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Public Private Partnerships in the Infrastructure Sector

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  • Public Private Partnerships in the Infrastructure Sector
CoursesealsPublic Private Partnerships in the Infrastructure Sector
  • Introduction to PPP in the infrastructure sector 6

    • Lecture1.1
      What is PPP and how is the concept defined? 30 min
    • Lecture1.2
      The growth of PPP from an historical perspective 30 min
    • Lecture1.3
      The concept of privatisation in the context of PPPs 30 min
    • Lecture1.4
      Conventional procurement and PPP procurement 30 min
    • Lecture1.5
      Examples of PPP reform 30 min
    • Lecture1.6
      Summary of key characteristics and criteria of PPPs 30 min
  • Chapter 2: Structuring a PPP project 5

    • Lecture2.1
      Structuring a PPP project 30 min
    • Lecture2.2
      Project structuring: feasibility study 30 min
    • Lecture2.3
      PPP economics 30 min
    • Lecture2.4
      PPP economics 30 min
    • Lecture2.5
      Alternative PPP structure: rail project case study 30 min
  • Chapter 3: Financing an infrastructure PPP project 6

    • Lecture3.1
      Sources of financing for an infrastructure PPP project 30 min
    • Lecture3.2
      What is Project Finance? 30 min
    • Lecture3.3
      Drawbacks of using project finance in infrastructure PPP transactions 30 min
    • Lecture3.4
      Structure 30 min
    • Lecture3.5
      Key parties 30 min
    • Lecture3.6
      Timeline for financing an infrastructure PPP project 30 min
  • Chapter 4 :Documenting the transaction: anatomy of a PPP concession agreement and key risk allocation issues 11

    • Lecture4.1
      Scope and term of a PPP Concession Agreement 30 min
    • Lecture4.2
      Construction period obligations 30 min
    • Lecture4.3
      Operation period obligations 30 min
    • Lecture4.4
      Payment regimes 30 min
    • Lecture4.5
      Supervening events 30 min
    • Lecture4.6
      Termination and compensation 30 min
    • Lecture4.7
      Liability and insurance 30 min
    • Lecture4.8
      Dispute resolution 30 min
    • Lecture4.9
      Government controls 30 min
    • Lecture4.10
      Government support obligations 30 min
    • Lecture4.11
      Additional terms and conditions 30 min
  • Chapter 5: Documenting the transaction: finance documents 8

    • Lecture5.1
      Core finance documents 30 min
    • Lecture5.2
      Equity arrangements 30 min
    • Lecture5.3
      Impact on the concession agreement 30 min
    • Lecture5.4
      Direct Agreements 30 min
    • Lecture5.5
      Security 30 min
    • Lecture5.6
      Enforcement and insolvency 30 min
    • Lecture5.7
      Involvement of multilateral development banks (MDBs), development finance institutions (DFIs) and export credit agencies (ECAs) 30 min
    • Lecture5.8
      Government shareholder arrangements 30 min
  • Chapter 6:Documenting the transaction: other project documents 2

    • Lecture6.1
      Construction contract, O&M contract and interface issues 30 min
    • Lecture6.2
      Sub-contract risk pass-down 30 min
  • Chapter 7:Procurement arrangements 2

    • Lecture7.1
      A typical PPP timetable 30 min
    • Lecture7.2
      Unsolicited proposals 30 min
  • Chapter 8:Introduction to key sector issues 7

    • Lecture8.1
      Road projects 30 min
    • Lecture8.2
      Urban rail projects 30 min
    • Lecture8.3
      Freight rail projects 30 min
    • Lecture8.4
      Airport projects 30 min
    • Lecture8.5
      Port projects 30 min
    • Lecture8.6
      Accommodation projects 30 min
    • Lecture8.7
      Glossary 30 min

    Conventional procurement and PPP procurement

    (a)        Conventional procurement

    Under a conventional procurement, the government would have taken responsibility for separately procuring and integrating the various elements of works and services required to develop and operate a new facility. Some of these tasks would be carried out in-house, but in some cases government authorities may have begun to lose or outsource many of their in-house capabilities, such as their design team. This increases the integration risk on the government as it makes it more difficult to manage the interfaces between the contracts. The government would also be reliant upon the availability of an adequate budget to be able to carry out these tasks. Restrictions on public sector borrowing may prevent large capital outlays for major projects, so this may slow down the delivery timetable.

    In recent years, conventional procurement has made a comeback in the UK for “mega-projects”, too big to privately finance, such as Crossrail in London (£15bn) and High-Speed 2 rail line (>£40bn). In these cases the government has sought to address the interface management risk by “upskilling” itself, namely by taking on one or more “development partners” – these are engineering companies who effectively second a long-term team into the client and who are incentivised to manage the delivery of the project to achieve price and timeliness outcomes.

    (a)        PPP procurement

    Under a typical PPP project, the private sector (in the diagram below termed “PPP Co”) enters into a long term contract with the government to provide all aspects of the project lifecycle – design, build, financing, operation and maintenance, providing “single point responsibility”.

    The dotted arrow at the top represents the fact that while the completion of the design is managed by the private sector, the government retains the responsibility for determining the outline design – the output specification that it wishes the private sector to achieve. However the detail of how this output is achieved is usually left to the private sector.

    SUMMARY OF KEY POINTS
    Conventional procurement

    • In this situation, the Government arranges the separate procurement of works and services required to develop and operate a new facility. It would also be responsible for integrating the works and services provided by different entities.
    • The integration risk is placed on the Government as it can be difficult to manage the interface issues between the various contracts and entities.

    PPP procurement

    • The Government only enters into one long-term contract with a single private sector entity (usually a special purpose vehicle set up specifically to oversee the PPP project) which will provide all aspects of the project lifecycle – design, build, financing, operation and maintenance.

    ·         The Government retains control over the initial design and output specifications and the private sector entity manages the completion of the project, ensuring the specifications are met.

     

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