The Asian Development Bank (ADB) estimated Asia’s total infrastructure investment needs (PDF,3.1MB) as US$8 trillion from 2010 to 2020, to cope with the challenges of economic growth and population expansion. Public expenditure is usually insufficient and traditional public service delivery isn’t always the best route to meet this volume of building work.
Most countries in the region are therefore exploring partnership-based routes, with Singapore, Vietnam, Malaysia, Indonesia, Thailand and the Philippines already on board, and many predicting an increase in public–private partnership (PPP) uptake between 2016 and 2025 (PDF,29KB). Provision of public services in this way will help to alleviate the financial burden on governments, and also encourage knowledge sharing between private sector and public sector. Sectors expected to attract the most PPP interest include power, water and waste water, education and healthcare.
Sectors expected to attract the most PPP interest include power, water and waste water, education and healthcare.
Global PPP markets are at very different stages in the maturity cycle, and are subject to differences in legislative frameworks and tendering processes. Mature PPP markets, such as the UK, have seen the industry and the procurement model evolve to address many of the obstacles associated with early PPP projects.
The strong historical pipeline of projects in these mature markets created an environment in which an iterative process was followed. This enables processes to be analysed, improved upon, controlled through changes in policy or procedure, and monitored. The use of a single department or organisation, identified by governments for management of PPP projects, maximises the benefit of past experience and allows a greater volume of iteration cycles to be experienced.
The use of a single department or organisation, identified by governments for management of PPP projects, maximises the benefit of past experience...
The lessons learned throughout this iterative process have political, societal and cultural sensitivities. Each PPP should therefore be assessed within, and tailored to, the unique project context. However, governments using PPP for the first time can certainly benefit from the experience of the global PPP industry:
- Awarding authorities will be in a stronger position to evaluate PPP projects’ value for money against traditional procurement if they have already undertaken a knowledge-gathering exercise of their current assets.
- It is important to identify the correct projects by undertaking appropriate feasibility studies, followed by development of a detailed business case.
- ‘Value for money’ is a key concept in PPP, however, quantification and evaluation of risk, as a factor of value over the life of a project, is a new concept to awarding authorities accustomed to a more traditional approach.
- It is important for private and public sectors to build mutual trust and confidence during this process and to work towards a transparent and robust value for money evaluation.
- It is important to develop a strong pipeline of work. Delayed, cancelled or on-hold projects are challenging for local PPP markets as a strong project pipeline, with supporting detailed business cases, is needed to attract investors and to sustain the required body of excellence.
- A wide range of project types limits the degree of document standardisation possible by limiting availability of project-specific precedents.
The opportunities are undoubtedly present, but project viability and long-term public/private contractual success depends on the public and private sectors’ capacity to adapt sufficiently to address the needs associated both with a country’s PPP strategy, and any specific project requirements.
Faithful+Gould has supported clients with a variety of PPP interests, notably including the Singapore Sports Hub, a 25-year PPP agreement and the world’s largest sports facility infrastructure project. The Sports Hub facilities include the National Stadium, Multi-purpose Indoor Arena and Aquatic Centre. The PPP deal was structured with the aim of achieving a balance of interest among the public sector, the private sector, and members of the public. This gives the Singapore government better value for money in the delivery of public services, and provides the private sector with business opportunities, encouraging them to maximise efficiency and innovation in providing solutions for the government.