Transcript Landing Fees

Independent Contractors and
and Businesses Association
PPP’s and the Infrastructure Agenda
Stephen Beatty
January 29, 2002
Burnaby, BC
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What is a Public/Private Partnership?

A business relationship wherein the public and private sectors
share:
–
Risks.
–
Rewards.
–
Responsibility for the success or failure.
Design, Build
and Operate
Less Risk
Transfer
Design, Build,
Operate and Finance
Concession
More Risk
Transfer
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What Makes a Good Public-Private
Partnership Candidate?
In conjunction with SuperBuild, KPMG developed a series of criteria which a project should ideally
meet to be considered a candidate for a successful public-private partnership. Each criteria contain a
number of considerations, each of which requires careful planning and deliberation.
Financial
No
Good PPP
candidate
Will the partnership be able
to carry out the project under
financial terms that are
acceptable to both?
Timing
Are there time constraints
that would preempt
consideration of PPP
approach?
Yes
No
Yes
No
Technical
Implementation
Can a technical solution to
the project be found using a
PPP approach?
Are there implementation
barriers that prevent the use
of a PPP Approach
Yes
Yes
Yes
No
Acceptability
Operational
Are there operational hurdles
that prevent a PPP approach
from being used?
No
Will the public accept the
involvement of the private
sector in implementing the
project?
Yes
No
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Poor PPP candidate
Before Going Public







Debate policy issues in private.
Analyze the affordability and/or feasibility.
Assess whether now is the right time.
Scope out the project.
Decide if private sector is to be a contractor or a manager.
Plan the selection process.
Commit to the project, including project champion.
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Identify Project Risks










Site risks (environmental, aboriginal, zoning)
Design and construction risks
Financial risks
Operating risks (inputs)
Market risks (demand and price)
Network/interface risks (complementary or competitive networks)
Labour relations risk
Legislative/regulatory risks
Force majeur risks
Asset ownership risks (design, technical, maintenance,
obsolescence and residual value)
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Establish a Risk Strategy



Risk transfer costs money.
Allocate risk to the party best able to manage the risk.
Transfer risks that the private sector can control or is prepared to
assume.
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Present a Viable Business Proposition


The public objectives:
–
To obtain maximum value from an opportunity.
–
To maximize service at a reasonable cost.
–
To minimize cost at an acceptable service level.
The private objective:
–
To earn a return commensurate to the risks and merits of the venture.
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Both Parties Face Uncertainty
Public Uncertainty
Private Uncertainty
Fear of being
ripped off by
private-sector
sharks
Fear of being
consumed by an
illogical political
process
Collective
Uncertainty
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Reduce Bidder Uncertainty






Develop clear, unambiguous requirements.
Resolve strategy debates before going public.
Use a transparent, understandable selection process.
–
Provide the same information to all proponents.
–
Provide bidders with access to relevant staff.
–
Disclose evaluation/selection criteria.
Allow proponents freedom to be creative.
Anticipate bidders’ questions, not just public requirements.
Respect confidentiality of the proposals.
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Reduce Bureaucrat Uncertainty


Read the RFP – all of it.
Read your proposal.
–

Ensure that it responds to the requirements of the RFP
Accept the public sector’s need for information.
 They are at least as smart as you.
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Project Champions and Managers



Political.
Bureaucratic.
Project Manager.
 The private sector needs to be able to identify these
individuals
 If they cannot be identified by the private sector, there is a risk that they
will not bid
 Without a well-thought-out and effective decision-making
process, the project will fail.
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Project Organization – Public Sector






Project Manager.
Technical.
Financial.
Operational.
Communications.
Administration.
 Provide sufficient resources.
 Build competence.
 Selection versus implementation.
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Project Organization – Private Sector

Traditional business partnership:
–
Cannot act like a contractor.

Identify, develop and retain strong project managers that thrive in
the new environment.

Build the right team internally and externally
–



Decide on the best role for your organization on the team
Need to address public partner’s information needs.
New types of customer service requirements.
Potential ongoing operating role as opposed to short term
design/construction role.
 You are in a different business now.
 Understand public partner’s approval process.
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Summary of Key Success Factors

Assess merits of partnership approach.
–



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

Decide if partnerships and PPPs are for you
Pre-plan, including empowerment of your team
Market the opportunity.
Logical risk-sharing rather than full risk transfer.
Reduce collective uncertainty.
Harmonize incentive structure.
Accept that it is a partnership.
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Protecting the Public Interest in the RFP


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Regulatory Regime:
–
Initial rate structure.
–
Future increases.
Development Standards.
Timing Requirements.
Service Level Standards.
Operational Standards.
Buy-Out Options/Renewal Provisions.
Handback Standards.
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Building on Successes (Public and Private)

Translating project success into program success.

Experience is a great teacher.

Finding project managers who will do it again.


Retaining key personnel.
Building intellectual capital:
–
Individuals.
–
Organizations.
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Building on Successes (Public and Private)
(Cont’d)

Different program models:
–
Financing.
–
Approvals.
–
Skills.

PPP skills are unique because PPP’s are different.

Program organizations and governance models will evolve as:
–
Competence grows.
–
Market matures.
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Building Competence

Select highest quality resources:
–
Internal.
–
External.

Build a complete team.

Empower your project manager and take away other job functions
that may be just distractions.

Develop an approvals process and stick to it.
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Building Competence (Cont’d)

Projects evolve and project organizations need to as well.

The best project manager during selection may not be the same
after implementation.

Empower the team.
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Conclusions


PPP’s are different and require different skills to manage them.
Greatest challenge to PPP’s as a concept is to build competence:
–
Public.
–
Private.

Effective, empowered project managers are the key to success at
the project level.

Need to treat PPP’s differently:

–
Public.
–
Private.
Managed well, the results are worth the effort.
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Contacts

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
Stephen Beatty
–
(416)777-3569 or (604)691-3182
–
[email protected]
Paul Levelton
–
(604)691-3409
–
[email protected]
Al Kanji
–
(604)691-3061
–
[email protected]
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