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Role of Procurement Professional in Public Private Partnerships (PPPs)
- 1. Role of ProcurementProfessional in Public Private Partnerships (PPPs) Professor Benon C Basheka, PhD DEAN, SCHOOL OF BUSINESS AND MANAGEMENT UGANDA TECHNOLOGY AND MANAGEMENT UNIVERSITY bbasheka@yahoo.co.uk, Mobile: +256782459354
- 2. INTRODUCTION • Today,the distinction between the role of government, and the private sector is blurred • It is quite common to find activities which were traditionally done by the government (at whatever level) now being done by the private sector • It is also no longer strange to find governments doing certain activities which are known to be for the non state actors
- 3. …. • Governmentdepartments and agencies also now want to make profits; which used to be the concern of the private sector • Governments are called upon to adopt ‘business-like approaches’ in their activities • There are several alternative service delivery mechanisms like contracting out, outsourcing, PPPs, third-party governance etc
- 4. Within this environment:- • The Role of the Procurement professional has changed and will continue to change • The skills requirements for procurement professionals become multiple-managerial as opposed to technical • The competences and strategic role in decision making by procurement professionals also changes
- 5. Globally, • TheProcurement profession is one of the fastest growing professions in the world • Global standards for procurement professional practice have been adopted • Debates on professional practice license have been made
- 6. Important to notethat:- • Governments and procurement departments around the world face real challenges in delivering good quality products and services, including challenges of mounting debt and budget cuts. • Good practices do exist, but media reports of waste and inefficiency are on the increase. • Excellent results are being achieved around the world using best practice principles.
- 7. Global Efforts •The Institute for Public Procurement (NIGP) and the United Kingdom's Chartered Institute of Purchasing and Supply (CIPS) have jointly released Ten Global Public Procurement Practices. • These ten standard practices provide high-level guidance across the following procurement activities: – Strategic Procurement Planning – Performance Measurement – Performance Metrics
- 8. – Use ofCooperative Contracts – Transparency – Risk Management – Ethical Procurement – Procurement Policy Manual – Performance Management and – Performance-Based Contracting.
- 9. The Chartered Instituteof Purchasing and Supply • Is the world's largest procurement and supply professional organization. • It is the worldwide center of excellence on purchasing and supply management issues. • CIPS has more than 65,000 members in 150 different countries, including senior business people, high-ranking civil servants and leading academics.
- 10. • The activitiesof purchasing and supply chain professionals have a major impact on the profitability and efficiency of all types of organization, and CIPS offers corporate solutions packages to improve business profitability. • The joint global initiative is a significant milestone for the public sector and has the potential to contribute significantly to the public good and global economies.
- 11. • Establishing andleading adoption of a set of principles and practical documents, and a common procurement language around the world, is ambitious. • Support of the initiative throughout the public sector can help to achieve worthwhile and sustainable change.
- 12. • Procurement professionalsare diverse in terms of: – Age – Gender – Experience and exposure – Educational attainment – Level of Professionalization – Trust – Competence and skills
- 13. Procurement Involvement •The procurement function, represented by procurement professionals, does not take a leading role in many government agencies. • There is often lack of procurement considerations in organizational planning and the setting of organizational strategy.
- 14. In Literature, •A significant amount of procurement literature reflects concern over perceptions of the field as a merely clerical or tactical function. • One group of authors captured this when they described public procurement as the “Rodney Dangerfield” of governmental activities; that is, it gets no respect due to its routine and mundane features (Gordon, Zemansky & Sekwat, 2000).
- 15. • Other authorslike (McCue & Gianakis, 2001; Matthews, 2005) argue that, procurement is becoming more strategic. • Ammer (1974) over 30 years ago, surveyed industry executives to investigate, among other questions, their perceptions of the purchasing (procurement) function.
- 16. He found thatgeneral managers saw (1) Leadership as an unimportant characteristic for purchasing managers; (2) Purchasing as having little interaction with the mainstream of management; and (3) Little involvement by purchasing in strategic decisions.
- 17. McCue and Gianakis(2001), • Concluded from a survey of procurement professionals that these professionals did not consider planning—an activity aligned with strategy and leadership—a major component of their duties. • The respondents also found planning to be insignificant compared to other steps in the procurement process.
- 18. • A laterstudy by Johnson, Leenders & McCue, 2003) developed similar conclusions, finding that procurement managers and offices have relatively little to do with major organizational activities. • Taken together, this body of research indicates that procurement is still considered by many both within and outside the field to be a routine function with little relation with organizational strategy and leadership.
- 19. Role of Procurementin PPPs • A public–private partnership (PPP) is a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies. • PPP involves a contract between a public sector authority and a private party, in which the private party provides a public service or project and assumes substantial financial, technical and operational risk in the project.
- 20. • In sometypes of PPP, the cost of using the service is borne exclusively by the users of the service and not by the taxpayer. • In other types (notably the private finance initiative), capital investment is made by the private sector on the basis of a contract with government to provide agreed services and the cost of providing the service is borne wholly or in part by the government. • Government contributions to a PPP may also be in kind (notably the transfer of existing assets).
- 21. • In projectsthat are aimed at creating public goods like in the infrastructure sector, the government may provide a capital subsidy in the form of a one-time grant, so as to make it more attractive to the private investors. • In some other cases, the government may support the project by providing revenue subsidies, including tax breaks or by removing guaranteed annual revenues for a fixed time period.
- 22. There are usuallytwo fundamental drivers for PPPs. – Firstly, PPPs enable the public sector to harness the expertise and efficiencies that the private sector can bring to the delivery of certain facilities and services traditionally procured and delivered by the public sector. – Secondly, a PPP is structured so that the public sector body seeking to make a capital investment does not incur any borrowing.
- 23. How did theyemerge • Politics-Administration Dichotomy (1887-1926) • Principles of Administration (1927-1937) • Era of Challenges (1938-1947) • Identify crisis (1948-1970) • From Public Administration to Public Management (1970s-Late 1990s)
- 24. • From PublicManagement to Governance (late 1990s to 2008) • Global economic crisis (2008-2010) • From Governance to New Public Governance (2010) • New Public service Management (2013)
- 25. From Public administrationto Public Management • The model was driven by the markets and was championed by public choice theorists and institutional economists – Terms like Management literally replaced Administration – Business Administration/Management Graduates were favored to work in government than graduates of public administration-whose primary area of operation is government – Certain public policies shifted and became driven by public management approaches as opposed to public administration approaches
- 26. – National developmentplans in most African Countries, where they existed adopted a Business Approach as opposed to a Public Administration approach – Public sector was fundamentally reduced through reforms like downsizing and retrenchment; although those retrenched in a number of countries, come back to government through the back door – Public administrators were replaced by public managers
- 27. – Government parastatalsin most countries were privatized only to come in a different form as executive autonomous agencies – Central governments were decentralized through a wave of initiatives – Public service values have been replaced by business values – Employment terms which used to be permanent and pensionable basis have been replaced by contract – based employment
- 28. – An entrepreneurialspirit has been injected in the running of government which has seen some government entities expected to run on business models as business corporations – Citizens have been replaced with a more business oriented terminology of customers and clients – Certain management philosophies and styles borrowed from the private sector have entered the public sector-results-oriented management, benchmarking, right sizing, re-tooling etc – Alternative modes of service delivery emerged including PPPs and contracting out
- 29. – Performance managementsystems have been introduced – Institutes of Public Administration had to be re-named to at least add the word management – That explains why MPA has a course Public Management Theories not Public Administration Theories – Reforms at a political and economic levels to reduce the role of government become a household name-decentralisation, privatisation etc
- 30. On PPPs specifically, • Pressure to change the standard model of public procurement arose initially from concerns about the level of public debt, which grew rapidly during the macroeconomic dislocation of the 1970s and 1980s. • Governments sought to encourage private investment in infrastructure, initially on the basis of accounting fallacies arising from the fact that public accounts did not distinguish between recurrent and capital expenditures.
- 31. • The ideathat private provision of infrastructure represented a way of providing infrastructure at no cost to the public has now been generally abandoned; however, interest in alternatives to the standard model of public procurement persisted. • In particular, it has been argued that models involving an enhanced role for the private sector, with a single private-sector organization taking responsibility for most aspects of service provisions for a given project, could yield an improved allocation of risk, while maintaining public accountability for essential aspects of service provision.
- 32. • Initially, mostpublic–private partnerships were negotiated individually, as one-off deals, and much of this activity began in the early 1990s. • PPPs are organized along a continuum between public and private nodes and needs as they integrate normative, albeit separate and distinct, functions of society—the market and the commons.
- 33. • A commonchallenge for PPPs is allowing for these fluxuations and reinforcing the intended partnership without diminishing either sector. • Multisectoral, or collaborative, partnering is experienced on a continuum of private to public in varying degrees of implementation according to the need, time restraints, and the issue at hand.
- 34. • Even thoughthese partnerships are now common, it is normal for both private and public sectors to be critical of the other’s approach and methods. • It is at the merger of these sectors that we see how a unified partnership has immediate impact in the development of communities and the provision of public services.
- 35. Centralised PPP units? • The World Bank (2007) states that governments tend to create Centralised PPP Units as a response to weaknesses in the central government’s ability to effectively manage PPP programmes. • Different governments suffer from different institutional failures in the PPP procurement process, hence these Centralised PPP units need to address these different issues by shaping their functions to suit the individual government needs.
- 36. • The function,location (within government) and jurisdiction (i.e. who controls it) of dedicated PPP Units may differ amongst countries, but generally these include: – Policy guidance and advice on the content of national legislation. Guidance also includes defining which sectors are eligible for PPPs as well as which PPP methods and schemes can be carried out. – Approving or Rejecting proposed PPP projects i.e. playing a gatekeeper role that can occur at any stage of the process i.e. at the initial planning stage or at the final approval stage.
- 37. – Providing technicalsupport to government organisations at the project identification, evaluation, procurement or contract management phase. – Capacity building i.e. training of public sector officials that are involved in PPP programmes or are interested in the PPP process. – Promote PPPs within the private sector i.e. PPP market development.
- 38. • A 2013review which targeted research based on the value of centralised PPP Units found- – No quantitative evidence: There is very little quantitative evidence of the value of centralised PPP coordination units against ministries or government agencies individually procuring PPP projects. – Limited Authority: The majority of the PPP Units reviewed in the literature do not play a particularly important role in approving or rejecting PPP programmes or projects. Whilst their advice is used in the decision making process by other government bodies, the majority do not actually have any executive power to make such decisions themselves.
- 39. – PPP Unitsdiffer by country and sector: Government failures, in regards to PPP units, vary by government. The requirements for PPPs also vary by country and sector and so do the risks involved (i.e. financial, social etc.) for the country government. • Hence PPP Units need to be tailored to solve these failures, properly assess risks and be located in the correct government departments where it can command the most power. • PPP Units can play a number of important roles in the PPP process, however not all PPP Units will play the same role as their functions have been tailored to individual country needs. In some cases, limits to their authority have curtailed their effectiveness.
- 40. – Implicit value:The lack of rigorous evidence does not prove that PPP Units are not an important contributor to the success of a country’s PPP programme. The literature review does show that whilst there is no quantitative data, there are widespread perceptions on the importance of a well-functioning PPP unit for the success of a country’s PPP programme.
- 41. Can Procurement professionalsthen play a key role in their PDUs to guide the procurement of PPPs
- 42. What Role WillProcurement Professionals play? • Policy guidance and advice on the content of national legislation. Guidance also includes defining which sectors are eligible for PPPs as well as which PPP methods and schemes can be carried out. • Approving or Rejecting proposed PPP projects i.e. playing a gatekeeper role that can occur at any stage of the process i.e. at the initial planning stage or at the final approval stage.
- 43. • Providing technicalsupport to government organisations at the project identification, evaluation, procurement or contract management phase. • Capacity building i.e. training of public sector officials that are involved in PPP programmes or are interested in the PPP process. • Promote PPPs within the private sector i.e. PPP market development.
- 44. – Set upstandardised procurement and contract documents which help ministries to independently develop the majority of PPP transactions, whilst other agencies (such as the South African PPP Unit) provide advice on best practices for PPP procurement. – In terms of PPP project implementation, most PPP Units take a hands-off approach once the procurement process is finished. A good PPP Unit can positively contribute to a country’s PPP programme, as was the case for the Republic of Korea’s Public and Private Infrastructure Investment Management Center (PIMAC).
- 45. • PIMAC andits predecessor agency (the Private Infrastructure Investment Centre) have helped to substantially increase the number of PPI projects in Korea, between 1998 and 2005, the value of PPI investments in the country rose from US$ 500 million to US$ 2.8 billion, whilst the government’s share of investment in infrastructure fell from 95% to 86%. The unit had shown value in its capacity to assist PPP tender preparations, evaluate the feasibility of projects and negotiate contracts (Farruggia et al. 2008).
- 46. – Professionals canalso carry out PPP Market development activities, which are aimed at improving the climate for PPP transactions that are under an agency’s jurisdiction, most agencies do carry out such a role, but it is those agencies that operate at greater “arm’s length” from the government that play a greater role i.e. Partnership UK.
- 47. • PPP marketdevelopment activities fall under a number of different categories: – Fostering business and policy environments aimed at enhancing PPP success – Providing information for potential bidders on PPPs – Assist the development of PPP markets in other jurisdictions – Work with service agencies to develop internal knowledge on PPPs – Collect and disseminate PPP best practices from previous projects
- 48. • Professionals canalso play a role in the quality control of PPPs. – They can act as a first reviewer of potential PPP project proposals. – Quality issues can arise if ministries or ministry line agencies promote PPP projects and do not take into account the full fiscal impacts on the government’s budget. – South Africa’s Treasury PPP Unit was specifically created to prevent ministries from following PPP projects that would violate national budgetary guidelines.
- 49. • Another qualitycontrol role that is to verify whether PPP project proposals submitted by the private sector can fulfill the criteria that the PPP was aiming fulfill. Portugal’s Parpublica carries out such technical assessments at the approval phase of a PPP project and provides any technical recommendations, for changes to the proposal, to the country’s ministry of finance
- 50. Requirements • Ifthe professionals are to play a key role, they need to have: • Attitudinal change • Change of behavior • New skills set • Competence –based professional development • Constant research
- 51. Opportunities are inVision 2040 • Identifies core Projects that need to be started; all of which require an excellent procurement system • The vision identifies the following projects: – A Hi-tech ICT city and associated ICT infrastructure – Large irrigation schemes in different parts of the country – Phosphate industry in Tororo – Iron ore industry in Muko-Kabale – Five regional cities (Gulu, Mbale, Kampala, mbarara
- 52. • Five strategiccities (Hoima, Nakasongola, Fort portal, Moroto and Jinja) • Four International Airports • A standard gauge railway network with high speed trains • Oil refinery and associated pipeline infrastructure • Multi-lane paved national road network linking major towns, cities and other strategic locations
- 53. • Globally competitiveskills development centres • Nuclear power and hydro-power plants (Ayago, Isimba, Karuma and Murchison Bay) • Science and Technology parks in each regional city • International and national referral hospitals in each regional centers – What about regional universities of science and technology?
- 54. Most of thesehuge projects will be implemented through PPPs and Professionals must strategize and prepare if they are to be useful in this transformation
- 55. CONCLUSION • Thefunction of PPP units can change over time, as a country’s PPP programme changes, its role can shift from an initial focus on policy guidance and regulatory changes to increased focus on ensuring value for money or developing more sophisticated project evaluation methodologies or maintaining political support for the PPP programme (Farrugia et al. 2008).
- 56. • Responsibilities forPPP processes can be divided between different units and this is where procurement professionals will be useful. • When responsibilities are divided between different organisations, it is important to clearly define each unit’s roles and make these roles clear to both private and public partners and professionals must assert themselves.
- 57. Specific cases •In India, public-private partnerships have been extremely successful in developing infrastructure, particularly road assets under the National Highways Authority of India and Midday Meal Scheme with Akshaya Patra Foundation • In South Africa, significant projects have been completed under PPPs • In Botswana, successes in PPP implementation have been reported and these examples suggest that if well managed, PPP can be good
- 58.