UNDERSTANDING PUBLIC PRIVATE PARTNERSHIP (PPP)

Today, we will understand what Public Private Partnerships (PPPs) are and why it is used as a procurement option to delivery infrastructure projects. PPPs are one way which government choose to procure an infrastructure in the mist of other ways such as the conventional procurement methods. Let us look at what is Public Private Partnerships.

DEFINITION OF PUBLIC PRIVATE PARTNERSHIP (PPP)

Public Private Partnership (PPP) can define as a long-term contract between the Public Party (government) and Private Party (contractor) to develop or manage an infrastructure that should have ordinary been developed by government (public asset) in which the Private Party bears significant risk throughout the lifecycle of the contract. The sole aim of this arrangement is for the Public Party to utilize the Private Sector’s efficiency in the delivery of such infrastructure. It is not all infrastructure that could be delivered through PPP, some infrastructure may be best delivered through the conventional procurement methods such as Engineering Procurement & Construction Contract (EPC) or Engineering Procurement & Construction Contract plus Finance (EPC+F).

In order to realize which procurement method could be best for the development of infrastructure, a need assessment for a project is necessary. The need must be conducted as a solution to existing problem identified and the various feasibilities must have been performed to choose the best suitable procurement methods.

Public Private Partnerships are one way to procure infrastructure and services, the PPP approach may provide significant benefits if and when a number of conditions are met. PPPs could be used to deliver both Greenfield, Yellowfield and Brownfield projects. It could be used to upgrade existing infrastructure and it provides greater benefits when compared to Privatization. Please note PPPs are not Privatization. PPP suitability checks requires series of process starting from Project Identification in Preparatory Activities to Move Forward in the PPP Cycle which involves conducting Need and Option Analysis, Scoping the Project & Collecting Information, Preliminary Economic Feasibility, Testing PPP Suitability & Affordability, Readiness of the Project Management Plan and Appraisal Report & Decision to Move Forward.

In Emerging Markets and Developing Economies (EMDEs)such as Nigeria, Government sees the PPP option an enabler to meets its service delivery obligations which is the very reason government should understand what problem they intend to solve before identifying possible projects. Government can go ahead to identify list of projects to form pipeline popularly known as PPP Pipelines.

A Pipeline is important in attracting investors because they prefer to invest in a market with an established and recognized PPP market rather than any small number of isolated projects. A government project pipeline should contain all major projects regardless of the procurement methods.

After identifying a Project, it becomes imperative to scope the project and define any other related specific information. This involves checking the physical condition of the sites and other activities required to make the proposed project a huge success.

A Project must demonstrate economic soundness before it can proceed under PPP. Any project selected must be tested for its economic soundness irrespective of the procurement route i.e. whether PPP method would be adopted or conventional method of procurement. They are various method which could be use to test economic soundness, this includes Cost Benefit Analysis (CBA). Cost Effectiveness Analysis could also be adopted to measure objectives such Naira per Time. Cost Effectiveness Analysis provides an alternative technique whereby valuing in monetary terms is almost impossible.

PPPs cannot success without proper assessment of various feasibilities, in order to achieve a successful PPP regime, the proposed project must pass the various aspect of feasibility. It is not every project that should be procured as PPP, only project that passes the test should proceed as PPP.

Also read;
TRAINING ON DELIVERY OF PROJECTS THROUGH PUBLIC PRIVATE PARTNERSHIP