Public-Private Public-Private PartnershipPartnership

Bangladesh PerspectiveBangladesh Perspective

Presented By:Presented By:Mohammad Zakir HossainMohammad Zakir Hossain

Deputy Comptroller and Auditor GeneralDeputy Comptroller and Auditor GeneralOffice of the Comptroller and Auditor General Office of the Comptroller and Auditor General

of Bangladeshof Bangladesh

Public-Private Partnership (PPP)Public-Private Partnership (PPP)

PPP is a contractual agreement formed between a PPP is a contractual agreement formed between a public agency and private sector entitypublic agency and private sector entity

PPP allows greater private sector participation in PPP allows greater private sector participation in the delivery of services the delivery of services

PPP allows the public agencies to tap private PPP allows the public agencies to tap private sector technical, management and financial sector technical, management and financial resources to achieve certain public agency resources to achieve certain public agency objectives such as objectives such as • greater cost and schedule certainty,greater cost and schedule certainty,• supplementing in-house staff,supplementing in-house staff,• innovative technology applications,innovative technology applications,• specialized expertise or access to private capital. specialized expertise or access to private capital.

Reasons for Public-Private Reasons for Public-Private PartnershipPartnership

Accelerating the implementation of high priority projects by Accelerating the implementation of high priority projects by packaging and procuring services in new wayspackaging and procuring services in new ways

Turning to the private sector to provide specialized Turning to the private sector to provide specialized management capacity for large and complex programs;management capacity for large and complex programs;

Enabling the delivery of new technology developed by Enabling the delivery of new technology developed by private entities;private entities;

Drawing on private sector expertise in accessing and Drawing on private sector expertise in accessing and organizing the widest range of private sector financial organizing the widest range of private sector financial resources;resources;

Encouraging private entrepreneurial development, Encouraging private entrepreneurial development, ownership, and operation of related assets;ownership, and operation of related assets;

Allowing for the reduction in the size of the public agency Allowing for the reduction in the size of the public agency and the substitution of private sector resources and and the substitution of private sector resources and personnel.personnel.

Key Benefits of Public-Private PartnershipKey Benefits of Public-Private Partnership

PPP provides benefits by allocating the responsibilities PPP provides benefits by allocating the responsibilities to the party – either public or private – that is best to the party – either public or private – that is best positioned to control the activity that will produce the positioned to control the activity that will produce the desired resultdesired result

The primary benefits of using PPP to deliver services The primary benefits of using PPP to deliver services include:include:• Expedited completion compared to conventional delivery Expedited completion compared to conventional delivery

methodsmethods• Cost savingsCost savings• Improved quality and system performance from the use of Improved quality and system performance from the use of

innovative materials and management techniquesinnovative materials and management techniques• Substitution of private resources and personnel for Substitution of private resources and personnel for

constrained public resources andconstrained public resources and• Access to new sources of private capital.Access to new sources of private capital.

How are risks and rewards allocated How are risks and rewards allocated in public-private partnershipin public-private partnership

Risks are allocated to the party that is Risks are allocated to the party that is the best equipped to manage themthe best equipped to manage them

PPP contracts often include incentives PPP contracts often include incentives that reward private partners for that reward private partners for mitigating risk factorsmitigating risk factors

Promoting Public-Private Partnership in Promoting Public-Private Partnership in BangladeshBangladesh

Fast changing policy situation with Fast changing policy situation with globalization and deregulation recognizes globalization and deregulation recognizes increasingly important role of private increasingly important role of private sector in Bangladesh sector in Bangladesh

Bangladesh has a very rich experience on Bangladesh has a very rich experience on PPP, especially in respect of the scope and PPP, especially in respect of the scope and diversity of Non-Government Organization diversity of Non-Government Organization (NGO) activities in social services(NGO) activities in social services

Sectors of PPP in BangladeshSectors of PPP in Bangladesh

Health SectorHealth Sector Education SectorEducation Sector Infrastructure DevelopmentInfrastructure Development Tourism SectorTourism Sector ICT SectorICT Sector IndustriesIndustries

Premises of PPP in Health and Education Premises of PPP in Health and Education SectorSector

PPP in health and education sectors are PPP in health and education sectors are based upon three premises:based upon three premises:• Health and education are critical areas of Health and education are critical areas of

activity for national developmentactivity for national development• The “public good” character of health and The “public good” character of health and

education and the scale of effort required to education and the scale of effort required to meet society’s needs in these two areas call meet society’s needs in these two areas call for close cooperation of all stakeholders in for close cooperation of all stakeholders in both public and private sectorsboth public and private sectors

• The current status and future prospects of PPP The current status and future prospects of PPP are contingent upon country specific are contingent upon country specific circumstances.circumstances.

The Spectrum of Relationship in PPPThe Spectrum of Relationship in PPP

Parallel activities:Parallel activities: Public and private Public and private activities are carried out without any activities are carried out without any contact with each other or contact with each other or acknowledgement of the existence of each acknowledgement of the existence of each otherother

Competitive activities:Competitive activities: The activities in The activities in the public and private sectors are carried the public and private sectors are carried out with same or similar objectives, out with same or similar objectives, targeting common clientele and competing targeting common clientele and competing with each other, which may mean either with each other, which may mean either wasteful duplication of activities or wasteful duplication of activities or enlargement of choices for the enlargement of choices for the beneficiaries.beneficiaries.

The Spectrum of Relationship in PPPThe Spectrum of Relationship in PPP(Contd.)(Contd.)

Complementary activities:Complementary activities: Activities Activities or services from the public and the or services from the public and the private sectors complement each other in private sectors complement each other in terms of nature and content of services terms of nature and content of services or geographical and population coverage, or geographical and population coverage, either by design or incidentallyeither by design or incidentally

Contractual services:Contractual services: The government The government contracts private sector for providing contracts private sector for providing specified services for agreed fees, with specified services for agreed fees, with the contractor being accountable to the the contractor being accountable to the government authority.government authority.

Cooperation and collaboration:Cooperation and collaboration: Public Public and private actors work together on the and private actors work together on the basis of shared objectives, strategies and basis of shared objectives, strategies and agreed criteria regarding assessing agreed criteria regarding assessing process and outcome; the partners also process and outcome; the partners also cooperate in developing common cooperate in developing common objectives and strategies and criteria for objectives and strategies and criteria for assessment of activities.assessment of activities.

The Spectrum of Relationship in PPPThe Spectrum of Relationship in PPP(Contd.)(Contd.)

Who are the PartnersWho are the Partners

Public Sector PartnersPublic Sector Partners

National governmentNational government District administrationDistrict administration Municipal authoritiesMunicipal authorities Local government bodiesLocal government bodies Para-statal corporationsPara-statal corporations State universities and research State universities and research

organizationsorganizations

Who are the Partners (Contd.)Who are the Partners (Contd.)

Private Sector PartnersPrivate Sector Partners

Commercial for-profit enterprises Commercial for-profit enterprises Development-focused voluntary non-Development-focused voluntary non-

governmental organizations (NGOs)governmental organizations (NGOs) Cooperative societiesCooperative societies Community-based organizationsCommunity-based organizations Religious organizationsReligious organizations Professional organizationsProfessional organizations Trade unionsTrade unions Research and academic institutionsResearch and academic institutions HouseholdsHouseholds

Judging Effective PartnershipJudging Effective Partnership

The principles of “non-rivalry” and “non-exclusion” of The principles of “non-rivalry” and “non-exclusion” of public goods logically point to the criteria of universality public goods logically point to the criteria of universality and equity in judging the value of partnership and equity in judging the value of partnership

Given the competing demands on scarce resources in Given the competing demands on scarce resources in developing countries, efficiency in terms of optimal developing countries, efficiency in terms of optimal benefits from a given cost must be an important criterionbenefits from a given cost must be an important criterion

Accountability to various stakeholders regarding Accountability to various stakeholders regarding objectives, process and outcome in basic social services objectives, process and outcome in basic social services also is a key considerationalso is a key consideration

In other words, In other words, • universalityuniversality• equityequity• efficiency and efficiency and • accountability accountability

of basic services are the four sets of criteria for judging of basic services are the four sets of criteria for judging the design and the results of partnership the design and the results of partnership

Criteria for Judging Effective PPP (Contd.)Criteria for Judging Effective PPP (Contd.)

UniversalityUniversality • refers to access for all who are eligible to a type of service; for example, refers to access for all who are eligible to a type of service; for example,

universal primary education for all children in the primary-school age groupuniversal primary education for all children in the primary-school age group EquityEquity

• is an elaboration of the universality criterion in terms of ensuring acceptable is an elaboration of the universality criterion in terms of ensuring acceptable quality of service for all; sharing of costs equitably when a cost is necessary quality of service for all; sharing of costs equitably when a cost is necessary to be imposed; and special attention to groups disadvantaged due to to be imposed; and special attention to groups disadvantaged due to historical, economic or cultural reasonshistorical, economic or cultural reasons

Efficiency Efficiency • has two aspects. Internal efficiency in terms of operations and management has two aspects. Internal efficiency in terms of operations and management

of an activity to achieve maximum output for the least cost; and external of an activity to achieve maximum output for the least cost; and external efficiency in terms of achieving best results in terms of objectives of the efficiency in terms of achieving best results in terms of objectives of the activity for the least costactivity for the least cost

AccountabilityAccountability • refers to holding the providers of services answerable to the beneficiaries refers to holding the providers of services answerable to the beneficiaries

and other stakeholders regarding both process and outcome of a program. and other stakeholders regarding both process and outcome of a program. Openness and transparency in management and a participatory approach in Openness and transparency in management and a participatory approach in planning, making key decisions, and evaluation are necessary conditions for planning, making key decisions, and evaluation are necessary conditions for accountabilityaccountability

Key Features or Findings Key Features or Findings of of

Case Studies of Case Studies of Non-Government Involvement Non-Government Involvement

in Bangladeshin Bangladesh

In the Health Sector of Bangladesh the following key features of In the Health Sector of Bangladesh the following key features of the partnership identified:the partnership identified:

In the total national effort to provide for In the total national effort to provide for health services, the government is a minor health services, the government is a minor actor in terms of the total health expenditures actor in terms of the total health expenditures and peoples’ utilization of services, contrary and peoples’ utilization of services, contrary to general impressionsto general impressions

It is evident that non-governmental It is evident that non-governmental organizations active in health and family organizations active in health and family planning have been engaged in: planning have been engaged in:

• a major collaborative relationship with the public a major collaborative relationship with the public sector services; or sector services; or

• have run their own complementary programs.have run their own complementary programs.

Key features of partnership (Contd.)Key features of partnership (Contd.)

In case of public sector health care In case of public sector health care and family planning services:and family planning services:

• their quality does not generally meet a their quality does not generally meet a minimum acceptable standard; minimum acceptable standard;

• they have widespread reputation of they have widespread reputation of mismanagement, corruption, mismanagement, corruption, inefficiency, and of being devoid of a inefficiency, and of being devoid of a friendly service-provider attitudefriendly service-provider attitude

• the public facilities are utilized the public facilities are utilized considerably below their expected considerably below their expected capacity.capacity.

Preventive and basic curative care Preventive and basic curative care provided by NGOs are generally provided by NGOs are generally regarded as:regarded as:• more effectivemore effective• more client-friendly and more client-friendly and • utilized more frequently than public utilized more frequently than public

facilitiesfacilities The private sector service providers in The private sector service providers in

health account for three-quarters of all health account for three-quarters of all health sector expenditureshealth sector expenditures

Key features of partnership (Contd.)Key features of partnership (Contd.)

There is no substitute for a strong public sector There is no substitute for a strong public sector role in setting policies and priorities for the role in setting policies and priorities for the nationnation

Effective protection of public interest demands Effective protection of public interest demands that the large and important role of NGOs, that the large and important role of NGOs, households and the other actors are recognizedhouseholds and the other actors are recognized• that they are taken into account in maintaining an that they are taken into account in maintaining an

overview of the sector by the government and in overview of the sector by the government and in guiding policies and priorities; and guiding policies and priorities; and

• that the policy and regulatory environment is created that the policy and regulatory environment is created for all actors to play their collaborative, for all actors to play their collaborative, complementary, parallel or competitive role complementary, parallel or competitive role

Key features of partnership (Contd.)Key features of partnership (Contd.)

Public-Private Partnership and SAI BangladeshPublic-Private Partnership and SAI Bangladesh

The audit mandate of the SAI Bangladesh with regard The audit mandate of the SAI Bangladesh with regard to audit of PPP is clear. All PPP, where the government to audit of PPP is clear. All PPP, where the government has a majority interest are within the purview of audit has a majority interest are within the purview of audit of SAI Bangladeshof SAI Bangladesh

The formidable task in this audit is the minimization of The formidable task in this audit is the minimization of risks, which is achieved through comprehensive audit risks, which is achieved through comprehensive audit planplan

The SAI is very careful in assessing the capacities of The SAI is very careful in assessing the capacities of the private sectors in delivering the “public goods” the private sectors in delivering the “public goods” through partnershipthrough partnership

A public-private partnership within the SAI itself in A public-private partnership within the SAI itself in terms of cooperation with the professional accounting terms of cooperation with the professional accounting bodies and hiring of private sector experts is also bodies and hiring of private sector experts is also being contemplated in this type of auditbeing contemplated in this type of audit