Some Thoughts on Small-Scale PPPs (SSPPPs)

Context

I am currently working with a municipality in the Middle East that is implementing a small-scale PPP (SSPPP) program.? SSPPPs are often seen as less glamorous projects because they do not have the allure that mega-projects have.? However, they cannot be ignored as SSPPPs are increasingly the municipal project norm that addresses the needs of smaller communities in unique often grassroot public-private sector partnerships that are focused on delivering impactful projects with less resources.

SSPPPs make up a large share of global projects. The World Bank has estimated that they make up about 40% of projects globally with a threshold value of below USD 50 million. Although they are not glitzy, the value of SSPPP projects lies in their responsiveness to local demands and needs and their ability to offer opportunities for middle level domestic investors, financiers and developers that are not typically available from larger projects.

Municipal SSPPP projects typically include projects in sectors like solid waste management, community/public toilets, housing, water supply, energy-efficient street-lighting, ICT, municipal parking, municipal parks and empty spaces, and social infrastructure.

SSPPPs Pragmatic Realities

Being an advisor on municipal scale PPP projects can be a challenging as municipal institutions that want to implement PPP projects have few inhouse practitioners, have a limited history of implementing PPP procurements, and have limited resources.

However, as with all PPPs no matter their scale, there are challenges associated with SSPPPs.? They include:

• Being too small to attract experienced investors and developers
• The lack of implementation experience
• The high transactional costs associated with PPPs, no matter their size, can serve as a deterrent
• Little municipal knowledge on how to procure and manage PPPs
• Budget constraints of smaller municipalities could limit the opportunities
• Higher costs associated with urban projects

Benefits

Not all is doom and gloom. Benefits associated with SSPPPs that have been revealed by the researchers and include the following:

• Their scale is attractive to local firms, local banks, and SMEs
• There is less risk to FOREX fluctuations as they are typical financed by local investors and banks
• Their smaller scale presents less failure risk to local governments
• They are more affordable and result in locally concentrated effects
• Their replicability makes them well suited for pilot-rollout projects
• Smaller projects are less disruptive to local communities

A Pragmatic approach

Careful planning, risk assessments and pragmatism can overcome the scale specific challenges that SSPPPs face. It must be pointed out that perceptions of scale can vary between countries and even within countries. A $50 million project in a rich industrialized country might be called small scale, but in a small country a project of this scale would be considered a large-scale project. This scale reality must be addressed project by project.

SSPPP project require a certain perceptual downsizing recalibration that requires innovative approaches to address the specific needs of smaller communities and excite the interest of local investors. If pilot projects are successfully implemented, they will be positively impactful on communities that would otherwise be ignored as not being project worthy. Success will also encourage municipalities to undertake more pragmatic projects.