Compact Development Guidance
As of March 2013
Chapter 20: Guidelines for Countries Proposing Vertical Structures
MCC will use the feasibility study of vertical structures as the basis to examine the following and make a determination on what supplemental studies, if any, are required to develop the project sufficiently so that appraisal could commence:
- Information on applicable building codes and requirements and a description of specific hazards that may affect the area such as seismic, fire, security, flood, upstream dams, and wind. Adequacy of applicable codes should be evaluated and alternative requirements should be proposed where necessary.
- Information on specific standards or regulations related to asbestos containing materials (ACM), lead based paint (LBP) and other hazardous substances related to building materials and systems.
- Identification of technical data, including preliminary design reports and drawings.
- Preliminary description of rationale, clear definition of the proposed use/functions of the facility including nature and measure of benefits, and beneficiaries (disaggregated by income, gender, and ethnicity).
- Demonstration supported by appropriate data and meaningful public consultation with potential beneficiaries, which may include income- and gender-based focus groups, that the proposed project is likely to deliver the stated benefits.
- Identification of the need and principal driver(s) for a new structure, structures, add-on expansion and/or renovation. Examples of such drivers: capacity restraint, failure to meet code, failure to meet security standards, existing facility cannot accommodate the change in function, serviced entity has geographically relocated, establishment of new agency, building at end of serviceable life, etc.
- Identification of the range of alternatives – renovating current facility, integrating into existing facility, acquiring space in another facility, including any environmental considerations related to each alternative.
- Demonstration supported by appropriate data, that commercial or private financing is not available for the project, and the reasons for its unavailability.
- Demonstration supported by appropriate data, that privatization – including concession contracts with EPC arrangements – is not possible, and the reasons why.
- Identification of areas which require obtaining more detailed, current or reliable information. If a new construction or demolition/construction is proposed, obtaining approvals from all relevant parties for permits may be a significant and time consuming issue; identify the party responsible for providing approval, and a timeline at commencement of the due diligence phase.
- Analysis of stakeholder(s) representative of potentially impacted parties (by income, gender, age, ethnicity, etc.) including social and women’s government ministries and NGOs and potential beneficiaries to establish that the project has been identified as a priority.
- Collection and integration of satellite imagery and topographical maps at the appropriate scale (typically 1:25,000 for urban planning) identifying key elements of existing and proposed infrastructure, rights-of-way, service areas, entire site, and adjacent properties layout. In addition, it may be appropriate for the due diligence process to identify other geo-spatial data – including but not limited to census data, water resources, and geological data – and combine them into a single GIS database.
Once MCC has made the determination to commence appraisal on a project, the infrastructure group will conduct the following assessments and identify key constraints.
In cooperation with the MCC economist responsible for the assessment, a market assessment will be undertaken, including an analysis of supply, demand, pricing and competition for products/services provided by the project. This assessment should provide baseline information to calculate a provisional financial IRR of the project.
- If applicable to the structure’s function, determine the function’s potential and growth prospects through thorough market assessment and business forecasts for such goods and services (e.g., airport concessions, real estate mortgaging, etc.). The analysis should be based on comprehensive compilation of all relevant statistical databases.
- Compare the growth prospects and business forecasts against the country’s demographic and economic trends, a 10-year market history in the country and the country’s relative competitive position to determine conformance.
Technical Assessment: Engineering
- Review all aspects of preliminary technical designs and proposed standards and confirm appropriateness of design criteria, demand requirements and environmental and social factors.
- Identify the functional capacity of the existing facilities, if such exists. Evaluate the condition (and code compliance) of systems including Heating-Ventilation and Air Conditioning (HVAC), potable and waste-water service, fire protection, back-up generation, electrical and telecommunications systems. Evaluate the building’s condition to include the roof, weatherproofing, insect infestation and associated damage, obvious settling mis-alignment, exterior walls, etc.
- Evaluate a requirement for renovation including space needs by function, adequate sizing of HVAC systems, potable and waste water service, safety, electrical and telecommunications requirements.
- Itemize and identify requirements for special equipment.
- Ensure supporting infrastructure such as power, water supply, wastewater treatment, solid waste disposal, transport etc., are adequately available in a sustained and environmentally and socially/ culturally acceptable manner.
- Confirm that multi-year operations and maintenance plans as well as the source of funding for such plans are in place for the proposed facility.
- Ensure that all existing facility structural studies are complete and conducted by an acceptable standard (UBC, ICBO or local) to include the joints, members, foundations, footings, etc.
- Conduct an economic analysis to compare the cost of renovation versus new construction.
- Compare the proposed design criteria to the standards to which the existing structure was designed or renovated, informed by meaningful public participation with potential beneficiaries.
- Confirm acceptability of site or site selection standards for new construction. These standards should include, but not be limited to, (a) land free of title dispute, (b) land that conforms to all applicable zoning, regulations and permitting, (c) access easements are permanently available, (d) not at risk to floods, landslides, active earthquake faults or unstable soil (liquefaction, underlying landfill, toxicity, low bearing strength), (e) permanent utility right-of-way to service water, sewage, electricity, telecommunications, gas and solid waste disposal, and (f) geographically assessable to target customers. Should location or land availability call for modified standards (e.g., large scale seismic zones or development of sheds in coastal areas), mitigation of hazards should be included in the designs.
- Ensure that building site access commensurate with its intended use and that there is adequate area for parking, loading, etc.
- Ensure that soils investigation are complete, including site exploration with test pit explorations (with a rubber-tired backhoe at various locations) and laboratory testings (e.g., compacted CBR test, sieve analysis, Atterberg limit determinations).
- Ensure that layouts meet current and projected sizing for structure’s function(s) including that all primary users have reviewed such layouts and their comments have been recorded and addressed.
- Evaluate local conditions, including local material suppliers, sources, and capabilities; and evaluate drainage alternatives.
- Ensure designs accommodate local conditions (e.g., high ambient air moisture, noise mitigation, high groundwater table, seismic issues, etc).
- Evaluate energy and resource saving measures. (e.g., white roofs, oriented for optimal exposure, motion-senor switches, etc).
- Ensure system designs are sized properly for building function, locality, and accommodates users taking into consideration gender and cultural differences of potential users. These may include but are not limited to electrical service (phases, step-down transformers, back-up supply, grounding, cogeneration), lightning protection, HVAC, potable and waste-water service points (restrooms, kitchens, pre/post treatment), safety (fire barriers, fire protection, security), systems unique to the function of the facility.
- Review and evaluate project layout, including verifying master plan dimensions and data.
- Ensure completeness and quality of the preliminary design report, including geotechnical investigation, topographical survey, foundation/structural design and analysis, drainage design analysis.
- Conduct an initial cost analysis and life-cycle cost analysis.
- Strategize bidding procedures to provide a basis for competitive bidding.
- Ensure completeness and quality of design and/or construction drawings including licensed engineer’s endorsements.
- Complete estimates of probable construction costs for the recommended alternatives.
- Identify major project risks and quantify, as much as possible, the impact of these risks on project cost, timeline and quality. Develop mitigation measures and estimate the cost of mitigation.
- Develop project cost estimates for the purposes of investment decision, including all associated costs, such as costs relating to environmental mitigation, resettlement compensation, social safeguard measures, construction supervision, project management and technical audits.
- Develop provisions to be included in project cost estimate, such as physical contingency, allowances for specific risks that were identified in Appraisal, price contingencies, and allowance for the effects of foreign exchange rate fluctuations, and determine meaningful rates of inflation – local and foreign – to apply to base costs.
Technical Assessment: Economic and Financial
The MCC economist responsible for the assessment will work to ensure that proposed vertical structure projects comply with MCC Guidelines for Economic and Beneficiary Analysis. The economic rate of return for each project should be sufficiently high to warrant investment and eligible countries should have reviewed relevant governance practices, including laws and regulations, and undertaken reforms, as possible, to enhance the anticipated economic benefits generated by the infrastructure projects. Infrastructure input to this analysis may include the following:
- Identify benefits expected to flow from the projects. Focus on increases in incomes for workers, firms, and households disaggregated by income, gender, age, and ethnicity. Identify the beneficiaries to the best extent possible. Compare projected incomes and other benefits with and without the proposed project.
- Make an assessment of how benefits resulting from increased efficiencies (e.g., improved storage, reduction in wait and queue time) are likely to accrue to the extremely poor, poor, near-poor, and not-poor.
- Summarize the design standards, design life and cost estimates (capital and maintenance) and confirm that these are consistent with the assumed benefits and duration of the benefit stream. Note that the duration of the benefit stream is typically assumed to be twenty years. Assumptions that the duration is longer or shorter than this should be clearly justified.
- Confirm that the costs and project life are consistent with the engineering design.
- Complete a financial analysis.
- Confirm that the technologies that are proposed in the project and the engineering design will allow fulfillment of operational performance, as well as financial and economic objectives.
Technical Assessment: Environment, Social and Gender
MCC environment and social assessment experts will review projects for their compliance with MCC Environmental Guidelines, Gender Policy, and resettlement guidance (www.mcc.gov), which include an expectation of compliance with host-country laws, regulations and standards, as well as requirements by which the host country is bound under international agreements. Particular attention must be paid to issues which generally arise including, but not limited to, increase in both pedestrian and vehicle traffic, waste generation and storage of hazardous materials. Assessment will also inform design by including the impact of the new structure on livelihoods, gender analysis of use, control of resources, design appropriateness, and how well gender is integrated into project design, participatory planning processes, and implementation. Also, assessment related to ACM and/or LBP, and other hazardous substances that may be present in existing buildings and/or buildings sites should be performed.
- Identify country-, region- or sector-level assessments, strategies and commitments with respect to climate change and their relevance to compact activities.
- Identify climate change impacts (from the project) and risks (to the project) and corresponding mitigation and/or adaptation opportunities, as relevant.
- Review detailed description of current arrangements for ownership, management and maintenance of the structure(s), including details of the administrative framework, funding arrangements and maintenance responsibilities.
- Review compliance with applicable security standards necessary to realized planned benefits.
- Review existing performance with respect to clarity and acceptance of arrangements and responsibilities, and acceptance of reserves for maintenance. Identify causes of inadequate performance including administrative arrangements, resources, technical capability and capacity, and funding.
- Review maintenance programs to ensure that such plans are suitable for the new or improved structure(s), including responsibilities, resources, funding. Identify shortfalls with current arrangements and providing details of a program to strengthen management and maintenance arrangements.
- Review details of alternative maintenance funding options. Include details of income derived from users (disaggregated by gender, age, income, ethnicity, etc.) and potential for increased cost recovery.
- Prepare a summary of actions needed to maintain the structure(s) to an acceptable level, including institutional strengthening, funding (responsibility and funding levels) and additional resources needed.
- Identify the proposed chain of ownership of the structure, and whether any changes in ownership will be needed upon the end of the proposed compact.
Risk Management Assessment
- Identify significant risks to the project, in particular construction cost increases, delays, material and/or labor availability, trade union issues, local acceptance and take-up of benefits by various beneficiary groups disaggregated by socio-economics, gender, age, and ethnicity, and other factors affecting economic performance and distribution of benefits including potential resettlement, HIV/AIDS, human trafficking, or child/forced labor.
- Identify other risks, such as public accessibility, etc.
- Identify and assess significant risks relating to durability, and confirm that design criteria adopted shall mitigate these risks within acceptable tolerance levels.
- Prepare a risk management plan to minimize the negative impact of the risks.
- Provide a summary of the technical and construction resources available in country and previous experience with projects of similar size, nature and type.
- Identify local and regional private sector familiarity with design and construction of similar projects, and evaluate potential market response to related procurements.
- Identify local factors that may affect the timely completion of the works, including transport to/from the location for the contractor’s equipment, fuel and other materials, seasonal weather patterns such as avoiding the wet season, or health risks including HIV/AIDS.
- Prepare an implementation program including contract awards, any approvals and permits needed, construction times, cash flow, government commitments and other hold points as appropriate.
- Recommend an appropriate procurement procedure, sequencing, and packaging.
Recommend suitable supervision and management arrangements.