There is no substitute for experience. Most countries with successful PPP programs adopt a "learn-by-doing" approach, using the experience with early projects to improve the PPP framework. Equally, most of these countries experienced problems with their early projects, but they learned from these and revised their rules, policies and guidelines to avoid repeating those same mistakes. For example, in South Africa, the initial project scope specified for the first maximum security prison procured on a PPP basis proved to be fiscally unaffordable. As a result, the project required two years of design and scope changes after the preferred bidder stage was reached to correct this. Learning from this experience, the PPP guidelines now require the strict testing of fiscal affordability at the earliest stage of project preparation.
Governments are well advised to select viable, strategic projects to test their PPP framework. In implementing such projects, they will identify legal and institutional gaps and other opportunities to improve the framework. These early projects also send a clear message to the market that the Government is serious about PPP, and is adopting a reasonable model for risk allocation.
There is a tendency to select early PPP projects that are large, complex and politically popular ("transformational" projects). This is generally a mistake. PPP is a difficult structure to adopt, and large complex projects can add to that difficulty. Early projects create precedent that will apply to later projects, and create expectations amongst investors. These early projects should therefore be:
• Of sufficient size to attract experienced PPP investors, but not so large that they are overly complex, in fact smaller projects may be better
• well developed, i.e. feasibility study done or agreed, with sufficient funding and staffing for preparation, and
• politically strategic, but not so high profile that political interference is likely.