(a) Government
The term "government" in this guideline is used to generically refer to the public sector, how ever it is constituted or represented. The government may be a state owned enterprise, an administrative entity, a division or department of the government, a minister acting on behalf of the government, a municipality or a local government.
This guideline also tends to assume that there is a single entity that acts for "the government" and the various and sometimes competing interests of various departments and entities within the government have been subsumed into this one entity. The reality, of course, is that different agencies may have overlapping responsibilities and conflicting agendas. The demarcation issues and conflicts arising in "government" may discourage the private sector from dealing with the "government" altogether. Government organisations need to make structural, institutional and cultural changes to enable it to present a "united voice". This is not only to conduct PPP projects more effectively and efficiently, but to better represent the interest of the public sector (and consequently the tax payers and the consumers of the infrastructure services) in negotiations for PPP projects.
The government needs to play a key role in PPP projects to ensure that they serve the public interest. The government usually identifies the project (although unsolicited submissions by the private sector sometimes occur). The government decides on the project and its scope, requires that the design, performance and maintenance of the project be tailored to the objectives of the country and selects the private sponsors by means of an appropriate bidding and evaluation process.13 In addition, a successful infrastructure project requires government direction and support, in the form of legislative, regulatory, administrative and (in some cases) financial support.14
Depending on the type of project and the PPP process of the particular government, the role of the government in defining the outcome will be different. For instance, the government may specify the required outputs in terms of objects, and ask the private sector to submit its proposal that includes designs of how to achieve the objectives. On the other hand, if the government has a clear and specific idea of the infrastructure project it requires the private sector to undertake, it may provide very specific request for proposals.
The government may or may not be involved in the running of the project company. Governments sometimes own shares in the project company and may be able to exercise some control, for example it may be able to nominate directors to the board of the project company. At the other end of the scale, the government's sole interest in the project may be that it assumes the interest in the infrastructure at the end of the concession (in the case of a BOT).
Alternatively, the government may be the main off-taker of a product or user of the service to be provided. This is more commonly the case in the electricity industry. The fact that the government is an "off-taker" will significantly affect the bankability of a project.
(b) Government Consultant
A government may have limited expertise in certain aspects of a PPP transaction. The government may obtain the expertise from in-house experts or from engaging experts from outside the government. In addition, the government may need to retain outside consultants for advisory services in areas where they have limited expertise.15 Consultants are usually retained to advise in the following broad areas:
• Technical. Usually technical expertise is needed to define the project, put together requests for proposals and to assess the bids. In addition, technical consultants are needed to determine whether the design of the facility is suitable, whether the construction of the facility is completed, whether the specifications and the minimum standards in relation to the construction, operation and transfer of the facility have been met.
• Financial. Financial advisers have knowledge about potential sources of funding, financing structures and instruments, foreign exchange, capital markets, feasibility studies and matters that lenders of the project will need to look at as part of their security package.
• Legal. Lawyers and legal consultants are needed to shape the legal structure of the project, draft, review and negotiate the necessary documentation for the project.
In addition to these, depending on the PPP project, other advisers with expertise in pension, human resources, environmental and public relations issues may also be consulted at a various stages of a PPP project.
The selection of appropriate and reputable government consultants can be critical to the success of the project. Governments may have a panel consisting of a number of potential consultants from which the government will need to select the one consultant for the particular project. Issues to consider when choosing the consultant are the qualifications and reputation, pricing, adequacy for the project and experience in the country and region.
In this respect, the World Bank's PPIAF unit has published a large and detailed report called A guide for hiring and managing advisors for private participation in infrastructure dated July 2001, available on the World Bank's website.
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13 See UNIDO, Guidelines for Infrastructure Development through Build-Operate-Transfer (BOT) Projects, 1996, 3-4.
14 Ibid 9.
15 Ibid 210.