PPP for Infrastructure Financing in the
MENA region
Istanbul, November 8, 2006
Public Private Partnerships*
Nuran Durmaz
*connectedthinking
PwC
Agenda
Definition
Benefits, Opportunities & Risks
Preconditions for Successful PPPs
About PPP Process
Recurring PPP Issues and Solutions
PwC- PPP Services
1
Definition
Benefits, Opportunities & Risks
Preconditions for Successful PPPs
About PPP Process
Recurring PPP Issues and Solutions
PwC- PPP Services
What is a Public Private Partnership?
PPP is a generic term for the
relationships formed between public
bodies and the private sector with the aim
of introducing private sector resources
and/or expertise to provide and deliver
public sector assets and services.
Public Private Partnerships*
PricewaterhouseCoopers
November, 2006
Slide 4
2
Definition
Benefits, Opportunities & Risks
Preconditions for Successful PPPs
About PPP Process
Recurring PPP Issues and Solutions
PwC- PPP Services
Benefits of PPPs
Encourage the injection of
private sector capital
Private sector takes life cycle
cost
Risks are allocated to the
party best able to manage
or absorb
Quality of service has to be
maintained
PPP
Budgetary certainty
PPP’s deliver value for money
Public Private Partnerships*
PricewaterhouseCoopers
Development of specialist skills
Force the public sector to focus on
outputs and benefits from the start
The public sector pays when the services are
delivered
November, 2006
Opportunities
Public Private Partnerships*
PricewaterhouseCoopers
November, 2006
Risks
• Partner selection
• Alibi competition
• Long-term connection (e.g. a
• Long-term connection (e.g.
change in requirements)
calculation of the final compensation)
• Complexity and expenses of PPP-
• Diverging interests
projects
• Protection of public interests
Public Private Partnerships*
PricewaterhouseCoopers
• Long-term decision-making
processes
November, 2006
3
Definition
Benefits, Opportunities & Risks
Preconditions for Successful PPPs
About PPP Process
Recurring PPP Issues and Solutions
PwC- PPP Services
Preconditions for Successful PPPs
• Before pursuing a PPP approach, the public sector authority
should consider
• Does sufficient private sector expertise exist to warrant
the PPP approach?
• Does the public sector have sufficient capacity and
skills to adopt the PPP approach?
• It is not always possible to transfer life cycle cost risk
• PPPs do not achieve absolute risk transfer
Public Private Partnerships*
PricewaterhouseCoopers
November, 2006
Slide 10
Preconditions for Successful PPPs
• The public sector must recognise the disadvantages of PPPs if
they adopt a PPP approach;
• PPPs imply a loss of management control by the public
sector
• PPP procurement can be lengthy and costly
• The private sector has a higher cost of finance
• PPPs are long-term relatively inflexible structures
Public Private Partnerships*
PricewaterhouseCoopers
November, 2006
Slide 11
4
Definition
Benefits, Opportunities & Risks
Preconditions for Successful PPPs
About PPP Process
Recurring PPP Issues and Solutions
PwC- PPP Services
Basic Structure of a PPP-Project
Public Private Partnerships*
PricewaterhouseCoopers
November, 2006
Summary of the PPP-Buying Process
PPP only in appropriate projects and if positive effects are established!
Public Private Partnerships*
PricewaterhouseCoopers
November, 2006
Five Phases of a PPP Procurement Project
Public Private Partnerships*
PricewaterhouseCoopers
November, 2006
5
Definition
Benefits, Opportunities & Risks
Preconditions for Successful PPPs
About PPP Process
Recurring PPP Issues and Solutions
PwC- PPP Services
Recurring PPP Issues and Solutions
•Legislative impediments to transport PPPs
National governments should continue to work to identify and eliminate legal uncertainties and
impediments to PPP.
•Procurement and State Aid issues
Guidance on PPPs for the public sector should include guidance on procurement procedures. In
our view, until the competitive dialogue is proven as a PPP procurement route, such guidance
should include guidance on the availability and use of the negotiated procedure as an
alternative.
•Affordability issues
•A shadow private sector bid model should be produced prior to starting the procurement so that
the authority has a realistic view of the affordability of the project.
Public Private Partnerships*
PricewaterhouseCoopers
November, 2006
Slide 17
Recurring PPP Issues and Solutions
•The speed and cost of PPP procurement
The public authority should critically assess the number of bidders and bid rounds necessary for
a particular project. It is often better to reach financial close on a good deal rather than negotiate
ad nauseam for the best deal. A degree of central government guidance to procuring authorities
might help such sensible decisions be made.
•Building a PPP Centre of Excellence
There is clear value in having a central unit giving guidance and policy on PPP issues within
each EU country. Developing an EU knowledge unit would also be very effective, but it should
only attempt to give guidance and demonstrate precedents, not impose a common EU-wide
approach.
Public Private Partnerships*
PricewaterhouseCoopers
November, 2006
Slide 18
7
Definition
Benefits, Opportunities & Risks
Preconditions for Successful PPPs
About PPP Process
Recurring PPP Issues and Solutions
PwC- PPP Services
PwC – Thought Leadership
Public Private Partnerships*
PricewaterhouseCoopers
November, 2006
PricewaterhouseCoopers Turkey
www.pwc.com/tr
Public Private Partnerships*
PricewaterhouseCoopers
November, 2006