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Project Identification and PPP Screening

39. Scoping the PPP Project and its Challenges

Scoping the PPP project means defining the work that must be done by the future private partner to deliver the project objectives. Potentially some portions of the project scope (technically speaking) may be refined and removed from the PPP project (for example, if the project selected is a bus rapid transit system, the future PPP may include the bus way, bus stops and depots but exclude the vehicles).

Consequently with the refined technical outline (accommodated to match the PPP scope), the project scoping includes the definition of the scope of the service and/or the scope of the business to be handled by the private (for example, it may or may not include tariff collection).

This should be expressed as a service standard defining what will be done, to what quality levels, and by whom. 

The following questions about a project[27] may assist governments in resolving uncertainty as to the PPP scope.

  • Who are the parties ultimately involved?
  • What do the parties want to achieve?
  • What is it that each party is interested in?
  • Which way (how) is each party’s work to be done?
  • What resources are required?
  • When does it have to be done?

Box 3.11 sets out how these questions were answered for an example project, Liverpool Direct.

BOX 3.11: Liverpool Direct[28]

In 2001, the Liverpool City Council, faced with under-investment in information technology infrastructure and with a badly integrated multitude of systems, entered into an 11 year strategic partnership with British Telecommunications worth £300 million.

Who are the parties ultimately involved?

The City Council was looking to change the quality of the services provided to citizens through the use of better information technology. Outdated technology, siloed information, and inefficient paper-based processes were among the problems it faced as one of the United Kingdom’s (then) worst-performing local authorities. Apart from better systems and technology, a significant amount of change management with the attendant labour issues would also be involved.

When does it have to be done? What resources are required?

The City Council was determined to move away from the traditional models of client and contractor adversarial behavior, as well as costly and bureaucratic contract monitoring arrangements. At the same time, it was looking for significant new investment combined with flexibility to meet the evolving needs of users. The services identified included call centers, customer contact centers, and payroll and human resource administration. A soft market testing process was then used to confirm that such a package was likely to generate interest from suppliers with relevant experience.

What do the parties want to achieve?

The pre-qualification process focused on the experience, expertise, and financial capacity of bidders, and output specifications were developed for each part of the service. Four bidders were short listed.

What is it that each party is interested in?

The partnership involved a 20 percent equity share and the involvement of the City Council through the board in the service delivery vehicle. This enabled the City Council to be involved in strategic decisions and keep a close eye on delivery costs. Service levels and the timetables for enhanced service delivery were then agreed for each service component. The City Council was not liable for the losses of the joint venture.

How is each party’s work to be done?

The project demonstrated high levels of performance, even higher than those contractually committed to, resulting in significant reductions in the costs of service delivery.

What is it that each party is interested in?

 

Robust project PPP scoping delivers benefits related to uncertainty reduction, including[29]:

  • More accurate risk calculations (through more open communications between project parties);
  • Reduced control costs (through, for example, faster and more effective contracting);
  • More effective teams (through improved confidence); and
  • Improved planning (through more honest specifications and estimates).

Many projects fail due to poor scoping in the early phases[30].

“Many projects start with good ideas, huge investments, and great efforts. However, most of them do not achieve much success. A major contribution to unsuccessful projects is the lack of understanding for defining project and product scope at the start of the project. A properly defined and managed scope leads to delivering a quality product, in agreed cost and within specified schedules to the stake-holders.”

A definitive decision on the contract scope is sometimes postponed to appraisal phase. Chapter 4 (section 1.4.1) provides some examples of how scoping is relevant and may vary significantly in some sectors.

 

[27]  Chapman C.B., Ward SC. Managing Project Risk and Uncertainty: A Constructively Simple Approach to Decision Making.  Chichester, UK: John Wiley & Sons Ltd.; 2003.

[28] Adapted from How to Engage with the Private Sector in Public-Private Partnerships in Emerging Markets. Farquharson, E.; de Mästle, C. T., Yescombe, E.R. The International Bank for Reconstruction and Development/The World Bank (2011).

[29] Hartman, F. Smart Trust: A Foundation for More Effective Project Management, in Proceedings of 15th IPMA World Congress on Project Management, London, 22–25 May 2000, London, IPMA, 2000.

[30] Mirzaa, M.  N., Pourzolfagharb, Z., and Shahnazaric, M.  Significance of Scope in Project Success.  In Procedia Technology 9 (2013) pages 722 – 729.

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