Ensuring Good Quality PPP Projects

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Ensuring Good Quality PPP Projects

• Martin Darcy

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Potential Projects

• Water/Sewerage
• Power provision
• Airports / Seaports
• Highways / Bridges / Tunnels
• Hospitals
• Prisons and Court Buildings
• Schools / Colleges / Universities
• Libraries and Museums
• Government Buildings (National / Municipal)
• IT / IS / Telecoms
• Waste Management
• Car parking

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How a PPP project is created

• Three main phases
• Project preparation and development
• The bidding and negotiation phase
• Implementation and operating phase

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1. Project preparation and development

• Define project objectives, need and business case
• Create the team (including external advisers)
• Risk assessment and strategy
• Technical Dialogue
• Procurement strategy and realistic timetable
• Develop bid evaluation criteria
• Draft contract documentation
• Approvals and marketing
• Without proper preparation the project will
  probably fail (before or after award process )

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Technical Dialogue

• Current position is confirmed
• Before launching a procedure for the award of a
  contract, contracting authorities may, using a
  technical dialogue, seek or accept advice which
  may be used in the preparation of specifications,
  provided such advice does not have the effect of
  precluding competition.

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2. Procurement and negotiation

• Advertisement and calls for expressions of
  interest
• Prequalification and selection of bidders
• Issue of tender documents to selected bidders
• Return of bids
• Evaluation of bids
• Select Preferred Bidder
• Contract negotiations
• Commercial / financial close
• At least 12 months

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3. Implementation,Operationand Regulation

• Creating a working partnership
• Managing contractual obligations
• Extracting the efficiencies
• Delivering / improving the services
• Change management

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Contractual Organisation Example
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Simple Funding Principles For A PPP Project
using Private Finance
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Risk Management at the heart of the matter

• Identify
• Analyse
• Allocate
• Mitigate
• The risk should be borne by the party best able
  to manage it or to manage the financial
  consequences.

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Treatment of Risk

• Key to Lenders and Investors
• Will affect the overall value for money of the
  project

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Gateway Reviews

• Mandatory in the UK and aimed at improving the
  quality and outcomes from public investment
  programmes / projects
• To identify and prevent mistakes that may only
  materialise when its too late
• Gives confidence and assurance to decision makers
• Idea based on the concept of Peer Review in
  common and widespread use in the private sector
  for decades.
• Must be independent
• Must not be burdensome or bureaucratic

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Each Gateway.

• has a team of usually three people all
  independent of the outcome
• team will meet for a briefing followed by the
  review itself. Total time and commitment usually
  less than two weeks per stage.
• need not delay anything. They are usually run in
  parallel with other activities
• should not be costly
• produces a draft report to the senior official
  for comment followed by final report.
• report uses a traffic light system for
  evaluating specific issues
• Green no problem go
• Amber issue identified - proceed with caution
• Red major problem identified do not proceed
  without immediate remedial action

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Differing motivations between public works
contracts and PPPs

• Public Works Contracts
• Often an in-built motivation towards cost
  over-run and delay
• Concessions/PPP
• In-built motivation towards on time and on budget
  completion

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Learning Lessons

• Value For Money (VFM) Audit (ex post evaluation)
• Provide Parliament with independent info, advice
  about how
• economically
• efficiently
• effectively public bodies use their resources
• Help bodies improve VFM performance