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Body of Knowledge:
Establishing a PPP Framework
The diversity of legal traditions and PPP types shows there is no single best way to document and give force to a PPP framework. Rather, the right way to establish a PPP depends on the administrative and legal traditions in the country, and the government’s objectives. This section looks at the...
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Body of Knowledge:
Establishing a PPP Framework
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...
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Body of Knowledge:
Establishing a PPP Framework
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,...
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Body of Knowledge:
Establishing a PPP Framework
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.
Governments need to ensure that only ‘good’ PPP projects are developed. These are PPPs that,...
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Body of Knowledge:
Establishing a PPP Framework
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...
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Body of Knowledge:
Establishing a PPP Framework
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...
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Body of Knowledge:
Establishing a PPP Framework
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...
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Body of Knowledge:
Establishing a PPP Framework
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...
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Body of Knowledge:
Establishing a PPP Framework
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...
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Body of Knowledge:
Establishing a PPP Framework
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...
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Body of Knowledge:
Establishing a PPP Framework
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...
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Body of Knowledge:
Establishing a PPP Framework
In developing a PPP framework, it is useful to consider the main responsibilities and identify an existing institution, if available, that is suitable for each one. The main responsibilities include the following.
Identifying and procuring projects: Driving forward the PPP project: identifying...
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Body of Knowledge:
Establishing a PPP Framework
Projects can be identified and championed by the procuring authority or central authorities. The procuring authority is the public party to the PPP contract. The procuring authority is responsible for conducting the PPP deal and managing the PPP contract. This role typically falls to the entity...
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Body of Knowledge:
Establishing a PPP Framework
Sector agencies may lack some of the skills needed to identify and develop PPP projects successfully. Particularly at the early stages of a PPP program, sector agencies may have little experience in engaging with the private sector on privately financed projects. Sector agencies may also lack...
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Body of Knowledge:
Establishing a PPP Framework
PPP programs create direct and contingent liabilities. The government will need to ensure that there is sufficient fiscal space to fund direct liabilities, as well as to deal with situations where contingent liabilities translate into fiscal expenditures. The financial management of PPPs is...
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Body of Knowledge:
Establishing a PPP Framework
Most governments have rules for approving capital investment projects that is, defining who can give approval at various points in the life of the project for the project to proceed to the next phase. Because PPPs often do not require capital investment by the government, they may not automatically...
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Body of Knowledge:
Establishing a PPP Framework
Many governments with successful PPP programs have created a dedicated unit (either as a separate entity, or within an existing department) tasked with implementing, facilitating, or advising on PPPs. (see box 2.15 for example) These are referred to as PPP units. Their roles often include the...
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Body of Knowledge:
Establishing a PPP Framework
Public financial management of PPPs relates to how fiscal commitments under PPPs are controlled, reported, and budgeted. Public financial management aims to reduce the risk of PPPs costing the government more than expected or placing undue burden on future generations.
PPP contracts commit...
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Body of Knowledge:
Establishing a PPP Framework
Fiscal commitments to PPPs can be payments for services, capital contributions, or subsidies to reduce costs for users, or a means to share risk. The wide range of fiscal commitments can usefully be divided into the following categories.
Direct liabilities: known payments that must be made if the...
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Body of Knowledge:
Establishing a PPP Framework
A government’s fiscal commitments – both direct and contingent – will be established by the PPP contracts. The value of direct liabilities will be relatively simple to quantify. In many cases its value will be explicitly expressed in the contract. Valuing contingent liabilities is more complicated...
