A podcast on PPP Contract Management: Experiences in Latin America by Lincon Flor

PPP Contract Management: Experiences in Latin America

The Open Learning Campus provides convenient and reliable access to the latest developments in topics, which address complex, real-world issues in priority areas such as governance, health, cities, climate change and public private partnerships.

This series of podcast presents some lessons from PPP experience around the world, discussing relevant cases and identifying best practices.

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Virginia began its experience with Public-Private Partnerships by passing the Virginia Public-Private Transportation Act (PPTA) of 1995, which provided the legal framework for PPPs in the transportation sector. In 2002, the Virginia legislature passed the Public-Private Educational Facilities & Infrastructure Act (PPEA) to expand the possibility of PPP procurement outside the transportation sector. The Commonwealth has had a dedicated PPP organization within the state government since 2005, the current form of which is the Virginia Office of Public-Private Partnerships (VAP3). Virginia’s approach to PPP was codified in the publication of its PPTA Implementation Manuel and Guidelines in 2005. Updates, tools, and supplemental material have been developed since then, and the PPEA Implementation Manual and Guidelines was released in 2015.

Virginia has successfully implemented major PPP projects over the past decade, including a Design-Build-Operate-Maintain contract for the Capital Beltway Express Lanes, the Downtown/Midtown Tunnel/Martin Luther King Boulevard Extension in Hampton Roads, and the Interstate 95 express lanes in 2012. Currently, VAP3 is finalizing a contract for the Interstate 66 Outside the Beltway project.

Virginia’s PPP selection process occurs in three phases: Project Identification, Project Screening, and Project Development. Solicited projects and unsolicited proposals are entertained during Project Identification. Project Screening is a two-part, high-level analysis: High-Level Screening/Policy Review and Detail-Level Screening. If proposals continue to Project Development, they will be subjected to value-for-money and risk analysis.

This webinar will seek to expand upon Virginia’s PPP selection process, especially in identification and screening. The webinar will also discuss how Virginia’s experience works within the U.S. federal, state, and local infrastructure, and how applicable this experience can be for developing economies.

Virginia P3: How Proposals Are Identified and Screened for PPP Development with Morteza Farajian

Virginia P3: How Proposals Are Identified and Screened for PPP Development with Patrick DeCorla-Souza

The Republic of Korea has a long history of PPP. Its early experience consisted of individual legislation for specific projects. In 1994, the government began to formalize its process with the passing of the Act for the Promotion of Private Capital Investment in Social Overhead Capital, which provided the legal framework for the broader use of PPP. The legislation was revised in 1999 to produce the Act for Public-Private Partnerships in Infrastructure, which provided for the establishment of a PPP unit. The Korea Development Institute’s Public and Private Investment Management Center (PIMAC) currently serves as Korea’s PPP unit. From 1994 to 2015, the country implemented 684 PPP projects.

PIMAC is authorized to conduct prefeasibility studies for publicly financed projects with a total project cost of at least W50 billion, where W30 billion or more is subsidized by the State. Under the PPP legal and institutional framework, PIMAC screens and appraises PPP projects during the selection process. Solicited projects costing W200 billion or more for build-transfer-operate projects, or at least W100 billion for build-transfer-lease projects, and all unsolicited proposals are subject to analysis by PIMAC.

In Korea, potential PPP projects are identified by line ministries, or the private sector in the case of unsolicited proposals. As part of the feasibility assessment, projects (publicly financed and PPP) are subject to the Analytic Hierarchy Process, which includes economic, policy, and balanced regional development analyses. Following this process, projects go through project appraisal, where qualitative and quantitative (including value-for-money) analyses occur. If a project successfully completes this process, PIMAC will recommend it for procurement as a PPP.

Unified Framework for Feasibility Assessment: Republic of Korea

The Netherlands has a rich history of private participation in the development of its public infrastructure, dating back to the country’s beginnings in the sixteenth and seventeenth centuries. However, the idea of formalized PPP immigrated to the Dutch political establishment in the 1980s from the United Kingdom’s experimentation with private finance initiatives. As a solution to the country’s budgetary woes, the Dutch government attempted PPP for a couple of tunnel projects at the end of the decade. Unfortunately, these projects experienced cost overruns and unpopularity, and the idea was abandoned for future projects until the late 1990s.

In 1999, the Ministry of Finance established the PPP Knowledge Centre, which drove much of the policy discussion on PPP until 2006. In 2004, the European Commission published a Green Paper on Public-Private Partnerships and Community Law on Public Contracts and Concessions. This paper currently serves as the legal guidance for Dutch PPP, and served as a catalyst for additional PPP development in the Netherlands. In 2006, the Ministry of Transport, Public Works, and Water Management started a PPP unit, beginning a rigorous campaign for PPP development. The success of this unit was followed shortly thereafter by the Ministry of Housing, Spatial Planning, and the Environment developing its own PPP unit, and later by the Ministry of Agriculture, Nature, and Food Quality. Cooperation between these three units led to the fast development of the Netherland PPP market and best practices, including standardized contracts, uniform reporting to Parliament, and standardized risk matrixes. This work precipitated project responsibility to fall to the executing ministry, with essential framework developments from the Ministry of Finance.

The Netherlands has developed its PPP selection process over the past decade, paying special attention to streamlining and publicizing the process to attract potential investors. The idea of creating an efficient and expeditious process was developed from the necessity to attract the private partners drawn to the larger PPP markets in France and the United Kingdom. This is also why the Netherlands only procures Design-Build-Finance-(Operate)-Maintain PPP projects. The Netherlands developed a small but dedicated group of civil servants, fostered by PwC, to create an enabling PPP environment. The Dutch approach to PPP selection is encompassed in three main analyses: Market Scan, Public-Private Comparator, and Public Sector Comparator.

An Attractive Environment: The Netherlands Approach to Identifying/Screening PPP Projects

Afghanistan, like many developing countries, has been seeking ways to develop and improve infrastructure within the framework of limited fiscal capabilities. In recent years, the World Bank Group has been working with the Government of Afghanistan on increasing private participation in infrastructure. Public-private partnerships are increasingly seen as a means to harness private innovation and finance while the government maintains ultimate ownership and insurance of the public interest. Although procuring infrastructure projects through PPP methods may be more efficient and provide greater value for money, the pre-tender project development costs tend to be higher than those associated with traditional procurement. In an effort to reduce waste in resources, it is important to have an effective methodology and tools to aid in identifying and screening potential PPP projects before resources are utilized in a full feasibility analysis. In 2015, the World Bank Group assisted the Government of Afghanistan in legal and regulatory reform to foster the growth of PPP. One of the products of this effort was the development of the PPP Suitability and Prioritization tool. This tool seeks to streamline the PPP process and ensure that resources are only used for proposals with a greater chance of viability.

PPP Contract Management: Experiences in Latin America

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