In this webinar, a discussion will focus on some of stages and particular approaches that enable enterprises to structurally improve best practices in Public-Private partnerships.
What is Public-Private Partnerships?
The Public-Private Partnerships is a long term contract between a public and a private sector. This type of contract is designed not only for development and management of a public asset but it is also designed for creating a win-win situation between both parties. In a PPP contract, the private sector bears significant risks and management responsibilities during the term of the contract. Therefore, it is crucial to set a win-win contract that allows the private sector to be rewarded.
The second key element that can be seen in the PPP contract is that the private sector needs to be liable for a significant portion of the finance at its own risk. The private sector can obtain considerable incentives for investing in the project itself, which leads to a successful project. The last feature of the PPP contract indicates that the private sector’s compensation is significantly dependent on its performance.
The seven major benefits of public-private partnerships are shown below:
- Access to capital
- Leverage innovation of the private sector
- Speed of the private sector
- Alignment of interests
- Transfer of risk
- Access to expertise
- Spread out of fiscal commitments
However, PPP entails an equal amount of risk at the same time. For instance, when it comes to leveraging innovation, there is a risk that the private sector will jeopardize or lose its intellectual property. Hence, a proper structure needs to be developed in order to manage benefits and risks in a way that is acceptable for all parties involved.
Figure 1: PPP Project Structure
How to build a consistent, measurable, and repeatable PPP framework?
Developing an effective PPP framework involves key measurable components as follows:
- The risks of PPPs are equally significant both for the public sector as well as private sector enterprises. Hence, it is crucial to ensure that the best interests of both parties are aligned with the PPP framework.
- There is a significant incentive for all parties involved to ensure that PPPs are well-planned, prepared and implemented effectively.
- There needs to be a structure in place that is building up on existing legislation, preparatory activities and collected expertise. As the specific duration of a particular project is based on individual expertise, a critical area to address is collective expertise and experience in establishing the PPP framework in the long term.
Based on these fundamental elements, a model referred to as Public-Private Partnership Maturity Index (PPPMI) is developed.
Introducing the PPPMI
At Cybiant, we have designed the Public-Private Partnership Maturity Index (PPPMI) in order to bring standardization to all parties involved in PPP Projects. The PPPMI is the result of Cybiant’s collective knowledge and experience from various PPP projects over the years.
The PPPMI establishes several crucial capabilities that every government should take into account when structuring their PPP programs.
The five core elements and one supporting element are outlined as follows:
- PPP Strategy
- PPP Governance
- PPP Execution
- PPP Processes
- PPP Framework
- Supporting Processes
Generally, five main components interact with each other and there are dependencies between different elements. In terms of supporting processes, these can be considered as processes that support five components rather than as individual categories.
When establishing the PPP framework in-depth, relationships between different components and how they interact as a whole need to be taken into consideration. By applying the PPPMI, it is possible to build up a step-by-step approach and establish all components simultaneously.
Figure 2: Public-Private Partnership Maturity Index (PPPMI)
5 Categories + 1 Supporting Process Domain
Five different categories of PPPs are subdivided into a number of various elements as shown in the figure below.
Figure 3: A subdivision of PPP categories
PPPMI Maturity Index Explained
To summarize, the PPPMI consists of a total of 30 practices and processes. This includes 22 management processes and 8 supporting process areas that underpin 5 categories of PPPMI. These practices and processes are subdivided into 5 categories across 5 levels.
Figure 4: Components of PPPMI
The PPPMI Maturity Levels
In terms of maturity, organizations can measure where they are on a particular scale. The skill that can be used for the establishment of this framework is known as Capability Maturity Index (CMI). The CMI consists of five levels where processes are structured and performed. At each level, different perspectives of PPPs are shown below:
Level 1 – Performed
PPPs are a way of procuring infrastructure like other procurement options at a performed level.
Level 2 – Managed
There is more awareness of the importance of sound PPPs to strengthen economic developments and critical infrastructure.
Level 3 – Defined
The third level is a defined level in which PPPs are treated as a critical component of the government’s infrastructure agenda.
Level 4 – Managed
In this stage, PPPs are viewed as a way of accelerating international investments and advancing national interests.
Level 5 – Optimized
Lastly, PPPs are seen as critical to advance the economic positional of the nation and embed innovation for the public benefit.
A well-designed PPP framework will ensure the objectives of the public and private sectors are aligned and ultimately, this will allow both parties to develop effective PPP practices.
To learn more about Public-Private Partnerships and certifications, feel free to reach us at info@cybiant.com or drop us a message in the chatbox and subscribe to Cybiant Newsletter.