Public Private Partnerships

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Public Private Partnerships

• Alternative Methods for Developing Infrastructure
  and Delivering Services

K.Jagannath CMS COMPUTERS LTD.
4th Feb, 2005
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What we cover

• Definition of P3s
• New Addition - C
• Type of P3s
• Pre-requisites Uniqueness of PPCP
• Public Sector - Readiness
• Checks and Balances Parameters
• Response Private Sector
• Benefits to all the 3 Ps
• Lessons learned
• Key success factors
• Conclusion

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How do we define PPP

• P3s are legal agreements between Government and
  Private sector for the purpose of providing
  Public Infrastructure, Community facilities, and
  related Services.

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Addition of C

• Commercial Partnership Bringing R3s
• Risk Sharing
• Reward Sharing
• Responsibility Sharing
• Financial Management Cost Analysis
• Capital costs / Interests / Opex costs
• Revenue Vs Expenditure
• Sharing the Commercial benefit with Stakeholders
• Revise PPP with Public Private Commercial
  Partnership

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Types of P3s
Public
Private
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What makes P3s Unique

• Partnering with Government Agencies
• Project Cycle Investment
• Upfront investment / Capital Intensive
• Ongoing requirement to continue investing in
  the facility
• Operating costs
• Innovation Concept / Delivery
• Specialized skills
• Risk sharing on Revenues (no assurances)
• Ability to bundle
• Design, Build, Operate
• Access of Capital (on or off balance sheet) /
  leveraging

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What makes P3s unique

• Synergies
• Capitalize on operations
• Capitalize on existing infrastructure
• Complementary Services
• Enhance service richness (I.T., administrative
  services)
• Additional service provision (parking cards, Bus
  passes)
• Additional facilities (Internet , Business
  center etc.)

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Pre-Requisites to PPCP

• An identifiable Commercial Opportunity
• Reduction in the cost of Operations by the
  Private Sector Involvement
• Efficiency results savings can be shared with
  Govt.
• Reliable Revenue Stream should be available for
  the Life
• Cycle of the Project
• Govt. does not have to own or operate the
  Infrastructure
• According to the Govt. strategic plan, Private
  sector is able
• to provide the Services in the Projects
• Private sector to bring in the latest technology
  with best Management Practices
• Requirements of Capital Funding from Govt. shall
  be reduced

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Readiness of Public sector

• Community needs and pressures
• Primary and secondary motivators
• Legal parameters
• Organizational issues
• Service provider community
• Stakeholders
• Project Advocates
• Viability and deliverability of the project
• In-house skills or willingness to hire external
  advisors

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Checks Balances

• Planning Strategy Development
• Assess viability and deliverability of the
  project (Public sector comparator, business case,
  etc.)
• Validate that the outcomes meets the objectives
• Identify and allocate risks according to risk
  appetite
• Procurement Process / Engagement Model
• Establish criteria that will lead to the expected
  result
• Fair, Open Transparent process
• Contracting Ongoing Management
• Performance Management and clear Service Levels
  (SLA)
• Resolution of Issues

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Response Private Sector

• Objectives and motivations
• Evaluation of opportunity
• Go and Get
• Costs
• Compatibility with Public sector
• Understanding the approval process
• Understanding the contract management needs
• Challenges to overcome
• Tools to enhance marketability
• Competition
• Differentiators
• Answering the questions

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Private Sector Expertise

• Fully integrated value chains suppliers and
  customers
• Using the Technology to
• Reduce costs
• Improve quality
• Expand markets
• Share benefits
• Resulting in
• Customized service and products
• Competitive pricing
• Streamlined operations
• Better inventory management

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Benefits of PPP to Government

• Private Sector Expertise
• Lower Public Expending
• Private Sector more up-to-date with technology
• SLA Driven Engagement

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Benefits to 3 Ps

• Benefits to Government
• Minimizing financial outgo
• Protection against technology obsolescence
• Speedier implementation of projects
• Efficiencies in management
• Better image
• Reduced costs

• Benefits to Citizens / Business
• Easy access to services
• Single window/ One-stop shop
• 24x7 convenience
• Flexibility in the choice of access methods
• Saving of indirect cost and hardship

• Benefits to private sector partners
• Reliable streams of revenue
• Low risk
• Creation of employment in the development,
• Implementation and delivery
• Capturing business from related sectors (wider
  market initiatives)

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Public - Private (P Vs. P)

• Incentives for Private Sector
• Efficiencies
• Savings and profits
• Quality service and productivity
• Obstacles to the Public Sector
• High costs due to scale of Government
• Rigid regulations and old habits
• Lack of inter- and intra-agency information
  sharing
• Complex procedures
• Security and data protection issues
• Lack of human capacity training

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Win-Win for PPP

• Cooperation to produce a commercially viable
  solution which results in a cost-effective
  outcome for Government and the Community.
• A transparent process that will withstand public
  scrutiny.
• A competitive proposal process to share risks and
  rewards
• Requirements that permit proposals to be prepared
  at a reasonable cost
• Consistent integration with Governments
  strategic plan

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Lessons Learned

• Significant benefits to investing upfront
• Importance of a solid contracting vehicle
• Outline Performance and Management tools in RFP -
  difficult to implement once contract is awarded
• Length of the term should be sufficiently long to
  ensure viability of project - considering private
  sectors capital investment
• Understand what you are seeking and remain
  focused on that objective
• Identify optimum financing upfront - avoids
  pursuing opportunities that will not generate
  desired benefits

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Lessons Learned

• Challenges
• Build internal competence to manage the agreement
  of P3s
• Assemble information in advance ensure
  agreement promotes open sharing of data and
  documents
• Recognitions
• Partnerships are between organizations -
  individuals may change through the process plan
  accordingly
• Partners and their interests are different -
  maintain their distinctiveness

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Key Success Factors

• What you need to start with
• - Commitment, Need, Understanding
• Responding to the need
• - Appropriate goals objectives, Project
  definition, effective involvement
• Recognition that the project is different
• - Momentum, Remove barriers, Marketing
• Identification of the needs (what) and not the
  means (how)
• - Allowing the Partner to bring innovative ideas
• Strong leadership sponsorship
• - Champion, Accountability, Support, Tools
• Planning Analysis is key

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Key Success Factors

• Know the Project Profile
• - Risk allocation, Funding, Influencing factors
• Understanding the Partnership
• - Right partner Balances, 3 Rs
• Building in flexibility
• - Provide ramp ups, Revisiting, Plan for change
• Understanding the risks
• - Dual management, Guiding principles
• Communication
• - Stakeholders, Monitoring

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Forms of PPP

• Contracts
• BOO
• BOOT (Build-Own-Operate-Transfer)
• BOT
• BOOR
• Joint Ventures

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Concluding Remarks

• Champion
• User and stakeholders considerations
• Flexibility and open minded
• The right project with due diligence completed
• Private sector maturity
• Acceptable risks
• Political backing
• Open, fair and transparent procurement process
• Comprehensive legal agreement
• Define SLAs
• Not all projects are P3able
• Professional Consulting and training

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Thank You
jagannath_k_at_cms.com
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SLA for e-Government projects

• Justification for SLA
• Govt is buying services not hardware, software
  networks
• Captures the Roles Responsibilities
• Specifies quantity quality of services
• Payments part or full are linked to
  performance against SLA
• Contains rewards penalties
• Drives the partners both public private to
  better performance

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SLA Metrics of a G2B project (1/3)
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SLA Metrics of a G2B project (2/3)
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SLA Metrics of a G2B project (3/3)