Project Management PPP

Anamitra Lahiri Ashok Prasad Avaya y Kumar Agasi g Daneshwar Kumar Deepak Kumar Acharya

WhatisaProject?

Temporary

Characteristics of Projects

Unique

Temporary Definitivebeginningandend Unique Newundertaking, undertaking unfamiliarground

Existing Scenario
MosttownsandcitiesaregrowingLikethis!

Quality of life

How we cope, p , presently p y

BACKGROUND
Continued growth rate of an economy rests on the provision of a

Quality infrastructure. 8 % of f th the G Gross D Domestic ti P Product d t or GDP needs d t to b be i invested. t d Fund investment of over US $ 494 billion has been conceived of according to the 11th Five Year Plan with effective from 2007 to 2012. 2012 The investment sectors under consideration includes: Telecommunications, Electric power, water transport, Road, Rail, air, water supply as well as irrigation. Amounts to about Rs. 20,27,169 croe according to 2006-07 prices. In order to meet such demands, various Public Private Partnerships or PPPs are being promoted for implementation of infrastructure projects

PPP Approach
Goal Need PPP approach

Attract private investments for

infrastructure projects

Lack of Budgetary Resources Need to improve efficiency in service delivery Private Sector contribution for:

- Financial investments - Best Management practices - Efficiency in service delivery - Efficient use of capital resources - Providing institutional commitment to project - Project Development & Selection of Developer - Viability gap funding (VGF), if any

Public Sector contribution limited to:

WhatisPPP?
It Is a Public Private Partnership.

A partnership between the public sector and the private sector for the p purposes p of delivering gap project j or a service traditionally y provided by the public sector. At the heart of every PPP project is :

To create better value for money (VFM) through g the exploitation p of f p private sector competencies and the allocation of risk to the party best able to manage it.

FormsofPPP
TherearesixformsofPPP: CreatingwiderMarket. Privatefinanceinitiatives(PFI). JointVentures. Partnership pCompanies. p Partnershipinvestments. Franchises. Alltheseformscanbegroupedasfollows: BOT Build,Operate,Transfer BOO Build,Own,Operate BOOT Build,Own,Operate,Transfer DBFO Design,Build,Finance,Operate DBO Design, g BuildandOperate p ManagementContract

Sponsors
EPCContractor Returns Investment

Service Government

SpecialPurpose Vehicle(SPV)

Debtservice
Creditagreement

Lenders,e.g.. Lenders eg Banks, Financial Institutions

Grant/ Monitor

Debt

USERS

TypicalPPPprojectCashFlow

A PPP is not a transfer of responsibility:

A PPP project DOES NOT Mean that the Government has little or no onus Its objective has to be synergy between th private the i t & public bli sectors t

Areas such as land acquisition, clearances, utilities etc., utilities, etc can still be best done only by the Government

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AdvantagesOfPPP
For public sector: Saving S i resources and d its i best b utilization. ili i Reduces project costs and time, while enhancing its overall efficiency and effectiveness. Enables access to and learning from private sector resources, technology, and managerial skills. Shifts risk to the private sector RISK SHARING. Pursues an integrated approach to project completion. PPP may provide greater economic benefits than other forms of cooperation, p , such as p public sector p procurement. These extra benefits are usually referred to as value for money (VfM).

Advantages d a tagesOf O PPP

For the private sector:

The analysis is based on the profitability of the project in terms of d ll and dollars d cents, t and d is i usually ll more objective bj ti than th that th t conducted d t d by b the public sector. tools. These projects usually involve a great deal of risk, but government backing and involvement of international financial institutions help mitigate risks. are even more crucial factors leading to project assessment. A great deal of emphasis is placed on risk management, including the formulation of an exit e it strategy. strateg

Participation in a given project can be analyzed using standard finance

The limits of riskreturn tradeoffs, and the ensuing risk allocation,

ProjectSuccess
CustomerRequirements satisfied/exceeded Completedwithinallocated timeframe

Completedwithinallocated budget

Acceptedbythecustomer

ProjectFailure
ScopeCreep PoorRequirements Gathering

Unrealisticplanningand scheduling

Lackofresources

PPPProject Process j Management g

Key Determinants for a Successful PPP

Adequate Demand for the services/goods Political P liti l commitment it t to t the th project j t Administrative framework and readiness to meet

requirements

Partnership of Public (Government) with Private

Sector rather than owner-contractor owner contractor relationship decision to reduce risks and uncertainty aspects

Provision of information required to take informed Technical, Environmental, Social, Financial, Legal Bankability of project and project documents

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S lI i i i P Sectoral Initiatives Ports

!NationalMaritimeDevelopmentProgramtobe implementedthroughPPP !PlanforrailroadconnectivityofPortsprepared !NewberthsthroughPPPandtransferofoldberthsto PPPinaphasedmanner PlantoreducedwelltimeinPortstomakethem globallycompetitive

SectoralInitiativesRailways

!Dedicatedfreightcorridorstobedevelopedpossiblywith PPP:estimatedinvestmentRs.37000cr(US$8.22billion) !Privatepartiestoruncontaineroperations CONCORs monopolyends !RailwayLandDevelopmentAuthorityisbeingformedto commerciallyuseavailableunusedlandPPPmodetobe used d DevelopmentofLogisticParks/Railsidewarehousing complexes p through g PPPs

SectoralInitiativesPower

NationalElectricityPolicypowerdemandtobefullymetinnext fiveyears Capacityadditiontothetuneof62000MWfortheEleventhPlan (20072012) IPPstobemajorplayers 5Ultramegapowerprojectstobesetupintheprivatesector,2 moreunderdiscussion:capacityadditionofabout28000MW Policyguidelinestoencourageprivateplayersintransmission ElectricityAct2003 providesformultiplebuyersandopenaccess TariffPolicynotifiedcompetitiveprocurementofpowerand reductionofcrosssubsidy RajivGandhiGrameenVidyutikaranYojanalaunched 90%capital subsidyforruralelectricityinfrastructure

SectoralInitiatives Highways

!Morethan45974KmNationalHighways g y arebeingdevelopedunderNHDP !AllprojectstobeundertakenonBOT basisexceptinexceptionalcircumstances !RestructuringofNHAIunderdiscussion !NewModelConcessionAgreementshall beusedwhichprovidesformoreoptimal riskallocation

Way Forward?
NottorushintoaProjectbid/implement

approach
Getframeworks/approvals/fundsinplacebeforedoing

so Capacitybuildingandreformshouldgoahead Nowthereisenoughprojectexperience/expertisetoset upa precedent d tb basis i

Adequateprojectpreparation
Funding grequired q todoso Nottoomanymoneybagswaitingtoinvestinto

infrastructure

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W F d Way Forward
Handholding

MOU with the Department/Agency for developing

select PPP projects Culmination

the

Projects

till

they long

reach term

Building

Capacities within for Sustainability of the PPP Initiatives Fee

Minimal Service Fee, Performance linked Success Advisory and Backend support Role, Decision

making g still with the concerned Department p

End to End Solution

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The Challenge g is to make the behemoth move..