Completing these three steps-determining public authority, defining project needs and objectives, and determining the best "owner" for each project component-should yield the optimal partnership structure for any given infrastructure project (see table 2 for an integrated guide to the steps). To see how this might work in practice, appendix C lays out how this approach is applied to the case of a hypothetical wastewater treatment plant.
Table 2. Integrated map for infrastructure modernization
Step | Considerations | Key questions to ask | Impact on private involvement |
Determine public authority | Laws and statutes | What laws and policies exist regarding private financing and delivery of infrastructure? | A poor legislative and statutory environment will constrain efforts to increase private sector participation in infrastructure development. |
Political | Are there political constraints that would make it difficult to use certain partnership structures? | Many jurisdictions face limitations from the public on the type and level of responsibility that can be allocated to a private partner. | |
Define project needs and objectives | Speed | How quickly does the asset need to be delivered? | Traditionally procured projects typically begin sooner and have shorter procurement cycles (provided financing for capital costs is available), while PPPs have a superior record in timely completion. |
Efficiency | How can the asset be delivered and maintained as efficiently as possible? | Properly structured partnerships focus the contractor's attention on delivering the lowest overall life-cycle cost. | |
Innovation | Is there an opportunity to incorporate private sector innovation? | The greater the scope for flexibility in the nature of the technical solution/service or the scope of the project, the more opportunity for private sector innovation. | |
Degree of certainty | Will changes in technology, policy or demand affect how we would meet the need tomorrow? | The greater the uncertainty about the project's scope and scale, the more a hybrid PPP or traditional procurement is likely the best option. | |
Determine the best "owner" for each project component | Financial | Who is going to pay for the project? | Fiscal conditions can either widen or constrain the PPP options available. |
Capabilities | What capabilities are there in-house to deliver the project and/ or manage the project? What capabilities exist in the market? | If a PPP model is chosen, the public sector must create the institutional capacity to manage a complex set of contractual arrangements. | |
Risk | How much risk should be transferred? Who is best able to bear what risks? | Optimal risk allocation is critical to successful partnerships. |