  These parameters are mentioned in
the RFP document . The criteria would usually focus on:
 Technical: The feasibility and standard of the proposed technical solution, covering the way in which the
specified service outputs would be financed, produced, managed and delivered

 Financial: The proposed whole-of-life cost or payment in the financial proposal

 Acceptance by the bidder of the risk allocation in the Draft Concession Agreement

The parameters in focus today are:

 
Revenue Share: All the bidders are required to quote revenue share in their bids
and which will be a key parameter for selecting the winning bid. The bidder who gives
the highest net present value of revenue share to the Government, as per transparent
methodology, will get the maximum marks under this parameter.

Revenue per passenger: As financial bid, Bidders are required to offer to pay a
premium in the form of Rs. per passenger (or pax) of traffic handled at the Airport
also called as the “Premium Rate” . The Project shall be awarded to the Bidder
quoting the highest premium termed as “Highest Bidder”.

Viability Gap funding: It's a one-time or deferred grant that's given to

infrastructure projects that are economically viable but lack financial feasibility. The
incentive is intended to entice private sector participants to participate in PPP
projects that would otherwise be financially unviable.
Bidders who seek the least VGF award are usually preferred.

Upfront premium: An upfront premium is a one-time fee that a bidder agrees to

pay to the selector or other entity involved in gaining access to the bid amount that
the bidder has submitted for the tender. It might be paid in a lump sum or over a set
period of time. The upfront premium will not be included in the project's cost.

The broad aim is to select the “most economically advantageous tender” that is, it maximises value for money
and provides optimal risk allocation.

Talking about importance of each of these bidding parameters,

 Revenue share can play an important role for optimal risk allocation. Revenue risk sharing
approach that seeks to protect the concessionaire against lower than expected revenues and
The "upside revenue sharing" approach that shares higher than expected revenues between
the two parties can help create better Value-for-Money.
 Revenue per passenger: It ensures affordability of airport services for passengers as
well as predictability of revenue for the winning bidder. It can lead to tangible
economic gain for AAI as their profitability will continue to increase year after year because
‘per passenger fee’ is indexed to the Consumer Price Index (CPI).
 Viability Gap Funding: More than 1 bid criterion is used when an Implementing
Agency (IA) is unsure whether a project requires a Viability Gap Funding (VGF) or can
support a revenue sharing/upfront premium scheme. In such cases, both the lowest present
value of VGF and highest revenue share for the Government may be used by the lA as bid
criteria for determining the most advantageous financial bid.
 Upfront Premium: For the final selection, the amount of upfront premium to be paid in
relation to the other bidders is critical. The bidder with the highest premium and who
meets all of the qualifications is chosen. 

Implications

 Revenue Share: In cases where the lA sees a potential upside for the government, it may set
a starting user fee and the financial proposal with the highest revenue share for the
government may be preferred. To maximize value capture, any additional source/s of
revenue of the project shall be considered and utilized to scale down the user fees and/or scale
up revenue for the government.
 Revenue per passenger: It focuses on setting up key performance indicators for
airport operations and strict monitoring to ensure quality of services. By linking concession
fee to number of passengers, the disagreement around gross revenue and the risk of revenue
leakage will be reduced.
 VGF: For projects developed on a user fee-based scheme where VGF has been extended, the
financial proposal with the lowest present value of VGF or other equivalent forms of
government support requirement during the tenure of the PPP contract may be considered,
provided that the total government undertaking shall not exceed (50%) of the total project
cost.

 Upfront premium: An upfront fee should only be considered when there is clear evidence
of the value of the excess revenue to the project company. The cost of capital matters should
be considered, as the project company will have to raise additional capital in order to pay the
fee.
In the two-stage bidding process, the first stage involves the determination of the technical and
financial strength of the applicants with reference to predetermined eligibility criteria and only firms
that meet the criteria are pre-qualified for the second stage of bidding. The second stage of bidding
typically involves obtaining financial bids from the pre-qualified bidders.

The criteria are primarily technical qualifications based on past relevant experience and financial strength
required for undertaking such projects. The bidders may also be asked about their understanding of the
project, approach, and methodology the bidder will be using for successful project delivery.

A balance needs to be drawn in setting eligibility criteria so that, on the one hand, the number of
participants is adequate for real competition and, on the other hand, a large participation from non-serious
bidders may dampen the process.

Viability Gap Funding: More than 1 bid criterion is used when an lA is unsure whether a project requires a
Viability Gap Funding (VGF) or can support a revenue sharing/upfront premium scheme. In such cases, both the
lowest present value of VGF and highest revenue share for the Government may be used by the lA as bid criteria
for determining the most advantageous financial bid; provided, however, that the revenue share/upfront premium,
if any, would be the preferred route, as a matter of policy subject to appropriate due diligence by the lA on the
evaluation of the bid proposals.

Quantitative Technical Criteria

The quantitative technical criteria should be determined based on the complexity and extent of work
involved in the entire project life cycle (concession period), including design, construction, operations and
management, in addition to other auxiliary activities. The technical criteria should be fixed to evaluate
bidders’ capability to undertake the project from the scope, time, cost, quality, and risk management points
of view during the entire concession period.

It is good practice to distribute 100 marks between multiple technical parameters, covering all aspects of
the project and set minimum qualifying marks (e.g., 75) to be eligible for participation in the financial
bidding stage.

For the investor community, the proposal is seen reducing regulatory uncertainty and
disputes arising out of tariff determination and revenue sharing. “For global airport
operators to come and invest in India, there have been two broad concerns — the
Airports Economic Regulatory Authority (AERA) fixes the aeronautical tariffs once in five
years and this leads to a degree of regulatory uncertainty, which could be daunting for
an investor, including a foreign investor. The second challenge was from the concession
granting authority. The biddable parameter, so far, was revenue share. If this can be
disputed then it becomes an item that is difficult to administer.

Revenue Sharing: It can play an important role in devising an optimal risk allocation. However, governments
may face budgetary restrictions that could keep them from achieving this optimal solution. Besides revenue risk
sharing mechanisms, upside revenue sharing mechanisms can help create better VFM by limiting excessive
returns for PPP concessionaires at the expense of users and taxpayers.
  VGF: For projects developed on a user fee-based scheme where VGF or other equivalent forms of
government support have been extended (in accordance with the Policy on Viability Gap Funding for
PPP Projects, which provides that VGFs are made available to solicited concession-based projects that
are economically viable but are not financially attractive), the financial proposal with the lowest present
value of VGF or other equivalent forms of government support requirement during the tenure of the PPP
contract may be considered, provided that the total government undertaking shall not exceed (50%) of
the total project cost.

Jewar RFP

Authority will open the Financial Bid of the Qualified Bidders shortlisted as per Clause 1.2.6
(b). As financial bid, Bidders will be required to offer to pay a premium in the form of INR
per passenger (or pax) of traffic handled at the Airport (“Premium Rate”). Subject to Clause
1.2.6, the Project shall be awarded to the Bidder quoting the highest premium.

Subject to the provisions of Clause 2.7 and Clause 1.2.6, the Qualified Bidder whose
Financial Bid is adjudged as responsive in terms of Clause 2.22 and who provides the highest
Premium, shall ordinarily be declared as the Selected Bidder (the “Selected Bidder””). In the
event of any difference between the figures and words, the amount indicated in words shall
be taken into account.
In the event that two or more Qualified Bidders providing the same amount of Premium (the
"Tie Bidders"), the Authority shall identify the Selected Bidder by asking the two Bidders to
provide their best and final offer. The Bidder offering the most advantageous final offer shall
be adjudged the “Selected Bidder”.

DIAL has satisfactorily performed its obligations without any material default under the
Project Agreements DIAL shall be deemed to be qualified for participation in the Financial
Bid opening stage of this
RfQ-cum-RfP.
In the event, the Premium quoted by DIAL within 10% (ten percent) of the “Highest Bidder”,
DIAL shall be invited to match the highest ranked Bid in order to exercise the ROFR. In the
event DIAL matches the highest ranked Bid, DIAL shall be deemed to be the Highest Bidder
and the Project shall be awarded to DIAL. DIAL shall be deemed to be qualified for
participation in the Financial Bid opening stage of this

Lucknow airport

Bids are invited for the Project on the basis of the Per-Passenger Fee for domestic passengers.
The Per-Passenger Fee for domestic passengers shall constitute the sole
criteria for appointment of the Selected Bidder.
(b) In this RFP, the term “Highest Bidder” shall mean the Qualified Bidder who is quoting
the highest Per-Passenger Fee for domestic passengers.
Delhi airport
Phase 4 was the final stage where the
preferred bidder was to be selected based on the highest share offered to the AAI as a
proportion of the gross revenues from the airport.