Institutional responsibilities for PPPs, that is, which entity will play what role at each step of the process will need to be defined in the framework.

Institutional arrangements differ widely from place to place. This depends on the particular needs of the PPP program and the pre-existing institutional roles and capacities.

General principles for effective design of institutional arrangement for PPPs

General principles to guide institutional arrangements for PPPs include the following:-

As an alternative approach to originating and developing PPP project ideas, some governments accept unsolicited or privately-initiated PPP projects. By welcoming “privately-initiated” projects, governments can harness information and ideas that private firms have about how to provide services people need. At the same time, allowing firms to promote their own project ideas is tricky. If the idea is then put out to competitive tender, firms may feel there is no point in volunteering good ideas since they cannot benefit from doing so.

Finally, having executed the contract, the PPP enters the final and longest “stage” – managing the contract throughout its operational phase. The challenge is to ensure the PPP provides Value for Money throughout the contract, not just at the Construction Phase. This typically requires ongoing management of the PPP.

A well designed and implemented procurement is central to achieving Value for Money from the PPP. Procurement processes can include marketing the PPP, checking the qualifications of bidders, inviting and evaluating proposals, interacting with bidders during the process, selecting the preferred bidder, and concluding the contract. Stakeholder engagement is essential to this and all other stages, as outlined in box 2.9.

Before the PPP transaction can be implemented, the tender documents and the draft PPP contract need to be prepared. To prepare the tender documents, the evaluation criteria and proposal requirements must be developed. To prepare a contract, the outputs, responsibilities, and risk allocation need to be fully defined and expressed in appropriate legal language.

Candidate projects that survive the “screening” are then developed and appraised. Again, this is an iterative, or multi-stage, process. The appraisal report, often called a “Business Case”, is typically the basis for approval to proceed with the PPP transaction.

In describing the framework in this PPP Guide, project and procurement decisions are considered as part of the same process. A two-stage process, however, is not always practical, as outlined in BOX 6.

The process starts with project origination, typically following the same or using a similar process as for originating public sector investment projects, while screening projects for their potential suitability as PPPs. Screening at this stage is usually indicative, limited to the information available at relatively low cost.

Decision criteria

The framework should ensure that only projects that meet the following criteria proceed:-

The framework should provide guidance on each stage of developing and implementing a PPP project from initially identifying candidate projects, to managing PPP contracts throughout the project lifecycle.

Thus far the discussion has assumed that a government is creating a framework to guide its own actions. However, where there are multiple levels of government, and there may be instances when one level may wish to empower, influence, or control a lower level of government. In federal systems, national governments may wish to affect the legal framework for states.[56] National and state governments may also wish to enable or control local government entering into PPPs.

Regardless of the tradition within which a PPP framework is constructed, it is not constructed in isolation. Rather, it builds on, incorporates, and modifies the pre-existing frameworks for contracting, procurement, and financial management in government. It makes sense to use as much of the existing frameworks as possible and to ensure that whatever is added that is specific to PPPs dovetails with existing systems. Among these pre-existing systems, the following are typically found:-