PPP Menu No. 1: To bundle or unbundle

Public-Private Partnership (PPP) involves a lot of choices. In the PPP Menu, the government implementing agency (IA) orders the strategy, project, PPP modality, selection procedure and form and amount of the contribution, among other “viands.”

One important viand is the constitution of the components of the PPP project—single component or unbundled project, or a bundled or multipurpose project. Examples of the first option would be a joint venture on bulk water supply, a management contract for the radiology department of a hospital, build-transfer- and-operate for power generation or a build-and-transfer of an evacuation center.

The reasons to unbundle projects, and not to bundle, are varied. One, the project may involve large capitalization and splitting the components would be more acceptable. Two, the market may be ready or is untested. Three, combining with other components may be unattractive for private-sector proponents (PSPs) or there might a dearth of qualified PSPs. Four, the IA has a limited mandate. Five, there could be political, human resource and social sensitivities if other components are included at the onset. Six, the law requires unbundling, like in the power sector.

A bundled project presents a combination or integration of several components or projects into one. There shall be multiple parts, embodied in one contract, offering several benefits to the public and more gains to the government, whereby one PSP, or a consortium, is selected through a competitive process. This presupposes that the IA has the mandate to pursue all the components/projects, and the PSP is eligible to undertake all the parts.

Bundling is viewed as one way of making a project more viable or making an unfeasible project feasible. Bundling can also expedite the realization of the multitude of benefits since all the projects are packaged into one and pursued in one get-go. Further, combining soft with hard projects would facilitate a cross-subsidy scenario whereby the revenue-raising activity will support the nonrevenue-raising component. Bundling a soft (e.g. socialized housing) with hard (e.g. reclamation) could make the hard more acceptable for the people or end-users.

Here are five examples of bundled projects:

(1) Integrated Water Development. In the spectrum of possible water projects, there could be seven parts—supply, distribution, reduction of nonrevenue water, irrigation, septage, sewerage and hydropower. These can be undertaken singly, 3-in-1 or all-in-1 project.

(2) Reclamation Plus. Horizontal development, as in land reclamation, can incorporate vertical development. On new land, airports, seaports, monorail systems can be established (hard), together with socialized housing, evacuation centers and government facilities (soft).

(3) Market Redevelopment. Rather than just rehabilitating an existing public/wet market, market redevelopment can accommodate so much more. A PPP on this can include a terminal, sports complex, parking, which can double as an evacuation and commercial spaces.

(4) Access Facilities and Real Estate. Roads, bridges and monorail projects, while relying on volume of commuters, could be more viable if coupled with add ons. The additional components could be commercial spaces and
residential units.

(5) Waste-to-Energy (WTE). Another trend in bundling is the mingling of solid-waste management with power generation. For WTEs, two governmental mandates and obligations are accomplished.

Bundling therefore offers more for less.