Introduction to Housing PPP for

Infrastructure Development

Dr Muhammad M. Gambo, Shelter Afrique

April 24, 2019

Radisson Blu Hotel, Nairobi

General Overview

▪ Sustainable Development

▪ Sustainable Development Goals (SDGs) and the New Urban Agenda (NUA)

▪ Demographics, Urbanization and Housing Deficits in Africa

▪ Affordable Housing Delivery in Kenya: Facts and Figures

Housing PPP project delivery: Principles and Structuration

▪ The concept of PPP as policy instrument for infrastructure development

▪ Basic principles and contract structure

▪ Key project participants in PPP Housing project delivery

▪ Skills sets for PPP Housing project delivery

▪ Critical Success Factors (CSF’s) for PPP Housing project delivery

Case Studies Assessment – Stakeholder Management for PPP Housing Delivery

Module Outline

• Sustainable development is the organizing principle for meeting human

development goals while at the same time sustaining the ability of natural

systems to provide the natural resources and ecosystem services upon

which the economy and society depends .

• The desired result is a state of society where living conditions and resource

use continue to meet human needs without undermining the integrity and

stability of the natural system, and

➢ Furthermore meets the needs of the present without compromising the

ability of future generations.

Introduction – Sustainable Development

• According to the report of the International Institute of Sustainable Development in2007, the global discussion in Sustainable Development was initiated with the RachelCarson report in 1962.

• The report highlighted the damaging activities of agricultural pesticides and theirimpending catastrophic impact on our environment.

• This report triggered the development of sustainable development concept;

• Sustainable development concept appeared for the first time in 1987 with the publication of the Brundtland Report,

➢ Which warned of the negative environmental consequences of economic growth and globalization;

➢ And tried to find possible solutions to the problems caused by industrialization and population growth.

Introduction – Sustainable Development (contd.)

• At the environmental level, sustainability prevents nature from

being used as an inexhaustible source of resources and ensures its

protection and rational use.

• Aspects such as environmental conservation, investment in

renewable energies, saving water, supporting sustainable mobility,

and innovation in sustainable construction, contributes to

achieving this environmental sustainability on several fronts.

Environmental Sustainability

• At the social level, sustainability can foster the development of

people, communities and cultures to help achieve reasonable

and fairly-distributed quality of life, healthcare and education

across the globe.

➢ The fight for gender equality, especially in developing

countries, is another aspect which in coming years will form the

basis of social sustainability.

Social Sustainability

• Sustainability focuses on equal economic growth, that

generates wealth for all, without harming the environment.

• Investment and an equal distribution of the economic

resources will strengthen the other pillars of sustainability for a

complete development.

Economic Sustainability

Sustainable Cities

and Communities

• Cities are hubs for ideas, commerce, culture, science, productivity, socialdevelopment and much more.

• Many challenges exist to maintaining cities in a way that continues to createjobs and prosperity without straining land and resources.

• Common urban challenges include congestion, lack of funds to provide basicservices, a shortage of adequate housing, declining infrastructure and rising airpollution within cities.

• Rapid urbanization challenges, such as the safe removal and management ofsolid waste within cities, can be overcome in ways that allow them to continueto thrive and grow, while improving resource use and reducing pollution andpoverty.

• There needs to be a future in which cities provide opportunities for all, withaccess to basic services, energy, housing, transportation and more.

SDG 11 – Sustainable Cities and Communities

The New

Urban Agenda

• In October 2016, the New Urban Agenda was unanimously adopted at the United

Nations Conference on Housing and Sustainable Urban Development (Habitat III),

serving as a new vision for our cities and municipalities for the next 20 years

• The NUA seeks to achieve the following objectives:

➢ Provide basic services for all citizens: These services include: access to housing, safe

drinking water and sanitation, nutritious food, healthcare and family planning,

education, culture and access to communication technologies.

➢ Ensure that all citizens have access to equal opportunities and face no discrimination

➢ Promote measures that support cleaner cities

➢ Strengthen resilience in cities to reduce the risk and the impact of disasters

The New Urban Agenda

• Take action to address climate change by reducing their

greenhouse gas emissions

• Fully respect the rights of refugees, migrants and internally

displaced persons regardless of their migration status

• Improve connectivity and support innovative and green initiatives

• Promote safe, accessible and green public spaces

The New Urban Agenda (contd)

Source: UN SDG (2016)

• The African region is facing an unprecedented population growth in the pastdecades, increasing on average by 2.53 percent annually between 1950 and 2015(UN 2015).

• This rapid growth is expected to continue in the next four decades. According to thelatest projections, Africa’s population will grow from 1.18 billion in 2015 to 2.44 billion in2050.

• Moreover, the population growth in Africa has resulted to an unrivalled urbanization inthe region, which rates at an average of 3.5 percent, considered the highest in theworld.

➢ In line with these projections, the urban share of Africa’s population isexpected to surpass 50 percent by 2037 (UN 2014).

Demographics, Urbanization and Housing

Deficits in Africa

• The current housing deficits in the region accounts for at least 51 million units.

• Housing deficits is defined as the difference between the number of households andthe number of permanent dwellings.

• The deficit can be estimated for a given period of time (flow), for example, anannual deficit, or it can be at a given date in which case it is referred to as housingbacklog (stock) (Bah et., al 2018).

• The shortage of housing will lead to an increase in slums, which are associated withseveral social and related economic problems: overcrowding, poor sanitation, highcrime rates and limiting labour participation in the formal sector

Housing Deficits in Africa

• Kenya is East Africa’s largest economy, and a leading financial centre in the region.

➢ 4.2 % urbanisation rate, more than the continent average of 3.5%

➢ Has an estimated two million units housing backlog

➢ 61 % of urban households living in slums

➢ 200 000 new units required annually, vs the 50 000 currently being constructed.

• In late 2016, a commitment to increasing affordable housing supply was made by the

government (the Big four Agenda), promising 500 000 affordable housing units in thecourse of five years.

Source: CAHF (2018)

Housing Delivery in Kenya: Facts and Figures

• Prior to the surge of private sector’s involvement in the provision of

infrastructure facilities in the 1990’s, governments have presumed that the

technology and economics of infrastructure provision precluded any

substantial role for the private sector.

• This reason can be related to the natural monopolies in terms of the earlier

known consideration that it is only the public sector that controls all forms

of investments in infrastructure,

• Economies of scale, externalities and other social factors that are involved

in the production and distribution of these needed infrastructure services,

➢ which these then made infrastructure services provision to be

considered more suitable for public provision than for private

The concept of PPP as policy instrument for

infrastructure development

• However, there was wide spread complaints of public sector monopoly in

infrastructure delivery notably in developing countries that tended to be

plagued by inefficiency and failure to expand services to meet rapidly

growing demand.

• Moreover, it is a known fact these nations cannot effectively cope with the

huge capital investments needed for the provision of the needed

infrastructure.

• Consequently, this has necessitated for the private sector participation

towards solving the infrastructure challenges that are facing the public

sector (Pongsiri 2002; Cheung & Kajewski 2010).

The concept of PPP as policy instrument for

infrastructure development (contd)

• The fundamental strategy underlying the adoption of PPP as an

implementation strategy for delivering affordable housing is to combine

and leverage on the strengths and capabilities of the private sector with

the regulatory and leadership mandate of the public sector to achieve

superior outcomes and value for money.

• However, the success of the PPP affordable housing strategy will majorly

depend on designing PPP implementation structures that make an;

➢ appropriate allocation of risks, responsibilities, rewards and;

➢ Importantly, create the incentives for value creation (achieving the

VfM objective)

Sources (Ministry of Housing and Urban Development 2017)

Key objectives of adopting PPP in Affordable

Housing

➢ Traditionally, PPP is considered as a source of private financing for a project.

In this arrangement, the private sector is required to provide commercial

funding seeking a fair return on investment for affordable housing.

➢ This arrangement could take the form of financing to cover the

constructions costs involved, subject to recovery, in lump sum or instalments,

of the investment with a reasonable return upon successful delivery of the

housing for purchase by the end users, where already exists an offtake

guarantee by the government.

Access to Financing

➢ The issue of availability and cost of well-located and serviced land is

central to achieving the objectives of affordable housing.

➢ Depending on status (zoning and available infrastructure) and project

location, land costs can vary anywhere between 20 to 60% of the total

project cost, as such the need for having a well serviced land becomes

imperative.

➢ In the PPP arrangement, governments can offer well-located, serviced land

at scale, and can facilitate necessary approvals.

Enhancing Access to Low Cost Land

➢ PPP projects typically adopt an output-focused contract which linkspayments to performance. This specifies project results in terms of thequality delivered, rather than how assets or services are provided.

➢ The private sector can be expected to contribute to efficiency gains in thedevelopment of land, construction, operations and maintenance foraffordable housing through the use of technology, better managementand construction practices.

➢ In addition, the private sector should be expected to bring economies ofscale from large projects and by involving a larger number of privatepartners.

Reducing costs through efficiency gains in construction

and operations through output-based contracts

Preliminary assessment consideration:

• Does the project have potential to fulfil the identified primary social

objective of affordable quality housing infrastructure?

➢ Suitability of land for housing

➢ Sufficiency of Development Potential

Project Selection Guidelines

• Does the project have sufficient existing and / or planned urban

infrastructure to support the population proposed to be inhabited?

➢ Proposed densities in accordance with the City Development Plan.

➢ Existing / Planned Road network sufficient to accommodate the

additional volumes generated by the proposed development.

➢ Existing / Planned Water and Sewerage network sufficient to

accommodate the additional volumes generated by the proposed

development.

Project Selection Guidelines (contd)

• Existing / Planned Power and Communication network sufficient to

accommodate the additional volumes generated by the proposed

development.

• Does the project have acceptance among social and political communities ?

• What is the affordability of potential buyers of housing units?

➢ Are there sufficient avenues of funds (self contribution, Bank Credit, Govt.

Grants) available to facilitate sale and off-take of these units?

• Are the planned timelines of the project reasonably achievable taking into

consideration the existing execution capabilities, technology used and market

demand?

Project Selection Guidelines (contd)

PPP Contract Structure

PPP contract

Loan agreement Project Development Contract

Services provided Revenues (mortgage)

Figure 1: PPP contractual relationship

Adapted from: UNESCAP (2014, p 11)

Private developer

End Users

Construction

Contractor

Financiers

Government

Housing PPP Contract Structure – Generic

Sources: Asian Development Bank (2008); Gunawasa (2012)

Stakeholders Roles

Government/Political

Decision Makers

- Provide enabling environment

- Establish and prioritize goals and objectives of PPP and communicate these to the

public

- Approve regulatory and legal frameworks

SPV Organization - Identify company specific needs and goals of PPP

- Responsible for the equity financing, design, construction and subsequent

operation and maintenance of the built facility (depending on the contract

structure)

- Assist in marketing and due diligence process

Consumers/Users - Communicate ability and willingness to pay for service

- Express priorities for quality and level of service

- Identify existing strengths and weaknesses in service

Investors - Provide feedback on the attractiveness of various the PPP option

- Perform thorough and due diligence resulting in competitive and realistic bidding

- Follow rules and procedures of competitive bidding process

Strategic Consultants - Provide unbiased evaluation of the PPP process

- Review existing framework and propose reforms

- Act as facilitator for cooperation among stakeholders

Roles of Different Stakeholders in the Housing

PPP process

In order to enable the housing PPP project to achieve its desired objectives in terms of efficiency and output, a set of PPP-specific skills need to be possessed by the project stakeholders.

Skills are a vehicle through which strategy, practice, tools and techniques and personality attributes are adopted to produce effective outcomes in organizations (Whetten , 2005)

Successful PPP project delivery cannot be achieved unless the relevant stakeholders are equipped with required skills and capabilities that will enable them to deliver the objectives that the particular PPP project seeks to achieve.

There is the underlying need for the stakeholders to possess the required capabilities in terms of delivering the PPP project in line with the output specifications as stipulated in the PPP contractual agreements.

Organizational Skills for Housing PPP Project

Delivery

Housing PPP Organizational Skills

Experience in negotiation and arbitration

Scoping in/out’ ability (ability to forecast the future effects of actions)

Stakeholder management skills

Value for money assessment ability

Conceptual skills

Project management skills

Communication capabilities

Coordination skills

Ability to formulate appropriate performance measures and development of

monitoring systems to determine performance

Ability to clearly define technical and output/outcome specifications and

standards for services to be procured

Technical and operational innovation skills

Legal and contracting knowledge

• Financial Perspective

➢ High prediction capability in foreign exchange risk

➢ Low construction costs

➢ Rational pricing mechanism

➢ Government guarantees and subsidies

• Learning and Growth Perspective

➢ Technology transfer

➢ Good communication skills between the relevant parties

➢ Risk awareness

➢ Continuous improvement practice

Critical Success Factors (CSF’s) for Housing PPP

Project Delivery – Balance Scorecard

• Internal Business Process Perspective

➢ Strong private consortium

➢ Appropriate risk allocation and risk sharing

➢ Project technical feasibility

➢ Effective project organization structure

➢ Innovative sourcing of technical solutions

➢ Strong internal networking

➢ Use of effective management practices

➢ Built-in flexibility for future growth and changes

➢ Transparency

Critical Success Factors (CSF’s) for Housing PPP

Project Delivery – Balance Scorecard (contd)

• Customer Perspective

➢ Low environmental impact strategy

➢ Appropriate tariff level(s) and suitable adjustment formula

➢ Feedback mechanisms

➢ Adoption of user-friendly technology

➢ Developing a supportive and understanding end user community

➢ Clear project brief and client requirements

Critical Success Factors (CSF’s) for Housing PPP

Project Delivery – Balance Scorecard (contd)

• Stakeholder management (SM) is a concept that describes anorganisation’s resolve to manage relationships with its stakeholdergroups in a proactive manner.

• The aim of managing relationships is to motivate stakeholders to actin manners that will promote the objectives of a firm (Harris 2010).

• The importance of effective management of stakeholders in projectsdelivery cannot be over stated due to the impact stakeholders canhave on projects.

• The complexity of modern projects has created a web of stakeholderswhich often make several demands on a project depending on theirinterest in the project.

Case Studies Assessment – Stakeholder Management

in PPP Housing Projects

▪ The complexity of modern housing projects has created a web of stakeholders which often make several demands on a project depending on their interest in the project.

➢ These multiple stakeholders more often than not have different interests and concerns which could be conflicting and mismanaging these interests and concerns can have devastating consequences on the projects

➢ Therefore, there is the need to develop a broad project management process that would aid in active interaction with stakeholders from the start of project to completion.

➢ Strategies should be formalised so as to help project practitioners manage stakeholders more intelligently and to avoid the unreliable informal or hit- or-miss methods.

Case Studies Assessment – Stakeholder

Management in PPP Housing Projects

• In the PPP project delivery, general public were often marginalised

because of a takeover by subsequent delegated agents.

➢ They argue that the delegated agent recognize the public body but not

the general public as a significant player, giving a lack of full (proper)

consultation both in the objectives and the operational outcomes of the

partnership.

• Consequently, the general public had developed a healthy sceptism

about the effectiveness, major shortfall in expected outcomes, VfM and

affordability of such projects (Shaoul, 2005).

Issues related to SM in Housing PPP project delivery

El-Gohary et al. (2006) identified factors, which have contributed to housing PPP project failures across the world;

➢ They argue that public opposition has been reported as the main reason for failure of housing PPP projects in several instances.

▪ They list three reasons for such failure, which are primarily connected with stakeholder management:

➢ stakeholders’ lack of awareness in the concept of PPP;

➢ stakeholders’ insufficient education about PPP; and

➢ stakeholders being denied access to detailed information contained in the consortium’s PPP proposals.

Issues related to SM in Housing PPP project delivery

What are the common social claims for Housing PPPs towards ensuring enhanced SM

in the project delivery?

➢ and how can we overcome social exclusions and poor understanding of objectives by relevant social groups?

What groups should be consulted in SM, and how?

How can the labour unions be effectively engaged in the SM process ?

Describe the SPV decision making processes involved towards delivering the SM objectives in housing PPP’s ?

In what aspects can regulations be further improved in order to facilitate the better

set up and operation of SPV’s towards further enabling them to deliver their SM objectives and consequently the overall improved delivery of housing PPP projects in Africa and other developing countries ?

Case Studies Questions

Book Publication

“Value Optimization for Innovative Project Delivery Systems in Developing

Countries” (In view).

Journal Publications

Gambo M. M & Gomez C.P. “Special Purpose Vehicle Best Value

Conceptual Framework for PPP Infrastructure Project Delivery (In View).

Gomez C.P & Gambo M.M. “Evaluation of SPV Organization Skill Sets

Taxonomy for Effective PPP Infrastructure Project Delivery’’. Journal of

Construction in Developing Countries, Vol. 21(1), pp 147–165.

Publications (selected)

Gambo M.M; Dodo M; Yusuf H; An Assessment of Stakeholders Perception on RiskFactors Associated With the Adoption of E-Procurement in the Nigerian ConstructionIndustry. Paper submitted for review for the upcoming West Africa Built EnvironmentResearch Conference (WABER), Accra, Ghana. August 2019

Dodo M; Gambo M.M; YarAdua F, Abduljabbar K.F Factors Affecting the Use ofExpanded Polystyrene (EPS) for Sustainable Housing Construction in Nigeria. Paper

submitted for review for the upcoming West Africa Built Environment ResearchConference (WABER), Accra, Ghana. August 2019

Gomez C.P & Gambo M.M. “A Constructivist Orientation to Effectively Align Value for

Money Objectives in PPP Infrastructure Projects”. Presented at the 19th InternationalSymposium on the Advancement of Construction Management and Real Estate,November 2014, Chongqing, China.

Refereed Conference Proceedings

Gambo M.M & Gomez C.P. “PPP Procurement Selection Decision Model for DeliveringEffective PPP Infrastructure Projects”. Presented at the 7th International Real EstateResearch Symposium (IRERS), April 2014, Kuala Lumpur, Malaysia.

Gambo M.M & Gomez C.P. “ ‘Rational Choice’ PPP Procurement Selection DecisionTool for Delivering Project Specific Value for Money Objectives”. Presented at the IEEEColloquium on Humanities, Science and Engineering (CHUSER), April 2014, Penang,

Malaysia.

Gomez C.P & Gambo M.M. “Structuring Best Value Delivery Process of PPPInfrastructure Projects in Malaysia”. Presented at the Royal Institute of Chartered

Surveyors (RICS) Construction and Building Research Conference (COBRA), September2013, New Delhi, India.

Refereed Conference Proceedings (contd)

• ADB (2008). Public-Private Partnership Handbook. Manila: Asian Development Bank.

• Bah E.M., Faye I. & Geh Z.F. 2018. The Housing Sector in Africa: Setting the Scene. In:

Housing Market Dynamics in Africa. Palgrave Macmillan, London

• Centre for Affordable Housing Finance (CAHF) 2018. African Housing Year Book.

• Cheung, E., & Kajewski, S. (2010). The Researcher's Perspective on Procuring Public Works.

Structural Survey, 300-313.

• El-Gohary, N. M., Osman, H. and El-Diraby, T. E. (2006). Stakeholder management for

public private partnerships. International Journal of Project Management, 24(7): 595-604.

• Gunawasa, A. (2012). Public private partnerships for major infrastructure projects in

developing countries in Ofori, G. (ed.). Contemporary Issues in Construction in

Developing Countries, UK: SPON Press.

Bibliography

• Harris, T. (2003). Private Participation in Infrastructure in Developing Countries: Trends,

Impacts, and Policy Lessons. Washington: World Bank.

• Ministry of Housing and Urban Development. 2017. Public Private Partnership Models for

Affordable Housing. Government of India.

• UN (United Nations) 2014. UN Population Division, World Urbanization Prospects, 2014

revision.

• UNESCAP (2009). A Guidebook on Public - Private Partnership in Infrastructure. Bangkok:

United Nations Economic and Social Commission for Asia and Pacific

• Pongsiri, N. (2002). Regulations and Public Private Partnerships. International Journal of

Public Sector Management, 487-495.

• Shaoul, J. (2002). New Developments: A financial appraisal of the London underground

public-private partnership. Public Money and Management, 22(2), 53-60.

• Whetten, D. (2005). Developing Managerial Skills. India: Pearson - Prentice Hall

Bibliography

Thank You