The public officials involved in PPP project teams need to have competencies to structure and evaluate a project considering its financial, legal and technical aspects. The particular areas of expertise that they need to have in the five broad areas of project planning, financial, legal, technical and project management are as follows:

Competencies of public officials

• Development of a robust business case for the project;

• Identification of the risks, development of an optimum risk-sharing arrangement between the public and private sectors and the financial implications of any such arrangement;

Main areas of financial expertise

• Structuring payment mechanisms considering responsibilities, risks and rewards for both parties - public and private;

• Analysis of the tender proposals received from the bidders. The public officials would require to scrutinise the financial proposals and their implications for the government. Verification of cost analysis and financial models are important tasks.

• Identification of and reviewing the contract clauses that have financial implications for the public sector.

• Preparation of the tender documents, PPP contract and applicable lease agreements;

• Ascertaining the best possible method of procurement or bidding following the government procurement rules/laws;

Area of legal expertise

• Legal matters involving taxation, property right, building and planning regulations, environmental law, and legal provisions in any other relevant laws (such as bankruptcy law, competition law, etc.) that have implications and need to be considered in tender documents and contract and lease agreements;

• Contract negotiation;

• Legal aspects on renegotiation the contract and other agreements due to unforeseen circumstances.

The main areas of technical expertise needed include

• Technical and outcome specifications and service standards for the services to be provided;

Areas of technical expertise

• Formulation of safety and security standards and their compliance by the private sector;

• Technical evaluation of proposals and bids;

• Assessment of the capacity of private sector bidders to deliver the project and subsequently operate and manage it;

• Quality control during construction, assessment of technical risks and their mitigation measures, and contractor compliance;

• Appropriate performance measures and monitoring systems to determine the performance of the service provider.

• Contract management

• Monitoring the quality of service and contractor compliance;

• Performance monitoring

• Partnership relationship management

Areas of project management expertise

In most developing countries the existing institutional arrangement for providing training and the mechanism for information dissemination and sharing of experiences on PPPs is not very helpful for the capacity-building of public officials. The establishment of networks of PPP implementation units and agencies, the private sector, and experts and professionals at the national and regional levels may go a long way to solve this problem. Networking is a useful modality for sharing of project information and project experiences. The network members may like to collaborate with themselves in developing a capacity-building programme to enhance the capacity of national officials. The networks can also play a role in creating awareness of policy-makers and politicians and provide information to the private sector.

How public sector’s capacity may be enhanced

MAJOR ISSUES CONCERING GOVERNMENT INVOLVEMENT IN PPPs…

• Formulation of a clear policy framework is helpful to remove ambiguities and uncertainties about government’s intention to PPP development. Such a framework may have two parts: the first part on common matters to all PPPs such as objectives, principles and general policy issues; and the second part on issues specific to each sector with clear guidelines. The roles of public and private sector should be clearly defined in the framework.

• Often, the existing market and the sector structure are not conducive to PPPs. The existence of barriers such as public or private monopoly and distortion in pricing of resources can be a serious problem for the motivation of the private sector to invest in a sector. The government may initiate steps in liberalization of the market and removal of sector inefficiencies to address these problems.

• Formulation of rules and clear guidelines on the administrative process involved in project implementation is necessary to overcome the administrative difficulties faced by the bureaucracy. Streamlined administrative procedures reduce uncertainties at different stages of project development and approval and enhance investors’ confidence in a PPP programme.

• Promotion of good governance based on certain generally accepted core principles is a major responsibility of the government. A fair and transparent rule-based administrative process by which PPP projects are developed and procured by governments for the improvement of essential public services and which takes into account views of all concerned is a key aspect of good governance.

• Lack of capacity in the public sector can be a major obstacle to PPP development in many countries. Skills of a diverse nature, from project identification and economic evaluation to financial and risk analysis to contract document preparation to procurement to contract negotiation are required in administering a PPP programme. Governments need to consider suitable capacity-building programmes for their officials involved in PPP project development and implementation.

• The government may be involved in a PPP project through assets ownership, equity participation, risk sharing and provision of various incentives including loan guarantees. These involvements require the government to bear explicit direct and contingent liabilities that have important implications for fiscal management. There is a necessity to estimate the likely direct and contingent liabilities while approvals of PPP projects are considered.

• Lack of funding from the traditional sources or interest of the private sector should not be the sole criteria in considering project implementation through the PPP modality. There are additional costs of having recourse to the private sector. A project should be considered for implementation through the PPP modality only when it proves to give a superior value for money as a PPP project compared with its value as a public sector project.

• The social and political acceptability of PPP projects is a key issue in many developing societies. In this respect, addressing the issue of pro-poor element in PPP projects could be very important. A built-in mechanism can be devised in designing PPP projects to protect the interests of the disadvantaged groups as well as increase the visibility and social acceptability of PPPs.

• Government intervention and provision of incentives for many PPP projects are justified on the ground that they correct market failure in addressing the problem of externalities. Governments may consider policies and establish formal mechanisms for providing support to such PPP projects as is done in many countries. These supports may come in various forms from equity participation to capital grants, loan guarantee and other types of guarantees, subsidies, and other measures to mitigate various risks and delays.

• Governments may consider to developing PPP training programmes for their public officials in collaboration with national training and academic institutions. International agencies can also help countries in this respect, particularly through development of training materials and sharing of international experiences. A useful modality for sharing of project information and project experiences is through formation of PPP networks of implementation units and agencies and education and training institutions.