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  1. eSAR Discussion Series How can the World Bank help? P P P s & e G o v e r n m e n t Mark Dutz Randeep Sudan Andi Dervishi Stefan Haid

  2. What should a good PPP include? Agenda • What are PPPs – Mark Dutz • The IFC Perspective – Andi Dervishi • Various Case Studies – Randeep Sudan • Case Study US Portals – Stefan Haid eSAR Discussion Series

  3. What are PPPs? What are PPPs? Private Sector Participation (PSP) models Conventional procurement PPP continuum Full Privatization Public ownership of assets, services via a range of MT/LT contractual arrangements w/ varying level of risk transfer Government responsible for inv., operation & risks Privately-owned assets, publicly regulated w/ licenses specifying rights & obligations of private parties & State Service contracts: pub.inv., pvt.operation of discrete tasks Management and affermage (O&M) contracts:pub.inv, pvt. Operation & Maintenance of system DBO contracts: pub.inv., pvt.Design, Build & Operation BOT & full concession (DBFO) contracts: pvt.Design, Build (construct and/or rehabilitate),Finance & Operate/maintain increased risk transfer to private sector eSAR Discussion Series

  4. Why are PPPs desirable? What are the benefits of PPPs? • Risk transferto private sector • Commercial know-how & managerial skills • Best-practice technologies & innovation • Enhanced government accountability • Entrepreneurship& local enterprise development • Private finance • Government payments can be leveraged by citizen user fees and/or government cost savings Result: Faster deployment of better services eSAR Discussion Series

  5. What should a good PPP include? What are the ingredients of a good PPP? Contractual arrangement should be based on: • Substantial risk transfer • allocation of risks to parties best able to manage them • Quality of service & output specification • focus on services associated with procured assets • Performance-related rewards • payment only if performance standards met • M&E plan over life of contract • achievement of whole-life performance eSAR Discussion Series

  6. What are the steps? Project Preparation Service Provider Selection Contract Management 8. Contract Mgmt. (construction, commissioning, monitoring,dispute settlement, continuing communications • Service Need • (Output specs over time) 5. Bid Preparation (EOI/ Short listing, RFP) Bid Doc Approval 2. Option Appraisal (Report on options) 3. Business Case (affrdblty./public interest) 6. Bid Evaluation (prf. bidder, value for $) Project/ Funding Approval Project Finalization Review 4. Project Dev. (team, PSC, plan) 7. Final Negotiation (sign contract, finc. close) eSAR Discussion Series

  7. What are pre-requisites for good PPPs? What are the pre-requisites? Clear policy and legal frameworks • Rationale for use of PPPs & legal powers to contract out services • Dispute resolution procedures • Oversight of fiscal costs Oversight procedures providing checks & balances • Project preparation – business case & value-for-money • Provider selection – guidelines for pre-qualification & tender • Contract management – M&E, performance-linked payments/penalties Support functions • Information dissemination – data, networking, training • Guidance – model contracts, tools, case studies • Catalytic functions – political/advisory support, funding Needed: Transparency, Competition, Monitoring, Empowered Public eSAR Discussion Series

  8. Special Example:Unsolicited Proposals • Rules to maximize transparency and competition • balance innovation stimulus with value-for-money • give private sector a framework within which to prepare proposals • Options to reward valid intellectual property • purchase concept and then award thru competitive bidding • offer proponent pre-defined advantage in a competitive bidding process: • bonus system (e.g. the original offer is selected as long as it falls within a stipulated percentage of the best offer, within 10% of the lowest offer) • Swiss challenge system (third parties allowed to make better offers, ‘challenges’ for project during designated period, with proponent then given right to counter-match superior offers) eSAR Discussion Series

  9. What can we do? What can we do? AAA: • Analysis of government’s ability to identify, procure and manage PPPs. TA: • Drafting/implementing policies & regulations • Building institutions • Training • Building support among stakeholders eSAR Discussion Series

  10. What can we do? What can we do? cont’d Financing support: • Providing IFC advisory or financing services for transactions • Supporting PPP preparation via project development funds • Funding PPPs via loans/credits where subsidies to complement user fees justified (e.g. OBA) • Providing financing beyond tenor available in capital markets • Providing credit enhancements to mitigate govt. performance risks (e.g. Partial Risk Guarantees, MIGA Investment Guarantees) eSAR Discussion Series

  11. The IFC Perspective:The Government Efficiency Curve Pre-privatization government Today’s Govt. Core Govt. eSAR Discussion Series

  12. The IFC Perspective:Natural Outsourcing Path eSAR Discussion Series

  13. Case Study:GCNet (Ghana Community Network) Trade facilitation system • Partners: • Equity $5.3 million • Customs, Excise and Preventive Services (20%) • SGS Switzerland and 3 other partners (80%) • Fee: • 0.4% ad valorem on imports • Results: • 49% increase in revenues in first 18 months • Clearance times at international airport reduced from 6 days to under 4 hours eSAR Discussion Series

  14. Case Study:Andhra Pradesh Broadband Project • Connecting 23 districts, 1127 mandals and 21,000 villages with 80,000 kms of fiber • Bandwidth from 100 Mbps to 10 Gbps • Investment of $90 million by private sector • Consortium consists of fiber optic manufacturer, Cable television provider, Railtel, VoIP company, ISP among others • Government contribution towards equity $5.7 million • Free right of way permissions • Government as anchor client eSAR Discussion Series

  15. Case Study:e-Procurement Projects • South Korea • Investment of ~$80 million in the Government e-Procurement System (GePS) • Savings of $2.8 billion annually • India (Andhra Pradesh) • Partnership with Commerce One • Investment by private sector partner ~$1 million • Payments by bidders • Substantial savings to departments • Issues: software in escrow account eSAR Discussion Series

  16. Case Study:e-Government Portal Typology © Stefan Haid eSAR Discussion Series

  17. Case Study:Categorization of the 50 US State Portals © Stefan Haid eSAR Discussion Series

  18. PPP: Utah Interactive Rankings: Top 5 Development: Private Operation: Private Funding: Private Est. Cost: 5m+2m p/a Business Model: Transaction fees on eServices Commentary: An ideal self-funding eGov portal Case Study:Portal Type 4 - Utah © Stefan Haid eSAR Discussion Series

  19. Makes maximum use of private sector potential Latest technology transfer due to private investment Little to no tax money is spent on the eGov portal Reinvestment budget Case Study:Characterization of Portal Type 4 Advantages Disadvantages • High transaction costs due to PPP with private firm • Limited control for state • Discontinuity if private firm leaves PPP prematurely • Allocative distortions if transaction fee is too high © Stefan Haid eSAR Discussion Series

  20. Private sector companies can provide... industry expertise to develop and operate portals. sufficiently trained and qualified human resources. enough money to finance an entire eGov portal. Case Study:Lessons from US Portals • Private sector companies need... • a viable business case with an attractive ROI. • sources of revenue like online transaction fees. • government guarantees and transparent regulation. • a long-term relationship with their public partners. © Stefan Haid eSAR Discussion Series

  21. What should a good PPP include? For More Information • KPMG: Public Private Partnerships/Private Finance Initiatives: An Introductory Perspective: • Green Paper on Public Private Partnerships and Community Law on Public Contracts and Concessions (European Union): • Using Hybrid Funding Strategies to Support the State of Arizona (Development of Portal): • National Association of State Chief Information Officers: Innovative Funding for Innovative State IT: New Trends and Approaches for State IT Funding, Version 2.0., November 2003. • • eSAR Discussion Series

  22. eSAR Discussion Series Thank You