Upload
dangkhanh
View
220
Download
0
Embed Size (px)
Citation preview
Exploring “Value for Money” Analysis in Low-Income
Countries Lessons learned from a PPP project in Tanzania
May 6th 2015
Lincoln Flor Bernardo Weaver
Marcelo PérezIrene Portabales
3
This paper presents a user-friendly two-step Value for Money (VfM) model tohelp Low-Income Countries (LICs) to understand and discuss qualitative andquantitative reasons to consider the likely implementation of a project under aPPP scheme, rather than conventional procurement.
The first section includes some reasons why governments decide to implementPPP or traditional procurement, with or without (VfM) analysis.
Why PPPs and VfM in LICs?
• Middle income countries with PPP experience see highcomplexity implementing traditional VfM analysis (PSC andtraditional approach). Other are refusing VfM analysis.
• IUK is reviewing policies and VfM approach.
• In LICs challenges preparing, procuring and monitoring ishuge:Weak institutional capacity
Constrains in fiscal space
Shallow capital markets.
limited track-record on traditional procurement and PPP deals
• Then, why and how VfM in PPPs can be addressed in LICs?
4
Follow VfMprinciples..., made it simple, practical and effective
• LICs have to discuss why a particular project has to be implement as a PPP.
• What comprise this discussion and what is the right balance, between:
• VfM provides information for the discussion and helps to take a decision.
• VfM (positive and quantitative) means: the project has to be a PPP? 5
Quantitative
Qualitative
Simplified VFM Analysis
Effectiveness
Efficiency
Economy
Motivation for PPPs are not only VfMPPPs Vs. Traditional Procurement:
What are we seeing?
PPPs• Accelerate public
investment programs• Maximize available public
funding• Is the only way to
implement the project• Achieve VfM if PPP if risks
are well allocated• Help keep maintenance
standards
Traditional Procurement
• Widely used, so all parties understand roles and concepts
• Procurement is standardized; government knows how to work
• Government retains control of the whole operation
6
VfM analysis also helps to spot disadvantages:
PPPs issues
• Contract renegotiations affect VfM if risk allocation changes
• Governments might use PPPs as a way to avoid fiscal controls
• PPPs can be more expensive than public procurement
Traditional Procurement issues
• Design and construction done in sequence by different parties
• Contractors’ expertise is not used in the design phase
• Projects are affected by short-term budget constraints
7
PPPs in LICs are trying to close infrastructure gap: still big gap between transport/water and
energy/telecom
0
5
10
15
20
25
30
Energy Telecom Transport Water and sewerage
0
20
40
60
80
100
120
140
160
180
Energy Telecom Transport Water andsewerage
Management and lease contract
Brownfield project
Greenfield project
10
11
The VfM model featured in this paper: a simple, practical and effective VfManalysis model for PPPs in LICs.
VfM Model Structure:2 Stages = Preparation and Application
12
THE MODEL PROVIDES BASE LINE INFORMATION THAT CAN BE ENHANCED BY OFFICIALS
Holistic approach: from qualitative to quantitative, step by step:
Qualitative Analysis,
interviews. If the project reaches a minimum
level, then it can continue
to the quantitative
part
Quantitative Assessment based on the
effective fiscal cost
criteria
Risk Analysis
to find within a range of
certainty if the project yields VfM
VfM Analysis,based on
qualitative and
quantitative parts
13
More Data Entered: Larger certainty
More Steps on the Analysis: More ways to check for errors
Sample Qualitative Questions and Topics Topics Questions
FinancingPayment Mechanisms – Do these boost risk management?
Amount of investment – Is the contract large enough to cover PPP transaction costs?
Bankability and
Private Sector
Appetite
Market interest – Is there appetite for the project? Do market players have the experience to deliver expected results?
Competition - Does the project structure stimulate competition? Does it lead to price reduction and higher efficiency?
Bankability – Is the project bankable? How costly are these funds? And is there access to IFIs and/or to local banks?
Implementation
Capacity and
Knowledge
Technical and operational capacity – Is there technical capacity available in the market to implement the project?
Institutional capacity – Is the government prepared to structure the project and monitor the contract?
Monitoring – Are projects inputs and outputs objective and measurable? Can they be assessed against common standards?
Risk Transfer
Risks – Are risks allocated to the party better prepared to manage and mitigate them?
Overinvestment – Is the contract structured on a manner that it does not incentivize overinvestment?
Flexibility – Is the contract flexible to mitigate demand changes? Is it structured to avoid political cycle changes?
Ability to manage risks – Can investors manage risks better than government in order to justify shifting risks?
Life cycle – Is it possible to integrate project design, construction, maintenance and operation?
Maintenance and
Rehabilitation
Economies of scale – Is rehabilitation and maintenance ensuring economies of scale for the project?
Key factor - Is maintenance and rehabilitation a key factor of the project? Is the private sector the best provider for these?
14
After all answers for theyes and no questions areentered, the MS Excelmodel will automaticallygenerate one of theseresults:
15 QUESTIONS
5 CATEGORIES
FURTHER QUESTIONS
Definition and Valuation of a general risk matrix:Sample Risk probability of occurrence and impact by
sector
15
Urban
Roads
Rural
Roads Railways
Public
Transport Energy Ports
Social Infra-
structure
PO IM PO IM PO IM PO IM PO IM PO IM PO IM
Implementation risk 90% 11% 95% 11% 92% 12% 93% 11% 94% 14% 95% 15% 96% 16%
Design risk 95% 30% 95% 30% 95% 15% 95% 30% 95% 15% 95% 15% 95% 15%
Funding risk 95% 25% 95% 25% 95% 25% 95% 25% 95% 25% 95% 25% 95% 25%
Exchange rate risk 95% 25% 95% 25% 95% 25% 95% 25% 95% 25% 95% 25% 95% 25%
Construction risk 95% 50% 95% 50% 95% 35% 95% 50% 95% 35% 95% 35% 95% 35%
Operation and performance 95% 35% 95% 35% 95% 15% 95% 35% 95% 15% 95% 15% 95% 15%
Regulatory risk 95% 10% 95% 10% 95% 10% 95% 10% 95% 10% 95% 10% 95% 10%
Risk of force majeure 95% 10% 95% 10% 95% 10% 95% 10% 95% 10% 95% 10% 95% 10%
Environmental risk 95% 10% 95% 10% 95% 10% 95% 10% 95% 10% 95% 10% 95% 10%
Demand risk 95% 20% 95% 20% 95% 20% 95% 20% 95% 20% 95% 20% 100% 20%
Political risk 95% 15% 95% 15% 95% 15% 95% 15% 95% 15% 95% 15% 95% 15%
16
BOT - No fare BOT - Fare TBOT - No fare TBOT - Fare DBOT - No fare DBOT - Fare
Public
Sector
Private
Agent
Public
Sector
Private
Agent
Public
Sector
Private
Agent
Public
Sector
Private
Agent
Public
Sector
Private
Agent
Public
Sector
Private
Agent
Implementation risk 100% 0% 100% 0% 100% 0% 100% 0% 100% 0% 100% 0%
Design risk 100% 0% 100% 0% 100% 0% 100% 0% 0% 100% 0% 100%
Funding risk 0% 100% 0% 100% 0% 100% 0% 100% 0% 100% 0% 100%
Exchange rate risk
Construction risk 0% 100% 0% 100% 0% 100% 0% 100% 0% 100% 0% 100%
Operation and performance risk 0% 100% 0% 100% 0% 100% 0% 100% 0% 100% 0% 100%
Regulatory risk 100% 0% 100% 0% 100% 0% 100% 0% 100% 0% 100% 0%
Risk of force majeure 100% 0% 100% 0% 100% 0% 100% 0% 100% 0% 100% 0%
Environmental risk 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50%
Demand risk 100% 0% 0% 100% 100% 0% 0% 100% 100% 0% 0% 100%
Political risk 100% 0% 100% 0% 100% 0% 100% 0% 100% 0% 100% 0%
Definition and Valuation of a general risk matrix:Sample Risk allocation by type of project
17
VfM under quantitative analysis
Private provision
Public provision cost adjusted by risk
allocation
Private provision cost adjusted by risk
allocationVFM
VFM > 0?
Public provision
Private provision
Yes
No
Value for Money Map
VfM MAPQUANTITATIVE EVALUATION
0-20% 20-40% 40-60% 60-80% 80-100%
QU
ALI
TATI
VE
EVA
LUA
TIO
N
Generates high
Generates
moderate
Generates low
Generates
minimum
Does not Generate
18
PUBLIC
PROCUREMENT
PPP
19
INITIAL SIMPLIFIED
MODEL
Increasenumber of questions
Weightquestions
Deeper risk analysis
...
Adding complexity modularly
This model was designed using a bottom-up approach. As this is an initial dualand simplified model embodying the principles of VfM, where complexity canbe incorporated modularly. If a more sophisticated analysis is desired,governments could add complexity as human capital is strengthened andproject data is more reliable.
20
The fourth section presents the application in a BRT project in Tanzania. In thiscase, the results show a 62 percent chance that the given project wouldgenerate VfM. This figure can vary, depending on risk distribution and valueinputs. After a qualitative and quantitative analysis and simulations, the BRT inTanzania would yield VfM for the local government.
The case of Tanzania: BRT project: lacking the following• Sound PPP policy;
• Human capital to design and implement projects;
• Long-term financing and guarantees;
• Negotiations, contract supervision, and implementation and management capacity;
• Risk-sharing mechanisms, guarantees;
• Mechanisms to recover capital from private investors;
• Lack of public awareness of PPPs and their benefits; and
• Role of Ministry of Finance.
21
Who do what in PPPs in Tanzania?Institution PPP projects role
Contracting Authority (CA)
CAs are the actual “project owners,” usually a line ministry, a developing agency, or a multilateral development agency.
Their staff takes the lead on the project.
Project Development Team (PDT)
CA’s PDT chooses which project should be done, and
conducts pre-feasibility studies and procurement.
Line Minister (LM)
LM interacts with PDT along the project; reviews and
approves feasibility study for the PPP coordination unit and
the finance unit.
Accounting Officer (AO) AO negotiates and designs the agreement.
Project Management Team (PMT) PMT carries out contract management tasks.
Tanzania Investment Centre PPP Coordination Unit (PPPCU)PPPCU Advises and recommends pre-feasibility/feasibility
studies submitted by CA.
Ministry of Finance
Reviews and approves key aspects of the PPP project cycle.
Minister of Finance MoF gives final approval before procurement.
PPP Finance Unit (PPPFU)
PPPFU receives PPP draft agreement, decides on its
approval before sending it to MoF for final approval.
Attorney-General´s Office (AGO)AGO reviews draft contract to issue legal opinion.
Regulatory Authorities (RA)RA provides advice to CA on project implementation.
22
The project: a BRT going to operation
• DART (DAR Rapid Transit), a BRT (bus rapid transit).
• Most of the infrastructure is brownfield.
• The project is now soon to be in operation phase.
• The BRT is mostly completed, but institutional difficulties have prevented the start of the operational phase.
• Quasi a BOT project, while basic infrastructure is already developed (terminals, stations, and riders), there is need for additional investment in basic equipment for the operation.
• Phase 1 includes:
• 21 km for the main corridor
• 58 km for feeder routes
• 2 warehouses
• 5 terminals
• 27 main stations
• 7 feeding stations
• 3 docking stations within the existing public transportation system
• Estimated peak demand in the morning in Jangwani is 17,000 passengers per hour.
23
Value for money map for the project
26
VfM MAPQUANTITATIVE EVALUATION
0-20% 20-40% 40-60% 60-80% 80-100%
QU
ALI
TATI
VE
EVA
LUA
TIO
N
Generates high
Generates
moderate
Generates low
Generates
minimum
Does not Generate
PUBLIC
PROCUREMENT
PPP
PPP
PPP
Tanzania
BRT
The model’s main advantage is its simplicity.
The model has the capacity to provide valid information to discuss if a project can be implemented as a PPP or traditional procurement.
It can be useful in LIC but also in countries with weak institutional capacity (including some subnational governments in MICs).
A key factor for guaranteeing the applicability of this model to find an appropriate balance between the qualitative and quantitative analysis.
The model can have more complexity added modularly. Application of a bottom-up approach.
Importance of a two stages approach, one for preparation and one for application.
On Stage One, the profile of respondents is crucial to avoid conflict of interest. (balance of multiple expertise, no conflict of interest, etc.) 28
The initial use of pre-stablished parameters for the risk analysis is an appropriate approach to mitigate the risks of lack of project data, as well as of data manipulation.
More accurate and better information should help LICs government officials and their advisors produce important decisions with a higher degree of certainty.
Reducing government mistakes can be an important step in enhancing accuracy of infrastructure assets and services delivery to the population.
Infrastructure projects accuracy should be especially important because of the well-known social impact of many of these projects and the sheer size of these economic interventions.
29
Thank you!Lincoln Flor
Bernardo Weaver
Marcelo Pérez
Irene Portabales
However, more research efforts and discussions areneeded to continue improving VfM approaches and toolsto select the right PPP project. This is an ongoing work…