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Title: APPRAISING THE SOCIAL COSTS AND BENEFITS OF TRANSPORTATION PROJECTS USING PPP


1
APPRAISING THE SOCIAL COSTS AND BENEFITS OF
TRANSPORTATION PROJECTS USING PPP
42nd IAHS WORLD CONGRESS The housing for the
dignity of mankind 10-13th April 2018 Naples,
Italy
Dr .Maha Mustafa Eltahir1 , Eng. Muna Omer Ali2 ,
Eng Mohammed Siddig3 1 Road, Bridges and
Drainage Corporation - Ministry of
Infrastructures and Transportation Khartoum
State - P.O.Box 818 - Khartoum -
SUDAN E-mailmahaeltahir_at_hotmail.com Linkedin
https//www.linkedin.com/pub/maha-mustafa-eltahir-
ibraheim-dr/42/88a/673 2 Road, Bridges and
Drainage Corporation - Ministry of
Infrastructures and Transportation Khartoum
State - P.O.Box 818 - Khartoum -
SUDAN E-mailHas-ooba_at_windowslive.com 3 (Msc.
Student Karry University) E-mailAlzoma76_at_gmail.co
m
2
INTRODUCTION
  • 1.1. An over view Of Public Private Partnership
  • Public Private Partnership ("PPP") is a
    cooperation agreement between public and private
    sectors for rendering of public services that are
    traditionally provided by the state and funded by
    taxpayers, and is characterized by sharing the
    investments, risks, liabilities and revenue
    between the cooperating parties. In this model,
    public and private sectors complement each other
    by their respective individual distinctive
    features. The economic challenges associated with
    supplying fundamental public services, i.e.
    healthcare, are shared with the private sector in
    order to assure public welfare.

3
INTRODUCTION
  • Advantages of the PPP model have enhanced it as a
    prominent and commonly used model in many
    countries. The PPP model, which was first adopted
    in the United Kingdom in 1990s, has then been
    applied in transportation, education and
    healthcare sectors both in other European
    countries (such as Ireland, Portugal, Spain,
    France, Italy and the Netherlands) and in other
    parts of the world (such as Australia, Japan,
    Canada and Latin America).

4
1.2 Benefits of PPPs
  • .
  • PPP offers an alternative approach by public to
    projects that are traditionally financed and
    operated by the state. Financing provided by the
    private partner allows faster and efficient
    construction of big-scale projects, which might
    otherwise get caught in the fishing net that is
    the state's budget.
  • As opposed to a state granted concession, PPP
    creates partnerships formed through negotiations
    held between equals thus the ability to more
    transparently and impartially determine, address
    and calculate risks and returns. When well
    structured, PPP helps addressing specific costs
    and investment challenges, creates improvements
    in efficiency i.e. improved service qualities
    (expertise, new technologies, a potential to
    attract and retain better performing staff) and
    low cost management1.

5
1.3 Risk Management
  • .
  • One of the most appealing aspects of PPP is
    sharing of risks related to the projects between
    the partners. While the "Build - Operate -
    Transfer" scheme limits the operational exposure
    and risk of the private sector to a relatively
    shorter period of time, the private investor in a
    PPP project is bound to be extra diligent when
    assessing its longer-term risks for financing,
    construction, quality of service, and
    maintenance. On the other hand, especially in the
    healthcare sector, long-term costs related to
    quality of service and maintenance can be quite
    difficult to foresee, and thus, may add up to an
    unknown variable while calculating future
    exposure. Therefore, contractual flexibility and
    giving the private investor breathing space
    especially during the construction phase through
    adjustment mechanisms are essential if the aim of
    the state is to attract top-tier
    domestic/international private partners.

6
1.4. Comparative between PPPsothertypeofcontracts
  • The main difference between PPP projects and
    procurement (also "Build - Operate - Transfer"
    projects) is that in PPP projects, private sector
    incomes are linked to the performance of the
    assets, including the proceeds generated by
    services, which forces the private sector to
    maintain a successful operation throughout the
    term of the partnership. Since payments to the
    private partner are made by the public following
    the delivery of the project, the private sector
    contractor has an actual benefit in making sure
    that the contracted asset is delivered in due
    time, and services meet the committed quality,
    which was also mentioned by the HM Treasury
    "Private sector expertise and experience has
    always been utilized in public sector
    procurement, but, where in traditional
    procurement, private companies built and then
    walked away, PFI seeks to ensure that the private
    sector takes responsibility for the quality of
    design and construction it undertakes, and for
    long term maintenance on an asset, so that
    value-for-money is achieved. As a summary, the
    advantages and key challenges of PPP projects can
    be stipulated as follows

7
1.5 Advantages
  • .
  • Maximized use of private sector experience and
    skill
  • Affordable projects
  • Life cycle cost risk is undertaken by the private
    sector
  • Budgetary certainty regarding the projects
  • Ensured level of quality
  • The state makes the payments to the private
    sector only upon the delivery of services
  • Encouraging injection of private equity
  • Lower long term use of state resources

8
1.6. Key challenges
  • Inability to transfer absolute risk
  • State's inability to day to day control of the
    management of the services provided in PPP
    Projects
  • Slow pace of the state's decision making and
    costly PPP projects
  • The private sector has a higher cost of finance
  • Lack of organizational focus on a state level
  • Lack of flexibility in public sector (heavy
    bureaucracy) 4

9
2. LITERATURE REVIEW
  • 2.1 What Is Public Private Partnership?
  •  
  • 2.1.1 Public Private Partnership (PPP) is a form
    of procurement introduced in 2004 under the Best
    Sourcing framework. Best Sourcing encourages
    public agencies to engage private sector
    providers in delivering non-core government
    services if it is more efficient to do so. Public
    agencies can engage the private sector in many
    ways, such as contracting for manpower, service
    outsourcing or Business Process Outsourcing.
    Public Private Partnership (PPP) is another form
    of Best Sourcing that can be used to work with
    private sector to deliver services, particularly
    services that require the development of new
    physical assets.

10
2. LITERATURE REVIEW
  • 2.1.2 PPP refers to long-term partnering
    relationships between the public and private
    sector to deliver services. It is an approach
    that Government has adopted to increase private
    sector involvement in the delivery of public
    services.
  •  
  • 2.1.3 Conventionally, public agencies have only
    engaged the private sector to construct
    facilities or supply equipment. Public agencies
    will then own and operate the facilities or
    equipment to deliver services. For example, a
    public agency might engage private companies to
    build a water treatment plant. Upon completion,
    the public agency will own and operate the water
    treatment plant to provide water to the public.

11
2. LITERATURE REVIEW
  • 2.1.4 With PPP, the public sector will focus on
    acquiring services at the most cost-effective
    basis, rather than directly owning and operating
    assets.For example, if PPP is used to develop a
    water treatment plant, the private sector will be
    engaged to not only construct the plant, but also
    to design, operate, maintain and secure financing
    to build the plant to supply water to the public
    agency. Hence, instead of owning and operating
    the water treatment plant, the public agency
    purchases the water directly from the private
    sector. This means that the private sector has
    more room to introduce innovation into the
    delivery of public sector services.

12
2. LITERATURE REVIEW
  • 2.1.5 Under PPP, the private sector can look
    forward to providing a wider range of services
    and over a longer contract period (usually
    between 15 to 30 years). Through closer
    collaboration with the private sector, public
    services can be delivered in a more value for
    money way by making optimal use of the public and
    private sectors? expertise, resources and
    innovation to meet public needs effectively and
    efficiently1.
  • The term PPP is sometimes used to describe a
    wider range of arrangements.as seen in PPP
    Schemes and Modalities box below3.

13
Table 1, PPP Schemes and Modalities
No Modalities Schemes
1 Build-own-operate (BOO) Build-develop-operate (BDO) Design-construct-manage-finance (DCMF) The private sector designs, builds, owns, develops, operates and manages an asset with no obligation to transfer ownership to the government. These are variants of design-build-finance-operate (DBFO) schemes.
2 Buy-build-operate (BBO) Lease-develop-operate (LDO) Wrap-around addition (WAA) The private sector buys or leases an existing asset from the government, renovates, modernizes, and/or expands it, and then operates the asset, again with no obligation to transfer ownership back to the government.
3 Build-operate-transfer (BOT) Build-own-operate-transfer (BOOT) Build-rent-own-transfer (BROT) Build-lease-operate-transfer (BLOT) Build-transfer-operate (BTO) The private sector designs and builds an asset, operates it, and then transfers it to the government when the operating contract ends, or at some other pre specified time. The private partner may subsequently rent or lease the asset from the government.
14
3. IMPORTANCE OF STUDY
  • 3.1 Why PPP?
  • PPP offers a win-win-win solution for the public
    sector, the private sector and members of the
    public1. For project also allows better
    screening of options, and helps in deciding
    appropriate project structure and choice of
    technology considering cost over the whole life
    cycle of

15
3. IMPORTANCE OF STUDY
  • 3.2 What is public-private partnership in
    infrastructure projects?
  • Governments in most developing countries face the
    challenge to meet the growing demand for new and
    better infrastructure services. As available
    funding from the traditional sources and capacity
    in the public sector to implement many projects
    at one time remain limited, governments have
    found that partnership with the private sector is
    an attractive alternative to increase and improve
    the supply of infrastructure services.
  • The partners in a PPP, usually through a legally
    binding contract or some other mechanism, agree
    to share responsibilities related to
    implementation and/or operation and management of
    an infrastructure project. This collaboration or
    partnership is built on the expertise of each
    partner that meets clearly defined public needs
    through the appropriate allocation of1
  • Resources
  • Risks
  • Responsibilities, and
  • Rewards
  • It is important to emphasize here that a PPP is
    not a solution option to an infrastructure
    service problem but it is a viable project
    implementation mechanism for a preferred solution
    option.2

16
3. IMPORTANCE OF STUDY
  • 3.3. What advantages PPPs may provide?
  • Governments worldwide have increasingly turned to
    the private sector to provide infrastructure
    services in energy and power, communication,
    transport and water sectors that were once
    delivered by the public sector. There are several
    reasons for the growing collaboration with the
    private sector in developing and providing
    infrastructure services, which include
  • Increased efficiency in project delivery, and
    operation and management
  • Availability of additional resources to meet the
    growing needs of investment in the sector and
  • Access to advanced technology (both hardware and
    software).
  • Properly executed planning and development the
    project 2.

17
3. IMPORTANCE OF STUDY
  • 3.4.ImportantCharacteristics Of PPP Projects
  • Promise of better project structure and design.
  • Allows better screening of projects. A bad
    project is a bad project no matter whether it is
    implemented by the public or the private sector.
  • Better choice of technology based on life-cycle
    costing.
  • Better service delivery, especially if
    performance based payment is considered.
  • Better chances of completion on time and within
    the budget.
  • Risk of default.
  • Project risks can easily turn into government
    risks.
  • Various liabilities on government (direct and
    indirect).
  • A long-term contract management system needs to
    be in place.
  • An administrative mechanism and special skills in
    the government are required to develop and
    implement PPP projects.2

18
4. STATEMENT OF THE PROBLEM
  •  
  • 4.1 Research Objectives
  • a. To ascertain the status of PPP in
    Sudan(Khartoum) through visibility study
    according to diligence key tasks as suggested
    below
  • The key tasks in this stage include
  • Project planning and feasibility
  • Risk analysis and management
  • Financing
  • Value for money
  • Pricing policy
  • Government support
  • Responsibilities of, and liabilities on
    government
  • Regulatory arrangements
  • Service and output specifications
  • Setting the main terms of contract
  • Getting the necessary government approvals2
  • b. Analyze the efficacy of PPP in fostering
    service work

19
4.2 Hypothesis
  • a. Public private partnerships leads to improved
    service work.
  • b. Public private partnerships do not necessarily
    improve public
    partner income.

20
5. RESEARCH METHODOLOGY
  • The identify the analysis process of the
    questionnaire that includes 120 samples out of
    the study community and 50 samples for some of
    the companies working in Khartoum, in order to
    determine the efficiency of Boot system in the
    development of the state.
  • 5.1. Basic information
  • 1- Project priorities.
  • 2- The citizens views about basic services.
  • 3- Types of funding and suggested resources.
  • 4 -knowledge and adopting boot system.
  • 5- Mechanism of payments.

21
5. RESEARCH METHODOLOGY
  • 5.2. Objective of study
  • The case study is applied in order to identify
    the knowledge and appeal of the citizens of
    Khartoum state towards the concept of boot. Also
    the aim of this study is to realize the tendency
    of companies to share government for
    infrastructure solutions as private sector.
  • 5.3. Citizens Questionnaire
  • 1. The number of research samples of the
    questionnaire is 120 administered among different
    locations within Khartoum and distributes as
    schedule of local housing, special concentration
    on two areas of Soba Alhilla and Tutu having 25
    samples of each of the two areas as seen in table
    no (2).

22
Table 2, living area
Locations Frequency
AL-Haj Yousif Soba Al-Hilla Al-Remella Al-Reyad Al-Kalaklla Al-Gooze Al-Lamab Al-Sajanna Al-Daim Burri Tuti Al-Muhandeseen Ombada 2 25 1 1 2 1 1 4 1 2 25 1 1
23
Table 3, living area
Locations Frequency
Kafori Hay-Alzohor Abu Hanja Nabta Al-graifSharig Omdurman Abu Saad Almorada Al-Sahafa Gable Awlia BahriGarib AL-Khartoum Bahri Al-Thora Shambat Al-Kadaru AL-Halfaia Total Missing System Total 1 1 1 2 1 8 1 1 1 2 1 4 2 1 1 1 114 6 120
24
5. RESEARCH METHODOLOGY
  • 2- Jobs awareness is of greater importance where
    52 engineers were,20 accountants,12 doctors,14
    labourers,2 consultant and specialists,6
    governmental employee ,7 company administrators
    and 1 computer operators .It is noticed that the
    number of year of experience more than 5 years
    and their total samples is 87 see Fig (1).

25
Fig. 1,Comparison of years of experience of
participants
26
5. RESEARCH METHODOLOGY
  • 3. The citizens views about basic services
  • As mentioned above of all samples that agree to
    the idea that roads, bridges and drainage in
    Khartoum state need improvement according to
    samples of 119. And it considered as of greater
    necessity as infrastructure projects and should
    be given priority in improvement. Important of
    any type of project has to identified according
    to users see Fig.(3). andIn comparing needs of
    whether maintenance or new projects to be given
    the property the (highest) degree of new
    establishment is 91 samples,

27
Fig. 2, Degree of importance of infrastructure
28
Fig. 3,Mechanism of payments
29
5.4. Mechanism of payments
  • A study is conducted about the type of funding of
    various in situations where samples were 17 banks
    funding and 80 samples for self funding and the
    rest for another unmentioned funding out of 120
    samples see Fig.(4)

30
Table 4, samples positively respond and 16
negatively react
Frequency Percent
60.0 4.2 64.2 35.8 100.0 72 5 77 43 120 yes no Total Missing Total
8- Samples of 76 is divided between 59 samples
positively respond and 16 negatively react toward
taking part in development.
Percent Frequency Type of payment
52.5 35.8 8.3 96.7 3.3 100.0 63 43 10 116 4 120 Magnetic cards In cash through Other Total Missing System Total
31
5.5. Questionnaire for the companies
  • Questionnaire was administered for a sample of 51
    subjects of companies in Khartoum state in order
    to tackle knowledge and respond to the raised
    questions of concern. the companies sample were
    officially in Sudan and approved by relevant
    authorities of concern with percentage of
    registrations 100 and the width of the sample
    is 51 company all companies worked in Sudan and
    in Khartoum state .
  • And companies are willing to adapt such contracts
    companies adopt boot system and percentage was
    100 for sample studied as the most effective
    system.Based on the samples views, how can
    relevant funding be feasible and a suggestion was
    introduced for 4 amounts of funding with Dollar
    were proposed as shown below in table (6).

32
Table 6, Fund available
Fund amount Sample width Percent
47.1 33.3 11.8 3.9 96.1 3.9 100.0 24 17 6 2 49 2 51 20000000 30000000 40000000 50000000 Total Missing System Total
Internal roads pavement the number were the
highest that reach 21 out of the total samples
33
Fig. 4, Order Prioritizes projects to improve
infrastructures
34
Table 7, Types of investment
Frequency Percent
56.9 33.3 5.9 3.9 100.0 29 17 3 2 51 Valid 5 years 10 years 15 years 30 years Total
In the companies view does investment in boot
system good for development in Khartoum state ?
Result was 100 positively responded of all
samples
35
6. RESULTS AND DISCUSSION
  • Questionnaire for the public and company was
    conducted for the use of boot contracts
    specifically and generally for infrastructure
    projects. The questionnaire is a very good method
    of date collection maintained to respond to
    improve KHARTOUM state infrastructure in
    collaboration of both the public and private
    sectors.
  • The questionnaire Samples was 120 samples from
    Citizens and 51 sample from companies. The
    citizen questionnaire contained a 8 questions out
    of 21 main question for Companies questionnaire.
    The Conclusion was the Infrastructure of Khartoum
    state need more development .A Number of 100
    agreed that the infrastructure of Khartoum state
    need more in work from companies to citizens. And
    The lack of knowledge of Financial system from
    citizen but the companies reach and 98 more
    knowledge of the system but they didnt
    participate in that system as well.

36
6. RESULTS AND DISCUSSION
  • companies to work in this system is clear but the
    lack of guarantee made them sustain their
    executing the system but the citizen had no
    problem in participate in reasonable price .a lot
    of countries consider this system as best safe
    solution from going throw any experiment from
    that type that have a benefits.
  • The results obtained from questionnaire as well
    as acknowledging the obstacles properties of the
    implementation of the boot system in KHARTOUM
    state , summary and recommendations are thus
    included.
  • 1- Currently infrastructure needs to be improved
    in all mostly all aspects of basic projects
    services .
  • 2- Lack of funding systems and Boot system as
    well
  • 3- Weakness of partnership among government and
    private companies.
  • 4- There is a desire for the companies to take
    partnership with government.

37
6. RESULTS AND DISCUSSION
  • 5- Lack of laws that regulate partnership
    investment.
  • 6- Lack of adequate warranty, guarantee and
    confidence.
  • 7- The private sector lack bravery and bravery in
    introducing new in experienced system.
  • 8- Boot is an effective system for state
    development.
  • 9- Boot system is characterized by flexibility
    and rapid in development process /operation.
  • 10- The priority for sanitation and drainage
    projects.
  • 11- Relevant system is in operation.
  • 12- Exceptional contacts regulations of the
    engineering and consultancy councils and their
    weak roles and lack of commitment.

38
7. CONCLUSION AND RECOMMENDATION
  • The results obtained from questionnaire as well
    as acknowledging the obstacles properties of the
    implementation of the boot system in KHARTOUM
    state. The recommendation for futures study are
    in the following points.
  • The necessity for expansion of investment.
  • Dare of private sector and endeared.
  • Establishment educational program offer for boot
    via mass media forwarded to investors.
  • Rules and regulations of establishment contracts.
  • Carry out feasibility studies that figure out
    basic services.
  • Arrange priorities for work in accordance work
    citizen's benefits.
  • Activate invested studies and educational 16. In
    project finance, structured finance broadly means
    debt structured to fit the cash flow. The risk
    matrix in table 3 shows some examples of possible
    mitigation measures against the risks

39
7. CONCLUSION AND RECOMMENDATION
  • The political leadership should ensure public
    awareness of the relative costs, benefits and
    risks of PPP and conventional procurement.
    Popular understanding of Public-Private
    Partnerships requires active consultation and
    engagement with stakeholders as well as involving
    end-users in defining the project and
    subsequently in monitoring service quality.
  • Roles and responsibilities should be maintained.
    This requires that procuring authorities, PPP
    units, the central budget authority, the supreme
    audit institution and sector regulators are
    entrusted with clear mandates and sufficient
    resources to ensure a prudent procurement process
    and clear lines of accountability.
  • Ensure that all significant regulation affecting
    the operation of PPPs is clear, transparent and
    enforced. Red tape should be minimized and new
    and existing regulations should be carefully
    evaluated. B. Ground the selection of PPPs in
    Value for Money

40
7. CONCLUSION AND RECOMMENDATION
  • All investment projects should be prioritized at
    senior political level. As there are many
    competing investment priorities, it is the
    responsibility of government to define and pursue
    strategic goals. The decision to invest should be
    based on a whole-of-government perspective and be
    separate from how to procure and finance the
    project
  • Carefully investigate which investment method is
    likely to yield most value for money. Key risk
    factors and characteristics of specific projects
    should be evaluated by conducting a procurement
    option pre-test. A procurement option pre-test
    should enable the government to decide on whether
    it is prudent to investigate a PPP option further
  • Transfer the risks to those that manage them
    best. Risk should be defined, identified and
    measured and carried by the party for whom it
    costs the least to prevent the risk from
    realizing or for whom realized risk costs the
    least.

41
7. CONCLUSION AND RECOMMENDATION
  • The procuring authorities should be prepared for
    the operational phase of the PPPs. Securing value
    for money requires vigilance and effort of the
    same intensity as that necessary during the
    pre-operational phase. Particular care should be
    taken when switching to the operational phase of
    the PPP, as the actors on the public side are
    liable to change.
  • Value for money should be maintained when
    renegotiating. Only if conditions change due to
    discretionary public policy actions should the
    government consider compensating the private
    sector. Any re-negotiation should be made
    transparently and subject to the ordinary
    procedures of PPP approval. Clear, predictable
    and transparent rules for dispute resolution
    should be in place.
  • Government should ensure there is sufficient
    competition in the market by a competitive tender
    process and by possibly structuring the PPP
    programmer so that there is an ongoing functional
    market. Where market operators are few,
    governments should ensure a level playing field
    in the tendering process so that non-incumbent
    operators can enter the market.

42
REFERENCES
  •  
  • 1 PUBLIC PRIVATE PARTNERSHIP HANDBOOK, VERSION
    2 March 2012
  • 2 A GUIDEBOOK ON PUBLIC-PRIVATE PARTNERSHIP IN
    INFRASTRUCTURE UNESCAP Bangkok, January 2011
    developed by Mr. Abdul Quium of the Transport
    Division of ESCAP
  • 3 INTERNATIONAL MONETARY FUNDPublic-Private
    Partnerships Prepared by the Fiscal Affairs
    Department(In consultation with other
    departments, the World Bank, and the
    Inter-American Development Bank) Approved by
    Teresa Ter-MinassianMarch 12, 2004 Executive
  • 4 Article by G?nençGürkaynakEsq and
    TunçLokmanhekimELIG, Attorneys-at-Law
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