THESIS
2013
vi leaves, vii-xii, 159 pages : illustrations (some color) ; 30 cm
Abstract
Public private partnerships (PPPs) are contractual relationships governing a long-term public
sector acquisition and private sector provision of public works and services. PPPs play an
important role in bringing private sector competition to public monopolies in infrastructure
development and service provision and in merging the resources of both public and private
sectors to better serve the public needs that otherwise would not be met. However, many PPP
projects suffered disastrous consequences because of construction cost/duration overruns,
changing market demand, depreciation of local currencies and/or reduction in tolls/tariffs.
Some of them had been postponed or abandoned by the sponsors and others had to be bailed
out by host governments. Substantial controversy and criti...[
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Public private partnerships (PPPs) are contractual relationships governing a long-term public
sector acquisition and private sector provision of public works and services. PPPs play an
important role in bringing private sector competition to public monopolies in infrastructure
development and service provision and in merging the resources of both public and private
sectors to better serve the public needs that otherwise would not be met. However, many PPP
projects suffered disastrous consequences because of construction cost/duration overruns,
changing market demand, depreciation of local currencies and/or reduction in tolls/tariffs.
Some of them had been postponed or abandoned by the sponsors and others had to be bailed
out by host governments. Substantial controversy and criticism exist in many countries over
whether PPPs have achieved value for money. This situation calls for improved
methodologies and practices to enhance the value for money (VFM) of PPP projects.
A comprehensive framework is developed in this research to integrate different stages in the
delivery of PPP projects and systematically address the key issues in each stage in order to
continuously improve VFM. This framework is based on worldwide best industrial practices
and lessons from unsuccessful projects, aimed at public–private win–win outcomes, and
justified by public procurement principles. A validation process has been conducted to justify
the proposed framework and evaluate its potential application in the industry. This framework
integrates four broadly divided stages in the infrastructure and service delivery process,
including (1) design of a workable concession, (2) competitive concessionaire selection, (3)
project regulation of the selected concessionaire during the concession period, and (4)
periodic concession rebidding to allow new entry for the concession. The public procurement
principles and public–private win–win solution act somewhat as guidelines or constraints for
decisions made in each of the four stages of the framework, which repeat over time possibly as long as the product/service is needed. The four-stage framework takes into account the
requirements of public services, realignment of responsibility and reward among multiple
participants in PPPs, the monopolistic rights of the concessionaire, and the wide range of risks
and uncertainties in the long concession period. The design of the right concession forms the
base on which other stages are implemented in addition to planning the project and allocating
risks for enhanced efficiency. The project regulation allows the government to address
changing conditions and regulate the concession for efficient operation with due discretion,
whereas the competitive concessionaire selection and periodic re-concession and rebidding
play an important role in achieving innovation, efficiency and cost effectiveness through
direct competition. In addition, varying competition elements are incorporated in each of the
four stages for continuous performance improvement of the concessionaire in the delivery of
infrastructure and services.
VFM has been used in many countries as an indicator to evaluate the performance of PPP
projects from the government’s perspective. However, the industry has been criticized for the
methods used in assessing the VFMs of PPP projects. In addition, there are great variations in
the VFMs of international PPP projects due to a number of factors affecting the setting and
attainment of the VFM. There is a need to improve the VFM assessment methodology in view
of different types of PPP projects. An empirical approach has been taken, in which a total of
397 PPP projects in Japan have been examined to identify key influencing factors and
evaluate their impacts on VFM. A data-preparation task has been undertaken, in which
projects with incomplete and/or unreliable information are removed after careful examination
of each project and 207 projects remain. A statistical analysis of the 207 PPP projects has
shown that there are significant correlations between VFM and the four influential factors:
assessment time, project sector, market dependence, and investment scale. These outputs
would provide some insights on the improvement in the VFM assessment of PPP projects.
Improved VFM assessment would allow a suitable VFM to be determined for a particular PPP
project in accordance with its specific operational environment, balance the interests of both
the public and private sectors, and promote the participation of the private sector in the timely
provision of necessary public works and services.
VFM is highly dependent on the performance of the concessionaire. A workable
concessionaire selection process is very important in ensuring the selection of a competent
concessionaire. International experience has revealed that inherent weaknesses and drawbacks
in the traditional tendering system, coupled with a poor understanding of the special features
of the selection procedure for PPP projects, result in a concessionaire selection process
fraught with confusion and pitfalls for both private investors and public clients. Through
literature review, 35 factors that impede the concessionaire selection process are identified.
Consequently, a structured questionnaire survey has been conducted, in which respondents
were requested to judge the significance of each of the 35 impeding factors on a six-point
scale. Through statistical analysis, nineteen factors are found to be critical factors. The results
of the Mann-Whitney U test indicate that there is no statistically significant difference
between the academic and industry sectors’ perception of most of these factors. Both the
Kaiser-Meyer-Olkin test and the Bartlett’s test of sphericity support the conclusion that the
survey data are adequate for factor analysis. Consequently, the critical factors are further
categorized into four components by a factor analysis: “opaque and weak legal and regulatory
system,” “lack of skills and experience in concessionaire selection,” “weaknesses inherent
in traditional tendering,” and “unfavorable local circumstances.” These results should help
contracting authorities determine the key managerial implications and remove the impeding
factors and policy-makers and planners determine the most crucial areas that require
improvement. These actions will definitely contribute to an improved concessionaire selection
process to enhance VFM of PPP projects.
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