Module - 2
Harris Private participation:
1. The Rise of Private Infrastructure:

Public provisions were found to be inefficient due to reasons like prices below cost, inability to cater
to poor and rural households, overstaffing, mismanagement, political interference, and conflicting
goals.

The privatization movement in the 1900s aimed to improve services in power, telecommunication,
transport, and water sectors due to these inefficiencies.
2. Reasons for Privatization:

Privatization aimed to reduce government budget burdens, ensure efficient service provision,
establish clear objectives, implement sustainable pricing, and enhance accountability.
3. The Fall of Private Infrastructure:

Indicators of decline included decreased investment flows, contract renegotiations, cancellations, renationalizations, reduced investor interest, public discontent, and pricing issues.

The primary issue was pricing of infrastructure services being lower than the economic costs and
government's ability to manage and sustain reforms.
4. Impact of Privatization in Infrastructure Development:

Positive impacts included improved efficiency, service expansion, quality enhancement, financial
benefits, effective serving of the poor, and environmental goals.

It also addressed issues of corruption and led to rapid development with better results.
5. Strategies for Private Participation:

Key strategies encompassed sustainable pricing, competition, regulatory frameworks, openness to
new alternatives, development of local capital markets, reform policies, management contracts,
leases, and output-based subsidies.
6. Private Participation in Urban India:

Urban India faces challenges such as managing rapid growth, sustainable development, climate
change impacts, and urban poverty.

Implementation challenges include drafting contracts, institutional changes, monopolistic nature of
projects, and issues with public sponsors.
7. Challenges from the Urban Environment:

These include insufficient incentives, lower governance capacity at municipal levels, congested areas,
political sensitivity, infrastructure needs in peri-urban areas, and attracting skilled professionals.
8. Strategies for Urban India:

Strategies include developing strong contract monitoring structures, monitoring outcome-based
contracts, addressing citizen interests and political opposition, and changing the urban
administration's approach to PPPs.
Public Private Partnerships in Urban India
1. Urban Agenda Challenges in Asia-Pacific:

Rapid urbanization, sustainability, climate change mitigation, and poverty elimination are key
challenges.

India faces the daunting task of managing urbanization, ensuring sustainability, and eliminating
urban poverty.
2. Infrastructure Investment:

Infrastructure is crucial for economic integration, energy use, emissions, and poverty reduction.

Planning and implementing sustainable and inclusive urban development pose significant challenges.
3. India's Urbanization Challenge:

India's slower historical urbanization intensifies challenges due to the sheer size of the urban
population.

Pressing need for substantial infrastructure investment.
4. Private Sector Collaboration:

Emphasis on private sector collaboration for financing and managing urban development.

Eleventh Five Year Plan and McKinsey's "India’s Urban Awakening" highlight this importance.
5. Public-Private Partnerships (PPPs):

PPPs promoted to address infrastructure challenges.

Roads sector leads in utilizing PPPs, followed by other sectors.
6. Infrastructure Investment Targets:

High Powered Expert Committee Report calls for significant private investment in urban
infrastructure.

Emphasis on reforms to enhance Urban Local Bodies' capabilities.
7. PPP Activity:

Despite challenges, PPP activity is increasing.

Financial commitments alone do not guarantee success.
8. Global PPP Lessons:

Lessons from global experiences highlight challenges in risk allocation, project threats, financing, and
equitable risk-sharing.
9. Urban Challenges in India:

Specific challenges for PPPs include fragmented jurisdictions and half-devolution of powers to local
bodies.

Managing infrastructure projects in densely populated areas is complex.
10. SWOT Analysis of Urban PPPs in India:

Discusses strengths, weaknesses, opportunities, and threats related to urban PPPs.

Emphasizes the need for capacity building, institutional reforms, and addressing contextual
challenges.
11. Monopolies and Hazards:

Private provider monopolies and hazards limit long-term commitments.

Federal complexities in cities need addressing in contracts.
12. Case Studies:

Changes in waste segregation rules in Tirupur affected waste management projects.

Global metro rail projects, including Hyderabad, faced delays and financial challenges.
13. Urban Transportation Sector:

Bus shelter projects succeed, but metro rail and urban road projects face challenges.
14. Water Supply and Sanitation:

PPPs in water supply face challenges in revenue generation and risk allocation.

Examples in Tirupur and Vishakhapatnam highlight project structuring issues.
15. Housing:

Limited attempts at PPPs in urban development and housing.

Regulatory intervention and government support crucial for low-income housing.
16. Institutional Environment:

Challenges in creating an institutional environment for PPPs in India.

Focus on pilot projects, legal frameworks, capacity building, and financial support.
17. Capacity Building:

Focus on model documents, PPP cells, and training programs in India.

Need to broaden capacity to handle uncertainties.
18. Monitoring and Oversight:

Lack of post-award monitoring attention and outcome-based contracts.

Importance of developing project monitoring capabilities and community partnerships.
19. Next Steps - Deepening Capacity-Building:

Broadening capacities beyond project preparation.

Emphasizing citizen engagement and community partnerships.
20. Conclusion:

Complex urban infrastructure needs in India require a stronger institutional environment.

Calls for a culture shift and the development of capacities for effective PPP implementation.
Aguas de Cartagena Case:
The Aguas de Cartagena case study outlines the privatization of water services in Cartagena, Colombia, including the
risks involved and the mitigation methods adopted:
Origin of the Problem and Causes:

Insufficient revenue, corruption, and poor management.

Inefficient collection of tariffs and customer information.

Environmental damage due to sewage deposition.

Empresas Publicas Municipales de Cartagena (EPM) struggled to meet demand in the 1970s and 1980s.
Reform Steps:
1. Reform of EPM by Mayor Gabriel Garcia Romero (1992):

Formation of Empresas Publicas Distritale (EPD) to replace EPM.

Reduction of workforce and financial restructuring, including a buyout-early retirement program.
2. Establishment of Aguas de Cartagena (ACUACAR) (1994):

A mixed capital company with Aguas de Barcelona as the primary operator.

Resistance from unionized workers and local residents.
Risks and Mitigation:

Financial Risk: Poor financial health of EPD, resulting in reforms and formation of ACUACAR.

Operational Risk: Inefficient and corrupt operations under EPM and EPD.

Political and Social Risk: Resistance from employees, residents, and changes in political leadership.

Environmental Risk: Damage due to untreated sewage.
Mitigation Strategies:

Privatization and Partnership with Aguas de Barcelona: To bring in expertise and investment.

Restructuring the Workforce: Reducing excess employees and reforming pension liabilities.

Establishing a Reward Structure: Incentivizing improvements in water loss reduction and collection rates.

City's Responsibilities: Defined under the Operations & Maintenance (O&M) contract, including
technological assistance, improvements in billing, and responsibility for future expansion.

Reforms in ACUACAR: Modified structure to increase the city’s supervision power and manage capital
finance risk.

Results Post-Privatization: Improved network, increased bill collection, but challenges in expanding services
to the entire population.
Continuing Challenges:

Financing Expansion: Limited city funds for expansion, necessitating private investment.

Regulatory Control: Balancing city control and private management in a natural monopoly environment.

Public Perception and Participation: Managing residents’ expectations and involvement in the privatization
process.
Conclusion:
The Aguas de Cartagena case study illustrates the complexities and risks involved in privatizing public utilities,
including financial, operational, political, and environmental challenges. The city adopted a mixed capital model with
private sector participation to improve the efficiency and quality of water services. The case underscores the
importance of careful planning, stakeholder engagement, and adaptive management in public-private partnerships.
Vives Framework:
The Vives Framework provides a systematic approach for evaluating the viability of public-private partnership (PPP)
projects in infrastructure investments. The key points and process are as follows:
Key Components of the Framework:
1. Local Conditions:

Eight key variables significantly impact project viability: legal framework, fiscal space, political risk,
macroeconomic conditions, institutional capacity, willingness to pay, tariff sustainability, and the
size/location of the project.

These variables should be tailored to the specific context of each project.
2. Modalities and Tools:

Various project modalities range from fully public to fully private structures.

Risk mitigation tools include Political Risk Insurance, Partial Credit Guarantees, Partial Risk
Guarantees, Subsidies, Credit Enhancement, Local Currency Financing, Arbitration Rules, and Off-take
contracts, each addressing specific risks.
Analytical Process:
1. Evaluate Local Conditions and Risk Mitigants:

Assess local conditions to understand their impact on project risks and feasibility.

Evaluate available risk mitigation instruments to address these risks.
2. Tailor Tools and Project Structure to Local Conditions:

Match project modalities and risk mitigation tools to the specific local conditions.

The framework aids in determining feasible project structures based on local conditions and the
applicability of different tools and modalities.
3. Project Feasibility Map:

A project feasibility map can be generated to relate local conditions with project modalities,
incorporating available tools to assess and evaluate the most likely feasible project structures.
Summary:
The Vives Framework is a comprehensive tool for planning and assessing PPP projects, particularly in infrastructure. It
emphasizes the importance of local conditions, the choice of project modalities, and the application of risk mitigation
tools to ensure the success and feasibility of projects. The framework is designed to be adaptable, allowing for
modifications based on the specific context and needs of the project and the investor.
Alandur Sewerage Project:
The Alandur Sewerage Project, initiated by Mayor Mr. B. Subramaniam, was a major undertaking to provide a
comprehensive sewerage system, including a sewage treatment plant (STP), for the town of Alandur in Tamil Nadu,
India. Here's an overview of the case, including the risks involved and the mitigation methods adopted:
Project Genesis and Rationale

Alandur, with its proximity to Chennai and its international airport, faced increased urbanization and demand
for infrastructure services in the late 1990s.

Most households had septic tanks, but by the mid-1990s, these were overflowing, causing health hazards.

The municipality decided to implement an integrated sewerage system, which received unanimous approval
from the municipal council in 1996.
Initial Project Development

The Tamil Nadu Urban Development Fund (TNUDF) played a key role in coordinating the project, considering
the involvement of multiple agencies.

In 1998, a consultant was appointed to prepare a detailed engineering report and cost estimates, which
amounted to INR 453.13 million, far exceeding Alandur's annual budget.
Risk Mitigation and Restructuring

To address financial constraints, TNUDF divided the project into two components: the sewerage network and
the STP.

A sustainable financial model was created, combining loans, grants, and user deposits. TNUDF and the Tamil
Nadu Urban Finance and Infrastructure Development Corporation (TUFIDCO) provided loans, while the
Government of Tamil Nadu offered grants to bridge gaps in Operations and Maintenance (O&M) expenses.
Public-Private Partnership (PPP) Approach

Initially, a standard item-rate contract was considered, but TNUDF suggested a PPP model through a BuildOperate-Transfer (BOT) approach for the STP to address operational inefficiencies observed in other
municipalities.

This approach was new and carried uncertainties, as there was no clear evidence of PPPs being more
beneficial in Indian municipal services.

A detailed analysis showed that the PPP approach could bring private sector expertise and reduce debt
financing requirements for the municipality.
Willingness to Pay and Community Mobilization

A 'Willingness to Pay' survey revealed a significant demand for the project but also highlighted the variance
in residents' ability to pay the proposed tariffs.

The financial structure was revised based on the survey, and a community mobilization campaign was
launched to educate residents about the project's benefits and the need for their financial participation.
Project Procurement and Contractual Provisions

The procurement process involved preparing contracts for both the sewerage system and the STP. The
construction contract for the sewerage system was straightforward, while the BOT agreement for the STP
was more complex.

The concessionaire was responsible for financing, constructing, operating, and maintaining the STP, with the
municipality bearing land acquisition risks and a portion of revenue receipts being escrowed to mitigate debt
repayment risks.
Bid Evaluation Framework

Alandur municipality and TNUDF decided to integrate both parts of the contract and award the entire project
to a single firm.

The evaluation considered both the construction cost of the sewerage network and the lease period for
operating the STP, with the aim of selecting a bidder that would deliver an integrated and operational
sewerage and treatment facility at a competitive price.
In summary, the Alandur Sewerage Project was a complex initiative that involved careful planning, risk assessment,
and innovative financial structuring, including the adoption of a PPP model. It highlighted the challenges and
solutions in urban infrastructure development in the context of a rapidly urbanizing area in India.
Cochabamba Case Study
The Cochabamba water conflict in Bolivia, arising from the concession awarded to Aguas del Tunari (AdT) for water
and sanitation services, illustrates key challenges in regulating private sector participation in urban water supply.
Here's an overview of the case, the risks involved, and the mitigation methods:
Background and Context

Urban Water Supply in Bolivia: Inadequate access and poor quality of urban water supply, with significant
deficiencies in service provision.

Legal and Regulatory Framework: Complex and overlapping legislative and regulatory framework for water
services in Bolivia.

SEMAPA's Poor Performance: SEMAPA, the municipal water company in Cochabamba, suffered from poor
performance, significant water losses, financial deficits, and water rationing due to resource shortages.
Concession Contract and Issues

Misicuni Multipurpose Project (MMP) Replaced: Initially, MMP was considered for addressing water issues
in Cochabamba, but due to high costs, it was replaced with the Corani project. The concession process was
eventually awarded to Aguas del Tunari.

Tariff Structure and Increases: A new increasing block tariff (IBT) structure was agreed upon, classifying
consumers into different groups. This led to varied increases in tariffs, with larger increases for higher-income
consumers.
Conflict and Stakeholders

Water Conflict: The concession led to a conflict, marked by public protests against tariff increases and the
contract's terms. This conflict involved a range of stakeholders including the national government, local
government, consumer rights groups, AdT, and small irrigation farmers.
Risks and Mitigation Efforts

Risk Factors:

Tariff increase and new IBT structure.

Potential charges for small farmer irrigation.


Exclusive rights granted to AdT over water resources and provision.
Mitigation Efforts:

Government involvement in conflict resolution.

Regulatory decisions by SSSB, including freezing tariff increases, re-negotiating the contract, and
ultimately canceling the concession.
Conclusion
The failure of the Cochabamba concession was a result of complex political, social, and economic factors, highlighting
the challenges in regulating private sector involvement in urban water supply. It underscores the need for effective
public regulation and the difficulties in balancing technical, economic, and social demands in utility regulation.
Project Administration:
1. Dealing with Cost and Time Overruns:

Utilization of planning and control systems during design and construction phases.

Application of assessment techniques like Critical Path Analysis and Earned Value Analysis to identify
potential delays and monitor project outcomes.
2. Value in Projects:

Emphasis on holistic, long-term project evaluation.

Consideration of broader impacts beyond just construction costs, as illustrated by the example of the
Sydney Opera House.

Strategies for improving project performance include encompassing the 'fuzzy front end' of projects
and enhancing stakeholder interaction.
3. Project Management 2.0:

Introduction of a decentralized and collaborative framework.

Shift from top-down to a more inclusive decision-making process ("We Plan, We Execute").

Key benefits include increased flexibility and agility, with an emphasis on measuring Planned Percent
Complete (PPC) to assess project progress.
4. Collaborative Approaches:

Adoption of methodologies like the Lean construction paradigm and tools such as the Last Planner
System.

These approaches exemplify the collaborative nature of Project Management 2.0.
5. Value Creation and Public-Private Partnerships (PPPs):

PPPs involve long-term agreements where the private sector takes on the risk of service delivery.

The process involves careful structuring, governance mechanisms, and a strong institutional
environment.

Examples of both successful and failed PPPs are noted.
6. Dealing with Changes in PPPs:

Alignment and adaptability in PPPs are essential for managing natural, economic, political, and
technical changes.

Emphasis on project alignment and adaptability, with strategies for implementation including
adjustments, real options, and negotiated settlements.
7. Adjustments in Contracts:

Incorporation of 'IF-THEN' clauses for automatic contractual adjustments based on external triggers.

Use of real options for flexible decision-making and negotiated settlements for addressing
uncertainties beyond predefined adjustments.
8. Conclusion:

Collaboration and decentralization in project administration are key to reducing overruns and
enhancing value.

Project Management 2.0 is gaining traction in India, focusing on flexibility and adaptability.

The approach addresses concerns about balancing private profit and public gain, highlighting the
importance of careful project design and administrative capacity building.
Pacifico Bond 3 Case:
The Pacífico 3 project, part of Colombia's 4G Road Program, was a significant infrastructure initiative involving the
development and maintenance of a major road network. Here's an overview of the case, including the risks involved
and the mitigation methods adopted:
Case Overview:

Project Scope: Pacífico 3 was a substantial road development project with a concession period of at least 25
to 29 years. It involved multiple phases, including pre-construction activities (design, property acquisition,
environmental procedures, licenses, and operation & maintenance planning), construction, and subsequent
operation and maintenance phases. The project was divided into five functional units (UFs), each with
specified completion dates.

Financial Requirements: The project required an estimated US$887 million, including engineering,
procurement, construction costs, interest during construction, and operational expenses. The funding
strategy included a mix of equity, loans, toll revenues, revenue reinvestments, and bond issuances. Two bond
issuances were planned, one in US dollars and the other in Colombian Pesos indexed to inflation (UVR).
Risks Involved:
1. Multiple Risks: The project faced a range of risks commonly associated with road programs, such as design,
construction, revenue, operations and maintenance, political, and strategic risks.
2. Environmental and Land Rights: Environmental permits and land acquisition presented significant
challenges. However, Colombia’s Infrastructure Act aimed to simplify the process for land access and reduce
related risks.
3. Cost Overruns and Corruption: Cost overrun risks were a concern, and the threat of corruption in the
infrastructure sector led to stricter government concession rules.
Mitigation Methods:
1. Government Support: To mitigate traffic revenue risks, the program included government-guaranteed
availability payments and Revenue Differentials (DR) based on traffic reports and toll revenue valuations.
2. Liquidity Support by FDN: The National Development Finance Corporation (FDN) provided liquidity lines to
normalize cash flow during unexpected events, such as delays in government payments or low traffic and toll
revenues.
3. Phased Project Approach: The project was systematically phased, with clear milestones for initiation, preconstruction, construction, operation and maintenance, reversion, and liquidation, ensuring structured
progress and accountability.
4. Structured Financing: A combination of equity, loans, and projected toll revenues, along with bond
issuances, was planned to finance the project. The bond issuances were structured to cater to different
investor preferences, with one in US dollars and another in inflation-adjusted Colombian Pesos.
In summary, the Pacífico 3 project was a complex and multifaceted endeavor that required careful planning, risk
management, and a comprehensive financing strategy to address its extensive infrastructure goals.
Tirupur Water Supply Project:
The Tirupur Water Supply Project, a Public-Private Partnership (PPP) in Tamil Nadu, India, aimed to provide water to
Tirupur's municipality and textile industries. Initially touted as a PPP success, the project later faced severe financial
challenges. Here's an overview of the case, including risks and mitigation strategies:
Case Overview:

Background: Tirupur, known for its textile industry, faced water quality and supply issues, impacting its
garment production. The Tirupur Exporters Association (TEA) sought a sustainable water solution.

Partnership with ILFS and USAID: The project was developed in collaboration with Infrastructure Leasing &
Financial Services Ltd. (ILFS) and received support from the United States Agency for International
Development (USAID).

PPP Model Adoption: Despite skepticism about PPPs in Tamil Nadu, the project team decided on a joint
venture PPP model. The New Tirupur Area Development Company Limited (NTADCL) was formed by the
Government of Tamil Nadu, ILFS, and TEA.
Risks and Mitigations:
1. Commercial Viability: Tariffs for industrial water supply were increased to ensure the project's financial
sustainability, after convincing TEA members of its necessity.
2. Legislative Amendments: NTADCL suggested legal changes to facilitate private sector participation in water
supply and sanitation, leading to the drafting of a complex concession agreement.
3. Contractor Selection and Financing: International competitive bidding was adopted to select a contractor
capable of meeting the project's standards. The financing plan involved a mix of debt and equity, with a Debt
to Equity ratio of 1.5:1.
Project Operations and Status:

Initial Success: The project initially succeeded, providing affordable water to local villages and industries.
However, by 2008, industrial demand for water was significantly lower than projected, impacting revenue.

Decreased Demand: Global recession and implementation of strict environmental norms led to a 30%
reduction in water demand, as industries installed their own water treatment facilities.

Financial Strain: The project struggled financially, supplying only 125 MLD of water compared to the planned
185 MLD, with revenues falling below expectations and project costs.
In summary, the Tirupur Water Supply Project highlights the challenges of PPPs in essential services like water supply.
Despite initial success, changes in external conditions and demand significantly affected its financial viability.
Module 3:
Mapping and Facing the Landscape of Risks:
1. Definition of Risk: Risk is the possibility of events and their impacts, which may differ from initial
expectations. It encompasses uncertainty and indeterminacy, leading to ambiguous decision-making. While
risks can be statistically estimated, uncertainties often cannot be quantified.
2. Risks in Large Engineering Projects: Different projects face varying risks. For example, oil platforms have
lower market and institutional risks but higher technical difficulty. Nuclear and hydroelectric projects have
high social integration challenges. Road and tunnel projects are less technically challenging but face high
social risks if tolls are applied. Market risks are particularly significant in these projects.
3. Types of Risks: Risks are categorized into market-related, completion, and institutional risks. Market risks
involve demand uncertainties, financial risks pertain to attracting investment, and supply risks relate to price
and access uncertainties. Technical risks are inherent and often linked to nature, while construction risks
arise from assumptions made during bidding.
4. Dynamic Interactions of Risks: Risks are associated with different project lifecycle stages. Regulatory risks
diminish once approvals are obtained, and technical risks reduce after experiments are completed. Some
risks, like market risks, are independent of the project lifecycle and influenced by external factors like
economic growth.
5. Risk Management Approaches: Decisioneering involves management science principles and probabilistic
future assumptions. It includes discounting future cash flows to adjust risks. Managerial approaches match
risks with strategies, assuming an uncertain future. This is most applicable for indeterminate futures.
6. Strategizing to Face Risks: A layering process is used for risk management, involving the reasoned
assignment of risks for imaginable futures and tackling unknown risks as they occur. Risk management
strategies are designed on a cost-benefit basis, and the process is iterative
Project from Hell:
The "Project From Hell" case study details the challenges faced during the construction of the Central Spine project,
including buildings OB1 through OB6, for the client InfoTech Construct. The project encountered numerous risks and
delays, particularly in OB1 and OB2, and required specific mitigation strategies:
OB1 Challenges and Risks:

Complex Structure: The complexity of OB1's structure contributed to delays.

Service Re-sequencing: Adjustments in the construction sequence were necessary.

Foreign Architect Issues: Lack of local knowledge by the foreign architect led to problems.

Unrealistic Schedule: The project schedule was overly ambitious.

Dictatorial Client Approach: The client's management style caused difficulties.

Material Procurement: Challenges in obtaining necessary materials.

Labour Availability: Shortages of labor affected progress.

Unseasonal Rains: Weather conditions disrupted the construction.

Drawing Iterations: Frequent changes in drawings led to delays.
OB2 Identified Risks:

Design and Engineering Risks: Risks associated with the project's design and engineering aspects.

Material and Labour Procurement Risks: Challenges in obtaining materials and labor, and the unavailability of
vendor's engineers on site.
Mitigation Strategy:

Repetition of OB1 Drawings: Utilizing the same drawings used for OB1 to save time and reduce errors.

Use of Already Procured Materials: Leveraging materials procured during OB1.

Similar Construction Methods: Adopting construction methods proven effective in OB1.

Addressing Subcontractor Underperformance: Recognizing the need to manage subcontractors more
effectively, particularly if they were involved in other projects.
Future Steps:

Assessment of Risks for OB2: Evaluating if the focus on equipment and labor availability is sufficient or if other
risks are being overlooked.

Smooth Construction of OB2: Strategies to ensure efficient progress for OB2.

Ensuring Success of Phase 2 (OB4, OB5, OB6): Planning interventions to avoid the issues faced in earlier
phases, benefiting from lessons learned and a fresh start.
In summary, the project faced multiple and diverse risks across its various phases, from structural complexities to
procurement challenges. The mitigation strategy focused on leveraging successful aspects from OB1 and improving
subcontractor management. Future phases of the project necessitated a comprehensive revaluation of risks and
strategies to prevent repeat issues.
Flyvbjerg Mega Projects
The key points from the "Group 3 Flyvbjerg Mega Projects" presentation are:
1. Scale of Megaprojects: Classified as mega (million-dollar), giga (billion-dollar), and tera (trillion-dollar)
projects, indicating their enormous scale and financial impact.
2. Global Spending on Megaprojects: Estimated at $3.4 trillion per year globally between 2013 and 2030,
comprising a significant portion of global GDP.
3. Increased Capital Expenditure in India: India's infrastructure spending increased substantially, highlighting the
global trend in megaproject investments.
4. Drivers of Megaprojects: Attractiveness due to technological, political, economic, and aesthetic factors,
offering benefits like economic growth, improved productivity, and environmental sustainability.
5. The Iron Law of Megaprojects: Characterized by consistent over budget and over time issues.
6. Break-Fix Model of Management: A reactive approach to megaproject management that focuses on fixing
issues as they arise, often leading to delays and cost overruns.
7. Survival of the Unfittest: Even poorly planned and executed megaprojects can sometimes succeed through
external support and adaptability.
8. Consequences of Poor Management: Inadequate management of megaprojects can lead to significant
financial, reputational, or political fallout.
9. Solutions for Better Management: Establishment of dedicated authorities for overseeing projects,
independent risk assessments, and recognition of the role of power and negotiation in project forecasting and
management.
Vadodara Halol Toll Road (VHTRL) project:
The Vadodara Halol Toll Road (VHTRL) project, undertaken by a Special Purpose Vehicle (SPV) promoted by the
Government of Gujarat and IL&FS, involved widening and strengthening a 31 km road from two lanes to four lanes
with service roads. Here's an overview of the case, risks, and mitigation strategies:
Project Overview:

Project Initiation: The concession agreement was signed between the SPV and the Government of Gujarat on
October 17, 1998.

Construction Period: Construction commenced on March 1, 1999, and was completed on September 15, 2000,
within the scheduled time and budget.

Importance and Location: VHTRL gained importance due to industrialization at Halol and offered a shorter
alternative route to NH8, reducing congestion near Ahmedabad.
In the context of the Vadodara Halol Toll Road (VHTRL) project, the primary economic risk involved was the shortfall in
actual traffic compared to the levels projected in the initial traffic study. This shortfall had a direct impact on the
project's revenue generation and financial viability. Here’s an analysis of the economic risk and the mitigation strategies
adopted:
Economic Risk:
1. Traffic Projection vs. Reality: The initial estimates were based on continuous industrial growth in Halol, which
did not materialize as expected due to economic recession. This led to significantly less traffic using the VHTRL,
resulting in only 34% of the projected revenue being generated.
2. Financial Consequences: VHTRL's inability to meet its financial obligations due to reduced revenue posed a
significant economic risk. The project struggled to fulfill its debt obligations and faced operational challenges
beyond mid-2003.
Mitigation Strategies:
1. Formation of Toll Review Committee (TRC): To address the economic challenges, a TRC was formed,
comprising various stakeholders, including government and IL&FS representatives. The committee was tasked
with reassessing the toll structure and financial strategies of the project.
2. Adjusting Toll Charges: The TRC identified that multi-axle vehicles (MAVs) were undercharged. Since MAVs
contributed to 17% of VHTRL's overall revenue, the committee suggested increasing their toll charges. This was
based on the rationale that better-quality roads decrease the vehicle operating costs (VOC), and thus, toll
prices for MAVs could be adjusted accordingly.
3. Exploring Additional Strategies: Other strategies considered by the TRC included marketing efforts to attract
more traffic, restructuring finances, possibly seeking a bailout, expanding the project scope by adding the
Halol-Godhra stretch, controlling leakage on service roads, and requesting the Government of Gujarat to
resume or extend tax incentives in the Panchmahal District. The committee also considered increasing the
concession period to mitigate the economic risk.
In summary, the VHTRL project's primary economic risk was the drastic shortfall in traffic and revenue. The mitigation
efforts focused on reassessing and adjusting the toll structure, exploring additional revenue sources, and considering
financial restructuring to address the challenges posed by lower-than-expected economic growth in the region.
Dabhol Power Project:
The Dabhol Power Project in Maharashtra, India, undertaken by Enron Development Corporation (EDC), highlights
significant political risks and the mitigation strategies adopted:
Political Risk:
1. Political Instability: There was concern about potential political changes at the central and state levels. The
Congress Party, which supported Prime Minister Rao’s liberalization policies, faced opposition both from within
and from other parties. This opposition centered around concerns related to social equity and the transfer of
government responsibilities to the private sector.
2. Opposition to Foreign Investment: Parties like the Bharatiya Janata Party (BJP) and Shiv Sena (SS) were known
to be skeptical of foreign investment, particularly in sectors like consumer goods. Given their potential rise in
power, this posed a risk to projects involving foreign companies like Enron.
Mitigation Strategies:
1. Risk Analysis and Management: EDC emphasized thorough risk analysis and management in its development
projects. This included careful evaluation of the power purchaser’s creditworthiness and securing sovereign
guarantees and letters of credit as necessary.
2. Revenue Protection: Revenues were tied to the U.S. dollar, with the host government or an external agency
responsible for currency conversion. This approach mitigated risks related to currency fluctuations.
3. Political Risk Insurance: To specifically address political risks, EDC involved entities like the Overseas Private
Investment Corporation and other commercial political risk insurance providers. Such involvement offered a
level of protection against the uncertainties of political change and policy shifts.
4. Project Financing from Multilateral Institutions: Financing for the project was sourced from multilateral
lending institutions, such as the U.S. Export-Import Bank, International Finance Corporation, export credit
agencies, development banks, and international bank lenders. This diverse financing structure helped to
distribute and mitigate the financial risks associated with political instability.
In summary, the Dabhol Power Project faced significant political risks due to potential changes in government policies
and opposition to foreign investment. EDC's mitigation strategy involved careful risk management, securing political
risk insurance, tying revenues to the U.S. dollar, and diversifying project financing sources to navigate the uncertain
political landscape in India.
Chad-Cameroon Petroleum Development and Pipeline Project
The Chad-Cameroon Petroleum Development and Pipeline Project, involving a $4 billion investment, presents a case
study in managing political risk in large-scale infrastructure projects. Here's an overview of the case, the political risks
involved, and the mitigation methods adopted:
Case Overview:

Project Background: Initiated to exploit oil fields in Chad and transport the oil via a pipeline through Cameroon.
This project aimed to stimulate economic development in Chad, one of the world's poorest countries.

Consortium Formation: Oil companies including Conoco, Chevron, Exxon, and Royal Dutch/Shell initially
discovered oil in Chad in the 1970s, but development was halted due to civil unrest. The project was later
revived and officially started after MOUs were signed with the governments of Chad and Cameroon in 1996.
Political Risks:
1. Instability and Civil Unrest: Chad had a history of civil war and political instability, with significant human rights
violations and economic decline under the leadership of President Idriss Déby.
2. Dependence on Foreign Investment: Chad's reliance on international development institutions and foreign
investment for economic development posed risks due to the unstable political environment.
Mitigation Strategies:
1. Involvement of Multilateral Institutions: To mitigate political risks, the sponsors considered including
multilateral development agencies in the deal. The involvement of these institutions was seen as crucial for
enhancing country commitment and mitigating political risks.
2. World Bank Participation: The World Bank, with extensive experience in developing countries, was
approached to participate in the project. The Bank's involvement was deemed essential for addressing the
political risks and ensuring economic development and poverty alleviation in the member countries.
3. Extensive Consultation Process: An extensive consultation process was conducted, involving meetings with
supporters and opponents of the project, advice from scientists and environmental engineers, and numerous
village-level meetings. This approach aimed to address concerns and ensure a broader acceptance of the
project.
4. Revenue Management Plan (RMP): The World Bank designed an RMP to prevent potential economic
distortion, corruption, and waste due to the large influx of oil revenues. This plan included specific allocations
for income taxes, royalties, and dividends, with a portion dedicated to poverty reduction and development
programs in high-priority sectors.
5. Oversight Committee: An oversight committee was formed to review and approve detailed annual expenditure
programs, with members from both the government and civil society. The World Bank monitored the program
and linked the government’s performance under the RMP to future lending, ensuring adherence to the plan.
In summary, the Chad-Cameroon Petroleum Development and Pipeline Project faced significant political risks due to
the unstable political climate in Chad. Mitigation strategies focused on involving multilateral institutions like the World
Bank, conducting extensive consultations, implementing a Revenue Management Plan, and establishing an oversight
committee to ensure that the project's benefits were used for the economic development and poverty alleviation of
the local population.
The Bujagali Dam Project
The Bujagali Dam Project in Uganda, involving AES Corporation, faced significant social and environmental risks. Here's
an analysis of these risks and the mitigation strategies adopted:
Social and Environmental Risks:
1. Impact on Local Communities: The Environmental Impact Assessment (EIA) revealed that the project would
affect approximately 14,496 people, displacing 2,236 due to the dam and transmission lines. This displacement
meant the loss of homes, land, and livelihood for many. Additionally, the project threatened to eliminate white
water rafting at Bujagali Falls, a significant source of revenue for the local economy.
2. Environmental Concerns: Non-governmental organizations (NGOs) highlighted that the dam would negatively
affect endemic fish species, harming subsistence and commercial fishing. They also raised concerns about an
increase in tropical diseases like malaria as a consequence of the project.
3. Questionable Energy Needs Assessment: NGOs questioned the actual need for the amount of power the dam
was projected to generate. They advocated for upgrading Uganda’s current distribution system, which suffered
significant power losses due to faulty transmission lines, as a more efficient alternative to building a new dam.
There were also calls to explore other power sources, challenging the bias towards hydropower in existing
studies.
4. Economic Analysis Concerns: Criticisms were raised about the World Bank's economic analysis of the project.
Critics found the document overly optimistic and containing inconsistencies, particularly regarding Uganda's
expected economic growth and demand for energy. It was also noted that the high price of utilities, including
electricity, was a major constraint to private investment in Uganda, contradicting the World Bank’s emphasis
on the quality and reliability of power.
Mitigation Strategies:
1. Environmental Action Plan (EAP): In response to the EIA, AES developed an EAP that outlined several
corrective measures to minimize the dam’s social and environmental impact. These included relocating
affected people to new lands, providing monetary compensation, planting native and medicinal trees, building
a cultural center, developing tourism, and constructing raft launches downstream from the dam. The plan also
addressed the disruption of cultural property, including family gravesites and spiritual markers, by involving
spiritual leaders to ensure respectful handling of these sensitive matters.
In summary, the Bujagali Dam Project was subject to significant social and environmental risks, particularly concerning
the displacement of local communities and ecological impacts. The mitigation efforts included comprehensive plans
for relocation and compensation, as well as measures to address environmental concerns and cultural sensitivities.
However, the project also faced criticism regarding its justification, particularly in terms of the actual power needs and
the World Bank's economic analysis.
Conoco Green Oil Strategy
In 1991, Conoco, an oil subsidiary of Du Pont, faced a significant decision regarding the development of a new oil
exploration site in eastern Ecuador, located within a pristine rainforest and partially within the boundaries of an
undeveloped national park. This area was of high environmental concern due to its immense biodiversity and the
presence of indigenous communities whose livelihoods and cultures were potentially at risk from oil development.
Social and Environmental Risks:
1. Environmental Impact: The oil exploration site was in a region of immense ecological importance, containing
a significant portion of the world's plant and animal species. The environmental risks involved potential
damage to this biodiversity due to pollution and habitat destruction.
2. Impact on Indigenous Communities: The local indigenous people, particularly the Huaorani tribe, faced
threats to their traditional way of life. Oil development posed risks of land encroachment, alteration of local
disease patterns, and cultural disruption.
Mitigation Strategies Adopted by Conoco:
1. Proactive Environmental Management Plan (EMP): Recognizing the potential environmental impacts, Conoco
developed an extensive EMP to minimize ecological damage. This plan was one of the most ambitious in the
oil industry and included additional costs estimated at 5% to 10% of the proposed $600 million investment.
2. Engagement with Stakeholders: Conoco expanded discussions with various stakeholder groups, including
environmentalists, local communities, and government officials, to address concerns and improve its EMP. This
approach sought to build consensus and support for the project.
3. Collaboration with NRDC and CS: Conoco engaged with the Natural Resources Defense Council (NRDC) and
Cultural Survival (CS) for independent oversight of its EMP and to channel economic benefits from the
development back to local communities. This collaboration was aimed at ensuring that Conoco's operations
respected the cultural and spiritual values of the indigenous people and the environmental integrity of the
area.
Outcome and Challenges: Despite these mitigation efforts, Conoco faced challenges in gaining consensus support
among various groups. Some environmental groups fundamentally opposed any oil development in rainforests or
national parks. Additionally, complex negotiations with the Ecuadorean government and legal challenges concerning
the legality of oil exploration in protected areas added to the difficulties.
In summary, Conoco's case in Ecuador highlights the complexities and challenges involved in balancing economic
development with social and environmental responsibilities. The company's approach of proactive environmental
planning, stakeholder engagement, and collaboration with environmental and indigenous groups represents a
significant effort to mitigate the risks associated with oil exploration in sensitive areas. However, the inherent tensions
between economic development and environmental conservation, as well as the challenges of achieving consensus
among diverse stakeholders, remained significant hurdles.
Module 4:
Fair Process and Negotiation:
1. Critique of Fisher and Ury (1981): Criticism for underemphasizing power dynamics in negotiations, particularly
military power at the international level.
2. Negotiating Power Definition: The ability to influence another's decision, often based on perceived strength.
3. Types of Negotiating Power:

Skill and Knowledge: Enhanced by understanding people, interests, and facts.

Good Relationship: Strengthened by trust and effective communication.

Good Alternative: Influenced by the strength of one's BATNA.

Elegant Solution: Increased by creating mutually beneficial solutions.

Legitimacy: Gained through fairness, law adherence, and objective standards.

Commitment: Utilizing offers and threats to influence outcomes.
4. Mistaken Views of Power:

Equating physical force with negotiating power.

The strategy of starting tough and softening later is questioned.
5. Enhancing Power:

Develop skills and knowledge relevant to negotiation.

Build trust and effective communication for good relationships.

Strengthen BATNA.

Generate creative, mutually beneficial solutions.

Utilize objective standards and principles for legitimacy.

Make strategic commitments.
6. Negative Commitments:

Defined as refusing agreements for better terms.

Can reduce negotiating power by limiting alternative exploration.
7. Role of Legitimacy: Importance of due process and fair consideration in negotiations.
8. Affirmative Commitments: Essential to have clear, consistent offers for effective negotiations.
9. Timing in Negotiations: Advises against early negative commitments and emphasizes the importance of
strategic timing.
10. Threats and Consistency: Discourages overreliance on threats, suggesting they should support a positive
relationship and overall strategy.
11. Ongoing Exploration: Recognizes the complexity of negotiation power dynamics and the need for continuous
strategy refinement.
Wheeler Note:
The document "Negotiation Analysis: An Introduction" provides an in-depth exploration of the strategies and
considerations essential for effective negotiation. Here's a summary of the key points:
1. BATNAs (Best Alternative To a Negotiated Agreement): Understanding what each party will do if they don't
reach an agreement is crucial. This concept helps negotiators evaluate their options and establish a "walkaway"
point.
2. Parties Involved: Identifying the real parties in a negotiation, including those not immediately visible, is critical.
This understanding can influence strategies and outcomes significantly.
3. Interests: Understanding the fundamental needs and priorities of all parties involved is vital. It allows
negotiators to identify potential value-creating trades.
4. Value Creation and Distribution: Negotiators should assess how value can be created and who is likely to
benefit from it. This involves exploring differences in valuation, expectations, and risk attitudes.
5. Barriers to Agreement: Recognizing and addressing potential obstacles, whether strategic, psychological, or
institutional, is important for reaching an agreement.
6. Power Dynamics: Understanding how various parties can influence the negotiation process and its outcomes
is essential. This includes redefining the set of parties, manipulating time constraints, and understanding each
party's BATNA.
7. Ethical Considerations: Negotiators must consider their moral and ethical obligations, including honesty,
fairness, impact on bystanders, and principal-agent conflicts.
Making Participation Work When Interests Conflict - Electronic
The document emphasizes that successful negotiation requires a blend of rigorous analysis and skillful implementation,
including listening, persuasion, patience, and humor. It underlines the importance of a strategic approach, informed
by understanding each party's alternatives, interests, and potential barriers, while being mindful of the ethical
implications of negotiation tactics.
The document titled "Making Participation Work When Interests Conflict: Moving from Facilitating Dialogue and
Moderating Debate to Mediating Negotiations" provides an extensive overview of strategies for effective participation
and negotiation in scenarios where interests conflict. Key points from the document include:
1. Transition from Facilitating to Mediating: The text emphasizes the need to move beyond just facilitating
dialogue or moderating debate, towards actively mediating negotiations, especially in contentious situations.
2. Understanding Conflict and Interests: The importance of comprehending the underlying interests and sources
of conflict among different parties is highlighted as a critical step in mediation.
3. Skillful Mediation Techniques: The document discusses various techniques used by skilled mediators to
transform antagonistic relationships into cooperative and productive ones. These include joint inquiry,
exploring options rather than escalating demands, and achieving practical ends that serve diverse interests.
4. Dealing with Barriers: Recognizing and addressing potential barriers, such as inequalities of power, income,
and information, is crucial for successful participation in planning processes.
5. Strategies for Negotiation: The text outlines various strategies to foster participation and mediate
negotiations, including indirect strategies, joint education, and focusing on underlying interests rather than
positions.
6. Learning from Practical Examples: The document includes case studies and examples that demonstrate how
mediators have successfully navigated complex negotiations and conflicts.
7. Building Relationships and Trust: Emphasis is placed on the importance of building relationships and trust
among stakeholders, which is essential for reaching mutually beneficial agreements.
8. Ethical and Practical Considerations: Ethical considerations and practical aspects of negotiation and mediation
are explored, including how to deal with historical grievances and the importance of acknowledging past
experiences while focusing on future possibilities.
In summary, the document provides a comprehensive guide on how to effectively manage participation in planning
processes where interests conflict, emphasizing the role of skilled mediation, understanding of underlying interests,
and the development of cooperative strategies to achieve mutually beneficial outcomes.
Design Thinking:
Design thinking is a methodology focused on empathetic, creative problem-solving and iterative development,
commonly utilized in various fields, including infrastructure planning and management. This approach is structured
into five distinct phases:
1. Empathize: This initial stage is centered around gaining a deep understanding of the users' needs and
viewpoints. Techniques such as interviews, observations, and research are employed to collect insights, crucial
for tailoring solutions to actual user requirements.
2. Define: Here, the insights from the empathize stage are consolidated to clearly articulate the problem or
challenge to be tackled. This involves analyzing data, recognizing patterns, and formulating a precise problem
statement.
3. Ideate: During ideation, a broad spectrum of ideas and solutions to the previously defined problem is
generated. This creative process might include brainstorming sessions, sketching, and other methods aimed at
producing a diverse set of potential solutions.
4. Prototype: This phase involves creating tangible or digital prototypes based on the ideas developed earlier.
The prototypes range from basic mockups to more sophisticated models, serving as a basis for testing and
refinement.
5. Test: The concluding phase is where the prototype undergoes user testing. Feedback is collected and the design
is iterated upon, refining the solution until it meets the users' needs effectively.
Applying design thinking in infrastructure planning and management can lead to more user-centric projects, as it aids
in understanding stakeholder needs and fosters improved negotiation and collaboration. Successful examples include
the redesign of hospital emergency departments and the development of new public transportation systems. This
approach emphasizes the significance of stakeholder involvement and a human-centered design mindset, valuing
empathy in comprehending user needs, and the importance of iterative prototyping. The broader impacts on social,
economic, and environmental factors are also considered, with the potential benefits of enhanced stakeholder
engagement, more efficient problem-solving, and heightened innovation.
Srirangapatnam - Design Thinking
The Srirangapatnam case study illustrates the effective use of design thinking in the redevelopment of Ranganatha
Nagara, a slum area. Here, the local municipal corporation aimed to transform the living conditions for its 283 residents
across 75 households. The project was unique in its bottom-up approach, prioritizing a deep understanding of the
residents' perspectives and needs.
Initial Empathy Phase: The project began with an extensive eight-month period of empathizing with the slum dwellers.
This involved detailed surveys conducted by the town municipal corporation in collaboration with local NGOs. The
surveys delved into the residents' lifestyles, income levels, and aspirations. Crucial questions were posed to each
household, focusing on what aspects of the community they wished to preserve, change, or introduce.
Ideation and Trade-offs: Following the empathy stage, the team entered the ideation phase. This involved synthesizing
the data collected to visualize potential solutions. Acknowledging that meeting every need was challenging, the team
considered necessary trade-offs, such as balancing the desire for prime water taps with the need for wider roads.
Prototyping and Testing: The final phase involved prototyping and testing the proposed solutions, refining them until
an optimal solution was identified. This led to the successful redevelopment of the slum, incorporating the residents'
needs and preferences.
Key Learnings from the Srirangapatnam Case Study:
1. Community-Centric Empathy: Understanding the community's needs and infrastructure requirements is vital
in urban redevelopment. Engaging deeply with residents helps in crafting solutions that truly resonate with
their needs.
2. Involving the Community: Design thinking's bottom-up approach, which includes community participation,
ensures that redevelopment projects are tailored to the actual needs of the residents.
3. Navigating Trade-offs: Urban redevelopment often involves balancing different needs and resources.
Identifying and managing these trade-offs is crucial for a practical and feasible redevelopment plan.
4. Importance of Prototyping and Testing: Testing various solutions and refining them based on feedback ensures
that the final redevelopment plan is effective and well-received by the community.
5. Community Ownership and Success: Involving residents in the redevelopment process fosters a sense of
ownership, which is a key factor in the success and sustainability of urban redevelopment projects.
The Srirangapatnam case is a testament to the power of design thinking in urban redevelopment, highlighting how
empathetic, community-focused approaches can lead to successful and sustainable outcomes.
PM 2.0:
Cultures and Institutions
The document "Cultures and Institutions" discusses the challenges in global construction projects involving participants
from multiple countries. Key points include:
1. Global Project Challenges: Differences in workplace norms, regulations, and cultural values across countries
contribute to project complexities and cost overruns.
2. Rise in International Construction: The increase in international construction activities leads to more complex
projects with uncertainties in technology, politics, economics, and the environment.
3. Case Study - Kattadam Inc.: The case study of Kattadam Inc. expanding into Europe highlights challenges in
high-rise development projects in France and Germany due to cultural and institutional differences.
4. Cross-National Challenges: Challenges in project planning, design, and construction phases arise from
differences in information gathering, aesthetics, building codes, materials, contracting practices, and
regulations.
5. Adapting to Institutional Differences: Adapting to local practices and regulations is crucial in global projects to
avoid misunderstandings and additional costs.
6. Neoinstitutional Theory: This theory explains how institutional environments influence behavior and
emphasizes aligning activities with the institutional environment to minimize costs and gain legitimacy.
7. Framework for Analyzing Global Projects: Institutional theory categorizes challenges into regulative,
normative, and cognitive conflicts, each requiring different resolution strategies.
In summary, understanding and adapting to institutional differences are crucial for the success of global construction
projects, helping minimize conflicts and costs.
Equator Principles
1. Equator Principles Definition: A commitment by financial institutions to reduce environmental and social harm
in infrastructure projects, advocating responsible lending and development.
2. Purpose: These principles provide a standardized framework to manage environmental and social risks in
projects, promoting sustainable practices and a code of conduct for financial institutions.
3. Project Categorization: Projects are classified into Categories A, B, and C, based on their environmental and
social risk levels, with Category A being high-risk.
4. Financial Institutions' Requirements: Institutions must conduct thorough impact assessments, create risk
mitigation plans, ensure transparency, disclose violations, and undergo independent reviews.
5. NGO Criticisms: NGOs demand more explicit and stricter principles, the creation of no-go zones for
environmentally costly projects, and improvements in transparency and enforcement.
6. Competitive Disadvantages: Concerns that adhering to these principles may put banks at a competitive
disadvantage, affecting their widespread adoption.
7. Global Sustainability Movement: The Equator Principles are part of a larger movement in sustainable
infrastructure development, aligning with various international initiatives and conventions.
8. Sustainability Challenges: The principles seek to balance economic, environmental, and social impacts,
ensuring comprehensive development without harming communities or the environment.
9. Effectiveness Debates: Discussions about the effectiveness of the principles center around their robustness
and the possible precedence of economic gains over sustainability.
10. Enforcement Challenges: Enforcing the principles is difficult due to economic interests and political influences.
11. Need for Stronger Frameworks: Questions arise about the robustness of existing frameworks like
environmental impact assessments, pointing to the need for more oversight.
12. Threats and Incentives for Adherence: Adherence is encouraged through potential sanctions and incentives
like the natural adoption of sustainability principles.
13. Quantifying Impacts: The triple bottom line approach quantifies economic, social, and environmental impacts
for a comprehensive sustainability assessment.
14. Quantification Challenges: Difficulties in measuring qualitative aspects, such as ecosystem damage and
cultural heritage loss, are acknowledged.
15. Qualitative Judgments: The balance between costs and benefits often involves subjective judgments,
highlighting the complexities in offsetting negative project impacts.
16. Project Assessment Objectives: Focus on environmental impact assessments, associating costs with resources,
and encouraging conservation efforts.
17. Market Value Assignment Difficulties: Assigning costs to resources like soil is challenging, despite some
resources having clear market values.
18. Assessment Framework: Involves quantifying emissions, evaluating ecosystem services, using functional
substitutability for valuation, and influencing decision-making.
19. Emissions Quantification: Life Cycle Assessment (LCA) measures inputs (land, labor, capital) and outputs
(product, pollutant, waste).
20. Ecosystem Services Evaluation: Differentiating between natural processes and benefits to humans, and
assigning environmental costs to these services.
21. Decision-Making Influences: Incorporating environmental costs into financial statements and replacing
affected ecosystem functions.
22. Case Study - Theme Park: Illustrates the environmental cost assessment of different pavement designs in a
theme park in China.
23. Accounting Standards Integration: Aiming to influence accounting practices to include environmental impacts
in financial assessments.
24. Challenges in Environmental Quantification: Recognizing the difficulty in measuring all environmental impacts
and their practical application in research.
25. CSR Applications: Viewing CSR spending as a cost and evaluating the impact of CSR initiatives on ecosystem
services.
26. Time-Dependent Valuation: Acknowledging changes in valuation over time, considering recurring costs and
technological advancements.
27. Complexity in Project Assessment: Recognizing the increased complexity in assessing large-scale projects like
dams and airports.
28. Advocacy for a Comprehensive Approach: Emphasizing the need for an approach that considers both
economic and environmental factors, aiming to minimize negative impacts for sustainable infrastructure
development.
NPM:
NPM (New Public Management) and Ensuring Effectiveness of Institutional Arrangements:
Creating Competition:

Competition is crucial for competitive pricing and resource allocation.

Encouraging contestability by removing entry restrictions promotes market competition.

Competitive contracting reduces corruption and ensures transparency in contractor selection.
Developing Effective Participation:

Participation from all sectors, including individuals and the private sector, is essential.

Success has been seen with community-based organizations and NGOs.

Participation should be a genuine objective, not a mere formality.
Reducing Risk:

Minimizing risk is vital for both public and private sectors.

PPP (Public-Private Partnership) projects, especially in BOT (Build-Operate-Transfer) format, distribute risk
between sectors.

Rigorous project monitoring from construction to operations is necessary.
Effective Regulation:

Regulation should be implemented judiciously with a well-defined framework.

Overregulation can significantly impact project savings.
Pricing and Financing:

Tariffs should cover operating costs and capital investment.

Consider various pricing structures based on demand and usage, such as Ramsey pricing and congestion
pricing.
NPM (New Public Management) Principles:
Strategic vs. Operational Management:

Distinguish between long-term strategic planning and short-term performance-oriented operational
management.
Necessity of NPM:

NPM aims to transform public administration with an entrepreneurial focus on efficiency and quality.

Equal treatment of private and public sector service providers is encouraged.
Requirements of NPM:

Clearly define responsibilities, with strategic management focusing on what to do and operational
management on how to do it.

Implement quality measurements and monitor performance outputs.
Instruments of NPM:

Key instruments include contract management, resource responsibility transfer, output orientation, and
personnel selection.

Information technology, quality management, and benchmarking play vital roles.
Implementation of NPM:

Successful implementation requires strong political will.

Efficient NPM can detect corruption and build trust among the people.
Conclusion and Reflections:

Shift from process-oriented to outcome-oriented approaches in infrastructure projects is emphasized.

NPM principles stress autonomy, customer orientation, benchmarking, and private sector involvement.

Challenges include corruption risks with increased autonomy and the need for a transparent and independent
regulatory framework.
The professor emphasized the importance of good governance, efficient decision-making, and a balanced approach to
involving the private sector while mitigating corruption risks. The comparison with the Cambodian case study provided
practical insights into these principles.
Delhi Airport:
The Delhi Airport case study involves the modernization and expansion of the Indira Gandhi International Airport (IGIA)
through a public-private partnership (PPP). This project, spearheaded by the Delhi International Airport Limited (DIAL),
a consortium led by the GMR Group, is a hallmark example of large-scale infrastructure development in a complex and
dynamic environment.
Context and Project Conceptualization:
The project was conceptualized against the backdrop of rapid economic growth in India during the 1990s, necessitating
the development of transportation infrastructure. The government of India prioritized the upgrade of civil aviation
facilities, including the Delhi airport, which was essential for sustaining this growth.
Project Development Phase:
1. Selection of Consultants: Various consultants were chosen for financial, technical, legal, and accounting
aspects of the project. Notably, KPMG was appointed to provide a roadmap for the project, recommending a
30-year lease period based on global examples.
2. Project Procurement and Bid Process: The process experienced delays and complexities, particularly after the
2004 national elections when the UPA government implemented changes to the project structure. The bidding
process involved technical and financial proposals, with significant focus on the management and development
capabilities of bidders.
Key Challenges and Strategies:
1. Political and Regulatory Risks: The change in government post-2004 elections and subsequent alterations in
the project's structure led to delays and investor uncertainty. To manage this, DIAL adapted its strategies to
align with the new government's vision, emphasizing collaboration and flexibility.
2. Financial and Construction Challenges: Cost overruns were a major concern, with the project cost escalating
significantly. DIAL managed this by introducing a Development Fee (DF) in 2009. However, this move faced
public opposition and legal challenges.
3. Operational Readiness: Transitioning to a high-tech operational environment was a challenge. DIAL
implemented the Operational Readiness and Airport Transfer (ORAT) process for efficient transition, ensuring
training and adaptation to new systems.
4. Stakeholder Engagement: The project faced resistance from various stakeholders, including NGOs and the
second-place bidder. Proactive engagement and communication strategies were vital in managing these
challenges.
5. National Facilitation Committee (NFC): The NFC, set up by the Prime Minister’s Office, played a crucial role in
coordinating between various stakeholders and resolving issues promptly, thereby facilitating smooth project
execution.
6. Innovative Project Management: DIAL used innovative techniques like the ‘Earned Value’ method for
monitoring project progress, which was critical in ensuring timely completion.
Project Outcomes and Key Learnings:
1. Successful Completion: Despite the challenges, the project was completed on time for the Commonwealth
Games in 2010. This was a significant achievement given the tight timelines and the project's scale.
2. Public-Private Partnership Model: The case exemplifies the complexities of large-scale PPPs in infrastructure
development. It highlights the need for strong government support, clear regulatory frameworks, and
adaptable project management strategies.
3. Governance and Auditing Concerns: Post-construction, the project faced scrutiny from various agencies,
including a report by the Comptroller and Auditor General (CAG), which raised concerns about financial and
operational aspects of the project.
4. Capacity Building and Stakeholder Management: The project underscores the importance of capacity
building, stakeholder engagement, and the need for adaptability in managing large-scale infrastructure
projects.
In summary, the Delhi Airport case study provides valuable insights into the governance, development, and operational
challenges of large infrastructure projects. It demonstrates the critical role of government support, effective
stakeholder management, and the ability to adapt to changing political and regulatory landscapes in the successful
execution of PPPs.
Analyzing the case of Delhi Airport's modernization and expansion, particularly the involvement of the Delhi
International Airport Limited (DIAL), provides insight into the various risks, impacts, and potential strategies from
Module 4 that could have been adopted.
Risks and Impacts in the Delhi Airport Case:
1. Political and Regulatory Risks: The change in government and the subsequent restructuring of project terms
led to significant delays and uncertainties. For instance, post the 2004 national elections, the United
Progressive Alliance (UPA) government implemented drastic changes to the project structure, impacting
investor confidence and altering project timelines.
2. Financial Risks: The project experienced a considerable increase in costs due to scope changes. For example,
by July 2010, the actual cost of the project was INR 12,587 crores, a significant jump from the initial estimate.
This necessitated the introduction of a Development Fee (DF) in 2009, which was met with public opposition
and legal challenges.
3. Construction and Operational Risks: The rapid pace of construction and the transition to a high-tech
operational environment posed significant challenges. The new runway was inaugurated in September 2008,
and the new international terminal, T3, was operational by July 2010, in time for the Commonwealth Games.
However, transitioning from the existing manually operated terminal to the new hi-tech one required extensive
training and adaptation.
4. Social and Stakeholder Risks: There were protests from various quarters, including NGOs and the second-place
bidder, against decisions like the levy of the Development Fee and other project aspects. This posed risks to
the project's public perception and legal standing.
Strategies from Module 4 and Their Feasibility:
1. Enhancing Negotiating Power: A more strategic approach in dealing with contractors and stakeholders could
have mitigated some of the challenges. For instance, developing better negotiation skills and fostering good
relationships might have eased the process of scope changes and cost overruns.
2. Applying Design Thinking: Adopting a user-centric approach could have helped in better anticipating and
addressing the needs of various stakeholders, including passengers, airlines, and government bodies. This
approach might have minimized resistance and enhanced operational efficiency.
3. Effective Participation and Collaboration: Inclusive decision-making in the early stages, involving all relevant
stakeholders, could have foreseen many challenges. The creation of the National Facilitation Committee (NFC)
by the Prime Minister’s Office, which included representation from all stakeholders, was a step in this direction.
Regular monthly meetings ensured that problems were addressed promptly, contributing significantly to the
project's timely completion.
4. Building Capacity and Adaptability: Given the project's complexity, there was a need for enhanced capacitybuilding among stakeholders and flexibility in project management. The adoption of innovative project
management approaches, such as the use of an 'Earned Value' technique by the civil contractor, was crucial in
ensuring project progress and timely completion.
Conclusion:
The Delhi Airport case exemplifies the multifaceted challenges encountered in large infrastructure PPPs. The project
navigated through complex political, financial, and operational terrains, highlighting the need for robust strategies in
stakeholder management, financial planning, and operational efficiency. While the project successfully managed
several challenges, a more proactive approach in stakeholder engagement, negotiation, and decision-making could
have further optimized outcomes. The case provides valuable lessons in managing large-scale infrastructure projects,
particularly in developing countries with dynamic political and regulatory environments.
The Mysore 24X7 Water Supply Project is a detailed case study of a public-private partnership (PPP) in the urban water
sector. This project was undertaken to address the water supply issues in Mysore city, India. Here's a summary of the
case:
Background and History

Mysore's Water Supply Legacy: Mysore was one of the first Indian cities to have a piped drinking water supply
in the early 20th century. The Vani Vilas Water Works Board (VVWWB) was established to operate and maintain
this network.

Mysore City Corporation (MCC): Initially part of the municipality, the MCC later took over the responsibility
for providing drinking water.
Project Need and Institutional Context

Aging Infrastructure: The city's water infrastructure was in disrepair, with a growing gap between supply and
demand, leading to substantial water loss and inefficiencies.

Karnataka Urban Water Supply and Drainage Board (KUWSDB): Along with MCC, KUWSDB played a significant
role in the city's water supply management.

Jawaharlal Nehru National Urban Renewal Mission (JNNURM): This government initiative aimed to upgrade
urban infrastructure, including water supply, and encouraged PPP models.
Project Conceptualization and Development

Karnataka Urban Development and Finance Corporation (KUIDFC): Involved in initiating the project under the
World Bank-sponsored Karnataka Urban Water Sector Improvement Project (KUWASIP).

JNNURM Involvement: The project received funding from JNNURM, which insisted on a 24X7 water supply as
a condition for grant sanction.
Project Procurement and Bid Process

Selection of Private Operator: Jamshedpur Utilities and Services Company (JUSCO) was selected as the private
operator to transform the intermittent water supply into a continuous, pressurized 24X7 system. The project
was structured into three phases: Preparatory, Rehabilitation and Operations, and Maintenance.
Challenges and Issues
1. Public Outcry: The privatization decision faced public opposition due to concerns about water tariffs and the
potential impact on the city's heritage.
2. Employee-Related Issues: The deputation of VVWWB employees to work under JUSCO raised concerns about
job security and operational control.
3. Collection Risk: JUSCO faced challenges in tariff collection, which was crucial for their remuneration.
4. Ambiguities in Project Scope: Discrepancies between project projections and ground realities led to significant
scope and cost adjustments.
5. Relationship Strains with KUWSDB: Operational issues and non-achievement of performance targets resulted
in a tense relationship and legal disputes.
Key Learnings

Stakeholder Engagement: The need for effective communication and involvement of all stakeholders, including
the local community, was highlighted.

Quality of Project Preparation: Accurate data collection and thorough project preparation are crucial for
realistic project planning and execution.

Contract Management: Flexibility in contractual terms and proactive management are essential for addressing
unforeseen challenges.

Procurement and Bid Process: The large variation in bid prices indicated the need for a more nuanced
approach in evaluating bids.
Conclusion
The Mysore 24X7 Water Supply Project underscores the complexity of PPP projects in urban infrastructure. It highlights
the importance of stakeholder engagement, accurate project preparation, adaptive contract management, and the
challenges of transforming traditional urban services through private sector involvement. The case provides valuable
lessons for similar urban infrastructure projects, particularly in developing countries.
The Mysuru 24X7 Water Supply Project, initiated to provide round-the-clock water supply in Mysore, faced several
challenges and risks post-award. These challenges and their impacts, along with potential strategies from Module 4
that could have been adopted, are outlined below:
Risks and Impacts:
1. Public Outcry Against Privatization: The decision to privatize water supply led to significant public opposition,
stemming from fears of losing the heritage of the VVWWB, potential exclusion of the poor from water supply,
and rising tariffs. This public resistance was fueled by a lack of information and transparency about the project
.
2. Employee-Related Issues: Employees of VVWWB feared privatization and potential retrenchments. The fact
that JUSCO managed these employees without control over their salaries created operational challenges.
3. Collection Risk: JUSCO faced the risk of collecting tariffs, relying on VVWWB employees who lacked motivation.
This situation was exacerbated when residents used more water than necessary, leading to higher bills and
increased public resentment.
4. Ambiguity on Project Approval: There was a significant discrepancy between the projected and actual
infrastructure requirements. JUSCO's decision to start rehabilitation based on an unofficially approved revised
plan led to a failure in meeting performance targets and increased scope ambiguity.
5. Relationship with KUWSDB and Default Notices: Relations between KUWSDB and JUSCO soured over time,
leading to default notices and mutual accusations of non-cooperation.
Potential Strategies from Module 4:
1. Enhanced Stakeholder Engagement:

Strategy: Proactively involving all stakeholders, including the public and employees, through extensive
consultations and transparent communication.

Feasibility: High, as it could have mitigated public outcry and employee fears, fostering a supportive
environment for the project.
2. Flexible Contract Management:

Strategy: Adapting contractual terms in response to unforeseen challenges, such as discrepancies in the project
requirements.

Feasibility: Moderately high, though dependent on the willingness of both parties (JUSCO and government
bodies) to renegotiate terms.
3. Effective Risk Allocation and Management:

Strategy: Clearly defining and allocating risks between public and private entities, especially in areas like tariff
collection.

Feasibility: High, as it involves upfront planning and agreement on risk-sharing mechanisms.
4. Transparent Bid Process and Evaluation:

Strategy: Implementing robust procurement reforms, including mechanisms to address bid variations.

Feasibility: High, as this would involve process changes at the institutional level.
5. Capacity Building and Training:

Strategy: Training for government bodies and JUSCO in contract management and stakeholder engagement.

Feasibility: High, as it would enhance the capabilities of both parties in managing complex PPP projects.
Conclusion:
The Mysuru 24X7 Water Supply Project's challenges highlight the critical importance of comprehensive planning,
stakeholder engagement, transparent communication, and flexible contract management in PPP projects. Adopting
strategies from Module 4 could have potentially mitigated many of the risks and improved the project's outcomes.
However, the successful implementation of these strategies would depend on the collaborative efforts of all parties
involved, including the government, the private operator, and the public.