Explanation:

 Audit of Total Project Cost -
• Total Project Cost (TPC) is a critical input and TPC determines the cost of construction, operation and management of the project, debt-equity mix, influences the user charge, viability of the project, financing pattern, financial rate of return (FRR) and economic rate of return (ERR).
• TPC could also be adversely impacted by concessionaire’s risk perceptions in terms of attitude of the government authorities and degree of absolutism in the terms and conditions incorporated in the bid documents as to those aspects which can be precisely predicted and measured upfront.
• It is therefore very important for the public auditors to closely examine the TPC to see that it includes only essential items, its composition conforms to accepted accounting standards, and is not ‘padded up’. Usually, the technical consultants for the project would have arrived at the TPC, which would be included in the DPR
• The partners to the project are expected to have carried out their due diligence to ensure the accuracy and correctness of the TPC, but the private participants may have some inclination to over-engineer the project, partly due to their apprehensions of safety and security requirements of the project.
• Moreover, since the ROI from the project and the user charge / tariff / toll will depend on the quantum of the TPC, a higher cost of construction might benefit the private partner at the cost of the user community.