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P3 Toolkit

Frequently Asked Questions

The Federal Highway Administration (FHWA)'s Office of Innovative Program Delivery (IPD) compiled Frequently Asked Questions (FAQs) throughout the development and testing of the P3-VALUE analytical tools. These FAQs supplement the four tool-specific user guides in providing technical assistance to tool users and are organized by category. Each category includes general questions and questions by tool worksheet.

Table of Contents

1. Introduction

Purpose of FAQs

The Federal Highway Administration (FHWA)'s Office of Innovative Program Delivery (IPD) compiled these Frequently Asked Questions (FAQs) throughout the development and testing of the P3-VALUE analytical tools. P3-VALUE is comprised of four interactive, integrated spreadsheet-based tools including Risk Assessment, Public Sector Comparator, Shadow Bid, and Financial Assessment. These FAQs supplement the four tool-specific user guides in providing technical assistance to tool users.

Organization of FAQs

The remainder of this document lists Frequently Asked Questions, with corresponding responses, by tool. The first section answers general, non-tool specific question. IPD considers this document as a "living" document and will periodically revise the list to include new questions. Thus, if your questions or comments are not documented below, please submit them to P3-VALUE@dot.gov .

Additional Resources

For additional guidance, IPD encourages users to also refer to the following P3 Toolkit components:

  • Orientation Guide for a summary of the issues and factors that are evaluated when considering a P3 as a financing and procurement mechanism;
  • Three Primers, one each on Risk Assessment (reference for Risk Assessment Tool), Value for Money Analysis (reference for Public Sector Comparator and Shadow Bid tools) and Financial Structuring and Assessment (reference for Financial Assessment Tool);
  • P3-VALUE user guides, one each on Risk Assessment, Public Sector Comparator, Shadow Bid, and Financial Assessment, for technical advice in support of this suite;
  • Evaluation Guidebooks (under development) for practitioners seeking a deeper understanding of evaluation processes and data sources as well as the concepts, assumptions, inputs and outputs involved in the above analyses; and
  • P3-SCREEN screening tool (under development) along with supporting user guide to assist practitioners seeking to perform a preliminary screening evaluation of the suitability of a P3 for highway projects.

2. P3-VALUE Toolkit

General Questions

This section provides responses to the following non-tool specific questions:

Q: What is the best method to share comments with FHWA?

A: Please send comments and additional questions to P3-VALUE@dot.gov.

Q: Can inputs be saved externally from the spreadsheet and imported for later use?

A: The current versions of the tools do not include any importing capabilities for assumptions. Users are encouraged to input their assumptions into each tool's respective assumptions worksheets and to save that version of the file locally on their computer as "v1," for example, or with their initials. A future iteration of P3-VALUE may utilize a "Consolidated Assumptions" sheet, thereby allowing users to enter all their assumptions once and to export them into the PSC and Shadow Bid tools.

Q: Can you cause the model to solve for a particular solution? For example, can you enter the data and have it solve for what subsidy is needed to make the project sufficiently attractive to the private sector?

A: The Shadow Bid Tool solves for payment amount to the private sector. The user can adjust funding and subsidy assumptions that affect the payment levels, but the models are not designed to define project parameters based on an available subsidy amount. The Financial Assessment Tool's Viability Assessment helps to determine the affordability of the base project.

Q: Are the tools deterministic based?

A: The Risk Assessment Tool is stochastic, i.e. probabilistic, while the Shadow Bid Tool is deterministic and the PSC Tool is calculation-based .

Q: Are these tools envisioned to be used by project sponsors with nominal advisor input as a precursor to making what kind of decision to do what?

A: FHWA envisions that public sector decision-makers and technical staff will use P3-VALUE for educational purposes only to improve their understanding of P3s as potential procurement options for delivering U.S. transportation projects. P3-VALUE will guide states in their efforts to better understand how changing the assumptions about key factors such as cost, schedule, revenue and financing can influence whether a partnership with the private sector will be a better value to the taxpayer than procuring the project through conventional means. P3-VALUE is a key component of a P3 toolkit, including primers, guides and fact sheets to help educate public agency decision-makers and practitioners with regard to the key issues in P3 implementation. It is essential that the users understand the amount of intra-agency coordination and background analysis required to make an informed decision regarding whether to pursue a project as a P3. Above all, users must understand that P3-VALUE is not designed as a decision-making tool. Users should engage appropriate experts in developing project-specific tools capable of evaluating real-world projects. The understanding of the P3 evaluation process gained through the use of P3-VALUE can help users understand the significance of key inputs and assumptions, as well as to understand and interpret modeling results from more detailed project-specific tools and analyses.

Q: Who can you share the model's results with and at what point in time?

A: Users are encouraged to work in a team of experts in design, engineering, right-of-way, construction, tolling, operations and maintenance, law, finance, environmental and geotechnical review, materials, and project management to simulate the level of collaboration necessary for evaluating a project. Users should review the results and understand how key inputs affect those outputs, but users should be familiar with the tools' technical limitations and therefore should not share the results with any decision-makers as a basis for pursuing (or not pursuing) a project as a P3.

Q: Is Net Present Cost (NPC) similar to Net Present Value (NPV)? Are these terms the same as nominal and real?

A: Net Present Value (NPV) and Net Present Cost (NPC) both essentially compare the value of a dollar today to the value of that dollar in the future, taking the time value of money into account. In the context of P3-VALUE, NPV is the present value of the project's expected future revenues (i.e., positive cash flows), minus the project's costs (i.e., negative cash flows); since this is generally a negative number, it would be called a "Net Present Cost (NPC)". If there are no project revenues, the NPC is simply the sum of all costs. Since P3-VALUE is designed to address greenfield (i.e., new build) projects, and such projects generally do not generate a positive cash flow (i.e., surplus revenue), the terms "NPV" and "NPC" are used somewhat interchangeably in P3-VALUE.

The concepts of nominal and real are related, but not the same as, NPV and NPC. Representing the model results in nominal, i.e. current, dollars would reflect the present value of the project assuming a zero discount rate (i.e., ignoring the time value of money - assuming that a dollar today has the same value as a dollar in the future) whereas real dollars would reflect the true value of the project by reflecting the time value of money (which includes removing the effects of inflation as well as other considerations).

Q: Are the inputs in real or nominal dollars?

A: Users should enter their assumptions in real dollars. The models then apply the user-defined inflation rates in future years to yield outputs in nominal dollars.

3. Risk Assessment Tool

General Questions

Q: What should users do to get the most out of this tool?

A: At a minimum, users should open the Risk Assessment Tool and refer to the Quick-Start Guide presented in the first section of the tool's user manual and on the second worksheet of the tool. To maximize their learning experience, however, users should use a hypothetical project and modify the model assumptions and risk register to fit that project's parameters. After reviewing the outputs sheet, users should return to the risk register and change several risk ratings and impacts to either a high or low extreme and observe any differences in the outputs. The Risk Assessment Tool may serve as a standalone tool, but provides greatest educational benefit when used in conjunction with the PSC and Shadow Bid tools. Users make note of the cost and schedule risk share (of public vs. private) and impacts by phase, as those values serve as inputs in the PSC and Shadow Bid tools.

Q: When would an agency conduct a risk assessment?

A: A project sponsor would conduct a risk assessment at the early stages of the project development process and revisit the risk assessment throughout project development and delivery as part of sound risk management practices. An initial risk assessment would begin once a project sponsor completed sufficient preliminary design work to understand a project's scope and alignment and developed an initial estimate of a project's schedule, procurement options, and life cycle costs.

Questions by Worksheet

Introduction

There are currently no questions regarding the Risk Assessment Tool's Introduction sheet.

Model Assumptions

Q: The model assumptions seem to have no effect on the outputs.

A: The model assumptions sheet prompts users to think about the project's costs as a basis for determining the range of reasonable values for risk impacts in the risk register; with the exception of the daily delay cost assumptions highlighted in yellow, the numbers do not factor into the outputs. It is essential that users consider an appropriate value for daily delay costs in the construction and operations phases as those assumptions directly factor into the dollar values of the schedule risk impacts.

Definitions

There are currently no questions regarding the Risk Assessment Tool's Definitions sheet.

Risk Assessment Matrix

There are currently no questions regarding the Risk Assessment Tool's Risk Assessment Matrix sheet.

Risk Register

Q: Why are some risks quantified while others are high, medium, or low?

A: A risk workshop may identify hundreds of potential risks with varying degrees of probability and consequences. It may not be an efficient use of resources to quantify the values of each risk; many agencies use a preliminary or qualitative risk assessment to determine those risks to quantify. An agency may decide that it needs to quantify all or only some risks because others have an overall negligible impact on the project or are highly unlikely to occur. In the Risk Assessment Tool, users only need to quantify those risks with medium, high, or very high risk ratings. Ultimately, those risks with medium or through very high ratings are both qualitatively and quantitatively assessed while low-rated risks are only assessed qualitatively (unless users choose to aggregate the lower-rated risks together and then quantify that cumulatively significant risk). It is important for the quantitative assessments to be in alignment with the qualitative assumptions. Users should refer to the risk assessment matrix in determining the probability percentage for each quantified risk.

Q: What is the difference between uniform and triangular distribution?

A: The Risk Assessment Tool uses a Monte Carlo simulation to calculate the total risk impacts on a project's cost and schedule. For the Monte Carlo simulation to function, a user must estimate the probability distribution of each risk's impact. Uniform distribution and triangular distribution are the two common techniques for quantifying risks for P3 projects. Uniform distribution assumes the user only knows the minimum and maximum impacts of a risk if it were to occur and that the actual impact is equally likely of being any value between the minimum and maximum values. Triangular distribution assumes that the user knows the most likely value of a risk impact in addition to the minimum and maximum values.

Q: Why do some of the cells turn gray?

A: The Risk Assessment Tool uses conditional formatting to guide users in entering their assumptions. If a user indicates that a particular risk follows a triangular distribution, then the cells for "minimum," "most likely," and "maximum" value are shaded light-blue, indicating that the user must enter values in those three cells. If the user changes the risk to follow a uniform distribution, then the cell for "most likely" turns gray, indicating that that input is no longer relevant under the new assumption. See question #3 immediately above for a more detailed explanation of why triangular distribution requires three inputs while uniform distribution requires only two.

Another explanation for the cell shading has to do with the risk consequence. The Risk Assessment Tool only runs its Monte Carlo simulation for those risks that have medium, high, or very high risk ratings. In conducting a risk workshop for a real project, analysts would likely aggregate all the low-rated risks, but for educational purposes it is sufficient for users to go through the risk identification process and to quantify only those medium and through very high risks. Thus, if the user's probability and consequence ratings result in a "low" or "very low" risk rating, the quantification and allocation input cells turn gray, indicating that the risk is not significant enough for the user to assess.

Q: Can users add rows for additional risks?

A: No. In conducting a risk assessment for a real-world project, a risk workshop may identify hundreds of risks; the Risk Register has space for users to enter up to 19 unique risks for educational purposes. Users should derive the intended learning benefits in completing the risk register exercise for the number of risks provided.

Q: How do you determine probability percentages?

A: The Risk Register prompts users to make preliminary, qualitative judgments regarding the likelihood of a risk occurring at a gross level (i.e. very high, high, medium, low, very low). The Risk Assessment Matrix tab includes tables to help guide users in making reasonable assumptions regarding the probability of a risk occurring. First consider whether a particular risk is very high, high, medium, low or very low and refer to the scale on the left-hand side of the table for the corresponding probability percentages and select the most reasonable probability rating, one to five.

Q: How do these inputs relate to the outputs?

A: The user's inputs for risk quantification and allocation feed into a Monte Carlo Simulation, which generates total risk impacts (for cost and schedule) that are used to calculate the risk-adjusted project cash flows. Even though the risk identification and qualification steps do not have direct impacts on the outputs, these are essential steps that enable the users to make reasonable assumptions regarding the risk quantification and allocation.

Q: From whose perspective should I fill out the risk register?

A: Users should first complete the risk register as part of the Public Sector Comparator analysis, saving a version of the file with outputs to feed into the PSC Tool. Users may then review the risk register from the private sector's perspective and make adjustments as appropriate, saving a new version of the file with outputs to feed into the Shadow Bid Tool. An alternate way to calculate risk from the private sector perspective as an input into the Shadow Bid is to use the results of the risk register entered from the public sector perspective applying an efficiency factor to reduce the resulting risk values. This treatment of risk in the Shadow Bid reflects an assumption that in a P3 the private sector will be transferred risks it is more capable of managing than the public sector and the public sector will retain risks it is more capable of managing thus lowering the overall expected value of risks relative to a conventional procurement.

Q: What is the "turn-over" impact phase - is it the same thing as handback?

A: "Turn-over" refers to the project phase during which documents such as warranties, license information, and O&M manuals are turned over to the operations team.

Q: What does "commissioning" mean?

A: "Commissioning" refers to the project phase in which a facility is prepared for operations. For example, if a project encounters issues in installing and testing complex systems equipment and controls (signage, etc.) during the commissioning phase, then there may be costs associated with delaying the operations period and potentially losing revenue if the project involves toll collection.

Q: How do you account for risks in a managed lane project?

A: In evaluating a real-world project, a project sponsor would host a risk workshop with a group of experts to identify, evaluate, and manage project-specific risks. For a managed lane project, the project's traffic and revenue study could inform the probability and consequences of traffic and revenue risks. For educational purposes, however, users are encouraged to complete the risk register for a notional project only and to carefully consider their notional project's unique risks. For example, in assessing the risks for a notional managed lane project, users may assign greater cost consequences to tolling and market demand (traffic and revenue) risks.

Q: How do you enter an opportunity risk?

A: To enter an opportunity, i.e., upside risk, users should select "opportunity" in the "Risk Type" drop-down menu in column E in the Risk Register. Users may then enter their quantitative assumptions normally. For example, if there is mild weather during the winter and construction is able to proceed, users may record that upside risk and indicate a minimum schedule impact of 15 days and minimum cost impact of $5 million, meaning that the project is 15 days ahead of schedule and realizes $5 million in savings. Do not enter cost impacts as negative values; the tool will automatically invert the cost impact into a cost savings.

Q: Does the risk register account for any interrelations between risks during the simulation?

A: No. The P3-VALUE Risk Assessment Tool is a simple tool for educational purposes only and consequently is not capable of accounting for an interdependency or correlation among risks.

Outputs

Q: Does the model have a sensitivity analysis that displays which risks have the greatest impact to the cost and schedule?

A: Yes. The outputs sheets "Table 6 - Cost Risk Sensitivity" and "Table 8 - Sched. Risk Sensitivity" include bar graphs that indicate which risks present the greatest average impact. The graph ranks the risks by average cost impact (in dollars) or by average schedule impact (in days).

Q: How many iterations should I run?

A: To run the Monte Carlo simulation, users must enter a number of iterations in the 'Generate Outputs' box on the "Table 5 - Cost Impact Outputs" sheet. To generate statistically significant results, users should enter a number between 300 and 1,000. The greater the number of iterations, the "smoother" the output distribution curve will be, but higher iterations require additional processing time. For educational purposes, running 300 simulations is sufficient.

Q: How do you know 1,000 iterations are enough? Can you have the simulation converge to a stable output distribution curve?

A: Running 1,000 iterations results in a stable output distribution curve, but running more than 1,000 simulations requires a significant amount of processing time (up to or exceeding 60 minutes) and may ultimately crash a user's computer. For educational purposes, as few as 250 simulations yield an s-curve that is relatively stable.

Q: What does P90 mean?

A: The cost and schedule impact outputs sheets present the Monte Carlo simulation results as a distribution histogram and as a cumulative distribution. The outputs highlight the P10, P70, and P90 values of total cost and schedule impacts to indicate the range of possible outcomes. If the P90 (or 90th percentile) value is $756,000 then it means that there is a 90 percent chance that a project's cost overruns will be less than $756,000 and a 10 percent chance that a project's cost overruns will be greater than that amount. If users are interested in the total cost or schedule impact at the 50th percentile (or at any other percentile not specified in the table), then they may look to the cumulative distribution, or "s-curve" graph.

Q: How are the cost impacts of unquantified (less significant) risks accounted for in the PSC and Shadow Bid tools?

A: The Risk Assessment Tool runs its Monte Carlo Simulation only for those risks that have medium, high, or very high risk ratings. Consequently, the cost and schedule impact outputs that feed into the PSC and Shadow Bid tools do not account for the unquantified risks. Users should be aware of this limitation of the tools, as models designed for evaluating real-world projects would aggregate all the low-rated risks. Users may choose to do an "off-sheet" calculation to aggregate the lower-rated risks into a more significant and quantifiable risk.

4. Public Sector Comparator Tool

General Questions

Q: What should users do to get the most out of this tool?

A: At a minimum, users should open the Public Sector Comparator (PSC) Tool and refer to the Quick-Start Guide presented in the first section of the tool's user manual and on the second worksheet of the tool. To maximize their learning experience, however, users should use a hypothetical project and modify the model's Assumptions sheet to fit that project's parameters, including inputting relevant risk values from the Risk Assessment Tool. After reviewing the PSC Output sheet, users should use the Scenario Analysis to adjust their assumptions and to observe any differences in the results. The PSC Tool may help a user understand the costs to a public agency of delivering a project through a traditional design-bid-build procurement, but provides greatest educational benefit when used in conjunction with the Shadow Bid and Financial Assessment tools to complete the hypothetical project's value for money (VfM) analysis.

Q: When would an agency develop a PSC?

A: While P3s may deliver value to agencies by leveraging the technical expertise and capital of the private sector, agencies typically consider multiple delivery options to determine the appropriate approach. A Public Sector Comparator serves as a benchmark for determining P3s' value for money and consequently is constructed when an agency has decided to move forward with a project and is considering its delivery options. Prior to constructing a PSC, an agency would need estimates for the project schedule, life cycle costs and revenues, project finance plan, and risk values.

Questions by Worksheet

Introduction

There are currently no questions regarding the Public Sector Comparator Tool's Introduction sheet.

Tool Index

There are currently no questions regarding the Public Sector Comparator Tool's Tool Index sheet.

Definitions

There are currently no questions regarding the Public Sector Comparator Tool's Definition sheet.

Assumptions

Q: Where can I enter my assumptions?

A: The Assumptions sheet of the PSC Tool is designed as the main portal for entering inputs. The Assumptions sheet is divided into several tables of inputs; the table names, highlighted in dark blue, are visible in column C. In general, users may edit and enter their assumptions into the light-blue cells of each table. Most inputs are entered by typing, though some inputs require users to check boxes or to make selections from drop-down menus. The PSC Tool's input tables include: Traffic Scenario, Project Delivery Structure, Timing, Other Project Costs, Construction Costs, Operating Costs, Maintenance Costs, Toll & Other Revenue, Funding, Financing, Inflation, Risk Allocation, Risk Values, Discount Rate, and PSC Adjustments.

Q: Where do the risk values come from?

A: The Risk Assessment Tool outputs are critical inputs to the other tools because the VfM analysis and project viability assessment are based on risk-adjusted cash flows. To adjust the PSC cash flows, users must record the values from the following tables in the Risk Assessment Tool's Output sheet: Cost Risk Results; Cost Share; Schedule Results; and % of Schedule Risk Share (refer to Table 2 of the PSC User Manual for specific cell references for the Risk Assessment Tool outputs that become inputs for the PSC Tool). The allocations of cost and schedule risk share between public and private in the design-build and operations phases become inputs for the Risk Allocation table on the PSC Tool's Assumption Sheet. The schedule and cost risk results serve as inputs for the Risk Values table.

Q: How do you value early completion incentives?

A: The PSC Tool does not account for early completion incentives.

Q: Where do the PSC adjustments come from?

A: For the VfM analysis to make a like-for-like comparison between a public sector delivery option and a P3 delivery option, it may be necessary to remove differences (called "competitive neutrality" differences) between them by making PSC adjustments. In the PSC tool, those adjustments are annual (or total) dollar values during the construction and/or operation phases. Such adjustments are often made to account for differences in the tax treatment of conventionally procured procurement and the tax treatment of P3s.

Q: Are the construction and O&M costs related? For example, if you have lower construction costs from using cheaper asphalt, will it be cheaper to maintain?

A: Users enter construction and O&M costs separately. For the O&M assumptions, users can enter their values either as a percent of construction or as a dollar figure. If users choose to enter their O&M costs as a percent of construction, then they may account for savings from materials, however users must use their judgment in making realistic assumptions about the costs of operating and maintaining the facility.

Q: What is percent of project financed after funding?

A: The PSC Tool requires an assumption regarding the level of project finance necessary after accounting for the project funding. This input, in cell E68, represents the amount of the funding gap or net costs after funding, to be financed. For example, if there is a $500 million project that receives a $100 million subsidy, then the remaining $400 million of that project's costs would be financed. By default, this value is 100 percent because it is unclear under what scenario a user would not finance 100 percent of a project's remaining costs after accounting for grants and other funding sources.

Q: What is the number of ramp-up periods?

A: If users assume that a project's delivery structure includes toll collection, then the assumptions in the "Toll & Other Revenue" table are activated (the input cells will change from black to light-blue). Users may make assumptions about the traffic ramp-up period, which reflects the period after the facility opens when initial traffic volumes increase to a steady state. By default, there are six semi-annual ramp-up periods, covering the first three years of tolling operations, for which users can specify a percentage value per period to be subtracted from that period's gross toll revenue. For real-world projects, a Traffic & Revenue (T&R) study would identify the anticipated length of a ramp-up period and its impacts on revenues.

Q: What do 'owner costs' include?

A: The "Other Project Costs" table allows users to itemize non-design/construction costs incurred by a project sponsor in its capacity as the project owner. Row 31 allows users to enter their assumptions about Owner Costs, which may include costs for environmental review, permits, or approvals.

Q: Does the tool include user costs?

A: No, the tools do not account for direct user costs.

Tolling Worksheets

There are currently no questions regarding the Public Sector Comparator Tool's Tolling Worksheets.

Cash Flow Worksheets

There are currently no questions regarding the Public Sector Comparator Tool's PSC Disclaimer sheet.

PSC Disclaimer

There are currently no questions regarding the Public Sector Comparator Tool's PSC Disclaimer sheet.

PSC Output

Q: What is the significance of the sensitivity analysis?

A: The Sensitivity Analysis demonstrates how different values of one assumption can impact the overall present value of the PSC. To run the Sensitivity Analysis, use the drop-down menus in the light-blue cells to select the risk percentile (P10, P70, P90) and whether to display the results as percentages or dollars and then click the "Run Sensitivity" button in the top-right corner of the table. Users should be aware that the Sensitivity Analysis may require several minutes to run.

5. Shadow Bid Tool

General Questions

Q: What should users do to get the most out of this tool?

A: At a minimum, users should open the Shadow Bid Tool and refer to the Quick-Start Guide presented in the first section of the tool's user manual or in the second worksheet of the tool. To maximize their learning experience, however, users should use a hypothetical project and modify the model's Assumptions sheet to fit that project's parameters, including inputting relevant risk values from the Risk Assessment Tool. After reviewing the Shadow Bid Output sheet, users should use the Scenario Analysis to adjust their assumptions and to observe any differences in the results. The Shadow Bid Tool may help a user understand the costs to a public agency of delivering a project as a P3, but provides greatest educational benefit when used in conjunction with the PSC and Financial Assessment tools to complete the hypothetical project's value for money (VfM) analysis.

Q: When would an agency develop a Shadow Bid?

A: While P3s may deliver value to agencies by leveraging the technical expertise and capital of the private sector, agencies typically consider multiple delivery options to determine the appropriate approach. Once an agency decides to move forward with a project and is considering its delivery options, it develops a Shadow Bid as a representative P3 cost estimate for comparing against the PSC benchmark. Prior to constructing a Shadow Bid, an agency would need estimates for the project schedule, life cycle costs and revenues, project finance plan, and risk values.

Questions by Worksheet

Introduction

There are currently no questions regarding the Shadow Bid Tool's Introduction sheet.

Tool Index

There are currently no questions regarding the Shadow Bid Tool's Tool Index sheet.

Definitions

There are currently no questions regarding the Shadow Bid Tool's Definition sheet.

Assumptions

Q: What is the function of scheduling efficiency?

A: In evaluating a real-world project, agencies would assess the potential efficiencies that the private sector may generate in delivering the project. The "Efficiency Options" table is located in the Assumptions sheet of the Shadow Bid Tool and allows users to apply general levels of efficiencies to the project's construction cost, schedule, operations, and maintenance. In Row 81 (Private Sector Schedule Efficiency), users can enter the percentage by which the length of construction will be reduced and the operation period will be extended, while maintaining the overall length of the concession. This will enable a project to begin generating revenue sooner (and for longer).

Q: How do you address a toll-based concession scenario?

A: Users are able to define the Project Delivery Structure in the Assumptions sheet. By default, the pre-populated scenario is a DBFOM (with availability payment) project, so to model a real toll concession, users must check "Toll Collection" in the "Project Delivery Structure" table. Selecting "Toll Collection" will activate the "Toll & Other Revenue" table (the input cells will change from black to light-blue). Users may make assumptions about the traffic ramp-up period, which reflects the period after the facility opens when initial traffic volumes increase to a steady state, and the annual revenue leakage rate. By default, the model will follow the Simple Toll Example under a toll scenario. Users may change that assumption to a Variable Toll Example or to the user-defined Toll Scenario Template in the "Traffic Scenario" drop-down menu toward the top of the Assumptions sheet. After updating the Assumption sheet (for example, the risk values may change because of greater traffic and revenue risk), users may navigate to the relevant tolling worksheet for their selected traffic scenario to either review the pre-populated data or to enter new data (if they selected "Toll Scenario Template"). On the Output sheet, users may run the Real Toll analysis to solve for the payment required by the private sector to make a viable investment (the payment represents the amount where the after-tax cash flow equals the required level of return). Users should refer to Chapter 6 of the Shadow Bid Tool's user manual for additional guidance in running a real toll analysis.

Q: What are reasonable assumptions for Federal and state taxes?

A: Although the Federal corporate tax rate is 35%, the actual rates paid by private entities depend on a variety of factors, so the 35% rate may be considered an upper limit. State corporate tax rates vary by state. These rates would need to be combined with the Federal tax calculations to get a "blended" all-in rate. For example, assuming a Federal tax rate of 35% and a state tax rate of 9%, the blended rate is calculated as 41%, as follows:

Blended rate = 0.35*(100 - 9) + 9 = 40.85

The example scenario in P3-VALUE excludes consideration of taxes because it is unclear at this time what rate might be appropriate, and further research is needed. For example, a concession may be set up as a limited partnership, and corporate taxes do not apply in this case. Also, depreciation deductions may reduce tax liabilities of partners in a concession set up as a limited partnership, especially in the early years of a concession, conferring a tax "benefit" to the partners.

Q: How would my assumptions for real v. shadow toll projects differ?

A: Unlike for a real toll scenario, users do not have to check "Toll Collection" as part of the Project Delivery Structure for a shadow toll scenario.

Q: Is it possible to utilize commercial bank debt for financing?

A: Users may enter their project financing assumptions into Row 64 of the Assumption sheet. The model only accommodates one debt tranche, however, and the % of Project Debt must equal 100 percent, so to model commercial bank debt financing, users must assume that the hypothetical project receives 100 percent of its financing from that commercial bank. However, the simple financial structure of the model is unable to accommodate the complexities typical of commercial financing. Commercial banks that lend to P3s tend to structure loans to encourage refinancing after 7 to 10 years, which tends to coincide with the initial period of construction and ramp-up. Commercial banks also tend to demand fixed, lower rates of return than equity investors.

Q: Does the value or condition of the asset at handback matter?

A: No. The tools do not account for the condition of the asset at handback.

Tolling Worksheets

There are currently no questions regarding the Shadow Bid Tool's Tolling Worksheets.

Cash Flow Worksheets

There are currently no questions regarding the Shadow Bid Tool's Cash Flow Worksheets.

Output Disclaimer

There are currently no questions regarding the Shadow Bid Tool's Output Disclaimer.

Shadow Bid Output

There are currently no questions regarding the Shadow Bid Tool's Output sheet.

Financial Statement

There are currently no questions regarding the Shadow Bid Tool's Financial Statement.

6. Financial Assessment Tool

General Questions

Q: What should users do to get the most out of this tool?

A: At a minimum, users should open the Financial Assessment Tool and refer to the Quick-Start Guide presented in the first section of the tool's user manual and in the second worksheet of the tool. To maximize their learning experience, however, users should use the VfM Analysis section of the tool to import the PSC and Shadow Bid results and to compare the two delivery options side-by-side. The Model VfM_PSC Output Sheet, NPC Results, and Charts present the comparison in both tabular and graphic formats. Users should also use the Viability Evaluation section to assess the cash flow viability of the base project.

Questions by Section

VfM Analysis

Section Index

There are currently no questions regarding the VfM Analysis Section Index.

Source Data

There are currently no questions regarding the VfM Analysis Source Data.

Cash Flow Summaries

There are currently no questions regarding the VfM Analysis Cash Flow Summaries.

Cash Flow Comparison

There are currently no questions regarding the VfM Analysis Cash Flow Comparison.

Model VfM_PSC Output Sheet

Q: How do you compare the cost of financing?

A: This sheet presents an itemized, side-by-side comparison of the PSC and Shadow Bid. Item #8 (row 25) shows the difference in Total P70 Finance Costs and includes notes on what components factor into those costs. Users should refer to Chapter 4 of the Financial Assessment Tool's user manual for a line-by-line explanation of the cost comparison.

NPC Results

There are currently no questions regarding the VfM Analysis NPC Results.

Charts

There are currently no questions regarding the VfM Analysis Charts.

Viability Evaluation

Section Index

There are currently no questions regarding the Viability Evaluation Section Index.

Definitions

There are currently no questions regarding the Viability Evaluation Definitions.

Assumptions

There are currently no questions regarding the Viability Evaluation Assumptions.

Tolling Worksheets

There are currently no questions regarding the Viability Evaluation Tolling Worksheets.

Cash Flow Worksheets

There are currently no questions regarding the Viability Evaluation Cash Flow Worksheets.

Viability Disclaimer

There are currently no questions regarding the Viability Evaluation Disclaimer.

Viability Output

There are currently no questions regarding the Viability Evaluation Outputs.