PPP HandBook.pdf

Embed Size (px)

Citation preview

  • 7/30/2019 PPP HandBook.pdf


    Information forDevelopment Program



    The Institute for Public-Private Partnerships

    June 2009





  • 7/30/2019 PPP HandBook.pdf


  • 7/30/2019 PPP HandBook.pdf





    Inormation orDevelopment Program

    An infoDv publicAtion prepAreD by:

    The Institute or Public-Private Partnerships

    June 2009

  • 7/30/2019 PPP HandBook.pdf


    2009 The International Bank or Reconstruction and Development/The World Bank

    1818 H Street NWWashington DC 20433Telephone: 202-473-1000Internet: www.worldbank.orgE-mail: [email protected]

    A ghs svd

    The ndings, interpretations and conclusions expressed herein are entirely those o the author(s) and do not necessarily refectthe view o infoDev, the Donors o infoDev, the International Bank or Reconstruction and Development/The World Bank andits aliated organizations, the Board o Executive Directors o the World Bank or the governments they represent. The WorldBank cannot guarantee the accuracy o the data included in this work. The boundaries, colors, denominations, and otherinormation shown on any map in this work do not imply on the part o the World Bank any judgment o the legal status o anyterritory or the endorsement or acceptance o such boundaries.

    rghs ad pmsss

    The material in this publication is copyrighted. Copying and/or transmitting portions or all o this work without permission maybe a violation o applicable law. The International Bank or Reconstruction and Development/The World Bank encouragesdissemination o its work and will normally grant permission to reproduce portions o the work promptly.

    For permission to photocopy or reprint any part o this work, please send a request with complete inormation to infoDevCommunications & Publications Department, 2121 Pennsylvania Avenue NW; Mailstop F 5P-503, Washington, D.C.20433, USA; telephone: 202-458-4070; Internet: www.infodev.org; Email: [email protected].

    All other queries on rights and licenses, including subsidiary rights, should be addressed to the Oce o the Publisher, TheWorld Bank, 1818 H Street NW, Washington, DC 20433, USA;ax: 202-522-2422; e-mail: [email protected].

    cv dsgby Patricia Hord Graphic Design, Inc.tsgby The Word Express, Inc.

    To cite this publication:The Institute or Public-Private Partnerships, 2009. Public-Private Partnerships in E-Government: Handbook. Washington, DC:infoDev / World BankAvailable at http://www.inodev.org/publications

    http://www.worldbank.org/mailto:[email protected]://www.infodev.org/mailto:[email protected]://www.infodev.org/publicationshttp://www.infodev.org/publicationsmailto:[email protected]://www.infodev.org/mailto:[email protected]://www.worldbank.org/
  • 7/30/2019 PPP HandBook.pdf


    Purpose o the Handbook and Guidelines or Its Use 1

    Context 1

    Te Role o this Handbook within the Overall PPPs in E-Government Project 1

    Te Methodology and Format o the Handbook 1

    Chapter 1. Understanding the Purpose and Rationale or PPPs in E-Government 5

    Understanding the Goals o and Benets rom PPPs in E-Government 5

    Forms o PPPs Applicable or Use in E-Government 6ypes o PPP Contracts 10

    Chapter 2. echniques or Establishing the Appropriate Policy, Legal, Regulatory,and Institutional Framework or PPPs in E-Government 13

    Essential Components 13

    echnique 2.1 Establishing an Appropriate PolicyFramework or PPPs in E-Government 14

    echnique 2.2.a Establishing an Appropriate LegalFramework or PPPs in E-Government 17

    echnique 2.2.b PPP Regulations and RegulatoryFramework or E-Government Systems 19

    echnique 2.3 Establishing an Appropriate InstitutionalFramework or PPPs in E-Government 23

    Chapter 3. echniques or Identiying and Selecting Appropriate CandidateProjects or PPPs in E-Government 29

    echnique 3.1 Assemble All Available Inormation about the Project 30

    echnique 3.2 How to Prioritize Candidate E-Government PPP Projects 32

    echnique 3.3 E-Government PPP Identication Report 36

    Chapter 4. echniques or Analyzing and Structuring E-Government Projectsto be Viable PPPs 41

    echnique 4.1 How to Analyze echnical Feasibility 42

    echnique 4.2 How to Analyze the E-Government PPPs Legal andInstitutional Feasibility 46

    echnique 4.3 Conducting PPP Financial and Economic Feasibility Analysis 49

    Table o Contents

    Table o Contents iii

  • 7/30/2019 PPP HandBook.pdf


    iv Public-Private Partnerships in E-Government: Handbook

    echnique 4.4 How to Identiy Relevant PPP Risks 52

    echnique 4.5 Assessing the Risks in Proposed E-Government PPP Projects 56

    echnique 4.6 How to Allocate the Risks Among Various Parties to the PPP 60

    Chapter 5. echniques or endering and Procuring PPP Projectsin E-Government 65

    echnique 5.1 How to Set Up and Manage a PPP Procurement Committeeor E-Government Projects 66

    echnique 5.2 Utilizing ransaction Advisors or Procuring E-GovernmentPPP Contracts 69

    echnique 5.3 Selecting the Appropriate Procurement echnique 73

    echnique 5.4 Developing Pre-Qualication Documents andManaging the Pre-Qualication Process 77

    echnique 5.5 How to Prepare Bid Documents and Conduct Bidding orE-Government PPP Projects 81

    Chapter 6. echniques or Negotiating Contracts and Financing PPP Projectsin E-Government 85

    echnique 6.1 How to Prepare, Conduct, Manage andFinalize Contract Negotiations 85

    echnique 6.2 Ensuring that Signed PPP Contracts ReachFinancial Closure and Implementation 87

    Chapter 7. echniques or Perormance Monitoring and Contract Monitoringor E-Government PPPs 95

    echnique 7.1 How to Design and Manage PPP Contract PerormanceMonitoring Institutions/Units 96

    echnique 7.2 How to Manage Requests or Adjustments in PPP ContractPrices and Costs 99

    echnique 7.3 How to Measure and Monitor E-GovernmentContractor Perormance 101

    echnique 7.4 How to Manage Contract Revisions, Renegotiations,and Dispute Resolution 103

    Annex 1. emplate or a PPP ransaction Advisor Contract 107

    Annex 2. Example o an E-Government PPPContract: Philippines LO I BOO 115


    Figure 1 Handbook Organized along PPP Project Lie Cycle 2

    Figure 2 echnology Architecture o Bangalore City Corporation 8

  • 7/30/2019 PPP HandBook.pdf


    Table o Contents v

    Figure 3 echnical Design o Bangalore City Corporation 9

    Figure 4 Malaysias Strong Multi-Sector Framework or PPPInvestments 26

    Figure 5 ePerolehan Framework 27Figure 6 Role o PPP Identication and Selection

    in the PPP Project Lie Cycle 29

    Figure 7 Major Stages in Developing Partnerships Victoria Projects 38

    Figure 8 Role o Feasibility Analysis and Project Structure in the PPP ProjectLie Cycle 41

    Figure 9 Feasibility Analysis or PPP 43

    Figure 10 EBRD Survey: Perceptions o Adequacy o National Legal Frameworksor Concessions 48

    Figure 11 Waterall Model o Cash Flows 49Figure 12 Diagram or the Design o an E-Government PPP Cash Flow Model 50

    Figure 13 South Arican PPP Project Cycle 57

    Figure14 Illustration o the Use o a PSC Estimate to Project theLikely Value or Money Benets o a Proposed PPP Project 63

    Figure 15 Role o endering and Procurement in PPP Project Lie Cycle 65

    Figure 16 Stages o PPP Procurement with Indicative imelines 72

    Figure 17 Role o Reaching Financial Closure in the PPP Project Lie Cycle 85

    Figure 18 Limited recourse Project Finance 88

    Figure 19 Enhancing PPP Creditworthiness through Introduction oSubordinated Debt 89

    Figure 20 Example o a Partial Credit Guaranteerom the Asian Development Bank 91

    Figure 21 Role o Perormance Monitoring and Contract Compliance inthe PPP Project Lie Cycle 95


    able 1 ypes o PPP Contracts 11able 2 Regulatory Categories Relevant to PPPs in E-Government 20

    able 3 Examples o ypical PPP Risks in E-Government 31

    able 4 Common Selection Criteria or E-Government PPP Projects 34

    able 5 Multi-Criteria Analysis Matrix orPrioritizing E-Government PPP Projects 35

    able 6 Criteria Weighting or MCA 36

  • 7/30/2019 PPP HandBook.pdf


    vi Public-Private Partnerships in E-Government: Handbook

    able 7 Summary o Selected Early PPP Projects underPartnerships Victoria PPP Framework 39

    able 8 Identiying Risk in E-Government PPP Projects 53

    able 9 PPP Risk Size/Impact Cost Estimation Matrix 58able 10 PPP Risk Probability Estimation Matrix 59

    able 11 PPP Risk Probability-Weighted Cost Estimation Matrix 60

    able 12 Risk Allocation Matrix 61

    able 13 Selecting the Appropriate Procurement Method 76

    able 14 Sample able o Contents o an RFQ or an E-Government PPP 78

    able 15 Determining the Appropriate Regulatory echnique 97

  • 7/30/2019 PPP HandBook.pdf


    G2G Government to GovernmentICB International Competitive BiddingIC Inormation and Communications

    echnologyIFC International Finance CorporationI Inormation echnology

    JV Joint VentureKPI Key Perormance IndicatorMCA Multi-Criteria AnalysisMDB Multilateral Development BankPCG Partial Credit GuaranteePFI Private Finance InitiativePPIAF Public-Private Inrastructure

    Advisory FacilityPPIFF Public-Private Inrastructure

    Financing FacilityPPP Public-Private PartnershipPRG Partial Risk GuaranteePSC Public Sector ComparatorRFP Request or ProposalsRFQ Request or Qualications

    SOE State-Owned EnterpriseSPV Special Purpose VehicleUNCIRAL United Nations Commission on

    International rade LawVFM Value or Money

    WB World Bank

    ADB Asian Development BankADR Alternative Dispute ResolutionADB Arican Development BankARM Automated Remote MeteringBOO Build-Own-OperateBO Build-Operate-ranserBPR Business Process Re-engineeringCAPEX Capital ExpenditureCCO Contract Compliance OceCIO Chie Inormation OcerCMU Contract Monitoring UnitDBFO Design-Build-Finance-OperateDFBO Design-Finance-Build-Operate-

    ranserDSCR Debt Service Coverage RatioEBIDA Earnings Beore Interest

    Depreciation axes andAmortization

    e-Gov Electronic-GovernmentEIRR Economic Internal Rate o ReturnELRS Electronic Land Registration System

    ESD Electronic Service Deliverye-SEVA Electronic ServiceFIRR Financial Internal Rate o ReturnFOREX Foreign ExchangeFS Feasibility StudyG2B Government to BusinessG2C Government to Citizen

    E-Government and PPP-Related Acronyms

    E-Government and PPP-Related Acronyms vii

  • 7/30/2019 PPP HandBook.pdf


    viii Public-Private Partnerships in E-Government: Handbook

  • 7/30/2019 PPP HandBook.pdf



    Te last ew years have seen a considerable amount oresearch and applications in the two areas o PublicPrivate Partnerships (PPPs) and e-government.Rather than attempting to redene these areas, orconsidering them as two distinct paradigms, thisKnowledge Map (KM) and the Handbook is aneort to bring a certain degree o convergence, and tosee whether PPPs are, or can be, eective instrumentsor e-government initiatives in a country.

    Te increasing emphasis on e-government is otendirectly attributed to the act that the use andapplication o Inormation and Communicationechnologies (IC) are now commonly accepted aspowerul engines or economic growth. As govern-ments embrace IC as a means to accelerate thedevelopment process this also becomes oremost inthe reorms agenda, and in their delivery o servicesto citizens, businesses, civil society organizations, andother government agencies.

    Te extensive experience and knowledge currentlyavailable allows us to ocus on the various dimensionso e-government and the specicities that invariablyneed to be taken into account at the national, sub-national, local, and district levels. Similarly, there isalso the need to understand the key aspects that playa signicant role in the eectiveness and indeed theappropriateness o PPPs in such scenarios. Tis KMand Handbook helps identiy such specicities, andhighlight the importance o policies, programs,services, and instruments that may acilitate theengagement o the private sector in areas that werehitherto the domain o the government.

    PPPs and e-government are complex exercises, whichmust encompass a variety o issues covering manyareas such as inrastructure, applications, institutions,

    people, and policies. While it is important tounderstand the nuances o each concept, it mighthelp to recognize the act hat PPPs are oten thechosen path when the objectives are to ease thenancial constraints on the government and at thesame time increase its eciency and eectiveness. Forthis reason, PPPs are all the more important in thecontext o the current nancial crisis. However, itshould also be noted that optimal benets can onlybe derived when good governance, transparency, andpolitical commitment are coupled with the existenceo appropriate legal, institutional, and regulatoryrameworks, and adequate local capacity (institu-tional, human, and nancial) beore such PPPprograms/strategies can be translated into action.

    Tis Handbook and KM should not be viewed as aprescription o best practices. Tey should be used asguides, and lessons should be learned, in terms ohow the good practices and experiences can bereplicated or applied while undertaking a PPP

    initiative in e-government. Tis Handbook isdesigned as a guide on the question oHow?, whilethe KM answers the questions oWhy?,What?, andWhere? to implement PPP projects in e-government.

    We anticipate that the KM and Handbook will bevaluable resources or policymakers and practitionersacross the world. Besides helping to address the needsin developing countries, they are also relevant ormiddle income as well as developed countries sincethey draw upon a broad spectrum o programs andexperiences across a wide range o sectors in a numbero countries.

    infoDev would like to acknowledge the contributiono the Institute or Public-Private Partnerships (IP3)in delivering this Handbook and KM.

    Vivek Chaudhry Randeep Sudan Valerie DCostaask Manager Lead Reviewer Program Manager

    Preace ix

  • 7/30/2019 PPP HandBook.pdf


    x Public-Private Partnerships in E-Government: Handbook

  • 7/30/2019 PPP HandBook.pdf



    Te Handbook is part o a broader infoDevinitiative to expand the scope o e-governmentapplications in all aspects o government services.Te Handbook contains extensive links to reerencematerials, and guidelines or contributing to thegrowing body o knowledge about e-government.

    Te idea or this Handbook or PPPs ine-government was born out o the recognition that,

    while governments have been successully employingPPP models in other sectors such as water, energyand transportation, their application to the IC ande-government sector is relatively new. Furthermore,given that the technological know-how required ormost e-government initiatives lies primarily with theprivate sector (especially in emerging economies),learning how to appropriately leverage that know-how is essential to ensuring the success oe-government. Te purpose o this Handbook is to

    provide a clear system o practical steps to ollowwhen implementing PPPs in e-government projectsand services.

    The Role o this Handbookwithin the Overall PPPs inE-Government Project

    Te KM provides an interactive and web-linkedoutline o what is known about PPPs in e-govern-

    ment, including: (i) concise thought pieces; (ii) casestudies that illustrate the key concepts; and (iii)resources or users that want more detailed inorma-tion. Tis Handbook is designed to be a paper and

    web-based resource that is based on the technicaloundation established by the KM. Whereas the KMestablishes what is known about PPPs in e-govern-ment and answers the questions,Why?,What?, and

    Where?, this Handbook serves as a Users Guide and

    answers the more practical question oHow? toimplement PPP projects in e-government.

    The Methodology and Formato the Handbook

    Te ormat o the Handbook is intended to be an

    easily accessible, practical guide that users canquickly consult or the inormation they needabout specic issues and challenges they encounter

    when trying to actually implement PPPs ine-government. Tereore, rather than beingpresented in the ormat o a textbook on PPPtheorywhich would require readers to digest theentire volume cover-to-coverthe Handbook ispresented more as a reerence manual, so users canread only the one or two relevant sections theyneed beore they return it to the shel or later use.Te ormat is favored with real-world case illustra-tions, and lessons learned and good practices


    Te organization and sequence o this Handbook isbased upon the sequence o steps that need to beollowed when actually implementing PPPs ine-government to make it easier or practitioners toquickly understand the sequence o the dierentstages o the overall PPP process. Te practitionerscan then determine where they are in the sequence

    What Do We Mean byE-Government?

    The World Bank, denes e-government as the use o inorma-tion and communications technologies by governments toenhance the range and quality o inormation and servicesprovided to citizens, businesses, civil society organizations,and other government agencies in an ecient, cost-eectiveand convenient manner, making government processes moretransparent and accountable and strengthening democracy.


    Purpose o the Handbook and Guidelines or its Use

    Introduction 1

  • 7/30/2019 PPP HandBook.pdf


    2 Public-Private Partnerships in E-Government: Handbook

    and easily consult only the relevant section coveringthe operational technique or which they specicallyneed guidance and help.

    Te order and sequence o the chapters o this

    handbook refects the order o the PPP project cycle:

    Introduction: Purpose and Format o the PPPHandbook and Guidelines on How to Use It Chapter 1: Understanding the Purpose andRationale or PPPs in E-Government Chapter 2: echniques or Establishing the

    Appropriate Policy, Legal, Institutional andRegulatory Framework or PPPs inE-Government Chapter 3: echniques or Identiying andSelecting Appropriate Candidate Projects orPPPs in E-Government Chapter 4: echniques or Analyzing andStructuring E-Government Projects to be ViablePPPs Chapter 5: echniques or endering andProcuring PPP Projects in E-Government Chapter 6: echniques or NegotiatingContracts and Financing PPP Projects inE-Government Chapter 7: echniques or Managing PPPContracts and Monitoring E-GovernmentPerormance

    Each chapter o the handbook is organized andpresented as a sequence o specic, practicaltechniques that should be ollowed when attemptingto implement PPPs. Te number o these PPPtechniques within each chapter varies, because some

    phases o the PPP project lie cycle require manydierent, discrete steps, whereas others generallyrequire ew. o achieve these important ormat andusability goals or this handbook, each PPP tech-nique has been organized using a consistent ormat.Tis enables users o the handbook to quicklyunderstand the most important, practical guidelinesor the specic PPP issue with which they areconronted.

    Within each chapter, each PPP technique ispresented according to the same outline.

    Defnition What is this PPP technique? Rationale Why is this PPP technique neces-sary or important? What would happen to thePPP project without this technique? Description What are the key steps, theinputs, and the outputs required to employ thisPPP technique? Case Illustration What is a realistic exampleo a case that shows how this technique has beenpractically perormed and what are the lessonslearned?

    Figure 1. Handbook Organized along PPP Project Life Cycle

    The Sequence of the ProjectLife Cycle for PPPs in E-Government

    Chapter 3: Chapter 4: Chapter 5: Chapter 6: Chapter 7:

    Identifying &

    SelectingAppropriateProject Candidatesfor PPPs inE-Government

    Analyzing &

    StructuringE-GovernmentProjects to beViable PPPs

    Chapter 2: Establishing an Effective Policy, Legal, Institutional, and Regulatory Framework for PPPs in E-Government

    Tendering &

    ProcuringPPP Projectsin E-Government


    Contracts &FinancingPPP Projectsin E-Government


    PPP Contracts& MonitoringE-GovernmentPerformance

  • 7/30/2019 PPP HandBook.pdf


    Introduction 3

    Good Practices and Lessons Learned A quickchecklist o practical tips to ollow and mistakesto avoid, when trying to implement thistechnique in practice.

    Te readers and users o this handbook are alsoencouraged to consult the two annexes o this

    handbook, which include useul and practicaldocuments essential to the e-government PPPprocess. Tese include a template contract orhiring PPP transaction advisors, as well as anexample o a PPP e-government contract or a large

    Build-Operate-ranser (BO) project.

  • 7/30/2019 PPP HandBook.pdf


    4 Public-Private Partnerships in E-Government: Handbook

  • 7/30/2019 PPP HandBook.pdf


    Understanding the Goalso and Benefts rom PPPs inE-Government

    A Public-private partnership in e-government maybe dened as a legally enorceable contract betweena private sector entity and a government body thatrequires the private partner to deliver a desiredelectronic public service, or which the private sectormust invest some o its own resources (nancial,technological, time, corporate reputation, etc.), andmust become responsible or some o the risks oservice delivery, and or which payments to theprivate partner are made only in exchange or actualperormance delivered.

    Tereore, e-government PPPs are dened to includea broad range o contracts in which private partnersand government bodies each share a dierent levelo the e-government projects risks. For example, in

    some PPPs, governments may be responsible ornancing and owning the projects underlyingelectronic network inrastructure and equipmentacilities, while the operation o a new e-governmentservice that uses this network becomes the contrac-tual responsibility o the private partner. In other

    cases, the private partner could become responsibleor design, nancing, installation and construction,as well as the operation o a new electronic network,including the delivery o electronic governmentservices.

    E-Government PPPs may even include joint venturecontracts, by which a new company is created by acombination o a private investor(s) and a govern-ment body(s), which then signs a contract to delivera specic e-government service. Te JV may eitherbe paid or the new electronic services they deliverythrough a xed availability payment rom theclient government department or agency, or romper-transaction ees paid by end-users.

    For example, the Indian State o Andhra Pradeshspioneering electronic service project (eSeva), rstlaunched in 1999, has created one-stop-shopkiosks throughout the state where a multitude oGovernment-to-Citizen (G2C) services may be

    transacted rom a single location. Te eSeva projectwas developed through a PPP on a Build-Own-Operate-ranser (BOO) basis (see explanation oBOO below). Te Government o Andhra Pradeshinvested in the development o e-governmentapplications at the back-end, and used a PPP modelto provide the interace with the citizens. Under thismodel the government invested some $600,000 orsite preparations, while eSevas private contractors,CMS Computers Ltd. and Ram Inormatics Ltd.,provided US$1 million o hardware, sotware, andnetworking. E-Seva was initially paid a rate oUS$0.08 per transaction by the Government o

    Andhra Pradesh.1

    Risks are allocated between the public and privateparties to the contract; this is what orms the

    F m ma Adha padshs Sva gam s1http://esevaonline.com/htmlpages/abouteSeva.htmadhttp://www.economist.com/specialreports/PrinterFriendly.cm?story_id=10638184

    Key Characteristics that DeneE-Government PPPs

    A legally enorceable contract between a public sector-

    body and a private sector contractorFor the purpose o the electronic delivery o a service thathas traditionally been provided by the GovernmentRequires some new investments by the private contractor(money, technology, specialized expertise/time, corpo-rate reputation, etc.)Transers some key risks to the private contractor (designo a new electronic service, installation and construction;system operation and service delivery, etc.),Payments to the private contractor are made only inexchange or actual perormance delivered

    Chapter 1

    Understanding the Purpose andRationale or PPPs in E-Government

    Understanding the Purpose and Rationale or PPPs in E-Government 5

  • 7/30/2019 PPP HandBook.pdf


    6 Public-Private Partnerships in E-Government: Handbook

    partnership. Generally, the operating risks areallocated to the private sector partner (generally thecommercial risks) while the political risks areallocated to the public sector partner. In practice,there are many kinds o risks that do not all neatly

    into the categories o commercial or political,and those risks are allocated between the partiesbased on negotiations.

    Te popularity o PPPs arose initially during the late1980s and early 1990s, out o governments need ornancing to meet increasing demand or expansionand rehabilitation o inrastructure such as telecom-munications networks, as well as other energy andtransport sectors. Employing PPPs as a tool ormeeting their obligations to citizens, governmentshave been able to avail themselves o state o the artelectronic technologies and private sector expertise,

    while avoiding excessive strains on already limitedbudgets. Citizens enjoy improved service deliveryand sometimes decreased user ees, and economicgrowth fourishes in sectors seeking to compete orlucrative PPP contracts.

    Te goals o PPPs in e-government are:

    o mobilize new private sector investment inorder to leverage public unds required in thedevelopment o e-government networks,including both underlying inormation and

    communications technology inrastructure andequipment, as well as the public services beingdelivered on these networks;o attract private sector experience, technology,and innovation in the design o electronicnetworks and services, and to benet romprivate sector creativeness and ingenuity; ando utilize private sector marketing channels andcustomer service expertise in the commercialdelivery o services to customers o thee-government system.

    Te potential benets o PPPs in e-government are:

    Increased pace o rolling out e-governmentservices, applications, and inrastructure, due tothe nancial participation o the private sectorthrough both investment and prot-sharing;Use o more advanced technologies in theengineering design and availability o morecustom-tailored engineering systems, madeavailable by the private sector;

    Increased ocus on outcomes resulting in betterquality o service delivery and increased clientsatisaction; andDownstream eects in terms o a more capabledomestic private sector.

    Forms o PPPs Applicable orUse in E-Government

    Tere are a number o PPP models; however, someo the key models in e-government include:(i) contracting or electronic services and ICacilities management; (ii) JV co-ownership andnancing o projects; and (iii) BO arrangements.

    Contracting or Electronic Services andICT Facilities ManagementContracting or outsourcing involves the provision oservices and inrastructure that have previously beenprovided by government. Contracting enablesgovernment to provide the specications. Servicecontracts enable government to procure serviceprovisions or a specied period o time. Te threepopular PPP contracting mechanisms are service,management, and leasing.

    examsUS State o Virginia Seat Management or IC

    Services Te state o Virginia in the US employsseat management contracts or many o its govern-ment oces. Seat management is a method ocoordinating all the computer workstations in anorganization by overseeing the installation, opera-tion, maintenance o hardware and sotware at each

    workstation, and providing help desk support. Testate pays a private operator a xed ee or thisservice. Te private contractor has the incentive tomanage the operation as eciently as possible, whilethe state saves on the expense o actually purchasingcomputer equipment.

    Singapore Te Government o Singapore awardeda $1.3 billion I transormation program inFebruary 2008 to the OneMeridian consortium ledby EDS. Te eight-year contract involves imple-menting and managing a desktop standard operatingenvironment across the whole o the Singaporegovernment, apart rom I inrastructure utilityservices. It is projected that 74 departments and60,000 users will benet rom the arrangement with

  • 7/30/2019 PPP HandBook.pdf


    Understanding the Purpose and Rationale or PPPs in E-Government 7

    a savings o S$500 million being generated over theprogram period. Te OneMeridian consortiumincludes EDS, Singpore Computer Systems (SCS),FrontLine echnologies, Fuji Xerox, Avanade, Cisco,

    Alcatel-Lucent, Microsot, and Singel. Te model

    is to charge on a utility and usage basis, e.g., cost perseat and pages printed per month.

    US Federal, State, and Local Governments Tesegovernments contract with private organizations toprovide IC network inrastructure and electronicservices that public agencies cannot oer ecientlyor eectively on their own. Te state government oexas entered into a public-private partnership withBearingPoint or the design and management o amulti-service platorm or citizens to access andtransact nearly all state government services online,including: (i) Department o Motor Vehiclestransactions; (ii) hunting and shing licenses; and(iii) state court transactions.2

    Canada and most European countries Tesecountries use private companies as public serviceproviders. An increasing number o developingcountries are also turning to private sector servicecontracts. One o the earliest e-government PPPs,

    was the joint development o eranet in 1991,between the government o Ontario and eramiraHoldings, Inc., or the operation o OntariosElectronic Land Registration System (ELRS).3

    Chile4 In Chile, the government createdChileCompra in 1999 or the streamlined electronicprocurement by government o goods and servicesrom businesses. By 2006, ChileCompra hadsucceeded by saving about US$60 million ingovernment administrative costs, and in transactingUS$34 billion per year (3% o Chiles GDP).However, Chiles small businesses, many o whichlacked the computers and Inormation echnology(I) skills required to access ChileCompra, werelosing out. Beginning in late 2006, a PPP, led byMicrosot, Inc., provided Mi Pyme Avanza (My

    Small Business Grows) packages o needed hardware,sotware, connections, and training to small busi-nesses through aordable 3-year nancing terms. Bylate 2007, the initiative had tripled its original targeto 10,000 businesses signed up. By 2008, 900 publicagencies were trading more than US$5 billion andconducting almost one hal million tenderingprocesses over the internet each year, generatingmore than 1.6 million purchase orders, which greatly

    improved conditions o eciency and transparency.Meanwhile, businesses have also improved theiraccess to this market, and the number o suppliersdoing business with the government has now tripled.More than 82,000 businesses place bids and/or are

    awarded contracts with the government each year,totalling more than 90% o the share o businessopportunities awarded; micro-, small- and medium-sized businesses are the ones that have gained themost rom this new marketplace. Finally, the systemsmanaged by ChileCompra produce a tremendousamount o savings in public expenditure: aroundUS$150 million each year.

    Case Illustration Bangalore CityCorporation (BCC)5Te BCC was suering rom a continued leakage

    in its nancial resources, while at the same timeexperiencing increased customer dissatisaction overslow response rates and bureaucratic delays inprocessing many nancial and administrativetransactions. With technical assistance rom the

    Asian Development Bank (ADB), the BangaloreAgenda ask Force (BAF) was contracted toimprove the technical capacity o the nancialmanagement systems, while at the same timeprovide electronic access or improved transactionprocessing speed. Nanden Nilekan, the CEO oInosys, was appointed as the chairman o the BAF.Te initiative brought together both public and

    private sector executives or addressing citizensissues and concerns relating to Bangalore City.

    Te implementation o this e-government PPP waschallenged by the lack o complete and reliablenancial data in the general records o the BCC. Tiswas an important lesson learned ore-government projects. Te value o any newe-government system is limited by the quality andcomprehensiveness o the inormation conveyed. Inpractice, or many e-government PPPs, there is atemptation to ocus too much on the design anddevelopment o a new IC network or system, and

    to overlook the issues o improving the quality,completeness, accuracy, and relevance o theinormation that will be delivered by the new system.

    S2 www.TexasOnline.comS3 http://www.teranet.ca/corporate/profleIndex.htmlS4 https://www.chilecompra.cl/portal/inormation/

    inormation_chilecompra.aspF m das hs as sd, vs5 www.bmponline.org


  • 7/30/2019 PPP HandBook.pdf


    8 Public-Private Partnerships in E-Government: Handbook

    Te PPP experienced a continuing series o delayslasting nearly a yearwhich were caused by thenecessity o manually compiling complete andaccurate data. Once that problem was taken care o,the implementation o the PPP began to gainmomentum. However, again unanticipated delays

    were caused by passive resistance among some BCCpersonnel. Te consultants were not able to identiy

    the exact causes o this resistance. Tey speculatedthat perhaps some personnel had a vested interest inthe nancial leaks that were enabled by the oldsystem, which would be nearly impossible in thenew system. Tis was another lesson learned, inthat the virtues o an e-government system (speed,transparency, accuracy, and ease o usage) are notalways welcomed by all stakeholders, or variousreasons, and this can lead to resistance.

    Te next challenge arose as the new electronicsystem was completed and became operational. Teconsultants learned that the end-users o the new

    services were not immediately trusting o theelectronic medium. In particular, transactionsinvolving nancial services or legal obligations werenot immediately welcomed by many consumers,

    who still only elt comortable i they conducted thetransaction with a real person and obtained a hardcopy real receipt. A considerable amount o publicawareness and education activity had to be con-ducted to overcome this problem. Figure 2 shows

    the projects technology architecture, internalinormation systems, and Internet transactionprocessing, developed by the BAF team.

    Te role o IC was not limited to the mere replace-

    ment o manual, paper-based systems with computer-based systems. Rather, it included substantialrevamping o overall business processesa orm obusiness process re-engineering. Te new IC system

    was also more than just a more ecient mechanismor the previously established inormation fows. Inaddition, it created some entirely new inormationmanagement, such as redening audit and controlmechanisms, and providing real-time inormationfow to and rom banks connected to the system vialeased dedicated phone lines. Tis kind o businessprocess re-engineering (BPR) requires a completere-thinking o what inormation managementactivities represent. In accounting, activities arerecorded according to their costs and benets. InBPR, an activity is managed in terms o its eort, e.g.,the amount o a persons time that is required toperorm the task, or the opportunity cost o a personperorming a given task instead o an alternative task,etc. With the BCC e-government PPP, as well asother BPR-based initiatives, a signicant amount otime and eort was required to prepare personnel tochange rom thinking in the traditional accountingterms o costs and benets, and to start thinking othe processinvolved in business activities.

    Te re-orientation o BCC personnel rom account-ing-based costing to process-based activity manage-ment took a lot o hard work, but it was eventuallysuccessul over a 2-year roll-out period. It also took alot o time and eort to customize the design themanagement reports that would be generated by thenew system, and to build the skills o managers to beable to use those tools eectively. Certain datasecurity systems had to be put in place or the leasedphone lines connecting BCC to its banks. But overallthe e-government PPP project was a clear success.Figure 3 shows the technical design o the system.

    Tis PPP project, in which a private rm providednot only the design and engineering, but alsoserved as the governments partner in the imple-mentation and management o the system, wasvery successul in converting a governmentorganization that had been plagued by nancialleakages and slow transaction processing into acompetitive organization that continues to be

    Figure 2. Technology Architectureof Bangalore City Corporation

    Technology Architecture


    Application development tool:


    Three-tier Client-Server architecture with MIDAS as the Application server,Oracle as Database server.

    The envisaged deployment model

    Oracle 8i

    Borland Delphi 5

    Distributed NT/Proxy servers hosting the application at the various zonal offices The data is then synced with the Head office server Connectivity through dedicated ISDN/leased lines

    Features envisaged Internet-based access to the application Allow web browsers to call and execute the application Online transaction processing model Real-time information processing for users Remote data capture thru the Internet

    : BATF

  • 7/30/2019 PPP HandBook.pdf


    Understanding the Purpose and Rationale or PPPs in E-Government 9

    nancially viable and provides high-qualitycustomer service.

    Co-Ownership and/or Co-Financingo E-Government ProjectsPPP policies in many countries either require orallow the government to retain some share o thestock in protable or strategic companies making

    them, in eect, joint ventures.

    examsEstoniaEstonia has one o the highest degrees oconnectivity in Europe. It ranks among the top 20countries worldwide or teledensity, as a result o thetremendous ocus placed on the development o acore network inrastructure and provision o accessto the general population. Trough a concessionagreement, the Estonian elephone Company helpedto ensure connectivity in rural and sparsely popu-lated areas in return or lucrative urban contracts.Te government is actively extending connectivity

    throughout the nation. By 2002, Estonia hadapproximately 300 public Internet access pointsproviding ree email and Internet access. Tesepoints also serve as e-government access points,where citizens can conduct the majority o theirtransactions with the public administration.

    India6 Te Government o Andhra Pradeshestablished a series o PPPs that ormed a multi-

    sector I Growth Corridor, as the oundation o itsstrategic inrastructure and its rapidly growing Iindustry. Te government created a new 159 kmouter-ring road that was undertaken as a PPP tolink the new I zones o city, and a new MassRapid ransit System PPP. In addition, it initiatedPPPs or the development o both the 156 acreHIEC Park (together with L& Inocity, Ltd.);and the 110 acre Mindspace Cyberabad, as specialzones or I industries. A key to the risk-sharing othese PPPs, has been the provision o governmentland to private inrastructure developers as well asgovernment unding o investments in ancillaryinratstructure such as roads, electricity, water, andsewage systems. Te private sector or its part hasinvested in the construction, marketing, andmanagement o core I Park oce space andacilities.

    Croatia7 o address its growing trac andparking congestion problems, the city o Zagreb

    was one o the rst in the world to enter into ane-government partnership or the remote, elec-tronic payment o municipal parking meters,called M-Parking. ogether with RaoEngineering, d.o.o. the partnership allows car




    Figure 3. Technical Design of Bangalore City Corporation

    Head Office


    100 KBPS Switch

    100 KBPS Switch 100 KBPS Switch


    Ethernet Ethernet


    Printer Printer





    Zone 1 Zone 2

    Modem Modem







    NTProxy Server

    NTProxy Server



    S6 http://www.ltinocity.com/S7 http://www.rao.hr/PARKEX%20-%20CPA%20


  • 7/30/2019 PPP HandBook.pdf


    10 Public-Private Partnerships in E-Government: Handbook

    owners to pay parking charges through establishedaccounts that are accessed through the usersmobile telephones. Te service automatically callsthe drivers mobile phone number 5 minutesbeore the meter is set to expire. Te joint project

    has reduced the citys parking administration andenorcements costs, and increased municipalparking revenues by 10%.

    Build-Operate-Transer AgreementsGovernments around the world use turnkey projects

    with consortia o private companies to build IC,telecommunication, and other large, inrastructureacilities and networks. Governments in bothadvanced and developing countries, oten usebuild-operate-transer (BO) agreements, in whichthey buy or lease completed acilities constructed byprivate investors ater the companies have recoupedtheir investment and a reasonable return byoperating the acilities or an agreed period o time.

    examsHong Kong8 ESDlie was a bilingual portal inHong Kong, which was developed and maintainedthrough a Design-Build-Own-Operate (DBOO)PPP that implemented the governments ElectronicService Delivery (ESD) Scheme rom 20002008.Under this contract, the private operator, ESDServices Limited (a JV between Hutchison

    Whampoa Limited and Hewlett-Packard HK SARLimited), was responsible or developing, nancing,operating, and maintaining the portal, and thegovernment was responsible or paying transactionees to the private operator ater the transaction levelhad reached a pre-agreed volume. In turn, theprivate operator was allowed to expand the portal toinclude commercial services, such as advertisementsand e-commerce, to generate additional income.Booking o sport venues, arrangement o marriageregistration, scheduling o identity card and passportapplications, and many other services could beutilized on this website. Te PPP contract withHutchinson Whampoa was completed on 1 January

    2008 and all government services have since beenmigrated to a single entry portal o all governmentinormation and services in Hong Kong.9

    Brazil10 Poupatempo Citizen Service Centers Poupatempo, meaning time saver, is a programo the State o Sao Paolo in Brazil, where citizenservice centers have been developed throughpartnership with two private companies, AMD and

    Intel. Tese centers are located in public places, suchas shopping malls, and have revolutionized Brazilstax system.

    Australia11 Te ederal and state governments have

    used BOO and BOs to establish new electroniccommunications systems or public sector police, re,and emergency response workers. Private rms design,nance, build, and operate these new electronicgovernment networks under government supervision,or periods o about 57 years. One o the mostchallenging risks to address in these PPPs, has beenobsolescence o the given e-government technology.

    Types o PPP Contracts

    able 1 summarizes the key types o PPP contractsand their eatures.

    Service Contracts (or outsourcing) Servicecontracts are legally binding agreements between agovernment authority and a private partner toperorm specic, usually non-core tasks. Examplesinclude government agencies, such as utilities,ministries, and municipal oces, that contract outor website design and management, capacitybuilding, janitorial services, billing and taricollection, or security services. Tese are usually

    short-term contracts. Tey avail government oprivate sector expertise, and save time and moneyspent on non-core services.

    Management Contracts Management contractstranser responsibility or the operation andmaintenance o government-owned entities to theprivate sector. Asset ownership remains with thegovernment, while management control, operatingauthority, and oten the risk o the commercialsuccess or ailure o the e-government service, aretranserred to the private management contractor.Such contracts provide a clear incentive or the

    private management contractor to apply its expertiseto improving management systems, eciency, andcustomer services practices. Compensation is oten

    S8 http://www.esd.gov.hk/home/eng/deault.aspS9 h://www.gv.hkS10 http://unpan1.un.org/intradoc/groups/public/

    documents/UNPAN/UNPAN023527.pdSee11 http://www.partnerships.vic.gov.au/


  • 7/30/2019 PPP HandBook.pdf


    Understanding the Purpose and Rationale or PPPs in E-Government 11

    in the orm o both a xed management ee and animportant perormance-based incentive payment.

    Leases Tere are two primary ways in which leasePPP agreements unction: (i) the private sector buildsan asset, such as a new specialized IC acility orpiece o equipment, and leases it to a governmententity, which then operates the asset; (ii) the privatesector leases an asset, such as an IC acility ornetwork, rom the government, which the privatepartner uses in order to deliver an e-governmentservice. Under the latter scheme, the private partnerpays the state (as the owner) rental or lease paymentsor the use o these assets, and it also collects eesrom its e-government customers, who may be

    government departments or retail end-users. Whilethe latter scheme is common in physical inrastruc-ture PPP projects, such as water and sanitation utilityoperations, the ormer scheme is most common andmost appropriate or e-government PPP initiatives. Inthis case, the private sector oten retains the rights tothe technology developed, and it may sell or leasethat technology to other clients (government orprivate). Another variant, is that the government may

    purchase the technology outright and lease thetechnology to other government agencies. In practice,private partners usually preer to maintain theirownership rights to the technology, which also helpskeep the government ocused on its core, strategicunctions, leaving specialized development andcommercialization o the IC technology in thehands o private rms.

    BOT and Variants Build-operate-transer(BO), build-own-operate (BOO), build-own-operate-transer (BOO), design-build-nance-operate (DBFO), and similar arrangements arecontracts specically designed or new projects.Under these arrangements, the private partner

    typically designs, constructs and operates acilitiesor a limited period o timetypically 10 to 20yearsater which all rights or title to the assetsmay be transerred to the government. Under aBOO contract, the projects residual assets remainindenitely with the private partner ater thecontract has expired. Te client government body

    will typically pay the BO partner a price calcu-lated over the lie o the contract to cover construc-

    TABLE 1. Types o PPP Contracts

    t Da Wha h pva na pvaca (as) ca rvs ca pma exams

    Service Contract(outsourcing)



    BOO & BOT







    Fee rom government or per-orming a non-core service

    Fee rom government or theservice and a perormance-based incentive

    All revenues, ees or chargesrom consumers or the provi-sion o the service; the serviceprovider rents the acility romgovernment

    The government mostly pays theservice provider on a unit basis

    All revenues rom the end-userso the e-government service;the service provider may paya concession ee to the govern-ment and may assume existingdebt

    Denitive, oten technical typeo service

    Manage the operation o agovernment service

    Manage, operate, repair, andmaintain (and maybe invest in)a service to specied standardsand outputs

    Design, nance (long-term)construct/install and operate,to specied standards, theacilities necessary or serviceprovision

    Manage, operate, as well asinvest in and expand, maintainand operate an ICT acility/net-work or e-government servicesto specied standards

    Website design and manage-ment, ICT Capacity Building

    Call center stang; Manage-ment and operation o a newrecords management project

    Equipment and ICT acilitiesor delivering a new electronicservice, Existing Govt. ocespace, interconnections, kiosks,etc.

    ICT Inrastructure; e-procurementsystems; e-business portals;Network o public kiosks

    Telecom operations and expan-sion, New ICT networks orthe delivery o e-governmentservices

  • 7/30/2019 PPP HandBook.pdf


    12 Public-Private Partnerships in E-Government: Handbook

    tion and operating costs and provide a reasonablereturn. For e-government and IC projects, BOOsand BOs are challenging, due to the issue otechnology risk and obsolescence. echnologiesused today or delivery o e-government services

    become obsolete within 57 years or less, and thevalue o the residual assets ater 710 years or moreis usually zero.

    Concessions Under a concession, the privatepartner (Concessionaire) bears overall responsibil-ity or an entire sector or network otgovernmentservices, including the design, technology, nancing,

    operation, maintenance, and periodic asset renewaland replacement. In concessions, the concessionaireservices the broad market o retail end-users directly,collecting user ees in exchange or each unit oservice delivered. Te xed assets either remain the

    property o the public authority or revert to publicownership at the end o the concession period. Temain advantage o a concession is that it passes ull,system-wide responsibility or commercial opera-tions, maintenance, rehabilitation, renewal, andservice expansion to the private partner, and thuscreates incentives or eciency and even orcustomer services in all activities.

  • 7/30/2019 PPP HandBook.pdf


    Chapter 2

    Techniques or Establishing the Appropriate Policy,Legal, Institutional and Regulatory Framework or

    PPPs in E-Government

    e-government project. Tese legal uncertaintiesgenerally make e-government PPPs less easible andattractive or the private sector.

    Direct Public Sector InvolvementOnce a partnership has been established, the publicsector must remain actively involved in the project atall levels, especially in monitoring the perormance oeach PPP project and o the e-government PPP policyimplementation overall. Ongoing monitoring o theperormance o each e-government PPP contract iscritical to assuring its success. Tis monitoring canocus on the nal outcomes o the partnership (e.g.,level o citizen satisaction) and can be done on adaily, weekly, monthly, or quarterly basis. Terequency is oten dened in the business plan and/orcontract. Tis monitoring also helps the governmentto explain to its citizens the positive attributes o theproject, in addition to ensuring that the private sectorpartner abides by agreed commitments.

    A Well-Crated Action PlanEach party must know what to expect o the partner-ship beorehand. A careully developed plan willsubstantially increase the probability o success o thepartnership. Te plan is oten devised with theassistance o an outside expert, who is well-conversantin the given eld. Tis plan most oten will take theorm o an extensive, detailed contract, clearlydescribing the responsibilities o both the public andprivate partners. In addition to addressing areas orespective responsibilities, a good plan or contract willinclude a clearly dened method o dispute resolu-tion, because not all contingencies can be oreseen.

    Eective Communicationwith StakeholdersMore people will be aected by an e-government PPPproject than just the public ocials and the privatesector partner. Aected employees, the portions o thepublic receiving the service, the press, labor unions,and relevant interest groups, will all have opinionsand, requently, signicant misconceptions about a

    Essential Components

    Designing and implementing PPPs in e-governmentsystems, requires long-term political will and a clearset o public policy, legal, regulatory, and institu-tional rameworks within which e-government PPPtransactions can develop and operate. Te processmust include the ollowing components.

    Commitment romthe Political Leadership

    A truly successul partnership between the publicand private sector can result only i there is commit-ment rom both the leadership in the governmentand the private sector organization. Tis needs to gobeyond mere public statements, and eature PPPtransactions as well. Te most senior public ocialsmust be willing to be actively involved in supportingthe goals o public-private partnerships, and take anactive leadership role in the development o each

    given venture. A well-inormed senior policymakercan play a critical role in minimizing misconcep-tions about the value to the public o an eectivelydeveloped partnership.

    Legal FrameworkEqually important is the need or a statutoryoundation or the implementation o PPPs ine-government. oo oten, existing laws may limit orlack clarity, regarding the legality o the ormationand management o public-private sector partner-ship contracts. Without this clarity, the privatesector leadership oten views these collaborative

    partnerships as risky ventures, and they are reluctantto bear the kinds o risks that would incentivizethem to invest in technologically innovative andcommercially creative solutions. A number ocountries have established eective statutoryrameworks to oster collaborative work with theprivate sector. Unortunately, any perception o risk,

    whether real or even just imaginary, tends toincrease the cost o undertaking that particular

    Techniques or Establishing the Appropriate Policy, Legal, Institutional and Regulatory Framework or PPPs 13

  • 7/30/2019 PPP HandBook.pdf


    14 Public-Private Partnerships in E-Government: Handbook

    partnership and its value to the general public. It isimportant to communicate openly and candidly withthese stakeholders, to minimize potential resistance tothe establishment o the partnership.

    The Right OpportunityOnly a select number o electronic governmentservices are going to be appropriate or PPP solu-tions. O these, a smaller number o potentialprojects may be ready or a PPP. Oten key reormsand preparations must be completed within a specicpublic service sector beore a PPP contract can beimplemented. Te e-government projects selectedshould have the right characteristicsclear need,aordable costs, limited uncertainties, opportunitiesor private sector innovation, etc. When orming apublic-private partnership, it is critically importantthat both parties set and manage reasonable expecta-tions, especially the government sector.

    The Right PartnerIn any contract or the delivery o a service over along period o time (more than 23 years) thelowest-priced bid is not always the best bid. Inpractice, such lowest-priced bids or long-termservice delivery contracts are oten under-pricedbecause they deliver a lower quality o service, andthey assume that the risks o any changes in circum-stances during the term o the contract will be borneby the public sector client. Tereore, selecting the

    right private partner should allow the government toselect the bid that provides the best value through-out the long-term relationship. A private candidatesexperience in the specic e-government or technol-ogy area o partnership should be an importantactor in identiying the right partner.

    Well-Defned Management ProcessesIt is important that both public and private sectorparties agree on key management processes early inthe ormation o the relationship.

    Technique 2.1 Establishing anAppropriate Policy Frameworkor PPPs in E-Government

    DefnitionEstablishing, drating, and publishing an eectivepolicy ramework or PPPs in e-government,

    involves the adherence on the part o policymakersto an agreed-upon denition o PPP, including itsgoals and principal requirements (aordability, valueor money, transparent procurement, and riskallocation) that should be upheld in any PPP


    RationaleTe e-government PPP policy is the oundation on

    which e-government PPP laws and regulations aredesigned and drated, so establishing the policyramework or PPPs in e-government is normally therst step in setting the overall ramework or PPPsin e-government. Without a clearly established andpublished e-government policywhich includesPPPsdierent individual government departmentsand agencies will oten seek, structure, and sign theirown dierent e-government PPP contracts ordierent, oten unsustainable reasons. Such ad-hoce-government PPPs tend to suer rom problemso being unaordable, lacking clear output stan-dards, exposing governments to too much risk, andnot delivering clear value to either government orpublic end-user clients and customers. Tereore,establishing and communicating a clear policy one-government PPPs is critical, both to ensuringsuccess and especially to avoiding costly ailures.

    DescriptionAn e-government PPP policy should be ocially

    articulated and circulated as an ocial governmentdocument. It should rst dene exactly what isconsidered to be an e-government PPP, and what it isnot. Ten it should conrm the governments clearsupport or PPPs as an option or delivering andimproving e-government service, and explain whythat support exists. Ten it should indicate what theresponsibilities o government agencies will be as aresult o the new PPP policy, e.g. that any govern-ment agency proposing a new e-government projectmust include an analysis o potential or use o PPPsto implement the e-government project and attractprivate investment to reduce demands on govern-

    ment budget resources. Finally, the e-governmentPPP policy statement should dene the basicprinciples o e-government project identication,project appraisal, and procurement or PPP projects.

    Some sample language rom an international goodpractice in designing and drating many o the keycomponents o an e-government PPP PolicyStatement, is provided below.

  • 7/30/2019 PPP HandBook.pdf


    Techniques or Establishing the Appropriate Policy, Legal, Institutional and Regulatory Framework or PPPs 15

    Defnition o Public-PrivatePartnership

    A public-private partnership is a commercialtransaction between a public institution and a

    private party, in terms o which the private party:

    perorms an institutional unction on behal oa.the institution; and/oris allowed the use o state property on behal ob.the institution; andassumes substantial nancial, technical, andc.operational risks in connection with theperormance o the institutional unction and/oruse o state property; andreceives a benet or perorming the institutionald.unction or rom utilizing the state property,either by way o:

    consideration to be paid by the institution,i.which derives rom a revenue und or, wherethe institution is a national governmentbusiness enterprise or a regional or localgovernment business enterprise, rom therevenues o such institution; orcharges or ees to be collected by the privateii.party rom users or customers o a serviceprovided to them; ora combination o such consideration andiii.such charges or ees.

    Te essence o PPP is the allocation o project risk

    to the parties best equipped to manage thosecategories o risk. Generally, political risk is allocatedto the public sector partner, and commercial risk isallocated to the private sector partner. By allocatingrisks in this manner, the success o the commercialtransaction and its uture operations are assured. Inpractice, there are always some categories o risk in

    which both partners must share managementresponsibility.

    Te rationale or PPPsin (name o country) is thatthey will accelerate inrastructure development byleveraging public nancial resources with privateinvestment, and they will increase the quantity andquality o public services to improve the quality olie or (name o countrys citizens). All governmentinstitutions should use PPPs whenever possible inconducting economic and/or procurement activitiesrequiring public expenditure. When proposing newprojects to be included in a national budget and anyrelated Public Sector Investment Plan, all ProjectSponsors (the government body that has proposed

    the project) shall include an appraisal o whether theproject should be a PPP.

    Principles o Public-Private Partnership

    Ada csms ad GvmAordability to Consumers shall be assessed byconducting a Consumer Demand, Aordability, and

    Willingness to Pay Survey, which must be conductedby all Project Sponsors. Te Survey does not have tobe exhaustive, only an indication o how consumersare likely to respond to the services to be providedby the projectwhether they will be able to aordthe services i oered at projected prices, and under

    what service conditions they will be willing to paythose prices.

    Te reason why the Survey is required, is that

    e-government PPP projects should be demand-driven. Tis is quite dierent rom traditionalprocurement, in which the government makesdecisions regarding the projects to be implementedand the prices to be paid. In PPPs, the emphasis ison service deliverythereore, consumer preerencesdictate which projects will be implemented and whatprices will be paid. Te responsibility o the govern-ment is to respond to such consumer preerences, tothe extent that resources permit, and to leveragethose resources by partnering with the private sector.

    Aordability to government shall be assessed bydetermining whether the proposed PPP project isincluded in the (name o national budget plan)maintained by (name o agency responsible or thenational budget plan), or ts within a category oprojects dened as eligible or inclusion within the(name o national budget plan). Once it is determinedthat the proposed project can t within the (name onational budget plan), the (name o agency respon-sible or PPP) will be the governments representativein determining what public resources will be commit-ted to the project. Te (name o agency responsibleor PPP) contact point or this process will be the

    (name o designated oce in that agency).Aa rsks w h ppp pasRisk allocation is at the essence o PPPs. In tradi-tional procurement, government takes all the designand service delivery risks, while the private sectorprovider is responsible only or the construction andcompletion risks. In PPPs, much o the design andlong-term service delivery risks are transerred tothe private sector, and the government ocuses on

  • 7/30/2019 PPP HandBook.pdf


    16 Public-Private Partnerships in E-Government: Handbook

    managing the risks that it is best equipped tomanage, i.e. the political risks. Similarly, the privatesector partner manages the risks that it is bestequipped to manage, i.e. the commercial risks.

    In practice, the dividing line between political risksand commercial risks is oten not so clear. Somekinds o risk have to be sharedor example, thedesign and demand risks, when the preliminaryestimate o the size o the new project that is neededto meet the governments own demand or thee-government service has been conducted by thegovernment and the nal design and engineeringhas been completed by the private partner. In thesecases, the risk o the level o demand or the projectis oten borne by the government. Other risks mayor may not be shared, depending on the publicpolicy environment, e.g. the exchange rate risk.

    Te guiding principle in allocating risks is that therole o government is to ensure that the interests oall stakeholders are protected. Tat includes consum-ers, who are protected by the service standards, andalso the private sector partner, or whom theprotection o a level playing eld must be pro-vided. Te role o the private sector is to deliver theservices at the specied levels o quantity and quality,at prices consumers can aord. Quantity and qualityo service delivery is known as the Service DeliveryStandards. Prices necessary to maintain the standards

    are dened by tari ormulas in the PPP contract,and are usually limited by an Investors EquityFinancial Internal Rate o Return, which has beenagreed upon during contract negotiations.

    In PPP contracting, there are sometimes threeparties representing the government. Te rst is theContracting Authority. Tis is the entity thatexecutes the PPP agreement, and which has ullresponsibility or the governments obligations underthe agreement. Te second is the Executing Agency.Tis is the entity responsible or implementing theacts or which the Contracting Authority is respon-

    sible under the PPP contract. Te third is theRegulator. Tis is the entity that serves to protectthe interests o all stakeholders in the PPP agree-ment, i.e. the government, the private sector partner,and the consumers. Tere should be inter-agency

    written agreements that clearly convey theContracting Authoritys right to legally obligate theother agencies to obligations they have in the PPPcontract. Te Regulator should be politically and

    nancially independent. It is essential that the rolesand obligations o each o these parties be clearlydened in the contract.

    Va M (VFM) lvag Fsa

    rssFrom a scal budgeting standpoint, the concept oVFM is at the core o the PPP approach. It may bedicult or the government to build and operate allrequired inrastructure and provide required services,

    without private investment to leverage public scalresources.

    Te concept o value or money is that the projectsto be selected will be those that will provide thehighest quantity and quality o service provision or agiven amount o public expenditure. In evaluatingbids or PPP projects, the ocus is dierent romtraditional procurement, which is to select the bidderthat can provide the specied product or service atthe lowest price. In PPPs, the winning bidder is theone that provides the highest quantity and quality oservice delivery, given a particular level o publicexpenditure, not necessarily the bidder with thelowest cost to the government. For example, a bidderoering a high level o service delivery at themaximum level o government investment allowed,could prevail over a bidder that oered a signicantlylower level o service delivery at a cost to thegovernment that is less than the maximum allowed.

    ppp pm ad cagTe tendering and procurement process or PPPs isdierent rom standard procurement, and morecomplex in some ways. Standard procurementrequires governments to do most o the design andengineering, and then publish tenders to invite theprivate sector to provide those acilities at the lowestprice. PPP procurement requires governments to doonly the basic design and engineering, because thetender is or delivery o the outputs rather thandelivery o the acilities. Private sector providerscomplete the design and engineering, indicating

    their planned approach in their proposals, anddemonstrate how this approach will comply withthe service delivery requirements. Tis inusesprivate sector innovation into the project design. InPPP contracting, the terms Outputs and ServiceDelivery Standards are oten used.

    Although private sector innovation is encouraged inPPP procurement, government still has the responsi-

  • 7/30/2019 PPP HandBook.pdf


    Techniques or Establishing the Appropriate Policy, Legal, Institutional and Regulatory Framework or PPPs 17

    bility o preparing a baseline project design, alongwith pre-easibility and easibility studies todemonstrate basic due diligence, and to orecast thenancial perormance o the project. A preeasibilitystudy is sucient to begin the process, with a

    Request or Qualication (RFQ), but by the timethe Request or Proposals (RFP) is issued, a com-plete easibility study should have been completedto ensure that any data derived rom prior reportshas been updated, and to ensure that the govern-ment has completed enough o its due diligence andanalysis to be reasonably assured that the inorma-tion in the RFP is accurate. Inaccurate inormationin an RFP can later lead to contract disputes.

    Detailed provisions regarding PPP procurement areprovided in the regulations pertaining to the PPP

    Act. In applying those provisions, stakeholders mustadhere to these principles:

    Fairness the procurement process must be airto all parties, i.e., the rights o all parties must beprotected at each stage o procurement, and thenin contract management.ransparency the procurement process mustkeep as much inormation as possible in thepublic domain, and as much inormation aspracticable must be shared equally with allbidders, especially the methodology or selection;Competition in order to avoid possible

    conficts o interest, and in order to ensure thatthe most qualied bidder is selected, theprocurement process must provide competitionsucient to ensure that vested interests and/orcorruption do not infuence selection; andAccountability decisions made by the partiesmust be open to review by stakeholders, anddecision-makers must be held accountable ortheir decisions.

    Technique 2.2.a Establishing

    an Appropriate Legal andRegulatory Framework or PPPsin E-Government

    DefnitionAll orms o PPP, rom the most capital intensive tothe least capital intensive, are usually covered undera Law on Concessions. While it used to be

    common that each sector would have their own lawon PPP or concessions, most countries are increas-ingly establishing multi-sector concession laws orumbrella legislation, to harmonize the key legalissues in PPPs across sectors.

    RationaleA well-dened concessions law will, at a minimum,clearly establish: (i) what sectors are eligible orPPPs; (ii) the orm o eligibility; (iii) eligible PPPapproaches; (iv) the rights and obligations o theparties; (v) how projects are approved; (vi) limits toownership; (vii) nancial requirements; (viii) publicroles and responsibilities; and (ix) dispute resolutionresponsibilities.

    DescriptionIn applying such a PPP law within an e-governmentenvironment, special problems arise. Electroniccommunications in e-government systems carrysignicance beyond the transactions they enablebetween governments and their constituents. Teyrepresent a radical change in the methods govern-ments use to govern, assuming that e-governmenttransactions will usher in a new era in whichgovernments use the e-government systems oractivities such as voting, polling, inormationdissemination, licensing, reporting, and other kindso interactions between government and theircitizens. Indeed, this trend is already well underway,

    so the international legal system needs to adapt tothe trend, both in terms o laws within jurisdictions,and laws between two or more jurisdictions.

    Legal Barriers to PPPs in E-GovernmentAs stated above, a well-crated multi-sector conces-sions law should provide a sucient legal rameworkor PPPs in e-government. Countries need not createseparate paradigms, in which e-government PPPs aredened by an entirely dierent set o legal principlesthan PPPs in any other sector. Tat said, specialproblems do arise in applying a multi-sector conces-sions law within an e-government environment. Te

    key legal barriers to PPPs in e-government all intothe ollowing categories:

    Liability (Contract Law)Intellectual Property Rights (Patent Law)Electronic Commerce (Commercial Law)Jurisdiction (Administrative Law)Consumer Protection (ort Law)Protection o Privacy (Constitutional Law)

  • 7/30/2019 PPP HandBook.pdf


    18 Public-Private Partnerships in E-Government: Handbook

    Illegal and Oensive Conduct (Criminal Law)Electronic Money and axation (Banking andax Law)

    Laws relating to liability should cover:

    Liability or the inrastructureLiability or the inormationExcluding liability in contractsUse o disclaimers in terms and conditionsension between economic risks and trustwor-thinessHarmonization o laws between dierent


    Laws relating to intellectual property rights shouldcover:

    Dissemination o inormation to the publicRequests or inormation rom the publicCommercialization o government inormationNeighboring rights, patents, trademarks,inventions, designs, and trade secrets

    Laws relating to electronic commerce should cover:

    ransaction securityElectronic signature securityProtection o personal inormationPrevention o unauthorized transactions

    JurisdictionJurisdiction is one o the most problematic areas olaw as it relates to PPPs in e-government. In

    Administrative Law, the problem can be partiallysolved by existing regulators by dening which kindso activities they will continue to regulate in the elec-tronic medium. Tis is covered below in the sectionon establishing an appropriate regulatory ramework.But in cases where activities cannot be clearly denedas alling appropriately within established regulatorypurview, jurisdiction becomes a key issue in dening

    which orum will be used or reviewing the case and

    making a binding legal decision.

    For PPPs in e-government systems, jurisdictionbecomes an issue o particular importance when thereis a dispute, and both the mechanism and the venueor resolving the dispute is not clear. Electroniccommunications have exacerbated the challenges tothe traditional model o within the borders o thestate and no urther, already created by increasing

    personal movement and commerce between states.Initially, a consensus emerged associated with theZippo case in the US, where the court decided it wasappropriate to take jurisdiction over the matter i theelectronic transaction involved active engagement

    in a territory over which the court had jurisdiction.Tis is known as the active/passive test.

    Recently, the active/passive test has been chal-lenged, because merchants and customers doingbusiness online are being exposed to an increasingnumber o legal regimes, whether or not they everhad any mutual intent to do business in thoseterritories. Te law is still moving very slowly in thisarea, but the trend is to look to the intentions o theparties and to try to determine what legal jurisdictionthey intended to be bound by in the transaction.

    While jurisdiction in the electronic mediumcontinues to evolve, some progress has been madein the area o dispute resolution. Governments aregenerally supporting o Online Dispute Resolution(ODR) when the parties have specied mutuallyagreed dispute resolution procedures in theiragreements. Accordingly, or PPPs in e-governmentsystems, it is appropriate and important or disputeresolution procedures to be clearly dened.

    Special Features o E-GovernmentLegal and Regulatory Frameworks

    Te essential elements necessary in an eective legaland regulatory ramework to promote PPPs areuniversal. Tat is to say, that attracting private sectorinvestment in key sectors o service delivery requirescertain undamental components in a legal andregulatory ramework, no matter the sectorbe ite-government and IC, or water and transportation.Some o those undamental components include:(i) principles o project selection and viability;(ii) sound policy to promote competition; (iii) aprocess or vetting, procuring, and awarding projects;and (iv) a clear and transparent ramework to set andadjust taris, especially i consumers are paying or

    the service directly, and over the long-run.

    However, e-government and IC legal andregulatory rameworks do need to be adjusted andcustomized to promote greater private sectorinvolvement in nance and management. Tis isparticularly true in the areas o technology obsoles-cence, intellectual property, and risk allocation orthe design and management o e-government

  • 7/30/2019 PPP HandBook.pdf


    Techniques or Establishing the Appropriate Policy, Legal, Institutional and Regulatory Framework or PPPs 19

    systems. While many o those issues can beaddressed within the contract between the govern-ment and the service provider, some o these issuesneed to be addressed within the broader rameworkitsel, in order to attract the highest number o

    bidders or a particular e-government or IC PPPopportunity.

    Technique 2.2.b PPPRegulations and RegulatoryFramework or E-GovernmentSystems

    Regulations are written in order to provide amechanism or interpreting and enorcing the law.Regulatory institutions use the authority conveyedin such regulations to provide an enorcementmechanism or the regulations, and in many cases amonitoring mechanism to track behavior that isregulated. Some regulators are independent o thegovernment, and are tasked with monitoringregulated behavior, and enorcing regulations, withequal regard to the protection o the government,private rms, and consumers.

    Other regulators are housed within government,oten as departments within relevant ministries, and

    they also are tasked with monitoring regulatedbehavior and enorcement o regulations, but theycan be infuenced by political pressure, because theyare not independent. Other regulators are housed

    within industry and proessional associations, ineect, to provide sel regulation within theindustry or area o proessional practice.

    For PPP projects, it is always optimal to haveindependent regulators. However, it is not alwayspossible to put in place such a politically andnancially independent organization. Monitoringand regulating activity or a PPP in an e-government

    project brings to bear a multitude o complex issues,one o which involves determining which organiza-tion is authorized to regulate.

    Broadcasting regulators, as in the Canadianexample provided to the right, can regulate theelectronic aspect o the transactions carried outover the Internet via a PPP or e-governmentsystem. Te substance o the transactions them-

    selves can be regulated by whatever regulatory bodyexists or those kinds o transactions. For example,in the US, the Federal Reserve Board monitors andenorces compliance with its regulations, withoutany regard or the electronic medium o the

    communications. In combination, the Canadianand US regulatory models can be used to regulatePPPs in e-government systems, by limitingconsumer transactions in electronic commerce (tocomply with broadcasting regulations), and byrequiring the disclosure o certain kinds o transac-tions (to comply with regulations pertaining toparticular kinds o transactions). able 2 shows thecategories o regulation relevant or PPPs ine-government.

    Regulation by ContractWhen a regulatory ramework is not ully devel-

    oped, the protections that would otherwise havebeen provided by regulators need to be provided, tothe extent possible, through the use o contracts.Te use o Model Contracts is recommended insuch situations, and a good reerence point is theUnited Nations Commission on International radeLaw (UNCIRAL) Model Concession Contract.Tere are also some sector-specic model contractson the World Banks IFC web portal, and in somePPP resource portals.

    Te ollowing sections describe the essentialelements o these model contracts.

    Da caTe contract must speciy its duration, along withthe Commencement Date that may or may not bethe date o contract signing. Te CommencementDate is normally beore the Service Period, and theduration o the contract must be long enough tocover the entire Service Period. Te choice oduration should be made in consideration o theollowing:

    Authority to Regulate CanadaThe Canadian Radio-Television and Telecommunications Com-mission (CRTC) has ruled that it has the legal power to regulatethe Internet, because material that is not alphanumeric text,or customizable or individual users, alls within the denitiono broadcasting. In addition, the physical inrastructure othe Internet and the market conduct o participants, such astelephone companies or cable companies or Internet ServiceProviders, are subject to regulation under various existing lawsand related regulations.

  • 7/30/2019 PPP HandBook.pdf


    20 Public-Private Partnerships in E-Government: Handbook

    Te service requirements o the Contracting

    Authority;Anticipated uses o assets that will remain withthe Contracting Authority;Te amount o time it will take the privateinvestor to achieve its targeted return;Te aordability o the Service or theContracting Authority;Te cost o periodic asset reurbishment andrelated expenses;Te terms o the projects debt nancing; andCertain components o the contract may have adierent duration than the duration o thecontract as a whole.

    cmmm Sv DvAter the signing o the PPP contract, there willusually be a period o construction or projectdevelopment to put in place all the service deliverymechanisms. Tere is considerable risk associated

    with this period, in particular, the risk o delays and/or cost over-runs or the construction eort. Tecontract must include provisions that speciy howthe public sector partner will be compensated in theevent that the private sector operator ails tocomplete construction within the agreed timerame.On the contractors side, they will need provisions in

    the contract that assure them the ContractingAuthority will accept the constructed acilities ithey meet certain specications.

    rmds Dad Sv DvBoth the Contracting Authority and the Contractorhave strong incentives to get service delivery goingon time. Te Authority is under pressure romstakeholders who will use the service, and the

    Contractor needs payments rom the Authority in

    order to make loan payments, and service other cashfow needs. As indicated in the preceding section,the Authority should not make any payments to theContractor until Service Commencement, unlessservices can be commenced incrementally asconstruction continues.

    Svg evsA supervening event is an event that prevents theContractor rom being able to comply with ServiceCommencement obligations. One type o superven-ing event, as mentioned in the preceding section, isaForce Majeureevent. Tere are also Relie Events,

    in which the Contractor bears some responsibility,but not to the extent at which the Authoritys rightso early termination would arise. Tere are alsoCompensation Events, in which the Authority hasthe obligation to compensate the Contractor.Normally a Compensation Event is one that takesplace when the risk o late completion is very high,or completion was delayed by actors largely underthe control o the Authority. Change in Law is otentreated as a Compensation Event, because the

    Authority is a government institution, and law isunder the control o government.

    ima Waas ad DsamsTe contract should clearly indicate which partybears the risk o accuracy or each category oinormation provided within the contract. Tisprovides the other party with recourse in the eventthat such inormation is inaccurate. It also coverslatent deects in assets put under the control o aparty by the other party. A common eature o PPPcontracts or inrastructure service provision is that

    Source: World Trade Organization

    TABLE 2. Regulatory Categories Relevant to PPPs in E-Government

    c rga Svs e-cmm Famwk rga

    Traditional services that are now distributed online (tele-health,1.tele-education, etc.)

    Reormulation o old regulations to apply to the online worldTraditional goods that are now delivered as electronic services2.(sotware, music, etc.)

    Reinterpretation o ormer goods regulation to new e-servicesregulation (i.e. content, intellectual property rights)

    New electronic services (auction platorms, sophisticated Internet3.search agents, etc.)

    New types o regulation

    AuthenticationCryptographyIntellectual Property RightsConsumer ProtectionSecurity modesPrivacy/Data ProtectionCompetition policy or open networksTax issues (i.e. VAT)Standards, technological compatibility

  • 7/30/2019 PPP HandBook.pdf


    Techniques or Establishing the Appropriate Policy, Legal, Institutional and Regulatory Framework or PPPs 21

    the government places assets it owns under thecontrol o the concessionaire. Te government

    warrants that the assets are in a particular condition,and the concessionaire warrants that at the end o thecontract it will return those assets to the government

    in the same condition, less normal wear and tear.

    Sv rqms ad AvaaTe ocus o PPPs is service delivery, so unavailabilityo the service should result in a reduction or elimina-tion o payment by the Authority to the Contactor.Te issue in PPP contracts is what constitutes serviceavailability. Tis is a key issue, because contracts orPPP projects usually require the Contracting

    Authority to pay the Contractor or service madeavailable, rather than service actually used.

    Maa Asss ad Sv Dv

    When the Contractor submits its nancial proposal,it will include the cost o ordinary repairs andmaintenance. Te risk associated with determining

    what needs to be replaced, and the cost o makingsuch replacements, is entirely upon the Contractor.Tis transer o risk to the Operator is best achievedby expressing the service requirements in terms ooutput specications. Bidders should be allowed topropose their own methods o repair and mainte-nance, within the parameters set by the outputspecications. Tis encourag