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Similaire à #Public-Private Partnership (PPP) Contract Models# By SN Panigrahi
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#Public-Private Partnership (PPP) Contract Models# By SN Panigrahi
- 2. 2 SN Panigrahi is a Versatile Practitioner, Strategist, Energetic Coach, Learning Enabler & Public Speaker. He is an International-Corporate Trainer, Mentor & Author He has diverse experience and expertise in Project Management, Contract Management, Supply Chain Management, Procurement, Strategic Sourcing, Global Sourcing, Logistics, Exports & Imports, Indirect Taxes – GST etc. He had done more than 150 Workshops on above Published more than 500 Articles; More than 60 Youtube Presentations He is an Engineer + MBA +PGD ISO 9000 / TQM with around 29 Yrs of Experience He is a certified PMP® from PMI (USA) and become PMI India Champion Also a Certified Lean Six Sigma Green Belt from Exemplar Global Trained in COD for 31/2 Yrs. on Strategy & Leadership GST Certified – MSME – Tech. Dev. Centre (Govt of India) ZED Consultant – Certified by QCI – MSME (Govt of India) Member Board of Studies, IIMM Co-Chairman, Indirect Tax Committee, FTAPCCI Empanelled Faculty in NI MSME He has shared his domain expertise in various forums as a speaker & presented a number of papers in various national and international public forums and received a number of awards for his writings and contribution to business thoughts. SN Panigrahi 9652571117 snpanigrahi1963@gmail.com Hyderabad
- 3. 3 Public-Private Partnership (PPP) is a funding model for a public infrastructure project such as a new telecommunications system, airport / sea port or power plant / Roads & Bridges or Infrastructure Projects. The public partner is represented by the Government at a Local, State and/or National Level. The Private Partner can be a privately-owned business, public corporation or consortium of businesses with a specific area of expertise.
- 4. 4 Public Private Partnership means an arrangement between a government / statutory entity / government owned entity on one side and a private sector entity on the other, for the provision of public assets and/or public services, through investments being made and/or management being undertaken by the private sector entity, for a specified period of time, where there is well defined allocation of risk between the private sector and the public entity and the private entity receives performance linked payments that conform (or are benchmarked) to specified and pre-determined performance standards, measurable by the public entity or its representative.
- 5. 5 PPP is a broad term that can be applied to anything from a simple, short term management contract (with or without investment requirements) to a long-term contract that includes funding, planning, building, operation, maintenance and divestiture. PPP arrangements are useful for large projects that require highly- skilled workers and a significant cash outlay to get started. They are also useful in countries that require the state to legally own any infrastructure that serves the public. Different models of PPP funding are characterized by which partner is responsible for owning and maintaining assets at different stages of the project.
- 6. 6 Public Private Partnership means an arrangement between a government/statutory entity/government owned entity on one side and a private sector entity on the other. It is often done for the provision of public assets or public services, through investments being made and/or management being undertaken by the private sector entity, for a specified period of time. There is well defined allocation of risk between the private sector and the public entity. The private entity who is chosen on the basis of open competitive bidding, receives performance linked payments that conform (or are benchmarked) to specified and pre-determined performance standards, measurable by the public entity or its representative.
- 7. The public entity should have the enabling authority to transfer its responsibility – enabling legislative & policy framework, administrative order – the instrument of transfer is through a contract There is usually a significant transfer of responsibility to the private entity – and usually includes financial investment obligations The private sector is responsible for carrying out or operating the project and takes on a substantial portion of the associated project risks During the operational life of the project the public sector’s role is to monitor the performance of the private partner and enforce the terms of the contract The private sector’s costs may be recovered in whole or in part from charges related to the use of the services provided by the project, and may be recovered through payments from the public sector
- 8. For a payment to the private entity – directly by users or by the public entity such that - a significant portion of project revenues and/ or the payments, are conditional on achieving pre-specified levels of performance Public sector payments are based on performance standards set out in the contract Often the private sector will contribute the majority of the project’s capital costs, although this is not always the case The nature of the relationship is usually long-term
- 9. 9 The Emergence of Public-Private Partnership (PPPs) is seen as a Sustainable Financing (Access to private sector finance) and Institutional Mechanism with the Potential of Bridging the Infrastructure Gap Apart from enabling Private Investment Flows, PPPs also deliver Efficiency gains and Enhanced Impact of the Investments from using private sector skills and from transferring risk to the private sector The Efficient use of Resources, availability of Modern Technology, better Project Design and Implementation and Improved Operations Combine to deliver Efficiency and Effectiveness gains which are not readily produced in a Public Sector Project Potentially Increased Transparency Enlargement of focus from only creating an asset to delivery of a service, including maintenance of the infrastructure asset during its operating lifetime PPP Projects also lead to Faster Implementation, Reduced Lifecycle Costs & Operational Costs, and Optimal Risk allocation Private Management also increase Accountability and Incenvizes Performance and maintenance of Required Service Standards. PPPs Results in Improved delivery of Public Services and Promote Public Sector Reforms
- 10. 10 Design Build, or Rehabilitate Finance Maintain Operate Transfer
- 11. 11 A central characteristic of a PPP contract is that it bundles together multiple project phases or functions. Nonetheless, the functions for which the private party is responsible vary and depend on the type of asset and service involved. Typical functions include: •Design (also called engineering work)—involves developing the project from initial concept and output requirements to construction-ready design specifications. •Build, or Rehabilitate—when PPPs are used for new infrastructure assets, they typically require the private party to construct the asset and install all equipment. Where PPPs involve existing assets, the private party may be responsible for rehabilitating or extending the asset. •Finance—when a PPP includes building or rehabilitating the asset, the private party is typically also required to finance all or part of the necessary capital expenditure, as described further in How PPPs Are Financed. •Maintain—PPPs assign responsibility to the private party for maintaining an infrastructure asset to a specified standard over the life of the contract. This is a fundamental feature of PPP contracts. •Operate—the operating responsibilities of the private party to a PPP can vary widely, depending on the nature of the underlying asset and associated service. For example, the private party could be responsible for: • Technical operation of an asset, and providing a bulk service to a government off-taker—for example, a bulk water treatment plant • Technical operation of an asset, and providing services directly to users—for example, a PPP for a water distribution system • Providing support services, with the government agency remaining responsible for delivering the public service to users—for example, a PPP for a school building that includes janitorial service
- 12. 12 For the provision of these services, the private party typically creates a PPP company, a Special Purpose Vehicle (SPV) solely to serve a particular function, such as the facilitation of a financial arrangement or creation of a financial instrument. A dedicated SPV allows for the segregation of all assets and liabilities linked to the private provision of services. The concession period is determined primarily by the length of time needed for the facility’s revenue stream to pay off the company’s debt and provide a reasonable rate of return for its effort and risk.
- 13. 13 The PPP Payment Mechanism The private party can be paid by collecting fees from service users, by the government, or by a combination of the two—with the common, defining characteristic that payment is contingent on performance. The payment mechanism should be structured in such a way that the net remuneration of the private party is linked to performance. For the private party to have the right incentives to deliver services at the performance levels intended by the procuring authority, Payment collecting fees from service users by the Government by a combination of the two
- 14. 14 Assets revert to the authority at the end of the concession period, including assets purchased by the concessionaire. In a concession the concessionaire typically obtains most of its revenues directly from the consumer and so it has a direct relationship with the consumer. The concessionaire will pay a concession fee to the authority. A Concession gives a concessionaire the long term right to use all utility assets conferred on the concessionaire, including responsibility for operations and some investment. Asset ownership remains with the authority and the authority is typically responsible for replacement of larger assets. private operator is responsible for operating and maintaining the utility. In the case of a lease the rental payment to the authority tends to be fixed irrespective of the level of tariff collection that is achieved and so the operator takes a risk on bill collection and on receipts covering its operating costs. Contractual arrangement for the management of a part or whole of a public facility or service by the private sector. Capital investment is typically not the primary focus in such arrangements. Build-Operate-Transfer (BOT) Projects, and Design- Build-Operate (DBO) Projects are types of public- private partnerships that are output focused. BOT and DBO projects typically involve significant design and construction as well as long term operations, for new build (greenfield) or projects involving significant refurbishment and extension (brownfield).
- 15. SN Panigrahi 15 Design-Build (DB) Operation & Maintenance Contract (O & M) Design-Build- Finance (DBF) Design-Build- Finance-Operate (DBFO) Design Build Finance Operate Manage (DBFOM) Design Build Operate (DBO) Build-Own- Operate (BOO) Build Operate Transfer (BOT) Build Own Operate Transfer (BOOT) Buy-Build- Operate (BBO) Finance Only Build Lease Transfer(BLT) Build-Lease- Operate- Transfer (BLOT) Lease Renovate Operate Transfer (LROT) Design Construct Manage Finance (DCMF) Operation License
- 16. 16 •Design-Build (DB): The private-sector partner designs and builds the infrastructure to meet the public- sector partner's specifications, often for a fixed price. The private-sector partner assumes all risk. •Operation & Maintenance Contract (O & M): The private-sector partner, under contract, operates a publicly-owned asset for a specific period of time. The public partner retains ownership of the assets. •Design-Build-Finance (DBF) : With the design-build-finance (DBF) procurement model, a single contract is awarded for the design, construction, and full or partial financing of a facility. Responsibility for the long-term maintenance and operation of the facility remains with the project sponsor, but could be included in a separate agreement. This approach takes advantage of the efficiencies of the design-build (DB) approach and also allows the project sponsor to defer financing either completely or partially during the construction period. •Design-Build-Finance-Operate (DBFO): The private-sector partner designs, finances and constructs a new infrastructure component and operates/maintains it under a long-term lease. The private-sector partner transfers the infrastructure component to the public-sector partner when the lease is up. Design Build Finance Operate Manage (DBFOM) •The responsibilities for designing, building, financing and operating are bundled together and transferred to private sector partners. There is a great deal of variety in DBFOM arrangements, and especially the degree to which financial responsibilities are actually transferred to the private sector.
- 17. 17 Design Build Operate (DBO): A design build operate (DBO) contract is a project delivery model in which a single contractor is appointed to design and build a project and then to operate it for a period of time, while the Sponsoring Authority finances the project and retains ownership •Build-Own-Operate (BOO): The private-sector partner finances, builds, owns and operates the infrastructure component in perpetuity. The public-sector partner's constraints are stated in the original agreement and through on-going regulatory authority. Build Operate Transfer (BOT) : The agreement commits the private company to build and operate a facility - such as a power plant - for a period of time then transfer ownership to the government. Build-Own-Operate-Transfer (BOOT): The private-sector partner is granted authorization to finance, design, build and operate an infrastructure component (and to charge user fees) for a specific period of time, after which ownership is transferred back to the public-sector partner. •Buy-Build-Operate (BBO): This publicly-owned asset is legally transferred to a private-sector partner for a designated period of time
- 18. 18 •Build Lease Transfer(BLT) Under BLT a private entity builds a complete project and leases it to the government. On this way the control over the project is transferred from the project owner to a lessee. In other words, the ownership remains by the shareholders but operation purposes are leased. After the expiry of the leasing the ownership of the asset and the operational responsibility are transferred to the government at a previously agreed price. •Build-lease-operate-transfer (BLOT): The private-sector partner designs, finances and builds a facility on leased public land. The private-sector partner operates the facility for the duration of the land lease. When the lease expires, assets are transferred to the public-sector partner. Lease Renovate Operate Transfer (LROT): In this type, the existing infrastructure is handed over to a private facility for a particular time period. This is given to undergo renovation and its operation for a specific time period. The operation is performed on the condition that the private facility will recover the cost that is agreed in return as per the contractual agreement along with the transferring of the entity back to the government.
- 19. 19 Design Construct Manage Finance (DCMF) : Some examples for the DCMF model are prisons or public hospitals. A private entity is entrusted to design, construct, manage, and finance a facility, based on the specifications of the government. Project cash flows result from the government's payment for the rent of the facility. In the case of hospitals, the government has the ownership over the facility and has the price and quality control. The same financial model could be applied to other projects such as prisons. Therefore, this model could be interpreted as a means to avoid new indebtedness of public finance •Operation License: The private-sector partner is granted a license or other expression of legal permission to operate a public service, usually for a specified term. (This model is often used in IT projects.) •Finance Only: The private-sector partner, usually a financial services company, funds the infrastructure component and charges the public-sector partner interest for use of the funds.
- 20. 20 There are Different PPP models. Each model has its own pros and cons and can be suitable to achieve some of the objectives of private participation. Special characteristics of some sectors and their technological development, legal and regulatory regimes, and public and political perception about the services in a sector may also be factors in deciding the suitability of a particular form of private participation. For example, management contracts are common for existing assets in the water and transport sectors, affermage / lease is common in the transport sector, concessions are common in the transport and telecommunication sectors, and turnkey and private ownership of assets are common in the power sector.
- 21. 21 Design-Build (DB) Operation & Maintenance Contract (O & M): Build & Finance Design-Build-Finance-Operate (DBFO) Build-Own-Operate (BOO) Build-Own-Operate-Transfer (BOOT) Privatization Buy-Build-Operate (BBO) Build-lease-operate-transfer (BLOT) Operation License Govt. Service / Management Contracts
- 22. 22 Examples of PPP projects of the combination type include The Shanghai Container Terminal Company Limited (between the Port Authority and Hutchinson Whampoa in Shanghai, China), International Container Terminal Services, Inc. (in Manila, Philippines), and Delhi International Airport Limited (under an Operation-Maintenance-Development Agreement between GMR-Fraport Consortium and Airports Authority of India in New Delhi, India). These long-term lease/concession combination contracts involve operation and management and significant investments in existing public assets. The Port Klang Container terminal deal in Malaysia is also an example of the combination type of PPP that involved leasing of existing infrastructure facilities at the port and Build-Rehabilitate- Operate-Transfer (BROT) for further infrastructure development. The terminal facility was located on land that could not be legally sold to any private company. In order to circumvent this problem, the Port Authority leased the land to the private company for 21 years for the express purpose of operating a container terminal.
- 23. 23 SECOND VIVEKANANDA BRIDGE (now Sister Nivedita Bridge) in Kolkota: This bridge is one the first BOT projects, undertaken in 1995. The concession agreement was signed in September;2002. The consortium members are from USA, UK, Mauritius and India. Though the financial close was delayed by one year, the construction thereafter was almost on time and the bridge was commissioned on July4, 2007. This bridge also won award for excellence for the year 2007 under the Foreign Bridge Project Category from the American Segmental Bridge Institute. Total project cost of INR 640 (USD 128 millions). The concession period of the project is 30 years. MUMBAI METRO: First MRTS project in India being implemented on Public Private Partnership (PPP) format. DMRC (Delhi Metro Rail Corporation) prepared the master plan for Mumbai Metro. The Private party involved was- Reliance Energy Ltd. Total Project cost- Rs. 2356 Crores First phase- 2006-1011 Commencement of Operations- 2009-2012 mass transit corridor from Andheri to Ghatkopar
- 24. 24 DND – LINK ROAD: The 4 lane 1.5 km long road will intersect the Delhi Noida link road at the intersection of the proposed Mayur Vihar District Centre. This link has been proposed to provide better access and the shortest connectivity from the existing DND flyway to the Trans Yamuna East Delhi area. The work involved detailed geometric design and structure design of the flyover over DND Flyway and another bridge. Estimated civil work cost of the project is Rs. 30 crores. The concession period of the project is 30 years. UNDERGROUND CAR PARKING SYSTEM CITY- Kolkata, West Bengal Year of execution- April 2007. Parking in central Kolkata, the heart of this mega city, has always been a hassle is the case with most of the inner city areas. In an attempt to address the situation, the Kolkata Municipal Corporation (KMC) decided to utilize the rights to underground space and undertake the parking project as a Public Private Partnership project on a Build-Own-Operate-Transfer (BOOT) basis for 20 years. The Private parties involved were- KMC and Simplex UG Level 1: Commercial Development UG Level 2: Parking lot
- 25. 25 List of all PPP Projects - Data collated since 2006 https://www.pppinindia.gov.in/infrastructureindia/project- list?id=1&searchType=Government%20Infrastructure%20Projects %20(PPP) www.infrastructureindia.gov.in is a repository of information on infrastructure projects being implemented in India by various Government Departments and Private Sector companies. This database has been developed by PPP Cell, Infrastructure Division, Department of Economic Affairs, Ministry of Finance, Government of India.
- 27. 27