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HoPs’ WG on PPPs Created by HoPs at their Oct. ’07 meeting Co-chaired by WB and IDB Objectives:  address increasing interest in and demand for PPPs from.

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Presentation on theme: "HoPs’ WG on PPPs Created by HoPs at their Oct. ’07 meeting Co-chaired by WB and IDB Objectives:  address increasing interest in and demand for PPPs from."— Presentation transcript:

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2 HoPs’ WG on PPPs Created by HoPs at their Oct. ’07 meeting Co-chaired by WB and IDB Objectives:  address increasing interest in and demand for PPPs from borrowers;  reach consensus among MDBs on financeable PPP options; and  provide common guidance to Banks’ staff and borrowers on appropriate procurement methods Internal consultations to be carried out at each Bank prior to first WG meeting

3 WB’s PPP monitoring group Conformed in Feb. ’08 by Procurement, Infrastructure, GPOBA & PPIAF, in preparation for further discussions at MDB level Tasked with drafting a concept note:  identifying/defining PPP modalities;  addressing areas where WB can help and stages at which to intervene; and  assessing appropriateness and acceptability of Bank’s and procurement processes employed worldwide

4 Highlights of WB’s Concept Note No guidance on which PPP option is suitable or should be pursued Not a single definition/modality but generic elements identified aimed to arrive at Bank’s own definition Bank has financed through IL:  Mgmt. contracts, leases, concessions & BOTs in energy, telecom., transport & WSS sectors;  Govt. contribution in form of equity to SPVs, infrastructure assets or subsidies Competitive procurement is a key condition for success of PPPs but traditional public tender process may be ineffective due to:  Uncertainty under which PPPs start/evolve;  PPPs involve multiple proposals and criteria other than lowest-evaluated price; and  PPPs require informal communication between public and private sectors Various alternative procedures employed worldwide depending on PPP types - Bank acceptability depends on them not being conducive to corruption or high costs to governments

5 Diversity of PPP definitions Some PPP Definitions The term public-private partnership (“PPP”) is not defined at Community Level. In general, the term refers to forms of cooperation between the public authorities and the world of business which aim to ensure the funding, construction, renovation, management or maintenance of an infrastructure or the provision of a service. Source: Green Paper on Public-Private Partnerships and Community Law on Public Contracts and Concessions, European Union Commission, April 2004 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: U.S. National Council for Public-Private Partnerships website: http://www.ncppp.org/howpart/index.shtml http://www.ncppp.org/howpart/index.shtml Public private partnerships (PPPs) are arrangements typified by joint working between the public and private sector. In the broadest sense, PPPs can cover all types of collaboration across the interface between the public and private sectors to deliver policies, services and infrastructure. Where delivery of public services involves private sector investment in infrastructure, the most common form of PPP is the Private Finance Initiative (PFI). Source: United Kingdom’s HM Treasury website HM Treasury Home “Public-Private Partnership” is a generic term for the relationships formed between the private sector and public bodies often with the aim of introducing private sector resources and/or expertise in order to help provide and deliver public sector assets and services. The term PPP is, thus, used to describe a wide variety of working arrangements from loose, informal and strategic partnerships, to design build finance and operate (DBFO) type service contracts and formal joint venture companies. Source: The EIB’s Role in Public-Private Partnerships, European Investment Bank, July 2004 PPP is any medium-to-long term relationship between the public and private sectors, involving the sharing of risks and rewards or multisector skills, expertise and finance to deliver desired policy outcomes. Source: Standard & Poor’s PPP Credit Survey, 2005 Public-Private Partnerships (PPPs) refer to “innovative methods used by the public sector to contract with the private sector, who brings their capital and their ability to deliver projects on time and to budget, while the public sector retains the responsibility to provide these services to the public in a way that benefits and delivers economic development and an improvement in the quality of life”. Source: Guidebook on Promoting Good Governance in Public-Private Partnerships, United Nations Economic Commission for Europe (UNECE), 2007

6 Diversity of PPP options Typical PPP arrangements* * Source: Guidebook on Promoting Good Governance in Public- Private Partnerships, United Nations Economic Commission for Europe (UNECE), 2007 Concession: Contractual arrangement where a facility is given by the public to the private sector, which then operates, maintains and improves a facility for a certain period of time after which the facility, including any improved assets, is transferred to the public sector. Buy-Build-Operate (BBO): Transfer of a public asset to a private or quasi-public entity usually under contract for upgrading and operating the assets for a specified period of time. Build-Own-Operate (BOO): The private sector finances, builds, owns and operates a facility or service in perpetuity. The public constrains are stated in the original agreement and through on-going regulatory authority. Build-Own-Operate-Transfer (BOOT): A private entity receives a franchise to finance, design, build and operate a facility (and to charge user fees) for a specified period, after which ownership is transferred to the public sector. Build-Operate-Transfer (BOT): The private sector designs, finances and constructs a new facility under a long-term concession contract, and operates the facility during the term of the concession after which ownership is transferred to the public sector if not already transferred upon completion of the facility. In fact, such a form covers BOOT and BLOT (see below) with the sole difference being the ownership of the facility. Build-Lease-Operate-Transfer (BLOT): A private entity receives a franchise to finance, design, build and operate a leased facility (and to charge user fees) for the leased period, against payment of a rent. Design-Build-Finance-Operate (DBFO): The private sector designs, finances and constructs a new facility under a long- term lease, and operates the facility during the term of the lease. The private partner transfers the new facility to the public sector at the end of the lease term. Note: Contracts for Operation & Maintenance (O&M), Management Services, and Design-Build (DB) are generally not considered PPP options. Categories of PPI projects 1. Management & Lease Contracts – A private entity takes the management of a state-owned enterprise for a fixed period while ownership and investment decisions remain with the state. (a) Management contract: The government pays a private operator to manage the facility. The operational risk remains with the government. (b) Lease contract: The government leases the assets to a private operator for a fee. The private operator takes on the operational risk. 2. Concessions – A private entity takes over the management of a state-owned enterprise for a given period during which it also assumes significant investment risk. (a) Rehabilitate, operate & transfer (ROT): A private sponsor rehabilitates an existing facility, then operates and maintains it at its own risk for the contract period. (b) Rehabilitate, lease or rent, and transfer (RLT): A private sponsor rehabilitates an existing facility at its own risk, leases or rents the facility from the government owner, then operates and maintains the facility at its own risk for the contract period. (c) Build, rehabilitate, operate, and transfer (BROT): A private developer builds an add-on to an existing facility or completes a partially built facility and rehabilitates existing assets, then operates and maintains the facility at its own risk for the contract period. 3. Greenfield Projects – A private entity or public-private joint venture builds and operates a new facility for the period specified in the contract. The facility may be turned to the public sector at the end of the concession period. (a) Build, lease, and transfer (BLT): A private sponsor builds a new facility largely at its own risk, transfers ownership to the government, leases the facility from the government and operates it at its own risk up to the expiry of the lease. The government usually provides revenue guarantees through long-term take-or-pay contracts for bulk supply facilities or minimum traffic revenue guarantees. (b) Build, operate, and transfer (BOT): A private sponsor builds a new facility at its own risk, operates the facility at its own risk, and then transfers the facility to the government at the end of the contract period. The private sponsor may or may not have the ownership of the assets during the contract period. The government usually provides revenue guarantees through long-term take-or-pay contracts for bulk supply facilities or minimum traffic revenue guarantees. (c) Build, own, and operate (BOO): A private sponsor builds a new facility at its own risk, then owns and operates it at its own risk. The government usually provides revenue guarantees through long-term take-or-pay contracts for bulk supply facilities or minimum traffic revenue guarantees. 4. Divestitures – A private entity buys an equity stake in a state-owned enterprise through an asset sale, public offering, or mass privatization program. (a) Full: The government transfers 100% of the equity in the state-owned company to private entities. (b) Partial: The government transfers part of the equity in the state-owned company to private entities. The private stake may/may not imply private management of the facility.

7 Diversity of procurement procedures 1/4 EU’s Choice of Procurement Procedures for Contractual PPPs Open procedure  Advertisement  No short listing  All documents issued to all candidates  No negotiation permitted  Award to bidder with lowest price* or most economically advantageous tender** Restricted procedure  Advertisement  Short listing (at least 5 candidates - range must be stated in notice; at least 3 if 5 not possible)  Invitation to Tender issued to selected candidates  No negotiation is permitted  Award to bidder with lowest price* or most economically advantageous tender** Negotiated procedure  With or without prior advertisement (according to circumstances)  Short listing (at least 3 when notice published)  Invitation issued to short-listed candidates  Preferred bidder selected based on announced award criteria  Negotiation with preferred bidder about all aspects of the contract permitted - negotiation with second best if no agreement reached  Award to bidder with lowest price* or most economically advantageous tender** Competitive dialogue procedure  Advertisement  Short listing (may be limited to at least 3)  Invitation issued to short-listed candidates  Dialogue (including negotiation) about all aspects of the contract permitted  Award to bidder with most economically advantageous offer** ONLY

8 Procurement process under Competitive Dialogue for a PFI project Source: UNECE’s Guidebook on Promoting Good Governance in Public-Private Partnerships, 2007 1234567 -Investment appraisal -Programme level VFM assessment -Select procedure -Justify and document -Design process for dialogue -Emphasis on early preparation -Evaluation criteria OBC -Selection of participants to take through dialogue -Issue descriptive document -Invitation to participate in dialogue -Conduct dialogue to develop solution -Successive stages -Closing dialogue -Final tenders -Evaluation of tenders -Clarify, specify and fine tune -No substantial modification of bids Stage 2 VFM assessment Stage 3 VFM assessment Diversity of procurement procedures 2/4 -Clarification and confirmation of commitments FBC Pr oc. Notice Contract notice PQQ / Selecting participants Competitive dialogue phase Final tender process Post-tender discussions Preferred Bidder Contract signature

9 Diversity of procurement procedures 3/4 World Bank’s Two-Stage Bidding Process  Employer issues bidding documents including objectives sought and performance specifications  Bidders asked to submit technical-only proposals  Employer evaluates technical proposals’ responsiveness to objectives/performance specifications  Employer verifies continued bidders qualification  Bidders may be invited to discuss content of technical proposals and technical/commercial changes required  Employer prepares minutes of required changes and may amend bidding documents based on discussions  Bidders invited to submit 2nd stage bids including final technical proposals and priced bids  Employer evaluates 2nd stage bids per evaluation criteria  Award to qualified bidder with responsive, lowest evaluated 2nd stage bid Invitation to 1 st Stage Bidding Evaluation of Technical Proposals Clarification/Feedback Meeting with Qualified Bidders Invitation to 2 nd Stage Bidding Technical/Financial Evaluation and Award

10 Diversity of procurement procedures 4/4 Handling of unsolicited proposals Initial proposal requested & assessed Formal proposal invited & examined YES Proposal no longer considered NO * Extra evaluation credit or proposal preparation cost reimbursement Authority engages in competitive selection granting incentives* to original proponent YES Authority may be authorized to negotiate directly with original proponent NO Authority invites all offerors to competitive negotiations NO Authority engages in competitive selection granting incentives* to original proponent YES Is project in the public interest? Is project possible w/o involving proprietary rights? Alternative proposals received? YES Many alternative proposals received? ** Variation: “Swiss challenge” – competitor offering lower-priced proposal gets award if not matched by original proponent NO Authority publishes description of proposal’s essential output elements & invites comparable proposals**

11 WB’s procurement policies on PPPs Guidance for Management Contracts Sample PQ & Bidding Docs. & technical note issued in Dec. ’07 BD includes selection approaches depending on nature of services:  Option A – Single Stage Bidding process, with 3 possible selection methods:  Lowest Evaluated Cost [governed by Proc. GLs] – Suitable for mgmt. services focused to O&M, with or w/o investment fund mgmt.  QCBS & Fixed Budget Selection [governed by Cons. GLs] – Suitable for mgmt. services leaning toward technical assistance  Option B – Two Stage Bidding process

12 WB’s procurement policies on PPPs Guidance for Concessions Para. 3.13 of the GLs covers procurement by private entrepeneur of Bank-financed G, W & S required by facility under BOO/BOT/BOOT, concessions & similar “private sector arrangements”, as follows:  An entrepeneur selected under acceptable ICB procedures* [may involve several stages to arrive to optimal evaluation criteria] is free to use own procedures  An entrepeneur not selected under acceptable ICB procedures must use WB procedures To be acceptable, ICB procedures used to select private entrepeneur must:  Meet principles of economy, efficiency, transparency & open competition  Include, as a minimum: (i) wide advertisement & promotion; (ii) PQ; (iii) clear/non-discriminatory bidding docs.; (iv) transparent, pre- disclosed eval. criteria; (v) selection based on announced criteria to bidder with technically responsive bid & best commercial proposal; (vi) effective & fair complaints-handling mechanism OM issued in Nov. ’05 clarifies conditions under which incumbent entrepeneur can use its own procurement procedures:  WB’s ICB procedures for procuring G, W & S may be impractical [e.g. low cost];  Case should involve expansion of existing system;  Entrepeneur must be privately-owned or if govt.-owned, must be financially autonomous & operate on commercial basis;  Upon upfront assessment & post-reviews, WB must accept entrepeneur’s procurement procedures & capacity

13 WB’s Action Plan after Concept Note Conduct survey among Procurement, Infrastructure, IFC & MIGA to learn:  Procurement issues per type of PPP [e.g., concessions, BOTs, management contracts, leases, etc.] that clients are more concerned about  Trends with regard to PPPs where clients see the Bank could provide more support Survey results to be analyzed to:  Prioritize and focus Bank’s resources toward future steps;  Assist the Monitoring Group in determining whether current WB’s procurement policies need to be clarified or changed and whether specific guidelines and/or model contracts for complex PPPs should be developed; and  Agree on Bank’s position to be further presented at the HoPs’ WG on PPPs

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