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PPP for Infrastructure Financing in the MENA
region Istanbul, November 8, 2006 Public Private
Partnerships
Nuran Durmaz
PwC
connectedthinking
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Agenda

• Definition
• Benefits, Opportunities Risks
• Preconditions for Successful PPPs
• About PPP Process
• Recurring PPP Issues and Solutions
• PwC- PPP Services

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• Definition
• Benefits, Opportunities Risks
• Preconditions for Successful PPPs
• About PPP Process
• Recurring PPP Issues and Solutions
• PwC- PPP Services

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What is a Public Private Partnership?
PPP is a generic term for the relationships
formed between public bodies and the private
sector with the aim of introducing private sector
resources and/or expertise to provide and deliver
public sector assets and services.
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• Definition
• Benefits, Opportunities Risks
• Preconditions for Successful PPPs
• About PPP Process
• Recurring PPP Issues and Solutions
• PwC- PPP Services

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Benefits of PPPs

Encourage the injection of private sector capital
Development of specialist skills
Private sector takes life cycle cost
Quality of service has to be maintained
Risks are allocated to the party best able to
manage or absorb

• PPP

Force the public sector to focus on outputs and
benefits from the start
Budgetary certainty
The public sector pays when the services are
delivered
PPPs deliver value for money
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Opportunities
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Risks

• Partner selection
• Long-term connection (e.g. a change in
  requirements)
• Complexity and expenses of PPP-projects
• Protection of public interests

• Alibi competition
• Long-term connection (e.g. calculation of the
  final compensation)
• Diverging interests
• Long-term decision-making processes

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• Definition
• Benefits, Opportunities Risks
• Preconditions for Successful PPPs
• About PPP Process
• Recurring PPP Issues and Solutions
• PwC- PPP Services

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Preconditions for Successful PPPs

• Before pursuing a PPP approach, the public sector
  authority should consider
• Does sufficient private sector expertise exist to
  warrant the PPP approach?
• Does the public sector have sufficient capacity
  and skills to adopt the PPP approach?
• It is not always possible to transfer life cycle
  cost risk
• PPPs do not achieve absolute risk transfer

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Preconditions for Successful PPPs

• The public sector must recognise the
  disadvantages of PPPs if they adopt a PPP
  approach
• PPPs imply a loss of management control by the
  public sector
• PPP procurement can be lengthy and costly
• The private sector has a higher cost of finance
• PPPs are long-term relatively inflexible
  structures

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• Definition
• Benefits, Opportunities Risks
• Preconditions for Successful PPPs
• About PPP Process
• Recurring PPP Issues and Solutions
• PwC- PPP Services

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Basic Structure of a PPP-Project
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Summary of the PPP-Buying Process
PPP only in appropriate projects and if positive
effects are established!
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Five Phases of a PPP Procurement Project
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• Definition
• Benefits, Opportunities Risks
• Preconditions for Successful PPPs
• About PPP Process
• Recurring PPP Issues and Solutions
• PwC- PPP Services

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Recurring PPP Issues and Solutions

• Legislative impediments to transport PPPs
• National governments should continue to work to
  identify and eliminate legal uncertainties and
  impediments to PPP.
• Procurement and State Aid issues
• Guidance on PPPs for the public sector should
  include guidance on procurement procedures. In
  our view, until the competitive dialogue is
  proven as a PPP procurement route, such guidance
  should include guidance on the availability and
  use of the negotiated procedure as an
  alternative.
• Affordability issues
• A shadow private sector bid model should be
  produced prior to starting the procurement so
  that the authority has a realistic view of the
  affordability of the project.

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Recurring PPP Issues and Solutions

• The speed and cost of PPP procurement
• The public authority should critically assess the
  number of bidders and bid rounds necessary for a
  particular project. It is often better to reach
  financial close on a good deal rather than
  negotiate ad nauseam for the best deal. A degree
  of central government guidance to procuring
  authorities might help such sensible decisions be
  made.
• Building a PPP Centre of Excellence
• There is clear value in having a central unit
  giving guidance and policy on PPP issues within
  each EU country. Developing an EU knowledge unit
  would also be very effective, but it should only
  attempt to give guidance and demonstrate
  precedents, not impose a common EU-wide approach.

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• Definition
• Benefits, Opportunities Risks
• Preconditions for Successful PPPs
• About PPP Process
• Recurring PPP Issues and Solutions
• PwC- PPP Services

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PwC Thought Leadership
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