Managing the PPP Process

and

Institutional Arrangements
ADB Institute
November 5, 2008
Arthur L. Smith
Chairman, National Council for PublicPrivate Partnerships

asmith@mainet.com
The 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
use. Terminology used may not necessarily be consistent with ADB official terms.

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.

1
O102004008OMI

The PPP Management Environment

POLICY FRAMEWORK

IN L
TE EG
G A
RA L
TI
O
N

AL ORK
G
LE EW
AM
R
F

T
PR EN
O DE
CE R
DU ING
RE
S

PPP

/
N
O
I
AT TE T
R
IT PU EN
B
M
S
AR DI LE
T
T
SE

FINANCIAL
INSTRUMENTS

2
O102004008OMI

Institutional Policy Framework

High-level Government Support
Clear Policy Statement
Central PPP Unit
- Republic of Korea, PPP Centrum (CZ),

Partnerships UK, Irish Central PPP Policy Unit

Regulatory Structure

3
O102004008OMI

Role of the Central PPP Unit

Integrate 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.
4
O102004008OMI

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.

5
O102004008OMI

Tendering Procedures
Public 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.
6
O102004008OMI

Tendering Procedures (contd)

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.
7
O102004008OMI

Arbitration / Dispute Settlement

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

8
O102004008OMI

Financial Instruments
Creation 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.

9
O102004008OMI

Performance Monitoring
A 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

10
O102004008OMI

Performance Monitoring
Monitoring and reporting should be an integrated process,
where monitoring feeds into the reporting.
Reporting at least monthly and annually
Private 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.
11
O102004008OMI

Thank you