Postgraduate Research Proposal

The significance and co-dependency

of “Robustness” in a PPP (PFI)

project environment from the

perspective of the Granting Authority

Gerald SundarajSchool of Built Environment

University of Salford

SPARC Conference7 May 2009

Public Private Partnerships

(PPP) A PPP refers to co-operation between

different players, usually one from the privateand one from the public sector.

They work together to promote a commoninterest, using the complementarities of eachpartners and their special qualities.

This term has become increasingly popular,because it suggests that the best elements ofthe private and public sector approach arecombined.

The aim of these partnerships is to use theskills and the know-how of the private sectorfor the provision of a public service.

Types of PPP

Models Alternative Contracts

◦ Known also as service contracts

◦ Simplest form of partnership

Leasing

◦ Private sector uses public facilities

◦ Rental fee for services provided

◦ Maintenance of asset by private sector

Joint Ventures

◦ Co-responsibility & co-ownership

Concessions

◦ Best value service in public service

◦ New service facility or improves an existing one

◦ 20-30 years duration

Privatization

◦ Sale of state-owned asset

◦ Also known as asset sales

◦ Transfer of equity to private sector without time limitations

Types of PPP Models in the

UK Asset sales

Wider Markets

Sales of business

Partnership companies

Private finance initiative (PFI)

Joint Ventures

Partnership investments

Policy partnerships

Private Finance Initiative (PFI) Introduced in1992 in the UK

PFI model, incentive to the private sector toparticipate in public works or services. Thisbecame necessary because,

• Government procured and managed projectshave been generally delivered over budgetand behind schedule;

• Government was under pressure to reduce itsPublic Sector Borrowing Requirement(PSBR) in order to meet the targets requiredunder the Maastricht Treaty;

• Government required a new financingstructure outside the public sector borrowingrequirements to meet its investment needs ininfrastructure.

PFI Trend – July 2003

PFI Trend – March 2008

PFI consortium model

Source: HM Treasury

Private Finance Initiative

Genuine risk transfer Output specification Whole life asset performance Performance-related reward Factors

◦ Risk Assessment

◦ Value for Money

◦ Affordability

◦ Robustness

Framework

PPP PFIParties

SPV

Financiers

Contractors

Granting Authority

Central Government

Local Authority

Agency

Public Enterprise

Rural/Urban

Structure

Revenue/

Financial Capabilities

Technical Expertise

Endogenous

Factors

Design

Construction

Commission & O&M

Technology

Obsolescence

Regulations

Legislation

Demand

Exogenous

Factors

SLEEPT

social

legal

economic

environment

political

technology

Risk Transfer

Value for Money

Affordability

Robustness

Whole-Life-Cycle

CSF

Perspective

Research Question

What is the link between Risk Transfer Assessment, Value for Money, Affordability and Robustness?

How do these four elements affect each other◦ Individually

◦ Collectively

to provide a balance in a PPP/PFI model?

How can these four elements provide sustainability to the PFI model in a PFI project environment?

CSF IndividuallyValue for Money

Risk Transfer

Robustness

Risk Transfer

Affordability

Risk Transfer

Affordability

Robustness

CSF Collectively

Value for Money

Affordability

Risk Transfer Assessment

Robustness

Robustness

Value for Money

Risk Transfer Assessment

Affordability

Sustainable Model/Framework

Research Aim

Determine the significance and co-

dependency of “Robustness” in a

PPP (PFI) project environment from

the perspective of the Granting

Authority

Proposed Research

Objectives1. To determine the significance of Robustness

in a PPP(PFI) project environment

2. To determine the co-dependency of the

Critical Success Factors

3. To determine a sustainable CSF

model/framework

Research

Methodology

Qualitative Analysis

Semi-structured Interviews

Data triangulation – The use of a

variety of data sources (interviews,

archival material, observational data)

Cognitive Mapping

Current Stage

Identifying the problems and gaps

Carrying out literature review on ◦ PPP Various PPP models

◦ PFI

◦ Granting Authority Various granting authority

◦ Risk Transfer

◦ Value for Money

◦ Affordability

◦ Robustness

◦ Research Methodologies

THANK YOU