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PPP Introduction and Overview

18. Causes of Project Failure: The Need for Sound Process Management and Preparation of Projects

Section 4 (Motivations for using PPPs) described the features and value drivers of a PPP, that is, those characteristics that allow the government and the taxpayer to benefit from incremental efficiency when procuring suitable projects as PPPs. But the section also signals some conditions necessary to access those benefits, as well as some disadvantages and potential pitfalls.

A PPP project should only be procured when there is strong evidence that it is the right project (as in any procurement option, the project has to be technically feasible and the best economical option for the public need), affordable and feasible in commercial terms (there will need to be significant competition, with bankable offers). In addition, the PPP option should only be adopted when there is significant evidence that it will add incremental Value for Money to the technical option or the project identified, compared to other procurement methods.

There are risks that VfM (and feasibility) may be improperly assessed (errors in estimating costs or assuming benefits, or indeed other mistakes in the whole assessment). Another risk is that the ground work is poorly prepared, for example, risks and weaknesses are not detected and properly treated in advance. VfM may be lost through improper structuring or drafting, or poor management of the tender process or contract during its operational life.

VfM has to be protected and maximized through the preparation and implementation process, and throughout the life of the contract. This involves a proper management of the process, with suitable capabilities and resources, as well as the need to follow standard approaches and good practices. These are the paramount conditions for a PPP to succeed (that is, to avoid project failures). Section 10 introduces the phases of a typical process, and chapters 3 to 8 of the PPP Certification Guide describe each of the phases of the PPP process cycle, providing intelligence and good practice regarding each of the phases.

Before the introductory description of the PPP process (section 10), this section will explain how improper PPP process management, especially regarding appraisal and preparation, may end in a project failure. It will also provide examples of project failures that emerge at different stages of the project process cycle.

Section 9 will introduce the concept of a framework and its relevance for the success of PPP as a programmatic and strategic approach.


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