PPP - Models of PPP date-27-07-2022.pptx

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1. MODELS OF PPP Government of Karnataka Administrative Training Institute Mysuru Public Private Partnership Cell PPP Prof. MADHU K A School of Civil Engineering REVA University Bengaluru

2. Contents of the presentation General Information Definitions Stages of a PPP Project Different Models of PPP Classification & SWOT Analysis Criticisms & Explanations Conclusions

3. PPP in India India always encouraged Private Sector even before Independence After Independence India followed mixed Economy Advent of LPG Regime 1991 – boost to PPP India is a huge country in Population and area and cannot meet all the of demands service provisions from Public Sector

4. Citizen’s Expectations India Urban growth – enormous Urban services – not as per Service Level Benchmark Citizens are always expecting better services from ULB’s but Urban Local Bodies are unable to meet the demand due to Financial conditions. 1992 – 74 th Constitutional Amendment Act brought changes in the functioning of ULBS Most Citizens are eager to pay for quality & timely services Per capita income has gone up Better purchasing power with the middle class Urban Infrastructure – below standards

5. Participation of Private Sector Examples: Health Institutions, Educational Institutions Communications. Energy (GAS) WATER Transport – Bus services, Solid Waste Disposal. Flight Services and Railways - Privatization in Freight Movement Defense and Space dept. Earlier some services were outsourced, contracted

6. What is P-P-P? “PPPs are aimed at increasing the efficiency of infrastructure projects by means of a long term collaboration between the public sector and private business. A holistic approach which extends over the entire lifecycle is important here” - Germany “The term public-private partnership (“PPP”) is not defined at community level. In general, the term refers to forms of cooperation between public authorities and the world of business which aim to ensure the funding, construction, renovation, management and maintenance of an infrastructure of the provision of a service” - Europe

7. What is P-P-P? “PPPs are long-term partnerships to deliver assets and services underpinning public services and community outcomes. Optimal structuring links private sector profitability to sustained performance over the long term, yielding robust and attractive cash-flows for invertors in return for delivering better value for money to the taxpayer” “Standard & Poor’s definition of a PPP is any medium to-long term relationship between the public and private sectors, involving the sharing of risks and rewards of multi-sector skills, expertise and finance to deliver desired policy outcomes”

8. Why Should Governments Consider PPP? Delivering of quality services that provides VFM (whole-life costings) New options for public sector finances (parallel vs. sequential development) Good Principles of PPP VFM (also qualitative factors, not lowest costs) Risk transfers (who does what best) Performance standards and competition (payments upon delivery - output focus) Maintain value of public assets - whole-life

9. Stages in a PPP Project Identifying & Defining the Project Screening of the Project Appraising the project Structuring of the procurement process & the contract Tendering & Awarding the project Managing/Monitoring the project

10. Difference b/w Traditional & PPP Capital & Operating Costs are paid by the public sector Risk of cost over-runs & late delivery

11. Difference b/w Traditional & PPP Public Sector only pays over the long-term as services are delivered Private sector funding from – Debt + Shareholders equity Returns will depend on the Quality Of Services Delivered

12. Pre-Requisites of a Successful PPP Program Political commitment (continuity of policy) Enabling legislation (enabling legislation - concession laws, tax anomalies) Expertise (capacity-building in both sectors) Project prioritization (focus to improve success rates) Deal flow and standardization (regularity of deals based on standard contracts)

13. Factors on which models of PPP depend Ownership of capital assets Responsibility for investment Assumption of risks Duration of contract

14. Broad Classification of Models in PPP Supply and management contracts Turnkey projects Affermage / Lease Concessions Private ownership of assets

15. Basic features of PPP models

16. Each model has its own pros and cons and can be suitable to achieve some of the objectives of private participation. Special characteristics of some sectors and their technological development, legal and regulatory regimes, and public and political perception about the services in a sector may also be factors in deciding the suitability of a particular form of private participation. For example, management contracts are common for existing assets in the water and transport sectors, lease is common in the transport sector, concessions are common in the transport and telecommunication sectors, turnkey and private ownership of assets are common in the power sector .

17. ಪ್ರತಿ ಮಾದರಿಯು ತನ್ನದೇ ಆದ ಅನುಕೂಲಗಳನ್ನು ಮತ್ತು ಅನನುಕೂಲಗಳನ್ನು ಹೊಂದಿದೆ ಮತ್ತು ಖಾಸಗಿ ಸಹಭಾಗಿತ್ವದ ಕೆಲವು ಉದ್ದೇಶಗಳನ್ನು ಸಾಧಿಸಲು ಸೂಕ್ತವಾಗಿದೆ. ಕೆಲವು ವಲಯಗಳ ವಿಶೇಷ ಗುಣಲಕ್ಷಣಗಳು ಮತ್ತು ಅವುಗಳ ತಾಂತ್ರಿಕ ಅಭಿವೃದ್ಧಿ, ಕಾನೂನು ಮತ್ತು ನಿಯಂತ್ರಣ ಆಡಳಿತಗಳು, ಮತ್ತು ವಲಯದಲ್ಲಿ ಸೇವೆಗಳ ಬಗ್ಗೆ ಸಾರ್ವಜನಿಕ ಮತ್ತು ರಾಜಕೀಯ ಗ್ರಹಿಕೆ ಸಹ ಖಾಸಗಿ ಪಾಲ್ಗೊಳ್ಳುವಿಕೆಯ ಯೋಗ್ಯತೆಯನ್ನು ನಿರ್ಧರಿಸುವ ಅಂಶಗಳಾಗಿರಬಹುದು ಉದಾಹರಣೆಗೆ, management contracts ಜಲ ಮತ್ತು ಸಾರಿಗೆ ಕ್ಷೇತ್ರಗಳಲ್ಲಿ ಅಸ್ತಿತ್ವದಲ್ಲಿರುವ ಸ್ವತ್ತುಗಳಿಗೆ ಸಾರಿಗೆ ವಲಯದಲ್ಲಿ lease ಸಾಮಾನ್ಯವಾಗಿವೆ, ಸಾರಿಗೆ ಮತ್ತು ದೂರಸಂಪರ್ಕ ಕ್ಷೇತ್ರಗಳಲ್ಲಿ concessions ಸಾಮಾನ್ಯವಾಗಿದೆ, Private ownership ವಿದ್ಯುತ್ ಕ್ಷೇತ್ರದಲ್ಲಿ ಸಾಮಾನ್ಯವಾಗಿ ದೆ.

18. Management contracts allow private sector skills to be brought into service for design and delivery, operational control, labour management and equipment procurement the public sector retains the ownership of facility and equipment. The private sector typically assumes specific responsibilities related to a service, and it is typically not asked to assume commercial risk. The private contractor is paid a fee to manage and operate services. Normally, payment of such fees is performance-based. Management contracts ಖಾಸಗಿ ವಲಯದ ಕೌಶಲ್ಯಗಳನ್ನು ವಿನ್ಯಾಸ ಮತ್ತು ವಿತರಣೆ, ಕಾರ್ಯಾಚರಣೆ ನಿಯಂತ್ರಣ, ಕಾರ್ಮಿಕ ನಿರ್ವಹಣೆ ಮತ್ತು ಸಲಕರಣೆ ಖರೀದಿಗಾಗಿ ಸೇವೆಗೆ ತರಲು ಅವಕಾಶ ನೀಡುತ್ತದೆ ಸಾರ್ವಜನಿಕ ವಲಯವು ಸೌಕರ್ಯ ಮತ್ತು ಸಲಕರಣೆಗಳ ಮಾಲೀಕತ್ವವನ್ನು ಉಳಿಸಿಕೊಂಡಿದೆ. ಖಾಸಗಿ ವಲಯವು ಸಾಮಾನ್ಯವಾಗಿ ಸೇವೆಗೆ ಸಂಬಂಧಿಸಿದ ನಿರ್ದಿಷ್ಟ ಜವಾಬ್ದಾರಿಗಳನ್ನು ಭಾವಿಸುತ್ತದೆ, ಮತ್ತು ಇದನ್ನು ಸಾಮಾನ್ಯವಾಗಿ ವಾಣಿಜ್ಯ ಅಪಾಯವೆಂದು ಪರಿಗಣಿಸಲಾಗುವುದಿಲ್ಲ. ಖಾಸಗಿ ಗುತ್ತಿಗೆದಾರರಿಗೆ ಸೇವಾ ಶುಲ್ಕವನ್ನು ಪಾವತಿಸಲಾಗುತ್ತದೆ. ಸಾಮಾನ್ಯವಾಗಿ, ಅಂತಹ ಶುಲ್ಕವನ್ನು ಪಾವತಿಸುವುದು ಕಾರ್ಯಕ್ಷಮತೆ ಆಧಾರಿತವಾಗಿದೆ. Management contracts

19. The main pros and cons of using management contracts Pros: Can be implemented in a short time Least complex of all the broad categories of PPPs In some countries, politically and socially more acceptable for certain projects (such as water and strategic projects like ports and airports) Cons: Efficiency gains may be limited and little incentive for the private sector to invest Almost all risks are borne by the public sector Applicable mainly to existing infrastructure assets

20. Types of management contract Supply or service contract : Supply of equipment, raw materials, energy and power, and labour are typical examples of supply or service contract, example : outsourcing Maintenance management:   For example, most buses of the Bangkok Metropolitan Transport Authority in Bangkok, Thailand are maintained by the supplier companies . Operational management : Examples include Delhi Airport Cargo Terminal; Vientiane Airport Terminal; and the New Container Terminal in Chittagong, Bangladesh. Management contracts are also quite common in the transport sector for providing some of the non-transport elements of transport operations such as the ticketing system of public transport and reservation systems. Operational management of urban transport services can also be contracted out to the private sector.

21. Turnkey Traditional public sector procurement model for infrastructure facilities. Generally, a private contractor is selected through a bidding process. The private contractor designs and builds a facility for a fixed fee, rate or total cost, which is one of the key criteria in selecting the winning bid. The contractor assumes risks involved in the design and construction phases. . ಸಾಮಾನ್ಯವಾಗಿ, ಖಾಸಗಿ ಗುತ್ತಿಗೆದಾರರನ್ನು ಬಿಡ್ಡಿಂಗ್ ಪ್ರಕ್ರಿಯೆಯ ಮೂಲಕ ಆಯ್ಕೆ ಮಾಡಲಾಗುತ್ತದೆ. ಖಾಸಗಿ ಗುತ್ತಿಗೆದಾರರು ನಿಗದಿತ ಶುಲ್ಕ, ದರ ಅಥವಾ ಒಟ್ಟು ವೆಚ್ಚಕ್ಕಾಗಿ ಸೌಲಭ್ಯವನ್ನು ವಿನ್ಯಾಸಗೊಳಿಸುತ್ತಾರೆ ಮತ್ತು ನಿರ್ಮಿಸುತ್ತಾರೆ, ಇದು ವಿಜೇತ ಬಿಡ್ ಅನ್ನು ಆಯ್ಕೆಮಾಡುವ ಪ್ರಮುಖ ಮಾನದಂಡಗಳಲ್ಲಿ ಒಂದಾಗಿದೆ. ವಿನ್ಯಾಸ ಮತ್ತು ನಿರ್ಮಾಣ ಹಂತಗಳಲ್ಲಿ ಒಳಗೊಂಡಿರುವ ಅಪಾಯಗಳನ್ನು ಗುತ್ತಿಗೆದಾರನು ಊಹಿಸುತ್ತಾನೆ

22. affermage /lease The Affermage /lease types of arrangements, the operator takes lease of both infrastructure and equipment from the government for an agreed period of time. Generally, the government maintains the responsibility for investment and thus bears investment risks. The operational risks are transferred to the operator. However, as part of lease, some assets may be transferred on a permanent basis for a period which extends over the economic life of assets. Fixed facilities and land are leased out for a longer period than for mobile assets. Land to be developed by the leaseholder is typically transferred for a period of 15-30 years. ಗುತ್ತಿಗೆ/ಖರ್ಚು/ಹಂತಗಳ ವ್ಯವಸ್ಥೆಗಳ ಪ್ರಕಾರ, ಆಪರೇಟರ್ ಒಪ್ಪಿತ ಅವಧಿಗೆ ಸರ್ಕಾರದಿಂದ ಮೂಲಸೌಕರ್ಯ ಮತ್ತು ಸಲಕರಣೆಗಳ ಗುತ್ತಿಗೆಯನ್ನು ಪಡೆಯುತ್ತದೆ. ಸಾಮಾನ್ಯವಾಗಿ, ಸರ್ಕಾರವು ಹೂಡಿಕೆಯ ಜವಾಬ್ದಾರಿಯನ್ನು ನಿರ್ವಹಿಸುತ್ತದೆ ಮತ್ತು ಆದ್ದರಿಂದ ಹೂಡಿಕೆಯ ಅಪಾಯಗಳನ್ನು ಹೊಂದಿದೆ . ಕಾರ್ಯಾಚರಣೆಯ ಅಪಾಯಗಳನ್ನು ಆಪರೇಟರ್ಗೆ ವರ್ಗಾಯಿಸಲಾಗುತ್ತದೆ. ಆದಾಗ್ಯೂ, ಗುತ್ತಿಗೆಯ ಭಾಗವಾಗಿ, ಕೆಲವು ಸ್ವತ್ತುಗಳನ್ನು ಸ್ವತ್ತುಗಳ ಆರ್ಥಿಕ ಜೀವಿತಾವಧಿಯನ್ನು ವಿಸ್ತರಿಸುವ ಒಂದು ಶಾಶ್ವತ ಆಧಾರದ ಮೇಲೆ ವರ್ಗಾಯಿಸಬಹುದು. ಸ್ಥಿರ ಸೌಲಭ್ಯಗಳು ಮತ್ತು ಭೂಮಿಯನ್ನು ಮೊಬೈಲ್ ಆಸ್ತಿಗಳಿಗೆ ಹೋಲಿಸಿದರೆ ದೀರ್ಘಕಾಲದವರೆಗೆ ಗುತ್ತಿಗೆನೀಡಬಹದು . ಗುತ್ತಿಗೆದಾರನು ಅಭಿವೃದ್ಧಿಪಡಿಸಬೇಕಾದ ಭೂಮಿಯನ್ನು ಸಾಮಾನ್ಯವಾಗಿ 15-30 ವರ್ಷಗಳ ಅವಧಿಗೆ ವರ್ಗಾಯಿಸಲಾಗುತ್ತದೆ .

23.   Rajiv Gandhi Container Terminal, India, Laem Chabang Port Terminals B2, B3 and B4 in Thailand, and Guangzhou Baiyan Airport in China. Pros: Can be implemented in a short time Significant private investment possible under longer term agreements In some countries, legally and politically more acceptable for strategic projects like ports and airports Cons: Has little incentive for the private sector to invest Almost all risks are borne by the public sector Generally used for existing infrastructure assets Considerable regulatory oversight may be required

24. In this form of PPP, the Government defines and grants specific rights to an entity (usually a private company) to build and operate a facility for a fixed period of time. The Government may retain the ultimate ownership of the facility and/or right to supply the services ಪಿಪಿಪಿಯ ಈ ರೂಪದಲ್ಲಿ , ಸರ್ಕಾರವು ಒಂದು ನಿರ್ದಿಷ್ಟ ಅವಧಿಯವರೆಗೆ ಒಂದು ಘಟಕವನ್ನು ( ಸಾಮಾನ್ಯವಾಗಿ ಖಾಸಗಿ ಕಂಪೆನಿಗೆ ) ನಿರ್ಮಿಸಲು ಮತ್ತು ನಿರ್ವಹಿಸಲು ನಿರ್ದಿಷ್ಟ ಹಕ್ಕುಗಳನ್ನು ವ್ಯಾಖ್ಯಾನಿಸುತ್ತದೆ ಮತ್ತು ನೀಡುತ್ತದೆ . ಸರ್ಕಾರವು ಈ ಸೌಲಭ್ಯದ ಅಂತಿಮ ಒಡೆತನವನ್ನು ಉಳಿಸಿಕೊಳ್ಳಬಹುದು ಮತ್ತು / ಅಥವಾ ಸೇವೆಗಳನ್ನು ಒದಗಿಸುವ ಹಕ್ಕನ್ನು ಉಳಿಸಿಕೊಳ್ಳಬಹು ದು Concessions In concessions, payments can take place both ways: concessionaire pays to government for the concession rights and the government may also pay the concessionaire ರಿಯಾಯಿತಿಯಲ್ಲಿ , ಪಾವತಿಗಳು ಎರಡೂ ವಿಧಾನಗಳಲ್ಲಿ ನಡೆಯುತ್ತವೆ ರಿಯಾಯಿತಿ ಹಕ್ಕುಗಳಿಗಾಗಿ ರಿಯಾಯಿತಿದಾರರು ಸರ್ಕಾರಕ್ಕೆ ಪಾವತಿಸುತ್ತಾರೆ ಮತ್ತು ಸರ್ಕಾರವು ರಿಯಾಯಿತಿದಾರರೀಗೆ ಪಾವತಿಸಬಹುದು. ( to reduce commercial risks)

25. Pros: Private sector bears a significant share of the risks High level of private investment Potential for efficiency gains in all phases of project development and implementation and technological innovation is high Cons: Highly complex to implement and administer May have underlying fiscal costs to the government Negotiation between parties and finally making a project deal may require long time May require close regulatory oversight Contingent liabilities to the government in the medium and long term

26. Private ownership of assets ಖಾಸಗಿ ವಲಯವು ಮೂಲಸೌಕರ್ಯ ಸೌಲಭ್ಯದ ವಿನ್ಯಾಸ, ನಿರ್ಮಾಣ ಮತ್ತು ನಿರ್ವಹಣೆ ಜವಾಬ್ಧಾರಿ ಹೊಂದಿರುತದೆ ಮತ್ತು ಕೆಲವು ಸಂದರ್ಭಗಳಲ್ಲಿ, ಸಾರ್ವಜನಿಕ ವಲಯವು ಸ್ವತ್ತುಗಳ ಮಾಲೀಕತ್ವದ ಹಕ್ಕನ್ನು ಖಾಸಗಿ ವಲಯಕ್ಕೆ ಬಿಟ್ಟುಕೊಡಬಹುದು The private sector remains responsible for design, construction and operation of an infrastructure facility and in some cases the public sector may relinquish the right of ownership of assets to the private sector.

27. Different Models in use BOT – Build-Operate Transfer BOO – Build-Own-Operate BOOT – Build-Own-Operate-Transfer DBF – Design-Build-Finance DBFO – Design-Build-Finance-Operate BLT – Build-Lease-Transfer BTO – Build-Transfer-Operate DBFOM – Design-Build-Finance-Operate-Maintain Leasing Joint Ventures Operations/Management Contracts LROT – Lease-Renovate-Operate-Transfer DCMF – Design-Construct-Manage-Finance BOOR – Build-Own-Operate-Remove

28. Advantages & Disadvantages of PPP Relationships - BOT Main Features • Contractor to design, build & operate a public facility for a defined period, after which the facility is handed back to the public sector • The facility is financed by the public sector & remains in public ownership throughout the contract • Key driver is the transfer of operating risk in addition to design & construction risk Application • Suited to projects that involve a significant operating content • Particularly suited to water & waste projects Strengths • Transfer of design, construction & operating risk • Potential to accelerate construction • Risk transfer provides incentive for adoption of whole life costing approach • Promotes private sector innovation & improved value for money • Improved quality of operation & maintenance • Contracts can be holistic • Government able to focus on core public sector responsibilities Weaknesses • Possible conflict between planning & environmental considerations • Contracts are more complex & tendering process can take longer • Contract management & performance monitoring systems required • Cost of re-entering the business if operator proves unsatisfactory • Does not attract private finance & commits public sector to providing long term finance

29. ಖಾಸಗಿ ವಲಯವು ಮೂಲಸೌಕರ್ಯ ಯೋಜನೆಯನ್ನು ನಿರ್ಮಿಸುವ, ಅದನ್ನು ನಿರ್ವಹಿಸುವ ಮತ್ತು ಅಂತಿಮವಾಗಿ ಮಾಲೀಕತ್ವವನ್ನು ಸರ್ಕಾರಕ್ಕೆ ವರ್ಗಾಯಿಸುವ ಒಂದು ರೀತಿಯ ವ್ಯವಸ್ಥೆ

30. Many instances government will become the firm's only customer and promises to purchase at least a predetermined amount of the projects output this ensures that the firm recoups its initial investment in a reasonable time span ಅನೇಕ ಸಂದರ್ಭಗಳಲ್ಲಿ ಸರ್ಕಾರವು ಸಂಸ್ಥೆಯ ಏಕೈಕ ಗ್ರಾಹಕರಾಗುತ್ತದೆ ಮತ್ತು ಯೋಜನೆಗಳ ಉತ್ಪಾದನೆಯ ಕನಿಷ್ಠ ಪೂರ್ವನಿರ್ಧರಿತ ಮೊತ್ತವನ್ನು ಖರೀದಿಸಲು ಭರವಸೆ ನೀಡುತ್ತದೆ ಸಂಸ್ಥೆಯು ತನ್ನ ಆರಂಭಿಕ ಹೂಡಿಕೆಯನ್ನು ಸಮಂಜಸವಾದ ಸಮಯದ ಅವಧಿಯಲ್ಲಿ ಮರುಪಾವತಿಸುತ್ತದೆ ಎಂದು ಇದು ಖಚಿತಪಡಿಸುತ್ತದೆ

31. Recent example Delhi Noida project

32. BOOT (build, own, operate and transfer ) ಖಾಸಗಿ ವಲಯದ ಸಂಸ್ಥೆಗೆ ಸರ್ಕಾರವು ನಿರ್ದಿಷ್ಟ ಸೌಲಭ್ಯವನ್ನು ನಿರ್ಮಿಸಲು, ನಿರ್ದಿಷ್ಟ ಅವಧಿಗೆ ಅದನ್ನು ಹೊಂದಲು, ಅದನ್ನು ನಿರ್ವಹಿಸಲು ಮತ್ತು ಅದರಿಂದ ಬರುವ ಆದಾಯವನ್ನು ತೆಗೆದುಕೊಳ್ಳಲು ಮತ್ತು ಅಂತಿಮವಾಗಿ ಅದನ್ನು ಸರ್ಕಾರಕ್ಕೆ ವರ್ಗಾಯಿಸಲು ಫ್ರ್ಯಾಂಚೈಸಿಯ ರಿಯಾಯಿತಿಯನ್ನು ನೀಡುತ್ತದೆ’. Government granting to a private sector organization a concession of a franchise to build a specific facility, to own it for a specified period, to operate it and to take the revenue from it, and ultimately to transfer it back to the Government’.

33. Main Features Risk Transfers Access to private finance Ownership Comment

34. BOO ( ನಿರ್ಮಾಣ, ಸ್ವಂತ, ಕಾರ್ಯನಿರ್ವಹಣೆ) ಎನ್ನುವುದು ಸಾರ್ವಜನಿಕ-ಖಾಸಗಿ ಸಹಭಾಗಿತ್ವದ ( PPP) ಯೋಜನಾ ಮಾದರಿಯಾಗಿದ್ದು, ಇದರಲ್ಲಿ ಖಾಸಗಿ ಸಂಸ್ಥೆಯು ಕೆಲವು ಸೌಲಭ್ಯ ಅಥವಾ ರಚನೆಯನ್ನು ಸರ್ಕಾರದಿಂದ ಸ್ವಲ್ಪ ಮಟ್ಟಿನ ಪ್ರೋತ್ಸಾಹದೊಂದಿಗೆ ನಿರ್ಮಿಸುತ್ತದೆ, ಮಾಲೀಕತ್ವವನ್ನು ಹೊಂದಿದೆ ಮತ್ತು ನಿರ್ವಹಿಸುತ್ತದೆ. ಸರ್ಕಾರವು ಈ ಮಾದರಿಯಲ್ಲಿ ನೇರ ಹಣವನ್ನು ಒದಗಿಸದಿದ್ದರೂ, ತೆರಿಗೆ-ವಿನಾಯಿತಿ ಸ್ಥಿತಿಯಂತಹ ಇತರ ಆರ್ಥಿಕ ಪ್ರೋತ್ಸಾಹಗಳನ್ನು ನೀಡಬಹುದು. ಡೆವಲಪರ್ ಸ್ವತಂತ್ರವಾಗಿ ಸೌಲಭ್ಯವನ್ನು ಹೊಂದಿದ್ದಾರೆ ಮತ್ತು ನಿರ್ವಹಿಸುತ್ತಾರೆ BOO (build, own, operate) BOO (build, own, operate) is a public-private partnership (PPP) project model in which a private organization builds, owns and operates some facility or structure with some degree of encouragement from the government. Although the government doesn't provide direct funding in this model, it may offer other financial incentives such as tax-exempt status. The developer owns and operates the facility independently

35. India’s Kutch and Pipavav Railways, China’s Xiamen Airport Cargo Terminal, Thailand’s Sukhothai Airport, China’s Wuhan Yangluo Container Port, Indonesia’s Balikapapan Coal Terminal . Recent example

36. Under a BOO the private sector designs and builds the infrastructure, finances its construction and owns, operates and maintains it over the concession period. Traditionally BOO projects provide for the infrastructure to be transferred to the government at the end of the concession period. BOO ಅಡಿಯಲ್ಲಿ ಖಾಸಗಿ ವಲಯವು ಮೂಲಸೌಕರ್ಯವನ್ನು ವಿನ್ಯಾಸಗೊಳಿಸುತ್ತದೆ ಮತ್ತು ನಿರ್ಮಿಸುತ್ತದೆ, ಅದರ ನಿರ್ಮಾಣಕ್ಕೆ ಹಣಕಾಸು ನೀಡುತ್ತದೆ ಮತ್ತು ರಿಯಾಯಿತಿ ಅವಧಿಯಲ್ಲಿ ಅದನ್ನು ನಿರ್ವಹಿಸುತ್ತದೆ . ಸಾಂಪ್ರದಾಯಿಕವಾಗಿ BOO ಯೋಜನೆಗಳು ರಿಯಾಯಿತಿ ಅವಧಿಯ ಕೊನೆಯಲ್ಲಿ ಸರ್ಕಾರಕ್ಕೆ ವರ್ಗಾಯಿಸಲು ಮೂಲಸೌಕರ್ಯವನ್ನು ಒದಗಿಸುತ್ತವೆ

37. Advantages & Disadvantages of PPP Relationships - Concession Main Features • As for DBFO except private party recovers costs from user charges • Key driver is the polluter pays principle & utilizing private finance & transferring design, construction & operating risk Application • Suited to projects that provide an opportunity for the introduction of user charging • Particularly suited to roads, water (non-domestic) & waste projects Strengths • As for DBFO plus: • Facilitates implementation of the polluter pays principle; & • Increases level of demand risk transfer & encourages generation of third party revenue Weaknesses • As for DBFO plus: • May not be politically acceptable • Requires effective management of alternatives / substitutes, e.g. alternative transport routes; alternative waste disposal options

38. A few criticisms on PPP / Private Finance Initiative (PFI) 1. “Public finance is always cheaper than private finance” Although private financing is typically 1-3% higher than public finance, the gap has been narrowing. Moreover, financing costs average only one third of the total cost of the projects and PFI only shows value if savings over whole life assets and service provision outweigh any additional margin on financing costs.

39. A few criticisms on PPP/ PFI 2. “PFI process hinders accountability” A range of scrutiny mechanisms exist, including reports by the National Audit Office. Also hospital business cases are published. These are often more transparent, measurable and effective than traditional private sector scrutiny and accountability procedures

40. A few criticisms on PPP/ PFI 3. “PFI is bad for public sector staff, whose terms and conditions of service are threatened” Staff concerns have largely been addressed through guidance on the need to disclose information, consult staff and provide comparable pensions. Empirical evidence suggest high levels of satisfaction among transferred employees on signed deals

41. A few criticisms on PPP/ PFI 4. “PFI leads to the public sector disguising open-ended liabilities, and therefore lacks control over these liabilities” The public sector's exposure to liabilities becomes less open-ended because payments and PFI contracts are relatively predictable and the true costs of financing and operating an asset are fully exposed. Also, estimates of future PFI commitments are published twice a year by the Treasury

42. A few criticisms on PPP/ PFI 5. “The PFI distorts spending priorities, because projects are taken forward on the basis of qualifying for the PFI and generating a bankable revenue stream, rather than because of their overall benefit” In practice, a range of criteria have been developed for prioritizing possible projects, although clearly they need to be suitable for the PFI before they can be assessed against these priorities

43. Keys to a successful project Project should have a clear strategic direction and strong political support Procuring authority should establish a sufficiently resourced and capable team that will be credible in the eyes of bidders Good planning and program management practices should be implemented throughout the process The RFP , including submission requirements, should be carefully drafted and should be consistent and clear Appropriate information should be provided to bidders through pre-bid conferences and a data room (in addition to the RFP)

44. Keys to a successful project (contd.) Evaluation criteria should be as per objective, clear & unchanged Qualification and evaluation work should be organized in advance (including Evaluation Manual/Scheme for Evaluation) Formal evaluation process should be conducted by an appropriate expert team and managed properly Strong capabilities and resources should be available to manage last minute interactions and potential challenges The time for bid submission, award & contract signature should be realistic

45. Conclusions PPP is a long-term relationship between public and private sectors to deliver a desirable output It is based on: Payment upon delivery (no deliver no pay) Risks allocation (who does what best) Value For Money (VFM) & whole-life costings Competition to get best VFM No tailor-made methods It is important to ensure that a national PPP program is well set up

46. Thank you very much for your patience