1 PUBLIC PRIVATE PARTNERSHIP (PPP) CONTRACT MANAGEMENT Muhammad A IngratubunSenior Procurement SpecialistAsian Development BankGeneva, Switzerland February 2012
2 There many definitions of PPP! Defining PPP (Is it Possible?)There many definitions of PPP!One thing in common “ … legally binding contract …” or “ ... contractual arrangement …” or “… relationships …”PPP as a procurement model/method)PPP is a “marriage” or “relationship” between public - private entities to produce output)
3 What is PPP Contract Management? ... The process that enables both parties to a contract… Delivering the PPP Agreement objectives (World Bank, Vickram Cuttaree, 2008)PPP Contract Management is the entire process in getting PPP project prepared, procured, delivered (operated) maintained and handed over.
4 What is PPP Contract Management? PPP contract management starts herePPP Market testingContract Administration and MonitoringPPP Market study / soundingPPP contract management covers the entire processAdopted (modified) from
5 Decision to Enter PPP PPP Contract Award Fuel Supply AgreementsO & M AgreementsLoan & Financing AgreementConcession AgreementsPPP Model/ MethodOther Contracts/ AgreementsTariff vs Subsidy Agreement & DecreeStatutory Agreements/ DecreesCentral vs Local Government AgreementsPPP IdentificationDecision to Enter PPPPPP Contract (Types)Guarantee vs counter GuaranteesEA’s staff engagement contract/ decreeConsultant Contracts (FS, Transaction Advisors, etc)Service providers ContractsPPP DevelopmentPPP Contract AwardContract Administration & PerformanceManagement of Construction& OperationPPP Operation
6 PPP (Concession ) Basic Structure Source:UNESCAP, A Legal Perspective of Public Private Partnerships (Internet Feb 2012)
9 Alliance or risk transfer? Cash or In-kind (assets)? Private vs Public – Entering ContractPublic SectorWhich PPP model?Alliance or risk transfer?Cash or In-kind (assets)?Existing vs New Regulatory Framework?Subsidy vs New Tariff vs Adjustment?Funding sources vs method?National Security?
10 Open bidding or sole source? (Solicited vs Unsolicited) Private vs Public – Entering ContractPrivate SectorOpen bidding or sole source? (Solicited vs Unsolicited)Profit vs Market Penetration?Joint venture vs Sole Bidder?Risks taken - shared – passed?Limited vs unlimited liabilityEquity or contracting role only?
11 Feasibility Study – Credibility! Risk Sharing and Management Typical Issues inPPP Contract ManagementResourcesFeasibility Study – Credibility!Risk Sharing and ManagementChanging Laws and RegulationsProcurementContract Administration
12 Lack of Capacity vs Loss Institutional Memory Typical Issues After PPP Contract AwardLack of Capacity vs Loss Institutional MemoryDelay (New Law, Procurement, etc)Change in Law and RegulationsPerformance Management (QA/QC)Handling DisputesManaging Contract Changes and VariationsEarly Termination and CompensationRenegotiations
13 Effective PPP Contract Management Begins when decision to enter PPP is made not when PPP Contract is awardedKeep core team from PPP Identification to OperationAdequate financial resources for contract monitoring with right skilled staff - TrAdvWin-Win & Smile-Smile = No Losers No StewingImportant - Good attitude among partnersSound preparation & fairness minimizes re-negotiations & variations risksContract Management Plan
14 MDBs Recommendation Every Jurisdiction & PPP project is different Structuring Challenges - Existing vs New PPP Regulatory FrameworksCapacity BuildingProject Development Facility (PDF)Early Engagement of Private Sector – Market Study/Sounding vs TestingPPP Procurement vs MDBs ProcurementCustomized Standardized Contract Forms.Early Engagement – PPL (Public-Private-Lender)