A PPP project is a type of public investment. Most governments have systems for reviewing and approving capital investment projects: to ensure all projects are effective at meeting objectives; provide value for money; and in line with fiscal priorities. Because PPPs often do not require capital investment by the government, they may not automatically be subject to these approval rules. Many governments therefore define similar review and approval requirements for PPPs. See Table 2.4 below for some examples.
Often, several decision points are created, allowing weak projects to be stopped before they consume too many resources, or develop a momentum of their own. This is illustrated in Figure 2.2: Typical PPP Process. These iterative reviews are sometimes called 'gateway' processes. Monteiro's article in IMF's book on PPPs [#214] describes a typical 'gateway' process, and how this process works in Portugal. At a minimum, approval is typically needed to enter into a PPP transaction. Because the final cost of a project is not known until procurement is concluded, final approval may be needed before the contract is signed.
Finance ministries typically have a leading role in this process, given their responsibilities for managing government resources, and (often) economic and fiscal policy. The IMF emphasizes the importance of the role of the finance ministry in its book on Public Investment and PPPs [#214, page 10]. In a few countries another entity has overall responsibility for overseeing the public investment program, and hence may play the same role for PPPs-such as the National Economic Development Agency (NEDA) in the Philippines. Many Ministries of Finance have established special PPP units through which to carry out their filtering and monitoring functions, as described further below.
Other oversight agencies can also have a role in reviewing and feeding into PPP project approvals, mirroring their roles in any major capital investment project. These can include:
• Planning agencies. Some systems separate responsibility for planning and project appraisal from fiscal oversight, with the latter housed in a dedicated planning agency. For example, in Chile the National Planning Authority must review and approve the economic analysis of proposed PPPs, as is the case for all public investment projects
• Attorney generals may be required to approve major government contracts, including PPPs, as part of their role as the government's legal advisor. For example, The PPP law of Tanzania (2010) requires that the implementing agency to submit the final draft PPP contract for approval by the Attorney General before the contract is executed [#224, pages 15-16].
• Supreme audit entities. Many Latin American countries also require approvals from audit entities that are independent of the executive branch of government, as described further in Section 2.5: Broader PPP Program Governance. For example, in Brazil, the Courts of Audit (the federal Tribunal de Contas da União, or TCU, and the sub-national Courts) is required to review each PPP project and its legal documents before it can go to market.
These additional reviews can be important checks on the quality and legality of the project appraisal and development process. However, they can also risk introducing delays at crucial points. Mechanisms for coordination can help, as described below. Capacity-building may also be needed to ensure these institutions are able to fulfill their roles as they relate to PPPs.
Ultimately approval may be by Cabinet or Parliament; typically aligned with requirements for other investment projects. Jurisdictions vary as to which entity can approve a PPP. A few countries require legislative approval of projects. More often, approval may come from Cabinet or a Cabinet-level committee, the finance ministry, or a combination. As described in Irwin's paper on controlling spending commitments in PPPs [#161, pages 113-114], approval power may depend on the size of the project, as is typically the case for other capital investments.