NAMIBIAN MINISTRY OF HEALTH
AND SOCIAL SERVICES (MoHSS)
HEALTH PUBLIC-PRIVATE PARTNERSHIPS
(PPP) CONFERENCE
8th December 2014
Infrastructure: Buildings
(Infrastructure delivery and planning)
Agenda:
Page
1. Models in Public-Private Partnerships (PPP’s)
5
2. Management of PPP’s
14
3. Agreements in place for Infrastructure
27
4. Partnerships and its Committee’s
29
5. Lessons Learnt
32
2
Who am I?
 Bachelors of Science in Construction and Project Management
 10 Years with a major contractor in the United Kingdom
 7 Years leading Consulting teams in the UK and South Africa
 Led biddings team in the UK for major PFI /PPP Hospitals
 Supported the South African National Treasury and National Department of
Health with various hospital project Feasibility Studies
 Managing Director, Profica
– Development, Project and Construction Management across African Continent
3
SECTORS
 Social Infrastructure
 Healthcare
 Education
 Mixed-Use
 Retail & Shopping
Centres
 Industrial & Processing
Plants
 Warehousing &
Logistics
 Residential & Housing
 Educational &
Institutional
 Hotel & Leisure
 Infrastructure
Libya
Algeria
Mauritani
a
Egypt
Mali
Niger
Gambi
a
Chad
Sene
gal
Guinea
Bissau
Guine
a
Sie
rra
Le
on
e
Cote
d’Ivore
Burk
ina
Faso
Gh
an
a
Eritre
a
Sudan
Djibo
uti
To
goBe
nin
SERVICE OFFERING
 Technical Advisory
(Public-Private
Partnerships)
 Development
Management
 Construction
Management
 Project Management
 Integration
Management
 Scope Management
 Time Management
 Cost Management
 Quality Management
 Human Resource
Management
 Communications
Management
 Risk Management
 Procurement
Management
Tunisia
Profica
Nigeria
Cameroon
Equit
orial
Guine
a
Ethiopi
a
Central
African
Republic
Gab
on
Rwanda
Democratic
Republic of
Congo
Ugand
a
Kenya
Buru
ndi
Tanzania
Angola
Zambia
Zimbabw
e
Namibia
Botswana
COMBINING SERVICES TO
ENSURE THE HANDS-ON
DELIVERY OF SUCCESSFUL
PROJECTS
South
Africa
Swazil
and
Lesot
ho
4
Section 1: Models in Public-Private Partnerships
Two types of PPPs are specifically defined:
 Where the Private Party performs an Institutional/Municipal function;
 Where the Private Party acquires the use of State/Municipal property
for its own commercial purposes
 A PPP may also be a hybrid of these types (Concessions, Leasing, JV’s
BOT, etc.)
5
Typical PPP Project Cycle
Typical PPP Project Cycle
Project Inception
Government
Phase II
Feasibility
Needs Analysis
Option Analysis
Project Due Diligence
Value Assessment
Economic Evaluation
Procurement Plan
Government
Procurement
(1) Request for Qualification (RFQ) –
Pre-qualification of Bidders
Phase III
Project Preparation
Phase I
Responsibility
(2) Request for Proposal (RFP) –
Selection of Preferred Bidder
(3) Negotiations with Preferred Bidder
Government and
Private Party
Phase IV
Development /
Construction
Phase V
Delivery / Operation
Phase VI
Project Term
(4) Finalisation of PPP Agreement and
Management Plan
Exit
Private Party with
Government
Monitoring Role
Government and
Private Party
6
Asset & Infrastructure Procurement
National Infrastructure
Plan
A New Virtuous Circle
Strategy
A New Approach to
Financing
Improved
Flexibility
Funding &
Financing
Change
Placing responsibility & risk
where it can best be managed
Operation
Construction
Government
Construction Strategy
7
The Established Construction & Infrastructure
Delivery Models
Traditional
Design &
Build
Prime Type
Contracting
DBO & BOT
PPP
PFI
Long Term Relationship
Perceived Risk Transfer
Flexibility
Commercial Competitiveness
8
Evolving Models
Capital
Funding
Loan /
Grant
Funding
Alliancing
Partnering
Competitive
Partnership
Private
Developer
Scheme
LEP / LIFT
Local Asset
Backed
Vehicles
PPP’s
Long Term Relationship
Perceived Risk Transfer
Flexibility
Commercial Competitiveness
9
PPP’s historically...
 PPP’s enable public sector to spread the cost of infrastructure
 It gets clear private sector buy-in to risk
 It encourages a whole life cost approach to be taken, ignoring cash
affordability constraints
 It drives on time delivery and the maintenance of defined service
standards
 PPP’s can be off balance sheet
10
Some of the real issues linked to PPP’s
Financiers have differing approaches to risk
The project finance model needs to recognise this
Real risk is in construction (and perhaps life cycle)
Hence the construction industry has a clear role & responsibility to drive
efficiency
Speed (or lack of) to market is a huge issue
Adds significant cost and risk – faster procurement is much more attractive
Market Confidence is essential
Need to seek to reduce bidding costs whilst still delivering VfM
The procurement route needs to be appropriate to the risk profile
Select a procurement option with care, once the long term business needs are
properly assessed
And …
11
The way the Ministry manages their programmes plays a key
role in achieving success and value for money
So:
Effective Programme & Project Management is Essential to
Success
12
And what must Government do?
Maintain a stable and credible policy and regulatory framework for
infrastructure across the sectors,
so that investors can plan and invest with confidence,
and political and regulatory risk is minimised.
And give confidence regarding the project pipeline
13
Section 2: Management of PPP’s
Phase I – Feasibility
The objective of the feasibility study is to enable the Ministry to make an informed decision as
to the best option for the redevelopment or new build of a facility. The feasibility study will
calculate the affordability and value for money to the government through comparing the PSC
and PPP models.
The feasibility will also assess the marketability of the project and the opportunity for the
Ministry to raise additional funding should this be required.
New South Glasgow Hospital (1,109 beds)
14
Approach and Methodology
Needs Analysis
 This stage is to obtain an understanding of the Ministry’s needs and requirements from the
Project.
 The needs analysis will document the User Requirements for the hospital, the service levels
to be achieved and any other User driven aspects of the development that the Ministry
might wish to achieve.
 This stage in the process is critical in that it is the foundation on which the rest of the project
is built.
Options Analysis
 The Option Analysis stage is used to identify, at a high level the options available to the
Ministry, including delivery and service options as well as procurement options.
 The site has been identified and thus there will not be an option assessment for the site. The
process will culminate with the selection of the Preferred Option.
 The options agreed upon will be evaluated in terms of their benefits, constraints, risks,
service delivery, market capability and other qualitative aspects.
15
Approach and Methodology
Text...
16
Approach and Methodology
Project Due Diligence
 The Project Due Diligence stage is conducted to complete technical due diligence in relation
to the preferred option.
 Existing data from the previous work or new data is used to assess the suitability of the site
and any associated costs.
 The Engineers will carry out a review of the utilities and services available to the site and
assess their suitability for the envisaged project. The technical site review will include a
desktop review of the geotechnical characteristics of the site, the utility services (water,
electricity, sewerage, and telephone), access, planning constraints, future infrastructure
development, surrounding development planning, space standards, technology and security
requirements.
17
Approach and Methodology
Value Assessment
 The objective of the VfM Assessment stage of the Project will be to determine the overall
feasibility of the Project, having regard to the project needs, the preferred option and any issues
identified from the Project due diligence. The VfM Assessment is conducted in the following
stages:
 Project specifications – the Project specifications will be amended, as appropriate, and costed for
the purposes of input into the financial models, such specifications shall include the Department’s
user requirements, the output specifications, availability and performance standards;
 Whole life-cycle costing – the capital, operating and lifecycle costing of each element of the
Project shall be conducted at this stage. The whole life cost carried out at an elemental level will
include the capital costs, operating costs including consumables, maintenance costs, and
refreshment cots.
 Risk Analysis – the Advisor, in consultation with the Project Team, will workshop the risks in the
Project and will prepare a comprehensive Risk Allocation Matrix. The risk matrix will involve the
identification of the risks, allocation of the risk to Government or the Private Party, the probability
of a risk event occurring and the consequential value of a risk event. The risk quantification is an
important input to the financial model and impacts the resulting value for money.
18
Approach and Methodology
Procurement Plan
 Development of procurement strategy and timelines
Reference Design
 The design brief requires a clear vision for the functionality of the hospital based on design
principles derived from the client department’s strategic plan. This will require input from
various key stakeholders. The methodology should includes engagement with clinical and
technical user groups which will be led by our Clinical and Architectural team.
 Design principles that underlie the approach to good hospital design:
 Excellent clinical functionality
 Listening to the client, clinicians and user groups
 Therapeutic design, and a building environment that generates a feeling of well-being
in patients, staff and visitors
 Value for money – not just in terms of the capital cost, - but over the whole life cycle
of the facility.
19
Approach and Methodology
Phase 2 – Procurement
 Prepare RFQ
Indicative Timeframe
2 Months
 RFQ Release, Evaluation and Shortlist
 Draft RFP and Evaluation Manual
4 Months
 Draft Project Agreement and Technical Schedules
4 Months
 Issue RFP
 RFP Response Period
7 – 9 Months
 Respond to Bidders Written queries
 RFP Evaluation
2 Months
 Appoint Preferred Bidder
 Negotiations to Financial Close
4 – 6 Months
 Financial Close
20
Efficiencies in Procurement and the Delivery of
Construction
 Construction Procurement is different from procurement of most other commodities and
services
 Any procurement (particularly complex procurements) must adopt a Gateway process to
make sure a project is in a fit state to progress
 Early Contractor Engagement and Integration bring real and measurable benefits
 Bundling contracts and the establishment of frameworks allow the centre to drive required
quality, service and behavioural standards
21
The problem...
Research directs us to a new approach:
Lack of Integration
From:
Poor collaboration in
problem solving
Adversarial
approach
Short term
relationships
Poor customer
focus
No supply chain
management
Lack of learning
culture
Lowest price
Poor Health & Safety
record
22
The Problem
Lack of Integration
To:
Poor collaboration in
problem solving
Adversarial
approach
Poor customer
focus
Better Performance
Construction meets user
requirement
Short term
relationships
Lower whole life & operational costs
Greater cost and time predictability
Lack of learning
culture
Eliminate waste
No supply chain
management
Lowest price
Poor Health & Safety
record
23
The desired Culture Shift
From
To

Poor management

Leadership

Risk adverse culture

Risk assessment and mgt

Integrated teams

Reviews and decisions




Design & construction in
isolation
Poor project flow
Non-value oriented approach
to procurement

Design quality and value for
money
Misinterpretation of need for
public accountability
24
Achieving Excellence
Management & Culture Change
 Commitment and Leadership
 Empowerment and Skilling
 Consistent and Skilled Project Management
Measurement
 Standard Key Performance Indicators
 Post Project Implementation Reviews
 Client Performance Surveys
25
Achieving Excellence
Standardisation
 Key standard practices on:
 Procurement decisions on total value for money
 Use of risk and value management
 Output / performance specifications
 Whole life costing
 Robust change control
 IT and standardised document handling
Integration
 Teamwork and partnering
 Procurement strategies – focus on:
 Design & build
 PPP
 Prime contracting
26
Section 3: Agreements in place for Infrastructure
Phase 1: Feasibility Study / Business Case
Feasibility Study
Relevant Treasury, Finance and Ministry of Health Approvals
Land Ownership
Reference or Sample Design (Optional)
27
Section 3: Agreements in place for Infrastructure
Phase 2: Procurement
 PPP Agreement
 Common Terms Agreement (CTA) - Lenders
 Construction Subcontract
 Operations Subcontract
 Private Party Proposal
 Output Specifications
 Clinical & Operational Narratives
Design & Build
 Mechanical, Electrical and Plumbing
 Medical Equipment
 FM Services
28
Section 3: Agreements in place for Infrastructure
Phase 2 Procurement (cont’d)
 Works Programme
 Independent Certifier (IC) Agreement
 Payment Mechanism
 Reviewable Design Data (RDD)
29
Typical Structure
Typical Project Finance
Structure for a PPP
Institution
Shareholders
Shareholders
Agreement
Construction SubContract
Construction SubContractor
PPP Agreement
Direct Agreement
Private Party
Financing
Agreement
Lenders
Operations SubContract
Operations SubContractor
30
Lesotho Hospital PPP
31
Section 5: Lessons Learnt
Planning, Planning, Planning
1. Develop a clear Brief
 Adopting international best practice
2. Appoint the right team (Advisors, Specialist etc)
 Adopting international best practice
3. Consultative Meetings with bidders during the RFP process
 Adopting international best practice of engaging in robust and frank consultative meetings
with individual bidder teams during the RFP exposure period. It’s possible achieve effective
results in a manner that would ensure fairness and transparency during the process and thus
realise the considerable benefits of this practice for the Project.
 It is a proven observation that those projects which undertake this practice have easier
evaluations, are able to select a preferred bidders quickly, spend less time in negotiations
and thus reach financial close sooner than those projects which only rely upon a written
question and answer process.
32
Section 5: Lessons Learnt (cont’d)
4. Client to establish Technical and Clinical Lead teams
 Create specialist teams for the technical and clinical work streams. These teams will have
consistent membership over time, delegates should be avoided if at all possible (unless both
principle and delegate routinely attend together). Each team would be allocated a terms of
reference and each team member delegated specific areas of responsibility.
 Teams tasked to interface with the TA team and assist in the process of clinical planning, the
development of the PSC design solution, Output Specification and the PPP Agreement.
5. Academic single point of contact for interface with TA Team
 Similar concept to the one above but rather focused on the academic / higher education
stakeholder group. The principle is the same, a single point of contact will make the process
of creating the documentation for the project and initially arriving at an accurately
articulated solution much simpler and increasing the probability of a high quality outcome.
33