Presentation on the Decentralization and Central Coordination of Government Agencies/Deparments for the Implementation of PPP Program. This presentation was first done in PPPI Days, 2006, which is a seminar organized by the World Bank Institute that used to be accessible only to the PPP Unit heads.

1. Decentralization and Central
Coordination
Mauricio Portugal Ribeiro
Head of the Brazilian Government PPP Unit
PPPI Days 2006
Washington, DC, June 6-8

2. Horizontal Decentralization
 Decentralization among agencies of a certain level of Government
 Central PPP Unit
• Public enterprise or PPP (PUK model)
• As part of the Ministry of Planning or of the Ministry of Finance
 Decentralized approach – the Brazilian case
• Development of projects, award of contracts, monitoring - Sector Line
Ministries
• Provide technical assistance to Government agencies, oversees the project
development and procurement specially in the pilot projects - Ministry of
Planning PPP Unit
• Evaluates the fiscal impact of each project and oversees the compliance with
the fiscal responsibility act requirements – The Treasury
• The Federal Government PPP program is managed by CGP, a council in
which the Ministers of Planning, Finance and the President Chief of Staff sit
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3. Vertical Decentralization
 Decentralization among Central (or Federal),
State and Local Government
• It is a legal and many times a Constitutional matter
• The law attribute to a certain Government entity the
responsibility to provide public utilities in a given sector
• For an instance, in the case of Brazil:
• Gas distribution - member States
• Energy transmission and generation – Federal Government
• Local transportation (bus) – Local Government
• The Government can provide it directly, creating a public
enterprise or under PPP arrangements
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4. Main Challenges created by
Decentralization
 Uniform legal and institutional framework
 Sector planning and project development
 Capacity building
 Project selection for PPP
 Risk management
 Financial strength of Regional/Municipal
governments
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5. Creating Uniform
Legal/Institutional Framework
 Uniform legal/institutional frameworks
 Creation of a PPP market requires knowledge and confidence
in the legal and institutional framework to implement PPP
 It also reduces transactions costs
 Means to create uniform legal/institutional frameworks
 Federal Government has by law the power to issue standards
on PPP
 Federal Government
• make available model laws (acts, decrees etc), contracts or
provisions for State or Local Governments
• provide assistance in the use of these models
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6. Sector planning and project
development
 The main PPP program difficulty for many developing countries
• Lack of capacity to adequately plan the investments in each sector and to
develop projects
• As a result, lack of trustable information on the projects
 Historical roots: during the privatization process of the 90’s
• No special strategy was adopted to maintain senior planning officers in the
Government
• Lost many of the senior officers to privatized companies and to regulatory
agencies
 This problem affects all levels of Government: the question is what can
the Federal Government do to help State/Local Governments that are
facing this problem?
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7. Recruitment and training of
the Government officials
 Main concern is the recruitment and training of
the Government officials
 The Brazilian Federal Government obtained a donation
from IADB (FUMIN) of U$ 2,5 million
• among other things to invest in training of the PPP staff of
Federal, State and Local Government
• to provide assistance on the creation of State/Local legal
and institutional framework to implement PPP
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8. Recruitment and training of
the Government officials
 Main concern is the recruitment and training of
the Government officials
 On the focus of the training
• In some countries might be the case that Local/State
Governments
• Have expertise to manage the procurement of public works
• Focus of the training in this case must be in:
• creating culture of service output specification
• developing financial and legal expertise
 How to avoid losing the trained personnel
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9. Developing model projects in
each sector
 Reasons
 Access to international best practices and adaptation to the domestic context
 Models can be reproduced in other projects
 Reduces transaction costs and tends to enhance the quality of the project
documents
 Learning by doing aspect of PPP projects
 Specially important if there is
 Underdevelopment of the domestic consultancy market which affects all levels of
Government
 Poor consultancy procurement practices and rules (use of price as the main
criterion)
 Historic underinvestment by the public sector in project development
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10. Developing model projects in each
sector
 Attempts to solve it
 Brazilian Federal Government has entered in agreements with multilateral
organizations (IFC and CAF) to obtain technical assistance to develop projects
 Brazilian Federal Government is considering the creation of a fund to be
managed by a multilateral organization to fund project development of Federal,
State and Local Governments
 The challenge in the medium term is to
 Have a model project in each strategic sector that can be reproduced
 Enhance the public sector consultancy procurement and monitoring expertise
• Development of model terms of reference and contracts for consultancy works by the
Federal Government to States and Local Governments is an option
 Have a real project pipeline, which allows the consultancy firms to invest in
creating expertise and provide higher quality service
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11. Project Selection
 Definition of the minimum scale that offsets the transaction costs involved
in a PPP
 In Brazil
• To be procured as a PPP, a project have to involve minimum of investment (PV) of R$20
million (approximately U$8m)
• technical matter that have political unfoldments
• Discussion on unconstitutionality of the minimum investment limit
 Minimum scale maybe a condition for the Federal Government to support a
Local/State PPP project
 Scale can be obtained by bundle of projects (ex. the British Schools of the Future
project)
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12. Fiscal Responsibility
 Fiscal responsibility requirements may
limit the capacity of State/Local
Government to enter in large PPP
contracts
 In Brazil, the PPP law limits annual expenses
with PPP payments in 1% of the entity current
net revenues
 Financial support of the Federal Government to
make certain projects viable (coordination
issue)
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13. Financial Strength
 Credit rating of State/Local
Government may not be enough
 Possibility of Federal Government to
backstop State/Local Government
 The concern with the incentives
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