Education

1. By
Dr. Md. Shamsul Arefin
Secretary
Anti-Corruption Commission
Date: 17 July 2018
Public Private Partnerships
for Poverty Reduction
Sunday, July 22, 2018 Dr. Md. Shamsul Arefin 1

2. Definition of PPP
• Public private partnerships (PPPs) are agreements between
government and the private sector for the purpose of
providing public infrastructure, community facilities and
related services.
• The private sector enter into a contract with government for
the design, delivery, and operation of the facility or
infrastructure and the services provided.
• The private sector finance the capital investment and recover
the investment over the course of the contract.
• The asset transfers back to the public sector at the end of the
contract

3. Range of PPPs
 Adapted from Canadian Council PPP 2009
Design and build
Operate and maintain
Build and finance
Design build finance maintain
DBFM-operate
Concession
Privatisation
PPPModels
Degree of private sector involvement
Degreeofprivatesectorrisk

4. Principles of PPPs
• Contracting Authority defines the service required
• Design of the works to deliver that service lies with the private sector
Output based
specification
•The contract can be for 25/30 years plus
Long-term contractual
arrangements
Value for money
Transfer of risk
•Competition will drive best value
•Gives public sector access to innovation
Market competition
Whole life costing
•Cost measured against conventional procurement.
•Whole life costs and quality are combined to gauge VFM
•Long term responsibility for building operation and maintenance
•Focus on reducing cost
•Transfer of design and construction risk
•Risk of ownership transferred to the private sector

5. World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 5
• Definition:
Public-Private Partnerships (PPPs) are contracts between the
public sector and private sector, which requires new investments
by the private partner (money, or technology, or expertise/time,
or reputation, etc.), which transfers some key risks to the private
sector (design/technology, construction/installation, availability,
demand, etc.), in which payments are made in exchange for
performance, for the purpose of delivering a service
traditionally provided by the public sector.
What ARE PPPs?

6. World Bank, ICT Days, Washington, DC, March 28-April 1, 2011 6
PPP Contract
Instrument
Average
Contract
Term
Provides the
Service or
the
Management
Provides the
Working
Capital
Receives
the Net
Income or
Covers Net
Loss
Provides
Long-Term
Finance
Legally
owns the
Assets
Provides
Sectoral
Planning &
Regulates
Services
Corporatization &
Private Market
Finance in perpetuity Public Pub./Priv. Public Pub./Priv. Public Public
Service Contract 2-3 years Private Public Public Public Public Public
Management
Contract 2-5 years Private Public Public Public Public Public
Lease/Affermage 7-15 years Private Private Private Public Public Public
BOT/PFI 20 - 30+ years Private Private Private Private Public Public
BOO 20 - 30+ years Private Private Private Private Private Public
Concession 20 - 30+ years Private Private Private Private Public Public
Divestiture &
Asset Sales in perpetuity Private Private Private Private Private Public
Range of PPP Structuring Options

7. Structure for PPPs
Government
PPP
Agreement
Private Sector
(Special Purpose)
Loan
agreement Debt
Subcontractors
Subcontractor
Construction
Subcontractor
Operations
ShareholdingEquity

8. PPP and Traditional Procurement
Contract
management and
review
PPP
Assessment
Initial appraisal
Approvals – PPP
procurement
assessment
Planning and
implementation
Post project
review
Establish
output
specification
Procurement
VFM assessment
Contract
award
PPP procurement
Traditional procurement

9. Funding - Project finance
The financing of long-term infrastructure is
based upon a non-recourse or limited recourse
financial structure where the debt and equity
used to finance the project are paid back from
the cash flows generated by the project.

10. Project finance
 High gearing requiring less equity
 Tax benefits
 Public sector use of revenue
 Long term debt funding

11. Why use PPPs?
Focus on outputs
PPPs make projects affordable
Better value for money over the lifetime of the
project
More efficiency in procurement
Faster project delivery with more projects in a
defined timeframe
Risks are allocated to the party best able to
manage the risk

12. Why use PPPs? (cont.)
 Deliver certainty of budget and outcomes
 Better asset utilization and social and
economic benefits
 Sustainable development and improved
regulation
 Public sector only pay when services are
delivered
 Injection of private sector capital

13. Outline Business Case
Strategic Context
Establish the Need for Expenditure
Define Objectives and Constraints
Identify and Describe Options
Identify & Quantify Monetary Costs
and Benefits
Assess Risks & Adjust for Optimism
Bias
Option 1 Option 2
Weigh up Non-Monetary Costs &
Benefits
Calculate NPV/(C)s and Assess
Uncertainties
Assess Affordability & Record Arrangements
for Funding, Management, Marketing,
Procurement, Monitoring, Benefits Realisation
and Ex-Post Evaluation
Results and Conclusion on
Preferred Option
Option n
STEP 1
STEP 2
STEP 3
STEP 4
STEP 5
STEP 6
STEP 7
STEP 8
STEP 9
STEP 10

14. Critical stages of a PPP
Initial feasibility
Procurement phase
Construction phase
Operation phase

15. Phase 1
Pre-
Procurement
Phase 2
Pre-
qualification
Phase 3
Competitive
dialogue
Phase 4
Final bid
financial
close
Phase 5
Contract
managemen
t
Pre -
Procurement
Official
Journal
European
Union (OJEU
Prequalification
questionnaire
(PQQ)
Invitation to
participate in
dialogue
(ITPD)
Invitation to
submit
detailed
solution
(TSDS)
Preferred
Bidder
Financial
Close
Contract
management
Prepare
Documents
Preparation and evaluation of bidder
documents
Financial
Close
Procurement Process
• Project Selection
• Brief development
• Market testing

16. Risks in PPP
 Optimal risk sharing
 Risk borne by the party best able to manage it
 Risk management
 Identification
 Allocation
 Mitigation

17. Dr. Md. Shamsul ArefinSunday, July 22, 2018 17