The document narrates a fictional account of a public-private partnership (PPP) for an airport in Freedonia, highlighting the challenges faced during the planning and execution phases amid a global recession. It discusses the optimistic initial forecasts, subsequent failures to attract bids, and the eventual signing of a PPP agreement that leads to inaction due to financing issues. Recommendations are provided to avoid future pitfalls, including improving government PPP capacity and managing public expectations effectively.

1. South
East
Europe
Airport
Infrastructure
Forum
Zagreb,
June
2013
Dr.Thomas
Frankl
MD,
Airport
Development
Partners,
Geneva
Principal,
Brixton
Capital,
San
Diego

3. THE
DOUALA
TRICK
* This
is
the
story
of
an
airport
PPP
told
from
the
perspective
of
a
member
of
the
Firefly
consortium
* A
purely
fictional,
subjective
and
subversive
account
* Any
resemblance
with
real
PPPs
would
be
entirely
coincidental

4. THE
DOUALA
TRICK
* The
CAST:
* The
government
of
Freedonia
(transport
ministry
and
PPP
agency);
* The
head
of
state
of
Azurria;
* Numerous
consultants
(PPP,
traffic
forecast,
…)
* 10
consortia,
two
of
which
are:
* The
Firefly
consortium
made
up
of
a
major
public
airport
operator,
a
leading
construction
firm
and
a
private
equity
fund
* The
Flyover
consortium
made
up
of
a
major
private
airport
operator,
a
leading
construction
firm
(in
which
the
government
of
Azurria
holds
11%)
and
a
finance
institution

5. Chapter
1
–
Early
Days
* It’s
early
2008,
before
the
global
financial
crisis
* Money
is
chasing
infrastructure
assets
* Infrastructure
PPP’s
are
drawing
record
interest,
achieving
record
prices
* They
have
come
to
be
accepted
as
the
‘friendlier
face’
of
privatization
* Government
of
Freedonia:
Our
capital
airport
is
a
(shame)
but
we
don’t
have
the
means
to
turn
it
into
what
it
should
be:
‘Let’s
do
a
PPP
!’

6. Chapter
1,
cont’d
–
Early
Days
* Traffic
forecasters
tell
the
government
what
it
wants
to
hear:
‘your
airport
has
the
potential
to
become
the
region’s
hub
before
your
bigger
archrival,
Sylvania,
will
be
able
to
–
‘build
the
infrastructure,
and
traffic
will
come’
* Freedonian
government
commissions
breath-­‐
taking
design
for
a
landmark
airport
terminal
based
on
highly
aggressive
traffic
forecasts
* Heated
public
debate
amid
suspected
corruption
about
rigged
design
selection
process
* 25-­‐year
BOT
tender
documentation
is
drafted
and
airport
PPP
consultants
hired
(on
a
part-­‐
success
basis)

7. Chapter
2:
The
PP
Plot
Thickens…
* Global
recession
–
now
it’s
assets
chasing
money
and
even
‘worst
case’
traffic
forecasts
have
been
proven
too
optimistic
* PPP
projects
that
used
to
be
bankable,
aren’t
so
any
longer…
* …while
governments
are
more
in
need
than
ever
to
implement
PPP
pipelines
* Consequence
for
Freedonia’s
capital
airport:
cancel,
adapt
terms
&
conditions,
or
pretend
nothing
has
changed
* ‘We
stick
with
it
!
–
we
have
gone
through
worse
crisis
than
this
...’

8. Chapter
2,
cont’d
:
The
PP
Plot
thickens…
* Consultants
panic:
we
can’t
get
the
minimum
number
of
interested
parties
for
the
PQ
* So
they
tell
candidates:
‘don’t
worry,
Free-­‐donia
will
finally
ease
up
on
the
conditions’
–
‘just
pre-­‐
qualify
and
you
will
be
ok’
* They
also
make
the
PQ
criteria
fit
to
candidates
who
otherwise
wouldn’t
be
able
to
participate

9. Chapter
2,
cont’d
:
The
PP
Plot
thickens…
* Government
speaks
to
potential
interested
parties
* ‘We
like
your
project,
there
are
just
one
or
two
problems…’
(aka
show-­‐stoppers)
* Future
bidders
start
high-­‐profile
lobbying
campaigns,
one
head
of
state
* In
the
meantime,
the
global
crisis
has
led
to
a
credit
crunch,
many
banks
are
too
busy
avoiding
bankruptcy

10. Chapter
3:
Going
live
* Pre-­‐qualification:
IM
and
supporting
documents
issued
–
full
of
errors,
contradictions
and
ambiguities
* Endless
rounds
of
Q&A’s,
requiring
multiple
deadline
extensions
* Consortia
realize
that
conditions
are
unchanged
–
they
attempt
to
change
them
via
the
Q&A
process
-­‐
unsuccessfully

11. Chapter
3:
Going
live
* A
number
of
consortia
prequalify,
anyway:
‘we
are
in
a
better
position
this
way
when
the
tender
conditions
will
be
relaxed’
* The
short-­‐listed
consortia
analyze
the
tender:
no
change.
‘We
can’t
make
this
work,
it’s
unbankable’
–
no
point
of
proposing
to
our
investment
committee.
‘We’ve
had
enough
,
we
are
out!’
* …except
for
the
Flyover
consortium

12. Chapter
3:
Going
live
* The
Flyover
consortium
issues
a
valid
bid
* The
other
consortia
are
in
disbelief:

13. Chapter
4:
The
Douala
Trick
* They
pulled
the
Douala
trick
!
‘All
we
may
get
out
of
* How
can
they
get
away
this
is
an
ethics
award
with
it
AGAIN
?!
–
but
that
won’t
cover
our
costs…’

14. Chapter
5:
Catch-­‐22
* Success
–
we
have
a
final
bidder
!
* The
PPP
Agreement
is
signed
with
great
fanfare,
ground-­‐breaking
before
April
11,
2013
* But
nothing
happens…no
crane
in
sight
* The
concessionaire
signals
problems
–
’we
can’t
get
financing
at
acceptable
term’
–
very
sorry,
but
not
our
fault’…could
it
be
because
the
PPP
is
not
bankable
?
(now
that
would
be
a
surprise
!)

15. Chapter
5:
Catch
22

16. Chapter
5:
Catch-­‐22
* The
PPP
agreement
gets
adapted
to
take
account
of
‘new
realities’
* The
drop-­‐out
consortia
are
too
frustrated
to
sue
–
they
have
moved
on…
* …and
they
won’t
bid
a
again
for
a
PPP
in
Freedonia

18.
How
avoid
future
Catch-­‐22
situations?
1. Governments
must
build
their
proper
PPP
capacity
–
consultants
won’t
do
it
for
them.
* Difficulty
of
reconciling
the
interests
of
government
and
consultants
* PPP
capacity
also
helps
select
competent
consultants

19. How
Avoid
Future
Catch-­‐22
Situations
?
2.
Manage
public
expectations
effectively:
* Establish
a
communications
strategy
* Be
(very)
wary
of
traffic
forecasts
–
understand
the
forecast
methodologies
* Don’t
overestimate
bidder
interest
* Don’t
raise
unrealistic
expectations
–
even
if
a
future
government
will
have
to
deliver
* Define,
and
communicate,
what
success
and
what
failure
will
be
like
(e.g.
min.
number
of
final
bids)
*
Have
a
plan
B
in
case
of
failure

20. How
Avoid
Future
Catch-­‐22
Situations
?
3.
Re-­‐structure
and
re-­‐organize
projects
in
response
to
a
changing
environment
(e.g.
higher
private
sector
risk
aversion,
interest
rates,
etc.)
* Communicate
early
to
stakeholders
and
the
wider
public
* Consider
conversion
into
a
shorter-­‐duration
management
contract
and
re-­‐issue
when
the
environment
has
improved

21. How
Avoid
Future
Catch-­‐22
Situations
?
4.
Creation
of
a
‘grey
list’
of
bidders
* Successful
non-­‐fair
play
bidders
can
damage
the
reputation
of
governments
–
and
of
PPP
in
general
* ‘Grey
Listed’
parties
would
flag
warning
signal,
not
mean
exclusion
* World-­‐wide
exchange
of
PPP
practices
and
experience
* Not
only
success
stories,
more
is
often
learned
from
tough
challenges
and
from
failures

22. How
avoid
future
Catch-­‐22
Situations
?
5
.
Immunize
PPP
projects
from
external
political
influence
* Anticipate
political
influence
for
high-­‐value
and
high-­‐profile
PPPs
* Communicate
policies
and
procedures
clearly
from
the
beginning
* Refer
to
them
and
stick
to
them