All About Public-Private Partnership

1.      What is a PPP?

PPP is a mode of project implementation where the government enters into a long-term partnership with private entities to fund, undertake and deliver public services and accelerate infrastructure development while at the same ensuring reasonable profit for the latter’s investment. Its success depends on the terms and conditions for ensuring quality and quantity of the project as well as risk-sharing.

2.      On funding and implementation strategies. How government projects are normally financed and implemented?

THREE (3) BASIC MODALITIES

Build-Operate-Transfer (BOT) and Variants

·         TRANSFER IMMEDIATELY

1.         Build and Transfer (BT)

2.         Build-Transfer-and-Operate (BTO)

·         TRANSFER AFTER COOPN PERIOD

1.         Build-Lease-and-Transfer (BLT)

2.         Build-Operate-Transfer (BOT)

3.         Contract-Add-and-Operate (CAO)

4.         Develop-Operate-and-Transfer (DOT)

5.         Rehabilitate-Operate-and-Transfer (ROT)

·         NO TRANSFER

1.         Build-Own-and-Operate (BOO)

2.         Rehabilitate-Own-and-Operate (ROO)

3.         Other variations: approved by the President

4.         Joint Ventures (JVs)

5.         Concession Agreement

3.      Based on your basic understanding on PPP as a tool for project implementation. Who are the normal Implementing/ Procuring Agencies for PPP projects?

·           National Government Agency

·           Government-owned and Controlled Corporation

·           Government Financial Institution

·           Local Government Units

·           Partnerships: PPP/BOT or JV

·           Private Investors

4.      Based on your understanding, why pursue PPPs in urban plan implementation?

·         To deliver basic public services which require big financing cost

·         To accelerate infrastructure development in the country

·         To encourage private sector participation in the economic development of the country.

5.      Based on your understanding, who normally pays for PPP projects?

      Sources of Funding for PPP Projects

·         Commercial loans

·         Foreign investment

·         Investment bank

·         Bonds and stocks may be floated by LGU

·         Mutual funds

·         Interpersonal loans

·         Supporting resources

·         ODA – Official Development Assistance (grant or loan)

6.      Enumerated are the normal possible projects under PPP for your easy understanding and guidelines. In your own words, explain each type and please limit answer to a paragraph for each type:

      A. Hard Projects – are physical infrastructure projects like the following:

·           Highways, including expressways, roads, bridges, interchanges, tunnels, and related facilities;

·           Railways or rail-based projects that may or may not be packaged with commercial development opportunities;

·           Non-rail based mass transit facilities, navigable inland waterways and related facilities;

·           Port infrastructures like piers, wharves, quays, storage, handling, ferry services and related facilities;

·           Airports, air navigation, and related facilities;

·           Power generation, transmission, sub-transmission, distribution, and related facilities;

·           Telecommunications, backbone network, terrestrial and satellite facilities and related service facilities;

·           Information technology (IT) and data base infrastructure, including modernization of IT, geo-spatial resource mapping and cadastral survey for resource accounting and planning;

·           Irrigation and related facilities;

·           Water supply, sewerage, drainage, and related facilities;

·           Education and health infrastructure;

·           Land reclamation, dredging and other related development facilities;

·           Industrial and tourism estates or townships, including ecotourism projects such as terrestrial and coastal/marine nature parks, among others and related infrastructure facilities and utilities;

      B. Soft Projects – are physical projects that are necessary in the delivery of services like health, education etc. Under PPP, these include the following:

·         Government buildings, housing projects;

·         Markets, slaughterhouses, and related facilities;

·         Warehouses and post-harvest facilities;

·         Public fishports and fishponds, including storage and processing facilities;

·         Environmental and solid waste management related facilities such as, but not limited to, collection equipment, composting plants, landfill and tidal barriers, among others; and

·         Climate change mitigation and adaptation infrastructure projects and related facilities.

      C. Bundling – is a combination or a package of soft and hard projects. For example, reclamation project which is a hard project combined with a soft project like socialized housing.

7.In your own understanding from all the readings I sent on PPP as a major tool for urban plan implementation, what influence the determination of the usual contract life for a PPP project?

The contract life of a PPP project depends on the ability of the project proponent to recover its investment and maintenance and operating expenses which can be raised by collecting tolls, fees, rentals or other charges from facility users.

8.      Enumerated are the typical risks in PPP. In your own word, explain each risk (Note: please limit answer to a paragraph for each risk):

A.            Policy and Political

Change in political landscape or change in leadership may mean policy changes as well. Risks in this area may involve government not honoring contracts. Worst case scenario is when the government nationalizes or expropriate the project for whatever reason.

B.             Economic and Fiscal

Currency and interest rates pose a threat to PPP projects. Weakening of the currency and the increase in interest rates mean an adjustment to the financial obligation of the implementing agency.

C.             Legal and Procedures

Change in law or force majeure may threaten the enforcement of the provisions of the contract.

D.            Environmental and Spatial

Complying with the environmental and spatial regulations may mean additional cost to the project especially that during the implementation stage, the IA is required to prepare and implement the environmental management plan.

9.      In Urban Plan Implementation using PPP as a tool, how are risks spread between parties?

Normally, risk is allocated to parties that has the most capacity to cope up, control and mitigate it. In so far as legislation and government policies are concerned, it is the government that take risks. For project’s operation, it is the private sector. At the start of project implementation, risks allocation should be clearly emphasized in the contract. If risk allocation is not clearly defined, a conflict might arise later.

10.  How are risks assessed in terms of certainty and impact based on a) Likelihood and b) Significance?

Risks are assessed based on the following areas including market, technical, financial, economic, distributional analyses. There specific matrices being used to determine the certainly and impact of risks.