HoPs’ WG on PPPsHoPs’ WG on PPPs• Created by HoPs at their Oct. ’07

meeting• Co-chaired by WB and IDB• Objectives:

address increasing interest in and demand for PPPs from borrowers;

reach consensus among MDBs on financeable PPP options; and

provide common guidance to Banks’ staff and borrowers on appropriate procurement methods

• Internal consultations to be carried out at each Bank prior to first WG meeting

WB’s PPP monitoring groupWB’s PPP monitoring group• Conformed in Feb. ’08 by Procurement,

Infrastructure, GPOBA & PPIAF, in preparation for further discussions at MDB level

• Tasked with drafting a concept note: identifying/defining PPP modalities; addressing areas where WB can help and

stages at which to intervene; and assessing appropriateness and

acceptability of Bank’s and procurement processes employed worldwide

Highlights of WB’s Concept NoteHighlights of WB’s Concept Note• No guidance on which PPP option is suitable or

should be pursued• Not a single definition/modality but generic elements

identified aimed to arrive at Bank’s own definition• Bank has financed through IL:

Mgmt. contracts, leases, concessions & BOTs in energy, telecom., transport & WSS sectors;

Govt. contribution in form of equity to SPVs, infrastructure assets or subsidies

• Competitive procurement is a key condition for success of PPPs but traditional public tender process may be ineffective due to: Uncertainty under which PPPs start/evolve; PPPs involve multiple proposals and criteria other than

lowest-evaluated price; and PPPs require informal communication between public

and private sectors• Various alternative procedures employed worldwide

depending on PPP types - Bank acceptability depends on them not being conducive to corruption or high costs to governments

Diversity of PPP definitionsDiversity of PPP definitionsSome PPP DefinitionsThe term public-private partnership (“PPP”) is not defined at Community Level. In general, the term refers to forms of cooperation between the public authorities and the world of business which aim to ensure the funding, construction, renovation, management or maintenance of an infrastructure or the provision of a service.Source: Green Paper on Public-Private Partnerships and Community Law on Public Contracts and Concessions, European Union Commission, April 2004

A Public-Private Partnership is a contractual agreement between a public agency (federal, state or local) and a private sector entity. Through this agreement, the skills and assets of each sector (public and private) are shared in delivering a service or facility for the use of the general public. In addition to the sharing of resources, each party shares in the risks and rewards potential in the delivery of the service and/or facility.Source: U.S. National Council for Public-Private Partnerships website: http://www.ncppp.org/howpart/index.shtml

Public private partnerships (PPPs) are arrangements typified by joint working between the public and private sector. In the broadest sense, PPPs can cover all types of collaboration across the interface between the public and private sectors to deliver policies, services and infrastructure. Where delivery of public services involves private sector investment in infrastructure, the most common form of PPP is the Private Finance Initiative (PFI).Source: United Kingdom’s HM Treasury websiteHM Treasury Home

“Public-Private Partnership” is a generic term for the relationships formed between the private sector and public bodies often with the aim of introducing private sector resources and/or expertise in order to help provide and deliver public sector assets and services. The term PPP is, thus, used to describe a wide variety of working arrangements from loose, informal and strategic partnerships, to design build finance and operate (DBFO) type service contracts and formal joint venture companies.Source: The EIB’s Role in Public-Private Partnerships, European Investment Bank, July 2004

PPP is any medium-to-long term relationship between the public and private sectors, involving the sharing of risks and rewards or multisector skills, expertise and finance to deliver desired policy outcomes.Source: Standard & Poor’s PPP Credit Survey, 2005Public-Private Partnerships (PPPs) refer to “innovative methods used by the public sector to contract with the private sector, who brings their capital and their ability to deliver projects on time and to budget, while the public sector retains the responsibility to provide these services to the public in a way that benefits and delivers economic development and an improvement in the quality of life”.Source: Guidebook on Promoting Good Governance in Public-Private Partnerships, United Nations Economic Commission for Europe (UNECE), 2007

Diversity of PPP optionsDiversity of PPP optionsTypical PPP arrangements*

* Source: Guidebook on Promoting Good Governance in Public-Private Partnerships, United Nations Economic Commission for Europe (UNECE), 2007

Concession: Contractual arrangement where a facility is given by the public to the private sector, which then operates, maintains and improves a facility for a certain period of time after which the facility, including any improved assets, is transferred to the public sector.

Buy-Build-Operate (BBO): Transfer of a public asset to a private or quasi-public entity usually under contract for upgrading and operating the assets for a specified period of time.

Build-Own-Operate (BOO): The private sector finances, builds, owns and operates a facility or service in perpetuity. The public constrains are stated in the original agreement and through on-going regulatory authority.

Build-Own-Operate-Transfer (BOOT): A private entity receives a franchise to finance, design, build and operate a facility (and to charge user fees) for a specified period, after which ownership is transferred to the public sector.

Build-Operate-Transfer (BOT): The private sector designs, finances and constructs a new facility under a long-term concession contract, and operates the facility during the term of the concession after which ownership is transferred to the public sector if not already transferred upon completion of the facility. In fact, such a form covers BOOT and BLOT (see below) with the sole difference being the ownership of the facility.

Build-Lease-Operate-Transfer (BLOT): A private entity receives a franchise to finance, design, build and operate a leased facility (and to charge user fees) for the leased period, against payment of a rent.

Design-Build-Finance-Operate (DBFO): The private sector designs, finances and constructs a new facility under a long-term lease, and operates the facility during the term of the lease. The private partner transfers the new facility to the public sector at the end of the lease term.

Note: Contracts for Operation & Maintenance (O&M), Management Services, and Design-Build (DB) are generally not considered PPP options.

Categories of PPI projects

1. Management & Lease Contracts – A private entity takes the management of a state-owned enterprise for a fixed period while ownership and investment decisions remain with the state.

(a) Management contract: The government pays a private operator to manage the facility. The operational risk remains with the government.

(b) Lease contract: The government leases the assets to a private operator for a fee. The private operator takes on the operational risk.

2. Concessions – A private entity takes over the management of a state-owned enterprise for a given period during which it also assumes significant investment risk.

(a) Rehabilitate, operate & transfer (ROT): A private sponsor rehabilitates an existing facility, then operates and maintains it at its own risk for the contract period.

(b) Rehabilitate, lease or rent, and transfer (RLT): A private sponsor rehabilitates an existing facility at its own risk, leases or rents the facility from the government owner, then operates and maintains the facility at its own risk for the contract period.

(c) Build, rehabilitate, operate, and transfer (BROT): A private developer builds an add-on to an existing facility or completes a partially built facility and rehabilitates existing assets, then operates and maintains the facility at its own risk for the contract period.

3. Greenfield Projects – A private entity or public-private joint venture builds and operates a new facility for the period specified in the contract. The facility may be turned to the public sector at the end of the concession period.

(a) Build, lease, and transfer (BLT): A private sponsor builds a new facility largely at its own risk, transfers ownership to the government, leases the facility from the government and operates it at its own risk up to the expiry of the lease. The government usually provides revenue guarantees through long-term take-or-pay contracts for bulk supply facilities or minimum traffic revenue guarantees.

(b) Build, operate, and transfer (BOT): A private sponsor builds a new facility at its own risk, operates the facility at its own risk, and then transfers the facility to the government at the end of the contract period. The private sponsor may or may not have the ownership of the assets during the contract period. The government usually provides revenue guarantees through long-term take-or-pay contracts for bulk supply facilities or minimum traffic revenue guarantees.

(c) Build, own, and operate (BOO): A private sponsor builds a new facility at its own risk, then owns and operates it at its own risk. The government usually provides revenue guarantees through long-term take-or-pay contracts for bulk supply facilities or minimum traffic revenue guarantees.

4. Divestitures – A private entity buys an equity stake in a state-owned enterprise through an asset sale, public offering, or mass privatization program.

(a) Full: The government transfers 100% of the equity in the state-owned company to private entities.

(b) Partial: The government transfers part of the equity in the state-owned company to private entities. The private stake may/may not imply private management of the facility.

Diversity of procurement procedures 1/4Diversity of procurement procedures 1/4

EU’s Choice of Procurement Procedures for Contractual PPPs

Open procedure Advertisement No short listing All documents issued to all candidates No negotiation permitted Award to bidder with lowest price* or most economically advantageous tender**Restricted procedure Advertisement Short listing (at least 5 candidates - range must be stated in notice; at least 3 if 5 not

possible) Invitation to Tender issued to selected candidates No negotiation is permitted Award to bidder with lowest price* or most economically advantageous tender** Negotiated procedure With or without prior advertisement (according to circumstances) Short listing (at least 3 when notice published) Invitation issued to short-listed candidates Preferred bidder selected based on announced award criteria Negotiation with preferred bidder about all aspects of the contract permitted -

negotiation with second best if no agreement reached Award to bidder with lowest price* or most economically advantageous tender**Competitive dialogue procedure Advertisement Short listing (may be limited to at least 3) Invitation issued to short-listed candidates Dialogue (including negotiation) about all aspects of the contract permitted Award to bidder with most economically advantageous offer** ONLY

Procurement process under Competitive Dialogue for a PFI projectSource: UNECE’s Guidebook on Promoting Good Governance in Public-Private Partnerships, 2007

1 2 3 4 5 6 7

-Investment appraisal

-Programme level VFM assessment

-Select procedure

-Justify and document

-Design process for dialogue

-Emphasis on early

preparation

-Evaluation criteria

OBC

-Selection of participants to take through dialogue

-Issue descriptive document

-Invitation to participate in dialogue

-Conduct dialogue to develop solution

-Successive stages

-Closing dialogue

-Final tenders

-Evaluation of tenders

-Clarify, specify and fine tune

-No substantial modification of bids

Stage 2 VFM assessment Stage 3 VFM assessment

Diversity of procurement procedures 2/4Diversity of procurement procedures 2/4

-Clarification and confirmation of commitments

FBC

Pr oc.Notice

Contract notice

PQQ / Selecting participants

Competitive dialogue

phase

Final tender process

Post-tender discussions

Preferred Bidder Contract

signature

Diversity of procurement procedures 3/4Diversity of procurement procedures 3/4

World Bank’s Two-Stage Bidding Process

Employer issues bidding documents including objectives sought and performance specificationsBidders asked to submit technical-only proposals

Employer evaluates technical proposals’ responsiveness to objectives/performance specificationsEmployer verifies continued bidders qualification

Bidders may be invited to discuss content of technical proposals and technical/commercial changes required Employer prepares minutes of required changes and may amend bidding documents based on discussions

Bidders invited to submit 2nd stage bids including final technical proposals and priced bids

Employer evaluates 2nd stage bids per evaluation criteriaAward to qualified bidder with responsive, lowest evaluated 2nd stage bid

Invitation to 1st Stage Bidding

Evaluation of Technical Proposals

Clarification/Feedback Meeting

with Qualified Bidders

Invitation to 2nd Stage Bidding

Technical/Financial Evaluation and Award

Diversity of procurement procedures 4/4Diversity of procurement procedures 4/4

Handling of unsolicited proposals

Initial proposal requested &

assessed

Formal proposal invited & examined

YES

Proposal no longer considered

NO

* Extra evaluation credit or proposal preparation cost reimbursement

Authority engages in competitive selection

granting incentives* to original proponent

YES

Authority may be authorized to negotiate

directly with original proponent

NO

Authority invites all offerors to competitive

negotiations

NO

Authority engages in competitive selection

granting incentives* to original proponent

YESIs project in the public interest?

Is project possible w/o

involving proprietary

rights? Alternative proposals received?

YES

Many alternative proposals received?

** Variation: “Swiss challenge” – competitor offering lower-priced proposal gets award if not matched by original proponent

NO

Authority publishes description of proposal’s

essential output elements & invites

comparable proposals**

WB’s procurement policies on PPPsWB’s procurement policies on PPPs

Guidance for Management Contracts• Sample PQ & Bidding Docs. & technical note

issued in Dec. ’07

• BD includes selection approaches depending on nature of services: Option A – Single Stage Bidding process, with 3

possible selection methods: Lowest Evaluated Cost [governed by Proc. GLs] –

Suitable for mgmt. services focused to O&M, with or w/o investment fund mgmt.

QCBS & Fixed Budget Selection [governed by Cons. GLs] – Suitable for mgmt. services leaning toward technical assistance

Option B – Two Stage Bidding process

WB’s procurement policies on PPPsWB’s procurement policies on PPPsGuidance for Concessions• Para. 3.13 of the GLs covers procurement by private entrepeneur

of Bank-financed G, W & S required by facility under BOO/BOT/BOOT, concessions & similar “private sector arrangements”, as follows: An entrepeneur selected under acceptable ICB procedures* [may

involve several stages to arrive to optimal evaluation criteria] is free to use own procedures

An entrepeneur not selected under acceptable ICB procedures must use WB procedures

• To be acceptable, ICB procedures used to select private entrepeneur must: Meet principles of economy, efficiency, transparency & open

competition Include, as a minimum: (i) wide advertisement & promotion; (ii) PQ;

(iii) clear/non-discriminatory bidding docs.; (iv) transparent, pre-disclosed eval. criteria; (v) selection based on announced criteria to bidder with technically responsive bid & best commercial proposal; (vi) effective & fair complaints-handling mechanism

• OM issued in Nov. ’05 clarifies conditions under which incumbent entrepeneur can use its own procurement procedures: WB’s ICB procedures for procuring G, W & S may be impractical [e.g.

low cost]; Case should involve expansion of existing system; Entrepeneur must be privately-owned or if govt.-owned, must be

financially autonomous & operate on commercial basis; Upon upfront assessment & post-reviews, WB must accept

entrepeneur’s procurement procedures & capacity

WB’s Action Plan after Concept NoteWB’s Action Plan after Concept Note• Conduct survey among Procurement,

Infrastructure, IFC & MIGA to learn: Procurement issues per type of PPP [e.g.,

concessions, BOTs, management contracts, leases, etc.] that clients are more concerned about

Trends with regard to PPPs where clients see the Bank could provide more support

• Survey results to be analyzed to: Prioritize and focus Bank’s resources toward

future steps; Assist the Monitoring Group in determining

whether current WB’s procurement policies need to be clarified or changed and whether specific guidelines and/or model contracts for complex PPPs should be developed; and

Agree on Bank’s position to be further presented at the HoPs’ WG on PPPs