PPP by lonyoo

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									  The Czech PPP Programme


Libor Cupal, Deputy Director, Head of Project Management


    6 November 2006, VI EUROSAI Training, Prague
   Building Institutional Capacity
                  &
Creating The Appropriate Framework




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Market Development Summary
+   Concession law in place from July 2006
+   Pipeline of pilot projects diversified in various sectors
+   Standardised Advisory Tender Process – documentation and contract
+   The Czech Standardised Project Agreement – market consultation started
+   Elections in June ´06 – position of PPP Centrum “likely” to be defined
+   PPP Centrum has full support of the Czech PPP Association – 70 members


–   No political champions yet – up to now indifferent approach with no support
–   Role of PPP Centrum is still politically not defined yet – no power
–   Transport projects out of PPP Centrum reach – no political will
–   Unable to create “programmes” – likely after the pilots prove success
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The Czech Standard Project Agreement

Publicly available - market consultation has just commenced

   Written by CMS Cameron McKenna and local lawyers
   Partly based on UK School and Health standard contracts
   Concerns about contracts developed for the pilots to be precedents
   Shall propose framework even for the pilots in terms of compensation on
    termination, risk treatment, …
   Coordinated market discussion
   Increase general awareness
   Not obligatory – currently no power to enforce

                                                                              3
Pilot Projects
4 projects in OBC phase with advisers already involved
5 projects in Inception phase before hiring advisers

        TWO JUSTICE
            COURTS
                               CAMPUS
                               UJEP
                                    PARDUBICE
                         ARMY       HOSPITAL
                      HOSPITAL
                       AIRCON    NA HOMOLCE
                                 HOSPITAL


                  MOTORWAY
                        D3                      SPORTS-HUB
                                      PRISON



                                                             4
Pilot Projects
7 non-transport projects of € 350 m in total value
2 transport projects of € 700-1000 m in total value
Projects in OBC phase                       Type     Value          Tender

Prison / guarded for 500 inmates            DBFM     € 37 m         Apr ‟07
Two Courts                                  DBFO     € 27 m         Feb ‟07
Army Hospital / new non-medical wing        DBFO     € 16 m         Jan ‟07

Sports-Leisure Hub Ponava *                 DBFO     € 90 m           na
Na Homolce Hospital / new medical wing      DBFM     € 22 m         Mar ‟07

  Projects in Inception phase                 Type      Value      Advisory Tender

  Motorway D3 - 30km part                     BOT     € 370 m      Bids in June ‟06
  Pardubice Hospital / med & non-m wing *    DBFO      € 73 m          Sept „06

  University Campus UJEP*                    DBFO      € 80 m          Dec ‟06
  AIRCON – airport city rail link            DBFO    € 400-600 m       H1 ‟07
                                                                                      5

    * city brownfield regeneration
Creating The Appropriate Framework
                for
   Gateway and Approval Process




                                     6
Right framework? Create four forces
Interaction between them creates pressure
and helps to keep momentum                           Let them

                                                   IV
                                                    Interested
                                                     need each
                                                  Private Sector
                                                     other!
                                                      Players


                       III
              Diversified portfolio of
           low-risk profile pilot projects
            into the more sectors & authorities




          I                                 II
    Political leader
                                           Law
      Regulator
                                    Rules & Guidelines
   Central PPP Unit
                                                                   7
Public sector issues
Be realists more than optimists!

 General reluctance to change
                                                           Give support
 Insufficient capacity and expertise
 Adversity to hire “expensive” advisors
 Limited funds buying limited scope – no will to invest    Set rules

 Hiring “preferred” but mostly incompetent advisors
 Public Authorities poor “corporate governance”              Coach
 “Short-termism” – lacking a long-term strategic view
 Popular spending at future expense
                                                            Regulate
 Fiscal threat creating hidden costs
                                                                          8
Institutional capacity
Ministry of Finance “Regulator”                        REGULATION
    Regulation of fiscal impacts on state budget
    Liability account book-keeping
    Project approval “Gateway” process                “GATEWAYS”


PPP Centrum                                          BEST PRACTICE
   Best practice center providing knowledge          into Guidelines
     transfer between projects and sectors
    Active support on projects
                                                    PROJECT SUPPORT
    Coaching public sector to be “Good Client”

Departmental PPP units                              BUILDING CAPACITY
   Slow but steady learning curve                                      9
PPP Centrum – current status
   Central government PPP unit employing professionals
   Company fully owned by Ministry of Finance
   Exists 27 months - gradually improves skills & recognition
   6 months spent to draft Standard contract guidance – key sections


GUIDELINES                               PROJECTS
the first drafts already on              9 in an inception/ preparation phase
 project governance
                                           5 pilots approved by Government
   selection and hiring advisors           to start preparation
   risks in PPP projects                  4 pilots supported by MoF
   control mechanisms – Gateways          close focus on health and
   processes                               education in next step

   code of ethics
                                                                           10
Developing PPP market
Where we are – where we go


     Legal           Government          Regulator and        Legislation      Drafting of
  framework           declaration        PPP Centrum         amendment         rules and
    analysis       of policy in PPP       established       process began      guidelines

     2003                          2004                                           2005


                                          Legislation
                                           in place


 The first pilot   Project inception   Project definition     The first     The first attempt
 PPP projects              &                   &              contracts      to standardise
  identified        Hiring advisors      Procurement           awarded       model/contract

    2005                          2006            NOW       2007                     2008

                                                                                                11
Our essential “MUSTs”
           for
project inception phase



                          12
Key stones of successful preparation
1. Ensure only credible advisors with relevant experience are hired
2. Set clear and binding rules of project governance
3. Put in place sufficient control mechanisms
4. Standard contract guidelines
Legislation amendmen process - Concession law in place

 central & regional authorities empowered to enter long-term contracts
 MoF having power to regulate central and also regional projects
 end-user charge collection allowed
                                                                          13
Project governance rules
Setting clear decision making and project management rules

Responsible Authority           Procuring Authority                  Regulator    Responsibility
   central or local                                                    MoF         and competences
    government                                                                     split
                                Members    nomination
                                                                                  Project Board
                                 PROJECT BOARD          Member                     must have power
                                                                                   to decide
    Stakeholders                                                                  One person
                                     PROJECT                                       responsible for
                                     MANAGER            Support                    day-to-day project
  Project team                                                                     management

                                                                                  Regulator a PPP
    Procuring      Financial   Technical      Legal        Public      Other       Centrum roles
    Authority      Advisor      Advisor      Advisor     Promotion    Advisors
      Team                                                Agency
                                                                                                    14
Approval & control process
To avoid costly mistakes during project preparation

 Mandatory approvals              Project preparation phases               Control process
according to the new law                                                  completeness check
                                        1. Project Identification
                                                                                    GATE 1
                                                                             Strategic Assessment
                                       2. Develop Business Case
                                                                                  GATE 2
                                                                            Economical Feasibility
                                 3. Develop Public Procurement Strategy
         APPROVAL I.                                                                GATE 3
   Business Case prior OJEU                                               Public Procurement Strategy
                                      4. Competitive Procurement
         APPROVAL II.                                                               GATE 4
  FBC & Contract prior signing                                                Investment Decision
                                     5. Contract Award and Signing
                                                                                   GATE 5
                                                                             Readiness for Service
                                        6. Contract Management
                                                                                   GATE 6
                                                                              Project Evaluation
                                                                                                     15
Standard contract guidance
To initiate market discussion and to keep control over the pilots
        Land
        Supervening Events (compensation, relief and force majeure events)
        Service Commencement
        Payment and Performance
        Bench Marking and Market Testing
        Indemnities
        Insurance
        Maintenance
        Changes
        Changes in Law
        Authority Step-in
        Expiry and Handback
        Early Termination
        Compensation on Termination                                          16
Discussion to Control process

 The audit on PPP projects incl. the examination of the achievement
 of value for money and next performance measurement in the
 project lifecycle demands the use of best practice principles,
 particularly in government, as the use of public funds should be
 open to the scrutiny of citizens and the parliament.

 The control/ audit system is therefore expected to be engaged to
 ensure that transparent and robust process is followed. The system
 must be capable of bringing an objective viewpoint to the project
 and to monitor the process throughout.




                                                                      17
Discussion to Control process

 Tasks and open questions :

  Set / refine roles and responsibilities of relevant bodies
  Approve project control “Gateway” process and analytical framework
     for audits
    Set a system of independent reviewers
    Define a set of key questions (in checklists/workbooks) for all
     important stages of the project lifecycle
    Political and instutional support
    Roles and expected impact of the Czech Supreme Audit Office




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Key messages

   Realistically on the ground – learnt from past failures
   Situation is not ideal but gradually improves
   Pragmatic approach – keep things simple
   Look for the best practice „transfer – adapt – use“
   Diversified focus on more sectors will keep momentum
   Up coming political changes unlikely to change direction
   Systematic approach to develop Czech PPP market




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www.pppcentrum.cz

            PPP Centrum a.s.
    Na Příkopě 3 – 5, 110 00 Prague 1
             Czech Republic

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