CLC1501 Introduction to the PPP Procurement Approach – Principles of PPP Procurement

PPP Procurement Potential to deliver value Reduced RiskHigher levels of serviceLower Cost Differences from other procurement approaches Impact on achieving potential value

PPP Procurement Principles Unique Procurement Process Global Good Practice Principles for PPP Procurement National, Sub-National Multilateral Regional Previous Projects Public and Private Sector

PPP Procurement Principles PPP Procurement  Integration of several contracts into one long-term contract  Focus on outcomes, with performance standards defining the service level and links payment to performance  Optimal risk allocation over the life of the contract  A partnering approach to the contractual relationship  A transparent, generally competitive process for contract award

PPP Procurement Principles PPP Procurement  Integration of several contracts into one long-term contract Other Procurement  Short-term contracts with one contract for each service

Public Service Delivery Assets Service Delivery

Fully Integrated Contracts Assets Service Delivery Public Operations & Maintenance Contractor/s SuppliesSupplies Construction Contractor/s PPP CONTRACT

A Long-Term Contract Assets Service Delivery Public All procured under the same procurement process

PPP Procurement Principles PPP Procurement  Integration of several contracts into one long-term contract  Focus on outcomes, with performance standards defining the service level and links payment to performance Other Procurement  Short-term contracts with one contract for each service  Focus on inputs or assets often with no ongoing performance standards

Focus on Outcomes  Purchase of services at an agreed quality, quantity and timeframe  Seeks innovative solutions to deliver outputs Focus on Outcomes and Performance Standards Performance Standards  Defines the service level required  Links performance to payment to provide financial incentive  Shift focus to procurement of supplies  Procurement process identifies a suitable partner

PPP Procurement Principles PPP Procurement  Integration of several contracts into one long-term contract  Focus on outcomes, with performance standards defining the service level and links payment to performance  Optimal risk allocation over the life of the contract Other Procurement  Short-term contracts with one contract for each service  Focus on inputs or assets often with no ongoing performance standards  Government accepts whole of life risk

Optimal allocation to party best able to manage → Reduced impact of risks Risks of delivery reflected in contract pricing → Improves transparency Shared risks → Rely on each other to manage risks Risk Allocation Crucial activity in PPP procurement process Directly impacts the value realized Public Private

PPP Procurement Principles PPP Procurement  Integration of several contracts into one long-term contract  Focus on outcomes, with performance standards defining the service level and links payment to performance  Optimal risk allocation over the life of the contract  A partnering approach to the contractual relationship Other Procurement  Short-term contracts with one contract for each service  Focus on inputs or assets often with no ongoing performance standards  Government accepts whole of life risk  Contract relationship based on buyer-supplier relationship

Focus on developing the relationship during the procurement process A Partnering Contractual Relationship Links the goals of both parties Work together to meet goals Constructive Dialogue Understanding skills and limitations Commitment to the contract

PPP Procurement Principles PPP Procurement  Integration of several contracts into one long-term contract  Focus on outcomes, with performance standards defining the service level and links payment to performance  Optimal risk allocation over the life of the contract  A partnering approach to the contractual relationship  A transparent, generally competitive process for contract award Other Procurement  Short-term contracts with one contract for each service  Focus on inputs or assets often with no ongoing performance standards  Government accepts whole of life risk  Contract relationship based on buyer-supplier relationship  Different levels of competition in contract award processes

Evaluation criteria based on measurable outcomes Qualitative & quantitative bid assessment A feedback process for unsuccessful bidders Competitive tension Transparent Competitive Process for Contract Award Achieve service outcomes and deliver value

Global Convergence In PPP Procurement Principles PPP Procurement  Integration of several contracts into one long-term contract  Focus on outcomes, with performance standards defining the service level and links payment to performance  Optimal risk allocation over the life of the contract  A partnering approach to the contractual relationship  A transparent, generally competitive process for contract award Global Good Practice Principles for PPP Procurement