OECD, 7th Meeting on Public-Private Partnerships - Peter LIVESEY
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This presentation by Peter LIVESEY was made at the 7th Meeting on Public-Private Partnerships held on 17-18 February 2014. Find more information at http://www.oecd.org/gov/budgeting/ppp.htm
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OECD, 7th Meeting on Public-Private Partnerships - Peter LIVESEY
- 1. Public Private Partnerships - Where do you start? A Personal View Peter Livesey OECD 18 February 2014
- 2. Is PPP of any kind the right solution? 1. There must be a need for investment. A major capital investment programme, requiring effective management of risks associated with construction and delivery. 2. It needs to fit with a PPP approach. The service needed is appropriate, allowing the public sector to define its needs as service outputs that can be adequately contracted for and where risk allocation between public and private sectors can be clearly made and enforced.
- 3. 3. Can you price what you are buying? The nature of the assets and services identified as part of the scheme, as well as the associated risks, are capable of being costed on a whole-of-life, long-term basis. 4. Is it large enough to make financial sense? The value of the project is sufficiently large to ensure that procurement costs are not disproportionate. 5. Do you understand what you are buying? The technology and other aspects of the sector are stable, and not susceptible to fast paced change.
- 4. 6. Will it be needed for a long time? Service delivery planning horizons are long-term with confidence that the assets and services provided are intended to be used over long periods into the future. 7. Can the private sector deliver? Does the private sector has the expertise to deliver? Is there good reason to think it will offer VfM and robust performance incentives can be put in place.
- 5. Which PPP? 1. Understand and examine all the models. 2. What is your appetite for risk and can you afford it? 3. Making a decision. 4. Will your chosen PPP approach deliver the programme’s objectives?
- 6. 1. PPP – What are the models? Degree of Private Sector Risk and Responsibility 10. Privatization 9. Build-Own-Operate Service Concession Arrangements 8. Build-Own-Operate-Transfer 7. Design-Build-Finance-Operate 6. Design-Build-Operate-Maintain 5. Operations Concession 4. Design-Build 3. Management Contract 2. Service Contract 1. Government Degree of Private Sector Involvement
- 7. 2. PFI, PPP or something else? – What is the trade off between risk and cost?
- 8. 3. Which PPP? – How do I decide?
- 9. 4. Could PPP deliver my programme objectives?
- 10. Advantages and Disadvantages Conceptual advantages Value for Money Integrated whole life management Risk transfer to private sector Private Sector Capital Banks capital at risk therefore risk transfer incentivised - Design Risk Project finance discipline leading to whole life costing - Construction Risk Bank step in on contractor default - Financing Risk - Technology & Obsolescence - Operating and FM Risk Focus on output specification Conceptual disadvantages Cost associated with risk transfer Opportunities for innovation in service delivery Price must include profit margin Long term certainty Inflexibility Private sector capital May be off Government Balance Sheet