C&PM - Lec 08 B Public Private Partnership

Public Private Partnerships (PPP)
BACKGROUND
 Pressure to change the standard model of public procurement arose
initially from concerns about the level of public debt during 1970s and
1980s.
 Governments sought to encourage private investment in infrastructure,
initially
 The idea that private provision of infrastructure represented a way of
providing infrastructure at no cost to the public has now been generally
abandoned
 Interest in alternatives to the standard model of public procurement
persisted.
 A single private-sector organization taking responsibility for most aspects of
service provisions for a given project, could yield an improved allocation
of risk, while maintaining public accountability for essential aspects of
service provision.
 Initially, most public–private partnerships were negotiated individually, as
one-off deals, and much of this activity began in the early 1990s in the UK.
PPP
 PPP is an arrangement where private parties

participate in or provide support for the provision of
infrastructure.
 PPP describes a government service or private
business venture which is funded and operated
through a partnership of government and one or
more private sector company.
 PPP is Not the procurement of an asset but the
payment of a stream of services under specified
terms and conditions.
PPP
 Government and a private
corporation combine to provide a
public service through the creation
and use of new assets for a set time
period
Key Characteristics of PPP’s
 Participants
 Relationship
 Resourcing
 Sharing
 Continuity
 Focus on services
 Whole-of-life cycle costing
 Innovation
 Risk allocation
Why Public Private Partnerships?
 Traditional Procurement
 Inefficient & Unreliable human resources
 Poor fiscal Management
 Financial need - budget deficit, large debt
 Growing demand on public sector services
 Search for greater efficiency and creativity
 Strides to introduce competition
 Lack of domestic experience or skills
Suitable Conditions for PPP’s
 Accommodating Political framework

 Right Legal framework
 Public acceptance
 Quality practitioners
 Availability of finance
Good Practice, using PPP’s
Ensure that:
 Private sector partner has the required
capacity
 Ensure public sector interests are factored in
 Taxpayers are guaranteed value for money
 Private sector partner/s has proper
motivation
 Establish a PPP Unit for Government
Benefits of PPP’s
 Mitigates and properly allocates risks
 Provide incentives for lowering costs
 Ensures value for money
 Attract the right skills and management
expertise
 Promotes innovation
 Reduces corruption and waste
 Reduce burden on taxpayers
Pitfalls of PPP’s
 Depends on EGAP principle (Everything

Goes According to Plan)
 The process of creating a PPP is much more
demanding than a traditional procurement
process. This is normally underestimated.
What is difference between
conventional and PPP Procurement?
Conventional procurement
Public sector institution prepares detailed
specifications that describe the works required
to deliver the necessary good or services. The
works are then put out to tender in order to get
the most competitive priced bid. Once the
contract is awarded, the client (or its
representative) closely supervises the works
carried out by the successful partner in order to
ensure compliance with the specifications.
Thus the client assumes the responsibility for
designing and planning the project, fulfilling all
statutory requirements (such as environmental
permits, heritage approvals, town planning
requirements, etc.) and covering any
unexpected costs. The partner is responsible for
the construction of the works in accordance
with the tender documentation and is thus only
responsible for matters covered in the tender
documentation or those which could reasonably
have been foreseen from the tender documents.
Conventional procurement is based on input
specification where the Institution decides what
it wants in order to deliver a service and takes
full responsibility for all works related to the
delivery of the service.
conventional and PPP Pocurement?
PPP procurement
When assessing a project through a PPP process it is
crucial to define the desired functionality or result for
procurement on the basis of output specifications.
Here, the client defines the service that is required.
These output specifications are then included in a
financial model to allow for comparability between the
two forms of procurement: public and private. Should
the PPP option be preferred, the client leaves certain
design stages of the works necessary to deliver that
sevice up to the partner that will be selected through
the bidding process.
In some circumstances, due to plicy or strategic
reasons the design requirements may not be left
entirely to the discretion of the partner and in
these cases the client may specify some inputs.
The preferred approach however is to ensure
that projects are driven substantially to the
private party and thereby ensure greater value
for money for the Government.

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Public Private Partnerships (PPP)

 PPP is an arrangement where private parties

 Accommodating Political framework

 Depends on EGAP principle (Everything

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