Saudi E-Gov PPP Framework

February 2008Suhail Al-AlmaeeDirector of Strategic Planning and Supporting Initiatives

Saudi eGovernment Program (Yesser)salmaee@yesser.gov.sa

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E-Gov&

Agenda

E-GOV PPP FRAMEWORK WHY & HOW?

USING THE FRAMEWORK BUILDING THE RELATIONSHIP

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E-GOV PPP FRAMEWORK WHY & HOW?

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PPP Definition

PPP is a contractual agreement (partnership) whereby a privatepartners performs part or all of government services or function. Such a partnership are characterized by sharing of investment, risk, responsibility and reward.

The essentials of PPP agreements are:

- Focus on the service to be provided, not the assets to be employed.

- Shift of the risk and responsibility to a private provider.

PPP = investment + long-term provision of services

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Rational

To establish a framework that will help government to achieve

the best outcome of PPP, which is driven by increased

need of efficiency and quality of E-Gov services delivered.

Secondly, the need for cost saving, access to advanced

technologies and resources and minimizing the risk.

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Framework Objectives

Developing a comprehensive framework to govern the use

of public-private partnerships (PPP) for e-government in

the Kingdom of Saudi Arabia.

In compliance with the Council of Ministers resolution No.

110 dated 5/4/1425.

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Challenges

Government

Globalization

Consumer / Customer Expectations

Technology Innovation

Limited Resources /Skills

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Globalization

+Customers

Technology

Resources / Skills =

+

-

Pressure …

… on governments to change

New Formula

E-Government + PPP =Government Innovation

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Major Project StagesMajor Project Stages

Scope of Work Track

PPP Policyframework

PPPManual

PPPTemplates Gap analysis

Readinessassessment

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Yesser PPP Framework development Project

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Major Projects Components

Readinessassessment

• Conducting needed interviews• Review relevant documents• Draft a PPP readiness assessment

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Scope of Assessment

A team of consultants collected information from a variety of sources. This Readiness Assessment is based upon the team’s access to:

Materials publicly available, including laws, regulations and examples of standard contracts;

Interviews with selected Gov stakeholders, interviews for example included (MoF, SEC, E Gov Program, EDI)

Interviews with selected private stakeholders, interviews included international and national companies.

International best practices for PPP.

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E-Gov& • Capture of international best practices

• KSA drivers• Draft a PPP policy framework

PPP Policyframework

Major Projects components con.

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E-Gov& • Module definition

• Input from PPP project and contract management experts• Draft a PPP Manual• Draft a PPP Quick reference Manual• PPP lifecycle Card

PPPManual

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Major Projects components con.

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• Develop templates/tools - Business Case - Feasibility assessments - Risk assessment - RFI

- RFP - Standard contract - SLA - Public consultation

PPPTemplates

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Major Projects components con.

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• Report to MCIT/Yesser identifying gaps and recommendation on legal framework as they impact PPP• Report to MCIT/Yesser/CITC identifying gaps and recommendation on institutional framework as they impact PPP

Gap analysis Legal and

institutional

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Major Projects components con.

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Consultation on PPP

• Public Consultation on the Framework • Stakeholders workshop• Revision of Policy, Manual, and Templates• Communicate the Framework to stakeholders

Next Steps

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E-Gov& • Develop and distribute additional

materials and case studies based on PPP projects in KSA as part of regular updating of PPP Manual.

(Ongoing role)

Case studies & Manualsupplements

Next Steps con.

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What's missing

• Communication PlanA national communication strategy should be put inplace to ensure that local authority officials are awareof the potential benefits of PPP and of the main issuesinvolved in implementing them. Also, the strategy

should have a similar part for the private sector.

• Training PlanProper training for local authority staff is essential for PPP success. For example:

- Project feasibility and business case- Project management- Contract conditions and negotiation- Risk management- Contract management- Performance and SLA management

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PPP vs. Traditional Procurement

PPP ≠ Traditional Procurement

PPP Traditional Procurement

Focus on services

Performance-based payment

Long duration (3-20 years)

Bigger role (and risk) for private sector

Buying products / assets

Payment based on specifications

Shorter contracts for delivery of assets

Private sector is contractor delivering a product

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Types of PPPs

Private Sector participation

Service contracts

(Pub $, Prv Op of discrete tasks)

Operation & Maintenance

(“Outsourcing”)

Design, Build, Operate

Build, Operate, Transfer

(Prv $ and BOT)

Increasing risk transfer to private sector

Private Sector participation

Service contracts

(Pub $, Prv Op of discrete tasks)

Operation & Maintenance

(“Outsourcing”)

Design, Build, Operate

(Pub $, Prv DBO)

Build, Operate, Transfer

Increasing risk transfer to private sector

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Relationship & Trust = PPP

Complexity & Trust

Bu

sin

es

s V

alu

e

Technical

SupportTechnical

Support

O&mO&m

BPOBPO

++ PPPs++ PPPs

RelationshipManagementDominates

ContractualManagementDominates

C

C

C

R

R

R

C = Contractual Management

R = Relationship Management}= The Partnership

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PPP for e-Government

• Full service delivery

• Fee-based funding

• Shared cost savings

• Shared revenue

PPP Models

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Full service delivery

PPP Model Advantages Disadvantages

Fee-based funding

Shared cost savings

Shared revenue

Encourages customer-centric focus

Results in more efficient Gov operations

No impact on existing ops; may result in higher compliance

Shifting services to new org. encourages innovation & efficiency

Customers will not acceptnew charges so agencyowning service will

Cost hard to measure; requires BPR (not easy)

May not produce more efficient Gov

Loss of control / authority

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PPP for e-Government

E-Gov&

PPP Drivers / Benefits

Why are governments using PPP?

• Faster, more efficient delivery of services / information

• Access to private sector expertise, skills, ICT and innovation

• Enabling an agency to focus on its core business

• Enhancing organizational learning / skills within public sector

• Increasing service levels or scope of e-services

• Shifting risk from agency to private sector

• Increased effectiveness of project management

• Reduce costs and increase revenues

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PPP Drivers / Benefits

Who benefits from using PPP?

To Government To Private Sector To Community

• Minimise capital investment and risk

• Faster implementation

• Tap private sector management and market expertise

• Unique business opportunities

• Income from government transactions

• Income from commercial services and advertisements

• One-stop-shop of public services

• Views from citizens and customers

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Current PPP Policies

Highlights

• PPP are intended to become a best practice in e-government implementation in KSA.

• Private sector participation in E-Gov based on principle of “shared expected revenue”

• Feasibility study and public tender (if feasible) are required for any proposed E-Gov PPP

• PPP rules apply when agencies contract private sector entity to “fund and implement“ a project

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Roles & Responsibilities

MoF: * Oversight of budgets, pricing and revenues of all projects

* Manages National e-Government Fund * Agencies must coordinate with MoF on

financing PPP

General Audit Bureau: Oversight powers that apply to PPP

Yesser: Facilitator of e-government (and e-services) in KSA

Sponsor Agencies: Primary responsibility for their PPP projects

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Best Practices & Lessons Learned

Global Best Practices

• Create a single, dedicated entity responsible for PPP

• Establish clear mechanisms, rules and review criteria

• Make PPP decision-making is streamlined, fair, open and transparent, enabling faster “go / no-go” decisions

• Free PPP from overly bureaucratic approval processes

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Global Lessons Learned

• Coordination with multiple agencies complicates (or obstruct) use of PPP

• Lack of clear process leaves sponsor agencies unsure when to consult and creates inconsistencies in what different agencies do (or don’t do)

• Too much bureaucracy and too many approvals can create major problems for sponsor agencies (and projects)

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Best Practices & Lessons Learned

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Global Best Practices

Identify, understand and consult your stakeholders

Employees

Users

Political officials

Financing institutions

Affected staff

Other departments

Other organizations

Consult early, consult often

Stakeholder buy-in is key toPPP success

Make stakeholders genuine participants in PPP process

Service owners

Identity owners

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Best Practices & Lessons Learned

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New Stakeholder Formula

Transparency

Buy-in

Willingness to …push, mandate, create incentives

PPP success31

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Readiness Checklist

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USING THE FRAMEWORK BUILDING THE RELATIONSHIP

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PPP Lifecycle

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Phase I: PPP Inception

Develop a business case =

Feasibility Study

Risk Assessment

+

… comparing costs of PPP vs. traditional procurement

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Phase I: PPP Analysis

Due Diligence Project Design

Be service-oriented from start

PPP must enable private sector to earn a profit

Clear, detailed description of services being delivered

Examine new risks created by private sector delivering services

Evaluate business opportunity and market to attract viable bidders

Continuing use of market research

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Phase II : PPP Procurement

Make RFP outcomes-based

Business case ensures feasibility and identifies procurement strategy

Pre-RFP consultants with private sector

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PPP Selection

Minimum thresholds eliminate bids that underestimate costs

Clear selection criteria

Bidder’s capacity to execute a project

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Phase III :PPP Contract Management

Service Level Agreements

Contract transparency

• Well-defined deliverables

• Performance benchmarks

• Documentation method

Well-designed contracts

+

Active contract management = PPP success

+

Relationship management

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Phase IV : PPP Project Management

Project Execution

Flexibility

No trust No Users No PPP

Communications

Political and Admin Support

Dispute resolution

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Performance & Knowledge Management

Project-level monitoring

High performance standards

Clear performance measurements

Sponsor knowledge management

Central knowledge management

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Phase IV : PPP Project Management

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Relationship Management

Long-term partnership

Long-term investment PPP ==

≠Partner Contractor

Margins count

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Phase IV : PPP Project Management

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Phase IV :PPP Auditing & Oversight

Auditing for regulatory and financial compliance

Independent external auditors

Quarterly review by PPP governing body

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PPP Closure

Options at end of PPP contract period:

Extend PPP with same partner

Agency takes over service delivery

Award PPP to new partner

#1 Issue: Continuity (and transition) of service delivery

Collect and publish PPP lessons learned

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Priority Agenda

PPP Governance:

• Coordination process

PPP Analysis: • Business case requirements

• Risk assessment requirements

Management: • Stakeholder consultations• Contract management

PPP Selection: • Selection criteria

• Feasibility study requirements

• Central PPP coordinator

• Conflicts of interest

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Central PPP Authority

Establish central PPP Unit with responsibility for:

• Maintaining, as needed, specific regulations and standardized methods for PPP procurement procedures, model contracts and documentation.

• Proposing new PPP policies with regard to financial issues for PPP.

• Publishing guidelines to resolve any obstacles (e.g., in tax, service pricing, use of “special purpose companies” and joint ventures) to use of PPP.

• Facilitating the setting of priority of PPP projects across government; and encouraging use of PPP as standard option in e-government.

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Conflicts of Interest

Standard rule against conflicts of interest:

• Any person or entity that has a potential conflict of interest in

performing their official duties during the PPP lifecycle – for

example due to their financial interests or personal relationships –

must report this to appropriate authorities prior to the exercise of

that person or entity’s duty.

• In general, persons or entities with a potential conflict of interest

with respect to a PPP project shall remove themselves

from the decision-making process for that PPP.49

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Use of Business Cases

Business plan (and tender docs) should clearly describe:

• Services being delivered

• Business, technical and procurement options

• Strategic alignment with the business plan of sponsor agency

• Operational impact on sponsor agency and delivery of public services

• Stakeholders and their business requirements

• Pricing / revenue sharing for services

• Resources needed from government partner (including human resources)

• Feasibility, risk assessment and risk management

• Implementation strategy / timetable

• Contract management processes and tools

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Risk Assessment

Areas of risk to consider:

• Reduced demand for service or failure to realize projected increases Revenue and cash flows

• Operational risks (e.g., failures in deployment or degraded service quality)

• Infrastructure costs

• Political / Regulatory risks

• Technology (e.g., failure of existing ICT or inappropriate ICT choice)

• Financial strength of private sector partner(s)

• Inflation / foreign exchange fluctuations

• New risks are introduced because private partners will deliver services

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PPP Selection

PPP selection criteria might include:

• Appropriateness of PPP for objectives and needs of E-Gov project

• Value-for-money (feasibility)

• Cost

• Ability to effectively implement and manage a project

• Viability of revenue sources and forecasts

• Availability of skills needed

• Time to implement

• Financial and legal risks in partnering with private sector

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PPP Contracts

Areas addressed in a standard PPP contract:

• Project objectives, quantitative outcomes, performance indicators

• Payment mechanism (based on availability, demand and quality)

• Sharing of additional yields and excessive profit

• Consequences of contract breach by either party

• Restriction of concessionaire's responsibility

• Risk sharing

• Change Mechanism

• Agency’s right to withdraw from project at its discretion with fair compensation to private partner

• What happens with assets after PPP contract ends

• Settlement of disputes and conflicts

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Relationship Risk

Relationship risks that exist when external resources are chosen

over internal resources. These risks include

Expectations on service delivery

Vendor responsiveness to the need for improvements

Vendor failure to deliver on time

Impact on staff—job satisfaction, morale, workload

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Why Fails

-Short term focus-Failure to understand the project motivations-Poor communication-Failure to recognize risk-Failure to identify risk until contract signed-Inadequate or none existence of SLA (service level agreement)

-Reward contract at low price approach-No performance measures

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After Signing the Contract

-The people who come to know us in the sales cycle go away once the

contract is signed.

-How can vendors be flexible during negotiation and not in delivery?

-I expected detail processes for implementation then I got (How do

you want to do this?)

-Insufficient effort during the discovery phase, it will come out in the

delivery phase.

-Do the vendor have a track record with others.

-There was no transition plan, I want to see tools that would facilitate

the transition.

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Pre-contract

-Defined the need:. Focus on results: Not procedures or processes. Be accurate: Do not guess what is to be expected. Be comprehensive: Cover all issues and express all expectation. Be detailed: Cover all desired outcome. Be specific: Illustrate in the needed outcome. Be measurable: include performance requirements

-Develop the means and methods to meet the needs:. Sitting the expectations for both parties. Know the:

- What- When- Where- How

of the contract. 57

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Make it Successful

Always think

Win-Win58

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for quality publicservices

for quality publicservices

Thanks

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