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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...
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Body of Knowledge:
Establishing a PPP Framework
Affordability means the “ability to be accommodated within the inter-temporal budget constraint of the government”.[130] Due to the long-term and contingent nature of PPP costs, it is not easy to decide whether they are affordable. In practice, affordability is assessed by considering the medium-...
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Body of Knowledge:
Establishing a PPP Framework
Budgeting for PPPs involves making sure that money is appropriated and available to pay for whatever cost the government has agreed to bear under its PPP projects. Because such costs may be contingent or occur in the future, PPP budgeting can be hard to manage in traditional annual budget cycles....
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Body of Knowledge:
Establishing a PPP Framework
Governments need to account for and report on their financial commitments, including those under PPP contracts. Fiscal reporting on PPPs needs to be consistent with fiscal reporting generally. There are three main types of fiscal reporting.
Government finance statistics: These are summary...
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Body of Knowledge:
Establishing a PPP Framework
In addition to considering fiscal exposure on a project-by-project basis, some governments introduce targets or rules limiting aggregate exposure. Given the difficulties in deciding whether a particular PPP commitment is affordable, limits on aggregate exposure can be a helpful way to ensure the...
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Body of Knowledge:
Establishing a PPP Framework
PPP projects are usually implemented by the Executive branch of government. The processes and responsibilities described in section 1.7 aim to create checks and balances within the executive branch as to how those decisions are made. This section describes the broader governance of the PPP program...
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Body of Knowledge:
Establishing a PPP Framework
The legislative branch of government, that is, the elected, law-making parliament or assembly may control the PPP process in several ways.
Defining the PPP legal framework and policy: The PPP framework is often established in specific PPP legislation. As described earlier in this chapter, one...
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Body of Knowledge:
Establishing a PPP Framework
Audit entities are an important link in the chain of accountability for public expenditure decisions, providing independent reviews of government finances and performance to parliaments and to the public. The International Organization of Supreme Audit Institutions (INTOSAI) provides an online list...
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Body of Knowledge:
Establishing a PPP Framework
PPPs are meant to provide value to the public. Getting the right level of public involvement in the PPP process and program can make or break the legitimacy of a PPP program, and directly contribute to good governance. Direct public participation at various points in the PPP process can improve...
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Body of Knowledge:
Establishing a PPP Framework
High value transactions attract the risk of corruption. Private players may attempt to improperly influence transactions and public officials may attempt to extract private profit from public office. Corruption in PPPs can be minimized using the mechanisms outlined above clear processes and...
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Body of Knowledge:
Appraising PPP Projects
PPP projects demand a very sound preparation if they are to deliver timely, effective, and cost-efficient infrastructure. A significant part of this preparation is done in the Appraisal Phase. Appraising a PPP project means conducting a series of feasibility exercises that inform a decision to...
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Body of Knowledge:
Appraising PPP Projects
The Appraising or Appraisal Phase, presented in this chapter, begins once the project has been clearly identified, screened as a PPP, and preliminarily defined (in terms of the scope of the proposed contract). It should end with the green light decision to procure the project through a PPP or to...
