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Transcript of World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 1 Public-Private Partnerships (PPPs) in...
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 1
Public-Private Partnerships (PPPs)
in eGovernment: Definition, Rationale,
and Regulatory Frameworks
Ned WhiteMonday, March 28, 2011
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 2
Session Overview1. Definition: “Just what ARE PPPs in
eGovt. and ICT?”2. Rationale for PPPs & the Role of
eGovt PPPs within Public Services Sector Reform
3. Key Elements of eGovt PPP Policy, Legal, & Institutional Frameworks
4. Looking Ahead: Key Challenges for eGovt. PPP Frameworks Going Forward & Case Examples
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 3
1.1- What ARE PPPs?Definition: Public-Private Partnerships (PPPs) are contracts between the public sector and private sector, which requires new investments by the private partner (money, or technology, or expertise/time, or reputation, etc.), which transfers some key risks to the private sector (design/technology, construction/installation, availability, demand, etc.), in which payments are made in exchange for performance, for the purpose of delivering a service traditionally provided by the public sector.
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 4
1.2-Range of PPP Structuring Options:
PPP Contract Instrument
Average Contract
Term
Provides the Service or
the Management
Provides the Working Capital
Receives the Net
Income or Covers Net
Loss
Provides Long-Term
Finance
Legally owns the
Assets
Provides Sectoral
Planning & Regulates Services
Corporatization & Private Market Finance in perpetuity Public Pub./Priv. Public Pub./Priv. Public Public
Service Contract 2-3 years Private Public Public Public Public PublicManagement Contract 2-5 years Private Public Public Public Public PublicLease/Affermage 7-15 years Private Private Private Public Public PublicBOT/PFI 20 - 30+ years Private Private Private Private Public PublicBOO 20 - 30+ years Private Private Private Private Private PublicConcession 20 - 30+ years Private Private Private Private Public PublicDivestiture & Asset Sales in perpetuity Private Private Private Private Private Public
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 5
1.3-Legal vs. Practical Definitions of PPP
A growing number of recent, new “PPP Laws” give legal definitions of PPPs that only apply to projects for which the private partner provides the long-term financing (ie new BOT/BOO & Concessions).While non-capital investment contracts (leases and management contracts) still apply the same practical PPP principles (transfering demand risks, etc. & pursuing better value for the public’s money), they are not legally “PPPs.” Their implementation, therefore, would not have to follow the same process of preparation, review, and approval as “official PPPs” do.
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 6
1.4-Govt of Kenya’s PPP Policy Statement of 2009 defines PPP as:
“A contractual arrangement between a public body and private party in which the private party and Government enter into a long term agreement, up to 30 years, to build a new infrastructure facility or to rehabilitate an existing one for the purpose of undertaking a public service on behalf of Government… The private party is required under the terms of the project agreement to take responsibility to mobilize finance – equity as well as debt – in order to complete the facility according to agreed specifications and schedule.”
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 7
1.5 – Jordan Education Initiative (JEI): A “PPP” or Not?
2003 World Economic Forum-led team of 30 int’l & local ICT corporations (including Microsoft, Intel, Cisco Systems, et al) donated $11 million the Jordan Education Initiative (JEI).Scope: install high-speed internet access, provide electronic curricula & teacher training, and support services to 102 public “Discovery Schools” (50,000 students + 2,300 teachers). The GoJ bound itself to providing specific support and contributions to the project, (especially active support and involvement of the King and Queen of Jordan)The private firms were willing to make this donation and ongoing support services primarily because they had:
Basically an enforceable agreement with the GoJ, Clear Govt. contributions & highest level support (no interference), Project had clear, measurable outputs (Program Management
Office) Context of $380 million Education Reform for the Knowledge
Economy (ErfKE) Program($120 million from WB)
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 8
1.6-JEI: Types & Sources of Contributions
Source: McKinsey & Company’s “Building Effective PPPs: Lessons Learned from the JEI”
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 9
1.7-JEI: Perform. Indicators (Draft)
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 10
2.1-Rationale for PPPs in eGovt & ICT:
Delivering Better Value for the Public’s Money (VfM): Improved Price & Risk/Quality in the provision of public services. However, VfM models be subject to manipulation & not relevant when a public ICT solution does not exist. Technology Transfer: Most eGovt technologies & capabilities are not available by the public sector alone. “Knowledge-Based Economy” Policies.Additionality: More public services & consumer welfare benefits available with the PPP project than without.Contracted Outputs & Improved Transparency: Resistance to new removing discretion from some public stakeholdersAvoided Public Financing/Borrowing: A priority for many Governments (especially in current public financial climate), but risks entering into long-term PPPs that are unaffordable or require imprudent assumption of risks by Govt. over long-term
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 11
2.2-PPPs are just one component of an Overall Public Services Reform Strategy
# Unbundled Functions Institution
1 Sector Reform Policies (allowing PPPs) Plans
Government Line Ministries
2 Sector Performance Monitoring & Tariff-Setting
Independent Sector/Utility Regulatory Bodies
3 Ownership & contracting of long-term infrastructure assets
State-Owned Asset Holding Cos. (AHC’s)/ Procuring Entities/ “Ceding Authorities”
4 Operation of infrastructure Networks & service delivery
Private investors, operators, & lenders (via competition)
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 12
2.3-eGovt PPPs in Isolation Rarely Work
Without these complementary, long-term sector reforms: eGovt PPP contracts alone often have limited success,
are not sustainable (cancelled) or affordable. Not possible to independently and transparently
compare public sector performance vs. PPP performance (which offers better value?)
Private partner will not be willing to bear many “commercial risks” (ie they will require more public financial supports & risk-sharing) if there is not a clear, fair market or “level playing-field”
PPPs can add new electronic service delivery mechanisms, but they often simply appear more expensive and may still rely on inefficient public monopolies to distribute public services to end-users.
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 13
2.4 “Value for the Public’s Money” is a combination of PRICE AND RISK
AveragePPPTariff
Level of Sector RISK Bourne by Government
PPP Option#1
Public “Utility” Curves
The Private Sector’s Price-RiskOffer Curve
PPP Option#3
PPP Option #2
P’P’’
P’’’
Thus, “The Lowest-priced bid is often not the best bid” for long-term (5-10 yr.) service delivery contracts.
Low High
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 14
2.5-Optimal vs. Minimal Public Risk-Sharing
Public Support High Pub. RiskLow Pub. Risk
Public’sValueFor
Money
Private Sector’sPrice-Risk Offer Curve
Low VfM
High VfM
PPPPrice(Cost/OutputUnit)
Minimal Public Support,But Low VfM
Moderate Public Support,=> Optimal VfM
LowPPP Price
HighPPP Price
VfM
Public VfM Utility Curves
Operating/Avail. Risk
Technology/Eq. Install. Risk
Market/Demand Risk
LandAcq.
PoliticalRisk
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 15
Illustration: VFM Analysis of a PPP Project
Base CasePSC
Risk-Adjusted
PSC
PublicAffordability
Limit
WinningPPPBid
$0
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
$140,000,000
$160,000,000
$180,000,000
$200,000,000
1 2 3 4
Value for
MoneyBenefits
2.6-Illustration of PSC & VfM Analysis
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 16
3.1-Key Elements of PPP Frameworks:
Clear PPP Policy StatementMulti-Sector PPP/Concession Law or RegulationsPPP Units: Central PPP Unit + Sector PPP NodesPPP Project Development/Preparation Facilities (PDF)PPP Manuals & Guidelines (Standardised Procedures)PPP Procurement Regulations (Price & Non-Price
Criteria)Treatment of Unsolicited Proposals: Especially for ICT
& eGovt ProjectsSpecific/limited Public Credit Enhancements AllowedPPP & Infrastructure Investment Fund EstablishedSystematic PPP Training & Capacity-buildingPPP Contract Performance Monitoring Capacity
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 17
3.2-Emerging Market PPP Frameworks
PPP Framework Elements Philipp
ines
Mal
aysi
a
ChileM
exic
o
Hungary
South A
frica
India
Your Count
ry?
PPP Policy Statement Yes Yes Yes Yes Yes Yes YesMulti-Sector PPP/Concession Law & Regs. Yes Yes Yes Yes Yes Yes Yes
Multi-Sector PPP Technical Unit Yes Yes Yes No Yes Yes YesLine Min./Sector PPP "Nodes" Yes Yes Yes Yes Yes Yes Yes
PPP Project Dev. Facility (PDF) Yes No No No No Yes YesPPP Procurement Regulations Yes Yes Yes Yes Yes Yes Yes
Unsolicited Proposal Procedures Yes Yes Yes No No Yes YesPublished PPP Manuals/Guidelines Yes No Yes Yes Yes Yes Yes
Public Sector Credit Enhancements Allowed (VGF, Contingent Liabilities, etc.) Yes Yes Yes Yes Yes Yes Yes
Public Sector Risk Management Framework: Unit & Regulations Yes Yes Yes Yes Yes Yes Not Yet
Systematic PPP Training & Capacity Building Yes Yes Yes Yes Yes Yes Not Yet
Infrastructure Regulatory Bodies & PPP Contract Monitoring Units (CMUs) Yes Yes Yes Yes Yes Yes Yes
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 18
3.3-Example:
South Africa’s
PPP Manual & Project
Cycle:
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 19
3.4-Key Characteristics of Effective PPP Toolkits &
Manuals: Clearly Distinguish between “Required PPP Procedures” vs.
“Optional Suggestions/Recommended Good Practices” Function as a Reference Volume, Using Instructional-Based
Writing Rather than Traditional Analytical-style Writing Provide Ready-to-Use PPP Templates or Models Provide Practical (Not just Theoretical), eGovt.-specific
Guidance (ie “Common Practical Pitfalls to Avoid”) Support PPP Capacity Building: able to be read, discussed,
and followed as part of any PPP training program. Institutionally-Relevant in Explaining specifically who
Performs each specific PPP Review, Procedure & Approval. Contribute to a Proven Track-Record of Completed PPP
transactions, (not just a “nicely-looking PPP framework on paper”)
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 20
3.5-Selected Countries with PPP Guideline Manuals, Standardised Procedures & Toolkits:
United KingdomVictoria, AustraliaSouth AfricaIndiaIrelandPhilippinesMauritiusEgyptSaudi Arabia
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 21
3.6-Drivers of Success for PPP FrameworksStandardisation: PPP Models & Documentation that can be easily replicated (PPP Feasibility Analyses & Business Cases, Risk Allocations, Tender Documents, PPP Contracts, etc.)Dealflow: Quantity: Sufficient scale to justify a PPP Strategy Quality: Determine which candidates are appropriate
as PPPs; Projects must be clear & “bankable”
Leverage: Create more opportunities to attract new finance using credit enhancementsCapacity Building: PPP won’t work unless the public sector understands its Governance and oversight responsibilities from beginning-to-end.
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 22
4.1-Key Issues Facing eGovt & ICT PPPs TodayApprovals Process: Many new PPP Frameworks are becoming “over-bureaucratized.” Too many, lengthy reviews & approvals make PPP less attractive to private developers & public agencies.
MOF & RMU
List of Public Sector
Projects
List of Public Sector
Projects
Sub Sector List of PPP Projects
fromInitial Screening
with MVA
Sub Sector List of PPP Projects
fromInitial Screening
with MVA
Ministry proposes Sector
PPP Projects
Ministry proposes Sector
PPP Projects
TenderingTendering NegotiationNegotiationContract
Management
Contract Managemen
t
Sector List of PPP Projects
fromSector-wide
Screening with MVA
Sector List of PPP Projects
fromSector-wide
Screening with MVA
Conduct Feasibility
Study*
Conduct Feasibility
Study*
Budget Review (subject to MOF
approval)
Budget Review (subject to MOF
approval)
GS is availabl
e
Need more
project preparatio
n
GS is needed
STAGE 1 STAGE 2 STAGE 3 STAGE 4 STAGE 5
Contracting Authority
Line Ministry & P3 Node
PPPS
Non
PPP
NOTES:MOF: Ministry of FinanceOBC: Outline Business CaseRMU: Risk Management UnitPPPS: Public Private Partnership SecretariatPPPSC: PPP Steering Committee
MCA: multi-criteria analysisGS: government support major route; optional route
Priority sub-sector PPP
Priority sector PPP
Non
PPP
National List of PPP Projects
fromNation-wide
Screening with MCA
National List of PPP Projects
fromNation-wide
Screening with MCA
GS is not available now
SU
BS
EC
TO
R- W
IDE
SE
CT
OR
- W
IDE
NA
TIO
N- W
IDE
GS is not needed
* For a project that likely needs GS then the Pre-FS shall be updated to a full FS.
GS is considered not suitable for
this projectVersion 4 –Sept 2010
PPP RC
OBC is developed and approval is
sought by PPPSC
Ministry P3 Node
Preliminary
consultation on
Projects under
processing
Preliminary
consultation on
Projects under
processing
See Figure 3 for more detailSee Figure 3 for more detail
Report to the Ministry
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 23
Public Capacity: Limited capacity of Governments to identify new eGovt solutions for public services & develop clear eGovt output performance standards. Especially limited PPP performance monitoring & contract management capacity.Market & Demand Risk Transfer: Growing Govt. preference to transfer to full commercial & demand risks (& profit incentives) to private eGovt service providers. Taxpayer/Rate-Payer Concerns about Fairness & Transparency. Should Private Providers of Traffic Speeding
Cameras receive fixed “availability payments” (including their profits) or a fixed-fee per transaction/violation?
4.2-Key Issues Facing eGovt & ICT PPPs Today
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 24
4.3-Case Example: NAFITH, Aqaba, JordanNAFITH: National Freight Information & Transport. HubPort of Aqaba, Aqaba Special Econ. Zone Authority (ASEZA): Growing problem of truck congestion around portScope: 2006 electronic Truck Control System/logistics on a PPP contract. Controls truck traffic between 32 key sites within Port’s Special Economic Zone176 registered trucking companies in Jordan. 13,700 total truck population. 3,000 trucks serviced daily by NAFITH10-year Concession ContractEach truck pays a 2 dinar ($3.00) fee for a permit to enter/exit port.Each trucking company & dispatcher had to have a computer to participate in system.15% of revenues remitted to ASEZA, 85% retained by NAFITH
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 25
Aqaba Special Economic Zone
4.4-Case Example: NAFITH, Aqaba, Jordan
Aqaba Truck Marshalling Yard Entry & Exit Points
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 26
4.5-NAFITH PPP, Aqaba, Jordan – Results:Clear Benefits in: Much less congestion Lower fuel consumption & pollution Improved Efficiency:
Cost of freight from Aqaba has fallen 20% Container cargo has increased 25% while number of trucks has
remained the same Increase in “double moves” by trucks (carrying full loads both in to
and out of Aqaba) from 6% to 25% Accurate and transport data & planning Significant improvements in truck safety (steep descent into
Aqaba had killed 2 drivers per month, rushing to get to the Port) Eliminated informal payments to gain access to port sites
PPP Issues: ASEZA has expressed interest in collecting more revenues Growth of a “secondary market” for permits, by market makers
who resell desired permits to truckers and dispatchers at a premium NAFITH
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 27
4.6-Key Issues Facing eGovt & ICT PPPs Today
Growing Govt. Preference for Simply Avoiding Public Borrowing: More Govts. Are pursuing PPPs across sectors simply to avoid public borrowing instead of delivering long term value for money.Limited Relevance of PSC Models and VfM Analyses in eGovt & ICT Sectors: More difficult to estimate Public Sector Costs (PSC) & conduct VfM Analysis for eGovt & ICT PPPs. Public sector options rarely exist.
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 28
Technology & Performance Risk: Many IT and eGovt projects don’t work. In 2003 UK’s Treasury discontinued Private Finance Initiative (PFI) projects in Information Technology following several “failures”: £230m 10-year deal to automate the Passport
Office £150m automation of National Insurance Criminal Records Office State benefit payments
Only 22% of the UK’s IT PFI projects delivered 80-100% of defined programme benefits. For non-IT projects the figure was 73%.
4.7-Key Issues Facing eGovt & ICT PPPs Today
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 29
PPP Project Pipeline: Biggest current constraint to PPPs in eGovt & ICT is not inadequate legal frameworks, but the limited number of candidate PPP projects being identified and prepared. Govts. should focus on building the PPP project pipeline.Public Sector Risk-Sharing in PPPs: During past 10 years private ICT project developers (and lenders) are requiring more and clearer forms of public sector support, risk-sharing, and contingent liabilities than before. Govt PPP Frameworks must be ready to manage these requests.
4.8-Key Issues Facing eGovt & ICT PPPs Today
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 30
eGovt PPP Example: Partnerships Victoria
(Australia) Mobile Data Network PPP
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 31
Mobile Data Network PPP
Description: To provide a mobile data network (MDN) to Victoria’s Police, Ambulance & Emergency Services vehicles in Melbourne area. Includes access in vehicles and outside to relevant databases, maps, emergency information & locator functions at a guaranteed operational reliability of 99.9%: Allow important information about the emergency and
the people involved to be sent directly to the vehicles involved;
Use Satellite technology to track vehicle location, allowing the closest vehicles to be sent to an emergency;
Give mobile access to databases such as vehicle registrations and drivers licenses; and
Allow police to submit paperwork via computer while still in the field.
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 32
PPP Payments & Performance Standards
If the Service Provider has not remedied a failure under within the time set out in the remediation plan or within any further period allowed by the Contract Manager, the State may reduce the Service Payments which would otherwise be payable to the Service Provider in accordance with the following:
ECV CAD End to End Performance Standards98th percentile Message delivery time
19 seconds or less
More than 19 seconds, less than or equal to 40 seconds
More than 40 seconds, less than or equal to 60 seconds
More than 60 seconds
Percentage abatement of daily Service Payment per day
0% 5% 7.5% 10%
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 33
Mobile Data Network PPP
PPP Contractor: Motorola Australia Pty Ltd.Govt. Client: Victoria Police & Ambulance ServicesContract Term: 5 year contract, beginning June 2003, 2 year contract extension optionCost of PPP Contract: $138 million in total PPP Payments over term of contract, equals $85 million NPV using State’s discount rate of 8.65%Estimated Value for Money Savings of PPP = 11% (A$10.5 million = U.S. $7.8 million)Lessons Learned: As one of the first eGovt PPPs in Australia, the procurement took a long time (3 yrs.) due to need to revise & re-clarify the contracts output standards. Especially difficult to estimate Public Sector Costs (PSC) when it was difficult for the public sector to provide the new technology required on its own
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 34
QUESTIONS?
Edward (“Ned”) [email protected]