Do We Need PPP Enabling Environments?

There is a Need

As a PPP consultant to governments, I am often asked why a PPP specific Enabling Environment is necessary. ?Although there are detractors who say that PPPs can be launched without specific PPP Laws, policies and guidance, I strongly feel that any effort to strengthen the governance of PPP procurements, implementation and monitoring can only be beneficial to both the public and private sector.

?A simple perusal of institutional views on strengthening PPP enabling environments supports my convictions that the private sector, which is risk averse, is convinced that governments are committed to a PPP process when they establish enabling environment.

?Enabling Environment Definition

?The World Bank states that “PPP frameworks (enabling environments) consist of the policies, procedures, institutions, and rules that together define how PPPs will be identified, assessed, selected, prioritized, budgeted for, procured, monitored, and accounted for; and who will be responsible for these tasks.”

?This sets the stage for a procurement environment that is based on trust.

?Creating a Trusting Implementation Environment

?PPIAF has the following to say regarding trusting environments:

?“Private firms are very cautious and try to assess the real commitment of the public sector toward the project, given the significant costs incurred by the private sector in bid preparation and contract award. The private sector also needs to be confident of the commitment of the public sector toward the long-term management of the PPP process.”

?Strong PPP enabling environments also help create a favorable investor climate.? PPP Laws. Policies, and guidance that promote completive and transparent procurement processes, describe the conditions of service delivery, and mitigate risk will placate the concerns of the private sector and encourage investment in PPP projects that are being procured.? The private sector is averse to a “Wild West” approach to procurements that offers little protection to all stakeholders, hence the need for an enabling environment.

?A Capable and Competent Public Sector

?A capable and competent public sector is essential for implementation of PPPs.? A cadre of confident public sectors implementors can only be achieved if they are provided with the tools necessary to implement PPPs.? This includes a legal framework that defines responsible parties and their responsibilities vis-à-vis procurements, policies that define a government objectives, and guidance that describes a consistent processes and approaches to procurement.

?Components of A PPP Enabling Environment According to the World Bank

?The World Bank has identified the components of a comprehensive PPP framework (enabling environment) which includes the following:

• Policy—articulation of the rationale behind the government's intent to use PPPs to deliver public services, and the objectives, scope, and implementing principles of the PPP program.
• Legal framework—the laws and regulations that underpin the PPP program—enabling the government to enter into PPPs, and setting the rules and boundaries for how PPPs are implemented. This can include PPP-specific legislation, other public financial management laws and regulations, or sector-specific laws and regulations.
• Processes and institutional responsibilities—the steps by which PPP projects are identified, developed, appraised, implemented, and managed, ideally within the Public Investment Management system; and the roles of different entities in that process. A sound PPP process is efficient, transparent, and is followed consistently to effectively control the quality of PPP projects.
• Public financial management approach—how fiscal commitments under PPPs are controlled, reported, and budgeted for, to ensure PPPs provide value for money, without placing undue burden on future generations, and to manage the associated fiscal risk.
• Other arrangements—how other entities such as auditing entities, the legislature, and the public participate in the PPP program, and hold those responsible for implementing PPPs accountable for their decisions and actions.

Global Infrastructure Hub Views on Enabling Environments

?The Global Infrastructure Hub (GIH) has the following to say regarding how enabling environments can promote efficient project preparation. What is require is:

• A robust policy framework that facilitates clarity, consistency and stability of government actions, while providing for agility to adapt and manage changes in the wider infrastructure ecosystem is beneficial.
• Well-governed public institutions with a clear role, mandate, and commensurate capacity to operationalize policy into effective project preparation and smooth implementation.

?The GIH also identified key elements of guidance under a policy framework that include:

• A clear policy and legislative framework signals government commitment to infrastructure development.
• While legal and policy frameworks ought to provide stability, they need to be agile and designed to evolve to meet the ever-changing needs of infrastructure development.
• Follow-up guidelines, standards and processes are key to make policy actionable.
• An aligned cascading of policies and legislation across the national and sub-national levels is important.
• Sector-specific legislation or policies may also be necessary to drive infrastructure project preparation, in addition to cross-cutting policies.
• Adapting and replicating contextually relevant policies from global experience can accelerate capacity creation for infrastructure development

Conclusion

?I would also like to offer a word of caution. There is a trap that needs to be avoided when drafting a PPP law. It is important to avoid the inclusion of implementation best practices content in a law rather than in guidelines.? If this happened the constantly evolving development needs of PPP implementation could be stifled due to rigidity of laws.? Supporting guidance documents can be easily adapted to meet new needs and trends - laws cannot.

?I remain convinced It is obvious that a clear policy and legislative framework helps set priorities and aspirations, clarifies accountability, and facilitates private sector participation in PPP programs that are viable, trusted, sustainable and resilient.

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