Overview
5 phases over 2–4 years, each with clearly defined deliverables
Project development phases
5
From momentum-building to operator selection
Overall timeline (an assumption this article makes)
2–4 years
Cap on the subsidy for feasibility study costs (Leading Public-Private Partnership Support Project)
¥20M
A flat subsidy. For prefectures and government-designated cities, half the cost up to ¥10M, except for concession projects
Small Concession project development proceeds through the following 5 phases. The overall timeline is an assumption this article makes rather than a published statistic; each phase has its own deliverables.
For a general overview of the Small Concession framework, see What Is Small Concession?.
| Phase | Estimated Duration | Key Deliverables |
|---|---|---|
| 1. Momentum-Building | 3–6 months | Internal consensus and establishment of review structure |
| 2. Facility Selection | 3–6 months | Idle facility inventory; shortlisted candidate facilities |
| 3. Feasibility Study | 6–12 months | Sounding results; assessment of private sector interest |
| 4. Project Planning | 6–12 months | Feasibility study report; financial simulation |
| 5. Solicitation and Selection | 6–12 months | Solicitation documents; evaluation criteria; operator decision |
Phase 1: Momentum-Building (3–6 months)
Build internal understanding of PPP/PFI. Engage the mayor, council, and relevant departments
Key Actions
This phase deepens internal municipal understanding of PPP/PFI. Specific tasks include the following:
- Briefing the mayor: Provide a concise overview of Small Concession and its expected benefits, and obtain top-down direction to proceed
- Coordination with relevant departments: Finance (budget), property management, planning (alignment with comprehensive plan), and the department responsible for the target facility
- Council communications: Proactive information sharing to dispel misconceptions about PPP/PFI as "outsourcing to the private sector"
- Study visits to leading cases: Visits to municipalities featured in 7 Small Concession Cases, or participation in seminars hosted by the Small Concession Platform
Common Failure
A significant number of municipalities bypass this phase and proceed directly to sounding. The result is that sounding findings, when brought back to the internal organization, are met with responses such as "we were not informed" or "this will not pass the council," causing the entire process to collapse.
Available Support
Free platform membership provides regular distribution of seminar information and leading case studies.
Phase 2: Facility Selection (3–6 months)
Conduct an inventory of idle facilities and narrow down candidates based on an area vision
Key Actions
Conduct an inventory of idle facilities and narrow down candidates for Small Concession.
- Compiling an idle facility inventory: List all idle public facilities — former schools, historic townhouses, former government buildings, former clinics, former recreational facilities, etc.
- Formulating an area vision: Consider not only individual facilities but also the desired future of the surrounding area. Approach from the question "What do we want this area to become?" rather than "What should we do with this facility?"
- Collecting baseline data: Current building conditions (seismic compliance, presence of asbestos, estimated renovation costs), surrounding population trends, transportation access, and existing comparable facilities
Example Evaluation Criteria
| Evaluation Item | High Score | Low Score |
|---|---|---|
| Location | Along major road / near station | Remote mountainous area / difficult access |
| Building Condition | Seismically compliant / requires only minor renovation | Requires major renovation / asbestos present |
| Surrounding Demand | Concentration of tourists or residents | Advancing depopulation |
| Legal Constraints | Change of use straightforward | Cultural property designation / urban planning restrictions |
Phase 3: Feasibility Study (6–12 months)
Conduct market sounding to gauge private sector interest in participation
Key Actions
This is the most critical of the 5 phases. Establishing in advance whether private operators are interested in participation prevents the outcome of "zero applications" after the public tender.
- Conducting market sounding: A dialogue-based market survey in which private operators are asked about ideas for utilizing the facility and the conditions for participation
- Publishing results: Publishing a summary of sounding results ensures transparency and can attract additional operators
- Determining the direction of the project scheme: Based on sounding results, determine the preferred approach (concession, PFI, lease, designated management)
For a comparison of available approaches, see A Comprehensive Comparison of 7 Public-Private Partnership Methods.
Key Considerations in Sounding Design
- Question items: At minimum, ask about interest in the facility, desired business content, necessary enabling conditions, and barriers to entry
- Participation incentives: Offering bonus points in the public tender to sounding participants increases participation rates (in the Kaiseizan Park case, participants received 5 bonus points)
- Phased approach: Where possible, a two-stage approach — Trial (social experiment) followed by Market Sounding — is ideal
Available Support
The specialist dispatch program under the Small Concession Formation Promotion Project provides municipalities with advisory support on sounding design at no cost.
Phase 4: Project Planning (6–12 months)
Verify project viability through financial simulation and feasibility analysis
Key Actions
Building on sounding results, rigorously test the project's viability as a business enterprise.
- Feasibility study: Integrated analysis covering current facility conditions, market analysis, project scheme design, and financial simulation
- Financial simulation: Year-by-year projections of initial investment (renovation costs), operating costs, and revenue estimates, with quantitative evaluation of project viability using NPV (net present value) and IRR (internal rate of return)
- Risk allocation design: Determine how to distribute risks between public and private parties — demand variability risk, facility deterioration risk, force majeure risk, and others
Cost Estimates
What a feasibility study costs to outsource depends on the facility and the scope of the work. We have found no published figure for the range nationally, so check tender results from municipalities of a similar size. The subsidy caps are known. MLIT's Leading Public-Private Partnership Support Project subsidises the study costs a municipality incurs when examining whether to adopt a leading public-private partnership. Eligible costs are fees paid to consultants and other specialists, and the cap is a flat subsidy of up to 20 million yen within the budget (for prefectures and government-designated cities, half the cost up to 10 million yen, except for concession projects).
Phase 5: Solicitation and Selection (6–12 months)
Draft solicitation documents, design evaluation criteria, and select an operator
Key Actions
- Drafting solicitation documents: Clearly specify scope of work, cost allocation, project period, and selection criteria. The Ministry of Land, Infrastructure, Transport and Tourism's Word-format template serves as a useful reference
- Designing evaluation criteria: A scoring framework that goes beyond price alone is recommended — for example: quality of business plan (40–60%), community contribution (10–20%), operational structure (10–20%), and cost reduction (10–20%)
- Proposal review: Document screening followed by presentations. Establish a selection committee that includes external experts
- Operator decision and agreement execution: Basic agreement → detailed design → permits and approvals → construction → opening
Key Considerations in Evaluation Criteria Design
Evaluation criteria in which "the lowest-cost bidder wins" should be avoided. Price-weighted evaluation creates a high risk of service quality degradation during the operational phase. In the Kaiseizan Park case featured in 5 Park-PFI Success Cases, "cost reduction" was allocated only 70 points out of 500 (14%), with greater weight placed on the quality of the business plan and community contribution.
Common Failure Patterns
Three patterns: skipping phases, omitting sounding, and price-weighted evaluation
Failure 1: Skipping Phases
A municipality proceeds to sounding (Phase 3) without first achieving internal consensus (Phase 1). When sounding results are brought back, they are met with opposition from the council or an "I wasn't informed" response, and the entire process reverts to zero.
Failure 2: Omitting Sounding
The optimistic assumption that "operators will come if we open a public tender" leads to a public tender with zero applications. In regional municipalities with populations of tens of thousands, a public tender without prior sounding carries extremely high risk.
Failure 3: Price-Weighted Evaluation
Selecting the lowest-cost operator results in service quality degradation during operations, generating resident dissatisfaction. In some cases, operators ultimately withdraw from the project entirely.
Comparing 7 PPP/PFI Methods
A comparison matrix and 5-step decision flow for narrowing down the right method based on Phase 3 sounding results.
A Guide for Private Operators on Small Concession
Sounding preparation, proposal evaluation criteria, and consortium design from the private operator's perspective — also useful for municipal staff designing proposal evaluations.
Where to begin among the 5 phases depends on the current situation of your municipality. If internal understanding is already well developed, facility selection (Phase 2) may be the appropriate starting point; if a candidate facility has already been identified, sounding (Phase 3) may be the right entry point.
The critical principle is not to skip phases. Each phase's deliverables serve as inputs to the next; omitting any step will invariably create problems downstream.
ISVD provides free consultations to help identify where your municipality currently stands in this process and co-design a concrete action plan for the next steps.
What to do next
When considering reuse of idle facilities, examine their condition, local demand and operator interest.
| # | What to check or consider | Responsible team or contact |
|---|---|---|
| 1 | Review idle facilities and local demand. Compare building condition and location with uses needed in the area | Asset management team |
| 2 | Check seismic assessment and asbestos survey results for candidate facilities. If surveys are missing, determine their scope and how to commission them | Facilities team |
| 3 | Use MLIT's platform to gather information. Membership is free and provides case studies and notices about grants and expert dispatch calls | Official platform website |
| 4 | Ask operators about their interest and requirements. If a standalone project is difficult, consider cooperation with neighbouring municipalities | Market sounding and neighbouring municipalities |
| 5 | Compare operating rights, leasing and designated management in light of operator feedback. Choose a method suited to the facility's use, finances and public-private responsibilities | Responsible department and asset management team |
Platform membership provides access to information about expert dispatch and grant calls. Before applying, check eligibility, available support and deadlines in the call documents.
References
Small Concession Promotion Policy — Ministry of Land, Infrastructure, Transport and Tourism, Bureau of General Policy (2024)
Small Concession Formation Promotion Project: Call for Specialists — Ministry of Land, Infrastructure, Transport and Tourism (2026)
Small Concession Platform — Ministry of Land, Infrastructure, Transport and Tourism (2024)
