Ar. Surashmie Kaalmegh

What are PPP’S?

Genesis of PPP’s :

Why and when are they needed / Importance ?

How do they work ?

Types of PPP’s.:-

Aspects of PPP’s

Reasons for success & failure , Efficacy

& best practices : Case Studies

Indian Scenario.

Methodology

A contractual agreement involving a Government agency & a Private Co. to renovate, construct, operate, maintain,

and/or manage a facility or system . • while the public sector usually retains ownership in the facility or system, the private sector will be given additional decision rights in determining how the project or task will be completed.

What are PPP’s?

Genesis In 1990 The UK Government. introduced Policies To provide greater transparancy And value for money in public accounting . Limited availability of Public funds thus resulted in these policies leading to the public sector obtaining Finance & funds , investments From Private Sector . Thus in Uk PPP’s are known as PFI’s

Private involvement achieves better value for money because. :-

Provides opportunity to develop innovative solutions to meet public sector requirements .

Any additional financial cost of the use of private sector funding should be offset by the enhanced level of service and

the value of risks are transferred to the private sector

Enhance discipline and efficiency

provides additional finance,

freeing public funds

for alternative use / for use

on core public projects

PPP’s Value for money : How ?

Balance between - Costs & Risks (from the public sector perspective)

Risk & Reward (from the private sector perspective) or

is the key theme underlying all PPP projects.

a simple outsourcing of functions where substantial financial, technical and operational risk is retained by the institution

A donation by a private party

for a public good

The 'commercialization' of a public function by the creation of a state-owned enterprise

A PPP does not constitute

borrowing by the state.

A PPP is not =>

Public-private partnerships, when structured correctly, can produce win-win situations that benefit both the public sector and private sector through a combination of public-sector governance and private-sector capital and efficiency.

WHY PPP’S ?

Why PPP’s?

Ppp’s are new tools to

finance projects, build infrastructure and deliver services

Where ---- PPP’s ?

Principles of PPP’s Openness and Binding Commitment

Supervision / Control

Successful Negotiation Process:

Equal Rights in Different Roles

Clear Division of

Tasks, Roles and

Functions

Clear Goals and Objectives

Sympathy & Creation of Synergy between Partners

Suitability of the Resources & Size of the Partnership

Risk Sharing & mutual trust

Active involvement

Political leadership

Secure public control

Limited complexity

Legal authority

Specific Needs

Failure /Efficacy of PPP’s

Prices are often negotiated

Private profit on a public project.

Opportunity for local contractors.

Quality & safety concerns Public perception &

education Priority for use of public

funds betterments

Prepare stakeholders properly for PPP

Create a shared vision

Understand key players needs

help them understand

Risks & rewards

Communicate early & often

involve them

Build trust & core value

Provide a “ trusted companion

How do PPP’s work? P3’s are a long-term

performance-based approach for procuring public infrastructure.

The private sector assumes a major share of the responsibility in term of risk and financing for the delivery and the performance of the infrastructure, from design, structural planning to long term maintenance.

The essence of a PPP project is that the private sector will do one or more of the following:

provide private finance to fund the project

enter into a long term [greater than 5 years] service contract

undertake the design and construction of an asset on the basis of an output specification prepared by the public sector and designed to meet broad performance targets

enter into a joint venture arrangement with the public sector to provide a service or asset

SPV – special project vehicle

Finance structure of a PPP

Types of PPP’s / Models

INNOVATION OR CREATIVITY: identifiable special characteristics.

which are the special characteristics of this practice

which make it of potential interest for others?.

EFFECTIVENESS/IMPACT: search for evidence of benefits .

what evidence is there regarding the benefits derived

from the practice?

REPLICABILITY: applicable to varied situations .

Is this a practice that could be somehow applicable

in different contexts or situations?

PERTINENCE: contribution .

how does the practice contribute, directly / indirectly,

to the allocation, construction, financing , operation of

a specific concession project?

EFFICIENCY AND EXECUTION : optimization .

Was the use of the resources (human, financial and material)

conducted in order to optimize the impact reached?

Criteria for best practices ? The determinants of good practices .

World-- PPP’s

http://www.infrastructureaustralia.gov.au/public_private/

Canada Scenario

CPCS.COM

Sydney Airport International

Terminal Rail Station M4 ,

M5 motorway & toll booth

Australia scenario

Indian scenario

Minister of State for Railways K. H. Muniyappa, as of Aug. 2012

http://www.nzsif.co.nz/Social-Infrastructure/The-benefits-of-using-PPPs-to-procure-Social-Infrastructure/

Indian scenario

Mechanism / Structure

Indian scenario II

INDIA URBAN PORTAL

Case studies

Dublin Region Waste Water Scheme, Ireland.

Ahmedabad , BRTS.

India

Dublin City Council faced the challenge of replacing their existing wastewater treatment plant with a new plant which would meet the requirements of both the Dublin Bay Water Quality Management Plan and the EU Urban Wastewater Directive and serve the whole of Greater Dublin with a population equivalent of 1.7 million. The new works had to be built in phases on the constricted 15 ha .site while keeping the existing plant operating.

Hyder Consulting with PH McCarthy provided programme and project

management services throughout the duration of the overall project, which comprised five contracts,

including the construction of an 11 km submarine pipeline to the state-of-the-art treatment facility with two-storey SBR biological reactors and sludge treatment utilising thermal hydrolysis and drying. The treated biosolids “Biofert”are used as an agricultural fertilizer and biogas powers more than 50% of the plant energy requirements. The plant has successfully entered its 20 year operation phase.

Dublin achieved water quality objectives

The primary goal of the Program was to improve the quality and efficiency of wastewater treatment by attracting the best technology and expertise available on the market.

The contract was awarded to an international consortium for 20 years for the operational phase.

The public sector retained asset ownership & provided no guarantee for the private-sector party since the overall investment was financed by the Irish public sector along with a grant by the EU Cohesion Fund.

The private-sector party bore the operation risk and was expected to cover maintenance & operation costs from the service charge paid by the public sector.

Thus, it had incentives to undertake cost-reducing efforts in order to increase profits.

The public sector collected revenues charging commercial consumers only because the Irish law exempts domestic consumers from paying for water treatment. In determining the tariff level, the amount of un-treated discharges and the capital and operation costs were taken into account.

Case Study: Dublin Bay Wastewater project (Ireland) explanation

Source: European Commission (2004)

Dublin Region Waste Water Scheme, Ireland

Rationale/Objectives of the PPP Attract the best technology/expertise available in the market;

increase economic &

environmental efficiency;

better protect capital investment.

PPP Actors Dublin Municipality; Water Authority; Private International Consortium.

Financial Structure The investment is financed by public money (Irish Government and E.U. Grant); Assets are publicly owned

E.U. Support? Cohesion Fund financed 50 percent of the costs

Contract Agreement between Parties DBO contract

Risk Allocation The risk is principally borne by the private operators, which cover maintenance & operating costs.

Institutional/Managerial Structure : None

Tariff Setting Municipality sets tariffs to cover both capital and operating costs

Strong Points : Attracted latest technology. The PPP agreement is set to protect the capital investment and ensure project sustainability.

Weak Points : Project is dependent on government funds to finance the gap between the rent paid to the operating consortium and the collected consumers revenues.

The use of modern technologies and a sophisticated combination of treatments turned the wastewater treatment plant in a unique facility of its type.

Ahmedabad – BRTS

Ahmedabad Janmarg Limited, a SPV, for:

• Planning of services;

• Selection of operators;

• Monitoring of service quality;

• Fare revisions;

• Coordination with relevant departments; and

• Future BRTS expansion plan.

PPPArrangements(Contracts):

• Bus Procurement,

Operations and Maintenance;

• Integrated Information

System including,

Automatic Ticketing

• Vehicle Tracking

System (BOT);

• Supply & Service Contracts for Bus Station

• Sliding Doors, Turnstiles;

• House Keeping & Cleaning of Bus Stations; • Management of Pay & Park facilities; • Lease of Advertisement Rights; • Development of Foot Over Bridges on DBFOT; • Development & Maintenance of Landscape; and Maintenance Contracts for Bus Stations (Civil Works), Lighting of Bus Stations & Corridor, Monitoring and Maintenance of BRTS Corridor (Civil works), Signage.

Ahmedabad BRTS with new technological applications / innovations has been in operation for the past one year.

It carries about 90,000 passengers daily with deployment of 45 diesel buses (30 AC buses out of 45, 12 meter long, 900mm floor height), with commercial speeds greater than 24 Kms. per hour.

A review of the two months progress of the Ahmedabad BRTS project, in terms of

various parameters, indicates that the system is running successfully.

Average passengers per day, average collection per day, average passenger per bus per day, average collection per bus per day have increased considerably during two months period.

During the period, average rating giving to BRTS by users is 8.61 out of 10.

Besides the above, during first four month , reflects positive impacts,

such as an increase in ridership (from 17,315 in first month to 69,759 passengers per day in eleventh month), increase in revenue (from ` 4,500 to ` 8,700 per bus per day), modal shift (shift of passengers from motor cycles, cars and 3-wheelers, which is about 50% of the total BRTS users), dependable service / reliability (95% departures are on time, 65% of arrivals were on time), improvement in travel speed (peak hour speed-24Kmph against 16-18 Kmph.

Bibliography

< http: www.pppcouncil.ca.>

http://www.ops.fhwa.dot.gov/publications/fhwahop12006/sec_4.htm

http://www.nzsif.co.nz/Social-Infrastructure/The-benefits-of-using-PPPs-to-procure-Social-Infrastructure

http://www.infrastructureaustralia.gov.au/public_private/