Public-Private Partnerships Transit Transport Infrastructure Ouagadougou, Burkina Faso June 19, 2007 Rick Norment NCPPP Executive Director

O OMI 1 IMPORTANT PARTNERS FOR ECONOMIC DEVELPMENT Regional Economic Communities (RECs) New Partnership for Africas Development (NEPAD) African Development Bank (ADB) UNDP, World Bank, IMF, NGOs Private Sector (PPPs and CSR) My Purpose: OUTLINE AN ADDITIONAL TOOL

O OMI 2 THE CONTEXT United Nations and PPPs UNECE PPP Alliance, ESCAP, UNDP and others Focus: –PPPs in transition and developing economies –Best Practices, including centralized administration –Governance with Transparency, Accountability and Sustainable Development –Infrastructure Demands –Development of the Economic Infrastructure, small businesses, workforce and business skills –Social Justice

O OMI 3 TRANSPORTATION A KEY TO ECONOMIC DEVELOPMENT Transportation Systems –Connect suppliers to markets –Connect labor to jobs –Can have a positive environmental impact BUT –Capital intensive –High Operations and Maintenance (O&M) costs –Often are not revenue generators Public-Private Partnerships may be the answer

O OMI 4 What is NCPPP? Non-profit educational institute Membership –Public and Private Partnerships range from –Outsourcing –Public-Private Partnerships –Privatization Public-Private Partnerships –Joint Ventures –Collaborative Enterprise NOT Privatization –Level of public control

O OMI 5 Public-Private Partnerships Defined A Public-Private Partnership is a contractual agreement between a public agency (federal, state or local) and a private sector entity. Through this agreement, the skills and assets of each sector (public and private) are shared in delivering a service or facility for the use of the general public. In addition to the sharing of resources, each party shares in the risks and rewards potential in the delivery of the service and/or facility. source:

O OMI 6 Range of Corporate Participation Outsourcing Public-Private Partnerships Privitization The Relationship of PPPs and Corporate Social Responsibility Private Sector Dollars to Other Causes

O OMI 7 Using PPPs to Meet The Challenges The Challenge of Meeting Public Needs The Challenge of Performance The Challenge of Perception The Challenge of Transformation of Practices –Transparency –Accountability –Sustainable Development Address the Limitations In –Social/Political Capital –Financial Capital –Human Capital

O OMI 8 PPPs as a Public Policy Tool Private Sector Can Not Be Unrestrained The Evolution of Law in the 19 th Century in Europe and U.S. –Regulatory controls equally applied –Anti-Trust Laws enforced by the courts –Enforced Contract Laws Between private and private Between public and private

O OMI 9 Private Sector Strengths The Result of Market Competition Management Efficiency Newer Technologies Workplace Efficiencies Cash Flow Management Shared Resources (Financial and other) Personnel Development

O OMI 10 Public Sector Strengths Legal Authority Broad prospective/balance the competing goals to meet public needs Personnel – dedicated but constrained Capital resources & underutilized assets Protection of Procurement Policies

O OMI 11 Successful Partnerships The Secret is to Balance the Strengths of Both Sectors

O OMI 12 Partnerships at Work The Experience of One Sector Helps Another Transportation Water/Wastewater Financial Management Urban Development Public Safety Social Programs Environmental Programs Education

O OMI 13 Advantages of PPPs Maximizes the use of each sectors strength Reduces development risk Reduces public capital investment Mobilizes excess or underutilized assets Improves efficiencies/quicker completion Better compliance with environmental Improves service to the community Improves cost-effectiveness Shares resources Shares/allocates risks Mutual rewards

O OMI 14 Social Advantages of PPPs Aids development of public sector administrative skills –Transparency –Accountability –Sustainable Development Aids development of in-country business –Direct employment and skills development –Economic integration –Market capitalization Improved social equality –Improved access to infrastructure and services for marginalized or rural populations

O OMI 15 Worldwide Major PPP Projects Since 1985 * By Project Type Roads65631% Water61629% Rail24712% Buildings25312% Airports1829% Seaports1427% TOTAL VALUE: $887.4 billion * Projects of more than $5 million and not including O&M contracts

O OMI 16 Worldwide Major PPP Projects Since 1985 By Region Europe20531% North America17427% Asia13721% Latin America12619% Africa 14 2% TOTAL VALUE: $887.4 billion Source: Synthesis of PPP Projects, on under resourceswww.ncppp.org

O OMI 17 PPPs and Cost Savings = Part of the Puzzle Quicker delivery vs. inflation Design-Build = can be another cost saver Economies of scale –Engineering –Materials –Management practices Savings – 5% to as much as 40% Manage currency fluctuations

O OMI 18 PPPs – Other Than Construction Projects Operations and Maintenance –All types of infrastructures Asset Management –Energy Savings Performance Contracts –Combined with construction, through a life cycle Competitive Sourcing of Personnel Functions –Social program delivery –Financial management (debt collection, etc.)

O OMI 19 Six Keys to Successful PPPs Statutory and Political Environment Organized Structure Detailed Business Plan Guaranteed Revenue Stream Stakeholder Support Pick Your Partner Carefully

O OMI 20 Managing for Success – Six Keys Component One: The Environment Statutory authority and regulations Political leadership must be in place –Leading Political Figure –Top Administrative Officials –The Will to Change the System –A Strong Policy Statement

O OMI 21 Managing for Success – Six Keys Component Two: Organizational Structure Dedicated unit (tied to the purpose of the partnership) TRAINED personnel (or with consultants) to monitor implementation Examples: TXDOT, VDOT, PPP Centrum, Partnerships UK, Irish Governments Central PPP Unit Best Value vs. Lowest Price –Difficult to Administer but… Need for Good Governance –To assure an open and fair procurement process –Consolidate staff = easier to monitor –Independent authority (domestic/internal or international)

O OMI 22 Managing for Success – Six Keys Component Three: Detailed Business Plan a.k.a. Enforceable Contract Performance goal oriented - Allow for innovative plans Best Value vs. Lowest Price Plan/Contract should include: –Specific milestones and goals –Reporting of metrics and frequency Risk Allocation –Shift to the private sector can raise costs –Identify best prices to retain, which to shift Dispute Resolution Methodology Workforce Development? –Develop in-country resources/small businesses

O OMI 23 Managing for Success – Six Keys Component Four: Guaranteed Revenue Stream Funds to Cover the Long-Term Financing –Tolls/Fees (real or shadow) Intelligent transportation systems –TIF or other form of a Tax District –Long-Term Maintenance Contracts –Availability Payments –Underutilized Assets –Concession Model (limited application) –Creative Approaches

O OMI 24 Managing for Success – Six Keys Component Five: Stakeholder Support Public Sector Employees Private Sector Labor Unions End Users Competing Interests Requires: –Open and frank discussion between sectors –Knowing the FACTS (no myths) –Translating each others language

O OMI 25 Managing for Success – Six Keys Component Six: Pick Your Partner Carefully This is a long-term relationship –Verify experience (technical capability) –Verify financial capability –Best Value vs. Lowest Price Remember each sectors motivation –Genuine need (market value to the project) –Political / statutory environment –Reasonable return on investment and manageable risks –Timely and effective execution vs. development costs

O OMI 26 Managing for Success The Most Critical is Component One: Strong LEADERSHIP makes all the other factors come together

O OMI 27 Case Study – New York Ave. Metro Station An In-fill Station on Washingtons Metro Economically depress area, but –Close to a residential and college community –Abandoned warehouses Transportation access = economic stimulus Total cost of construction = $110 million Developers paid 30 percent of construction cost, plus provide the land for the station Tolls cover maintenance and operation of the station

O OMI 28 Case Study – New York Ave. Metro Station

O OMI 29 Case Study – Bogotá BRT BRT = Bus Rapid Transit – One third the cost of light rail Managed by TransMileno, a public dedicated unit Construction of roadways and stations done by the public sector, financed with gas tax, general revenues, World Bank loan –80 kilometers for $450 M by 2005 –Total of 388 kilometer for $2 B by 2019 Operation and Maintenance done by private companies – their investments at risk Rates and operating rules set by TransMileno Positive impacts –Environmental (Noise, Air, Fuel) –Traffic Congestion reduced / faster transit –Cost effective

O OMI 30 Case Studies – Bogotá BRT

O OMI 31 CASE STUDY – UNION STATION Build in 1907, but poorly maintained throughout the 1970s property to be condemned A Public Corporation created by Congress, with both public and private parties $160 million spent, funded by –Garage built by City -- $40 M parking fees –Railroads -- $70 M ticket sales –Private Developer -- $50 M retail rentals Still publicly owned, privately operated and maintained, and very solvent (possible use of surplus funds for other economic development projects)

O OMI 32

O OMI 33 Case Study – The Oyster School Washington, DC City could not afford to maintain or replace the original school City owned underutilized and undervalued asset (1.7 acres) in upscale residential neighborhood Private development of a 211 unit, full market rental apartment building 35 year Payment in Lieu of Taxes (PILOT) $11 million for construction of a new 47,000 square foot school First new school in over 20 years

O OMI 34 Case Study – The Oyster School After Partnership

O OMI 35 Case Studies for UNDP – SU/SSC Website Under development Environmental Transportation Water/wastewater Energy Economic Development Health care

O OMI 36 Six Keys to Successful PPPs Statutory and Political Environment Organized Structure Detailed Business Plan Guaranteed Revenue Stream Stakeholder Support Pick Your Partner Carefully

O OMI 37 Need Help? Case Studies, Fundamentals of Partnerships, Issue Papers, Publications, Resources 1660 L Street, NW Suite 510 Washington, DC