Public-Private PartnershipsTransit Transport InfrastructureOuagadougou, Burkina Faso

June 19, 2007Rick Norment

NCPPP Executive Director

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IMPORTANT “PARTNERS” FOR ECONOMIC DEVELPMENT

Regional Economic Communities (RECs)

New Partnership for Africa’s Development

(NEPAD)

African Development Bank (ADB)

UNDP, World Bank, IMF, NGOs

Private Sector (PPPs and CSR)

My Purpose:

OUTLINE AN ADDITIONAL TOOL

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THE CONTEXTUnited Nations and PPPs

UNECE PPP Alliance, ESCAP, UNDP and others

Focus:

– PPPs in transition and developing economies

– Best Practices, including centralized administration

– Governance with Transparency, Accountability and Sustainable Development

– Infrastructure Demands

– Development of the Economic Infrastructure, small

businesses, workforce and business skills

– Social Justice

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TRANSPORTATION A KEY TO ECONOMIC DEVELOPMENT

Transportation Systems– Connect suppliers to markets

– Connect labor to jobs

– Can have a positive environmental impact

BUT– Capital intensive– High Operations and Maintenance (O&M) costs– Often are not revenue generators

Public-Private Partnerships may be the answer

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What is NCPPP? Non-profit educational institute Membership

– Public and Private

Partnerships range from– Outsourcing

– Public-Private Partnerships

– Privatization

Public-Private Partnerships– “Joint Ventures”

– “Collaborative Enterprise”

NOT “Privatization”– Level of public control

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Public-Private Partnerships Defined

A Public-Private Partnership is a contractual agreement

between a public agency (federal, state or local) and a

private sector entity. Through this agreement, the skills

and assets of each sector (public and private) are

shared in delivering a service or facility for the use of the

general public. In addition to the sharing of resources,

each party shares in the risks and rewards potential in

the delivery of the service and/or facility.

source: www.ncppp.org

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Range of Corporate ParticipationRange of Corporate Participation

OutsourcingOutsourcing Public-Private Public-Private PartnershipsPartnerships PrivitizationPrivitization

The Relationship of PPPs and Corporate Social Responsibility

Private Sector Dollars to Other CausesPrivate Sector Dollars to Other Causes

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Using PPPs to Meet The Challenges

The Challenge of Meeting Public Needs

The Challenge of Performance

The Challenge of Perception

The Challenge of Transformation of Practices– Transparency

– Accountability

– Sustainable Development

Address the Limitations In– Social/Political Capital

– Financial Capital

– Human Capital

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PPPs as a Public Policy Tool

Private Sector Can Not Be “Unrestrained”

The Evolution of Law in the 19th Century in Europe and U.S.– Regulatory controls equally applied– Anti-Trust Laws enforced by the courts– Enforced Contract Laws

• Between private and private

• Between public and private

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Private Sector Strengths

The Result of Market Competition

Management Efficiency

Newer Technologies

Workplace Efficiencies

Cash Flow Management

Shared Resources (Financial and other)

Personnel Development

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Public Sector Strengths

Legal Authority Broad prospective/balance the competing goals

to meet public needs Personnel – dedicated but constrained Capital resources & underutilized assets Protection of Procurement Policies

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Successful Partnerships

The Secret is to Balance the Strengths of Both

Sectors

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Partnerships at Work

The Experience of One Sector Helps Another

Transportation

Water/Wastewater

Financial Management

Urban Development

Public Safety

Social Programs

Environmental Programs

Education

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Advantages of PPPs Maximizes the use of each sector’s strength

Reduces development risk

Reduces public capital investment

Mobilizes excess or underutilized assets

Improves efficiencies/quicker completion

Better compliance with environmental

Improves service to the community

Improves cost-effectiveness

Shares resources

Shares/allocates risks

Mutual rewards

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Social Advantages of PPPs

Aids development of public sector administrative skills– Transparency– Accountability– Sustainable Development

Aids development of in-country business– Direct employment and skills development– Economic integration– Market capitalization

Improved social equality– Improved access to infrastructure and services for

marginalized or rural populations

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Worldwide Major PPP Projects Since 1985 *

By Project Type

Roads 656 31%

Water 616 29%

Rail 247 12%

Buildings 253 12%

Airports 182 9%

Seaports 142 7%

TOTAL VALUE: $887.4 billion

* Projects of more than $5 million and not including O&M contracts

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Worldwide Major PPP Projects Since 1985

By Region

Europe 205 31%

North America 174 27%

Asia 137 21%

Latin America 126 19%

Africa 14 2%

TOTAL VALUE: $887.4 billion

Source: Synthesis of PPP Projects, on www.ncppp.org, under “resources”

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PPPs and Cost Savings = Part of the Puzzle

Quicker delivery vs. inflation

Design-Build = can be another cost saver

Economies of scale – Engineering– Materials– Management practices

Savings – 5% to as much as 40%

Manage currency fluctuations

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PPPs – Other Than Construction Projects

Operations and Maintenance– All types of infrastructures

Asset Management – Energy Savings Performance Contracts– Combined with construction, through a life cycle

Competitive Sourcing of Personnel Functions– Social program delivery– Financial management (debt collection, etc.)

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Six Keys to Successful PPPs

Statutory and Political Environment

Organized Structure

Detailed Business Plan

Guaranteed Revenue Stream

Stakeholder Support

Pick Your Partner Carefully

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Managing for Success – Six Keys

Component One:

The Environment

Statutory authority and regulations

Political leadership must be in place

– Leading Political Figure

– Top Administrative Officials

– “The Will to Change the System”

– A Strong Policy Statement

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Managing for Success – Six Keys

Component Two: Organizational Structure

Dedicated unit (tied to the purpose of the partnership)

TRAINED personnel (or with consultants) to monitor implementation

Examples: TXDOT, VDOT, PPP Centrum, Partnerships UK, Irish Government’s Central PPP Unit

Best Value vs. Lowest Price– Difficult to Administer but…

Need for Good Governance– To assure an open and fair procurement process– Consolidate staff = easier to monitor– Independent authority (domestic/internal or international)

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Managing for Success – Six Keys

Component Three: Detailed Business Plan

a.k.a. Enforceable Contract

Performance goal oriented - Allow for innovative plans Best Value vs. Lowest Price Plan/Contract should include:

– Specific milestones and goals– Reporting of metrics and frequency

Risk Allocation– Shift to the private sector can raise costs– Identify best prices to retain, which to shift

Dispute Resolution Methodology Workforce Development?

– Develop in-country resources/small businesses

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Managing for Success – Six Keys

Component Four:

Guaranteed Revenue Stream

Funds to Cover the Long-Term Financing– Tolls/Fees (real or shadow)

• Intelligent transportation systems

– TIF or other form of a Tax District

– Long-Term Maintenance Contracts

– Availability Payments

– Underutilized Assets

– Concession Model (limited application)

– Creative Approaches

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Managing for Success – Six Keys

Component Five:

Stakeholder Support Public Sector Employees Private Sector Labor Unions End Users Competing Interests Requires:

– Open and frank discussion between sectors

– Knowing the FACTS (no myths)

– Translating each other’s language

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Managing for Success – Six Keys

Component Six: Pick Your Partner Carefully

This is a long-term relationship– Verify experience (technical capability)– Verify financial capability– Best Value vs. Lowest Price

Remember each sector’s motivation– Genuine need (market value to the project)– Political / statutory environment– Reasonable return on investment and manageable

risks– Timely and effective execution vs. development costs

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Managing for Success

The Most Critical is Component One:

Strong LEADERSHIP makes

all the other factors

come together

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Case Study – New York Ave. Metro Station

An “In-fill Station” on Washington’s Metro Economically depress area, but

– Close to a residential and college community– Abandoned warehouses

Transportation access = economic stimulus Total cost of construction = $110 million Developers paid 30 percent of construction

cost, plus provide the land for the station Tolls cover maintenance and operation of the

station

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Case Study – New York Ave. Metro Station

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Case Study – Bogotá BRT

BRT = Bus Rapid Transit – One third the cost of light rail Managed by TransMileno, a public dedicated unit Construction of roadways and stations done by the public

sector, financed with gas tax, general revenues, World Bank loan– 80 kilometers for $450 M by 2005– Total of 388 kilometer for $2 B by 2019

Operation and Maintenance done by private companies – their investments at risk

Rates and operating rules set by TransMileno Positive impacts

– Environmental (Noise, Air, Fuel)– Traffic Congestion reduced / faster transit– Cost effective

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Case Studies – Bogotá BRT

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CASE STUDY – UNION STATION

Build in 1907, but poorly maintained throughout the 1970’s property to be condemned

A Public Corporation created by Congress, with both public and private parties

$160 million spent, funded by– Garage built by City -- $40 M parking fees

– Railroads -- $70 M ticket sales

– Private Developer -- $50 M retail rentals

Still publicly owned, privately operated and maintained, and very solvent (possible use of surplus funds for other economic development projects)

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Case Study – The Oyster School

Washington, DC City could not afford to maintain or replace the

original school City owned underutilized and undervalued asset

(1.7 acres) in upscale residential neighborhood Private development of a 211 unit, full market

rental apartment building 35 year “Payment in Lieu of Taxes” (PILOT) $11 million for construction of a new 47,000

square foot school First new school in over 20 years

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Case Study – The Oyster School

After Partnership

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Case Studies for UNDP – SU/SSC WebsiteUnder development

Environmental

Transportation

Water/wastewater

Energy

Economic Development

Health care

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Six Keys to Successful PPPs

Statutory and Political Environment

Organized Structure

Detailed Business Plan

Guaranteed Revenue Stream

Stakeholder Support

Pick Your Partner Carefully

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Need Help?

www.ncppp.org

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Publications, Resources

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