This paper was presented by Senator Iyiola Omisore, FNSE at the Nigeria Society of Engineers Annual Conference, Uyo, Akwa Ibom State, Nigeria 2016

1. November 24, 2016
By:

2. Since the advent of globalisation, much promoted by internet
technology, some twenty years ago, the world, outside of its
southern hemisphere, the era of government, at every level of
nation’s political economy, being solely responsible for the total
conception, financing and management of public projects, has
since ceased to be the norm.
Today, there has been much and involving contractual
relationships between the public and the private sectors of the
polity in the procurement of public utilities under an
arrangement known as public private partnership [PPP].
Introduction

3. • Although, PPP is seen as new and novel initiative that has come on
stream in the last 20 years, the idea, historically, has not been absent,
since governments, as authorities of states, have as a matter of social
contract, had to procure utilities for the people, hundreds of years back.
• The reality is that the private sector has always been involved whenever
it has become necessary for governments, or their agencies, to provide
public services for their people. The arrangement prevalent in most
societies is the design and finance [by government], build and deliver [by
private contractors] and manage [by government].
• Hitherto, before PPP became the norm, this was the arrangement by
which roads, railway, electricity and water services were provided, the
world over.
The PPP Model

4. Whereas, countries outside sub-regional Africa has had a major
paradigm shift in public procurement, countries within the sub-
regional African continent, Nigeria inclusive, are yet to avail
themselves of the opportunities and advantages in the
provisions of public services and utilities, as offered by the PPP
model, for their peoples, thereby expanding the scope of their
socio–economic developments.
The PPP Model

5. While it is recognised that the PPP model has
been deployed to execute a few public projects in
Nigeria, its utility value has been mostly felt in
Lagos state where the authorities have partnered
with private sectors for design, finance and
management of public utilities. Even then, the
projects involved are hardly ones that can
recommend themselves to a sustainable
management status under an ideal PPP model.
Outside of Lagos State, cursory survey of the infrastructure procurement
by state governments is still largely tied to the old model of contract
awards to private firms to execute a project designed and financed by
governments. Thus, on the average, Nigeria has fared, rather poorly,
especially in view of the country’s need for requisite infrastructure for
nation’s potential developmental capacity.
….The PPP Model

6. • My intervention in the following submission is anchored on a
very straight forward argument to the extent that, even with
real needs and potential returns on investment by investors,
inadequate provisions in the legal framework to sufficiently
safeguard investors and financiers interest, may continue to
constitute major road blocks for Nigeria at all levels of
authorities in the country’s PPP drive for the much needed
public procurement of utilities and services.
• The critical point to be made here is that, though, there seems
to be shortage of investable funds in the International Market,
but Nigeria crisis seems compounded by the integrity profile of
our legal framework for an ideal PPP model.
….….The PPP Model

7. .• In the final analysis, and without going into the details of the
shortfalls in the legal framework, as has been identified in many
studies, see, for instance, Essia and Yusuf, 2013,
• Suffice to say, however, that the Infrastructure Concession
Regulatory Commission [ICRC] Act of 2005, the Public
Procurement Act 2007 regulations issued by ICRC governing the
PPP process and various state laws as described in each State’s
PPP policies falls short of necessary regulatory framework for
proper implementation of PPP projects, most importantly with
respect to dispute resolution during the tenor of the contract.
• Yet, the apex bank should make concerted efforts to offer
assistance to commercial and industrial banks to enable them
after financial skills required in PPP management.
….,,,The PPP Model

8. .CONCEPTUAL CLARIFICATION
• PPP has become a generic term to describe plethora of contractual
business relationships and management indices between
governments [national, state and local, including their respective
agencies] and private sector- that may be promoters and financing
Institution, i.e. banks.
• In some PPP model, project financiers [banks] may be part of
contractual arrangement as investors, thereby part of the risk-
sharing, with a view of participating in the accruing profit and also
losses from such business undertakings.
• It suffices, however, that this arrangement is not popular in ideal PPP
model for public procurement, as some financial regulations preclude
banks from getting involved in business ventures beyond their
statutory function of managing public funds, committed to the
procurement of public infrastructure.

9. .OPERATIONAL MODELS UNDER PPP ARRANGEMENT
In the public perception, any contractual relationship between
government and a private sector is deemed to qualify as a business
model under a PPP arrangement. However, there seems to be some
consensus around the following business arrangements as qualifying for
PPP business relationships

10. .
1. BRT –Build –Operate- Transfer. Under this arrangement, private
investors access funds to build a public facility/utility, sells the output
to the public and transfer at the end of the contract arrangement.
2. BRT-Built-Rent-Transfer. This is a model where private investor builds
a facility, rents it out to recoup investment, and, thereafter transfer the
facility to the authority [government] at the end of contract duration.
3. BTO –Build –Transfer –Operate apply to a contractual agreement
where a private vendor builds facility, transfer to government who
either operates directly or contract such facility out to a Third Party.
The investor either gets full payment at the end of contract, or share in
the earnings from operation, thereafter.
…OPERATIONAL MODELS UNDER PPP ARRANGEMENT

11. .
4. Concession is a model, whereby the private vendor, otherwise called
the concessionaires may or may not build a facility, but is allowed to
operate an already existing facility on which he may have refurbished.
He is allowed to charge users a fee or toll for use of the facility for
a period of the contract.
5. DBB -Design- Bid-Build is a model where government agency provides
a design, put out tender for private investors to bid and build upon
winning by a private investor.
6. DBFO –Design –Build -Finance and Operate. Under this PPP model,
government designs an Infrastructure facility; private vendor finances
building and, thereafter, operates for cost recovery.
….OPERATIONAL MODELS UNDER PPP ARRANGEMENT

12. .……OPERATIONAL MODELS UNDER PPP ARRANGEMENT
7. DBMF -Design -Construct -Maintain and Finance. Under this arrangement,
government takes the responsibility for the design and the finances of the
facility, while the private sector do the construction and maintenance of facility,
with returns to government, based on some sharing formula.
8. EPC CONTRACT –Engineering Procurement and Construction. This is, perhaps,
the most complex and expensive of the PPP models because it involves a
situation whereby the contractor provides a complete installation to
specification at a fixed price and at a fixed schedule of facility delivery. A typical
example of this PPP model is the installation of power plant.
9. FRANCHISE. Under this PPP arrangement, the service provider, called the
franchisee is allowed to charge a fee on the public for the use of an
infrastructure facility which has already been built by government for which the
franchisee pays a periodic lump sum to government after making allowance for
maintenance cost and profit margin.

13. .………OPERATIONAL MODELS UNDER PPP ARRANGEMENT
10. Lease/Maintain is a typical arrangement, whereby private
vendor pays rent for use of facility owned by government. The
vendor is responsible for maintenance of the utility.
11. ROT -Rehabilitate-Operate-Transfer is a model, whereby a
private investor rehabilitates facility, operates it to recover cost of
investment and then transfer to government at the end of
contract.
12. RLT -is a PPP arrangement under which private enterprise
rehabilitates a facility, signs a lease agreement with a government
agency for use, with a view of cost recovery, thereafter transfer,
facility to government at the end of contract.

14. GENERAL FEATURES OF PPP SCHEMES…
• Irrespective of the model adopted, there are common
features that define the essence of any contractual
business relationship assumed to be PPP.
• The infrastructure or service must be funded, in whole or
in part by the private partner, and this, in essence,
influences how risks are distributed between the public
partner and the private investor.

15. GENERAL FEATURES OF PPP SCHEMES…
• To be sure, PPP are complex structures, involving multiple parties and
relatively high transaction costs.
• But whatever the cost, a PPP model must relieve government of the
yearly burden in budget provisions for a public utility, because PPP
must become a procurement tool where the focus is payment for the
successful and efficient delivery of services. Here, the performance
risk is transferred to the private partner.
• PPP is an output/performance based arrangement, as opposed to the
traditional input-based model of public service delivery where the
focus is payment for the successful delivery of services. (i.e. Design,
construction, maintenance and operation), with a view to increase
synergies and discourage low-capital/high operating –cost proposals.

16. …GENERAL FEATURES OF PPP SCHEME
• In general, a PPP model must offer a new and dynamic approach to
managing risk in the delivery of infrastructure and services.
• In a typical PPP arrangement, the private sector is compensated
through either: user- based payments (i.e., toll roads, airport or port
charges).
• Availability payments from the public authority (i.e., pfl, power
purchase agreements (PPAS), water purchase agreement ( WPAS).
• A combination of the above user based payment structures, the
government or public authority often needs to provide some
financial support to the project to mitigate specific risks, such as
demand risks, or to ensure that full cost recovery is compatible with
affordability criteria and the public’s ability to pay.

17. PPP LOCKJAM
Until very recently, there was simply no regulatory framework for PPP
in Nigeria. PPP in line with the different methods of financing same,
was to a large extent, an alien concept.
• In fairness to the public service, there were no precedents or reference
points. And, as suggested in my introductory remarks, there was clearly
a serious knowledge deficit on the part of the regulators in dealing with
issues.
• And these posed major problems to both sides of the transaction which
may have accounted, to a large extent, for some of the challenges in the
early period of the PPP arrangements.
• For example, the insufficient knowledge of the nature of PPP is largely
responsible for the perception that the scheme is primarily for revenue
generation, rather than to provide infrastructure or services required by
the public, as quickly as possible and in the most efficient manner.

18. PPP LOCKJAM
• While the infrastructure Concession Regulatory Commission Act
2005 is in place, a cursory examination of the Commission has very
little effective powers, so much that it is becoming largely a
monitoring and policy-making entity without the capacity to
enforce compliance, particularly on the side of government.
• The slow pace at which the justice delivery system works is also a
major impediment to doing business in Nigeria, and which
continues to cause serious delays in PPP projects.

19. PPP LOCKJAM
• In other climes, a 3-stage approach to dispute resolution is
available to parties under PPP arrangement before approaching the
court, where all parties involved in dispute are assured that their
respective complaints would be satisfactorily resolved.
• Perhaps, a resort to this may be a viable alternative to litigation.
The point to be made here is that when dispute resolution costs
and uncertainties are high, private participation in infrastructure
may be held back.
• Judicial systems ought to play a major role here, but in many
developing economies, Nigeria inclusive, they tend to be
cumbersome, slow and expensive. Yet, they are perceived as
pandering to the public party in dispute.

20. . CONCLUSION
• One of the issues is absence of political will on the part of an administration to
see through the policies of a previous administration.
• And because concessionaires are aware of a negative tendency by a new
administration not to honour, to the lather, all the tenets of an arrangement
by a departed administration,
• they are often inclined to speed up the commissioning of projects before the
date of departure of a sitting administration, with avoidable increase in the
cost of project.
• Yet, except there is a determination that a PPP succeed, there are offer
sufficient vested interests in a country, especially in a multi-faith and multi-
ethnic country like Nigeria to ensure that the governments initiative to
promote PPP as a policy fail.
• In bringing this address to a close, it is
important that we do not gloss over the
political and cultural issues that often
constitute major disincentives to public
procurement, via PPP arrangement

21. ● ● CONCLUSION
• Public-private partnership projects often encounter serious resistance
from labour unions, civil service employees and sundry socio-
economic interest groups.
• Also, present is the negative understanding by the general public,
borne out of ignorance, on the strategic importance of PPP in a nation’s
socio-economic development.
• Whereas, PPP, are meant to be partnership contractual arrangement
between the public and private sectors of the economy, in which
responsibilities, risks and obligations, are to be shared by both sides
in order to guarantee the greatest benefits to the public.

22. ● ● ● CONCLUSION
• But regrettably, in Nigeria, a segment of the public service operators
tend to see the private sector concessionaires as the enemies that
would deprive them of their jobs, therefore, to be overcome at all
cost.
• And this is often achieved when some extant rules in the civil service
are exhumed to advise the government on why all of a PPP
undertaking, or some aspects of PPP project agreement should not be
honoured, thereby leading to government unilaterally rebidding on
contracts voluntarily entered.
• Moreso, with a weak legal framework, under which concessionaires can
be protected, the tendency is for the private sector operators, both from
within and from outside of the country, to be wary of doing business with
government.
• Thus, timely procurement of public utilities suffers and the socio-economic
development and the country is the worst for it.

23. THANK YOU