3 Understand the needs and capacity of the market
Governments must undertake a thorough supplier assessment in order to deliver the best public service outcomes. This requires a strategic approach to assessing markets and suppliers and links to aspects of procurement and contract management, such as early engagement. Getting a clearer picture of what the market can and cannot deliver is necessary if authorities are to understand the supply side and help providers respond to the needs of citizens. More effective needs assessment can help tailor services and ensure the right provider is selected for the project.
For procurement to be successful, robust reviews must be applied before the tendering process to identify what the needs are. This requires government to analyse and thoroughly think through what aims it wants to achieve before going out to procure the services. Clarity from governments and public authorities is essential to ensure effective commissioning and avoid procurement process delays. This is one lesson the UK has learnt the hard way. The average cost of delay on a UK health PFI scheme is 1% of capital cost, amounting to £2.45m over each deal and total losses of £98m over the health PFI programme.30
To harness the full benefits of PPPs, there needs to be an outcomes-focused approach with clear objectives for all groups involved. This requires a thorough needs analysis of what services or assets are required and rigorous planning.
| CASE STUDY | KPMG in Ireland, Australia, Canada and Portugal |
| KPMG has played a key role in the development of policy for the National Roads Authority (NRA) in Ireland, including consideration of tolling strategy, public sector discount rates, payment mechanisms and process methodologies. In 1999, the PPPs process was new to Ireland and as such it became a key objective to educate the market to maximise interest and competitive pressure. KPMG's advice to the NRA on the marketing of the scheme and its structure, especially in the early days, drew primarily on experience in the UK but also countries like Australia, Canada and Portugal. The PPP roads programme has in recent times led developments in the marketplace and has attracted strong competitive interest from local and international companies far beyond original expectations. The benefit of this competitive interest has been reflected in the excellent terms of the deals signed to date. | |
In the UK, businesses and public authorities involved in PPPs have found that without the right commissioning process, a partnership is likely to run into trouble.