Presentation made by Jose Viegas, International Transport Forum, OECD, at the Symposium on Governance of Infrastructure held at the OECD, Paris, on 29 February 2016

1. Planning and preparing Infrastructure
plans and projects
Jose Viegas,
Secretary General
International Symposium on the Governance of Infrastructure
Paris, 29 February 2016

2. • Anticipating future infrastructure needs
 Demand forecasts are never accurate
 But main sources of variation should be identified and reflected in plans
 We are currently in the confluency of three major vortexes,
creating additional design difficulties for forecasts:
 Reduce carbon emissions / electrification;
 Autonomous driving vehicles
 Emergence of sharing economy (and mobility solutions)
• Identifying and managing interdependencies between sectors
or projects
• Diversity of interests  Building stakeholder support
• Aligning incentives between a short-run regulatory horizon and
long-term outcomes (return on assets; solving problems)
Challenges on Strategic project planning

3. • Assess projects’ performances under different scenarios, test
robustness of potential options
• Devising highly adaptable masterplans (robust design), supported by
structured dialogue
 Ensuring views from other sectors and jurisdictions are considered
 In a transparent and collaborative process, to maximise
stakeholder support
• Adopt a stable policy and regulatory framework
 With in-built mechanisms to facilitate evolution to predictable
future policy adaptations and limit impacts of other hurdles to
project delivery
How to overcome these?

4. Procurement mode depends on the
sector governance model
• Planning and procurement of major infrastructure is mostly
managed by the state. In general, the state has three options:
 traditional public procurement, sometimes with a limited
degree of bundling (mostly design&build) and contract power
(cost-plus, risk sharing, fixed price/turn-key);
 project finance PPPs (design, construction, and
management of discrete assets);
 regulated concessions/privatizations (of networks and
discrete assets) and procurement through the regulated
company.
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5. What is the best procurement mode?
• A structured process to of unbiased assessment of each
procurement mode against a common VfM standard must be
evidence-based
– i.e. requires a solid perception of VfM of past of projects
under different procurement modes
• But there is no available research on the comprehensive
comparative performance of PPPs vs other forms of infrastructure
provision and management
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6. What is the optimal risk allocation
• Basic recommendation from the literature:
 Allocate risks to parties best able to manage and bear them;
• But even this is not always enforced and recommendation not
precise enough.
• How much risk should we transfer?
 Large risk transfer leads to higher financing costs, and self-
selection from bidders, reducing competition for the contract
 Transferring “risk” or uncertainty? (transferring “uncertainty”
is a lot more expensive to transfer than “risk”)
 Complete contracts assume that all sources of outcome
variation are well known!
• Efficiency = information (on risk) + competition (for the contract)
 Do we have that?
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7. Is there a public sector capacity
problem in infrastructure planning?
• Generally yes, due to two major causes:
Insufficient evidence-based knowledge
Multiple and diverging interests in presence
 Short-term vs. long-term
 Across sectors and levels of administration
 General vs. particular
 The knowledge gap  focussed research on:
 Scenario development integrating the emerging deep changes
 Critical issues for assessment of procurement modes
 Develop open contracts with window for real partnership when addressing
unpredictable outcomes
Diverging interests  Structured dialogue:
 External dialogue: Use of reference bases for problem identification, ex-ante cost and
time estimates
 Internal dialogue: With multiple stakeholders, develop common awareness of the
challenges and constraints and vison on how to address them
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8. ITF’s upcoming work
Working Group on Infrastructure Governance: Infrastructure
Risk Treatment and Moving Beyond the (project finance) PPP
• How does risk transfer affect the efficiency incentives in different
models of private investment? (regulated model vs competition for
the contract).
• What is the optimal risk treatment in diverse sector contexts in
transport infrastructure projects?
 Is risk pricing in project finance PPPs efficient?
 What is the comparative perspective of risk pricing in regulated
concessions/privatisations?
 How precise are our perceptions about risks? A good view on the
distinction between risk and uncertainty ?
 ….
• Request for nominations by countries has been launched
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9. Thank You
jose.viegas@itf-oecd.org