Objectives, Projects and Communication
| GOVERNANCE CHALLENGE Some governments undertake PPPs without an overall PPP policy, which leads to ill-defined goals and a greater likelihood of problems with the projects. |
Principle 1 - The PPP process requires coherent policies that lay down clear objectives and principles, identifies projects, sets realistic targets and the means of achieving them, with the overall aim of winning the support of the population for the PPP approach.
A PPP policy is needed to set a 'roadmap' for implementation. Without it, there will be no mechanism to enable aspirations to materialize into concrete projects.
The PPP policy should begin by fixing clear economic objectives…
Governments should have clear goals and objectives in their PPP policies - but what should they be? Some governments have tended to argue that whether a given service should remain in the hands of the state, or be turned over to other private organizations, should be a pragmatic decision. Often by 'pragmatic' it is meant economically the most efficient method and one that offers the best 'value for money'.
…With strong social objectives…
However, such efficiency criteria alone can be insufficient to convince members of the public and other stakeholders that the PPP approach is best fitted to deliver public services that are basic to human well-being, such as electricity, heating, lighting, health and education. Public services are not commercial products and as a result they tend to be heavily dependent on taxpayers money. Moreover, those who work in public services tend to do so out of a public service ethos, a commitment to the community, and while commercial criteria can be used to deliver public services they cannot substitute the public interest goals enshrined in public services.
Public interest goals include: social equity, inclusiveness, accessibility, transparency and accountability, etc. These goals are particularly important to stress in low-income countries, which want to both increase the efficiency of their services and increase accessibility of basic services to citizens, especially those who are economically and socially disadvantaged.
…That is linked to core values and principles.
Governments also need to link their policy with 'core values and principles' that will be employed when implementing their goals. Here it is important to mention those principles that need to be safeguarded in PPP schemes - the typical key concerns of the public. At every stage of the process from initiation to the ongoing management of partnerships, government officials may wish to ask key questions such as:
• What are the core values government must protect?
• How can public officials maintain the integrity of these values?
• In what ways can PPPs serve the public interest in a manner that is both equitable and sustainable?
Answering these questions will touch on a number of important issues, such as access to services, cost to citizens, fairness and equity, conflicts of interest, financial accountability, stability and quality of services provided.
| Means of achieving the goals Once the objectives and principles have been set governments will need to examine how these should be implemented. For example, each of the following should be taken into account by governments: • The forms of PPPs it will consider; • The degree of risk it is prepared to accept; • How it intends to manage risk; • The risks it is not prepared to accept; • The criteria for determining whether PPPs are a viable method of service delivery; and • Its policy on the involvement of stakeholders. |
| PPP Policies should incorporate the possibility of change… PPP policies should be open to change as mistakes will inevitably be made and refinements needed. The UK is a good example. The UK government initiated a PPP policy, learnt from the mistakes and, rather than backing down, revised its policy and moved forward. The policy process became one of continuity but with an inherent ability to innovate and take on new models of cooperation. …And reach consensus both within government… The elaboration of PPP Policies should involve all relevant government departments. It is important to start with an initial dialogue, bringing together representatives from different Ministries (transport, finance, housing, energy, health, education, etc.) to discuss the use of PPPs so that some common position can be found for implementation. Coordination and cooperation within the government is a good basis for effective policy implementation. If there are municipal or sector-specific policy frameworks, care should be taken to avoid contradictions and overlapping. | Governments should look at the sectors where PPPs have been especially successful in other countries: United Kingdom: schools, hospitals, prisons and defence facilities and roads. Canada: energy, transport, environment, water, waste, recreation, information technology, health and education. Greece: transport projects: airport and roads. Ireland: road and urban transport systems. Australia: transport and urban regeneration. Netherlands: social housing and urban regeneration. Spain: toll roads and urban regeneration. United States: projects, which combine environmental protection, commercial success and rural regeneration. |
…And outside government.
An important consideration in preparing the policy is the need for considerable consultation with most relevant stakeholders. Given that the policy may impact various existing policies and arrangements, it is essential that stakeholders affected by the new policy be given the opportunity to be involved in its preparation.
It is crucial to identify the right PPP projects …
The challenge is to select the right projects and sectors where the possibility of achieving success is realistic. In this regard:
(a) The project must be one for which there is plainly a social and economic need, while its delivery is recognized as important to most political opinions;
(b) It should involve known and tested technologies, while cultivating an environment conducive to a marketplace of potential suppliers with whom to enter into partnership;
(c) The project payment stream must be clearly affordable by the sponsoring ministry or agency (and/or supported by Ministry of Finance issued guarantees). The project should be of a sufficient size to interest international financiers and concession companies; and
(d) The payment stream must not only be affordable but the public authority responsible for payments must also be creditworthy (or suitable credit enhancing mechanisms put in place).
| A Useful Model to Get Started One model that can be used to develop the PPP market is transport / urban renewal projects. Under such a scheme a government releases underused assets such as real estate around a transport hub such as a railway station and allows the private sector to commercialize the area through the building of shops, offices and recreational areas. The private developer can unlock value from an underutilised asset and use it to raise revenues. The government gives over the asset so that the developer becomes responsible for rebuilding and then operating and maintaining it. Such innovative deals have transformed small cities in Spain. In the U.S. as well, this approach has been used to renovate ageing railway stations in inner cities, while promoting transit-oriented development. |
…Which have realistic targets…
It is important to encourage governments to prioritize and identify realistic goals for their PPP policy. Governments should start with those projects that are most likely to succeed and which are relatively simple and straightforward.12
…And establish procedures for consultation …
Misunderstanding and even conflicts can develop between governments and the private sector, and so it is important to establish an informal mechanism and opportunities for dialogue between the public and private sectors to smooth out problems. By creating a forum in which government officials and stakeholders can discuss their concerns openly, conflicts can be resolved and friction between the different parties can be diminished before more serious problems emerge.13
…While simultaneously communicating the benefits of PPPs…
A strategic communication plan should be part of policy that explains the benefits of the programme and can prevent the discussion from being defined by PPP critics, within the media and elsewhere. By taking a proactive stance, PPP advocates can shift the focus to topics like congestion relief, the economic benefits that will result, and the greater service access provided to those in need, especially socially and economically disadvantaged groups.
…And building market interest.
PPP policy frameworks must provide guidelines and confidence to the investor community. Information must be provided on the types of support which government can give to increase the incentives to investors. In addition, there should be an appropriate number of projects coming into the market at the right pace to ensure that constructors and facility management firms have the capacity and financial ability to keep pace with the potential projects.
| ACTION POINT PPPs are new and there is still no international forum where governments can cooperate in shaping effective PPP policies. In the light of the growing importance of PPPs, governments should promote the creation of international forums to exchange best practice and engage in policy discussions on this topic. |
Sources and Further Information
(i) Croatian Government: Guidelines for Purely Contractual Public-Private Partnerships, September 2006.
(ii) Deloitte and Touche, Closing the Infrastructure Gap, Global Addition, 2006.
(iii) Lithuania: Workshop on Establishing Public-Private Partnerships (PPPs) in the Transport Sector, Vilnius, 30 June 2005.
(iv) PriceWaterhouseCoopers LLP, "Developing Public-Private Partnerships in New Europe", 17 May 2004.
(v) United Kingdom, HM Treasury, The Private Finance Initiative, Key Policy, March 2006.
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12 The country can realise a host of benefits from this innovative model:
• The railway station / port / harbour / etc. can be built quickly, spurring economic development faster than would otherwise have been possible;
• Long-term maintenance risks are shifted to the private sector; and
• And the country releases greater value from the land than would be possible under government ownership - all with reduced or no expenditure of tax revenues.
13 For example, when the Netherlands initiated its first highway PPP, 'alignment meetings' were held between the public and private sector to solve cooperation problems. These meetings, which provided an informal setting for open dialogue, allowed for the key team members of both sides to de-escalate problems even before they became serious concerns.