PPP involves a significant shift in mind set, processes and practices in Government development, management and procurement of infrastructure. This shift requires a strong effort from Government policymakers and staff to drive PPP policy implementation and coordinate Government efforts. The coordination function helps to streamline Government PPP activities, and ensure consistency of Government support for PPP.
A separate entity or steering committee may be created to ensure coordination amongst the different Government agencies (usually a high-level group, possibly cabinet level) with a technical committee supporting it (in particular at a project level). Coordinating the different Government ministries and agencies that will provide critical inputs into any successful PPP program or project can be a particular challenge.
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| Box 3.1: PPP Units |
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| Many jurisdictions use a centralized institution to provide capacity (often known as a "Public-Private Partnership (PPP) Unit"), generally located within or attached to a key ministry that provides resources for project development or other incentives to use PPP. Typically PPP units have a number of functions, including: • improving the policy/legal/regulatory context for PPP • ensuring that the PPP programme is integrated with overall planning, fiscal risk management and regulatory systems • ensuring that projects protect government environmental and social interests and comply with relevant requirements • promoting PPP opportunities at national and regional levels, amongst potential investors and the financial markets and developing those projects that maximize value for money, competition and sustainability. The PPP unit can provide a single point of contact for investors and government agencies alike, coordinating PPP activities across sectors so that the PPP program is as uniform and consistent for investors as possible. A PPP unit usually works best when connected with a key ministry or department (such as the ministry of finance or planning). PPP units with executive powers tend to work better than those who provide solely advisory services as they have more influence over contracting agencies. |
In most countries with successful PPP programs, the program and initial projects were strongly and personally backed by the president or prime minister. For example, in both Colombia and the Philippines, the president chairs the inter-ministerial committee responsible for PPP projects. In the Netherlands, Australia and the United Kingdom, decisions on major PPP projects, as well as the overall PPP program, are made by the cabinet, which is chaired by the prime minister. In India, the Cabinet Committee on Infrastructure (CCI) decides on infrastructure sector projects and monitors their performance. This 12-member committee is headed by the Indian prime minister.
In Kenya, a PPP Steering Committee has been created at permanent secretary level with representatives from key central ministries and line ministries as well as the attorney general.15 The steering committee is a high level body that reviews project issues periodically and solves critical problems as they arise, e.g. where a Government agency is not providing inputs in a timely manner, where a constraint will require additional support from a Government agency, or where an agency's activities are constraining the project.
The most common approach is to create a single PPP unit to promote PPP, assess potential projects and help manage Government liabilities. For example, South Africa created a PPP unit in the Ministry of Finance, as did the United Kingdom, with the Treasury Taskforce, which became Partnerships UK and recently split into Infrastructure UK and Local Partnerships.16
However, there is an inherent conflict of interest where the same entity is responsible for promoting PPP and monitoring/regulating the risks borne by the Government. The promotions team is incentivized to bring projects to market, which may conflict with the need to reject projects that do not represent value for money for the Government.
The importance of legal, environmental and social concerns, including issues as diverse as labour unions and foreign investment criteria (often established by treaty or compacts like the equator principles), should not be underestimated. These issues form a key part of the public consultation, awareness and relations efforts that will be critical to the success of any PPP program. The PPP agency can help sensitize Government entities to these requirements, ensure consultations are carried out, and help manage back-lash from different constituencies.
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| Box 3.2: South Korea's PPP Unit |
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| The Republic of Korea introduced the Promotion of Private Capital into Social Overhead Capital Investment Act (PPP Act) in August 1994. The Ministry of Strategy and Finance is responsible for developing and implementing PPP policies, and chairs the high-level PPP Review Committee that must give final approval to PPP projects. The Public and Private Infrastructure Investment Management Center (PIMAC) at the Korea Development Institute (KDI) serves as a secretariat for the PPP Review Committee. PIMAC has four major functions: i) policy research and strategy; ii) technical support to review proposed PPPs using feasibility studies and value-for-money tests; iii) promote PPP to foreign investors; and iv) education programs on PPP for line ministries/local governments and private partners. Approximately 80 people staff PIMAC, of whom 42 work in the PPP Division. PIMAC is fully funded by the Ministry of Strategy and Finance, with additional resources from fees levied upon line ministries/ local governments for services provided. Source: Dachs, International Benchmark Comparator Report February 2013. |
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| Box 3.3: South Africa's PPP Unit |
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| A Strategic Framework for PPPs was endorsed by the South African Cabinet in December 1999, and in April 2000, Treasury Regulations for PPPs were first issued in terms of the Public Finance Management Act (Act 1 of 1999). By mid-2000, with technical assistance funding from USAID, GTZ and DFID, the PPP unit was established as a unit within the Budget Office in the National Treasury The PPP unit also administers a project development facility (PDF) as a so-called "trading entity"-a government financing facility that funds project development as well as recovers funds from successfully closed PPP projects. The PDF cannot appoint the transaction advisors itself, these will either be appointed by the contracting agency or by an intermediary such as the Development Bank of Southern Africa (DBSA) on behalf of the contracting agency. Source: Dachs, International Benchmark Comparator Report February 2013. |
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| Box 3.4: Lessons from London Underground-The Importance of the Regulator |
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| "We consider that the gathering and publication of information by the PPP Arbiter will generally tend to benefit all interested parties: London Underground as client, the Infracos as suppliers and the public as users. The Government should also find such information useful for assessing the benefits and costs of similar proposals in the future. There is some evidence to indicate that an earlier review could have mitigated the impact of Metronet's collapse, if not averted it entirely. However, it is important that any reporting process is seen as neutral and is designed to provide the information that both the Infracos and London Underground require to address performance issues and to prepare for Periodic Review. It would have been wiser to make the annual review an automatic process rather than one which had to be initiated by a party to the contract." Source: House of Commons, Transport Committee, "The London Underground and the Public-Private Partnership Agreements," Second Report of Session 2007-08, HC 45 (January 2008). |
In addition, PPP desks or nodes are often created in different sector ministries, SOEs and local Governments to capture skills and funding at the project implementation level, with close links to the central PPP institutions to ensure cross-fertilization, development of best practice and greater economies of scale for advisers, capacity building programs and other knowledge functions.
Many countries with strong PPP programs make mistakes in connection with their early PPP projects and use the lessons from these experiences to improve their subsequent efforts. South Korea revisits its PPP policy annually to adjust for lessons learned. In Colombia, Conpes has issued more than 100 written policy decisions building on and improving the PPP legal framework as it gains experience implementing PPP projects across multiple infrastructure sectors and with evolving approaches to financing. The Philippine PPP framework is supplemented by a series of detailed and clearly written rules, regulations, procedures, forms and checklists that must be utilized by the implementing agencies and local Government units during the project selection and development process.
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