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Are PPPs a form of funding or procurement?


The business dictionary defines private-public partnerships (PPPs) as “the involvement of private enterprise (in the form of management expertise and/or monetary contributions) in the government projects aimed at public benefit”.

This definition provides two dimensions, PPP is a form of public sector project funding by the private sector and it’s also a means of public sector service delivery.

The report on Zimbabwe National Revenue Authority’s (Zinara) Plumtree-Harare-Mutare highway rehabilitation deal that resulted in an arrangement involving SA’s Group Five raised State Procurement Board (SPB) eyebrows.

The reason was how the two institutions perceived the project; Zinara seems to consider it a finance deal whilst SPB regards it a procurement deal.

Developing countries have funding gaps for infrastructure development and the Minister of Finance indicated that Zimbabwe alone was in need of $8 to $10 billion.

This creates an opportunity to involve the private sector in delivery of public service.

PPP involves an agreement between a public institution and private entities in which the private party provides a public service or project and assumes substantial financial, technical and operational risk in the project.

In some types of PPP, the cost of the project is borne exclusively by the private sector and not by the taxpayer.

There are others that involve taxpayers’ monies such as the Zinara-Group Five deal because the major shareholder’s only source of funding is the taxpayer.

If we consider a PPP from an objective view, it is a project aimed at creating public goods in the infrastructure sector, where the government lacks capacity.

In that context, a PPP is more than a form of project financing, but a form of infrastructure procurement undertaken by government with the aid of the private sector.

Experts describe PPPs as another infrastructure procurement option. PriceWaterhouse- Coopers identifies them as a growing element of public sector procurement across Europe.

The involvement of PPP can be done by way of public tender, the manner in which Zim-highways won the Beitbridge-Harare-Chirundu road dualisation where SPB was involved in the selection process.

Zinara handpicked Group Five to partner them and gave birth to a special purpose vehicle infralink. Both methods are acceptable for as long as they are transparent.

Handpicking is ordinarily done at government level through Cabinet resolutions to protect or promote bilateral arrangements.

Project procurement of tender-selected and handpicked contractor would be different. Where SPB was involved in the selection process of the main contractor, the tender process would evaluate the main contractor’s procurement capacity in order to protect private interests.

The project will not need SPB’s direct involvement because due diligence will have been done on the main contractor’s capacity to handle procurement in the interest of the public.

Where the partner was handpicked, all the other subsequent purchases would need to follow provisions of the SPB Act in order to protect public interests. Infralink procurement needs to be regulated by the SPB Act and its subsequent regulations.

SPB was therefore right in taking a proactive approach to protect public interests by investigating infralink expression of interest that did not involved them.

PPPs if properly constituted can go a long way in facilitation of government service delivery thereby improving lives of citizens.

If the project formation is not transparent, Zimbabwe can end up with multitudes of works-in-progress that will not see the light of day such as the way in which the Harare Airport Road dualisation is progressing.

The other problem if PPPs are not transparent is that public funds can be lost where contractual parties’ obligations are not clearly defined as reported in the Harare Airport Road dualisation.

Nyasha Chizu is the branch chairman of the
Chartered Institute of Purchasing and Supply. Email: chizunyasha@yahoo.com

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