How to Engage with the Private Sector in Public-Private Partnerships in Emerging Markets

by Edward Farquharson, Clemencia Torres de Mïstle, E.R. Yescombe, Javier Encinas

Overview

There is increasing interest in the use of public-private partnerships in emerging markets. But what does this actually require governments to do if they are to establish successful long term partnerships with private partners and ensure that public partner has the right information, on the right projects, for the right partners at the right time. This book takes the reader through the steps in the life of a PPP to provide a realistic overview of what is required successfully to engage and manage such a partnership from the early stages. Drawing on experience from both mature and developing PPP markets across the world, the book assesses the policies, processes and institutions that are needed to select the right projects and manage the preparation of projects for market and their subsequent operation. It also looks at the role of advisers, and how they should be selected and used. Particularly in light of the recent financial crisis, the various approaches used to finance projects are also considered together with the policy responses that governments have recently adopted. Case studies are used to illustrate the key messages throughout. The book recognizes that governments will use a wide range of PPPs in different sectors and that legal and administrative systems vary. The purpose of the book is to identify and bringing clarity to the underlying principles so that there is a better understanding of why and how the various processes are carried out. This book is aimed primarily at public officials who are involved with delivery of infrastructure projects and services through partnership with the private sector as well as institutions who are looking to support PPP programmes.

Product Details

ISBN-13:	9780821378632
Publisher:	World Bank Publications
Publication date:	01/14/2011
Edition description:	New Edition
Pages:	196
Product dimensions:	6.00(w) x 8.90(h) x 0.50(d)

Table of Contents

Acknowledgments xi

About The Authors xiii

Abbreviations xv

1 Introduction 1

Role of Public-Private Partnerships 3

Scope of the Guide 6

Limits to the Guide 7

2 Defining Public-Private Partnerships 9

Privatization and Management Contracts 9

Small Private Providers of Infrastructure Services 10

User-Fee and Availability-Based Public-Private Partnerships 11

3 Setting the Framework 15

Policy Rationale 15

Legal and Regulatory Framework 16

Investment Framework 21

Implementation Framework 23

Summary 26

Case Study: Water and Electricity Services Provision in Gabon 28

4 Selecting Projects 31

Project Scope and Requirements 33

Can the Project Be Delivered as a Public-Private Partnership? 34

Should the Project Be Delivered as a Public-Private Partnership? 41

Initial Market Assessment 43

Lessons from Experience: How the Private Sector Has Addressed Key Risks in Projects 44

Case Study: Hospital Regional de Alta Especialidad del Bajío, Guanajuato State, Mexico 50

5 Financing PPP Projects 53

Lenders and Risk: Bankability 54

Contract Terms: Bankability 57

Equity Investment 57

Contractual Relationships 57

Refinancing 59

Risk Mitigation and Other Sources of Project Funding 61

Output-Based Aid 67

Case Study: São Paulo Metro Line 4, Brazil 69

Case Study: Improved Access to Water Services in the East Zone of Metro Manila, the Philippines 73

6 Preparing Projects for Market 77

Management of the Process 78

Funding for Project Preparation 84

Unsolicited Proposals 85

Project Assessment 86

Case Study: PPP Program in the National Highways Sector, India 89

7 Project Advisers 93

Role of Advisers 93

When to Use Advisers 95

Appointment of Advisers 96

Role of Public-Private Partnership Units 97

Management of Advisers 97

Case Study: Queen Alia Airport Expansion, Amman, Jordan 99

8 Managing the Initial Interface With the Private Sector 103

Preparation for Market Sounding 104

Before the Launch 105

Perception of the Project 107

Role of Development Finance Institutions and Donors 107

Transition to the Procurement Phase 108

9 Managing Procurement 111

Outcome of the Procurement Phase 112

Role of Advisers 112

Role of Development Finance Institutions 113

Bid Stages 113

Project Launch 113

Prequalification 118

Request for Proposals 121

Preferred Bidder and Financial Close 124

Case Study: Inkosi Albert Luthuli Central Hospital, South Africa 126

10 After Signing 133

Managing Contracts 133

Evaluating PPP Projects and Programs 138

Case Study: Sofia Water, Bulgaria 139

11 Conclusion 145

Appendixes 149

A World Bank and PPIAF Private Participation in Infrastructure Project Database 149

B Sample Extract of a Risk Management Register for Managing the PPP Project Process 153

C List of PPP Web Sites 159

References 167

Index 171

Boxes

1.1 Port Concessioning and Competition in Colombia 5

3.1 Lessons 24

4.1 Liverpool Direct 35

4.2 Regional Projects 47

5.1 Major Concerns of Project Lenders 56

5.2 Major Concerns of Contractors and Investors 58

6.1 Common Problems in Project Governance 82

6.2 Common Mistakes in Project Preparation 84

8.1 Top 10 Tips for a Successful Market-Sounding Exercise 106

9.1 Project Information Memorandum 116

9.2 Bidders' Conference 117

9.3 Summary of RfQ for Public-Private Partnership Projects, Government of India 119

10.1 Tips on Managing Contracts 136

Figures

1.1 Investment Commitments to New and Existing Infrastructure Projects with Private Participation in Developing Countries, by Sector, 1990-2008 2

1.2 Investment Commitments to New PPI Projects Reaching Closure in Developing Countries, by Region, 1995-2009 2

1.3 Key Phases of the Public-Private Partnership Project Process 7

3.1 Relationship between When to Standardize Contract Terms and Benefits from the Project 22

4.1 Stages of Project Selection 32

4.2 Elements of a Risk Management Plan 40

4.3 Number of Projects with Private Participation in Infrastructure, by Sector and Type of Contract, 1996-2008 45

4.4 Number of Transport Projects in Sub-Saharan Africa in the World Bank PPI Database, by Sector, 1996-2007 48

5.1 Typical Contractual Structure of a Public-Private Partnership 59

6.1 Project Preparation Process 79

6.2 Outline of a Structure of Project Governance 81

9.1 Outline of the Procurement Process 114

9.2 Outline of the Prequalification Phase 118

9.3 Outline of the Request-for-Proposals and Financial Close Phase 122

Tables

4.1 An Example of Output Specifications for an Accommodation Public-Private Partnership 36

7.1 Role of External Advisers 94

8.1 Checklist before Launching the Procurement Phase 109