A Public Private Partnership

A Public Private Partnership (PPP) is an arrangement between the public and private sectors (consistent with a broad range of possible partnership structures) with clear agreement on shared objectives for the delivery of public infrastructure and/or public services by the private sector that traditionally would have been supplied by conventional public sector procurement.

Under Public Private Partnership arrangements, private sector contractors become long term providers of services rather than simply upfront asset builders, combining the responsibilities of designing, building, operating, maintaining and possibly financing assets in order to deliver the services needed by the public sector. As a result, central and local government agencies become increasingly involved as regulators and focus resources on service planning, performance monitoring and contract enforcement rather than on the direct management and delivery of services.

Compared with traditional some advantages:

• More buildable designs (experience and more capacity to design),

• Open and Innovative solutions,

• Risk allocation (risk shared),

• increased financial capacities,

• Better Public Value (the value that an organization contributes to society)

• Value for Money, in particular over the life cycle (higher efficiency and effectiveness)

• Greater certainty in construction and operational cost and,

• Long term Operational Guarantee.

Moreover however some disadvantages:

• What´s measured is what matters (needs fully transparency),

• Costs of the projects can vary depending on the assumed risk & fel conditions (we all pay the bill),

• Increased regulations & changing contracts,

• Limited number of private participants big enough to take on these tasks may limit the competitiveness required for cost-effective partnering.  

The United Kingdom has historically been one of the largest markets for PPPs worldwide. Since PPP programs in Latin America began twenty five years ago, the selection and structuring of PPP projects have improved substantially. However, Issues related to performance at contracts are common.

Some Questions:

Do the government and the contractor have comprehensive knowledge of service performance?

Is the contractor providing a service in accordance with the contract? 

Are they actively managed by the Government to meet or exceed requirements?

There is a big gap between project structuring and contract management, crucial component of a PPP.

Common problems when CM are not used:

•             Risk involved

•             Poor management

•             Poor project governance

•             Claims, Disputes

•             Affordability issues

General Comments

  • Involve contract management team during PPP procurement. They will know what to do when the contract is signed;
  • Always preserve Value for Money (VfM);
  • PPPs are complex and require multi-disciplinary teams;
  • Successful PPPs require a lot of preparation from the very beginning.
  • We need to map and identify the mistakes and problems, using the Lessons Learned, and move toward efficiency gains.
  • Better contracts, aligned to FIDIC Model, reducing risks (20 years long term),
  • Front-end loading (FEL) methodology, with a clear feasibility analysis. This involves developing sufficient strategic information and design to make better decisions in order to maximize the potential for success, ( PPPs aren’t designed and implemented following consistent procedures),
  • Bad requirements & Poor requirements management are the second leading cause of project failure (PMI). Project Quality Management addresses the management of the projects and the deliverables of the project (Service standards),
  • Review the payment mechanism. This document determines how the private partner in the PPP will be remunerated.

We are skidding on feasibility studies and leaving the risks high for the parties. The result, of course, someone pays this account, which will be added to the fee / contract in some way.

The “Value for Money” is quite clear. It refers to the best possible outcome for society, taking into account all the benefits, costs and risks during the life cycle of the project.

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