The primary objective of this phase is to uncover privatization opportunities on a government-wide basis. There are three main steps in this phase.

1. Assemble and Organize Data.

2. Establish Criteria to Qualify Each Privatization Opportunity.

3. Apply Privatization Techniques to a Whole Range of Government Services and Facilities.

STEP 1: Assemble and Organize Data. The more that is known about the government services and facilities, the greater the number of privatization opportunities. Data will include such items as:

  • Current Financial Report,

  • Capital Improvement Program (CIP);

  • Existing legislation, regulations, and procurement laws, which may be constraints or opportunities for privatization. This type of data would address: public employees, contracting out, financing capital improvements, etc;

  • Facility Master Plans or Urban Development Plans;

  • Current major contracts with private operators, concessionaires, and management companies;

  • Any information on prior privatization transactions or nontraditional financing;

  • Current Costs for Providing Services; and

  • Revenue and Expenditures for Major Facilities.

The type of data relevant will be somewhat dependent on the sponsoring government's goals and objectives for the privatization program.

STEP 2: Establish Criteria to Qualify Each Privatization Opportunity. This criteria, jointly established by the sponsoring government and their advisor, will also be used later in evaluating and implementing privatization opportunities. The number and type of criteria used will reflect the government's needs and objectives. The total number of criteria typically ranges from 25 to 50.

The criteria will be used in this phase to qualify or ensure that each privatization opportunity included in the "menu of privatization opportunities" generally meets the government's specific needs. Once the privatization opportunities are identified, these criteria are used later to more thoroughly evaluate each privatization opportunity.

The evaluation criteria are generally organized into eight to ten generic categories. They would in reality be specifically tailored to reflect the government's goals for the privatization program. The criteria generally fall under categories such as:

  • Characteristic of Privatization Opportunities (project scope, cost, level of risk, complexity of deal structure, etc.);

  • Economic Return/Cost Savings (annualized and term);

  • Public/Private Finance (source, technique, and instrument);

  • Implementation (management issues and approval s);

  • Impact on Public and Private Groups (intergovernmental, unions, media, etc.);

  • Schedule Requirements;

  • Anticipated Problems.

STEP 3: Apply Privatization Techniques to a Whole Range of Government Services and Facilities. By applying one or more of the privatization techniques identified earlier to government assets, facilities, infrastructure, services, government-owned companies, facility operations, and other selected government activities, a government-wide privatization program yields 100 to 200 privatization opportunities. Consequently, there is a menu of privatization opportunities from which governments select privatization projects for further development and/or implementation. A detailed example of how several privatization options can be generated by applying a variety of techniques to a single facility is described in the appendix.

The opportunities comprise a wide range of characteristics, such as:

  • small to large project scopes;

  • low to high levels of risk;

  • immediate to lengthy implementation schedules; and

  • varying equity/debt ratio requirements.