Transcript Slide 1

Public-Private Partnerships
Transit Transport Infrastructure
Ouagadougou, Burkina Faso
June 19, 2007
Rick Norment
NCPPP Executive Director
IMPORTANT “PARTNERS” FOR
ECONOMIC DEVELPMENT
 Regional Economic Communities (RECs)
 New Partnership for Africa’s Development
(NEPAD)
 African Development Bank (ADB)
 UNDP, World Bank, IMF, NGOs
 Private Sector (PPPs and CSR)
My Purpose:
OUTLINE AN ADDITIONAL TOOL
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THE CONTEXT
United Nations and PPPs
UNECE PPP Alliance, ESCAP, UNDP and others
Focus:
– PPPs in transition and developing economies
– Best Practices, including centralized administration
– Governance with Transparency, Accountability and
Sustainable Development
– Infrastructure Demands
– Development of the Economic Infrastructure, small
businesses, workforce and business skills
– Social Justice
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TRANSPORTATION
A KEY TO ECONOMIC DEVELOPMENT
Transportation Systems
– Connect suppliers to markets
– Connect labor to jobs
– Can have a positive environmental impact
BUT
– Capital intensive
– High Operations and Maintenance (O&M) costs
– Often are not revenue generators
Public-Private Partnerships may be the answer
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What is NCPPP?
 Non-profit educational institute
 Membership
– Public and Private
 Partnerships range from
– Outsourcing
– Public-Private Partnerships
– Privatization
 Public-Private Partnerships
– “Joint Ventures”
– “Collaborative Enterprise”
 NOT “Privatization”
– Level of public control
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Public-Private Partnerships Defined
A Public-Private Partnership is a contractual agreement
between a public agency (federal, state or local) and a
private sector entity. Through this agreement, the skills
and assets of each sector (public and private) are
shared in delivering a service or facility for the use of the
general public. In addition to the sharing of resources,
each party shares in the risks and rewards potential in
the delivery of the service and/or facility.
source: www.ncppp.org
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The Relationship of PPPs and Corporate Social Responsibility
Range of Corporate Participation
Outsourcing
Public-Private
Partnerships
Privitization
Private Sector Dollars to Other Causes
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Using PPPs to Meet The Challenges
 The Challenge of Meeting Public Needs
 The Challenge of Performance
 The Challenge of Perception
 The Challenge of Transformation of Practices
– Transparency
– Accountability
– Sustainable Development
 Address the Limitations In
– Social/Political Capital
– Financial Capital
– Human Capital
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PPPs as a Public Policy Tool
 Private Sector Can Not Be “Unrestrained”
 The Evolution of Law in the 19th Century in
Europe and U.S.
– Regulatory controls equally applied
– Anti-Trust Laws enforced by the courts
– Enforced Contract Laws
• Between private and private
• Between public and private
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Private Sector Strengths
The Result of Market Competition
 Management Efficiency
 Newer Technologies
 Workplace Efficiencies
 Cash Flow Management
 Shared Resources (Financial and other)
 Personnel Development
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Public Sector Strengths
 Legal Authority
 Broad prospective/balance the competing goals
to meet public needs
 Personnel – dedicated but constrained
 Capital resources & underutilized assets
 Protection of Procurement Policies
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Successful Partnerships
The Secret is to Balance
the Strengths of Both
Sectors
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Partnerships at Work
The Experience of One Sector Helps Another
 Transportation
 Water/Wastewater
 Financial Management
 Urban Development
 Public Safety
 Social Programs
 Environmental Programs
 Education
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Advantages of PPPs
 Maximizes the use of each sector’s strength
 Reduces development risk
 Reduces public capital investment
 Mobilizes excess or underutilized assets
 Improves efficiencies/quicker completion
 Better compliance with environmental
 Improves service to the community
 Improves cost-effectiveness
 Shares resources
 Shares/allocates risks
 Mutual rewards
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Social Advantages of PPPs
 Aids development of public sector administrative
skills
– Transparency
– Accountability
– Sustainable Development
 Aids development of in-country business
– Direct employment and skills development
– Economic integration
– Market capitalization
 Improved social equality
– Improved access to infrastructure and services for
marginalized or rural populations
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Worldwide Major PPP Projects Since 1985 *
By Project Type

Roads
656
31%

Water
616
29%

Rail
247
12%

Buildings
253
12%

Airports
182
9%

Seaports
142
7%
TOTAL VALUE: $887.4 billion
* Projects of more than $5 million and not including O&M contracts
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Worldwide Major PPP Projects Since 1985
By Region

Europe
205
31%

North America
174
27%

Asia
137
21%

Latin America
126
19%

Africa
14
2%
TOTAL VALUE: $887.4 billion
Source: Synthesis of PPP Projects, on www.ncppp.org, under “resources”
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PPPs and Cost Savings = Part of the Puzzle
 Quicker delivery vs. inflation
 Design-Build = can be another cost saver
 Economies of scale
– Engineering
– Materials
– Management practices
 Savings – 5% to as much as 40%
 Manage currency fluctuations
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PPPs – Other Than Construction Projects
 Operations and Maintenance
– All types of infrastructures
 Asset Management
– Energy Savings Performance Contracts
– Combined with construction, through a life cycle
 Competitive Sourcing of Personnel Functions
– Social program delivery
– Financial management (debt collection, etc.)
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Six Keys to Successful PPPs
 Statutory and Political Environment
 Organized Structure
 Detailed Business Plan
 Guaranteed Revenue Stream
 Stakeholder Support
 Pick Your Partner Carefully
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Managing for Success – Six Keys
Component One:
The Environment
 Statutory authority and regulations
 Political leadership must be in place
– Leading Political Figure
– Top Administrative Officials
– “The Will to Change the System”
– A Strong Policy Statement
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Managing for Success – Six Keys
Component Two:
Organizational Structure
 Dedicated unit (tied to the purpose of the partnership)
 TRAINED personnel (or with consultants) to monitor
implementation
 Examples: TXDOT, VDOT, PPP Centrum, Partnerships UK, Irish
Government’s Central PPP Unit
 Best Value vs. Lowest Price
–
Difficult to Administer but…
 Need for Good Governance
–
–
–
To assure an open and fair procurement process
Consolidate staff = easier to monitor
Independent authority (domestic/internal or international)
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Managing for Success – Six Keys
Component Three:
Detailed Business Plan
a.k.a. Enforceable Contract
 Performance goal oriented - Allow for innovative plans
 Best Value vs. Lowest Price
 Plan/Contract should include:
– Specific milestones and goals
– Reporting of metrics and frequency
 Risk Allocation
– Shift to the private sector can raise costs
– Identify best prices to retain, which to shift
 Dispute Resolution Methodology
 Workforce Development?
– Develop in-country resources/small businesses
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Managing for Success – Six Keys
Component Four:
Guaranteed Revenue Stream
 Funds to Cover the Long-Term Financing
– Tolls/Fees (real or shadow)
• Intelligent transportation systems
– TIF or other form of a Tax District
– Long-Term Maintenance Contracts
– Availability Payments
– Underutilized Assets
– Concession Model (limited application)
– Creative Approaches
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Managing for Success – Six Keys
Component Five:
Stakeholder Support
 Public Sector Employees
 Private Sector
 Labor Unions
 End Users
 Competing Interests
 Requires:
– Open and frank discussion between sectors
– Knowing the FACTS (no myths)
– Translating each other’s language
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Managing for Success – Six Keys
Component Six:
Pick Your Partner Carefully
 This is a long-term relationship
– Verify experience (technical capability)
– Verify financial capability
– Best Value vs. Lowest Price
 Remember each sector’s motivation
– Genuine need (market value to the project)
– Political / statutory environment
– Reasonable return on investment and manageable
risks
– Timely and effective execution vs. development costs
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Managing for Success
The Most Critical is
Component One:
Strong LEADERSHIP makes
all the other factors
come together
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Case Study – New York Ave. Metro Station
 An “In-fill Station” on Washington’s Metro
 Economically depress area, but
– Close to a residential and college community
– Abandoned warehouses
 Transportation access = economic stimulus
 Total cost of construction = $110 million
 Developers paid 30 percent of construction
cost, plus provide the land for the station
 Tolls cover maintenance and operation of the
station
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Case Study – New York Ave. Metro Station
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Case Study – Bogotá BRT
 BRT = Bus Rapid Transit – One third the cost of light rail
 Managed by TransMileno, a public dedicated unit
 Construction of roadways and stations done by the public
sector, financed with gas tax, general revenues, World
Bank loan
– 80 kilometers for $450 M by 2005
– Total of 388 kilometer for $2 B by 2019
 Operation and Maintenance done by private companies –
their investments at risk
 Rates and operating rules set by TransMileno
 Positive impacts
– Environmental (Noise, Air, Fuel)
– Traffic Congestion reduced / faster transit
– Cost effective
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Case Studies – Bogotá BRT
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CASE STUDY – UNION STATION
 Build in 1907, but poorly maintained throughout the
1970’s  property to be condemned
 A Public Corporation created by Congress, with both
public and private parties
 $160 million spent, funded by
– Garage built by City -- $40 M  parking fees
– Railroads -- $70 M  ticket sales
– Private Developer -- $50 M  retail rentals
Still publicly owned, privately operated and maintained, and
very solvent (possible use of surplus funds for other
economic development projects)
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Case Study – The Oyster School
Washington, DC
 City could not afford to maintain or replace the
original school
 City owned underutilized and undervalued asset
(1.7 acres) in upscale residential neighborhood
 Private development of a 211 unit, full market
rental apartment building
 35 year “Payment in Lieu of Taxes” (PILOT)
 $11 million for construction of a new 47,000
square foot school
 First new school in over 20 years
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Case Study – The Oyster School
After Partnership
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Case Studies for UNDP – SU/SSC Website
Under development
 Environmental
 Transportation
 Water/wastewater
 Energy
 Economic Development
 Health care
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Six Keys to Successful PPPs
 Statutory and Political Environment
 Organized Structure
 Detailed Business Plan
 Guaranteed Revenue Stream
 Stakeholder Support
 Pick Your Partner Carefully
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Need Help?
www.ncppp.org
Case Studies, Fundamentals of
Partnerships, Issue Papers,
Publications, Resources
1660 L Street, NW
Suite 510
Washington, DC 20036
202-467-6800
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