Transcript Policy, Legal & Regulatory, and Institutional Options for Public-Private Partnerships (PPPs) in Information & Communications Technology Ned White Institute for Public-Private Partnerships February 17 - 19,

Policy, Legal & Regulatory, and
Institutional Options for Public-Private
Partnerships (PPPs) in Information &
Communications Technology
Ned White
Institute for Public-Private Partnerships
February 17 - 19, 2008
The Sequence of the Project
Life Cycle for
PPPs in ICT & e-Government
Module 3:
Identifying,
Analyzing &
Structuring
ICT
Projects to be
Viable PPPs
Module 5:
Module 4:
Tendering &
Procuring
PPP Projects
in ICT
Negotiating
Contracts &
Financing
PPP
Projects
in ICT
Module 6:
Managing
PPP ICT
Contracts
&
Monitoring
Contractor
Performance
Module 2: Establishing Effective Policy, Legal, Institutional,
& Regulatory Frameworks for PPPs in ICT/e-Govt.
2- Policy & LIR Options for PPPs in ICT
2
Session Overview:
1. The role of PPPs within overall ICT sector policy &
institutional reforms
2. The International Record on PPP investments in
telecommunications infrastructure
3. PPP Legal, Institutional & Regulatory (LIR)
Framework Good Practices
4. PPP LIR Frameworks for Public Sector Supports
5. Case Example: “Partnerships Victoria” - LIR
Framework for PPP in Victoria, Australia and Mobile
Data Network PPP Case Example
2- Policy & LIR Options for PPPs in ICT
3
ICT Sector
Objectives
Strategies
Line Ministries
(Infra. Reform Policies)
New Investment
Efficient Management
& New Technologies
Legal Enforcement
Consumer Protection
Institutions
Competition
Independent
Infra. Regulators
Private Sector
Participation
Autonomous
Public Infra.
Contract Agencies
(Asset Hldg. Cos.)
PPP Technical
Unit
2- Policy & LIR Options for PPPs in ICT
Competitive
Private Operators
4
PPPs are just one component of Strategies of
Overall ICT Sector Reform
#
Unbundled Functions
Institution
1
Policy Making & Sector Planning
Government Ministries
2
Regulation, Performance
Monitoring & Tariff-Setting
Independent Sector Regulatory
Bodies & Contract Compliance
Offices
3
Ownership & contracting of longterm network infrastructure assets
State-Owned Infrastructure
Contracting Agencies & Asset
Holding Cos. (AHC’s)
4
Operation of ICT network
infrastructure & service delivery
Private Sector PPP
contractors
Without these supporting sector-wide reforms & unbundling of
institutional functions, multiple PPPs will add new capacity & costs,
but will not, on their own, deliver needed sector-wide ICT efficiency
& sustainability
2- Policy & LIR Options for PPPs in ICT
5
PPP LIR Good Practices:
• Policies: should make ICT PPPs an attractive option for
line ministries & contracting agencies (ready approvals,
quick implementation, available public supports, etc.)
• Laws: Public Finance Laws should make PPP a required
option to be analyzed for any new ICT investment project
• Capacity: Line Agencies need to have the skills, models
& technical resources to identify & tender candidate PPPs
• Institutions: PPP Technical Units to:
•
•
•
•
Promote the PPP policy & help build PPP capacity in line agencies
Review & approve proposed PPP projects for quality & completeness
Measure, Manage, Minimize & Monitor Public Sector Risks
Separate the institutional functions of PPP project proposal vs. PPP
project approval
• Monitoring: continuously monitor PPP performance,
ensure compliance with contracts & assess lessons learned
2- Policy & LIR Options for PPPs in ICT
6
Effective PPP LIR Frameworks must reduce
transaction costs over time to be sustainable
PPP
Transaction
Costs ($):
• Preparation
Times,
• Development
Costs,
• PPP Financing
Risk Premia (%)
• Opportunity
Costs, etc.
1st
2nd
3rd
4th
5th
Sequence of PPP Pilot ICT Transactions
2- Policy & LIR Options for PPPs in ICT
7
International PPP Record:
ICT (Telecom) Sector Continues to Dominate PPPs:
Private Investments in LDCs by Sector (1990 - 2006)
$70,000
Investments ($ Millions)
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
$0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Energy
Telecom
Transport
Water and sewerage
2- Policy & LIR Options for PPPs in ICT
8
PPPs in ICT/Telecom by Region
Private Investments in Telecom by Region (1990-2006)
$30,000
Investments ($ Millions)
$25,000
$20,000
$15,000
$10,000
$5,000
$0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
East Asia and Pacific
Europe and Central Asia
Latin America and the Caribbean
Middle East and North Africa
South Asia
Sub-Saharan Africa
2- Policy & LIR Options for PPPs in ICT
9
Private ICT/Telecom Investments in Selected Countries (1994-2006)
Algeria
$2,000
Egypt, Arab Rep.
Iran, Islamic Rep.
$1,500
Iraq
Jordan
$1,000
Lebanon
Morocco
Syrian Arab Republic
$500
Tunisia
West Bank and Gaza
20
06
20
05
20
04
20
03
20
02
20
01
20
00
19
99
19
98
19
97
19
96
19
95
$0
19
94
Investments ($ Millions)
$2,500
2- Policy & LIR Options for PPPs in ICT
Yemen, Rep.
10
Multi-Sectoral PPP Law/Reg.
Sectoral Guidelines for PPP
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
No
Yes
Yes
Yes
No
Yes
No
Yes
Multi-Sector PPP Technical Unit
Yes
Yes
Yes
No
Yes
No
Yes
No
PPP Project Development Facility
Sectoral PPP Technical "Cells"
Long-Term Service PPP Contract
Procurement Regulations
Approvals Required by Special
Committee/President
Direct Negotiation Allowed
Yes
Yes
Not Yet No
Not Yet Yes
No
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
Yes
No
Yes
No
Yes
No
Yes
No
Yes
No
Unsolicited Proposals Allowed
Yes
Govt. Guidelines on PPP Structuring
& Risk Allocation
Yes
Financial Performance Guarantees
by Govt. Allowed
Yes
Yes
No
Yes
No
No
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
No
Yes
Public Sector Risk Management
Framework: Unit & Regulations
No
Systematic PPP Training & Capacity
Building
Yes
Infrastructure Regulatory Bodies &
PPP Contract Compliance Offices
Not Yet Yes
Not Yet Not Yet Yes
Yes
Not Yet
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
2- Policy
PPPs inYes
ICT
Yes
Yes & LIR
YesOptions
Yes for Yes/No
nt
ry
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Yo
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ga
ry
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yp
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i
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ex
ic
o
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do
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Selected International PPP LIR Frameworks
11
PPP LIR Goal:
Better “Value for the Public’s Money”
1. Estimate the how much it would cost (or currently is
costing) the Public Sector to provide an ICT service
2. Add the likely (historic) costs of additional risks the public
sector would take (construction/installation cost overruns,
ineffective technologies, project completion delays, higher
operating cost than planned)
3. How much would it cost the private sector to provide the
SAME output service levels (lower construction & operating
costs, but higher costs of financing…)
4. Which option offers the best “Value for the Public’s
Money?”
“Value for Money” = Risk-Adjusted PSC – Winning PPP Bid
2- Policy & LIR Options for PPPs in ICT
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PPP Laws & Regulations
• The International Record has shown that in order
to succeed, Public Finance Laws must require:
Good Practice: That before any new infra. project
can ask the National Treasury or MoF for new funds
for long-term projects it should first analyze if PPP is
feasible (South Africa, Pakistan, India)
Better: Public Finance Laws should require that
before public funds can be given by Treasury/MoF for
a new ICT project, the line ministry/infrastructure
contracting agency must first prove that a PPP
approach is not feasible (UK, Australia, Chile, et al)
2- Policy & LIR Options for PPPs in ICT
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PPP Laws & Regulations
 Affordability: In developing & middle-income
countries, like ESCWA members, one of the biggest
limits to the viability of any PPP projects (in ICT and
other sectors) is going to be their affordability.
 PPP Laws should require that Govt. agencies first
demonstrate that they (or public end users) can afford
the payments needed by any new ICT project, before
offering it as a PPP
 PPP Laws & Regs should prevent the “deferred
payments”, “avoided sovereign borrowing” and the
“off-balance Sheet” components of PPPs from being
used to make them appear more affordable (in the shortterm…)
2- Policy & LIR Options for PPPs in ICT
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Deferred PPP Payments Example
• A Govt. Agency wants to build a new ICT project for $10
m. It will cost $2 m to operate each year, growing at
10%/yr. for 20 years (including all Risk Adjustments: cost
overruns, operating inefficiency risks, etc.)
• However, the Govt. Agency cannot borrow the $10 m
needed to construct & install this ICT project
• A PPP bid proposes payments from the Govt. of $2.5m year,
growing at 10%/yr. for 20 years. Govt. Contracting agency
estimates its planned budget could make these lower annual
payments.
• Government’s Cost of Capital (Discount Rate) is 12%.
• Is this PPP an attractive offer? Should the Govt. agency
accept this PPP bid?
2- Policy & LIR Options for PPPs in ICT
15
Analyzing Deferred PPP Payments
Public vs. PPP Costs (NPV @ 12%)
Costs to Govt. ($ Millions)
$40.00
$35.00
$30.00
$25.00
$20.00
NPV of Payments
$15.00
$10.00
$5.00
19
17
15
13
11
9
7
5
3
1
N
PV
$0.00
Public Sector Cost
PPP Bid
Capital
Cost
Op Costs/
Cost
Discount
(Millions) Yr. (Millions) Growth/Yr.
Rate
Public Sector Cost
10
2
10.0%
12.0%
NPV
$35.94
PPP Bid
$37.82
0
2.5
10.0%
2- Policy & LIR Options for PPPs in ICT
12.0%
16
PPPs & Public Sector Risks
• PPPs do place new long-term (performance-based) financial
obligations onto Govts. (almost the same as sovereign loans…)
• “Fiscal Opportunism”: In the past (Pre-1997), many PPPs & BOTs
had been opportunistically used by Govt. agencies to finance priority
public infrastructure projects “Off the Govt’s. Balance Sheet.”:
• PPP payment liabilities were not disclosed to outside credit rating agencies
or lenders analyzing Sovereign creditworthiness
• PPP payment obligations (Contingent & Non-Contingent) were also not
recorded, monitored or provisioned against by Govts. themselves (Ministries
of Finance, Central Banks, etc.)
• Emerging Mkt. Financial Crises in late-1990’s revealed multiple “OffBalance Sheet” PPP liabilities undermine Sovereign creditworthiness
(& increase long-term credit risks faced by PPP investors)
• To sustain PPPs, Govt. MoFs must:
•
•
•
•
Endeavor to minimize use of Public Liabilities (Maximize VFM)
Disclose all PPP liabilities (within Govt. & to outside analysts & lenders)
Ensure that all PPP liabilities can be paid & Provision Against them
Monitor the Govt’s PPP risk exposure continuously
2- Policy & LIR Options for PPPs in ICT
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•PPP is a “leverage” technique not a replacement for public finance
• Only about 15% of all public infrastructure investments can be feasibly
provided by PPPs
Low
High
Social &
Political
Priority
(EIRR)
Financial Attractiveness (FIRR)
High
Publicly Identified
Projects
1. Project Structuring
(Public Supports)
Privately
Identified
Projects
2. Project Screening
Low
2- Policy & LIR Options for PPPs in ICT
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Managing Public Sector Risks
• Generally, public sector supports for PPP projects should
be minimized (to transfer key risks away from the public
sector_
• Use only enough public sector support to make the PPP
project financially viable, but not more (avoid publicly
subsidizing private profits)
• In general, reducing public sector support increases the
“Value for the Public’s Money” in the project (up to a
point…)
• However, Public Sector Supports should not be
eliminated, because some risks are more effectively (and
cheaply) managed by the public sector. Transferring too
much risk onto private sector, raises overall costs of the
project
2- Policy & LIR Options for PPPs in ICT
19
Optimal Public Support vs. Minimal or
“NO” Public Support for PPPs
High
Cost
Minimal Public
Support,
But Low VfM
Moderate Public
Support,
=> Optimal VfM
PPP
Price
(Cost/
Output
Unit)
Low
Cost
VfM
Private
Sector’s
Price-Risk
Exchange
Offer
High VfM
Govt’s.
Value
For
Money
Public VfM
Utility Curves
Low VfM
Low
Pub. Support
Public Support
2- Policy & LIR Options for PPPs in ICT
High
Pub. Support
20
Separate Govt. PPP Institutions:
“Proposing & Promoting PPP ICT Projects”
vs.
“Review & Approving/Disapproving PPP ICT Projects”
• Line Ministries & Govt. Agencies (as the customer of any
PPP) should be responsible for identifying & selecting which
ICT projects they want to implement as PPPs. Thus, Line
Ministries and their “PPP Nodes” should propose and
promote their own specific PPP transactions.
• A separate body, responsible for managing public sector
finances & public sector risks (ie a “PPP Unit” within the
Min. of Finance), should independently review these
proposed PPPs and either approve or disapprove them,
based upon what offers the best value for the public’s money.
• It is a hazardous conflict-of-interest to combine these two key
functions under a single Government unit…
2- Policy & LIR Options for PPPs in ICT
21
PPP LIR Example:
Partnerships Victoria, Australia
• Victoria: 2nd Largest Australian State, by economy &
population (pop. = 5.0 million)
• Plans to spend $A 3.2 Billion (U.S.$2.5 Billion) on
public infrastructure 2006 – 2010
• History of individual PPPs & BOTs in 1980’s to finance
projects “Off Balance Sheet,” avoid public borrowing
limits, but little risks transferred to private sector
• 1990’s sought to maximize risk transfer to private
sector, but some projects could not be sustained
• June, 2000: New “Partnerships Victoria Policy” Adopted
2- Policy & LIR Options for PPPs in ICT
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Partnerships Victoria Policy, 2000
• A more balanced policy to integrate sustainable private
investment into public infrastructure
• Primary goal of providing “Value for Money” in the
public interest
• Does not assume that the private sector is necessarily
more efficient at building & operating infrastructure
assets
• Requires estimating and recognizing whole-life costing
for projects
• Emphasizes “Optimal Risk Transfer” to private sector,
instead of “Maximal Risk Transfer”
2- Policy & LIR Options for PPPs in ICT
23
Partnerships Victoria - Principles
 PPP is not “another bucket of money” for projects
 PPP does not avoid public funding procedures
 PPP does not get projects & public liabilities “Off the Balance
Sheet”
 PPP is not just about “building new things”
 PPP is not privatisation
 PPP does not suit all projects & service delivery needs (goal
of just 10-15% of total public investments)
 PPP is one option for procuring and delivering needed
services
 PPP IS about delivering services, and not just about financing
& building
 Overarching goal is providing “Value for the Public’s Money”
2- Policy & LIR Options for PPPs in ICT
24
Partnerships Victoria –
PPP Tools, Models & Publications
• June, 2000:
• June, 2001:
Partnerships Victoria Policy
• Partnerships Victoria Practitioners’ Guide
• Risk Allocation & Contractual Issues Guide
• Public Sector Comparator – Technical Note
• June, 2003: Contract Management Framework
• July, 2003:
• Public Sector Comparator – Supplementary Technical Note
• Use of Discount Rates
• June, 2005: Standard Commercial Principles
• Available for Download at www.partnerships.vic.gov.au
2- Policy & LIR Options for PPPs in ICT
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Major Steps in
Developing
Partnerships
Victoria Projects
2- Policy & LIR Options for PPPs in ICT
26
Partnerships Victoria – PPP Process
1. Business Case
Assess the PFI Potential & Commence PSC
2. Funding Approval
Review preliminary PSC
Funding approval signals bankability to private investors & lenders
3. Expressions of Interest
Formally notify private market about the project
Define timetables & deadlines
Confirm the level of market interest
Allow potential bidders to comment on proposed project structure
Shortlist at least 3 bidders
4. Project Brief (Request for Proposals)
Formal Govt. commitment to project
Detailed Project information & requirements for bidders
Bid evaluation criteria & process
5. Final Negotiation
2- Policy & LIR Options for PPPs in ICT
27
Partnerships Victoria PPP Projects
Partnerships Victoria Projects
#
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
Size (NPV)
Name
Sector
($A Millions)
Victorian County Court
Public Facilities
$195.0
Casey Hospital
Health Care
$115.0
Docklands TV & Film Studio
Public Facilities
$8.7
Wodonga Wastewater
Water & Enviro.
$32.5
Echuca Wastewater
Water & Enviro.
$51.5
Correctional Facilities
Public Facilities
$275.0
Mobile Data Network
Info.& Comm. Tech.
$85.0
Southern Cross Station
Transport
$309.0
Enviro Altona
Water & Enviro.
$20.3
Metropolitan Mobile Radio
Info.& Comm. Tech.
$120.0
Emergency Alerting System
Info.& Comm. Tech.
$100.0
Mitcham Frankston EastLink
Transport
$2,500.0
Royal Women's Hospital
Health Care
$364.0
Royal Melbourne Showgrounds Public Facilities
$108.0
Melbourne Convention Centre Public Facilities
$367.0
North Ballarat Reclaimed Water Water & Enviro.
$50.0
Term
20
25
20
10
25
25
5
30
10
7
7
39
25
25
25
15
VFM
Savings
N/A
9.0%
N/A
N/A
28.0%
Status
Construction Complete
Construction Complete
Construction Complete
Construction Complete
Construction Complete
Construction Complete
11.0% Construction Complete
5.0% Contract Signed
6.0% Contract Signed
Contract Signed
Contract Signed
Contract Signed
Contract Signed
Contract Signed
Contract Signed
Contract Signed
2004 Review of 8 early projects revealed average
savings was 9% against the Risk-Adjusted PSC
2- Policy & LIR Options for PPPs in ICT
28
ICT PPP Example:
Partnerships Victoria’s
Mobile Data Network PPP
2- Policy & LIR Options for PPPs in ICT
29
Mobile Data Network PPP
• Description: To provide a mobile data network to Victoria’s
Police & Ambulance vehicles in Melbourne area. Includes
access in vehicles and outside to relevant databases, maps,
emergency information & locator functions at a guaranteed
operational reliability of 99.9%:
 Allow important information about the emergency and the
people involved to be sent directly to the vehicles involved;
 Use Satellite technology to track vehicle location, allowing the
closest vehicles to be sent to an emergency;
 Give mobile access to databases such as vehicle registrations
and drivers licenses; and
 Allow police to submit paperwork via computer while still in
the field.
2- Policy & LIR Options for PPPs in ICT
30
Mobile Data Network PPP
•
•
•
•
PPP Contractor: Motorola Australia Pty Ltd.
Govt. Client: Victoria Police & Ambulance Services
Contract Term: 5 year contract, beginning June 2003
Cost of PPP Contract: $138 million in total PPP Payments
over term of contract, equals $85 million NPV using State’s
discount rate of 8.65%
• Value for Money Savings of PPP = 11% (A10.5 million =
U.S. $7.8 million)
• Lessons Learned: As one of the first ICT PPPs in Australia,
the procurement took a long time (3 yrs.) due to need to revise
& reclarify the contracts output standards. Difficult to estimate
a Public Sector Cost when the public sector could not
technically provide the service on their own
2- Policy & LIR Options for PPPs in ICT
31
Partnerships Victoria –
PPP Project Selection Criteria:
 Scale: Minimum of $A10 million ($A 7.5m - $A75 m is
better)
 Key Performance Indicators (KPIs): Measurable
service outputs
 Risk Transfer: Clear opportunities to transfer risks
(construction, completion & operation) to private sector
 Term: Long term of contract (15 – 30 yrs.)
 Innovation: Project allows opportunities for private
sector to innovate in designing, building, financing, and
operating projects
 Market Appetite: clear indications that there are
experienced private developers interested in these
contracting opportunities
2- Policy & LIR Options for PPPs in ICT
32
Partnerships Victoria – Lessons Learned
 The first stage, the Business Case, is the most important
opportunity to establish a PPP project’s clear strengths, or to
stop unsuitable projects from advancing as PPPs
 Focus on the project’s clear, stated objectives throughout the
process (output standards MUST be clear & quantifiable) Clear
output specifications are essential for an effective project
development process
 PPP Procurement processes are complex and time-consuming.
More time & money spent on risk analysis & PPP structuring
leads to more efficient PPP solutions
 Contract signing is the “beginning,” not the “end.” PFI Contract
management requires more legal & commercial resources than
assumed
 Multiple Public Sector parties to a PPP make governance very
challenging
 PPP processes must be flexible to learn lessons of experience
2- Policy & LIR Options for PPPs in ICT
33
and to adapt & improve
Questions?
2- Policy & LIR Options for PPPs in ICT
34
The Institute for Public-Private Partnerships (IP3)
Washington | Cairo | Jakarta | Dakar
Washington
1010 Wisconsin Avenue, NW, Suite 250
Washington, DC 20007 USA
Jeff Wuorinen
Cairo
19 Ahmed El Shattoury Street
Dokki, Giza, Egypt
Tamer Shaltout
Regional Representative, Middle East/North Africa
Program Manager, Egypt
E-mail: [email protected]
E-mail: [email protected]
Tel: 1-202-466-8930
Fax: 1-202-466-8934
www.ip3.org