Enhancing Performance of Public Private Partnerships by Reducing Transaction Costs to Countries

by Chen Yougang, McKinsey & Co.

PPP Forum, BeijingMarch 21, 2007

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PUBLIC PRIVATE PARTNERSHIPS HAVE CONTRIBUTED MANY BENEFITS

• Increased countries’ planning capacity and robustness of disease plans

• Helped countries address neglected disease areas and scale up key interventions rapidly, beyond merely adding resources or technical capacity

• Strengthened country rigor of program monitoring and improved accountability and transparency

• Introduced/increased the profile of non-governmental stakeholders like NGOs and the private sector in the health space

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HOWEVER, THERE ARE SIX MAJOR CHALLENGES TO REDUCE TRANSACTION COSTS TO COUNTRIES AND CAPTURE FULL BENEFITS

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Poor communication between PPP, partners and

country

“One size fits all” processes

Inadequate implementation

support

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Ineffective country-level coordination

models

Duplication of efforts on cross-

cutting issues

Shifts in policy and technology

Transaction costs of PPP interactions

Today's focus

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2. POOR COMMUNICATION BETWEEN PPP, PARTNERS AND COUNTRY

PPP secretariat

Multilateral/partner HQ

• Lack of clarity on role of partners and clear line of support for PPP-related activity

Implementing grantee/agency in-country

Multilateral/partner field office

• Delay in getting technical assistance/advice from HQ

• Lack of organizational clarity on relationship with PPP

• Country office may not view itself as part of the PPP “Partnership”

• Expectation of, but lack of clarity around partners’ roles in country to support PPP mandate

• Varying quality/quantity of communication with PPP

• Inadequate and unclear feedback

• Difficulty reaching secretariat for clarification

• Perceived lack of secretariat’s country knowledge

• Do not perceive PPP flexibility and don’t feel empowered to ask

• Communication broken at multiple levels• Myths about PPP intentions and policies

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POTENTIAL OPPORTUNITIES TO REDUCE TRANSACTION COSTS FROM POOR COMMUNICATION BETWEEN PPPS, PARTNERS AND COUNTRY

• PPPs need to do much more to harness the power of the “partnership” and project a clear coordinated face in country

• Country-specific – and not global level- MOUs with partners would be a starting point to clearly define roles, responsibilities, resources and deliverables

• PPPs must strengthen communication and dialogue with country stakeholders including instituting some basic service norms around communication e.g. 3-day turnaround time, 30 days to resolve issues, coordinate external missions within a disease area among partners

Practice that helped countries better manage cost

“Informal” communication norms such as frequent visits to country

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4. “ONE SIZE FITS ALL” PROCESSES

• PPPs aim to support country processes, but more often, overlay their processes on country processes. This “one-size-fits-all approach” can duplicate and undermine a country’s processes in key areas

• For example

Planning FinancingMonitoring and evaluation

Procurement systems

• PPP planning timelines and scope are often different from a country’s

• On balance, countries accept cost given the magnitude of the funding and the infrequency of the planning exercise

• PPP financing mechanisms mostly separate from country mechanisms

• Difficult for country to track financial flows, plan medium-term expenditures, financial sustainability planning

• Metrics not consistently integrated into national systems

• Some programmatic and grant specific metrics take up scarce capacity

• Duplication on format and timing

• PPPs seen to have encouraged countries to use procurement systems that duplicate efforts and deplete resources

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POTENTIAL OPPORTUNITIES TO REDUCE TRANSACTION COSTS FROM “ONE SIZE FITS ALL” PROCESSES

• Several PPPs are experimenting with proposals to adapt processes to the needs of individual or segments of countries. Such flexibility is required in several areas, including:

– Frequency and level of detail in grant applications– Size of grant, pace of ramp up and sustainability planning– Use of existing country systems and timelines in areas like planning, monitoring

and evaluation, procurement or coordination– Nature of interactions with central, state and district-level decision makers

• Tailoring processes, while helpful, will exacerbate the challenges of communication by making the rules less clear for both countries and potentially for PPP partners. Hence, PPPs will have to invest upfront in proactively communicating the boundaries of flexibility, as well as establishing clear standards for countries to structure different interaction models with PPPs

• Invest to provide feedback to countries when country mechanisms are not adequate for PPP in the short term and develop plans to improve these systems and transition to them

Practice that helped countries better manage cost

Experimenting with other models even with potential risk of losing PPP financing and resources

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6. DUPLICATION OF EFFORTS ON CROSS-CUTTING CHALLENGES

• Influx of PPP money has highlighted cross-cutting challenges and system gaps in multiple areas, including infrastructure, procurement, logistics, health information and financial systems and human resources

• In the absence of integrated efforts to address gaps, PPPs are addressing these issues individually, which runs the risk of being an inefficient approach to resolving cross-cutting challenges

• Similarly, many PPPs – in addition to multilateral and bilateral agencies - are undertaking program-specific sustainability planning efforts, for both talent and financial resources. The cumulative effect of such efforts by multiple partners could well overwhelm countries

– Talent: PPP programs may be underestimating the HR required to implement grants; scarce resources consumed by program-specific project management units

– Funding: Large funding gaps make 3-5 year sustainability plans infeasible; discussions held within programs and not at the health sector level; financial flows are very fragmented and often unaccounted for; and key stakeholders outside the health sector are often not involved

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PPPS ARE ADDRESSING HEALTH SYSTEM STRENGTHENING VERTICALLY, WITH NEGATIVE IMPACT ON COUNTRIES

“We did not submit a HSS grant because the CCM is divided into disease specific sub-committees for application and there was no mechanism to create a broad HSS grant”

CCM member China

“We did not apply for HSS funding in Round 5 because GFATM does not fund through basket/pooled funds and that is where we need support”

CCM member Zambia

“In 5 years we know what we need to pay to take over the HepB vaccine. But in addition to Hep B, we need to support ACTs and ARV. It does not make sense to do this planning for each program.”

Ministry official Tanzania

PPP initiatives in Health Systems Strengthening

• Round Global Fund Grants for Health Systems Strengthening

• GAVI grants for Immunization System Support (ISS) and financial sustainability planning

• Stop TB Resolution supporting sustainable financing for tuberculosis prevention and control

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POTENTIAL OPPORTUNITIES TO REDUCE TRANSACTION COSTS FROM DUPLICATION OF EFFORTS ON CROSS-CUTTING ISSUES

• PPP’s may need to collaborate in asking countries for one unified multi-year plan for the health sector (or government system) covering priorities, programs, health system requirements, as well as funding

• Countries and PPPs should evaluate alternative models to fund health system strengthening instead of individual PPP efforts. E.g., country incorporates an “overheads” charge in individual grants to fund shared health system investments; create pooled resources for shared investments

• Sustainability planning must be coordinated across PPPs, with a unified discussion with the MoH, MoF, MoP and any other relevant entities. Also, timeframe for such sustainability must be realistic in line with country’s current spending and required ramp-up

Practice that helped countries better manage cost

Avoiding pressure to apply for specific PPP money for Health System Strengthening until in-country mechanisms are in place to reduce duplication