Page 64 - Industrial plants

b. Value for money PPP projects deliver greater value j. The government or public authority still retains
for money compared with that of an equivalent strategic control of the overall project and service
asset procured conventionally. The combination k. The process can assist in the reform of the public
of design construction and operation outweigh the sector
higher cost of finance. PPP focuses on
procurement process on the whole life cost of the
project not simply on its initial construction cost. It Requirements
identifies the long term costs and assesses the for successful PPPs
suitability of the project.
c. Transfer the risk of performance of the asset to the • Political support political support at the policy
private sector. The private sector only realises its level is important for the private sector, because
investment if the asset performs according to its unless PPP is seen to offer continuing business
contractual obligations. As the private sector will opportunities, firms will be reluctant to develop the
not usually receive any payment until the facility is necessary resource that is required to bid for
available for use, the PPP structure encourages contracts.
efficient completion, on budget and without
defects • Enabling legislation PPP projects need to be
d. Buildings and services which would not otherwise supported by enabling legislation that is firmly
be affordable – this is a major benefit and helps embedded in the legal structure of the host
public authorities to take a long term strategic country. A key aspect of this enabling legislation
view of the services they require over a long is the existence of a concession law that can be
period. readily applied to projects.
e. The concept helps to reduce government debt
and frees up public capital to spend on other • Expertise Both the public and private sectors
government services must have the necessary expertise to deal with
f. Innovation and best practice. The expertise and the PPP process.
experience of the private sector encourages
innovation, resulting in reduced cost, shorter • Project prioritisation The government needs to
delivery times and improvements in the identify those sectors and projects that should
construction and facility management processes. take priority in the PPP process and undertake a
Developing these processes aids best practice. review of the viability of each scheme before the
g. Repairs and maintenance – assets and services project is procured. This avoids unnecessary
will be maintained at a pre-determined standard failures and high bidding costs.
over the full length of the concession
h. Enable investment decisions to be based on fuller • Heavy Deal flow and standardisation. A
information as it requires a defined analysis of regular and predictable flow of deals based on
project risks by both the government and lenders recognised risk allocation templates, assists the
at the outset. development of a successful PPP programme.
i. The tax payer benefits by avoiding paying higher Guidance on contract structure also helps to keep
taxes to finance infrastructure development costs down.

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