Session 5: Making a choice: partners and options

1. Identifying partners2. Role of different partners in providing public

services3. Partnership processes 4. Selecting PPP options

PPPUE/Capacity 2015 Public-Private Partnership training

1. Identifying partners

Private – local and international, small

and largeFor profit: owners, operators, financiers

Not for profit: community development, NGOs,

unions

Individual: consumers, users, neighbors,

workers, voters

Identifying partners Public – all levels, but working up from those

with the least capacityLocal: municipal utilities, mayors' officesState/Provincial: regional utilities, economic

development and environmental agenciesNational: national/capital city utilities, finance,

economic development and environmental agenciesMultilateral: sources of finance (loans, grants,

guarantees)

Sectors Core Assets and Weaknesses

Government Business Civil Society

Assets Laws/regulation Enforcement Taxation

revenues Policy knowledge Longevity Reputation

Capital/financial assets

Production sys. Sector knowledge Innovation Reputation

Inspirational/ member assets

Community bonds

Community knowledge

Reputation

Weaknesses Limited finances Inflexible rules Slow decisions Complexity of

systems Desire to control

Pull to monopoly Disregard for

externalities Short-term focus Inequality of

outcomes Transactional

focus

Narrow focus Amateurism Scarce materials Fragmentation Ideological

parochialism

Adapted from Plummer and Waddell 2002

How to identify partners?

1. Carry out a stakeholder analysis Drawing up stakeholder table, identifying

stakeholders their interests likely impact setting priorities

Assessing the likely impact Identifying assumptions and risks about

stakeholders

Stakeholder table example

How to identify partners?

2. Identifying possible roles in PPPs Enablers: setting the frameworks for

service provision Providers: supplying the services Users: paying fees to obtain the services Overseers: monitoring and ensuring

service quality and price

3. Define relationships and gaps

Possible Roles in PPPsEnabler Provider User Overseer

Public

Municipal

Regional

National

Multilateral

Donor

Private for profit

Local

Int'l

Private not for profit

CBO

Local NGO

Int'l NGO

Individuals

3. Each party brings its own processes Public sector

RegulationPublic procurement

Private SectorDue-diligence

CommunityParticipation in decision-making

4. Selecting a PPP option

MisconceptionsOften this stage is considered as the most

important stepOften refer to the main pubic ad private

sectors interactions form as the PPPs

FullyPublicSectorBuilding

Awareness

FullyPrivateSector

For-profitNon-profitBuilding

Awareness

PassivePrivate

InvestmentGov’t bonds

ServiceContractsOperateMaintainLease

Build,Operate

and InvestBOT

Concession

AgreeingFrameworksRegulatoryDialogue

Covenants

AgreeingFrameworks

Local Agenda 21CommunityVisioning

TraditionalPublic

ContractingDesignBuild

JointVentures

Co-ownershipCo-responsibility

Passive PublicInvestmentEquity, DebtGuarantees

Grants

Broadest Definition of “Public-Private Partnerships”

Public PrivateInvestment Responsibility

Provider Enabler & Regulator

Government Role

Spectrum of possible relationships between public and private service providers

Bradford S. GentryYale/UNDP Programme on Public-Private Partnerships

Often used PPP options

OptionAsset

ownership

Operations &

maintenanc

Capital investment

Commercial risk

Scope of contract

Duration, years

Service contract

PublicPublic and

privatePublic Public

Meter reading, bill collection,

leak repairs

1–2

Management contract

Public Private Public Public Full system 3–5

Lease Public Private Public Shared Full system 8–15

ConcessionPublic/ Private

Private Private Private Full system 25–30

Divestiture Private Private Private Private Full system Indefinite

20–30

Build-operate-transfer (BOT)

Bulk supply, wastewater treatment

plants

Private Private Private Private

Objectives met by different forms of PPPs

Government objective

Service contract

Manage-ment

contract Leasing

BOT/ ROT

Conces-sions

Dives-titure

Improve efficiency √ √ √ √√√ √√√ √√√

Transferring investment risks

X X X √√√ √√√ √√√

Improving quality of service

√ √ √√√ √√√ √√√ √√√

Maintaining conttrol over the serice provision

√√√ √√√ √ X √ X

Key: √√√ to a large extent; √ to a small extent; X not usually. PPIAF/WB Toolkit

Prerequisites of successful PPP (WB’97)

Stakeholder support & political

commitment

Cost-recovering tariffs

Good information about the system

Developed regulatory framework

Good country financial

rating

Service Contract

Unimportant Not necessary in the short term

Possible to proceed with only limited

information

Minimal monitoring capacity needed

Not necessary

Managment contract

Low to moderate

levels needed

Preferred but not necessary in the

short term

Possible to proceed with only limited

information

Minimal monitoring capacity needed

Not necessary

Lease Moderate to high levels

needed

Necessary Good system information required

Strong capacity for regulation and co-ordination needed

Not necessary

BOT Moderate to high levels

needed

Preferred Good system information required

Strong capacity for regulation and co-ordination needed

Higher rating will reduce

costsConcession High levels

neededNecessary Good system

information requiredStrong regulatory capacity needed

Higher rating will reduce

costsDivestiture High levels

neededNecessary Good system

information requiredStrong regulatory capacity needed

Higher rating will reduce

costs

Choosing theappropriateform of PPP

Risk transfer to private sector

Source: PPIAF/WB Toolkit

PPP forms used in the region

CountryManagement

contract O&M LeaseConcess

ionBOT, ROT

AlbaniaArmeniaBulgariaCroatiaGeorgiaKazakhstanKosovoMacedoniaRomaniaRussiaTajikistanTurkey

Uzbekistan