MLIT's Priority Review Regulation: 10 Billion Yen Threshold, 8 Methods, 3 Review Stages, Four Listed Project Categories
A structural breakdown of MLIT's Priority Review Regulation (effective April 1, 2017). Covers project thresholds (10 billion yen for projects including construction / manufacturing / refurbishment, 1 billion yen annual for operation only), the eight PPP/PFI methods covered, the three review stages (method selection, simplified review, detailed review), result publication rules, the four listed project categories, and propagation to local governments via the Cabinet Office Guidelines.
TL;DR
- The Priority Review Regulation defines the procedure by which MLIT reviews the suitability of PPP/PFI methods in priority over conventional methods for public facility development projects
- Thresholds: 10 billion yen for projects including construction / manufacturing / refurbishment; 1 billion yen single-year for operation-only projects
- Review proceeds in three stages (method selection, simplified review, detailed review) with mandatory internet publication of results
What Is the Priority Review Regulation
MLIT's Priority Review Regulation defines the procedure by which the Ministry of Land, Infrastructure, Transport and Tourism reviews, in priority over conventional self-implementation methods, whether the introduction of diverse PPP/PFI methods is appropriate for public facility development projects that MLIT itself implements. It took effect on April 1, 2017.
The regulation's stated objectives are organized into five points.
- Creation of new business opportunities
- Stimulation of private investment
- Efficient and effective development of social capital
- Provision of low-cost and high-quality services to the public
- Healthy development of the national and regional economies
This regulation is not unique to MLIT. It is a representative ministry regulation responding to the Cabinet Office's "Guidelines for Preferential Consideration of Various PPP/PFI Method Introduction" (December 2015). Similar regulations have propagated to other ministries and local governments.
The Eight PPP/PFI Methods Covered
The regulation covers three groupings of PPP/PFI methods, totaling eight types.
| Grouping | Methods |
|---|---|
| Private operator handles operation etc. of public facilities | Public facility operating right (concession) / Comprehensive private consignment / O (Operate) |
| Private operator handles design, construction or manufacturing, and operation etc. of public facilities | BTO / BOT / BOO / DBO / RO |
| Private operator handles design and construction or manufacturing of public facilities | BT / Private-build leaseback |
In addition to PFI project methods under the PFI Act (BTO / BOT / BOO / RO), the regulation also includes public facility operating right (concession) method, comprehensive private consignment, and DBO (Design-Build-Operate).
Project Thresholds and Listed Categories
Two Project Thresholds
| Project Type | Threshold |
|---|---|
| Public facility development projects including construction, manufacturing, or refurbishment | Total project cost of 10 billion yen or more |
| Public facility development projects that involve only operation etc. | Single-year project cost of 1 billion yen or more |
Construction projects below 10 billion yen, or operation-only projects below 1 billion yen per year, fall outside the regulation's scope. These are reviewed separately under local government regulations or individual judgment.
Exclusions
The following projects are excluded from the regulation's scope.
- Projects for which the introduction of PPP/PFI methods is presupposed (projects already determined under the Market Testing Act)
- Projects whose implementation by private operators is legally restricted
- Projects already under review on the premise of PPP/PFI method introduction
- Disaster recovery and other projects requiring urgent implementation
The Four Listed Project Categories and Review Start Timing
| Project Category | Review Start Timing |
|---|---|
| Government office construction projects | Before new selection evaluation |
| Government facility operation etc. projects | Before new selection evaluation, or two years before the end of existing contracts |
| National park revenue facility installation and management projects | At the planning review stage for new installation or refurbishment of revenue facilities |
| National-managed airport operation etc. projects | Excluded (concession method already under review) |
The category of national park revenue facility installation and management projects is the origin of Park-PFI. This regulation functions as the upper-level rule when considering Park-PFI.
The Three Review Stages
Priority review proceeds in three stages.
1. Selection of Adopted Methods
Based on the project's period, characteristics, and scale, the most appropriate PPP/PFI method (the "adopted method") is selected. When selecting a single method is difficult, multiple methods can be selected. The design considers quality assurance.
2. Simplified Review
The stage where the adopted method and the conventional method are compared to evaluate the suitability of PPP/PFI method introduction. Two evaluation approaches are provided.
Approach A: Comparison by Total Cost (using the VFM Simplified Calculation Model)
The VFM Simplified Calculation Model is used to compare the total cost (present value) of the following six items between the conventional method and the adopted method.
- Cost of public facility development (excluding operation)
- Cost of public facility operation
- Appropriate profit and dividend for the private operator
- Cost required for surveys
- Cost required for financing
- User fee revenue
When multiple methods are selected, the total cost is calculated for each, and the lowest is compared against the total cost of the conventional method.
Approach B: Other Evaluation Methods
When MLIT recognizes that total cost comparison is difficult due to limited precedent for the adopted method, the following methods are available.
- Evaluation reflecting opinion gathering from private operators
- Evaluation reflecting investigation of similar cases
The requirement is objective evaluation of whether the adopted method contributes to public burden reduction.
3. Cases Where Simplified Review Can Be Skipped
In the following cases, the simplified review is skipped and the project proceeds directly to detailed review in stage 5.
- BTO method for projects where facility development work weighs heavily, or where operation content is standardized
- The adopted method when a PPP/PFI proposal has come from a private operator and the proposal includes an objective evaluation (such as total cost comparison) showing the adopted method's introduction is appropriate
4. Detailed Review
For projects (other than projects under simplified review) for which the simplified review evaluated that the adopted method introduction is not suitable, external specialist consultants are engaged. Required service levels and risk allocation are examined, then detailed cost comparison is conducted.
Publication Rules for Evaluation Results
The regulation requires that priority review evaluation results be published on the internet at an appropriate time, such as after the conclusion of the bidding procedure.
Publication of Simplified Review Results
Results from Total Cost Comparison
When the evaluation determines that introduction of a PPP/PFI method is not suitable, the following two items are published.
- The fact that PPP/PFI methods will not be introduced
- Content of the attached form (PPP/PFI Method Simplified Quantitative Evaluation Form, listing development cost etc. / operation cost etc. / user fee revenue / financing cost / survey cost etc. / tax / after-tax profit/loss / total / total (present value) / fiscal expenditure reduction rate / other)
Results from Other Evaluation Methods
- The fact that PPP/PFI methods will not be introduced
- The content of the objective evaluation results
Publication of Detailed Review Results
- The fact that PPP/PFI methods will not be introduced
- Content of the attached form
Publication is designed to ensure transparency in decisions to forgo PPP/PFI methods and to secure verifiability for subsequent operators and the public.
Structure of the Attached Form: PPP/PFI Method Simplified Quantitative Evaluation Form
The "PPP/PFI Method Simplified Quantitative Evaluation Form" attached at result publication is a comparison table with the conventional method and the adopted method placed in parallel columns.
| Item | Conventional Method | Adopted Method |
|---|---|---|
| Candidate PPP/PFI method | — | Candidate |
| Cost of development etc. (excluding operation) | Calculation basis | Calculation basis |
| Cost of operation etc. | Calculation basis | Calculation basis |
| User fee revenue | Calculation basis | Calculation basis |
| Financing cost | Calculation basis | Calculation basis |
| Survey cost etc. | Calculation basis | Calculation basis |
| Tax | Calculation basis | Calculation basis |
| After-tax profit and loss | Calculation basis | Calculation basis |
| Total | Aggregate | Aggregate |
| Total (present value) | Aggregate | Aggregate |
| Fiscal expenditure reduction rate | — | Calculation |
| Other | — | — |
Calculation basis is mandatory. The VFM Simplified Calculation Model's output becomes the numerical basis for this form.
Propagation to Local Governments
While this regulation is internal to MLIT, the Cabinet Office Guidelines (December 2015) also urge local governments to develop similar priority review regulations.
Local governments with populations of 200,000 or more were asked to develop a regulation or equivalent judgment criteria. In practice, many local governments have developed local government regulations referring to this MLIT regulation.
In practice, municipal staff confirm their own local government's priority review regulation while referring to this MLIT regulation as the upper-level reference.
Practical Use
For Municipal Staff
Use it as a judgment framework when organizing PPP/PFI introduction candidate facilities within the comprehensive management plan for public facilities or individual facility plans.
- Roughly estimate the total project cost of candidate facilities (assess against the 10 billion yen threshold for construction / refurbishment and 1 billion yen for operation)
- Confirm whether the project corresponds to any of the four listed categories
- Select methods from the eight candidate PPP/PFI methods that match the project characteristics
- Conduct simplified review with the VFM Simplified Calculation Model
- Based on the result, decide on detailed review (external consultants) or non-adoption of PPP/PFI
For Private Operators
When looking at a local government's public facility development plan, identify which projects are expected to undergo priority review under this regulation. By timing a proposal at a stage that allows skipping the simplified review (at the simplified review stage), positions of advantage in subsequent tender processes can be created.
Summary
MLIT's Priority Review Regulation (effective April 1, 2017) defines the procedure for reviewing the introduction of PPP/PFI methods in priority over conventional methods for public facility development projects. Project thresholds are 10 billion yen total cost for projects including construction, manufacturing, or refurbishment, and 1 billion yen single-year cost for operation-only projects. The eight PPP/PFI methods covered span three groupings.
Review proceeds in three stages (method selection, simplified review, detailed review). Simplified review is in principle a total cost comparison using the VFM Simplified Calculation Model; when precedent is limited, it is replaced by opinion gathering from private operators and investigation of similar cases. Result publication on the internet is mandatory.
Review start timing is set for each of the four listed project categories (government office construction, government facility operation, national park revenue facility, national-managed airport). Local governments, responding to the Cabinet Office Guidelines, have developed their own priority review regulations referring to this regulation as the upper-level reference.
- Primary Source Library: MLIT PPP/PFI Guidance Series (May 2026 publication)
- Related guidance: The Priority Review Regulation is document 07 in the same archive
- Related articles: VFM Simplified Calculation Model Guide / How to Conduct Market Sounding