Managing the PPP Processand

Institutional ArrangementsADB Institute

November 5, 2008

Arthur L. SmithChairman, National Council for Public-

Private Partnerships

asmith@mainet.comThe views expressed in this presentation are the views of the author and do not necessarily reflect the views or policies of the Asian Development Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their u s e . T e r m i n o l o g y u s e d m a y n o t n e c e s s a r i l y b e c o n s i s t e n t w i t h A D B o f f i c i a l t e r m s .

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Attracting Private Sector Investment

The private sector chooses which projects to participate in from amongst many investment alternatives. Investors seek investment opportunities where they may reasonably anticipate a fair return on their investments.

Equitable risk allocation and transparent and predictable policies attract investors and reduce the need for sovereign guarantees.

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POLICY FRAMEWORKPOLICY FRAMEWORK

LEGAL

LEGAL

INTEGRATION

INTEGRATION

PPPPPP

FINANCIAL FINANCIAL INSTRUMENTSINSTRUMENTS

TENDERING

TENDERING

PROCEDURES

PROCEDURES ARBITRATION /

ARBITRATION /

DISPUTE

DISPUTE

SETTLEMENT

SETTLEMENT

LEGALLEGAL

FRAMEWORK

FRAMEWORK

The PPP Management Environment

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Institutional Policy Framework

High-level Government SupportClear Policy StatementCentral PPP Unit- Republic of Korea, PPP Centrum (CZ),

Partnerships UK, Irish Central PPP Policy Unit

- Regulatory Structure

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Role of the Central PPP UnitIntegrate PPP process with budget process.Develop project pipeline.Develop standard procedures for project design and evaluation of alternatives.Develop standard contracts.Develop standard bid evaluation procedures.Develop standard processes for monitoring, administering, and enforcing contracts.Develop standard dispute resolution processes.Provide training and disseminate procedures to national and regional agencies.

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PPP Legal Framework and Integration

Create sound legislative basis for PPPs.

Provide clear definitions, applicability, and responsibility.

Provide stable legal foundation, integrated within overall legal framework.

Provide fairness and transparency.

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Tendering ProceduresPublic advertisement of PPP opportunities, in a recognized (standard) source or sources, with provision of international exposure.Clear, detailed Requests for Tender, with full disclosure of all known risks.Opportunity for bidder comment on Request for Tender.Clear, detailed tender evaluation procedures, known to all parties, and providing a level playing field.Clearly stated project goals and objectives.

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Tendering Procedures (cont’d)

Clearly stated performance standards for assessing project performance.Open participation in tender process, to include foreign-owned firms.Qualified tender evaluation board, with subject matter expertise and no conflicts of interest.Objective, documented evaluation and negotiations process, consonant with the published evaluation factors.Public notice of award, with debriefing opportunity for unsuccessful bidders.

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Arbitration / Dispute SettlementInclusion of dispute resolution procedures, to include third-party arbitration and/or choice of forum (access to international arbiters or bodies).

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Financial InstrumentsCreation of financial structures that will facilitate generation of project capital.Availability of security instruments on the assets and cash flow of projects, to include “step in” rights.

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Performance MonitoringA successful monitoring system must

– Be based on Output Specifications– Set unambiguous, measurable performance criteria– Focus on objective measurement– Link effectively with the payment mechanism– Be fair to both parties– Be primarily self-monitoring– Emphasize service delivery, not measurement– Use automated systems, where available

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Performance MonitoringMonitoring and reporting should be an integrated process, where monitoring feeds into the reporting.Reporting at least monthly and annuallyPrivate Party– Monitors problems.– Monitors problem resolution/failure.– Records problems and failures.– Calculates deductions based on the payment mechanism.– Reports Monthly

Public Agency– Monitors performance and reports problems.– Carries out performance audits.– Audits recording process and system.– Imposes penalties for non-reporting of failures.

Thank you