Simply stated, PPP (Public-Private partnerships) are contracts between private sector entity and a government body that call for a private partner to deliver a desired service and assume the associated risks. The government is relieved of financial and administrative burden of providing the service, but retains an important role in regulating and monitoring the performance of private partner.
PPP as a tool to promote e-government
The first question that needs to be answered whether implementing and running an ICT project would be preferable to public sector financing? Is it going to free up public sector resources for projects that have higher social returns? And second – whether private sector would be able to perform more efficiently than government. The idea is also to get as many as possible competitive bids so that government gets value for money and maximum technical innovation.
“We are really in a public-private partnership as we run this country in some form or another” – Dany Williams
Forms and Models for PPP Projects
a. Service contracts, or Outsourcing
Service contracts are legally binding agreements between a government authority and private partner to perform specific non-core tasks. These are usually short term contracts and avail government of private sector expertise. They save time and money on non-core services such as website design and management, tariff collection, janitorial services or security services.
b. Management Contracts
Management Contracts transfer responsibility of operations and maintenance of government-owned entity to the private sector. Asset ownership and commercial risk remains with the government, while management control and authority are transferred to private partner, which applies its expertise. Compensation may be in the form of fixed fee or may be linked to performance indicators.
There are 2 ways in which lease agreements functions –
1. The private sector builds an asset and leases it to State for operations.
2. The private sector operates an asset owned by State and pays the State rent, collecting fees from end users.
While the latter is common in physical infrastructure, the first form of lease is common for e-Government initiatives. The right to commercialization of technology is retained by private sector and leased to government agencies.
d. BOT and Variants
BOT: Build, Operate and Transfer
BOO: Build, Own and Operate
BOOT: Build, Own, Operate and Transfer
DBFO: Design, Build, Finance and Operate
The above forms of contracts are specifically designed for new contracts that require extensive rehabilitation. Under such arrangement, private operator designs, builds and operates for a certain period of time, after which all rights and title is relinquished to government. Under BOO, the asset remains indefinitely with private partner.
Under a concession, the Concessionaire (private partner) bears the responsibility of services, including operation, maintenance, and management, as well as capital investment. The fixed assets either remain the property of public, or at the end of concession period the ownership is reverted to public agency.
The e-Government PPPs must include partnerships for management and expansion of ICT infrastructure. There is scope for flourishing e-Government PPPs at all levels – National, regional and municipal level. However, for private enterprises to be keen on PPP projects, there is a requirement of policy ecosystems.
Key Policy Objectives and Issues of PPP
Extending PPPs to support broader reforms can onset new agenda which is beyond mere efficiency improvement. A policy framework needs to be set up which includes following elements:
- Government bodies to focus on policy making, but delegate operational decision making to public contracting agencies
- Regulation & performance monitoring of these public contracting agencies or any private agencies be done an independent regulatory body, or by a dedicated contract compliance office (CCO).
- Operation of public assets and networks, and the delivery of services should happen through transparent, competitively-procured PPPs.
However, PPPs should not be viewed by Government as a means only to transfer risks, save public money or do unviable projects. Projects that are already technically, environmentally, economically and socially feasible should qualify for PPP considerations.
Key legal and regulatory pre-requisites for PPP in E-Government
A well designed PPP enabling environment includes a legal and regulatory framework that clearly articulates government policy on PPP in e-Government. These include:
- PPP Laws: Most countries are establishing an “umbrella” legislation that harmonize the key legal issues in PPP across sectors. The law will address the rights and obligations of parties, limits to ownership, financial requirements, public roles and responsibilities, and dispute resolution responsibilities.
- PPP Central Body: To spearhead PPP initiative in government agencies, a central coordinating unit may be established. The objective of the central unit is planning, guiding and implementing PPP as required.
- PPP Guidelines: Establishing guidelines on how PPP projects are planned, approved and awarded creates a predictable environment in which private partners are willing to engage. The fundamental areas where standardized guidelines would be useful are:
- Project Identification: The government agency must evaluate and express the need of PPP projects rather than relying on PPP body.
- Project prioritization: If there are more than one candidate for potential PPP project, there should be guidelines for determining project priority.
- Project Feasibility Study: Once priority projects are determined, there should be guideline for carrying out project feasibility analysis.
- Project Approval: Once project is determined to financially and technically feasible, there should be guidelines on determining which government departments would approve project readiness.
- Project procurement guidelines: These guidelines should include procedures for transparent bidding process, method for evaluating bids and contract award.
- Financial Instruments: There are guidelines to evaluate whether implementing the project in PPP mode is a good value for money. To ensure that private enterprises are interested in project, some governments also offer sovereign guarantees. Following methods are commonly used in evaluating PPP projects:
- Public Sector Comparator
- Value for money framework
- Contract Compliance and Dispute Resolution Procedures: Government and regulatory bodies ensure that the terms of the contract and prevailing laws and regulations are complied. Contract must also state dispute resolution procedures.
- Asset Ownership Guidelines: E-government projects are different from other project, where upkeep of assets does not helps with technology obsolescence. In some cases, assets are also rolled out clients other than government. Therefore there is need for some allowance for asset ownership by private partner during and after the end of contract.
- Labor Laws: Government employees are often wary of displacement due to PPP. It is therefore important to seek consultation from all stakeholders including labor organization from the start of PPP initiatives. As and when needed, labor laws should be amended to make employees move from private to public enterprises and vice versa more amenable.
- Tax Laws: In e-Government sector, tax laws can be amended to reduce import and duty taxes on computer, server and other internet based hardware as well as greater investment in technology based solutions and services.
- Digital Signature Laws: A number of implementation would require digital signature as an important tool for providing authenticity to digital documents. Having a digital signature law gives the same level trust and assurance as any physically signed document.
- Sector Regulation: Each sector must select the regulation that best meets national ambition. There is no universal answer. However, regulations should not throttle free function of private enterprise for PPPs to grow.
- Independent Regulator: It is important to have mature regulatory regime which are independent, transparent, accountable and consistent.
- Competition Laws: Competition is healthy that provides quality and value for money to end users. Competition laws drive market structure, and therefore it is important that players are given level playing field.
- Stakeholder Consultation: A system of timely and prior consultation with stakeholders can help build support for change and ensure long term stability.