PRESENTED AT THE PUBLIC SERVICE REFORM RETREAT
OPPORTUNITIES FOR PUBLIC PRIVATE PARTNERSHIPS IN PUBLIC SERVICE PROVISION PRESENTED AT THE PUBLIC SERVICE REFORM RETREAT Aminu DikoDIRECTOR GENERAL/CEOINFRASTRUCTURE CONCESSION REGULATORY COMMISSION Africas Most Formidable CV Past and Present
Largest Economy in Africa/First to Eradicate Virulent Form of Ebola/Guinea Worm in Recent Times.First TV Broadcast in Africa (before Belgium) One of the oldest locations of human existence (9000 BC) 521 Languages (Fourth Largest in the world) UCH 8th Hospital in the Commonwealth Largest Diversity of Butterflies in the World Mandela hid in Nigeria for 6months to escape the Apartheid Regime Longest Bridge in Africa (11.8 Kms) 26th Largest Economy in the World Half a Trillion GDP Largest Black Country in the World 170 Million (1/5th of Africas Population) Largest Entrepreneurial Population in Africa 128 Mobile Phone Users Third Largest Movie Industry in the World Diversifying Economy With Growing Non Oil Sector 51% Services, Agric 22%, Industry 26%, Oil 15% Richest Man in Africa Aliko Dangote Leading Destination for Investment in Africa UNCTAD IF YOU ARE NOT IN NIGERIA, YOU ARE NOT IN AFRICA Nigeria of Our Dreams ABAK ROAD FLYOVER AND THIRD RING ROAD Outline The challenge in Public Service Provision The Solution
Public Private Partnerships (PPPs) Understanding PPPs Opportunities for PPPs Some PPP Projects in Nigeria ICRCs Role Conclusion $14billion/annum The Challenge $6billion National Annual Budget
Resource requirement in context $14billion/annum National Annual Budget $6billion Shortfall for service provision $8billion Source Shelter Afrique/CME The Challenge Absence of an effective integrated national planning framework for infrastructure development Project preparation: The dearth of capacity by public authorities to carry out economic appraisal of projects, long-term investment strategy which will provide a planning tool for the development of infrastructure Faulty project execution framework, together with the dearth of project execution capacity and competencies Dearth of long term finance, together with the inappropriateness and inadequacy of the annual budget The Solution Long term financing through options such as PPPs
Confirmation of Critical and Urgent projects from the NIIMP to be executed through a dedicated Project Delivery Framework A Critical Infrastructure Delivery Leadership Council, Headed by the Vice President, with key ministers of infrastructure sectors as members will provide high level oversight and supervision for the delivery of all critical and urgent infrastructure Actual delivery of critical and urgent infrastructure will be organized at sectorial levels (power, transport, others, etc.) Dedicated Project Managers and Project Delivery Teams (PDT)/Task Forces, will be responsible for day to day delivery of the projects or group of projects WHAT ARE PPPs? WBI Video Keywords and Sentences from Video
Traditional public procurement cannot meet all needs PPP offers a way out Share financing, design and operations with the private sector via PPP PPP is not privatization, Government leads on a PPP Competitive Tender Costs recovered by fees paid by government or users Lifecycle planning, Risk Sharing and Allocation Complex legal and financial arrangements Good governance principles Economically warranted, All Stakeholders Environmental protection and transparent procurement Football Game !!!! Public Service Delivery Options
Infrastructure Services Direct Public Delivery Privatization / Divestiture Government creates assets & provides services Government transfers entire sector responsibility to the private sector which then creates assets and provides services Contracting of Services: Government creates assets and contracts service provision to private sector Government awards concession/license to private sector for a fixed term under which it creates assets and provides services PPPs 13 Bath-001-Presentation-ProjectSponsor-TonyHagan-6thNov2008
Asset Procurement Options Public Sector Private Sector Risk Spectrum Traditional Procurement
The public and private sectors have always worked together Companies have paid taxes Companies have supplied governments with goods Companies have constructed projects for the government Traditional infrastructure procurement Gov designs / finances Private company constructs Government owns / operates / maintains Example Government designs a bridge joining 2 islands Runs tender and gets cheapest construction company to build it Government pays for the construction from the budget When built the government operates and maintains the bridge If anything goes wrong the government pays PPPs A Public-Private Partnership is a contractual agreement between a public agency (federal, state or local) and a private sector entity. Through this agreement, the skills and assets of each sector (public and private) are shared in delivering a service or facility for the use of the general public. In addition to the sharing of resources, each party shares in the risks and rewards potential in the delivery of the service and/or facility. Wide Infrastructure Gap Growing demand for private sector participation in infrastructure Small and depleting Government resources Urgent need for alternative funding of Infrastructure The goal is to combine the best capabilities of the public and private sectors for mutual benefit 16 PPPs are Fundamentally Different
Formal contract between public and private partner (over the years duration the service will beprovided) usually multiple years duration Entered through competitive procurement Using output specification government specifies what, private sector can define how With suitable risk allocation between parties Putting private investment at risk With regulation or contract management of performance of the private partner Example Government defines output =connection to let 1,000 vehicles p.d. travel between islands Government tenders for best solution over 30 years e.g. ferry, tunnel, bridge?? Government enters 30-year contract with private company Private company designs, builds, finances bridge, then operates and maintains it for 30-years Private company receives payment if the bridge works and is available for traffic Government checks on safety and availability If the bridge is closed, or unsafe, the private company looses money 7 Essential Conditions That Define Public Private Partnerships
1 Arrangement Between public & private BOT-Toll Road Project GRANTING AGENCY CONSTRUCTION CONTRACTOR DESIGN CONSULTANT Finance Ris Risk Demand, Traffic, SPV ROAD USERS Design Consultant Construction Contractor O&M Contractor Concession Agreement Design Risk Construction Risk Tolls 2 Provision Of services for public benefit by private partner The final responsibility for service delivery continues to remain with the public sector agency 3 Investments In and/or management of public assets by private partner 4 Time Period For a specified time FINANCIERS Equity Investors, Lenders, Guarantors, Insurers Service 5 Risk Sharing Optimally between contracting parties The salient features of any PPP arrangement are as follows: Contractual arrangement: Bring the public and private sector together to create better value for money for the taxpayers through the use of the management skills and financial strength of the private sector, and conducive legislative and policy measures of the public sector. Substantial risk transfer to the private sector: Engage the private sector through a transparent process and oversee the PPP according to accepted performance norms. Financial rewards based on performance: The government pays the private sector for the services it renders; these services are based on actual performance as against the targets. Operational Risks Traffic/Revenue & O&M 6 Standards Focus on quality of service / performance 7 Payments Linked to performance Why Public Private Partnerships
PPPs fill a critical resource and expertise gap in infrastructure procurement, delivery and operation PPPs engender accelerated procurement of infrastructureand services (additionality) PPPs promote faster implementation of projects, and reduced lifecycle costs and operations /mtce due to private sector efficiencies PPPs provide for better risk allocation between public and private sectors, thus offering abetter and sustainable incentive to perform PPPs engender accountability in resource utilization and alsoimprove the overall quality of service PPPs often lead to the generation of additional revenue and overall value for money for the entire economy Bath-001-Presentation-ProjectSponsor-TonyHagan-6thNov2008
What characteristics have PPPs got? Characterised by the Public Sector: Entering into contracts to acquire services, rather than procuring an asset Specifying the service requirement on the basis of outputs, not inputs Linking payments to the private sector to the level and quality services actually delivered Often requiring a whole life approach to the design, building and operation of project assets Seeking optimal risk transfer to the private sector Requiring private partner to be responsible for raising some, or all, of investment finance required Utilising diverse payment mechanisms, such as market revenue, shadow tolls, capacity availability payments and so on Forms of PPP Service contracts:
Private sector contracted for specific tasks Capital investment and ownership of the asset is by the public sector Public entity pays the private company for provision of services but retains the commercial risk Management contracts: Private sector manages the utility but does not finance it Capital investment and ownership are retained by the public Public entity pays private manager a fixed management fee Commercial risk is held by the public Lease: Private sector manages the utility and finances the O&M Private operator collects revenues and pays to the public entity a fixed fee Commercial risk is shared Concession: Private operator manages the utility and finances new investments as well as O&M Capital investment is made by the private operator but ownership is retained by the public Private operator collects revenues and may pay a concession fee to the public entity Commercial risk is borne by the private operator BOT ( and other variations e.g. BOOT, BTO, DBOT, DFBOT, etc) Private operator builds new infrastructure, operates it for fixed period and transfers it to public sector Capital investment is made by the private operator, but ownership is by both at different points in time Public utility pays private operator for services provided by the new asset Commercial risk is usually private, but could also be shared Types of PPPs Alphabet Soup
DBFOM Design Build Finance Operate Manage Leasing Joint Ventures Operations or Management Contracts Cooperative Arrangements LROT Lease Renovate Operate Transfer DCMF Design Construct Manage Finance BOOR - Build Own Operate Remove BOT Build Operate Transfer BOO Build Own Operate BOOT Build Own Operate Transfer DBF Design Build Finance DBFO Design Build Finance Operate DBO Design Build Operate BLT Build Lease Transfer BTO -Build Transfer Operate Advantages of PPPs Maximizes the use of each sectors strength
Reduces development risk Reduces public capital investment Mobilizes excess or underutilized assets Improves efficiencies/quicker completion Improves service to the community Improves cost effectiveness Shares resources Shares/allocates risks Mutual rewards Government is moving from role of Developer & Operator to Facilitator
PPPs are about !!! Mobilizing private sectors money, expertise and capacities for infrastructure development Long- term relationship between government and private sector (usually>10years) 3. Sharing of Risks and Rewards (no lop-sided agreements-privatizing the profits, nationalizing the loses) Private sector performs to agreed KPIs Life cycle focus (operations and maintenance) Government is moving from role of Developer & Operator to Facilitator Developer& Operator Facilitator Suitable Candidates for PPPs
Transport (road, rail, ports, airports) Fixed links (bridges, tunnels) Water resources (filtration plants, irrigation, sewage treatment, pipelines) Tourism (facility development) Health (hospitals and specialized health services) Specialized accommodation facilities (courts, police stations) Educational facilities (schools, museums, libraries) Correctional services (prisons, remand and detention centres) Arts, sport and recreational facilities Convention centres Government office accommodation Social housing Experience is transferable - Lessons learned from one . . . PPP PROJECTS MUST BE BANKABLE & AFFORDABLE
IRR > Weighted Average Cost of Capital RoE > Shareholders Requirement Debt Service Cover Ratio > Bankers or Lenders Requirements Loan Life Cover Ratio > Bankers or Lenders Requirements Focus on not just comparative but competitive advantage !! Ideas dont get funded bankable projects get funded. You must take to market projects with robust cashflows and cost reflective returns What a PPP is & what it is not
PPP is not privatisation or disinvestment PPP is not about borrowing money from the private sector PPP is more about creating a structure ... in which greater value for money is achieved for services ... through private sector innovation and management skills ... delivering significant improvement in service efficiency levels This means that the public sector ... no longer builds roads, it purchases kilometres of maintained highway ... no longer builds prisons, it buys custodial services ... no longer operates ports but provides port services through world class operators ... No longer builds power plants but purchases power PPPs: Common Myths/Concerns
Myth/Concern Clarification Profitmotive of private sector is incompatible with the service motive of public sector No. The key is to harness private sectors profit motive, by incentivizing them to provide better quality service and earn reasonable return. PPPs increase user tariffs Not Necessarily. When appropriate safeguards like effective regulation and/or adequate competition are in place. However in sectors where existing tariffs are inadequate to cover costs of specified level of service tariffs may initially require some upward adjustment. Over time efficiency gains expected to rationalize tariffs. Money for PPPs comes from private sector pockets Initially, YES.But private sector would make those investments provided they can recover those investments either from users or the government with reasonable return. Once a private sector partner is brought in, there is little or no role for the public sector No. Public sectors role changes from direct involvement in construction and service provision, to ensuring that the PPP delivers value for money for the government and better services for users. In most sectors tariffs regulated by government or independent regulator. In competitive sectors tariffs are determined by market. Government could mitigate the impact of increasing tariffs on weaker sections through subsidy payments. Key Benefits of PPPs Rigorous project preparation since the focus shifts to developing bankable projects Delivery of a whole life solution going beyond asset creation and including Operation and Maintenance (O&M) Focus shifts to service delivery construction responsibility is integrated with O&M obligations and together with appropriate quality monitoring and service delivery-linked payments such an arrangement could enhance the levels of servicedelivery It is possible to adopt a programmatic approach to infrastructure development and service delivery various time bound projects can be integrated under a programme and have a time-bound implementation plan Can lead to better overall management of public services transparency in selection and ongoing implementation OPPORTUNITIES FOR PPPs IN NIGERIA Some PPP Projects In Nigeria
Bridges Project Name:2nd Niger Bridge Client:Federal Ministry of Works Description: Bridge is a 6-lane dual carriageway of approximately 1.760m long and 32.4m wide including 14km long approach road with three (3) river bridges and three (3) interchanges on the approach road Preferred PPP Model:Build Operate Transfer (BOT) for bridge alone. Approach roads via traditional procurement Project Status: Ground breaking ceremony performed in March, 2014 by the President. Early works ie. mobilization and hydrographic studies by concessionaire in progress PROPOSED IBOM DEEP SEA PORT
Mission: To provide an efficient, safe and customer friendly port and free trade zone as an additional gateway to the Nations economy Vision: To be the world-class economic engine in Western Africa and a destination hub for countries around the Gulf of Guinea and their hinterland Some PPP Projects In Nigeria
Seaport Infrastructure Description: Greenfield Deep-Sea Port Project in Akwa Ibom State, Nigeria part of 14,400 hectare Ibom Industrial Cityto be supported by large-scale Free Trade Zone development Current status Outline Business Case (OBC)completed and certificate of compliance issued. Investment required is US $2 Billion. Project Objectives Eastern Maritime Gateway for Nigeria Serve national/regional needs & facilitate the adjacent Free Trade Zone & Ibom Industrial City Provide container handling, storage capacity and import capacity for petroleum products and vehicles Provide dedicated import capacity for food and agricultural products Provide dedicated export capacity for industrial output and natural resources Provide a supply route base for the regional oil & gas sector and serve as logistics park base and regional trans shipment & trading hub for West Africa The National Theatre, Lagos The National Theatre, Lagos
Urban Infrastructure Project Name: Development and Concession of Land Area around the National Theatre Client:Federal Ministy of Tourism, Culture & National Orientation& The National Theatre Management Board Description: The Federal Government wants to realize the original master plan for the National Theatre complex by full utilization of the land area for tourism and entertainment destination facilities ie. Leisure Park, Recreation Centre, Multi Level car park, Shopping Mall and a five (5) Star Hotel etc. The National Theatre and the entire land mass is approximately hectares and only about 20 hectares is currently being utilized. The National Theatre will also be fully refurbished with use and control retained by the Public Sector. Will complete the Lagos Metro blue line major station located near the National Theatre. Preferred PPP Model: Rehabilitate, Design, Build, Finance, Operate and Transfer (RDBFOT) model Project Status: OBC approved by FEC and HE Mr. President. Procurement process about to commence via road shows in Dubai, South Africa and London. EoI evaluation completed and six prospective investors short listed. National Theatre - Proposed Design National Theatre - Current State of Facilities National Theatre Proposed Some PPP Projects In Nigeria
Power Infrastructure Client:Federal Ministy of Power Project Name:PHCN 3 Large Hydro Power Plants Description: Concession of Kainji, Jebba and Shiroro as part of Power Sector reforms Preferred PPP Model:Rehabilitate Operate Transfer (ROT) model Project Status: Handover occurred as part of PHCN unbundled asset handover in 2013. Project Name:Small and Medium Hydro Power Projects Description: Generation of up to 43 MW from existing Ten (10) Small and Medium dams. Preferred PPP Model:Rehabilitate/Build, Operate Transfer (RBOT) model Project Status: : PPP Development in progress. OBC review by ICRC completed Some PPP Projects In Nigeria
Roads Project Name:Rehabilitation and Upgrade of Murtala Muhammed Airport Road Client:Federal Ministry of Works Description: 2.8km dual carriage Apakun - Murtala Muhammed Airport (MMA) road is to be expanded from its present width of 4 lanes to 8 lanes with 2.75m shoulders on either side, including vehicular bridges and pedestrian bridges at appropriate locations. Preferred PPP Model:Build Operate Transfer (BOT) Project Status:: Procurement - selection of preferred bidder and preparation of FBC for approval. Some PPP Projects In Nigeria
Bridges Client: Federal Ministry of Works Project Name:River Niger Bridge at Nupeko Description: New bridge on critical crossing for Agriculture Products Preferred PPP Model:Build Operate Transfer model with tolling Project Status: Due to insufficient tollable traffic PPP delivery model being reviewed Some PPP Projects In Nigeria
Inland Ports Project Name:Operations and Management of Onitsha Inland Port Client:Federal Ministy of Transport/National Inland Waterways Authority (NIWA) Description: The Onitsha River Port has a 180m quay length berth with other facilities which include: warehouse, mechanical workshop, administrative offices and cargo handling equipment fully built by the Government. Preferred PPP Model: Operate Maintain & Transfer (OMT) model Project Status: Interim operations in place; TA procured via WB support. Procurement of concessionaire in progress. Some PPP Projects In Nigeria
Seaport Infrastructure Project Name:Rehabilitation and Upgrade of Kiri Kiri Lighter Terminals I & II Client:Federal Ministy of Transport/Nigerian Ports Authority (NPA) Description: NPA is undertaking the process to concession the terminals to private operators for a variety of possible uses including fishing and container operations PPP Model: Landlord Port Model for the Nigerian ports in line with the ports reform programme Project Status: TA procured via WB support. Procurement of concessionaire in progress. Some PPP Projects In Nigeria
Agricultural Infrastructure Project Name:31 Silo complexes Client:Federal Ministy of Agriculture & Rural Development Description: The Federal Ministry of Agriculture and Rural Development intends to concession 31 Silo Complexeslocated in different parts of the country to allow for greater participation of farmers and the private sector in the Agricultural Transformation Agenda. Preferred PPP Model: Rehabilitate/Build Operate Transfer (RBOT) model Project Status: Review of harvested EoIs in progress. Some PPP Projects In Nigeria
Oil & Gas Infrastructure Project Name:Trans Nigeria Gas Pipeline (TNGP) Project (subset of Trans Saharan Gas Pipeline) Client:Nigerian National Petroleum Corporation Description: The Trans Nigeria Gas Pipeline (TNGP) Project is a subset of the Trans Saharan Gas Pipeline Project valued at $5 Billion. Preferred PPP Model: A mix of models Project Status: The TNGP Project is under development presently, and will be in the market soon PPP Pipeline Other Project Opportunities
Roads Power Transport (Rail and Maritime) Housing Health Urban Infrastructure List of projects published ICRCS ROLE The ICRC Act 2005 Establishes the Infrastructure Concession Regulatory Commission (ICRC) Sec. 14.1 MDAs may enter into a contract with or grant concession to any duly pre-qualified private sector proponent for the financing, construction, operation, and maintenance of any infrastructure that is financially viable or any development facility of the Federal Government. (Section 1.1). Empowers the ICRC to; Provide general policy guidelines, rules and regulations. Take custody of every concession agreement entered by the Federal Government Ensure efficient execution of any concession agreement or contract entered by the Federal Government. Section 11 (Arbitrary Variation etc)No agreement reached in respect of this Act shall be arbitrarily suspended, stopped, cancelled or changed except in accordance with the provisions of this Act. General Lessons Learned: Project Development
Project Preparation: A well prepared project will attract funding and support during implementation. A poorly prepared project will ultimately fail, no matter how well funded. There is Need for experienced transaction advisers and thorough project Preparation (time spent in preparation is always regained during smooth and effective implementation) Operating Environment: Only a conducive, transparent, and competitive environment can attract the right partners Data: Technical and Economic data are critical for thorough project preparation. Data gathering must be a continuous programme Transaction Management: Agency responsible for implementation must take Ownership and Responsibility from inception to completion Stakeholder Consultation: Engagement should include all stakeholders that will be directly or indirectly affected throughout the life of the project General Lessons Learned: Procurement and Contracts
Procurement is Most Critical to ensuring a vibrant PPP market. Procurement processes must be Transparent and Competitive Govt. must understand, in totality, what they are committing to, with clear roles and responsibilities (conditions of contracts) In-depth due diligence (Legal, Technical, Financial, Environmental and Social) must be captured at the OBC level of all potential PPP projects Risks must be thoroughly assessed and shared between parties, with clear Understanding of the responsibilities Public partners must understand that PPPs imply a Loss of Management Control to the Private sector True Partnership implies equality in the relationship. Govts must appreciate and imbibe the qualities of partnership in a PPP environment PPP Procurement can be Lengthy and Costly. MDAs must appreciate this fact, and exercise Patience and Discipline, to maintain best practices NATIONAL POLICY ON PPP Government Commitment Policy Objectives
Economic Social Environmental Enabling institutional environment Guidelines for the PPP Coordination and planning Capacity building Effective communication Roles and responsibilities Market development Collaboration with states and other stakeholders ICRC at a Glance Who is ICRC? WHAT ICRC DOES WHAT ICRC DOES NOT DO
Policy, Guidelines, Regulations, and Capacity Building Ensure Bankability of PPP Projects Ensure VfM and Appropriate Risk Sharing between Parties Pre Contract Post Contract ICRC is the agency of the FGN responsible for regulating public private partnerships for the development and implementation of a viable PPP framework towards the development ofbrownfield and greenfield infrastructure for the benefit of Nigerians WHAT ICRC DOES NOT DO Project Initiation & Approval Determine Output Requirements Contracting Authority PPP LIFECYCLE in line with National Policy
Development Phase TRANSACTION ADVISER NEEDS ANALYSIS PPP OPTIONS APPRAISAL VALUE FOR MONEY AFFORDABILITY SUSTAINABILITY PRELIM RISK MATRIX VIABILITY/BANKABILITY VGF OBC OBC APPROVAL BY FEC PREPARING AND IMPLEMENTING EFFICIENT AND EFFECTIVE PPP TRANSACTIONS PPP LIFECYCLE in line with National Policy Procurement Phase EoI/RFQ Phase AND RFP BIDDING BIDDERS CONFERENCE BID EVALUATION VALUE FOR MONEY TEST PREFERRED BIDDER FULL BUSINESS CASE BY FEC Implementation Phase INDEPENDENT ENGINEER MONITOR DESIGN AND CONSTRUCTION COMMISSIONING TEST VERIFY OUTPUT REQUIREMENTS CONTRACT MANAGEMENT Project Identification Project Prioritization Project Selection Preliminaries ICRC ICRC-MDA Interface MDA Post-Contract Identification
Pre-Contract Post-Contract Technical Adviser Project Monitoring Commissioning Test Verify Output Requirements Contract management Development Phase Procurement Phase ImplementationPhase Needs Analysis PPP Options appraisal Value for Money Affordability Sustainability Prelim Risk Matrix Viability/Bankability VGF assessment OBC approval Transaction adviser EoI and RFP Bidding Bidders Conference Bid Evaluation Value for Money Test Preferred Bidder Full Business Case FEC Approval ICRC MDA Take custody and Ensure Compliance with Terms and Conditions of Agreement Policy, Regulation, Capacity Building Ensure Bankability Recommend OBC Approval Ensure VFM and Appropriate Risk Sharing Create a Robust PPP Market Interface Recommend FEC Approval Preliminaries Identification Prioritization Selection MDA; NPC; BOF; MoF THE KEY PPP PRINCIPLES BEING DRIVEN BY ICRC
Value for Money Ensure project appraisals take into account not only cost but also risks and service quality Public interest Adequate and prior consultation with end-users and other stakeholders of an infrastructure projectas standard. Output requirements Concept of verifiable service standards to be used as basis for output or performance based specifications. Transparency Very high world class standards of public and corporate governance to enhance credibility and transparency. Risk allocation Risks allocated to the party best able to manage them. Competition Ensure business activities are subject to competition and appropriate commercial pressures, dismantling unnecessary barriers to entry, and implementing and enforcing adequate competition. Capacity to deliver Ensure authorities responsible for privately operated infrastructure have the capacity to manage the commercial processes involved and to partner on equal basis with their private sector counterparts. PPP Process Solicited Route Unsolicited PPP Proposal Route
Initiated by Private Party (must be full proposal with development phase complete or nearly complete ie, bankable OBC) (Unsolicited proposals means moving straight into PPP procurement phase) Contracting Authority Receives and Makes Preliminary Review Does proposal certify OBC requirements Send to ICRC (Confirm OBC requirements met) Decision to use Swiss challenge to introduce competition FEC approval sought ie. OBC approval Counter proposals requested for Process followed till full business case as for solicited proposal. ICRC commends MDAs for establishing PPP Unit
PPP Next Steps ICRC commends MDAs for establishing PPP Unit But there is immediate need to strengthen the Units Allocate Budget/Carryout PPP Capacity Building Identify and Select Pilot PPP Projects Seek ICRC and Min of Finance Concurrence Procure Transaction Advisor/s Prepare Pilot Projectsie. Outline Business Case and seek PPP partners Obtain FEC approval, operate and monitor pilot PPP projects Build on Success of Pilot PPP Projects Whats The Road Block to Good Public Service Provision?
Awareness & Education, Political Will, Execution Discipline and Due Process PPP & TIME CHALLENGE The biggest challenge to procuring infrastructure services via PPP is time PPPs require: TIME to undertake a proper feasibility study/business case TIME to secure approvals TIME to conduct a fair, equitable, transparent and competitive procurement process. .Challenges INTEGRATED PLANNING Planning data/statistics still weak and unreliable (NIIMP) Capacity/Skills & commitment to Planning Tendency to short-circuit procedures PROJECT DEVELOPMENTAND PROJECT MANAGEMENT Lack of funding for project preparation Requires paradigm shift in looking at PPP projects as focused on SERVICE PROVISION rather than ASSET DEVELOPMENT Ability to differentiate between PPP and traditional procurement lacking FUNDING Adequate funding required to carry out pre-contract & post-contract activities GOVERNMENT COMMITMENT Needs patience & commitment to follow through Cooperation and Collaboration between ICRC and MDAs LEGAL & REGULATORY Need harmonized and aligned laws and regulatory framework INSTITUTIONAL CAPACITY Project identification, evaluation, -VfM-risk analysis, financial modeling are key requirements for PPPs FINANCE Nigerian Financial Systems majority short term based balance sheets so lacks long term funds Bond market still evolving but dominated by Govt. Bonds Project structuring & financing skills not adequate It is our expectation that with the passage of the revised ICRC Act, and the acceptance of PPPs by key stakeholders for service delivery; the Commission is ready to go the next performance level, after the present teething phase Message to All Poverty anywhere in the Nigeria.is a threat to prosperity everywhere in the Nigeria If you agree on this. .Lets be bold, daring and fearless, lets focus on big fast results we have nothing to loose, except the decadent status quo lets do things differently to move Nigeria forwardlets transform the Nigeria with PPPs and the Private Sector as outlined in the Presidents Transformation Agenda. A transformed Nigeria would be a most lovely place.Lets just do it. Conclusion PPPs offer a dependable and sustainable funding option, increased accountability, accelerated infrastructure provision and faster implementation of projects. The huge infrastructure deficit is an opportunity to partner with the private sector in virtually all economic and social infrastructure space. Project preparation is key. PPP also stands for Preparation Preparation Preparation and Patience Patience Patience Stakeholders must take the lead to create, nurture and foster the enabling environment for maximum private sector participation in infrastructural developmentby using the institutional, legal, regulatory and finance support framework being put in place by the ICRC to incentivize the private sector to partner with the public to upscale the infrastructure space in the country. S. Brian Samuel, Vice-President, Castalia
The Seven Deadly Sins of PPPs Presented at Public-Private Partnerships for Sustained Growth, Barbados Hilton, Nov 19-20, 2013 S. Brian Samuel, Vice-President, Castalia The Seven and how to avoid them
Sin # 1: Badly chosen projects Sin # 2: Weak procurement processes Sin # 3: Direct negotiation of unsolicited proposals Sin # 4: Lack of capacity Sin # 5: Inadequate risk allocation Sin # 6: No budgeting for fiscal costs Sin # 7: Going it alone Good governance lessons for PPPs from other climes?
Stable policy & regulatory framework competition/ entry criteria, role of the private sector, use of limited natural resources, setting of tariffs, real estate Long term strategy/ plan owned by the govt. Adequate project development capacity to develop projects of requisite scale Equitable contractual framework risk allocation Transparent selection process competitive bidding Reliable revenue sources - sustainability Managing the unexpected implementation & monitoring/ partnership in practice Political will central to governance (Source Cherian Thomas IDFC India) Private Sector Strengths
WELCOME TO A GLOBALLY COMPETITIVE NIGERIA..World Class Infrastructure, Good Governance, Industrial Power House with an educated workforceWelcome to Nigeria in !!!! Abuja Palms - JABI Wise Words THANK YOU Barr. Aminu Diko Director General/CEO
Infrastructure Concession Regulatory Commission Website: Prerequisites for Successful PPP Environment TRADITIONAL OR CONVENTIONAL PROCUREMENT
Procurement of goods and services through annual budgetary allocation: Inefficient, volatile and rarely meets crucial infrastructure expenditure requirements in a timely manner Exerts constant pressure on fiscal budget due to competingdemands Funding generally inadequate and receives a larger brunt offiscal retrenchment in times of financial crises Leads to constant abandonment of Projects or Projects thattake for ever to complete. Many Universities in Nigeria arestill at their temporary sites. Need for another way.....PPPs.....but no silver bullet Key Differences between Privatisation & PPPs
Accountability/ Responsibility Responsibility and accountability for delivery and fundingservice rests with the private sector Responsibility and accountability for service delivery lies with the public sector Ownership Ownership rights and associated costs and benefits are sold to the private sector Legal ownership of assets retained by government Nature of Service Private sector determines the nature and scope of services Both public (govt.) and private sector contractually determine the nature and scope of services Risk and Reward Private sector assumes all inherent risks Public and private sector share risks and rewards Public procurement: Traditional v/s PPP
Characteristic Public procurement PPP Focus Procuring Assets Procuring Services Project management Public sector is responsible for all project management roles Private sector manages overall project - design, construction, operations and maintenance. Focus on project life cycle expected to bring efficiency. Service Delivery Public sector directly responsible for service delivery to users Private sector directly responsible for service delivery to users Financing Public sector responsible forfinancing the project. Thus financing impacted by budgetary allocations and then actual disbursements Private sector may contribute finance through debt and equity issuances Risk Sharing Public sector bears all project risks. Risk sharing limited to the extent of warranties. Risks allocated to parties whichcan manage them most efficiently Contractual Arrangement Short term, generally segregated contracts for asset creation (BOQ based) and maintenance. Long term contracts- Public sector/users pay for services linked to performance. Concept The above table summarizes key differences between traditional public procurement and PPP. Note that financing by the private sector is not a necessary condition in a PPP. PPP:The public sector procures a service, not an asset, from the private sector. WORDS OF ADVICE Capacity for preparing bankable & sustainable PPPs is currently very limited in the public service Establish your PPP Units as required by Extant Circular PPPs are complex legal and financial arrangements that are not easily amenable to SAFE SELF HELP Getting a PPP Adviser is often via Traditional Public Procurement PPP procurement can be expensive and time consuming Best use if there is a clear business case Short cuts can lead to a life time of troubles for your institution Get a Competent Advisers or Consultants INSTITUTIONAL FRAMEWORK
Critical Success Factors for PPPs ACCESS TO CAPITAL Availability of long tenor private capital SUCCESSFUL PPPs POLITICAL WILL AND TRANSPARENT POLICY A PPP Champ with the transperency Track record and power to make it happen cleanly INSTITUTIONAL FRAMEWORK Publicsector competence and expertise to ensure efficient and effective detailed preparation of projects and faithful implementation of transact ions LEGISLATION To enable private sector participation in an efficient and effective manner Six Keys to Successful PPPs
Statutory and Political Environment Organized Structure Detailed Business Plan Guaranteed Revenue Stream Stakeholder Support Pick Your Partner Carefully Bath-001-Presentation-ProjectSponsor-TonyHagan-6thNov2008
What are the ingredients of a good PPP? Contractual arrangement should be based on: Substantial risk transfer allocation of risks to parties best able to manage them Quality of service & output specification focus on services associated with procured assets Performance-related rewards payment only if performance standards met M&E plan over life of contract achievement of whole-life performance FINAL POINTS PPP are a form of Public Procurement
Each form of Public Procurement has due process requirements Compliance with these requirements Earns stakeholder trust and commitment Assures Financial Bankability Assures Legal Bankability