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Paper No.

670

The short listing and limiting of number depends on The profitability will be greater and risk profile of
the choice and composition of PQ criteria. In this the project will be lower if there exist high demand
vein, Singh & Tiong13 have observed that research and willingness to pay for the road services15. In
focus is different from the industry practices and case of high demands and willingness to pay for
where industry seems to depend on the principles the road services, more number of private parties
of client organization and their methodologies. will be interested in the projects and the Granting
For public projects, more specifically, some Authority will have enough flexibility in fixing
governments set PQ limits to restrict the bidders, higher prequalification limits to shortlist the private
while others don’t specify any PQ requirements parties. On the contrary, if there is less demand and
(like in case of open procedure). But, in general, willingness to pay for the envisaged road project,
the focus of PQ criteria is mostly on the tangible the profitability will be lower and risk profile will
attributes such as technical and financial be higher for the private parties. In such cases,
experience and the same are used in most of the the Granting Authority may be bound to set lower
countries. Lower limits on these criteria are set by prequalification limits in addition to switching
the governments and these limits are used to either from toll based projects to annuity based projects
screen or rank the bidders. In spite of these general to have enough private parties for shortlisting.
recommendations, private sector is more inclined
Gross State Domestic Product (GSDP)
towards standardisation of PQ criteria, their limits,
and the bidding process so as to aid efficiency, National Highways runs within a state and
predictability, and approval process of the project5. interstate as well. Gross State Domestic Product
Thus, the intended standardization of PQ limits (GSDP) is an indicator of income. State and its
should not be embarked upon without gathering neighboring states having higher GSDP will have
empirical evidences from the PQ experiences of larger economic activities that involves the use
PPP projects in a given sector. This is because, of transport. High per capita income of a state
setting unrealistic PQ limits may either lead to indicates that traffic will be more and user will
participation of incompetent bidders and make have willingness to pay for the road services 15.
the competition very intense or make the project For PPP project in such a state/states, profitability
unattractive for the bidders. While extant literature will be higher and the traffic revenue risk will be
has given directives for application, the selection lower, thereby attracting more numbers of private
of qualified bidders to participate in the bidding prayers. The prequalification limits can be set
process is not clearly understood thus far Indian higher for such a state/states. But if the GSDP of
highway projects. The current study, therefore, a state and its neighboring states is low, traffic
identifies the PQ criteria, limits, and analyses their risk revenue will be higher and the project will
behaviour in order to facilitate the generation of be less attractive to the private parties. In such
empirical evidences to support the future projects. situation, the Granting Authority may be bound to
3. Prequalification Limits’ Factors set lower prequalification limits. Therefore, one
can expect higher prequalification limits in the
The attractiveness of a PPP projects to the private
National Highway PPP projects in the state/states
parties mainly lies with the profitability and the
having higher GSDP. Moreover, the behavior of
risks involved. Three factors which affects the
high per capita income states and corresponding
profitability and risks profile of a PPP highway
traffic growth would also relevant. In cases where
projects are identified from the literature15 and are
per capita income is high traffic growth might be
reviewed subsequently.
witnessing low traffic growth rate due to saturation
User willingness to pay of business activity while for states with low per
The principle of setting prequalification limits is capita income, the traffic growth rate may be
to shortlist the private parties to a selected few higher due to the potential industrial, agricultural,
so as to minimize the cost and time involved in and trade possibility. However, the influence of
the evaluation of bids and also at the same time per capita income is not considered in the current
fostering competition among the private parties 14. study.

94 Journal of the indian Roads Congress, July - September, 2017