Public Private

Partnership
Kumar Bijoy
Financial consultant
kumarcfa@yahoo.com
09810452266

Background
What takes the government 50 years to achieve
can be done by the private sector in a tenth of the
time
- Milton Friedman.
Non-Government is Effective (A Sarkari- Asarkari)
- Binoba Bhave

Terminology

PSP: Private Sector

Participation

PFI: Private Finance

initiatives

PPP: Public Private

Partnership

PPPP: People Public

Private Partnership

Agenda

PFI: a precursor for PPP in 1992 by

conservative govt. in UK
PFI was for reduction of Public Debt
Quest for Value for money got central focus
(Tony Blair-1997)
PPP was developed in response for the quest
i.e. Value for Money.

Definition
IMF/OECD:
Public-private partnerships refer to the private
sector financing, designing, building, maintaining
and operating infrastructure assets traditionally
provided by the public sector.

Government and a private corporation combine to

provide a public service through the creation and
use of new assets for a set time period

PPPexample

Highway example usual arrangements

Government borrows money or Tax Public, pays to

get a Highway built, Public uses the facility for free
but pay in form of Increased Tax

PPP

Private firm borrows money, builds Highway, Public

pay fee to use the highway, Firm hands over the
property to Govt. after say 20 years

PPP global examples

Canada

The 407 ETR toll road in Toronto, Ontario

The Royal Ottawa Hospital in Ottawa, Ontario
The William Osler Hospital in Brampton, Ontario
The Viva bus rapid transit network in
York Region, Ontario
Confederation Bridge construction in
Prince Edward Island

India

NISG, Hyderabad..

PPP global examples

United Kingdom

Private Finance Initiative

The maintenance of London Underground (since
2003)
National Air Traffic Services (since 2001)
Some National Health Service (NHS) hospitals
and other agencies
Firrhill High School
Williamwood High School

PPP global examples

United States

California Fuel Cell Partnership (CaFCP)

California State Route 125, San Diego, California
Central Park, New York City
Chicago Skyway Bridge, Chicago, Illinois
Indiana East-West Toll Road, (Interstate
80/Interstate 90), Northern Indiana
Southern Indiana Toll Road, (Interstate 69,
proposed), Martinsville to Evansville, Indiana
Las Vegas Monorail, Nevada

PPPwhy?

Aging infrastructure

Shrinking Govt. budget

Constituent demands

PPP = AN answer, and Not the answer

PPPchallenges ahead to bring

P & P together
Failure to Communicate

We Dont Speak the Same Language

Business Speak

Customer Satisfaction
Return on Investment
Risk/Reward Evaluation

Public Speak

Responsibility
Accountability
Risk Avoidance

But Are These Really

Different?

BUSINESS
Customer Satisfaction
Return on Investment
Risk/Reward Evaluation

GOVERNMENT
Responsibility
Accountability
Risk Avoidance

Private Sector Strengths

Private Sector Strengths

Management Efficiency
Newer Technologies
Workplace Efficiencies
Cash Flow
Management
Personnel
Development
Shared Resources
(Money?)

Public Sector Strengths

Legal Authority
Protection of Procurement Policies
Broad prospective/balance the competing
goals to meet public needs
Personnel dedicated but constrained
Capital resources

Successful Partnerships

The Secret is to
Balance the Strengths
of Both Sectors

The Experience Of One

Sector Helps Another

Advantages of PPPs

Maximizes the use of each sectors strength

Reduced development risk
Reduced public capital investment
Mobilizes excess or underutilized assets
Improved efficiencies/quicker completion
Better environmental compliance
Improved service to the community
Improved cost effectiveness
Shared resources
Shared/allocated risks
Mutual rewards

Risk Factors for PPP

Lack of political leadership, vision and

strategy
Not implemented in a context of wider
change/ administrative reform
Poor costing or lack of resources creeping
commitments
Inappropriate definition of project goals and
scope

Risk Factors for PPP

Automation without process reengineering

Hurried implementation
Management of change-resistance from
vested interest
Use of untested fancy technology
Inadequate attention to monitoring and
evaluation

Six Keys to Successful PPPs

Statutory and Political Environment

Organized Structure
Detailed Business Plan
Guaranteed Revenue Stream
Stakeholder Support
Pick Your Partner Carefully

Managing for Success Six

Keys

The Environment

Statutory authority and regulations

Political leadership must be in place
Leading Political Figure
Top Administrative Officials
The Will to Change the System
A Strong Policy Statement

Managing for Success Six

Keys

Organizational Structure

Dedicated group (tied to the purpose of the partnership)

Dedicated and Trained personnel to monitor implementation
Best Value vs. Lowest Price
Difficult to Administer but
Need for Good Governance
To assure an open and fair procurement process
Consolidate staff = easier to monitor
Independent authority (domestic/internal or
international)

Managing for Success Six

Keys

Detailed Business Plan

Performance goal oriented - Allow for innovative plans

Best Value vs. Lowest Price
Plan/Contract should include:
Specific milestones and goals
Reporting of metrics and frequency
Risk Allocation
Shift to the private sector can raise costs
Identify best prices to retain, which to shift
Dispute Resolution Methodology
Workforce Development?
Develop in-country resources/small businesses

Managing for Success

Six Keys

Guaranteed Revenue Stream

Funds to Cover the Long-Term Financing

Tolls/Fees (real or shadow)
Intelligent transportation systems
TIF or other form of a Tax District
Long-Term Maintenance Contracts
Availability Payments
Underutilized Assets
Concession Model (limited application)
Creative Approaches

Managing for Success

Six Keys

Stakeholder Support

Public Sector Employees

Private Sector
Labor Unions
End Users
Competing Interests
Requires:
Open and frank discussion between sectors
Knowing the FACTS (no myths)
Translating each others language

Managing for Success

Six Keys

Pick Your Partner Carefully

This is a long-term relationship

Verify experience (technical capability)
Verify financial capability
Best Value vs. Lowest Price
Remember each sectors motivation
Genuine need (market value to the project)
Political / statutory environment
Reasonable return on investment and manageable
risks
Timely and effective execution vs. development costs

Managing for Success

The Most Critical is

Component One:
Strong LEADERSHIP makes
all the other factors come together

PPP models:

Public develops Pvt. Operates & maintains

Public & Pvt. jointly develops and maintains.
Pvt. Develops and Public finances the gap
Pvt. Develops and Public only facilitates
Public and Pvt. Work independently but in
coherence.
Pvt. Develops, Public facilitates and People
monitor the development and pay charges for
use (PPPP)

Extend of participation of the

private sector

PPPs becoming a global business across

developed & emerging markets

selected group of OECD and

developing countries

Top Countries: PPPs in Highways

Country
United States
United Kingdom
China
Spain
Mexico
Italy
Germany
Republic of Korea
Japan
Greece
Brazil
France
Portugal
Australia
Malaysia
Canada
Russia
Chile
Argentina
Ireland
Denmark
South Africa
Czech Republic
Indonesia
Thailand

Number of Projects
74
37
53
47
78
3
34
18
1
11
44
8
15
12
18
22
2
24
20
14
1
6
2
6
3

Project Cost
(US$ billion)
42.7
30.5
21.6
21.1
20.4
18.5
17.1
16.2
14.4
11.8
11.4
10.2
9.8
8.6
7.8
7.7
6.6
6.3
3.7
3.0
2.7
2.3
2.2
2.1
2.1

Number of Projects Project Cost (US$ billion)

Cumulative sum of # projects & estimated costs since 1985

Regional distribution

350
300

Number of Projects
Project Cost ($bn)

250
200
150
100
50
0
SubMiddle
Developed Latin East Asia Europe South
World America and
and
Asia Saharan East and
and the Pacific Central
Africa
North
Africa
Caribbean
Asia

Thank you