1. Introduction to Public Private Partnerships
Module

2. Module Structure Good Governance Funding PPPs Developing an OBC
Effective procurement
Risks in PPPs
Sustainability
Lessons and recommendations

3. Definition of PPP
Public private partnerships (PPPs) are agreements between government and the private sector for the purpose of providing public infrastructure, community facilities and related services.
The private sector enter into a contract with government for the design, delivery, and operation of the facility or infrastructure and the services provided.
The private sector finance the capital investment and recover the investment over the course of the contract.
The asset transfers back to the public sector at the end of the contract 3

4. Degree of private sector risk Degree of private sector involvement
Range of PPPs
Adapted from Canadian Council PPP 2009
Privatisation
Concession
DBFM-operate
PPP Models
Design build finance maintain
Degree of private sector risk
Build and finance
Operate and maintain
Design and build
Degree of private sector involvement

5. Principles of PPPs Output based specification
Contracting Authority defines the service required
Design of the works to deliver that service lies with the private sector
Output based specification
The contract can be for 25/30 years plus
Long-term contractual arrangements
Value for money
Transfer of risk
Competition will drive best value
Gives public sector access to innovation
Market competition
Whole life costing
Cost measured against conventional procurement.
Whole life costs and quality are combined to gauge VFM
Transfer of design and construction risk
Risk of ownership transferred to the private sector
Long term responsibility for building operation and maintenance
Focus on reducing cost

6. Typical SPV structure for PPPs
Government
PPP Agreement
Private Sector
(Special Purpose Vehicle)
(SPV)
Equity
Shareholding
Loan agreement
Debt
Subcontractors
Subcontractor
Construction
Subcontractor
Operations

7. PPP and Traditional Procurement

8. Governance - principles
Participation
Decency
Transparency
Accountability
Fairness
Efficiency

9. Funding - Project finance
The financing of long-term infrastructure is based upon a non-recourse or limited recourse financial structure where the debt and equity used to finance the project are paid back from the cash flows generated by the project.

10. Project finance High gearing requiring less equity Tax benefits
Public sector use of revenue
Long term debt funding

11. Why use PPPs? Focus on outputs PPPs make projects affordable
Better value for money over the lifetime of the project
More efficiency in procurement
Faster project delivery with more projects in a defined timeframe
Risks are allocated to the party best able to manage the risk

12. Why use PPPs? (2)

13. Outline Business Case

14. Critical stages of a PPP
Initial feasibility
Procurement phase
Construction phase
Operation phase

15. Stages in procurement Procurement strategy stage
Qualification and selection stage
Dialogue
Award

16. Phase 5 Contract management
Procurement Process
Phase 1
Pre-Procurement
Phase 2
Pre-qualification
Phase 3
Competitive dialogue
Phase 4
Final bid
financial close
Phase 5 Contract management
Pre -Procurement
Official Journal European Union (OJEU
Prequalification questionnaire (PQQ)
Invitation to participate in dialogue (ITPD)
Invitation to submit detailed solution (TSDS)
Preferred Bidder
Financial Close
Contract management
Prepare
Documents
Preparation and evaluation of bidder documents
Project Selection
Brief development
Market testing
Financial Close

17. Risks in PPP Optimal risk sharing
Risk borne by the party best able to manage it
Risk management
Identification
Allocation
Mitigation

18. Stages of risk management
Risk identification
Risk quantification
Risk allocation
Risk mitigation
Risk monitoring and control

19. Sustainability Embedded environmental and social safeguards
Focus on longer timescales
Public, business and government working in partnership

20. What makes a successful PPP?
Political will
Government commitment
PPP Champion
Clear output specification
Appropriate risk sharing
Value for money
Performance management

21. Conclusions PPPs allow the injection of private sector capital
Undertake projects for the benefit of the citizens, including the socially and economically disadvantaged
Allows governments to approach projects hitherto unobtainable due to lack of funding
Provide incentives to the private sector to adopt green criteria
Embraces the MDGs
PPPs allow the injection of private sector capital

22. End-of-Module Questions
1. Which of the following best describes PPP projects?
Using funding from public borrowing.
Local government sets the specification
Public sector details design and pays for the construction
Government sets the required outputs and funding is provided by the private sector.
Answer: d)
2. What is the name of the organisation created to design, build finance and maintain the asset?
Answer: Special Purpose Vehicle - SPV

23. End-of-Module Questions
3. Which of the following are critical to good governance?
Funding for the project
Clarity and openness
Putting the public first
Transferring the risk to the private sector.
Answer: b) and c)
4. Which one of the following would not be described as an international investor? a) Banks b) Pension funds
c) Insurance companies d) Employees holding shares through an employee share scheme.
Answer: d)

24. End-of-Module Questions
5. The term sustainability refers to?
Maintaining resource use at current or higher levels
Keeping the natural environment and society in a happy healthy and functional state
Holding or increasing the value of human life
Focus on fulfilling short term need.
Answer: b)
6. Risks should be borne by the party best able to manage them a) True
b) False
Answer: a)

25. End-of Module Questions
7. What does an OBC demonstrate? a) That a project is economically sound, financially viable and will be well managed
b)That a project meets market expectation
c) That significant profit will accrue for the public and private sector
d) None of the above
Answer: a)
8. What are the phases in a PPP project life cycle?
Answer: Initial feasibility, Procurement phase, Construction phase, and
Operational phase
9. Match up the boxes.
Service contracts
Design, build, finance
Concession contracts
Private sector managing services
Construction contracts
Public sector provides management support