Various countries from both developed and developing nations are providing infrastructure using public-private-partnership (PPP) arrangements. From the lessons learnt from several countries that have implemented such projects, countries joining the bandwagon to provide infrastructure through PPPs can follow a pattern that yielded results.
PURCHASING & SUPPLY: NYASHA CHIZU
Effective planning of PPP projects is paramount to the success of such projects. The planning process requires considerable time and resources to achieve the justification of the project. Hastily formulated projects are often characterised by little or non-availability of financial means and technical help and in the end, the projects fail to attract credible partners at the detriment of the success of such.
The dearth of well-prepared PPP projects is the source of major challenges faced by procuring entities in the implementation of PPPs. The preparation of PPPs follow a four-stage process that includes the identification of the project, feasibility studies, deciding on the structure of the PPP and design of the PPP contract. The majority of PPP projects fail because feasibility studies are normally undertaken only after the contract has been awarded.
This will be like putting the cart before the horse.
The identification of strategic infrastructure that can be implemented through PPP is the first stage in a solicited PPP project. The project must be identified and prioritised on the basis of an integrated infrastructure plan that is followed by rigorous economic cost-benefit analysis. This stage is critical and most failed projects undertake this process after the partner has been identified and the contract already awarded.
The feasibility study is the next step to assess whether the project can succeed as a PPP. This assessment involves the objective and rational study of the project to disentangle the strength and weaknesses of the proposed venture further assessing opportunities and threats that are present in the environment. The resources required to carry out the project and the prospects of the success of the project are also analysed. The ultimate answer to such an assessment is the establishment of the project costs that shall be compared to the value that shall be attained.
Such studies are demanded by potential investors and lending institutions.
The feasibility study assesses five areas that include the technical, economic, legal, operational and scheduling.
The outcome should then be balanced for the project to be viable. Such assessments inform the third stage in the planning of PPP projects. This then informs the structure of the PPP project including the assessment and decisions on the allocation of risks. It also informs the appetite of the market and its capacity to accept them.
Finally, the structure of the PPP project decided from the appraisal process leads to the procuring entity formulating the documentation required to launch the project. This includes the design of project specifications and documentation necessary to launch the PPP procurement process.
The best practices in the implementation of PPPs ensures that the decision on the implementation of a PPP is justified and that the procuring entity is ready to initiate the procurement process. Most systems in countries that are implementing PPP provide for the Ministry of Finance to approve the long-term financial implications of the project. The projects are then assessed and prioritised along with other public investment projects in the context of national public investment plan.
The project is justified on the adequacy of the socio-economic analysis, fiscal affordability assessment, financial viability, risk assessment, comparative assessment of PPP procurement against conventional procurement and finally, market assessment. After all these necessary processes, the procuring entity then prepares the draft PPP contract that includes the request for expression of interest and the request for proposals. In order to achieve consistency and to expedite the process, best practice is the development of standard PPP model contracts.
Planning of PPP projects is very critical since lack of planning is planning to fail.
Nyasha Chizu is a fellow of the Chartered Institute of Procurement and Supply writing in his personal capacity. Feedback: email@example.com Skype: nyasha.chizu