Making successful cases for Public Private Partnerships
Mark Williams, property and infrastructure lead at PA Consulting Group and John Wilkinson, MOD Defence Infrastructure Organisation PFI Advisor (on secondment from PA Consulting Group)
Infrastructure investment under good PPPs/P3s deals
It is well documented that infrastructure investment is vital to support economic growth. In emerging markets and developing economies there is now greater collaboration between the public and private sector working to transform property and infrastructure, thus providing exciting investment opportunities. We are seeing public private partnerships (PPPs/P3s) in a wider range of countries and in new sectors, for example water and wastewater, in both new PPP/P3 markets and in those with established PPP/P3 agreements in development and operation. Success is dependent on structuring the right deal and gaining support from government institutions and the private sector.
The variety, complexity of deals and the mixed messages that have been sent have resulted in criticism in some quarters of existing deals and challenges in agreeing new ones. PPP/P3 deals have become contentious and the projects can take a long time and consume valuable, scarce resources with some deals failing to be agreed after significant development.
This article considers how government institutions can improve the flow of infrastructure funding through PPP agreements, focusing on how performance can be improved by building capability to create good deals and using a compelling business case to convince decision makers and influencers.
Creating good deals
To support the development of good deals, specialist PPP/P3 training is available to equip public sector organisations with the capabilities to prepare, procure and manage the full range of these valuable partnerships. The Certified PPP/P3 Professional (CP3P) / APMG PPP Certification Program has been developed by a number of regional development banks and the World Bank Group, and was part funded by the Public-Private Infrastructure Advisory Facility to enhance PPP performance globally. The course covers:
- Definition and main characteristics of a PPP
- Alternatives for infrastructure finance and procurement
- Types of PPP and other terminology applied
- Where PPPs are used
- Motivations for using PPPs
- Typical structure of a PPP
- How PPPs are financed
- Reasons for project failure
- Introduction to the PPP Framework concept and considerations
- Overview of the PPP Process
The CP3P credential provides a credible demonstration that an individual has PPP skills that are aligned with international good practice. At a national scale, the benefits of this accreditation programme include equipping organisations with the know-how to champion vital collaborative infrastructure programmes and projects.
Using the Five Case Model to build a compelling business case for successful PPPs
Irrespective of whether the proposed PPP/P3 is the greatest deal ever, without the ability to progress through the decision making hurdles it remains an academic exercise. Greater transparency and scrutiny mean that the decision making business case for the deal must be robust, with the business case used as the tool to explain the deal and convince approvers.
The UK Treasury defines a government business case model in the Green Book and to support this has been developing and championing the Better Business Case (BBC) approach; this is now being used by governments and global non-governmental organisations around the world. The APMG BBC training course and accreditation programme has been delivered to around 4,000 government officials and advisors.
The APMG BBC training equips staff to guide decision makers and senior stakeholders through the Five Cases to build the compelling Business Case Model to make the best value-for-money decision.
The Five Cases organise the business case into the key relevant topics:
- Strategic = “Applicable” does it meet the policy, strategic and organisational needs?
- Economic = “Appropriate” does it offer optimal public value, in the context of a long list and then short list of options?
- Commercial = “Attractive” is it attractive to both the public and the private sector (on the assumption that a procurement competition will be required)?
- Financial = “Affordable” can we afford it within the agreed funding envelope?
- Management = “Achievable” can it be successfully delivered?
This model is being used extensively to support better decision making in the appraisal of government spend. The clarity delivered is particularly relevant in support of PPP deals where the complexity and long term nature of the deals raises many questions.
More information on CP3P is available at https://ppp-certification.com/.
More information on BBC is available at www.apmg-international.com/en/qualifications/better-business-cases/better-business-cases.aspx
For more information about PA Consulting Group visit www.paconsulting.com
Mark Williams, Director and Property & Infrastructure Lead at PA Consulting and member of CIPFA's Governments Faculty Board - specializes in providing financial and commercial advice on a range of complex contract PPP/PFI savings projects across defence, transport, education and health.