Infrastructure: Buildings (Infrastructure delivery and planning)
NAMIBIAN MINISTRY OF HEALTH AND SOCIAL SERVICES (MoHSS)
HEALTH PUBLIC-PRIVATE PARTNERSHIPS (PPP) CONFERENCE8th December 2014
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Agenda:
Page
1. Models in Public-Private Partnerships (PPP’s) 5
2. Management of PPP’s 14
3. Agreements in place for Infrastructure 27
4. Partnerships and its Committee’s 29
5. Lessons Learnt 32
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Bachelors of Science in Construction and Project Management
10 Years with a major contractor in the United Kingdom
7 Years leading Consulting teams in the UK and South Africa
Led biddings team in the UK for major PFI /PPP Hospitals
Supported the South African National Treasury and National Department of Health with various hospital project Feasibility Studies
Managing Director, Profica– Development, Project and Construction Management across African Continent
Who am I?
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Profica
Libya
Zambia
Zimbabwe
Botswana
Lesotho
Namibia
Uganda
Central African
Republic
Burkina Faso
Algeria
NigerChad
Egypt
Sudan
Ethiopia
Eritrea
Djibouti
Som
a
lia
Mala
wi
Kenya
Tanzania
Mada
gasc
ar
Swaziland
Moza
mbiq
ue
South Africa
Con
go
Angola
Equitorial Guinea
Be ni n
Ghana
Nigeria
Cameroon
Gabon
Cote d’Ivore
To go
Liberia
GuineaSierra Leone
Guinea Bissau
Gambia
MaliMauritan
ia
Senegal
Wes
ter
n Sa
har
a
Mor
occ
o
Tun
isia
BurundiDemocratic
Republic of Congo
Rwanda
Niger
SECTORS Social Infrastructure
Healthcare Education
Mixed-Use Retail & Shopping
Centres Industrial & Processing
Plants Warehousing &
Logistics Residential & Housing Educational &
Institutional Hotel & Leisure Infrastructure
SERVICE OFFERING Technical Advisory
(Public-Private Partnerships)
Development Management
Construction Management
Project Management Integration
Management Scope Management Time Management Cost Management Quality Management Human Resource
Management Communications
Management Risk Management Procurement
Management
COMBINING SERVICES TO ENSURE THE HANDS-ON DELIVERY OF SUCCESSFUL PROJECTS
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Two types of PPPs are specifically defined:
Where the Private Party performs an Institutional/Municipal function; Where the Private Party acquires the use of State/Municipal property
for its own commercial purposes A PPP may also be a hybrid of these types (Concessions, Leasing, JV’s
BOT, etc.)
Section 1: Models in Public-Private Partnerships
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Typical PPP Project CycleTypical PPP Project Cycle
Project I nception
Feasibility Needs Analysis Option Analysis
Project Due Diligence Value Assessment
Economic Evaluation Procurement Plan
Procurement (1) Request for Qualification (RFQ) –
Pre-qualification of Bidders
(2) Request for Proposal (RFP) – Selection of Preferred Bidder
(3) Negotiations with Preferred Bidder
(4) Finalisation of PPP Agreement and Management Plan
Development / Construction
Delivery / Operation
Phas
e IPh
ase I
IPh
ase I
II
Proje
ct Pr
epar
ation
Responsibility
Government
Government
Government and Private Party
Exit
Private Party with Government
Monitoring Role
Government and Private Party
Proje
ct Te
rm Ph
ase I
VPh
ase V
Phas
e VI
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A New Virtuous Circle
Asset & Infrastructure Procurement
Strategy
Funding & Financing
Construction
Operation
Change
National Infrastructure Plan
A New Approach to Financing
Government Construction Strategy
Placing responsibility & risk where it can best be managed
Improved Flexibility
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Long Term Relationship
Traditional Design & Build
Prime Type
Contracting
DBO & BOT PPP PFI
The Established Construction & Infrastructure Delivery Models
Perceived Risk Transfer
Flexibility
Commercial Competitiveness
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Long Term Relationship
Evolving Models
Capital Funding
Loan / Grant
FundingAlliancing Partnerin
g
Competitive
Partnership
Private Developer Scheme
LEP / LIFTLocal Asset
Backed Vehicles
PPP’s
Perceived Risk Transfer
Flexibility
Commercial Competitiveness
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PPP’s enable public sector to spread the cost of infrastructure
It gets clear private sector buy-in to risk
It encourages a whole life cost approach to be taken, ignoring cash affordability constraints
It drives on time delivery and the maintenance of defined service standards
PPP’s can be off balance sheet
PPP’s historically...
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Financiers have differing approaches to riskThe project finance model needs to recognise this
Real risk is in construction (and perhaps life cycle)Hence the construction industry has a clear role & responsibility to drive efficiency
Speed (or lack of) to market is a huge issueAdds significant cost and risk – faster procurement is much more attractive
Market Confidence is essentialNeed to seek to reduce bidding costs whilst still delivering VfM
The procurement route needs to be appropriate to the risk profileSelect a procurement option with care, once the long term business needs are properly assessed
And …
Some of the real issues linked to PPP’s
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The way the Ministry manages their programmes plays a key role in achieving success and value for money
So:
Effective Programme & Project Management is Essential to
Success
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Maintain a stable and credible policy and regulatory framework for infrastructure across the sectors,
so that investors can plan and invest with confidence, and political and regulatory risk is minimised.
And give confidence regarding the project pipeline
And what must Government do?
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Phase I – Feasibility
The objective of the feasibility study is to enable the Ministry to make an informed decision as to the best option for the redevelopment or new build of a facility. The feasibility study will calculate the affordability and value for money to the government through comparing the PSC and PPP models.
The feasibility will also assess the marketability of the project and the opportunity for the Ministry to raise additional funding should this be required.
Section 2: Management of PPP’s
New South Glasgow Hospital (1,109 beds)
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Needs Analysis This stage is to obtain an understanding of the Ministry’s needs and requirements from the
Project. The needs analysis will document the User Requirements for the hospital, the service levels
to be achieved and any other User driven aspects of the development that the Ministry might wish to achieve.
This stage in the process is critical in that it is the foundation on which the rest of the project is built.
Options Analysis The Option Analysis stage is used to identify, at a high level the options available to the
Ministry, including delivery and service options as well as procurement options. The site has been identified and thus there will not be an option assessment for the site. The
process will culminate with the selection of the Preferred Option. The options agreed upon will be evaluated in terms of their benefits, constraints, risks,
service delivery, market capability and other qualitative aspects.
Approach and Methodology
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Text...
Approach and Methodology
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Project Due Diligence The Project Due Diligence stage is conducted to complete technical due diligence in relation
to the preferred option. Existing data from the previous work or new data is used to assess the suitability of the site
and any associated costs. The Engineers will carry out a review of the utilities and services available to the site and
assess their suitability for the envisaged project. The technical site review will include a desktop review of the geotechnical characteristics of the site, the utility services (water, electricity, sewerage, and telephone), access, planning constraints, future infrastructure development, surrounding development planning, space standards, technology and security requirements.
Approach and Methodology
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Value Assessment The objective of the VfM Assessment stage of the Project will be to determine the overall
feasibility of the Project, having regard to the project needs, the preferred option and any issues identified from the Project due diligence. The VfM Assessment is conducted in the following stages:
Project specifications – the Project specifications will be amended, as appropriate, and costed for the purposes of input into the financial models, such specifications shall include the Department’s user requirements, the output specifications, availability and performance standards;
Whole life-cycle costing – the capital, operating and lifecycle costing of each element of the Project shall be conducted at this stage. The whole life cost carried out at an elemental level will include the capital costs, operating costs including consumables, maintenance costs, and refreshment cots.
Risk Analysis – the Advisor, in consultation with the Project Team, will workshop the risks in the Project and will prepare a comprehensive Risk Allocation Matrix. The risk matrix will involve the identification of the risks, allocation of the risk to Government or the Private Party, the probability of a risk event occurring and the consequential value of a risk event. The risk quantification is an important input to the financial model and impacts the resulting value for money.
Approach and Methodology
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Procurement Plan Development of procurement strategy and timelines
Reference Design The design brief requires a clear vision for the functionality of the hospital based on design
principles derived from the client department’s strategic plan. This will require input from various key stakeholders. The methodology should includes engagement with clinical and technical user groups which will be led by our Clinical and Architectural team.
Design principles that underlie the approach to good hospital design: Excellent clinical functionality Listening to the client, clinicians and user groups Therapeutic design, and a building environment that generates a feeling of well-being
in patients, staff and visitors Value for money – not just in terms of the capital cost, - but over the whole life cycle
of the facility.
Approach and Methodology
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Phase 2 – ProcurementIndicative Timeframe
Prepare RFQ 2 Months RFQ Release, Evaluation and Shortlist Draft RFP and Evaluation Manual 4 Months Draft Project Agreement and Technical Schedules 4 Months Issue RFP RFP Response Period 7 – 9 Months Respond to Bidders Written queries RFP Evaluation 2 Months Appoint Preferred Bidder Negotiations to Financial Close 4 – 6 Months Financial Close
Approach and Methodology
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Construction Procurement is different from procurement of most other commodities and services
Any procurement (particularly complex procurements) must adopt a Gateway process to make sure a project is in a fit state to progress
Early Contractor Engagement and Integration bring real and measurable benefits Bundling contracts and the establishment of frameworks allow the centre to drive required
quality, service and behavioural standards
Efficiencies in Procurement and the Delivery of Construction
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The problem...
Short term relationships
Lowest pricePoor Health & Safety
record
Adversarial approach
No supply chain management
Poor customer focus
Lack of learning culture
Poor collaboration in problem solving
Research directs us to a new approach:
From:Lack of Integration
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The Problem
Short term relationships
Lowest pricePoor Health & Safety
record
Adversarial approach
No supply chain management
Poor customer focus
Lack of learning culture
Poor collaboration in problem solving
Better Performance
Construction meets user requirement
Lower whole life & operational costs
Greater cost and time predictability
Eliminate waste
Lack of IntegrationTo:
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The desired Culture Shift
Poor management Risk adverse culture Design & construction in
isolation Poor project flow Non-value oriented approach
to procurement Misinterpretation of need for
public accountability
From
Leadership Risk assessment and mgt Integrated teams Reviews and decisions Design quality and value for
money
To
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Management & Culture Change Commitment and Leadership Empowerment and Skilling Consistent and Skilled Project Management
Measurement Standard Key Performance Indicators Post Project Implementation Reviews Client Performance Surveys
Achieving Excellence
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Standardisation Key standard practices on:
Procurement decisions on total value for money Use of risk and value management Output / performance specifications Whole life costing Robust change control
IT and standardised document handling
Integration Teamwork and partnering Procurement strategies – focus on:
Design & build PPP Prime contracting
Achieving Excellence
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Phase 1: Feasibility Study / Business Case
Feasibility Study
Relevant Treasury, Finance and Ministry of Health Approvals
Land Ownership
Reference or Sample Design (Optional)
Section 3: Agreements in place for Infrastructure
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Phase 2: Procurement PPP Agreement Common Terms Agreement (CTA) - Lenders Construction Subcontract Operations Subcontract Private Party Proposal Output Specifications
Clinical & Operational NarrativesDesign & BuildMechanical, Electrical and PlumbingMedical Equipment FM Services
Section 3: Agreements in place for Infrastructure
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Phase 2 Procurement (cont’d) Works Programme Independent Certifier (IC) Agreement Payment Mechanism Reviewable Design Data (RDD)
Section 3: Agreements in place for Infrastructure
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Typical StructureTypical Project Finance
Structure for a PPP
Institution
PPP Agreement
Private PartyShareholders Agreement
Shareholders Financing
Agreement Lenders
Direct Agreement
Construction Sub-Contract
Operations Sub-Contract
Construction Sub-Contractor
Operations Sub-Contractor
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Lesotho Hospital PPP
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Planning, Planning, Planning1. Develop a clear Brief Adopting international best practice
2. Appoint the right team (Advisors, Specialist etc) Adopting international best practice
3. Consultative Meetings with bidders during the RFP process Adopting international best practice of engaging in robust and frank consultative meetings
with individual bidder teams during the RFP exposure period. It’s possible achieve effective results in a manner that would ensure fairness and transparency during the process and thus realise the considerable benefits of this practice for the Project.
It is a proven observation that those projects which undertake this practice have easier evaluations, are able to select a preferred bidders quickly, spend less time in negotiations and thus reach financial close sooner than those projects which only rely upon a written question and answer process.
Section 5: Lessons Learnt
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4. Client to establish Technical and Clinical Lead teams Create specialist teams for the technical and clinical work streams. These teams will have
consistent membership over time, delegates should be avoided if at all possible (unless both principle and delegate routinely attend together). Each team would be allocated a terms of reference and each team member delegated specific areas of responsibility.
Teams tasked to interface with the TA team and assist in the process of clinical planning, the development of the PSC design solution, Output Specification and the PPP Agreement.
5. Academic single point of contact for interface with TA Team Similar concept to the one above but rather focused on the academic / higher education
stakeholder group. The principle is the same, a single point of contact will make the process of creating the documentation for the project and initially arriving at an accurately articulated solution much simpler and increasing the probability of a high quality outcome.
Section 5: Lessons Learnt (cont’d)