With 7 options, water is the next big thing in PPPs

WHY is everyone into water? What government agencies can pursue public-private partnerships (PPPs) in water?  Who are the end-users and payors of water-related PPP projects? Why choose PPP instead of procurement of water projects? What makes water attractive to investors?

Yes, water is the next big thing. In fact, water is already the “flavor” of government PPP projects, at all levels. To date, close to 20 water-related PPP projects have been awarded by government agencies, water districts and local government units.

Responding to the needs of the communities is the plain reason why government undertakes PPP projects on water. PPPs are meant to address infrastructure and deficits. We need water. Water is a basic human right, which all stakeholders must provide. Build- or rehabilitate-operate-and-transfer schemes, joint ventures, concessions, management and service contracts, leases and divestments are the available modalities.

PPP in Philippines pop quiz: How much do you really know?

How much or how little do you know about public-private partnerships (PPPs) in the Philippines? Should PPPs be understood by ordinary citizens? Is there a broad learning ecology on PPPs? Do stakeholders have a common understanding of what a PPP is and what it is not?

This pop quiz is intended to gauge your basic appreciation of PPPs. Kindly rate yourself “excellent” if you get 13 to 15 numbers correctly; “very good” if you score 10 to 12; “good” if 7 to 9; and “not-so-good” if below 7. But regardless of your rating and score, we must all be conscientious, vigilant
and active stakeholders in PPPs.

PPP nonstarters and deal-breakers: The six-way test

WHY the shift from a cautionary stance to an aggressive position? How come there were only 12 public-private partnership (PPP) projects awarded in the past five years, and why the hurry to grant five to seven more in the last few months? What are the drawbacks and threats of rushing the selection of the private- sector proponent (PSP) without addressing all antecedent  issues? Why do we have delayed or failed biddings?

The latest “black eye” to the “rush PPP job” is the failed bidding of the Laguna Lakeshore Expressway-Dike Project (LLEDP), an ambitious bundled project with three components, that of reclamation, expressway and dike. This is just one of many delayed projects in the pre-June 30 pipeline of PPP projects. The LLEDP, regional airports, North-South Rail, Davao Sasa Port, LRT 2 maintenance and Department of Justice prison projects were also delayed or are facing setbacks.

Are we organizationally ready for PPPs?

Are our government agencies ready for public-private partnership (PPP) arrangements? Do we have the right leaders, partners and followers? Do implementing agencies undertake PPPs just to join the bandwagon? Do all stakeholders understand what PPP is and what it is not? Do partners share the same vision and trust each other?

PPPs are not just about technical and financials. Organizations must be ready to enter into PPPs. PPP is not for the technically unequipped, knowledge-dependent, innovation-averse, fainthearted and distrustful organizations.

According to Cameron and Quinn, there are four “competing” values in an organization. An organization may be focused just on itself or focused on the market and stakeholders. An organization may give premium to stability and control, or emphasizes flexibility and discretion.

The 75 choices on PPP menu

Why public-private partnership (PPP) for a road project and not procurement using public funds? Why do most local government units and water districts opt for joint ventures and not a build-operate-transfer scheme? Why will government assume the right-of-way risk and not the operations risk? Why use the lowest tariff, not the highest concession fee, as financial parameter for bulk-water supply project? Why bundle a reclamation project with land development and expressway, and why unbundle a radiology department from a PPP of the whole hospital? Why contribute the usufruct of government property and not cash in a PPP arrangement?

The answers to these questions can be found on the PPP menu. Like choosing from various cuisines and dishes, PPPs involve making choices from a host of options. Like ordering in a restaurant, not everything on the menu is ordered in one sitting, but food choices can be combined.

For PPPs, the alternatives revolve around what is more feasible, viable and acceptable.

Conclusion

Simplifying a complex arrangement like a public-private partnership (PPP) is not a daunting task as it may seem. Using metaphors and comparing PPPs with common or day-to-day activities will definitely help in informing the public about this development strategy. Popularizing PPP de-monopolizes knowledge and facilitates the creation of a broad PPP learning ecology.

(1) PPP is a “mega-credit card.” Because of the size of the deal, the nature of the responsibilities and terms of payments, certain quarters refer to a PPP as a “mega-credit card.” A credit card is used by a bank, where it allows the credit-card holders to borrow funds.

In the case of PPPs, where the government subsidizes the project and pays in “installments” or tranches, the government “borrows” from the private-sector participant (PSP). The PSP invests and, as a consequence, it charges “interest” or is entitled to obtain a reasonable rate of return. The PSP “lends” to government, since the latter does not have enough resources. Effectively, however, we are the ones paying for what the government “borrows,” since it is our money that is being used to pay the PSP.