Public-Private
Partnerships (PPPs) in
eGovernment:
Definition, Rationale,
and Regulatory
Frameworks
Ned White
Monday, March 28, 2011
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011
1
Session Overview
1. Definition: “Just what ARE PPPs in eGovt.
2.
3.
4.
and ICT?”
Rationale for PPPs & the Role of eGovt
PPPs within Public Services Sector Reform
Key Elements of eGovt PPP Policy, Legal, &
Institutional Frameworks
Looking Ahead: Key Challenges for eGovt.
PPP Frameworks Going Forward & Case
Examples
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011
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1.1- What ARE PPPs?
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.
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011
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1.2-Range of PPP Structuring
Options:
Average
Contract
Term
PPP Contract
Instrument
Corporatization &
Private Market
Finance
in perpetuity
Service Contract
2-3 years
Management
Contract
2-5 years
Lease/Affermage
7-15 years
BOT/PFI
20 - 30+ years
BOO
20 - 30+ years
Concession
20 - 30+ years
Divestiture &
Asset Sales
in perpetuity
Receives
Provides the
the Net
Service or Provides the Income or
Provides
Legally
the
Working
Covers Net Long-Term owns the
Management
Capital
Loss
Finance
Assets
Provides
Sectoral
Planning &
Regulates
Services
Public
Private
Pub./Priv.
Public
Public
Public
Pub./Priv.
Public
Public
Public
Public
Public
Private
Private
Private
Private
Private
Public
Private
Private
Private
Private
Public
Private
Private
Private
Private
Public
Public
Private
Private
Private
Public
Public
Public
Private
Public
Public
Public
Public
Public
Public
Private
Private
Private
Private
Private
Public
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011
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1.3-Legal vs. Practical Definitions of PPP
A growing number of recent, new “PPP Laws” give
legal definitions of PPPs that only apply to projects
for which the private partner provides the long-term
financing (ie new BOT/BOO & Concessions).
While non-capital investment contracts (leases and
management contracts) still apply the same practical
PPP principles (transfering demand risks, etc. &
pursuing better value for the public’s money), they
are not legally “PPPs.” Their implementation,
therefore, would not have to follow the same
process of preparation, review, and approval as
“official PPPs” do.
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011
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1.4-Govt of Kenya’s PPP Policy
Statement of 2009 defines PPP as:
“A contractual arrangement between a public body
and private party in which the private party and
Government enter into a long term agreement, up
to 30 years, to build a new infrastructure facility or
to rehabilitate an existing one for the purpose of
undertaking a public service on behalf of
Government… The private party is required under
the terms of the project agreement to take
responsibility to mobilize finance – equity as
well as debt – in order to complete the facility
according to agreed specifications and schedule.”
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011
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1.5 – Jordan Education Initiative (JEI):
A “PPP” or Not?
2003 World Economic Forum-led team of 30 int’l & local ICT
corporations (including Microsoft, Intel, Cisco Systems, et al)
donated $11 million the Jordan Education Initiative (JEI).
Scope: install high-speed internet access, provide electronic
curricula & teacher training, and support services to 102 public
“Discovery Schools” (50,000 students + 2,300 teachers).
The GoJ bound itself to providing specific support and
contributions to the project, (especially active support and
involvement of the King and Queen of Jordan)
The private firms were willing to make this donation and
ongoing support services primarily because they had:




Basically an enforceable agreement with the GoJ,
Clear Govt. contributions & highest level support (no interference),
Project had clear, measurable outputs (Program Management Office)
Context of $380 million Education Reform for the Knowledge Economy
(ErfKE) Program($120 million from WB)
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011
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1.6-JEI: Types & Sources of
Contributions
Source: McKinsey & Company’s “Building Effective PPPs: Lessons Learned
from the JEI”
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011
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1.7-JEI: Perform. Indicators (Draft)
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2.1-Rationale for PPPs in eGovt & ICT:
Delivering Better Value for the Public’s Money (VfM):
Improved Price & Risk/Quality in the provision of public
services. However, VfM models be subject to manipulation &
not relevant when a public ICT solution does not exist.
Technology Transfer: Most eGovt technologies &
capabilities are not available by the public sector alone.
“Knowledge-Based Economy” Policies.
Additionality: More public services & consumer welfare
benefits available with the PPP project than without.
Contracted Outputs & Improved Transparency:
Resistance to new removing discretion from some public
stakeholders
Avoided Public Financing/Borrowing: A priority for many
Governments (especially in current public financial climate),
but risks entering into long-term PPPs that are unaffordable
or require imprudent assumption of risks by Govt. over longterm
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011
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2.2-PPPs are just one component of an
Overall Public Services Reform Strategy
#
Unbundled Functions
Institution
1
Sector Reform Policies
(allowing PPPs) Plans
Government Line Ministries
2
Sector Performance
Monitoring & Tariff-Setting
Independent Sector/Utility
Regulatory Bodies
3
Ownership & contracting of
long-term infrastructure
assets
State-Owned Asset Holding Cos.
(AHC’s)/ Procuring Entities/
“Ceding Authorities”
4
Operation of infrastructure
Networks & service delivery
Private investors, operators,
& lenders (via competition)
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011
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2.3-eGovt PPPs in Isolation Rarely Work
Without these complementary, long-term sector
reforms:




eGovt PPP contracts alone often have limited success, are
not sustainable (cancelled) or affordable.
Not possible to independently and transparently compare
public sector performance vs. PPP performance (which
offers better value?)
Private partner will not be willing to bear many
“commercial risks” (ie they will require more public
financial supports & risk-sharing) if there is not a clear, fair
market or “level playing-field”
PPPs can add new electronic service delivery mechanisms,
but they often simply appear more expensive and may still
rely on inefficient public monopolies to distribute public
services to end-users.
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011
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2.4 “Value for the Public’s
Money” is a combination
of PRICE AND RISK
PPP Option
#3
Average
PPP
Tariff
PPP
Option #2
P’’’
Low
P’’
PPP Option
#1
P’
The Private
Sector’s
Price-Risk
Offer Curve
Public “Utility” Curves
Level of Sector RISK Bourne by Government
High
Thus, “The Lowest-priced bid is often not the best bid”
for long-term (5-10
service
delivery
contracts.
World yr.)
Bank, ICT
Days, Washington,
DC, March
28-April 1, 2011
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2.5-Optimal vs. Minimal Public Risk-Sharing
High
PPP Price
Minimal
Public
Support,
But Low VfM
PPP
Price
(Cost/
Output
Unit)
Low
PPP Price
VfM
Moderate
Public
Support,
=> Optimal
VfM
Private
Sector’s
Price-Risk
Offer Curve
High VfM
Public’s
Value
For
Money
Public VfM
Utility Curves
Low VfM
Political Land
Market/
Technology/ Operating/
Risk Acq. Demand Risk Eq. Install. Risk Avail. Risk
High Pub. Risk
Low Pub. Risk
Public Support
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011
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2.6-Illustration of PSC & VfM Analysis
Illustration: VFM Analysis of a PPP Project
$200,000,000
$180,000,000
Public
Affordability
Limit
RiskAdjusted
PSC
$160,000,000
$140,000,000
Base Case
PSC
$120,000,000
Value
for
Money
Benefits
Winning
PPP
Bid
$100,000,000
$80,000,000
$60,000,000
$40,000,000
$20,000,000
$0
1
2
3
4
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011
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3.1-Key Elements of PPP Frameworks:
 Clear PPP Policy Statement
 Multi-Sector PPP/Concession Law or Regulations
 PPP Units: Central PPP Unit + Sector PPP Nodes
 PPP Project Development/Preparation Facilities (PDF)
 PPP Manuals & Guidelines (Standardised Procedures)
 PPP Procurement Regulations (Price & Non-Price
Criteria)
 Treatment of Unsolicited Proposals: Especially for ICT
& eGovt Projects
 Specific/limited Public Credit Enhancements Allowed
 PPP & Infrastructure Investment Fund Established
 Systematic PPP Training & Capacity-building
 PPP Contract Performance
Monitoring Capacity
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011
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nt
ry
?
C
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Multi-Sector PPP Technical Unit
Line Min./Sector PPP "Nodes"
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
PPP Project Dev. Facility (PDF)
PPP Procurement Regulations
Yes
Yes
No
Yes
No
Yes
No
Yes
No
Yes
Yes
Yes
Yes
Yes
Unsolicited Proposal Procedures
Published PPP Manuals/Guidelines
Yes
Yes
Yes
No
Yes
Yes
No
Yes
No
Yes
Yes
Yes
Yes
Yes
Public Sector Credit Enhancements Allowed
(VGF, Contingent Liabilities, etc.)
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Public Sector Risk Management Framework:
Unit & Regulations
Yes
Yes
Yes
Yes
Yes
Yes
Not Yet
Systematic PPP Training & Capacity Building Yes
Yes
Yes
Yes
Yes
Yes
Not Yet
Infrastructure Regulatory Bodies & PPP
Contract Monitoring Units (CMUs)
Yes
Yes
Yes
Yes
Yes
Yes
Yo
ur
di
a
In
PPP Policy Statement
Multi-Sector PPP/Concession Law & Regs.
Yes
ou
fri
ca
A
So
ut
h
ga
ry
Hu
n
ex
ic
o
PPP Framework Elements
M
Ph
ili
pp
in
es
M
al
ay
si
a
Ch
ile
3.2-Emerging Market PPP Frameworks
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011
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3.3-Example:
South Africa’s
PPP Manual &
Project Cycle:
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011
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3.4-Key Characteristics of
Effective PPP Toolkits & Manuals:
 Clearly Distinguish between “Required PPP Procedures” vs.
“Optional Suggestions/Recommended Good Practices”
 Function as a Reference Volume, Using Instructional-Based
Writing Rather than Traditional Analytical-style Writing
 Provide Ready-to-Use PPP Templates or Models
 Provide Practical (Not just Theoretical), eGovt.-specific
Guidance (ie “Common Practical Pitfalls to Avoid”)
 Support PPP Capacity Building: able to be read, discussed, and
followed as part of any PPP training program.
 Institutionally-Relevant in Explaining specifically who
Performs each specific PPP Review, Procedure & Approval.
 Contribute to a Proven Track-Record of Completed PPP
transactions, (not just a “nicely-looking PPP framework on
paper”)
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011
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3.5-Selected Countries with PPP
Guideline Manuals, Standardised
Procedures & Toolkits:
United Kingdom
Victoria, Australia
South Africa
India
Ireland
Philippines
Mauritius
Egypt
Saudi Arabia
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011
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3.6-Drivers of Success for PPP Frameworks
Standardisation: PPP Models & Documentation that
can be easily replicated (PPP Feasibility Analyses &
Business Cases, Risk Allocations, Tender Documents,
PPP Contracts, etc.)
Dealflow:


Quantity: Sufficient scale to justify a PPP Strategy
Quality: Determine which candidates are appropriate as
PPPs; Projects must be clear & “bankable”
Leverage: Create more opportunities to attract new
finance using credit enhancements
Capacity Building: PPP won’t work unless the
public sector understands its Governance and
oversight responsibilities from beginning-to-end.
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011
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4.1-Key Issues Facing eGovt & ICT PPPs Today
Approvals Process: Many new PPP Frameworks
are becoming “over-bureaucratized.” Too many,
lengthy reviews & approvals make PPP less
attractive to private developers & public agencies.
STAGE 1
Contracti
ng
Authority
No
n
PP
P
Sub Sector List
of PPP Projects
from
Initial Screening
withsub-sector
MVA
Priority
No
n
PP
P
Sector List of
PPP Projects
from
Sector-wide
Screening with
MVA
PPP
Line
Ministry
& P3
Node
PPPS
MOF
& RMU
Version 4 –Sept 2010
List of
Public
Sector
Projects
STAGE 2
Conduct
Feasibility
Study*
STAGE 3
Tendering
STAGE 4
Negotiation
STAGE 5
Contract
Managemen
t
Priority
sector
PPP
Ministry
proposes Sector
PPP
Projects
Ministry
P3
Node
Need
GS is
more National List of
not
project PPP Projects
needed
preparati
from
Prelimina
on Nation-wide
PPP RC
GS is
ry
Screening with
not
GS
is
consultati
MCA
availab
needed
on on
Budget Review
le now
GS is
Projects
(subject to MOF
availabl
under
approval)
Report to
OBC is developed
e
processin
the Ministry
and approval is
g
sought by PPPSC
GS is considered
*
For
a
project that likely needs GS then
not suitable for
the Pre-FS shall be updated to a full FS.
this project
See Figure 3 for more detail
SU
BS
EC
TO
RWI
DE
SE
CT
OR
WI
DE
NA
TIO
NWI
DE
NOTES:
MOF: Ministry of Finance
OBC: Outline Business Case
RMU: Risk Management Unit
PPPS: Public Private Partnership
Secretariat
PPPSC: PPP Steering Committee
MCA: multi-criteria analysis
GS: government support
 major route;  optional route
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011
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4.2-Key Issues Facing eGovt & ICT PPPs Today
Public Capacity: Limited capacity of Governments
to identify new eGovt solutions for public services &
develop clear eGovt output performance standards.
Especially limited PPP performance monitoring &
contract management capacity.
Market & Demand Risk Transfer: Growing Govt.
preference to transfer to full commercial & demand
risks (& profit incentives) to private eGovt service
providers. Taxpayer/Rate-Payer Concerns about
Fairness & Transparency.

Should Private Providers of Traffic Speeding Cameras
receive fixed “availability payments” (including their
profits) or a fixed-fee per transaction/violation?
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011
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4.3-Case Example: NAFITH, Aqaba, Jordan
NAFITH: National Freight Information & Transport. Hub
Port of Aqaba, Aqaba Special Econ. Zone Authority
(ASEZA): Growing problem of truck congestion around port
Scope: 2006 electronic Truck Control System/logistics on a
PPP contract. Controls truck traffic between 32 key sites
within Port’s Special Economic Zone
176 registered trucking companies in Jordan. 13,700 total
truck population. 3,000 trucks serviced daily by NAFITH
10-year Concession Contract
Each truck pays a 2 dinar ($3.00) fee for a permit to
enter/exit port.
Each trucking company & dispatcher had to have a
computer to participate in system.
15% of revenues remitted to ASEZA, 85% retained by
NAFITH
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011
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4.4-Case Example: NAFITH, Aqaba, Jordan
Aqaba Special
Economic Zone
Aqaba Truck Marshalling
Yard Entry & Exit Points
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011
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4.5-NAFITH PPP, Aqaba, Jordan – Results:
Clear Benefits in:



Much less congestion
Lower fuel consumption & pollution
Improved Efficiency:
 Cost of freight from Aqaba has fallen 20%
 Container cargo has increased 25% while number of trucks has
remained the same
 Increase in “double moves” by trucks (carrying full loads both in to
and out of Aqaba) from 6% to 25%



Accurate and transport data & planning
Significant improvements in truck safety (steep descent into Aqaba
had killed 2 drivers per month, rushing to get to the Port)
Eliminated informal payments to gain access to port sites
PPP Issues:


ASEZA has expressed interest in collecting more revenues
Growth of a “secondary market” for permits, by market makers
who resell desired permits to truckers and dispatchers at a
premium NAFITH World Bank, ICT Days, Washington, DC, March 28-April 1, 2011
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4.6-Key Issues Facing eGovt & ICT PPPs Today
Growing Govt. Preference for Simply
Avoiding Public Borrowing: More Govts.
Are pursuing PPPs across sectors simply to
avoid public borrowing instead of delivering
long term value for money.
Limited Relevance of PSC Models and
VfM Analyses in eGovt & ICT Sectors:
More difficult to estimate Public Sector Costs
(PSC) & conduct VfM Analysis for eGovt &
ICT PPPs. Public sector options rarely exist.
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011
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4.7-Key Issues Facing eGovt & ICT PPPs Today
Technology & Performance Risk: Many IT and
eGovt projects don’t work. In 2003 UK’s Treasury
discontinued Private Finance Initiative (PFI)
projects in Information Technology following
several “failures”:




£230m 10-year deal to automate the Passport Office
£150m automation of National Insurance
Criminal Records Office
State benefit payments
Only 22% of the UK’s IT PFI projects delivered 80100% of defined programme benefits. For non-IT
projects the figure was 73%.
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011
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4.8-Key Issues Facing eGovt & ICT PPPs Today
PPP Project Pipeline: Biggest current constraint
to PPPs in eGovt & ICT is not inadequate legal
frameworks, but the limited number of candidate
PPP projects being identified and prepared. Govts.
should focus on building the PPP project pipeline.
Public Sector Risk-Sharing in PPPs: During past
10 years private ICT project developers (and
lenders) are requiring more and clearer forms of
public sector support, risk-sharing, and contingent
liabilities than before. Govt PPP Frameworks must be
ready to manage these requests.
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011
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eGovt PPP Example: Partnerships
Victoria (Australia) Mobile Data
Network PPP
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011
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Mobile Data Network PPP
Description: To provide a mobile data network (MDN)
to Victoria’s Police, Ambulance & Emergency Services
vehicles in Melbourne area. Includes access in vehicles
and outside to relevant databases, maps, emergency
information & locator functions at a guaranteed
operational reliability of 99.9%:




Allow important information about the emergency and
the people involved to be sent directly to the vehicles
involved;
Use Satellite technology to track vehicle location,
allowing the closest vehicles to be sent to an emergency;
Give mobile access to databases such as vehicle
registrations and drivers licenses; and
Allow police to submit paperwork via computer while still
in the field.
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011
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PPP Payments & Performance Standards
If the Service Provider has not remedied a failure under within
the time set out in the remediation plan or within any further
period allowed by the Contract Manager, the State may
reduce the Service Payments which would otherwise be
payable to the Service Provider in accordance with the
following:
ECV CAD End to End Performance Standards
98th
percentile
Message
delivery time
19
seconds
or less
More than 19
seconds,
less than or
equal to 40
seconds
More than 40
seconds,
less than or
equal to 60
seconds
More than
60
seconds
Percentage
abatement
of daily
Service
Payment per
day
0%
5%
7.5%
10%
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011
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Mobile Data Network PPP
PPP Contractor: Motorola Australia Pty Ltd.
Govt. Client: Victoria Police & Ambulance Services
Contract Term: 5 year contract, beginning June 2003,
2 year contract extension option
Cost of PPP Contract: $138 million in total PPP
Payments over term of contract, equals $85 million NPV
using State’s discount rate of 8.65%
Estimated Value for Money Savings of PPP = 11%
(A$10.5 million = U.S. $7.8 million)
Lessons Learned: As one of the first eGovt PPPs in
Australia, the procurement took a long time (3 yrs.) due
to need to revise & re-clarify the contracts output
standards. Especially difficult to estimate Public Sector
Costs (PSC) when it was difficult for the public sector to
provide the new technology
required on its own
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QUESTIONS?
Edward (“Ned”) White
[email protected]
World Bank, ICT Days, Washington, DC, March 28-April 1, 2011
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